Note 8. Property and Equipment

Property and equipment:

Property and equipment consisted of the following as of June 30, 2021 and December 31, 2020:

During the six months ended June 30, 2021, the Company received 16,603 miners related to its current purchase contracts with Bitmain and, as of June 30, 2021, the Company had received a total of 23,946 new Antminer model S17-Pro or newer miners and a total of 16,146 were deployed; the remaining miners are anticipated to be deployed in the third quarter of 2021.

During the six months ended June 30, 2021, the Company paid approximately $70.5 million as deposits, primarily for miners, including $62.6 million paid to Bitmain as refundable deposits for the acquisition of 57,500 Antminer S19j (90 TH/s) miners for an aggregate purchase price of $145.7 million, which are scheduled to be delivered, on a monthly basis, between October 2021 and December 2022, with the remainder of the payments due in advance of deliveries. As of June 30, 2021, the Company reclassified $41.1 million to property and equipment in connection with the receipt of 16,603 miners at the Coinmint Facility and at Whinstone.

In December 2020, the Company entered into a pilot project with a dual focus of evaluating next-generation immersion technology to increase mining productivity, in addition to evaluating software to reduce energy costs. These technologies have the potential to reduce the Company’s Bitcoin production costs, increase hashrate capacity and significantly extend the life of the Company’s Bitcoin mining ASICs. As of June 30, 2021, this pilot project had commenced full operation and the approximate $2.7 million in equipment costs for this project previously not yet operational and included in “Miners and mining equipment” in the table above, commenced being depreciated.

Depreciation and amortization expense totaled approximately $5.7 million and $0.8 million (including $0.03 million and $0.02 million of patent amortization) for the three months ended June 30, 2021 and 2020, respectively. Depreciation and amortization expense totaled approximately $8.6 million and $1.5 million (including $0.05 million and $0.05 million of patent amortization) for the six months ended June 30, 2021 and 2020, respectively.

Depreciation is computed on the straight-line basis for the periods the assets are in service.

Construction in progress:

Upon completion of the Whinstone Acquisition, the Company commenced expansion of the Whinstone Facility from its existing 300 MW developed capacity to 750 MW. This expanded Bitcoin mining infrastructure is expected to comprise four new buildings totaling approximately 240,000 square feet, with the capacity to support an estimated 112,000 S19j Antminers based upon current configurations. It is expected that the first portion of this expansion will be completed by Q1 2022 and the balance during Q2 2022. The expansion of Bitcoin mining infrastructure at Whinstone provides critical capacity for Riot to deploy its future shipments of Bitcoin mining hardware, in addition to providing an opportunity to expand Whinstone’s hosting business for third-party Bitcoin miners. As of June 30, 2021, the Company had paid approximately $14.5 million in deposits related to this expansion project.

Riot Blockchain, Inc. and Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited)

As of June 30, 2021, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain for a total of 15,500 miners (2,000 new S19-Pro model miners and 13,500 new S19j-Pro model miners), scheduled to be delivered through October 2021, and had paid a deposit of 20% of the total purchase price for the acquisition of an additional 42,000 model S19j miners pursuant to a purchase agreement entered into by the Company and Bitmain, dated effective as of April 5, 2021. A summary of the purchase agreement commitments, deposits paid and expected delivery timing (remaining balances are payable in advance of shipping) is summarized as follows:

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

** The Company paid approximately $29 million as a deposit for the miners to be acquired under the purchase agreement, dated effective as of April 5, 2021, with Bitmain to acquire approximately 42,000 Antminer model S19j Miners, which are scheduled to be shipped in 12 batches of approximately 3,500 miners each, on a monthly basis, between November 2021 and October 2022.