Note 8. Property and Equipment 

Property and equipment: 

Property and equipment consisted of the following as of September 30, 2022 and December 31, 2021:

As of September 30, 2022, the Company had deployed a total of 55,728 miners in its mining operation, all at the Rockdale Facility.

During the nine months ended September 30, 2022, the Company paid approximately $194.9 million as deposits, primarily for ASIC miners, which are scheduled to be shipped monthly through December 2022. During the nine months ended September 30, 2022, the Company reclassified $288.1 million to property and equipment in connection with the deployment of miners at the Rockdale Facility.

During the nine months ended September 30, 2022, the Company elected not to renew its co-location mining services agreement with Coinmint, which was therefore terminated automatically by its terms, effective as of July 8, 2022. In connection with the termination of its agreement with Coinmint, the Company arranged for the transfer of the miners it was operating at Coinmint’s Massena, New York facility (the “Coinmint Facility”) to the Company’s Rockdale Facility. The Company also entered into an equipment exchange agreement (the “Swap Agreement”) with a third-party Bitcoin mining company (the “Counterparty”) whereby Riot transferred approximately 5,700 of the Antminer model S19 Pro miners it had previously deployed at the Coinmint Facility to the Counterparty in exchange for the Counterparty delivering 5,000 factory-new Antminer model S19j Pro miners to Riot at the Rockdale Facility. Pursuant to the Swap Agreement, the miner exchange occurred in two stages. The first exchange occurred in June 2022, and the second exchange occurred in July 2022. After completing the transfer of the miners to the Counterparty under the Swap Agreement, the Company relocated the balance of the miners it had deployed at the Coinmint Facility to the Rockdale Facility. In accordance with ASC 610-20, Sales and transfers of nonfinancial assets, (“ASC 610-20”), during the three and nine months ended September 30, 2022, the Company recognized a gain on exchange of equipment of $7.7 million and $16.3 million, respectively, associated with the miners exchanged in June and July.

During the year ended December 31, 2021, the Company entered into six additional purchase agreements with Bitmain Technologies Ltd. (“Bitmain”) to acquire 52,500 Antminer model S19j miners and 30,000 of their latest Antminer model S19XP miners for a combined total purchase price of approximately $535.0 million. Pursuant to these agreements and as of September 30, 2022, approximately $44.9 million remains payable to Bitmain in installments in advance of shipment of the miners, subject to future adjustments as provided in the contracts. Shipment is scheduled to occur on a monthly basis through December 2022.

Included in construction in progress as of September 30, 2022, are deposit payments of approximately $0.1 million that relate to a Whinstone initiative for providing certain on-site temporary housing for stakeholders, including partners, analysts, stockholders, etc. The initiative arose as a result of limited accommodations for visitors in the Rockdale, Texas, area, which is generally a remote area. The transaction as contemplated would involve Whinstone developing the temporary housing on land to be purchased from by Lyle Theriot (indirectly, through a limited liability company). Mr. Theriot is part of the management team at Whinstone and is considered a related party of Whinstone. The Company is evaluating certain related party implications of the initiative on an ongoing basis, under U.S. GAAP and other applicable regulatory reporting requirements including, but not limited to, the Sarbanes-Oxley Act of 2002.

Depreciation and amortization expense related to property and equipment totaled approximately $26.2 million and $7.3 million for the three months ended September 30, 2022 and 2021, respectively, and approximately $60.3 million and $15.0 million for the nine months ended September 30, 2022 and 2021, respectively.

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

Commitment:

As of September 30, 2022, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain for a total of approximately 12,097 new model S19j Pro miners and 19,947 new model S19XP miners. Miners are scheduled to be shipped through December 2022. Pursuant to these agreements, approximately $44.9 million remains payable to Bitmain, subject to future adjustments as provided in the contracts. 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 (in thousands):

⁽¹⁾ Pursuant to the Company’s agreements with Bitmain, among other provisions, the Company is responsible for all shipping charges incurred in connection with the delivery of the miners.