Riot Platforms, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair value measurements

Fair value measurements

3 Months Ended

Mar. 31, 2019

Note 5. Fair value measurements:

During the three months ended March 31, 2019 the Company issued senior secured promissory notes and warrants in connection with these notes. The convertible notes and warrants were classified as liabilities and measured at fair value on the issuance date, with changes in fair value recognized as other expense on the consolidated statements of operations and disclosed in the condensed interim consolidated financial statements.

A summary of weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s senior secured promissory notes and warrants at the issuance date of January 28, 2019 and at March 31, 2019 is as follows:

Senior Secured Promissory Notes:

	January 28, 2019	March 31, 2019
	(Unaudited)	(Unaudited)
Dividend yield	0%	0%
Expected price volatility	119.5%	118.0%
Risk free interest rate	2.60%	2.41%
Expected term	1 year	10 months

Warrants:

	January 28, 2019	March 31, 2019
	(Unaudited)	(Unaudited)
Dividend yield	0%	0%
Expected price volatility	111.6%	113.7%
Risk free interest rate	2.58%	2.23%
Expected term	5 years	4 years, 10 months

The following tables classify the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2019:

	Fair value measured at March 31, 2019 (Unaudited)
	Total carrying value at March 31, 2019		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Liabilities:
Senior secured convertible notes	$	7,975,308	$	-	$	-	$	7,975,308

Warrant liability	$	5,322,162	$	-	$	-	$	5,322,162

There were no assets or liabilities measured at fair value during the three months ended March 31, 2018.

The following table presents changes in Level 3 liabilities measured at fair value for the three months ended March 31, 2019. Unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.

	Convertible Notes		Warrant Liability
Issuance of senior secured convertible notes	$	6,330,726	$	-
Issuance of warrants in connection with convertible notes		-		2,568,934
Balance at January 28, 2019		6,330,726		2,568,934
Change in fair value		1,644,582		2,753,228
Balance at March 31, 2019	$	7,975,308	$	5,322,162

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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