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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
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:
Common Stock, no par value per share
RIOT
The Nasdaq Capital Market
(Title of class)
(Trading Symbol)
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Securities Exchange Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes X No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act: Yes ☐ No X
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 X 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 X 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
definitions of "large accelerated filer,” "accelerated filer,” "smaller reporting company,” and "emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer X
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 the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. X
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No X
The aggregate market value of the shares of common stock, no par value, held by non-affiliates of the registrant as of June 30, 2024, was approximately $2.1 billion, based on the closing sale
price per share of the registrant’s common stock as reported by the Nasdaq Capital Market on such date.
As of February 20, 2025, the registrant had 350,207,536 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.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for the 2025 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K, to the
extent indicated. Such definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year ended
December 31, 2024.
g
( )
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RIOT PLATFORMS, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
Page
PART I
Item 1.
Business
4
Item 1A.
Risk Factors
16
Item 1B.
Unresolved Staff Comments
30
Item 1C.
Cybersecurity
30
Item 2.
Properties
32
Item 3.
Legal Proceedings
32
Item 4.
Mine Safety Disclosures
32
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
32
Item 6.
[Reserved]
35
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
35
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
53
Item 8.
Financial Statements and Supplementary Data
55
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
67
Item 9A.
Controls and Procedures
67
Item 9B.
Other Information
70
Item 9C.
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
70
PART III
Item 10.
Directors, Executive Officers, and Corporate Governance
71
Item 11.
Executive Compensation
71
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
72
Item 13.
Certain Relationships and Related Transactions, and Director Independence
73
Item 14.
Principal Accountant Fees and Services
73
PART IV
Item 15.
Exhibits and Financial Statement Schedules
74
Item 16.
Form 10-K Summary
79
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RIOT PLATFORMS, INC.
As used in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (this "Annual 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 Annual Report contains forward-looking statements within the meaning of the United States 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 by reference herein. All statements in this Annual Report and the
documents incorporated by reference herein, other than statements of historical fact, are "forward-looking statements” within the scope of this cautionary
note, including, but not limited to, statements concerning: our plans, strategies and objectives for future operations, integration of new equipment,
systems, technologies, services or developments, the feasibility of developing the Company’s remaining power capacity for artificial intelligence
("AI”)/high-performance computing ("HPC”) uses, and the development and implementation of industrial-scale immersion-cooled Bitcoin mining hardware
at our Bitcoin Mining facilities in Kentucky and Texas; the anticipated demand for AI/HPC uses; 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; future self-mining hash rate capacity; timing of receipt and deployment of miners; 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 our management’s opinions, expectations, 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
our 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 I, Item 1A of this Annual Report. 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.
Accordingly, you should read this Annual Report, and the other filings we make with the SEC, completely and with the understanding that our future
results may be materially different from our historical results and from the results expressed in, or implied by, the forward-looking statements contained in
this Annual Report and the documents incorporated by reference herein. The forward-looking statements contained in this Annual 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.
Industry and Market Data
Information regarding market and industry statistics referenced in or incorporated into this Annual Report has been obtained from industry and other
publications that we believe to be reliable, but that are not produced for the purposes of securities filings. We have not independently verified any market,
industry, or similar data presented or referenced in this Annual Report, and we cannot assure you of the accuracy or completeness of such data. Further,
we have not reviewed or included data from all sources. Forecasts and other forward-looking information obtained from third-party sources are subject to
the same qualifications and the additional uncertainties discussed above in this cautionary note accompanying any of our forward-looking statements
regarding estimates of future market size, revenue, and market acceptance of products and services. As a result, investors should not place undue reliance
on any such forecasts and other forward-looking information.
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PART I
ITEM 1. BUSINESS
General
We are a vertically-integrated Bitcoin mining company principally engaged in enhancing our power infrastructure to mine Bitcoin in support of the Bitcoin
blockchain. We are also exploring the feasibility of developing a portion of our power capacity for AI/HPC uses. We provide comprehensive and critical
infrastructure for institutional-scale Bitcoin mining at our large-scale Bitcoin Mining facilities in Rockdale, Texas (the "Rockdale Facility”), Navarro
County, Texas (the "Corsicana Facility”), and two Bitcoin mining sites in Paducah, Kentucky (the "Kentucky Facility” and, together with the Rockdale
Facility and the Corsicana Facility, our "Facilities”). The Rockdale Facility is believed to be the largest Bitcoin mining facility in North America, as
measured by developed capacity. During 2024, we completed Phase I of development of the Corsicana Facility, a second large-scale Bitcoin mining
facility, currently equipped to provide up to 400 megawatts ("MW”) of capacity for our Bitcoin Mining. Upon completion, the Corsicana Facility is
expected to have approximately one gigawatt ("GW”) of operational capacity available for our business purposes. Additionally, in 2024, we completed a
transaction to acquire Block Mining, Inc. ("Block Mining”), a Kentucky-based vertically-integrated Bitcoin miner expanding our Facilities to include two
operational sites, in Kentucky, totaling 60 MW of operational capacity with potential to expand up to 155 MW. We intend to expand the two Block
Mining sites, targeting 110 MW for self-mining operations in 2025. Through our acquisition of Block Mining (the "Block Mining Acquisition”), we also
own a greenfield expansion opportunity, adjacent to an existing substation, presenting us with the ability to develop 60 MW of additional capacity, and
the potential to expand up to 150 MW.
In 2024, we adopted and implemented our "Bitcoin Treasury Strategy” strategy, a corporate strategy of acquiring and holding Bitcoin on our balance
sheet, and, from time to time, subject to market conditions, issuing debt or equity securities or engaging in other capital raising transactions to fund
operations and/or purchase Bitcoin. For more information see "Bitcoin Treasury Strategy” in Part II, Item 7. "Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of this Annual Report.
We operate in an environment which is frequently evolving based on the proliferation of Bitcoin and cryptocurrencies in general. We have determined
that it is in the best interest of our business to undertake a formal process to evaluate the feasibility of developing the approximately 600 MW of
remaining power capacity at the Corsicana Facility for AI/HPC uses with the goal of maximizing the potential of our assets. We have engaged a leading
consultant in the data center industry to conduct a feasibility assessment of the Corsicana Facility. A significant component of our overall business
strategy is to effectively and efficiently allocate capital between opportunities that generate the highest return on investment.
We operate in two reportable business segments: Bitcoin Mining and Engineering, which are organized based on purpose and services performed. Each
of our business segments is further discussed herein.
Unless otherwise indicated, amounts in this Annual Report are stated in thousands of U.S. Dollars except for: share, per share, and miner amounts; Bitcoin
quantities, prices, and hash rate; cost to mine one Bitcoin; and production value of one Bitcoin mined.
Business Segments
Bitcoin Mining
As of December 31, 2024, our Bitcoin Mining business segment had a total deployed hash rate of 31.5 exahash per second ("EH/s”), as compared to a total
deployed hash rate of 12.4 EH/s as of December 31, 2023. In 2024, we mined 4,828 Bitcoin, which represented a decrease of 27.1% compared to the 6,626
Bitcoin we mined in 2023. Based on our existing operations and expected deliveries and deployment of miners we have purchased, we anticipate having
approximately 38.4 EH/s of total hash rate in operation by the end of 2025. All amounts are inclusive of the effects of the Block Mining Acquisition.
Our Bitcoin Mining operations are focused on maximizing our ability to successfully mine Bitcoin by growing our hash rate (the amount of computer
power we devote to supporting the Bitcoin blockchain), to increase our chances of successfully creating new blocks on the Bitcoin blockchain (a process
known as "solving a block”). Generally, the greater share of the Bitcoin blockchain’s total network hash rate (the aggregate hash rate deployed to solving
a block on the Bitcoin blockchain) a miner’s hash rate represents, the greater that miner’s chances of solving a block and, therefore, earning the block
reward. The current block reward is 3.125 Bitcoin plus transaction fees per block (subject to periodic halving, as discussed below). As the proliferation of
Bitcoin continues and the market price for Bitcoin increases, we expect additional miner operators to enter the market in response to an increased demand
for Bitcoin. As these new miner operators enter the market and as increasingly powerful miners are deployed in an attempt
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to solve a block, the Bitcoin blockchain’s network hash rate grows, meaning existing miners must increase their hash rate at pace commensurate with the
growth of network hash rate to maintain its relative chance of solving a block and earning a block reward. As we expect this trend to continue, we will
need to continue growing our hash rate to compete in our dynamic and highly competitive industry.
A key component of the Bitcoin Mining business segment is to acquire highly specialized computer servers (known in the industry as "miners”), which
operate application-specific integrated circuit ("ASIC”) chips designed specifically to mine Bitcoin. We deploy such miners at-scale in our Facilities and
utilize a combination of air cooled and immersion-cooled environments to maximize miner efficiency. Our Facilities, which are supported by our dedicated
best-in-class team, enable our large-scale Bitcoin Mining operations and provide the necessary infrastructure and available power capacity for us to
continue scaling our vertically-integrated Bitcoin Mining business. Our miners are some of the most effective and energy-efficient miners available today,
and our efficiency is constantly improving as we replace aging miners with new state-of-the-art models. Our miners are deployed in air-cooled
environments and in quiet, immersion-cooled environments. By utilizing both methods of cooling we are able to continue growing our hash rate and
optimizing our miners’ capabilities. Immersion-cooling provides more efficient heat dissipation and reduced wear-and-tear compared to traditional air-
cooled hardware, and with a smaller footprint and lower noise pollution. Air-cooling provides us with greater power benefits as we do not have to divert
energy to power the tanks and immersion systems required by immersion-cooling.
During the year ended December 31, 2023, we entered into a long-term master purchase and sales agreement, dated as of June 23, 2023, as amended (the
"Master Agreement”), with MicroBT Electronics Technology Co., LTD, through its manufacturing affiliate, SuperAcme Technology (Hong Kong) Limited
(collectively, "MicroBT”) to secure the long-term supply of state-of-the-art immersion miners from MicroBT, all of which are being manufactured in the
United States. Pursuant to the Master Agreement, MicroBT agreed to provide us with ready access to its newest and most powerful miners, at their most
competitive prices. Through December 31, 2024, we executed three purchase orders under the Master Agreement to acquire miners with a total hash rate
of 31.4 EH/s, for a total purchase price of approximately $550.1 million. Delivery of the MicroBT miners initially began in the fourth quarter of 2023 and will
be completed in monthly batches according to the delivery schedules specified under the applicable purchase order. All miners are expected to be
received and deployed by mid-2025. Upon full deployment of these state-of-the-art MicroBT miners, we anticipate a total self-mining hash rate capacity of
38.4 EH/s. We have four additional annual options to purchase miners, on the same or more favorable terms as the second purchase order executed under
the Master Agreement, through December 31, 2027 which may be further extended by the production and delivery schedule of any additional purchase
orders executed under the Master Agreement. These additional miners represent a total hash rate of approximately 75.0 EH/s, assuming we exercise of all
four annual purchase options.
Mining Pools
A "mining pool” is a service operated by a mining pool operator that combines the resources of individual miners to share their processing power across a
network. Mining pools were created to address the growing difficulty and network hash rate competing for Bitcoin rewards on the Bitcoin blockchain,
providing a way to lower costs and reduce the risk of an individual miner’s mining activities. The mining pool operator provides a service that coordinates
the computing power of the independent miners participating in the mining pool. Mining pools are subject to various risks such as disruption and down
time. In the event that a pool we utilize experiences down time or is not yielding returns, our results may be impacted.
We utilize a type of mining pool that pays Bitcoin rewards utilizing a "Full-Pay-Per-Share” payout of Bitcoin based on a contractual formula. The formula
calculates payouts primarily based on the hash rate we contribute to the mining pool, as a percentage of total network hash rate, along with other inputs.
Under this system, we are entitled to receive consideration even if the mining pool operator does not successfully solve a block.
Immersion-cooling
Phase I of the development of the Corsicana Facility involved the construction of 400 MW of immersion-cooled Bitcoin Mining infrastructure. We
anticipate that immersion-cooling technology will present many unique opportunities to increase efficiencies in Bitcoin mining and are constantly
evaluating new and emerging technologies in the Bitcoin ecosystem to make our mining operations more efficient.
When miners are immersion-cooled, they operate in a more stable environment that is better able to dissipate the heat generated by the miners’ operation,
allowing the equipment to run at sustained higher productivity rates for longer periods of time. We are continuing to test our immersion-cooling mining
operations and, if our desired performance metrics are achieved, we plan to leverage our infrastructure development capabilities to expand the
implementation of our immersion-cooled Bitcoin mining hardware to
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increase our Bitcoin mining hash rate without relying solely on purchasing additional new miners and mining equipment, which we believe will result in
increased operating efficiencies, and, thus, improved capital efficiencies.
Engineering
Our Engineering business segment designs and manufactures power distribution equipment and custom engineered electrical products that provide us
with the ability to vertically integrate many of the critical electrical components and engineering services necessary for the Corsicana Facility development
and Rockdale Facility expansion. This integration helps reduce our execution and counter-party risk in our ongoing and future expansion projects. The
specialized talent employed in our Engineering business segment also allows us the opportunity to explore new methods to optimize and develop best-in-
class Bitcoin mining operations and has been instrumental in the development of our industrial-scale immersion-cooled Bitcoin mining hardware.
Our Engineering business segment also provides electricity distribution product design, manufacturing, and installation services primarily focused on
large-scale commercial and governmental customers and serves a broad scope of clients across a wide range of markets including data center, power
generation, utility, water, industrial, and alternative energy. Products are custom built to client and industry specifications.
In December 2024, we acquired E4A Solutions, LLC ("E4A Solutions”), a leading provider of electrical engineering services to a diverse customer base of
energy developers and data center operators. This acquisition adds to our vertically integrated strategy by adding engineering expertise to service our
own existing and future electrical infrastructure as well as provide solutions and services to the rapidly growing market for electrical infrastructure.
Competition
Our business is highly competitive and operates 24 hours a day, 7 days a week, on a global basis. The primary drivers of competition are demand for
Bitcoin, sufficient capital resources to acquire large quantities of high-quality miners, the ability to secure these miners from a limited number of suppliers
on rapid delivery schedules, and the ability to execute on those miner deployments with the best-in-class mining infrastructure to generate the highest
returns while incurring the lowest costs to mine.
Our competition in the Bitcoin mining space fluctuates due to a number of factors, including, but not limited to, the value of Bitcoin rewards for mining
and public perception. See more details below under "Industry Trends”. Our main competitors generally include other large, public Bitcoin mining
companies. Additionally, we compete with other Bitcoin miners who participate in mining pools.
Industry Trends
Industry Expansion
The price of Bitcoin increased during the first quarter of 2024 due to a new source of demand, the eleven Bitcoin spot Exchange Traded Funds ("ETFs”),
which were approved to begin trading by the SEC on January 11, 2024. Significant interest in the ETFs followed their introduction. One such ETF earned
recognition as the fastest ETF ever to surpass $10 billion in assets under management since its launch. The ETFs, as investment vehicles, provide a new
access point for investors to gain exposure to Bitcoin through more traditional methods. The price of Bitcoin increased again in the fourth quarter of 2024
to all-time highs based on the results of the United States presidential election.
During 2023 and 2024, the Bitcoin mining industry experienced record growth as the price of Bitcoin increased from the lows seen in early 2023. The rising
Bitcoin price created renewed opportunities for public companies to access capital markets to fund growth, leading to unprecedent expansion in mining
operations. As a result, the size of provisioned hash calculation services on the network increased, as measured by total hash rate. We expect competition
within the mining industry to persist as long as Bitcoin prices remain elevated or continue to rise.
Bitcoin Network Changes and Competition
The Bitcoin mining industry recently experienced an increase in transaction fees on the Bitcoin network, as well as an increase in overall demand for
Bitcoin. Various protocols on the Bitcoin network gained popularity during 2023, and at various times temporarily resulted in a significant increase in the
transaction fees paid to add a certain Bitcoin transaction to the blockchain. These transaction fees are volatile in nature but are paid directly to miners and
are representative of public interest in transacting in Bitcoin. Transaction fees are packaged with the block subsidy issued by the Bitcoin network to
combine for the total reward paid to miners upon solving a block.
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The Bitcoin reward issued by the Bitcoin network for solving a block is subject to periodic incremental halving. The network halving is a preprogrammed,
fixed process of the Bitcoin network where the Bitcoin reward for solving a block received by miners is reduced by half approximately every four years,
resulting in a predictable and controlled inflationary rate. The network halving will continue to occur on this schedule until the amount of Bitcoin in
existence reaches the cap of 21 million. Historically, many Bitcoin miners have been a source of selling pressure on Bitcoin as miners have sold their
production to fund operations. After each halving, the decrease in the reward provided to miners from the Bitcoin network may result in a decrease in the
supply of Bitcoin sold by miners into the market. The network halving occurred in April 2024, cutting the subsidy from 6.25 to 3.125 Bitcoin per block.
Network difficulty, which is a measure of how hard it is for miners to solve a block on the Bitcoin blockchain (and, thus, earn a mining reward), is
determined by the network’s total hash rate (i.e., the total computational power devoted to solving a block), which is adjusted every 2,016 blocks (with a
new block being added approximately every ten minutes). Therefore, as more miners join the network and the network’s global hash rate increases, its
difficulty will increase. Conversely, if miners leave the network and its hash rate decreases, its difficulty will decrease. We have observed that when the
market price for Bitcoin experiences a sustained increase (as it did throughout 2024), new miners are introduced onto the Bitcoin network, increasing its
network hash rate, and network difficulty increases as a result. Thus, despite increasing our hash rate by approximately 154.0% from December 31, 2023, to
December 31, 2024, the halving in April 2024 and increased network difficulty following increased network hash rate across the periods resulted in an
approximately 27.1% decrease in the number of Bitcoin we mined for the year ended December 31, 2024, as compared to the same period in 2023.
Accordingly, as market prices for Bitcoin increase and more miners and hash rate are drawn onto the Bitcoin network, network difficulty and competition
will continue to increase, meaning existing miners like us will need to increase their hash rate to maintain and improve their chances of earning a Bitcoin
mining reward. To do this, we continually seek out new Bitcoin Mining capacity, including through our acquisition and development of new Bitcoin
Mining facilities (such as the Corsicana Facility and the Block Mining Acquisition) and the electricity supply and distribution facilities to service them, as
well as other strategic growth opportunities. Further, we have adopted new and improved technology to increase both our mining power and efficiency,
including our industrial-scale adoption of immersion cooling and our strategic acquisitions of large quantities of the newest and most powerful and
efficient miners available.
Vertical Integration
Prior to the halving event, shifts in strategy by prominent Bitcoin miners focused on implementing vertically-integrated business models by investing in
infrastructure, and upgrading and expanding fleets at their own facilities rather than renting out space from a third-party’s data center. Vertical integration
provides additional control over operational outcomes as well as better management of any input costs such as power and overhead fees. Flexibility, and
the ability to manage expenses, becomes increasingly important as the amount of competition on the Bitcoin network expands and the subsidy in Bitcoin
provided by the network contracts decreases.
The Company has led the industry by focusing on a vertically-integrated business model since 2021. We continue to focus on building long-term
stockholder value by taking strategic actions to further vertically-integrate our business at the current Rockdale Facility, developing the Corsicana
Facility, and having acquired the Kentucky Facility and E4A Solutions. Management believes a focus on vertical integration will positively affect each of
our business segments by providing increased capacity for our Bitcoin Mining operations, more opportunities for implementing our proprietary power
strategy, and by positioning us to capitalize on supply chain efficiencies and electrical engineering services garnered through our Engineering segment.
We continue to focus on deploying our efficient Bitcoin Mining fleet, at scale, while realizing the benefits of being an owner and operator of our Facilities.
We anticipate the Bitcoin network will continue to see increased competition and consolidation in the Bitcoin mining industry. Further, given our relative
position and liquidity, we believe we are well positioned to benefit from such consolidation. We are continuously evaluating opportunities which we may
decide to undertake as part of our strategic growth initiatives; however, we can offer no assurances that any strategic opportunities which we decide to
undertake will be achieved on the schedule or within the budget we anticipate, if at all, and our business and financial results may change significantly as
a result of such strategic growth.
Digital Asset Exchanges
Digital asset exchanges provide trading venues for purchases and sales of Bitcoin. Bitcoin can be exchanged for fiat currencies, such as the U.S. dollar, at
rates of exchange determined by market forces on Bitcoin trading platforms, which are not regulated in the same manner as traditional securities
exchanges. In addition to these platforms, over-the-counter markets and derivatives markets for Bitcoin also exist. The value of Bitcoin within the market is
determined, in part, by the supply of and demand for Bitcoin in the
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global Bitcoin market, market expectations for the adoption of Bitcoin, and the volume of peer-to-peer transactions, among other factors.
The shutdowns of certain digital asset exchanges and trading platforms due to fraud or business failure negatively impacted confidence in the digital
asset industry as a whole and led to increased oversight and scrutiny of the industry. We did not have any exposure to any digital asset lenders or
exchanges who have declared bankruptcy or have suspended operations. We only hold and sell Bitcoin that we have mined or purchased and do not sell,
hold, or redeem any Bitcoin for any other parties. Our Bitcoin is held in cold storage wallets by well-known U.S.-based third-party digital asset-focused
custodians.
Custody of our Bitcoin
Our Bitcoin is held in cold storage wallets by well-known U.S.-based third-party digital asset-focused custodians, NYDIG Trust Company LLC ("NYDIG”)
and Coinbase, Inc., on behalf of itself and Coinbase Custody Trust Company, LLC, and, if applicable, Coinbase Credit, Inc. or Coinbase Custody
International Ltd. (collectively, "Coinbase” and, together with NYDIG, our "Custodians”). We may also sell our Bitcoin using our Custodians’ U.S.
brokerage services. The cold storage wallets in which our Bitcoin are held are located in the United States. NYDIG is a standalone trust company
organized by an institutional-grade New York City bank, which holds our Bitcoin in trust accounts solely for our benefit. Coinbase is established as a New
York Trust Company, a fiduciary under New York state law, and is regulated by the New York Department of Financial Services ("NYDFS”). Any
Company funds that may be held by Coinbase are legally segregated at the account, sub-account, and on-chain wallet address level. While we believe
that our custodial agreements provide our business with reasonable protections for our operations and the safe storage of our digital assets, we make no
assurances that storing our digital assets with either NYDIG or Coinbase is free from risk. To the best of our knowledge, NYDIG and Coinbase safely store
our digital assets in segregated accounts as represented in the NYDIG Custodial Agreement and the Coinbase Prime Broker Agreement; however, if either,
or both, of our Custodians were to be in breach of its agreement, our digital assets could be compromised. Similarly, if NYDIG or Coinbase were to cease
operations, declare insolvency or file for bankruptcy, there is a reasonable risk that recovery of our assets, though kept in segregated accounts, would be
delayed or unrecoverable. For further discussion of our custodial agreements, see Part II, Item 7. "Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of this Annual Report.
Applicable insolvency law is not fully developed with respect to the holding of digital assets in custodial accounts. If our custodied Bitcoin were
considered to be the property of our Custodians’ estates in the event that such Custodian were to enter bankruptcy, receivership or similar insolvency
proceedings, there is a risk that we could be treated as a general unsecured creditor of such Custodian, inhibiting our ability to access our Bitcoin. Even if
we are able to prevent our Bitcoin from being considered the property of a Custodian’s bankruptcy estate as part of an insolvency proceeding, it is
possible that we would still be delayed or may otherwise experience difficulty in accessing our Bitcoin held by the affected Custodian during the
pendency of the insolvency proceedings. To our knowledge, our Custodians have not petitioned for bankruptcy protection, been declared insolvent or
bankrupt, made any assignment for the benefit of creditors, or had a receiver appointed for its assets, at any point while we have been a customer. Further,
none of our Bitcoin was, as of the time of filing this Annual Report, custodied with any entity that has petitioned for bankruptcy protection, been declared
bankrupt or insolvent, made any assignment for the benefit of creditors, or had a receiver appointed for its assets. The recent bankruptcies in the crypto
industry and failures of certain financial institutions have not resulted in any loss or misappropriation of any of our Bitcoin nor have such events
impacted our access to any of our Bitcoin.
We are not aware of any of our Custodians experiencing excessive redemptions or withdrawals, or having suspended redemptions or withdrawals, of any
customer assets (Bitcoin, crypto, or otherwise). Further, we have not experienced any loss of, or access to, our Bitcoin custodied with our Custodians, we
have never been unable to account for such Bitcoin assets, and we are not aware of our Custodians having ever been unable to account for our Bitcoin
assets or the crypto assets of its other customers.
To the extent we sell any of our Bitcoin custodied with either NYDIG or Coinbase, these transactions are done through the Custodian’s U.S. brokerage
services, which are registered with the Financial Crimes Enforcement Network ("FINCEN”) and hold NYDFS Bitlicenses. Such brokered sales are made
primarily through market-making transactions with institutional grade investors. While we do not know the identity of the purchasers in such brokered
sales of our Bitcoin, each of our Custodians have made all customary representations to us regarding its compliance with all Know Your Customer and
Anti-Money Laundering ("KYC/AML”) regulations applicable to such brokered sales of our Bitcoin. Our agreements with such brokerage services require
them to comply with all applicable FINCEN and NYDFS rules and regulations, and with respect to the NYDIG Custodial Agreement, the Office of Foreign
Assets Control’s rules and regulations, including with respect to KYC/AML.
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Insurance
We maintain property insurance coverage for our mining hardware, buildings, and infrastructure. This includes coverage for business interruption,
earthquakes, flood and tornadoes. We also maintain cybersecurity coverage, casualty, general liability, pollution and builders’ risk insurance policies. We
believe each Custodian maintains limited insurance policies covering the pool of digital assets it custodies against certain events of loss, such as theft.
We do not carry additional insurance coverage on our Bitcoin holdings. We engage our insurance broker annually to solicit underwriters to provide
proposals to renew our current coverage or update our policies to meet our needs, prior to the policies’ expiration.
Research and Development
In 2022, we initiated development of the Corsicana Facility to expand our Bitcoin Mining capabilities on a 265-acre site in Navarro County, Texas, located
next to the Navarro Switch. Once complete, we expect the Corsicana Facility to have one GW of developed capacity for Bitcoin Mining or for other
business purposes.
Phase I of the development of the Corsicana Facility involved the construction of 400 MW of immersion-cooled Bitcoin Mining infrastructure, as well as a
high-voltage power substation and transmission facilities to supply power and water to the facility. Construction of Phase I was completed during the
year ended December 31, 2024. We are currently evaluating the feasibility of developing the approximately 600 MW of remaining power capacity at the
Corsicana Facility for AI/HPC operations.
Materials and Suppliers
We maintain several key supplier relationships that are important to our business for securing mining hardware, infrastructure components and other
materials. Due to the complexity of developing mining hardware, only a few suppliers can produce ASICs miners at scale. All of our miner purchases in
2024 were from MicroBT. Our potential purchase orders with MicroBT may have future delivery schedules that extend out many months before those
miners are delivered to our Facilities. These delivery timeline fluctuations require us to plan to purchase miners well in advance of their anticipated
deployment.
The development and potential expansion of our Facilities require significant quantities of electrical infrastructure components and construction materials.
We seek to procure these materials from our suppliers in sufficient quantities to ensure we can deploy miners at scale on accelerated timelines.
Additionally, our immersion-cooled Bitcoin Mining activities require large volumes of specialized non-conductive fluid, for which there are limited
manufacturers.
Global Logistics
Global supply chain logistics have continued to cause delays across all distribution channels. Similarly, we have also experienced delays in certain miner
delivery schedules and infrastructure development schedules due to constraints in the global supply chains for miners, electricity distribution equipment
and construction materials. Through the date of this Annual Report, we have effectively mitigated any delivery delays to prevent material impacts on our
miner deployment schedule; however, there are no assurances that we will be able to continue mitigating any such delivery delays in the future.
Additionally, the development and potential expansion of our Facilities require large quantities of construction materials, specialized electricity
distribution equipment and other component parts that can be difficult to source. To help mitigate global supply chain logistics and pricing concerns, we
have procured and hold many of the required materials. We continue to monitor global supply chain developments and assess their potential impact on
our expansion plans.
Regulatory
We anticipate that Bitcoin mining will be a focus for potentially increased regulation in both the near- and long-term, and we cannot predict how future
regulations may affect our business or operations.
The United States has imposed economic sanctions that affect transactions with designated foreign countries, foreign nationals, and others. The Office of
Foreign Assets Control ("OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as
defined by various Executive Orders and acts of Congress. OFAC publishes, and routinely updates, lists of names of persons and organizations
suspected of aiding, harboring or engaging in terrorist acts, including the Specially Designated Nationals ("SDNs”) and Blocked Persons List. Our
policies prohibit transactions with SDNs, and we take measures to prevent transactions that do not comply with OFAC and other applicable sanctions,
including establishing a risk-based compliance program that has policies, procedures and controls designed to prevent us from having unlawful business
dealings with prohibited countries, regions, individuals or entities, however, due to the pseudonymous nature of blockchain transactions, and our
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reliance on third-party vendors to identify and prevent transactions with SDNs, we may unknowingly engage in transactions with SDNs, despite our best
efforts.
State regulation of Bitcoin mining and related energy consumption is an important consideration with respect to where we conduct our mining operations.
The Rockdale Facility and the Corsicana Facility are both located in the State of Texas. To the extent that there is any state regulation of Bitcoin mining or
issues relating to the energy grid which may affect Bitcoin mining, we believe the State of Texas is likely to remain one of the most favorable regulatory
environments for Bitcoin miners. In 2024, we acquired Block Mining in the Commonwealth of Kentucky, which also maintains a favorable regulatory
environment for Bitcoin mining. In 2025, we announced a process for evaluating potential AI/HPC uses for the remaining 600 MW of capacity at the
Corsicana Facility. Accordingly, we will monitor potential regulatory developments affecting data centers more broadly and their affiliated energy use.
In March 2024, the SEC issued a final rule requiring climate-related disclosures in public company annual reports and registration statements for the year
ending December 31, 2025 for large accelerated filers. We have been evaluating the impact this rule may have on our disclosures, though due to ongoing
litigation, the rule has been stayed, and due to the change in administration, we anticipate that the rule may ultimately be rescinded.
In January 2023, the Board of Governors of the Federal Reserve System (the "Federal Reserve”), Office of the Comptroller of the Currency, and FDIC
issued a joint statement regarding perceived risks to banks with clients in crypto asset industries. In January 2023, the Federal Reserve also issued a
policy statement expanding its regulatory authority to limit the activities of state-chartered banks. Several leaders in the U.S. Congress sent oversight
letters to the prudential regulators pushing back on any efforts to place limits on banking activity for digital asset industries. In 2025, legislation and
potential rules addressing fair access to banking are being considered to prevent such limitations. To mitigate any potential regulatory risks with respect
to financial services, we have diversified our banking relationships to mitigate any potential regulatory risk with respect to financial services.
Additionally, in January 2023, the U.S. House of Representatives announced its first ever Financial Services Subcommittee on Digital Assets, with the
intention of developing a regulatory framework for the digital asset industry. In 2024, the U.S. House of Representatives passed a bill titled the Financial
Innovation and Technology for the 21st Century Act, aiming to provide a market structure for digital assets, although it did not receive consideration in
the Senate. In January 2025, the House renewed its Subcommittee, and the Senate Banking Committee also announced its own Subcommittee on Digital
Assets, with the shared goal of developing a regulatory framework. We anticipate that such a market structure may be considered by both houses of
Congress in 2025.
In January 2024, a decade after initial applications were filed, the SEC approved a series of spot Bitcoin exchange-traded funds, which have received
billions of dollars of in-flows. In 2025, the SEC established a working group that aims to establish regulatory certainty for digital asset industries.
Also in January 2024, the U.S. Energy Information Administration initiated a provisional survey to collect electricity consumption information from
cryptocurrency mining companies operating in the United States. The survey was authorized by the Office of Management and Budget as an emergency
data request; however, it was subsequently withdrawn following a successful lawsuit led by us and the Texas Blockchain Council.
In 2023 and 2024, leaders on both the U.S. House Financial Services Committee and U.S. Senate Banking Committee expressed interest in passing
legislation to provide additional regulatory authority to address risks related to the use of digital assets in illicit financial activity. The U.S. Treasury
Department also requested additional authorities to address such risks. However, we have not seen sufficient support emerge in favor of any particular
proposal at this time to anticipate any specific changes. The Trump administration has instead signaled a stronger focus on the benefits of digital assets
as opposed to the risks, appointing a first-ever AI and Crypto Czar to foster growth in the industries in the U.S., and so we continue to see insufficient
support for any particular proposal to advance additional regulatory measures to address risks in this space at this time.
We are aware that members of the U.S. House Committee on Ways and Means, along with other leaders, are considering changes to the tax treatment of
Bitcoin. Potential changes could include taxing Bitcoin like similarly situated commodities at the point of sale, rather than at the point of mining as well as
capital gains at the point of sale. Additionally, we are aware of members considering a de minimis exemption for low-dollar Bitcoin transactions similar to
the exemption that exists for foreign currencies, which could facilitate broader adoption of the asset at the consumer level.
We are unable to predict the impact that any new standards, legislation, or regulations may have on our business at the time of filing this Annual Report.
However, we continue to monitor and proactively engage in dialogue on regulatory and legislative matters related to our industry.
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As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other agencies, which
may affect our Bitcoin Mining and other activities. For additional discussion regarding our belief about the potential risks that existing and future
regulation pose to our business, see Part I, Item 1A. "Risk Factors” of this Annual Report.
Environmental
Concerns have been raised over the quantity of energy used for Bitcoin mining, particularly the environmental effects of energy from non-renewable
sources. Many media reports focus exclusively on the energy requirements of Bitcoin mining but fail to include discussion of its positive contributions to
other customers on the electrical grid. Bitcoin mining operations can be quickly curtailed, uniquely positioning businesses that engage in Bitcoin mining
to respond to increased electricity demand in emergency situations. Throughout 2024, we voluntarily curtailed our operations’ energy consumption to
allow our energy providers to redirect our power allotment back into the Electric Reliability Council of Texas ("ERCOT”) and Midcontinent Independent
System Operator ("MISO”) markets during extreme weather events. Such actions helped to stabilize the grid by allowing our power allotment to be
delivered to the areas of greatest need, such as heating homes and powering hospitals. In exchange for powering down our systems during times of high
electricity demand, we receive benefits associated with the difference between our contractual cost of power and the price at which such power is sold on
the ERCOT and MISO markets. Additionally, we voluntarily participate in load response programs operated by ERCOT and MISO, whereby we
temporarily give ERCOT and MISO the right to curtail a set portion of our power load at their discretion in exchange for a fee. Overall, our operations
incentivize the development of new power generation capacity and our actions help to reduce the frequency and impact of power failures and electricity
price surges, which benefits are shared by us and all participants in the ERCOT and MISO markets.
Human Capital Resources
During the past year, we have made substantial investments in our workforce to attract and retain best-in-class employees, substantially growing our
employee base, while internally promoting individuals to key positions across the Company. As of December 31, 2024, our total workforce consisted of
approximately 783 employees across our entire organization, including professionals in engineering, information and technology, construction,
manufacturing, finance, legal, communications, and Bitcoin Mining operations. Of our total workforce, approximately 629 employees were in engineering,
construction, manufacturing, and Bitcoin Mining operations and approximately 154 employees were in a general or administrative support function, such
as information and technology, finance, legal or communications. As of December 31, 2024, approximately 28% of our workforce was in Colorado, 70% was
in Texas, and 2% was in Kentucky.
Our human capital resources strategy aims to align the interests of our employees with our key long-term success drivers. To support execution of this
strategy, we have implemented a long-term performance incentive program, under which all eligible employees are granted a combination of service-based
restricted stock awards that generally vest over a three-year period and performance-based restricted stock awards that are eligible to vest based on
achievement of specific performance or total stockholder return milestones. During 2023, certain employees under the long-term performance program
were eligible to receive cash in lieu of restricted shares of our common stock awards based on achievement of these same performance milestones. We
believe our performance program is a key incentive for our employees aligning their long-term interests with our long-term objectives as an organization.
In addition to our long-term incentive program and competitive cash compensation practices, our employees are provided with excellent health benefits,
paid maternal and parental leave, paid time off, and additional benefits.
We recognize the positive impact that leaders within a company can have on their teams, and we believe every employee is and should be a leader within
our Company. Consequently, in addition to seeking out top talent from outside of our organization to foster this positive impact, we offer management
and executive leadership training and encourage the continuous development of leaders across the Company, and motivate every employee to take
ownership over their impact on our success.
We seek to attract a pool of best-in-class candidates and foster their career growth by hiring the best talent available, rather than relying solely on
educational background. In support of such initiative, we actively seek candidates from local communities and large cities alike, with a variety of
backgrounds and a goal of providing long-term, growth-oriented careers for each employee. We also believe that our ability to retain our workforce is
dependent on our ability to foster an environment that is sustainably safe, respectful, and fair.
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Compensation and Benefits
Our compensation programs are designed to provide incentives to attract, retain, and motivate employees to achieve our long-term goals. Specifically, we
compare salary and wages against quantitative benchmarks and adjust monetary compensation to ensure wages are competitive and consistent with
employee positions, skill levels, experience, and geographic location. We maintain a robust process for ensuring pay equity across the Company and
increases in incentives and compensation based on merit and performance.
We provide a comprehensive range of benefits options, including medical, dental, and vision insurance for employees and family members, paid and
unpaid leaves, and life and disability/accident insurance coverage. Benefits for employees outside of the United States are provided based on country-
specific practices and are intended to support the health and well-being of our employees and their families.
Bitcoin Mining Results
Bitcoin Mining Production, Purchases, and Sales
One way we measure the success of our operations is by the number and U.S. Dollar value of the Bitcoin rewards we earn from our Bitcoin Mining
activities. The following table presents information regarding our Bitcoin Mining operations, including production, purchases, and sales of Bitcoin.
Quantity
Amounts
Balance as of January 1, 2022
4,884
$
150,593
Revenue recognized from Bitcoin mined
5,554
156,870
Proceeds from sale of Bitcoin
(3,425)
(79,529)
Exchange of Bitcoin for employee compensation
(39)
(1,495)
Realized gain on sale/exchange of Bitcoin
—
30,346
Impairment of Bitcoin
—
(147,365)
Balance as of December 31, 2022
6,974
109,420
Cumulative effect upon adoption of ASU 2023-08
—
5,994
Revenue recognized from Bitcoin mined
6,626
188,996
Bitcoin receivable
(21)
(878)
Proceeds from sale of Bitcoin
(6,185)
(176,219)
Exchange of Bitcoin for employee compensation
(32)
(869)
Change in fair value of Bitcoin
—
184,734
Balance as of December 31, 2023
7,362
311,178
Revenue recognized from Bitcoin mined
4,828
321,002
Bitcoin receivable
5
(625)
Acquisitions of Bitcoin
5,784
577,500
Proceeds from sale of Bitcoin
(212)
(9,518)
Exchange of Bitcoin for employee compensation
(45)
(2,478)
Change in fair value of Bitcoin
—
457,409
Balance as of December 31, 2024
17,722
$
1,654,468
The Bitcoin rewards earned from our Bitcoin Mining operations were 6,626 Bitcoin in 2023 and 4,828 Bitcoin in 2024, representing a decrease of
approximately 27.1%. Revenue recognized from our Bitcoin Mining activities increased from approximately $189.0 million during 2023 to $321.0 million
during 2024, representing an increase of approximately 69.8%. The increase in revenue was primarily due to an increase in Bitcoin prices and rewards
earned as a result of an increase in our deployed hash rate of 12.4 EH/s as of December 31, 2023, to 31.5 EH/s as of December 31, 2024, partially offset by
the impact of the halving in April 2024.
Factors Affecting Profitability
Market Price of Bitcoin
Our business is heavily dependent on the spot price of Bitcoin. The prices of cryptocurrencies, including Bitcoin, have experienced substantial volatility,
meaning that high or low prices may be based on speculation and incomplete information, subject to rapidly changing investor sentiment, and influenced
by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting. Bitcoin (as well as other
cryptocurrencies) may have value based on various factors, including,
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but not limited to, their acceptance as a means of exchange by consumers and producers, scarcity, and market demand, all of which are beyond our
control.
Halving
Further affecting the industry, particularly for the Bitcoin blockchain, the Bitcoin reward for solving a block is subject to periodic incremental halving. The
reward was initially set at 50 Bitcoin currency rewards per block. The Bitcoin blockchain has undergone four halving events since its inception on the
following dates: (1) on November 28, 2012, at block height 210,000; (2) on July 9, 2016, at block height 420,000; (3) on May 11, 2020, at block height
630,000; and (4) on April 19, 2024 at block height 840,000, when the reward was reduced to its current level of 3.125 Bitcoin per block. The next halving for
the Bitcoin blockchain is currently anticipated to occur in mid-2028 at block height 1,050,000. Many factors influence the price of Bitcoin, and potential
increases or decreases in prices in advance of or following a future halving is unknown.
Network Hash Rate and Difficulty
A Bitcoin miner’s probability of solving a block on the Bitcoin blockchain and earning a Bitcoin reward generally depends on the miner’s hash rate in
relation to the global network hash rate. As more powerful miners have been deployed, the Bitcoin network’s difficulty has consequently increased.
Network difficulty is adjusted every 2,016 blocks (approximately every 2 weeks) to maintain an average time of approximately ten minutes between each
block validation. A higher network difficulty means more computational power is required to solve a block and earn a Bitcoin reward. This, in turn, makes
the Bitcoin network more secure by limiting the possibility of one miner or mining pool gaining control of the network. Therefore, as new and existing
miners increase their hash rate, the global network hash rate will continue to grow, meaning a miner’s share of the global network hash rate will decline if it
fails to deploy additional hash rate at scale with the industry.
For further discussion of the factors affecting our profitability, see the discussion under Part II, Item 7. "Management’s Discussion and Analysis of
Financial Condition and Results of Operations” under the heading "Summary of Bitcoin Activity” of this Annual Report, as well as the discussion of
various risks, factors, and uncertainties we believe may affect our revenue and results of operations under Part I, Item 1A. "Risk Factors” of this Annual
Report.
Performance Metrics
We aim to mine Bitcoin by utilizing our miners to solve blocks. In exchange for solving a block, we receive a Bitcoin reward, which we can either hold or
sell on the market to generate cash.
Hash Rate
Bitcoin miners typically measure their performance in terms of hash rate, which is the number of cryptographic hashing algorithms solved (or "hashes”)
per second. Generally, miners (or mining pools) with a greater hash rate relative to the global Bitcoin network hash rate at a given time will, over time, have
a greater chance of earning a Bitcoin reward, as compared to miners with relatively lower total hash rates.
However, as the relative market price of Bitcoin increases, more miners are incentivized to mine Bitcoin, which increases the global network hash rate.
Therefore, to remain competitive, miners seek to continually increase their total hash rate, creating a feedback loop: as Bitcoin gains popularity and its
relative market price increases, more miners attempt to mine Bitcoin and its global network hash rate is increased; in response, existing miners and new
miners devote more and more hash rate to the Bitcoin blockchain by adding more, and increasingly powerful, miners to attempt to ensure their ability to
earn additional Bitcoin rewards. As a result, the network difficulty of the Bitcoin network is increased to maintain the pace of new block additions,
spurring miners to seek to deploy yet further hash rate to earn the same relative number of new Bitcoin rewards. In theory, this process should continually
replicate itself until the supply of available Bitcoin is exhausted.
Miners have attempted to boost their hash rate by deploying increasingly sophisticated miners in larger quantities. This has led to an "arms race” within
the Bitcoin mining industry. There are very few miner manufacturers capable of producing the necessary number of high-quality miners to meet this
demand, creating scarcity and driving up prices. Furthermore, it has been noted that some manufacturers may increase prices for new miners in response
to the rising market price of Bitcoin.
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Intellectual Property
We actively utilize specific hardware and software for our Bitcoin Mining operations. The Bitcoin blockchain is primarily built on open-source code and,
in certain cases, the source code and other software assets we use in our Bitcoin Mining operations may be subject to an open-source license. For these
works, we adhere to the terms of any license agreements that may be in place.
We currently rely on trade secrets, trademarks, service marks, trade names, copyrights, and other intellectual property rights. Additionally, we may obtain
licenses to use intellectual property rights owned and controlled by others. Furthermore, we have developed and may continue to develop certain
proprietary software and hardware applications in connection with Bitcoin Mining operations, including our immersion-cooled Bitcoin Mining
developments.
Information About Our Executive Officers
The following sets forth the name, age, and position of each of the persons who were serving as executive officers as of the filing of this Annual Report.
Name
Age
Position
Jason Les
39
Director and Chief Executive Officer (principal executive officer)
Benjamin Yi
42
Director and Executive Chairman
Colin Yee
49
Executive Vice President, Chief Financial Officer (principal financial officer)
William Jackman
41
Executive Vice President, General Counsel and Secretary
Jason Chung
43
Executive Vice President, Head of Corporate Development & Strategy
Ryan Werner
45
Senior Vice President, Chief Accounting Officer (principal accounting officer)
Stephen Howell
49
Senior Vice President, Chief Operating Officer
Jason Les (age 39) has served as our Chief Executive Officer ("CEO”) since February 2021 and as a member of our Board of Directors ("Board”) since
November 2017. He has been deeply involved with Bitcoin since 2013, with significant experience in Bitcoin mining, as an engineer studying protocol
development, and contributing to open-source projects. Mr. Les was previously a founding partner of Binary Digital from May 2017 to November 2020, a
software-development company where he led the engineering team and coordinated project development for artificial intelligence, reverse engineering,
and inter-software compatibility projects. Additionally, his background includes over a decade of unique experience as a former professional heads-up
poker player. He holds a Bachelor of Science, Computer Science from the University of California, Irvine.
Benjamin Yi (age 42) has served as our Executive Chairman since May 2021, as a member of the Board since October 2018, and as Chairman of the Board
from November 2020 through May 2021. In this role, he is directly involved in our day-to-day operations, playing a key role in setting and fulfilling the
Board’s strategic aims for the Company. Mr. Yi brings significant corporate governance experience to Riot’s Board and executive management team,
having served as an independent director and committee chair of several private and public companies. Prior to joining Riot, Mr. Yi led capital markets and
corporate development at IOU Financial, a fin-tech enabled lender to small businesses across North America and investee company of Neuberger Berman
from January 2017 through May 2021. Mr. Yi brings almost two decades of unique capital markets experience to the Company, and a particular expertise in
fintech, specialty finance, and investing throughout a company’s capital structure. Mr. Yi holds a Bachelor of Commerce, specialist in Finance, major in
Economics from University of Trinity College and a Master of Finance from University of Toronto – Rotman School of Management.
Colin Yee (age 49) has served as our Executive Vice President, Chief Financial Officer ("EVP-CFO”) since July 2023, and served as our Chief Financial
Officer from September 2022 to July 2023. Previously, he was our Head of Corporate and Financial Operations from April 2022 to September 2022. Prior to
joining Riot, Mr. Yee founded Clear Capital Management Corporation which has been operating since September 2007. He served as the Chief Operating
Financial Officer of Avebury Partners, a leading asset management firm that operates within the real estate, geothermal exchange, and construction
sectors, from March 2021 to March 2022. From 2016 to 2021, Mr. Yee served as the CFO for Forum Equity Partners, a large private equity firm specializing
in real estate, renewable energy and infrastructure. Mr. Yee is a Chartered Professional Accountant and holds a Bachelor of Science in Cellular Biology
and a Bachelor of Commerce in Accounting from the University of Calgary.
William Jackman (age 41) has served as our Executive Vice President, General Counsel and Secretary, ("EVP-General Counsel”) since September 2022, and
as General Counsel and Secretary since July 2021. As a member of the executive team, Mr. Jackman manages the Company’s legal affairs, drawing upon
his unique business and legal acumen to navigate strategic decisions and develop innovative solutions to complex challenges. Previously, Mr. Jackman
represented S&P 500 companies as well as other public companies in the areas of securities laws, mergers and acquisitions, and power generation. Prior to
joining Riot, Mr. Jackman was a
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Leader of Public Companies and Securities at Roger Towers, P.A., one of Florida’s oldest and most established law firms, from March 2018 to January
2022. Additionally, he was a Senior Corporate Attorney at Holland & Knight LLP, a multinational law firm, from May 2014 through August 2017. Mr.
Jackman holds dual Juris Doctorate law degrees from the Universities of Windsor and Detroit, as well as an MBA from Nova Southeastern, and is a
member of the New York, Florida, and Ontario Bar Associations.
Jason Chung (age 43) has served as our Executive Vice President, Head of Corporate Development & Strategy ("EVP-Head of Corporate Development &
Strategy”) since July 2023, and Head of Corporate Development & Strategy from June 2022 to July 2023. Mr. Chung spearheads the coordination of Riot's
corporate development, capital markets, and investor relations efforts. Mr. Chung brings two decades of experience in investment banking and a wealth of
knowledge in corporate finance to Riot. Prior to joining Riot, Mr. Chung served as Managing Director, M&A, at Nomura Holdings, Inc. from March 2017
through June 2022 and Executive Director, Mergers & Acquisitions from March 2014 through December 2016 where he advised global clients on cross-
border transactions in the technology sector across multiple countries, including the US, Canada, Germany, Japan, Korea, France, and Singapore. Mr.
Chung’s investment banking career spanned nearly $20 billion in mergers and acquisitions transactions and included building and growing advisory
teams. Mr. Chung is a CFA charter holder and earned a Bachelor of Commerce and Finance degree, minoring in History, from the University of Toronto.
Ryan Werner (age 45) has served as our Senior Vice President and Chief Accounting Officer since September 2022. Previously, Mr. Werner served as our
Vice President of Finance from March 2021 to September 2022. Mr. Werner is responsible for the leadership and oversight of our public accounting
function, leading the Company’s team of accounting and finance professionals. Prior to joining Riot, Mr. Werner was a Senior Director, Real Estate and
Transactions Accounting at UDR, an S&P 500 constituent and multifamily real estate investment trust, from March 2013 through March 2021. Mr. Werner
began his career in Ernst & Young’s audit practice, where he was a Senior Manager and specialized in publicly traded companies. Mr. Werner is a
Certified Public Accountant and holds a Master of Accounting and Information Systems degree, as well as a Bachelor of Science in Accounting &
Business Administration degree, both from the University of Kansas.
Stephen Howell (age 49) has served as our Senior Vice President and Chief Operating Officer ("COO”) since June 2024. Mr. Howell has also served as
Chief Executive Officer at ESS Metron, LLC ("ESS Metron”), a leading manufacturer of power distribution centers, portable substations, low and medium
voltage switchgear, custom controls and relays since December 2021. Previously, Mr. Howell served as Director of Business Development – South at ESS
Metron from October 2019 through December 2021. Prior to his role at ESS Metron, Mr. Howell served as VP, Senior Sales Representative at Castleman
Power Systems International, LLC, a power developer and technology solutions provider, from October 2011 through October 2019. From January 2006
through October 2011, Mr. Howell served as Outside Sales Executive for Consolidated Electrical Distributors, an electrical solutions distributor and
product supplier. Mr. Howell served as Estimator and Project Manager for Integrated Electrical Services Holdings, Inc., an integrated electrical design and
installation company from January 2004 through January 2006, and as Outside Sales Engineer at Eaton Corporation plc, a power management and electrical
systems company from January 2000 through January 2004. Mr. Howell holds dual Bachelor of Science degrees in industrial distribution and marketing
from the University of Alabama at Birmingham.
There are no familial relationships among our executive officers and any directors. There are no arrangements or understandings between any of our
executive officers and any other person pursuant to which any of such executive officers were selected.
Corporate Information
Our principal executive office is located at 3855 Ambrosia Street, Suite 301, Castle Rock, Colorado 80109, and our telephone number is (303) 794-2000. Our
records are kept at our principal executive office.
We were incorporated in the State of Colorado on July 24, 2000, under the name AspenBio, Inc., and have been through a number of subsequent name
changes. Effective October 19, 2017, we adopted the corporate name Riot Blockchain, Inc., and changed our state of incorporation to Nevada. Effective
December 30, 2022, we adopted our current corporate name, Riot Platforms, Inc., and remained incorporated in Nevada.
Our website address is www.riotplatforms.com.
Additional Information
We file or furnish periodic reports and amendments thereto, including our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q,
current reports on Form 8-K, proxy statements and other information with the SEC. These reports, and any amendments thereto, as filed with the SEC, can
be accessed, free of charge, on the SEC’s website www.sec.gov. These documents may also be accessed on our website: www.riotplatforms.com through
a link in the "Investors” section. The contemplated documents
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are placed on our website as soon as reasonably practicable after their filing with the SEC. The information posted on our website is not incorporated by
reference into this Annual Report.
ITEM 1A. RISK FACTORS
The Company’s business, reputation, results of operations, financial condition and stock price can be affected by a number of factors, whether
currently known or unknown, including those described below. When any one or more of these risks materialize from time to time, the Company’s
business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. These risk factors do not
identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we
currently do not consider to present significant risks to our operations. This section should be read in conjunction with Part II, Item 7. "Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report and the consolidated financial statements and
accompanying notes.
Risks Related to Our Business
Our success depends on external factors affecting the Bitcoin industry.
The Bitcoin industry has historically been subject to various risks relating to Bitcoin, as an asset, which have adversely affected the market price of
Bitcoin. Ownership of Bitcoin has, historically, been concentrated in a relatively small number of persons or entities that, collectively, hold a significant
number of Bitcoin (referred to as "whales” in the Bitcoin industry). While ownership of Bitcoin has diversified significantly in recent years, whales
continue to exist whose market activity (e.g., sales of large numbers of Bitcoin) could have an adverse effect on the demand for, and market price of,
Bitcoin, which could have an adverse effect on our business and results of operation. Further, while larger, increasingly regulated exchanges with greater
transparency and oversight have begun to proliferate, the Bitcoin economy remains nascent and largely opaque. The venues for Bitcoin transactions may
experience greater operational problems and be exposed to a greater risk of facilitating unethical, fraudulent or illicit transactions (such as "wash trading”),
than traditional financial markets and securities exchanges. Digital asset trading platforms may also be susceptible to "front-running” activity, which is the
process by which someone uses technology or market advantage to obtain prior knowledge of upcoming transactions allowing bad actors to take
advantage of forthcoming price movement and make economic gains at the cost of those who introduced the transactions. Front-running is a frequent
activity on centralized and decentralized digital asset trading platforms. Further, venues for Bitcoin transactions do not typically make complete
information regarding their ownership structure, management teams, corporate practices, and regulatory compliance available to the public, who are,
therefore, unable to verify the impartiality of such venues in respect of the Bitcoin transactions they facilitate. As a result of such lack of regulation and
transparency, as well as the risk posed by Bitcoin whales, wash trading and front-running, the public may lose confidence in Bitcoin transactions and the
price integrity of the digital asset, which could adversely affect the market price of Bitcoin, perhaps materially, which would have an adverse impact on our
business and results of operations.
There is a finite supply of Bitcoin, and the number of new Bitcoin rewarded per block algorithmically decreases over time, which poses a risk to our
business.
We earn revenue from Bitcoin Mining principally by earning Bitcoin rewards for solving blocks on the Bitcoin blockchain; however, the supply of new
Bitcoin introduced to the market via Bitcoin mining is finite, permanently capped at 21,000,000 coins, with the last new Bitcoin expected to be mined in the
year 2140 (approximately 115 years from now) according to experts. As of December 31, 2024, there were approximately 19.8 million Bitcoin in circulation.
Accordingly, once the final new Bitcoin is introduced into the market, we will no longer earn revenue from Bitcoin Mining by earning Bitcoin rewards for
solving a block. Instead, our Bitcoin Mining revenue will be dependent on the fees we earn from the transactions recorded on the blocks we solve.
Historically, such transaction fees have been low; however, we have observed that, as the number of new Bitcoin introduced into the market is reduced in
each halving, and as Bitcoin ownership and transactions in Bitcoin continue to proliferate, the fees charged for recorded transactions on the Bitcoin
blockchain have increased. We cannot, however, predict whether such transaction fees will increase sufficiently to replace the value of earning new
Bitcoin once the last Bitcoin is mined in the year 2140, and, therefore, we cannot guarantee that we will be able to earn sufficient revenue from Bitcoin
Mining for our Bitcoin Mining business to continue as a going concern. Should any of these events occur, our business and results of operation may
suffer, and the price of our securities may be affected, perhaps materially.
We operate in a highly competitive market and if we fail to grow our hash rate, in a cost-effective manner, we may be unable to compete.
Generally, a Bitcoin miner’s chance of solving a block on the Bitcoin blockchain and earning a Bitcoin reward is a function of the miner’s hash rate,
relative to the global network hash rate. As greater adoption of Bitcoin occurs, we expect that the demand for
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Bitcoin will continue to increase, drawing more mining companies into the industry and thereby increasing the global network hash rate. As new and more
powerful miners are deployed, the global network hash rate will continue to increase, meaning a Bitcoin miner’s chance of earning Bitcoin rewards will
decline unless it deploys additional hash rate at pace with the industry. Accordingly, to compete in this highly competitive industry, we believe we will
need to continue to acquire new more effective and energy-efficient miners, both to replace those lost to ordinary wear-and-tear and other damage, and to
increase our hash rate to keep up with a growing global network hash rate.
These new miners are highly specialized servers that are difficult to produce at scale. As a result, there are limited producers capable of supplying large
numbers of sufficiently effective miners, and, as demand for new miners has increased, and will likely continue to increase, in response to increased
Bitcoin prices, we have observed that the price of these new miners has also increased. If we are unable to acquire enough new miners or otherwise
access sufficient capital to fund acquisitions to grow our hash rate, our results of operations and financial condition could be adversely affected, as could
investments in our securities.
We may be impacted by macroeconomic conditions due to global pandemics, epidemics or outbreaks of disease and the resulting global supply chain
crisis.
Global trade conditions and consumer trends that originated during the COVID-19 pandemic continue to persist and may also have long-lasting adverse
impact on us and our industry. There are continued risks arising from new pandemics, epidemics or outbreaks of disease which may exacerbate port
congestion and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of new miners, as well as critical
materials needed for our expansion plans. Further, miner manufacturers have been impacted by the constrained supply of the semiconductors used in the
production of the highly specialized ASIC chips miners we rely on, and by increased labor costs to manufacture new miners as workforces and global
supply chains may further be impacted by global outbreaks of various epidemics or disease, ultimately leading to continually higher prices for new miners.
Thus, until the global supply chain crisis is resolved, and these extraordinary pressures are alleviated, we expect to continue to incur higher than usual
costs to obtain and deploy new miners, and we may face difficulties obtaining the new miners we need at prices or in quantities we find acceptable, if at
all, and our business and results of operations may suffer as a result.
Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in crypto-related activities.
A number of companies that engage in Bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that
are willing to provide them with bank accounts and other services. Similarly, a number of companies and individuals or businesses associated with crypto
may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions. To the extent that such
events may happen to us, and we are unable to secure alternative services, they could have a material adverse effect on our business, prospects or
operations and potentially the value of any Bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.
We may be unable to access sufficient additional capital for future strategic growth initiatives.
The expansion of our miner fleet and Facilities are capital-intensive projects, and we anticipate our future strategic growth initiatives will similarly require
significant capital. While we plan to raise additional capital to fund these initiatives, there is no guarantee that we may be able to do so in a timely manner,
in sufficient quantities, or on favorable terms, if at all. If we are unable to secure the necessary capital, our ability to execute on these growth initiatives
may be hindered, potentially reducing our competitiveness in the industry. The results of our operations and financial condition may suffer, and the
market price for our securities may be materially and adversely affected.
We face potential risks and challenges in evaluating and leveraging our remaining power capacity for AI/HPC uses.
The demand for power in emerging and evolving industries, such as AI and HPC, has increased. We believe that by maintaining a clear and transparent
focus on both our Bitcoin Mining activities and evaluating expansion into emerging, high-demand markets, we can deliver long-term value for our
stockholders. In January 2025, we launched a formal process to evaluate the feasibility of developing the approximately 600 MW of remaining power
capacity at the Corsicana Facility for artificial intelligence AI/HPC uses. As we evaluate the potential uses for our remaining power capacity at the
Corsicana Facility, and determine if a pivot to AI/HPC is appropriate, we could face reputational harm, liability and adverse financial results making our
evaluation of our business and future prospects uncertain. Deviating from Bitcoin Mining focus may harm our reputation with a variety of stakeholders,
including investors, stockholders, employees, and the broader crypto industry. If we are unable to maintain, or strengthen, our reputation and brand
recognition and are not able to timely and appropriately adapt to changes in our business environment, our business and the
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market price for our securities may be materially and adversely affected, and the results of our operations and financial condition may suffer.
We may not be able to timely complete our future strategic growth initiatives or within our anticipated costs estimates, if at all.
Our strategic growth initiatives may require construction, expansion or conversion of associated power facilities, which may expose us to significant risks
that we may otherwise not be exposed to, including risks related to: construction delays; lack of availability of parts and/or labor, increased prices as a
result, in part, of inflation, and delays for data center equipment; labor disputes and work stoppages, including interruptions in work due to pandemics or
other public health crises; unanticipated environmental issues and geological problems; delays related to permitting and approvals to commence
operations from public agencies and utility companies; delays in site readiness leading to our failure to meet commitments made in connection with such
expansion; and delay or halts related to evaluations of strategic growth initiatives.
All construction-related projects depend on the skill, experience, and attentiveness of our personnel throughout the design and construction process.
Should a designer, general contractor, subcontractor or key supplier experience financial difficulties or other problems during the design or construction
process, we could experience significant delays, increased costs to complete the project and/or other negative impacts to our expected returns.
If we are unable to mitigate these risks and complete our growth initiatives on schedule and within our anticipated costs, if at all, deployment of any newly
acquired miners and implementation of new strategies into our business may be delayed. Such delays or implementation failures may hinder our ability to
realize anticipated benefits, and our business and financial condition may suffer as a result.
Global economic and geopolitical events, policies and conflicts may adversely affect our business, financial condition and results of operations.
We may be exposed to price volatility and uncertainty in our supply chain due to geopolitical crises and economic downturns such as recessions, rising
inflation, tariffs, social, political and economic risks, conflicts and acts of war, sanctions and other restrictive actions by the United States and/or other
countries. Changes in policy positions and priorities from the new U.S. government administration could increase this price volatility and uncertainty.
Such crises will likely continue to have an effect on our ability to do business in a cost-effective manner. Inflationary pressures, as well as disruptions in
our supply chain, have increased the costs of goods, services and personnel, which have in turn caused our capital expenditures and operating costs to
rise. Additionally, these crises may discourage investment in Bitcoin and investors may shift their investments to less volatile assets. The effects of such
global economic shifts, worsening inflationary issues, changes in policy, and geopolitical events could adversely affect our ability to access the capital
and other financial markets, as such, we may be required to consider alternative sources of funding for our growth and operations which may increase our
cost of capital. Such events and conditions could have a materially adverse effect on our business, operations, or financial results and the value of the
Bitcoin we mine.
Failure to successfully integrate acquired businesses could negatively impact our balance sheet and results of operations.
Strategic acquisitions, such as the Block Mining Acquisition and the E4A Solutions Acquisition, both in 2024, and the acquisitions of Whinstone US,
Inc. ("Whinstone”) and ESS Metron, both in 2021, are key to our growth strategy. The success of any acquisition depends, in part, on our ability to
integrate the acquired business and realize the anticipated synergies. Integration may involve unforeseen difficulties, require a disproportionate amount of
our management’s attention, and may necessitate reallocating resources, both financial or otherwise.
We may encounter challenges in the integration process, including: difficulties associated with managing the resulting larger and more complex company,
aligning administrative and corporate structures, standards, controls, procedures and policies, integrating business cultures, hiring and retaining key
employees, conforming compensation and benefits structures, coordinating geographically dispersed operations, and delivering on our strategy going
forward.
Acquisitions may expose us to new liabilities and risks, some of which may be unknown. Although we and our advisors conduct due diligence on the
operations of the businesses we acquire, there can be no guarantee that we are aware of all liabilities associated with an acquired company. These
liabilities, and any additional risks and uncertainties related to an acquired company not known to us or that we may deem immaterial or unlikely to occur
at the time of the acquisition, could negatively impact our future business, financial condition, and results of operations.
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We can give no assurance that we will be able to effectively integrate and manage the operations of any acquired business or realize anticipated
synergies. Failure to successfully integrate an acquired business could have a material adverse effect on our financial condition and results of operations.
We may experience increased compliance costs as a result of our strategic acquisitions.
Future strategic acquisitions may come with substantial compliance burdens, potentially limiting our ability to achieve the anticipated benefits of such
acquisitions. These burdens may require our management and personnel to divert attention from other functions, increasing costs and diverting
resources. As a result, our ability to realize the expected advantages of such strategic acquisitions may be affected, and our business, results of
operations, and financial condition may suffer as a result.
We have financed our strategic growth primarily by issuing new shares of our common stock in public offerings and the issuance of debt and plan to
raise additional capital through similar offerings in the future, and our inability to do so on favorable terms may adversely affect our operations and
the market price of our securities.
We have raised capital to finance the strategic growth of our business through public offerings of our common stock and the issuance of debt, and plan
to raise additional capital through similar offerings to fund current and future expansion initiatives. We may not be able to secure additional debt or equity
financing on favorable terms, if at all, which could hinder our growth and adversely impact our operations. In 2022 and 2023, a number of digital asset
platforms and exchanges filed for bankruptcy and/or became the subjects of investigation by various governmental agencies for, among other things,
fraud. These disruptions in the crypto asset market may impact our ability to obtain favorable financing. If we raise additional equity financing,
stockholders may experience dilution of their ownership interests, and the per share value of our common stock could decline. If we are unable to generate
sufficient cash flows to support our strategic growth, we may be required to adopt one or more alternatives, such as reducing or delaying investments or
capital expenditures, selling assets, or obtaining additional equity financing on terms that may be onerous or highly dilutive. Furthermore, as we engage in
debt financing, in the event of bankruptcy, the holders of any debt we issue would likely have priority over the holders of shares of our common stock in
terms of order of payment preference. We may be required to accept terms that restrict our ability to incur additional debt or take other actions, including
accepting terms that require us to maintain specified liquidity or other ratios that could otherwise not be in the interests of our stockholders.
We have a history of operating losses, and we may report additional operating losses in the future.
Our primary focus is on vertically integrating our Bitcoin mining, and we have recorded historical losses and negative cash flow from our operations when
the value of Bitcoin we mine does not exceed our associated costs. Further, as part of our strategic growth plans, we have made capital investments in
expanding and vertically integrating our Bitcoin Mining operations, increasing our employee base, and incurring additional costs associated with owning
and operating a self-mining facility. However, future market prices of Bitcoin are difficult to predict, and we cannot guarantee that our future Bitcoin
Mining revenue will exceed our associated costs.
The lack of regulation of digital asset exchanges which Bitcoin, and other cryptocurrencies, are traded on may expose us to the effects of negative
publicity resulting from fraudulent actors in the cryptocurrency space and can adversely affect an investment in the Company.
The digital asset exchanges on which Bitcoin is traded are relatively new and largely unregulated. Many digital asset exchanges do not provide the public
with significant information regarding their ownership structure, management teams, corporate practices, or regulatory compliance. As a result, the
marketplace may lose confidence in, or may experience problems relating to, such digital asset exchanges, including prominent exchanges handling a
significant portion of the volume of digital asset trading. In 2022 and 2023, a number of digital asset exchanges filed for bankruptcy proceedings and/or
became the subjects of investigation by various governmental agencies for, among other things, fraud, causing a loss of confidence and an increase in
negative publicity for the digital asset ecosystem. As a result, many digital asset markets, including the market for Bitcoin, have experienced increased
price volatility. The Bitcoin ecosystem may continue to be negatively impacted and experience long term volatility if public confidence decreases.
These events are continuing to develop and it is not possible to predict, at this time, every risk that they may pose to us, our service providers, or the
digital asset industry as a whole. A perceived lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset
exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud may reduce confidence in digital asset networks and
result in greater volatility in cryptocurrency values. These potential consequences of a digital asset exchange’s failure could have a material adverse
effect on the market price for our securities.
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We depend on attracting and retaining officers, managers, and skilled professionals.
Our success depends on our ability to hire, retain and motivate talented leadership, and professionals. We cannot guarantee employee retention, which
may inhibit our management functions, strategic development, and other critical functions. Our growth may be constrained by human capital resource
limitations as we compete with other companies for skilled employees. Strategic action must be taken to expand and develop our pool of management and
skilled employees to meet the demands of our corporate functions. If we are not able to do so, our business, and thus our ability to grow, may be
materially adversely affected.
Risks Related to the Price of Bitcoin
Our ability to achieve profitability is largely dependent on the price of Bitcoin, which has historically been volatile.
Our ability to achieve profitability is largely based on our assumptions regarding the future value of Bitcoin, which has been subject to significant
historical volatility and may be subject to influence from malicious actors, real or perceived scarcity, political, economic, and regulatory conditions, and
speculation creating price volatility or "bubble” type risks for the trading price of Bitcoin. Unlike traditional stock exchanges, which require issuers to
comply with rigorous listing standards and rules, and monitor transactions for fraud and other improprieties, markets for cryptocurrencies tend to be
underregulated, if regulated at all. In general, less stringent markets are perceived to have a higher risk of fraud or manipulation and any lack of oversight
or perceived lack of transparency could reduce confidence in the price of Bitcoin and other cryptocurrencies, which could adversely affect the price of
Bitcoin. As disclosed in Part I, Item 1. "Business” of this Annual Report, under the subheading "Regulatory,” Bitcoin and crypto asset markets generally
may be subject to increased scrutiny and regulation by the U.S. legislature and government agencies, and such evolving regulatory and legal environment
may impact our Bitcoin mining and other activities.
These factors make it difficult to accurately predict the future market price of Bitcoin and may also inhibit consumer trust in, and market acceptance of,
cryptocurrencies as a means of exchange, which could limit the future adoption of Bitcoin and, as a result, our assumptions could prove incorrect. If our
assumptions prove incorrect and the future price of Bitcoin is not sufficiently high, our income from our Bitcoin Mining operations may not exceed our
costs, and our operations may never achieve profitability.
Bitcoin market exposure to financially troubled cryptocurrency-related companies may impact our reputation, the price of Bitcoin and the
profitability of our Bitcoin Mining operations.
The failure of several crypto platforms has impacted and may continue to impact the broader crypto economy; the full extent of these impacts may not yet
be known. Bitcoin is subject to price volatility resulting from financial instability, poor business practices, and fraudulent activities of players in the
broader cryptocurrency market. When investors in cryptocurrency and cryptocurrency-based companies experience financial difficulty as a result of price
volatility, poor business practices, and/or fraud, it has caused, and may continue to cause, loss of confidence in the cryptocurrency space, reputational
harm to cryptocurrency assets, heightened scrutiny by regulatory authorities and law makers, and a steep decline in the value of Bitcoin, among other
material impacts. Such adverse effects have affected, and may in the future, affect the profitability of our Bitcoin Mining operations.
Bitcoin is subject to halving, and our Bitcoin Mining operations may generate less revenue as a result.
As disclosed in Part I, Item 1. "Business” of this Annual Report, under the subheading "Halving,” the number of new Bitcoin awarded for solving a block
is cut in half – hence, "halving” – at mathematically predetermined intervals. The next halving for the Bitcoin blockchain is currently anticipated to occur
in mid-2028. While Bitcoin prices have historically increased around these halving events, there is no guarantee that the price change will be favorable or
would compensate for the reduction in mining rewards. If a corresponding and proportionate increase in the price of Bitcoin does not follow future
halving events, the revenue we earn from our Bitcoin Mining operations would see a decrease, which could have a material adverse effect on our results
of operations and financial condition.
Transaction fees may decrease demand for Bitcoin and prevent expansion.
As the number of Bitcoin currency rewards granted for solving a block in the Bitcoin blockchain has decreased, transaction fees have increasingly been
used to incentivize miners to continue to contribute to the Bitcoin network. However, high Bitcoin transaction fees may slow the adoption of Bitcoin as a
means of payment, which may decrease demand for Bitcoin and future prices of Bitcoin may suffer as a result. If Bitcoin prices are not sufficiently high,
our Bitcoin Mining revenue may not exceed our associated costs, and our results of operations and financial condition may suffer. Further, because the
price of shares of our common stock may be linked to the price of Bitcoin, if demand for Bitcoin decreases, causing future Bitcoin prices to decrease, the
market price of our securities may be materially and adversely affected, limiting our ability to raise additional capital to fund our strategic growth plans.
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Bitcoin faces significant scaling obstacles that can lead to high fees or slow transaction settlement times.
Bitcoin (and cryptocurrencies, generally) face significant scaling obstacles that can lead to high fees or slow transaction settlement times and attempts to
increase the volume of transactions may not be effective. Scaling cryptocurrencies is essential to the widespread acceptance of cryptocurrencies as a
means of payment, including Bitcoin. Many cryptocurrency networks face significant scaling challenges. For example, cryptocurrencies are limited with
respect to how many transactions can occur per second. Participants in the cryptocurrency ecosystem debate potential approaches to increasing the
average number of transactions per second that a network can handle and have implemented mechanisms or are researching ways to increase scale, such
as increasing the allowable sizes of blocks, and therefore the number of transactions per block, and sharding (a horizontal partition of data in a database or
search engine), which would not require every single transaction to be included in every single miner’s or validator’s block. There is, however, no
guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of cryptocurrency transactions will be effective.
If adoption of Bitcoin (and cryptocurrencies, generally) as a means of payment does not occur on the schedule or scale we anticipate, the demand for
Bitcoin may stagnate or decrease, which could adversely affect future Bitcoin prices, and our results of operations and financial condition, which could
have a material adverse effect on the market price for our securities.
Risks Related to our Operations
To remain competitive in our industry, we seek to grow our hash rate to match the growing network hash rate and increasing network difficulty of the
Bitcoin blockchain, and if we are unable to grow our hash rate at pace with the global network hash rate, our chance of earning Bitcoin from our
Bitcoin Mining operations would decline.
As the adoption of Bitcoin has increased, the price of Bitcoin has generally appreciated, causing the demand for new Bitcoin rewards for successfully
solving blocks on the Bitcoin blockchain to likewise increase. This has encouraged more miners to attempt to mine Bitcoin, which increases the global
network hash rate deployed in support of the Bitcoin blockchain.
Because a miner’s relative chance of successfully solving a block and earning a new Bitcoin reward is generally a function of the ratio the miner’s
individual hash rate bears to the global network hash rate, as the global network hash rate increases, a miner must increase its individual hash rate to
maintain its chances of earning new Bitcoin rewards. Therefore, as new miners enter the industry and as miners deploy greater and greater numbers of
increasingly powerful machines, existing miners must seek to continually increase their hash rate to remain competitive. Thus, a feedback loop is created:
as Bitcoin gains popularity and its relative market price increases, more miners attempt to mine Bitcoin and the Bitcoin network hash rate is increased; in
response, existing miners and new miners devote more and more hash rate to the Bitcoin blockchain by deploying greater numbers of increasingly
powerful machines in an attempt to ensure their ability to earn additional Bitcoin rewards does not decrease. Compounding this feedback loop, the
network difficulty of the Bitcoin network (i.e., the amount of work (measured in hashes) necessary to solve a block) is periodically adjusted to maintain the
pace of new block additions (with one new block added to the blockchain approximately every ten minutes), and thereby control the supply of Bitcoin. As
miners deploy more hash rate and the Bitcoin network hash rate is increased, the Bitcoin network difficulty is adjusted upwards by requiring more hash
rate to be deployed to solve a block. Thus, miners are further incentivized to grow their hash rate to maintain their chance of earning new Bitcoin rewards.
In theory, these dual processes should continually replicate themselves until the supply of available Bitcoin is exhausted. In response, miners have
attempted to achieve greater hash rate by deploying increasingly sophisticated and expensive miners in ever greater quantities. This has become the
Bitcoin mining industry’s great "arms race.” Moreover, because there are very few manufacturers of miners capable of producing a sufficient number of
miners of adequate quality to meet this need, scarcity results, leading to higher prices. Compounding this phenomenon, it has been observed that some
manufacturers of Bitcoin miners may increase the prices for new miners as the market price of Bitcoin increases.
Accordingly, to maintain our chances of earning new Bitcoin rewards and remaining competitive in our industry, we must seek to continually add new
miners to grow our hash rate at pace with the growth in the Bitcoin global network hash rate. However, as demand has increased and scarcity in the
supply of new miners has resulted, the price of new miners has increased sharply, and we expect this process to continue in the future as demand for
Bitcoin increases. Therefore, if the price of Bitcoin is not sufficiently high to allow us to fund our hash rate growth through new miner acquisitions and if
we are otherwise unable to access additional capital to acquire these miners, our hash rate may stagnate and we may fall behind our competitors. If this
happens, our chances of earning new Bitcoin rewards would decline and, as such, our results of operations and financial condition may suffer.
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Because our miners are designed specifically to mine Bitcoin and may not be readily adaptable to other uses, a sustained decline in Bitcoin’s value
could adversely affect our business and results of operations.
We have invested substantial capital in acquiring miners using ASIC chips designed specifically to mine Bitcoin and other cryptocurrencies using the
256-bit secure hashing algorithm ("SHA-256”) as efficiently and as rapidly as possible based on our assumption that we will be able to use them to mine
Bitcoin and generate revenue from our operations. Therefore, our Bitcoin Mining operations focus exclusively on mining Bitcoin, and our Bitcoin Mining
revenue is based on the value of Bitcoin we mine. Accordingly, if the value of Bitcoin declines and fails to recover, for example, because of the
development and acceptance of competing blockchain platforms or technologies, including competing cryptocurrencies which our miners may not be able
to mine, the revenue we generate from our Bitcoin Mining operations will likewise decline. Moreover, because our miners use these highly specialized
ASIC chips, we may not be able to successfully repurpose them in a timely manner, if at all, to other uses, following a sustained decline in Bitcoin’s value
or if the Bitcoin blockchain stops using SHA-256 for solving blocks. This would result in a material adverse effect on our business and could potentially
impact our ability to continue as a going concern.
Our reliance on third-party miners may subject our operations to increased risk of design flaws.
The performance and reliability of our miners and technology is critical to both our reputation and operations. We currently use Bitmain Technologies
Limited ("Bitmain”) Antminer, and MicroBT WhatsMiner type miners, and if there are issues with those machines, such as design flaws in the ASIC chips
they employ, our system could be substantially impacted. Further, we have encountered, and may continue to encounter, software and firmware
complications related to adapting our miners to operate in our immersion-cooled Bitcoin mining hardware, which may delay or otherwise limit the
anticipated benefits of adopting immersion-cooled mining. Any system errors or failures may cause significant delays in response times or result in
system failure. Any disruption in our ability to continue mining could result in lower yields and harm our reputation and business. Given that any
exploitable weakness, flaw, or error common to the Bitmain or MicroBT miners we currently utilize could affect a substantial portion of our miners, if a
defect or other flaw exists and is exploited, a majority of, or all of our miners could be adversely impacted. Any interruption, delay or system failure may
result in financial losses, a material adverse effect on the market price for our securities, and damage to our reputation.
Our reliance primarily on immersion-cooling exposes us to additional risks.
We are increasingly relying on immersion-cooling technology for our Bitcoin Mining infrastructure, to a large extent at the Rockdale Facility, and entirely
at the Corsicana Facility. Immersion-cooling is an emerging technology in Bitcoin mining, which is not in wide-spread use, and has yet to be deployed at
this scale. As such, there is a risk that we may not succeed long term in deploying immersion-cooling at such a large-scale to achieve sufficient cooling
performance. All Bitcoin Mining infrastructure, including immersion-cooling and air-cooling, is an evolving study. Cooling of Bitcoin miners in general is a
risk to achieving full potential from our hash rate, especially in the State of Texas.
Additionally, both our immersion-cooling and air-cooling operations require substantial volumes of water to support cooling of our Bitcoin miners. If we
are unable to secure adequate water, or lose access to such required water, it could significantly impact our ability to sustain efficient Bitcoin Mining
operations.
Our revenue generation is subject to risks applicable to our mining pool, including risks outside of our control.
We participate in a "Full-Pay-Per-Share” mining pool, which calculates Bitcoin payouts primarily based on the hash rate provided by us to the mining pool
as a percentage of total network hash rate, along with other inputs. We currently derive a significant portion of our revenue from our mining pool
participation, which accounted for 85.2% and 67.3% of our total revenue for the years ended December 31, 2024 and 2023, respectively. We own all of our
miners and accompanying infrastructure, and the only connection between our assets and our mining pool is that the total hash rate capacity of our
miners is currently allocated to our mining pool, which we are free to change at any time, in our discretion. Further, the mining pool in which we
participate, like most mining pools, is decentralized and has protections in place to prevent malicious actors or technical errors from affecting the pool’s
ability to operate; however, these protections are not foolproof, and we may lose access to the mining pool, perhaps permanently. Because of the
monitoring systems we have in place, we would become aware within minutes if our mining pool were to suffer downtime or cease to exist altogether, and
we would expect to be able to resume mining without a mining pool within minutes, or redirect our hash rate to another mining pool, within an hour of the
downtime event. However, self-mining has, historically, been less successful in earning Bitcoin rewards than participating in a mining pool, and our
Bitcoin Mining revenue would become more volatile and may decline–perhaps materially–as a result of the loss or unavailability of our mining pool. If
such unanticipated circumstances associated with our mining pool arise, and we are unable to quickly switch to another pool, self-mine without a pool or
otherwise diversify our sources of Bitcoin Mining revenue, our business, results of operations, and financial condition may suffer as a result.
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Our use of third-party mining pools exposes us to certain risks.
We receive Bitcoin rewards from our mining activity through third-party mining pool operators. Mining pools enable miners to combine their processing
power, increasing their chances of solving a block and earning Bitcoin rewards from the network. After deducting any applicable pool fees, the pool
operator then distributes the rewards proportionally based on our contribution to the pool’s overall mining power. Should the pool operator’s system
suffer downtime due to a cyber-attack, software malfunction or other issue, it could negatively impact our ability to mine and receive revenue; particularly
if we are unable to quickly switch to another pool or to self-mining without a pool. Additionally, there is a risk that the mining pool operator could fail to
accurately record the total processing power provided to the pool for a given Bitcoin mining application, which would inhibit our ability to verify our
proportion of the pool’s total processing power. While we track both our hash rate and the total hash rate used by the pool internally, the pool operator
uses its own record-keeping system to determine our share of the rewards, which may not align with our calculation. If we are unable to consistently
obtain accurate proportionate rewards from our mining pool operators, we may not receive accurate block rewards from the pool, with limited recourse to
resolve such inaccuracies. This could lead us to reconsider our participation in a particular mining pool, or mining pools in general, which may affect the
predictability of our mining returns and have an adverse effect on our business and operations.
We may not be able to realize the benefits of forks.
The Bitcoin blockchain is subject to modification based on a consensus of the users on its network. When a significant minority of users on the network
agree to a modification that is not compatible with the prior network protocol, a "fork” of the network results, with one prong running the pre-modified
protocol and the other running the modified protocol. The effect of such a fork would be the existence of two "versions” of the blockchain running in
parallel that are not interchangeable, which requires exchange-type transactions to convert between the two forks. Additionally, it may be unclear
following a fork which of the two protocols represents the original and which is the new protocol. Different metrics adopted by industry participants to
determine which is the original asset following a fork in the Bitcoin blockchain may include: referring to the blockchain with the greatest network hash
rate, or to the "length” of blockchain (i.e., the time between the first transaction recorded in the blockchain’s distributed ledger and the date of the most
recent transaction). Accordingly, it is possible that a fork may occur on the Bitcoin blockchain that results in an asset different from our current Bitcoin
holdings, or a protocol different from SHA-256 (which our miners are specifically designed to operate), gaining predominance, and the value of our Bitcoin
assets may suffer, or we may not be able to adapt our miners to the new protocol. Therefore, we may not realize the economic benefit of a fork in the
Bitcoin blockchain, either immediately or ever, which could adversely affect an investment in our securities.
We may be exposed to potential liability from claims relating to intellectual property rights.
We may become the subject of third-party intellectual property right infringement claims relating to our own systems and/or the use of third-party
equipment and systems. For example, as further identified in Note 17. Commitments and Contingencies to our Consolidated Financial Statements, Green
Revolution Cooling, Inc. ("GRC”) has alleged that the immersion cooling systems we use, which were purchased from Midas Immersion Cooling, LLC and
Hash House Tech, Inc., infringe on certain of GRC’s patents. While we reasonably rely on the representations and warranties of third-party vendors, such
as Midas Immersion Cooling, LLC, it is not possible for us to avoid all potential claims of infringement of third-party intellectual property rights. If such
claims are successful, we may be required to pay royalties or be ordered to cease using any technologies found to be infringing on such third-party rights
altogether. Additionally, any such legal action would cause the diversion of time, energy, and resources away from our operations and toward defending
against such actions.
We are subject to counterparty risks, including in particular risks and uncertainties relating to our Custodians.
We rely on our Custodians, NYDIG and Coinbase, to safeguard our Bitcoin using cold storage. Each Custodian receives and holds our custodied assets,
which include both our digital assets and any cash we may choose to custody with the applicable Custodian. Pursuant to the NYDIG Custodial
Agreement and the Coinbase Prime Broker Agreement, each Custodian has covenanted that they hold our digital assets in segregated accounts for the
Company’s benefit; that the Custodian has no rights, interest or title in our digital assets; and that our digital assets do not constitute an asset on the
balance sheet of such Custodian. To the extent a Custodian holds any cash on our behalf, it may hold our cash in one or more omnibus "for benefit of
customers" accounts at one or more U.S. insured depository institutions. However, currently, the Company has no cash custodied and has no immediate
or future plans to custody any cash with either Custodian. Under the terms of the NYDIG Custodial Agreement and the Coinbase Prime Broker
Agreement, each Custodian has covenanted that our digital assets will not be commingled with other digital assets held by the Custodian, except that in
the NYDIG Custodial Agreement, assets may be temporarily commingled (typically for no longer than 12 hours, but in no case longer than 72 hours) as an
operational matter, if required, to effect a transfer into or out of our digital asset account. In the NYDIG Custodial Agreement, NYDIG further represents
and warrants that beneficial and legal ownership of all our
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digital assets is, and will remain, freely transferable without the payment of money or value and that NYDIG has no ownership interest in our account.
While we believe that each of the NYDIG Custodial Agreement and Coinbase Prime Broker Agreement provide our business with reasonable protections
for our operations and the safe storage of our digital assets, we make no assurances that storing our digital assets with either Custodian is free from risk.
To the best of our knowledge, each Custodian safely stores our digital assets in segregated accounts as represented in the NYDIG Custodial Agreement
and Coinbase Prime Broker Agreement; however, if a Custodian were to be in breach of its agreement, our digital assets could be compromised. Similarly,
if a Custodian were to cease operations, declare insolvency or file for bankruptcy, there is a reasonable risk that recovery of our assets, though kept in
segregated accounts, would be delayed or unrecoverable. Applicable insolvency law is not fully developed with respect to the holding of digital assets in
custodial accounts. If our custodied Bitcoin were considered to be the property of a Custodian’s estate in the event that such Custodian were to enter
bankruptcy, receivership or similar insolvency proceedings, there is a risk that we could be treated as a general unsecured creditor of such custodian,
inhibiting our ability to access our Bitcoin. Even if we are able to prevent our Bitcoin from being considered the property of a Custodian’s bankruptcy
estate as part of an insolvency proceeding, it is possible that we would still be delayed or may otherwise experience difficulty in accessing our Bitcoin
held by the Custodian during the pendency of the insolvency proceedings. A delay in our ability to access our Bitcoin could result in the loss of the
value related to some or all of our Bitcoin and could have a material adverse effect on our financial condition and the market price of our common stock.
We also do not have a readily available additional backup custodians at this time, so if NYDIG or Coinbase were to cease operations, declare insolvency
or file for bankruptcy, we would need to self-custody the applicable digital assets using cold storage until we could contract with another adequate
custodian for the safe storage of our assets which may have a disruptive effect on our business. In the meantime, our mined Bitcoin would continue to
aggregate in our proprietary wallet until we found another suitable cold storage custodian.
Our limited rights of legal recourse and our lack of insurance protection over our Bitcoin expose us and our stockholders to the risk of loss of our
Bitcoin for which there may be no adequate remedy.
While we rely on well-known U.S.-based third-party digital asset-focused custodians to safeguard our Bitcoin, our Bitcoin is not insured by us, including
not being subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protection. Accordingly, if our Bitcoin is lost,
stolen or destroyed under circumstances rendering a party liable to us, our loss could be significant and the responsible party may not have the financial
resources sufficient to satisfy our claim. For example, as to a particular event of loss, the only source of recovery for us might be limited, to the extent
identifiable, to responsible third parties, such as a Custodian, or in other instances, a thief, terrorist or others, any of which may not have the financial
resources (including liability insurance coverage) to satisfy a valid claim. We believe each Custodian maintains limited insurance policies covering the
pool of digital assets it custodies against certain events of loss, such as theft. NYDIG and Coinbase custody the digital assets of hundreds of parties,
worth billions of U.S. dollars, and any insurance coverage held by any of these Custodians is likely significantly less than the total value of the custodied
digital assets of their customers. Any insurance proceeds received by a Custodian in response to a loss would likely be shared by the Custodian with us
and other affected parties, rendering any amount we would receive significantly less than the value of our lost custodied assets. Furthermore, any
insurance held by the Custodians may be terminated without notice to us. Any loss of insurance coverage would impede our ability to be compensated
for our losses. Therefore, a loss may be suffered with respect to our Bitcoin for which there may be no recourse or adequate remedy, which could have a
material adverse effect on our results of operations and financial condition and, consequently, an investment in our securities.
Cyber-attacks, data breaches or malware may disrupt our operations and trigger significant liability for us, which could harm our operating results
and financial condition, and damage our reputation or otherwise materially harm our business.
As a publicly traded company, we experience cyber-attacks, such as phishing, and other attempts to gain unauthorized access to our systems on a regular
basis, and we anticipate continuing to be subject to such attempts. The volume and sophistication of cyber-attacks may increase if AI capabilities are
implemented by malicious actors and there is an ongoing risk that some or all of our Bitcoin could be lost or stolen as a result of one or more of these
incursions. As we increase in size, we may become a more appealing target of hackers, malware, cyber-attacks, or other security threats, and, despite our
implementation of strict security measures and frequent security audits, it is impossible to eliminate all vulnerabilities. For instance, we may not be able to
ensure the adequacy of the security measures employed by third parties, such as our service providers. Additionally, though we provide cybersecurity
training for employees, we cannot guarantee that we will not be affected by further phishing attempts. Efforts to limit the ability of malicious actors to
disrupt the operations of the internet or undermine our own security efforts may be costly to implement and may not be successful. Such breaches,
whether attributable to a vulnerability in our systems or otherwise, could result in claims of liability against us, damage our reputation and materially harm
our business.
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If our third-party digital asset-focused custodian experiences a security breach or cyber-attack and unauthorized parties obtain access to our Bitcoin, we
may lose some or all of our Bitcoin and our financial condition and results of operations could be materially adversely affected.
To date, we have not experienced a material cyber incident; however, we continue to encounter ongoing cyber-attacks and the occurrence of any such
event in the future could subject us to liability to our customers, suppliers, business partners and others, or give rise to legal and/or regulatory action,
which could damage our reputation or otherwise materially harm our business, operating results, and financial condition.
Incorrect or fraudulent Bitcoin transactions may be irreversible and we could lose access to our Bitcoin.
Bitcoin transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the Bitcoin from
the transaction. Because of the decentralized nature of the Bitcoin blockchain, once a transaction has been verified and recorded in a block that is added
to the Bitcoin blockchain, an incorrect transfer of a Bitcoin or a theft thereof generally will not be reversible, and we may not have sufficient recourse to
recover our losses from any such transfer or theft. It is possible that, through error, theft, or criminal action, our Bitcoin rewards could be transferred in
incorrect amounts, to unauthorized third parties, or to uncontrolled accounts. Though high-profile enforcement actions against individuals laundering
stolen Bitcoin have demonstrated some means of bringing malicious actors to justice, the stolen Bitcoin may remain unrecoverable. Furthermore, we utilize
a third-party custodian for our Bitcoin, and thus do not maintain our private keys. If they lose access to our wallet, or if a malicious actor successfully
denies our Custodians access to our wallet, we may be permanently denied access to the Bitcoin held in the wallet corresponding to the lost, stolen or
blocked keys. Though we have taken and continue to take reasonable steps to secure our data and to store our Bitcoin, if we, or our Custodians were to
experience data loss relating to our digital wallets, we could effectively lose access to and the ability to use our Bitcoin assets. Moreover, historically, we
have been unable to secure insurance policies for our Bitcoin assets. To the extent that we are unable to recover our losses from such action, error or
theft, such events could have a material adverse effect on our business, results of operations and financial condition.
The Rockdale Facility is subject to a long-term ground lease, and we may be unable to fully realize the anticipated benefits of its expansion if the
lease is not renewed or is otherwise terminated.
The Rockdale Facility is subject to a ground lease with an initial term of ten years, followed by three ten-year renewal periods at our option, unless
terminated earlier. The long-term success of our plans for the Rockdale Facility is largely based on our ability to maintain the lease in effect and to renew it
going forward. If we fail to maintain the lease or renew it once its initial term expires and the landlord requires the Rockdale Facility to vacate the premises,
we will likely incur significant costs in relocating its operations, if we could do so at all, and our Bitcoin Mining operations would be interrupted during
such relocation. Further, if we fail to renew the lease on terms favorable to us, and our costs are increased, then we may not realize the anticipated benefits
of our investment in the Rockdale Facility or any future development of its remaining available capacity. Any disruptions or changes to the Rockdale
Facility’s present relationship with the landlord could disrupt our business and our results of operations negatively.
Our business could be harmed by prolonged power and internet outages, shortages, or capacity constraints.
Our operations require a significant amount of electrical power and access to high-speed internet to be successful. If we are unable to secure sufficient
electrical power, or if we lose internet access for a prolonged period, we may be required to reduce our operations or cease them altogether. If this occurs,
our business and results of operations may be materially and adversely affected.
We are subject to risks associated with our need for significant electrical power.
Our operations have required significant amounts of electrical power, and, as we continue to expand our mining fleet and operate our Facilities, we
anticipate our demand for electrical power will continue to grow. The fluctuating price of electricity we require for our operations, and to power our
expansion, may inhibit our profitability. If we are unable to continue to obtain sufficient electrical power on a cost-effective basis, we may not realize the
anticipated benefits of our significant capital investments.
Additionally, our operations could be materially adversely affected by prolonged power outages. Although certain critical functions of the Rockdale
Facility may be powered by backup generators on a temporary basis, it would not be feasible or cost-effective to run miners on back-up power generators
for extended periods of time. Therefore, we may have to reduce or cease our operations in the event of an extended power outage, or as a result of the
unavailability or increased cost of electrical power. If this were to occur, our business and results of operations could be materially and adversely affected.
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Our access to power is dependent on our electrical distribution provider, grid operator and regulator, which collectively manage whether our
operations are performing in accordance with market rules, requirements and regulations, and any adverse determination or action by any such
entity may have a material adverse effect on our financial condition, results of operations and cash flows.
The Public Utility Commission of Texas ("PUCT”), ERCOT, and Oncor Electric Delivery Company ("Oncor”) collectively oversee the regulatory,
administrative, and delivery aspects of our power supply in Texas; MISO oversees our power supply in Kentucky. In recent years, regulatory scrutiny on
Bitcoin mining facilities and their energy consumption has intensified as the industry has grown. In April 2022, ERCOT established a task force to review
the participation of large flexible loads, including Bitcoin mining data centers, in the ERCOT market. This task force is tasked with developing policy
recommendations for ERCOT concerning network planning, market operations, and the interconnection processes for large flexible loads.
As the grid operator, ERCOT is responsible for monitoring and testing market participants, including the Rockdale Facility and the Corsicana Facility, to
assess their impact on grid reliability. We are periodically tested and monitored, and have experienced curtailment of power through this testing process
based on instructions we receive from Oncor and ERCOT. During this process, ERCOT may determine that our data centers’ substantial power usage
negatively affects grid reliability. If so, ERCOT could issue a curtailment order, requiring us to reduce or cease our power use immediately. Consequently,
our power supply in Texas could be partially or fully curtailed. If we cannot secure adequate electrical power, we may be forced to reduce or shut down
our operations, which would have a material adverse effect on our business, prospects, financial condition, and operating results and, consequently, an
investment in our securities.
Our operations have been, and may continue to be, adversely affected by events outside of our control, such as natural disasters.
We may be impacted by natural disasters, wars, health epidemics, weather conditions, the long-term effects of climate change, power outages or other
events outside of our control. For example, we voluntarily halted operations at the Rockdale Facility during the severe winter storms in the first quarter of
2022 and 2021 that had a widespread impact on utilities and transportation. Additionally, as previously disclosed, we sustained damage to the Rockdale
Facility’s infrastructure during the severe winter storms affecting Texas in December 2022 which caused miners to be offline and impacted approximately
2.5 EH/s of our hash rate capacity. In the future, regulators or power providers may, under new or revised rules, require us to power down our Facilities,
during such events. If major disasters such as earthquakes, floods or other climate-related events occur, the Rockdale Facility, the Corsicana Facility, the
Kentucky Facility, or our other offices are severely damaged, or our information system or communications break down or operate improperly, our
operations may be interrupted. We may incur expenses or delays relating to such events outside of our control, which may not be covered by insurance,
and such events could have a material adverse impact on our business, operating results and financial condition.
Increased scrutiny and changing expectations from stakeholders with respect to our environmental, social, and governance ("ESG”) practices and
the impacts of climate change may result in additional costs or risks.
Companies across many industries are facing increasing, and at times conflicting, scrutiny related to their ESG practices. Investor advocacy groups,
certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices and in recent years have
placed increasing importance on the non-financial impacts of their investments. Furthermore, increased public awareness and concern regarding
environmental risks, including global climate change, has resulted and may continue to result in increased public scrutiny of our business and our
industry, and our management team may divert significant time and energy away from our operations and towards responding to such scrutiny and
reassuring our employees.
In March 2024, the SEC issued a final rule requiring climate-related disclosures in public company annual reports and registration statements for the year
ending December 31, 2025 for large accelerated filers. Although the SEC issued an order staying the new rule in April 2024 pending ongoing litigation
challenging the rule, we are evaluating the impact this rule will have on our disclosures if it becomes effective. If this final rule becomes effective, the
resulting increased public scrutiny of our business may affect our operations, competitive position, and financial condition.
In addition, the physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supply of energy,
demand for Bitcoin and other cryptocurrencies, and could increase our insurance and other operating costs, including, potentially, to repair damage
incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events. If environmental laws or
regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our
operations, or if our operations are disrupted due to the physical impacts of climate change, our business, capital expenditures, results of operations,
financial condition and competitive position could be negatively impacted.
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Risks Related to Governmental Regulation and Enforcement
Changing environmental regulation and public energy policy may expose our business to new risks.
Our Bitcoin Mining operations require a substantial amount of power and can only be successful, and ultimately profitable, if the costs we incur, including
for electricity, are lower than the revenue we generate from our operations. As a result, any mine we establish can only be successful if we can obtain
sufficient electrical power for that mine on a cost-effective basis, and our establishment of new mines requires us to find locations where that is the case.
For instance, our plans and strategic initiatives for the Rockdale Facility and the Corsicana Facility are based, in part, on our understanding of current
environmental and energy regulations, policies, and initiatives enacted by federal and Texas regulators. If new regulations are imposed, or if existing
regulations are modified, the assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to
adapt our planned business, if we are able to adapt at all, to such regulations.
In addition, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty for our business because the
Bitcoin mining industry, with its energy demand, may become a target for future environmental and energy regulation. New legislation and increased
regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements,
capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. Further, any future climate change
regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.
Moreover, in the State of Texas, we currently participate in energy demand response programs to curtail operations, return capacity to the electrical grid,
and receive funds to offset foregone operational revenue when necessary, such as in extreme weather events. Furthermore, we, as well as other Bitcoin
miners operating primarily in the State of Texas, have recently received a mandatory survey from the U.S. Energy Information Administration (the "EIA”),
seeking extensive information regarding our Facilities’ use of electricity, and certain information regarding our operations, solely for the month of January
2024. It is possible that mandatory surveys such as this will be used by the EIA to generate negative reports regarding the Bitcoin mining industry’s use
of power and other resources, which could spur additional negative public sentiment and adverse legislative and regulatory action against us or the
Bitcoin mining industry as a whole. Surveys and other regulatory actions could increase our cost of operations or otherwise make it more difficult for us to
operate at our current locations.
Given the political significance and uncertainty around the impact of climate change and how it should be addressed, and energy disclosure and use
regulations, we cannot predict how legislation and regulation will affect our financial condition and results of operations in the future in the United States
and the States of Texas and Kentucky. Further, even without such regulation, increased awareness and any adverse publicity in the global marketplace
about potential impacts on climate change or energy use by us or other companies in our industry could harm our reputation. Any of the foregoing could
result in a material adverse effect on our business and financial condition.
The compliance costs of responding to new and changing regulations could adversely affect our operations at the Rockdale Facility and the
Corsicana Facility.
We (along with those from whom we purchase electricity) are subject to various federal, state, local, and international environmental laws and regulations,
including those relating to the generation, storage, handling, and disposal of hazardous substances and wastes. Certain of these laws and regulations
also impose joint and several liability, without regard to fault, for investigation and cleanup costs on current and former owners and operators of real
property and persons who have disposed of or released hazardous substances into the environment. Our operations may involve the use of hazardous
substances and materials, such as petroleum fuel for emergency generators, as well as batteries, cleaning solutions, and other materials.
Electricity costs could also be affected due to existing or new regulations on greenhouse gas emissions, whether such regulations apply to all consumers
of electricity or just to specified uses, such as Bitcoin mining. These regulations may be federal, or we may be exposed to such regulations due to our
Texas and Kentucky-based operations. There has been interest in the U.S. federal government and in the state governments of Texas and Kentucky in
addressing climate change, including through regulation of Bitcoin mining. Past policy proposals to address climate change include measures ranging
from taxes on carbon use or generation to energy consumption disclosure regimes to federally imposed limits on greenhouse gas emissions or energy use
restrictions specific to Bitcoin mining. Further, although Texas has historically sought to maintain some degree of energy independence from the United
States as a whole, it is unclear how future legislation and regulation will affect the Rockdale Facility and the Corsicana Facility. The course of future
legislation and regulation in the United States and in Texas remains difficult to predict, and potential increased costs associated with new legislation or
regulation cannot be estimated at this time.
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Regulatory changes or actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects
our business, prospects, or operations.
As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies; certain
governments have deemed them illegal, and others have allowed their use and trade without restriction, while some jurisdictions, such as the United
States, subject the mining, ownership and exchange of cryptocurrencies to extensive, and in some cases overlapping, unclear and evolving regulatory
requirements.
In January 2025, U.S. President Donald Trump issued an executive order forming a presidential working group to establish a clear regulatory framework for
digital assets, and leaders in both houses of the U.S. Congress have announced a bicameral working group with the objective of passing legislation to
provide regulatory clarity for the industry. Committees in both houses of the U.S. Congress have held hearings to ensure fair access to financial services,
including for companies operating in the digital asset space. Additionally, President Trump and members of the U.S. Congress announced that they are
studying the possibility of creating a national strategic digital asset reserve to include Bitcoin, and at least twelve states have introduced legislation to
create strategic Bitcoin reserves.
While these ongoing regulatory developments appear to be positive, and we anticipate greater regulatory certainty in the future, given the difficulty of
predicting the outcomes of ongoing and future regulatory actions and legislative developments, it is possible that future developments could have a
material adverse effect on our business, prospects, or operations.
Our interactions with a blockchain may expose us to SDN or blocked persons and new legislation or regulation could adversely impact our business
or the market for cryptocurrencies.
OFAC requires us to comply with its sanction program and not conduct business with persons named on its SDN list. However, because of the
pseudonymous nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions with persons named on
OFAC’s SDN list. Our Company’s policy prohibits any transactions with such SDN individuals, and we take all commercially reasonable steps to avoid
such transactions, but we may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to
selling Bitcoin assets. Moreover, there is a risk that some bad actors will continue to attempt to use cryptocurrencies, including Bitcoin, as a potential
means of avoiding federally imposed sanctions, such as those imposed in connection with the Russian invasion of Ukraine.
We are unable to predict the nature or extent of new and proposed legislation and regulation affecting the Bitcoin industry, or the potential impact of the
use of Bitcoin by SDN or other blocked or sanctioned persons, which could have material adverse effects on our business and our industry more broadly.
Further, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties as a result of any
regulatory enforcement actions, all of which could harm our reputation and affect the value of our common stock.
Bitcoin and Bitcoin mining, as well as cryptocurrencies generally, may be made illegal in certain jurisdictions, including the ones we operate in,
which could adversely affect our business prospects and operations.
It is possible that state or federal regulators may seek to impose harsh restrictions or total bans on Bitcoin mining which may make it impossible for us to
do business without relocating our mining operations, which could be very costly and time consuming. Further, although Bitcoin and Bitcoin mining, as
well as cryptocurrencies generally, are largely unregulated in most countries (including the United States), regulators could undertake new or intensify
regulatory actions that could severely restrict the right to mine, acquire, own, hold, sell, or use cryptocurrency or to exchange it for traditional fiat
currency such as the United States Dollar. Such restrictions may adversely affect us as the large-scale use of Bitcoin as a means of exchange is presently
confined to certain regions globally. Such circumstances could have a material adverse effect on us, which could have a material adverse effect on our
business, prospects or operations and potentially the value of any Bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own
account, and thus harm investors.
Risks Related to Ownership of Our Common Stock
The trading price of shares of our common stock has been subject to volatility.
The trading price of our common stock has been, and is likely to continue to be, volatile, and may be influenced by various factors including the risks,
uncertainties and factors described in this Annual Report and our other filings with the SEC, as well as factors beyond our control or of which we may be
unaware. If these risks come to pass and our business and results of operation suffer as a result, the market price of our securities may decline, which
could have a material adverse effect on an investment in our securities.
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Bitcoin is subject to price volatility resulting from financial instability, poor business practices, fraudulent activities of players in the market, and other
factors outside of our control. Such factors may cause a decline in the price of Bitcoin, which may affect the trading price of our shares of common stock.
We have issued new shares of our common stock, which has a dilutive effect.
We have, primarily, financed our strategic growth through our at-the-market ("ATM”) offerings and issuances of our common stock. Our ATM offerings
allow us to raise capital as needed by tapping into the existing trading market for our shares by selling newly issued shares into the market depending on
prevailing market prices. Our efforts to raise capital is for the purpose of executing on development plans and strategic growth opportunities as they
arise; however, holders of our common stock may experience dilution as a result of our sales of newly issued shares of our common stock in such ATM
offerings.
We have a classified Board; therefore, only approximately one-third of the Board is up for election at each annual stockholders’ meeting, which
could limit stockholders’ ability to influence directors’ decision making.
Our Bylaws provide for a classified Board consisting of three classes of directors serving staggered three-year terms, and each year our stockholders elect
one class of our directors. We believe that a classified board structure facilitates continuity and stability of leadership and policy by helping ensure that,
at any given time, a majority of our directors have prior experience as directors of our Company and are familiar with our business and operations. In our
view, this permits more effective long-term planning and helps create long-term value for our stockholders. The classified board structure, however, could
prevent a party who acquires control of a majority of our outstanding voting stock from obtaining control of our Board until the second annual
stockholders’ meeting following the date that party obtains control of a majority of our voting stock. The classified board structure may discourage a third
party from initiating a proxy contest, making a tender offer or otherwise attempting to obtain control of us, as the structure makes it more difficult for a
stockholder to replace a majority of our directors.
Article X of our Bylaws, as amended, designates the courts of the State of Nevada as the sole and exclusive forum for certain types of actions and
proceedings that may be initiated by our stockholders, and therefore may limit our stockholders’ ability to choose a forum for disputes with us or our
directors, officers, employees, or agents.
Article X of our Bylaws, as amended, provides that, to the fullest extent permitted by law, and unless we consent to the selection of an alternative forum,
the state and federal courts in and for the State of Nevada shall be the sole and exclusive forum for the resolution of certain actions and proceedings that
may be initiated by our stockholders, and that, by purchasing our securities, our stockholders are deemed to have notice of and consented to this forum
selection clause. Under Article X of our Bylaws, the following claims are subject to this forum selection clause: (a) any derivative action or proceeding
brought on behalf of the Company; (b) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director or officer of the
Company to the Company or the Company’s stockholders; (c) any action or proceeding asserting a claim against the Company arising pursuant to any
provision of the Nevada Revised Statutes or the Company’s Articles of Incorporation or Bylaws (as either might be amended from time to time); or (d) any
action or proceeding asserting a claim against the Company governed by the internal affairs doctrine.
By its terms, the forum selection clause in our Bylaws applies to the foregoing claims to the fullest extent permitted by law, and, as such, should not be
interpreted as precluding our stockholders from bringing claims under the Exchange Act in the appropriate federal court with jurisdiction over such claims,
or any other claim for which the federal courts of the United States have exclusive jurisdiction.
We believe the choice-of-forum provision in our Bylaws will help provide for the orderly, efficient, and cost-effective resolution of legal issues affecting
us by designating courts located in the State of Nevada as the exclusive forum for cases involving such issues. However, this provision may limit a
stockholder’s ability to bring a claim in a judicial forum that it believes to be favorable for disputes with us or our directors, officers, employees, or agents,
which may discourage such actions against us and our directors, officers, employees, and agents.
The Nevada revised statutes permit us to make this selection in our Bylaws. However, if a court were to find the choice-of-forum provision in our Bylaws
inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with
resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.
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Nevada law contains provisions that could discourage, delay or prevent a change in control of our Company, prevent attempts to replace or remove
current management and reduce the market price of our stock.
Certain provisions of Nevada law described below may make us a less attractive candidate for acquisition, which may adversely impact the value of the
shares of our capital stock held by our stockholders. We have not opted out of these provisions in our Bylaws, as permitted under the Nevada Revised
Statutes.
Nevada Revised Statutes Sections 78.411 through 78.444 (the "Nevada Combinations Statute”) generally prohibit "combinations” including mergers,
consolidations, sales and leases of assets, issuances of securities and similar transactions by a Nevada corporation having a requisite number of
stockholders of record (of which we are one) with any person who beneficially owns (or any affiliate or associate of the corporation who within the
previous two years owned), directly or indirectly, 10% or more of the voting power of the outstanding voting shares of the corporation (an "interested
stockholder”), within two years after such person first became an interested stockholder unless (i) the board of directors of the corporation approved the
combination or transaction by which the person first became an interested stockholder before the person first became an interested stockholder or (ii) the
board of directors of the corporation has approved the combination in question and, at or after that time, such combination is approved at an annual or
special meeting of the stockholders of the target corporation, and not by written consent, by the affirmative vote of holders of stock representing at least
60% of the outstanding voting power of the target corporation not beneficially owned by the interested stockholder or the affiliates or associates of the
interested stockholder.
Two years after the date the person first became an interested stockholder, the Nevada Combinations Statute prohibits any combination with that
interested stockholder unless (i) the board of directors of the corporation approved the combination or transaction by which the person first became an
interested stockholder before the person first became an interested stockholder or (ii) such combination is approved by a majority of the outstanding
voting power of the corporation not beneficially owned by the interested stockholder or any affiliate or associate of the interested stockholder. The
Nevada Combinations Statute does not apply to combinations with an interested stockholder after the expiration of four years from when the person first
became an interested stockholder.
Because we do not currently intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their
shares unless they sell them.
We currently intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash
dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares
unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.
If we are unable to maintain an effective system of internal control over financial reporting and disclosure controls, we may fail to produce timely
and accurate financial statements.
The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors,
misstatements or misrepresentations. While we have identified material weaknesses in our internal control over financial reporting in the past, as of
December 31, 2024, we concluded that our internal control over financial reporting contained no material weaknesses, and our management continues to
implement measures designed to ensure controls are designed, implemented, and operating effectively.
While our management frequently reviews the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there
can be no guarantee that our disclosure controls and procedures and internal control over financial reporting will be effective in accomplishing all control
objectives all of the time. Ineffective internal control over financial reporting and disclosure controls could cause us to fail to meet our periodic reporting
obligations and cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our
common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. Cybersecurity
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in
Item 106(a) of Regulation S-K. These material risks are managed across Riot, our subsidiaries, and third-party
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contractors, and monitoring such risks and threats is integrated into our overall risk management program. Our risk management program is comprised of,
among other things, policies that are designed to identify, assess, manage, and mitigate cybersecurity risk, and is based on applicable laws and
regulations, informed by industry standards and best practices.
We conduct risk assessments to evaluate the effectiveness of our systems and processes in addressing threats and to identify opportunities for
enhancements. Additionally, we conduct privacy and cybersecurity reviews, as well as annual employee training, and monitor emerging laws and
regulations related to information security and data protection. We utilize third party tools and techniques to test and enhance our security controls,
perform annual cybersecurity framework assessments, conduct ongoing penetration testing of our systems, and benchmark against industry practices.
Our internal audit function provides independent assessment on the overall operations of our cybersecurity program and the supporting frameworks.
In support of our risk management program, we have adopted an Information Security Policy (the "Info-Sec Policy”) and an Incident Response Plan (the
"Response Plan”) that establish administrative, physical, and technical controls and procedures to protect the integrity, confidentiality, and accessibility
of sensitive data that may exist throughout the Company as well as processes to assess, identify, manage, and report cybersecurity risks and incidents.
Our Info-Sec Policy applies to all persons working for the Company, as well as any third parties working with us in any capacity. Violation of our Info-Sec
Policy may result in revocation of access privileges, and disciplinary action up to and including termination of employment or service relations for third
parties.
Our cybersecurity team analyzes all third-party vendors for compliance with our internal Info-Sec Policy in order to help us assess potential risks
associated with their security controls. We also generally require third parties to, among other things, maintain security controls to protect our
confidential information or data, and to notify us promptly, but in any case, no later than twenty-four (24) hours after the occurrence of any data breach or
cybersecurity incident that may impact our data. After coordinating a response to any third-party cybersecurity incident, the incident response team
reviews service providers’ compliance with the privacy and data security requirements of our Info-Sec Policy, obtains written assurance of corrective
actions, as appropriate, and considers whether additional measures need to be taken to protect the Company.
Our cybersecurity team engages and utilizes third-party services as it monitors and actively responds to cybersecurity threats. We utilize an Endpoint
Detection and Response (EDR) platform, an anti-virus application, through which incoming electronic communications are filtered, and an email security
platform which seeks out identifiers in communications that disguise, impersonate, or otherwise misrepresent the source of the communication. Any such
communications are then subject to quarantine or removal depending on the severity of issue. Additionally, we use a Security Information and Event
Management (SIEM) system, which allows us to store logs off the system of record to prevent log tampering and provides the cybersecurity team
functionality to build alerts on specific use cases that are important and unique to our business. We also implement robust network security protections
and enterprise hardware for firewalls to safeguard our infrastructure against unauthorized access and cyber threats. Our strategy for 2025 includes
leveraging AI and machine learning for enhanced threat detection and response, adopting a Zero Trust architecture, and using quantum-resistant
encryption methods for data protection. We also focus on ransomware defense, regular backup and recovery processes, and continuous employee
training and awareness programs. Additionally, we ensure compliance with the latest regulations, participate in threat intelligence sharing, and explore
emerging technologies like post-quantum cryptography and blockchain security. If our applications fail or our software does not successfully block
malicious electronic communications, employees are required to notify an immediate supervisor or the cybersecurity team promptly, but in no
circumstances later than twenty-four (24) hours after such occurrence.
Our Board has ultimate oversight of our strategic and business risk management and, as such, has oversight responsibilities for risks and incidents
relating to cybersecurity threats, including compliance with disclosure requirements, cooperation with law enforcement, and related effects on financial
and other risks. The Board has delegated to the Audit Committee oversight risks of cybersecurity risk policies, practices and procedures. Management is
responsible for identifying, assessing, and managing material cybersecurity risks on an ongoing basis, establishing and updating processes to ensure
such potential risks are monitored, putting in place appropriate mitigation measures, and providing regular reports on cybersecurity trends and risks, and
should they arise, any material incidents with our Board.
Our Chief Financial Officer is responsible for our cybersecurity program, and our Director of Cyber Security is our incident response team leader. In this
position, our Director of Cyber Security oversees our cybersecurity team, and guides our incident response team, which is comprised of members from
across our organization, including cybersecurity, IT support, mining operations, software engineering, compliance and legal, as well as contractors and
other partners, as they support our cybersecurity functions. Our Director of Cyber Security has nearly two decades of experience in cybersecurity
management and policy, achieved through job training, college education, and work in security and alignment of information technology solutions.
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The Response Plan, developed by management and our cybersecurity team, and IT support team, serves as a Company-wide guide to facilitate
coordinated, prompt, and systematic responses to any cybersecurity incidents and utilizes four interconnecting phases: (1) Preparation; (2) Detection and
Analysis; (3) Containment, Eradication, and Recovery; and (4) Post-Incident Activity.
Upon detection of a cybersecurity incident and initial intake and validation by our cybersecurity team, our incident response team triages and evaluates
the cybersecurity incident, and, depending on the severity, escalates the incident to management and a cross-functional working group. Any incident
assessed as potentially being or potentially becoming material is immediately escalated for further assessment and reported to executive management.
Determination of what resources are needed to address the incident, prioritizing of response activities, forming of action plans, and notification of external
parties as needed are then undertaken by executive management and the cross-functional working group, led by our Chief Financial Officer and Director
of Cyber Security. We consult with outside counsel as appropriate, including on materiality analysis and disclosure matters, and our executive
management makes the final materiality and disclosure determinations, among other compliance decisions.
During 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy,
results of operations or financial condition. However, despite our efforts, we may not be successful in eliminating all risks from cybersecurity threats and
can provide no assurances that undetected cybersecurity incidents have not occurred. See Part I, Item 1A. "Risk Factors” of this Annual Report for more
information regarding the cybersecurity risks we face.
ITEM 2. PROPERTIES
Leased Property
As of December 31, 2024, we leased: various corporate offices; manufacturing facilities in Denver, Colorado and Houston, Texas used for our Engineering
segment; and temporary office space at the Corsicana Facility, a data center in Kentucky, and, pursuant to a long-term ground lease for the land upon
which the Rockdale Facility is constructed, all of which are used for our Bitcoin Mining segment.
Property Owned
As of December 31, 2024, we owned the Rockdale Facility, the Corsicana Facility, the land upon which the Corsicana Facility is built, and land and a data
center in Kentucky.
In our opinion, our Facilities, whether owned or leased, are suitable and adequate for their intended purposes, are well-maintained and generally in regular
use and have capacities adequate for current and projected needs. Other than the ground lease for the Rockdale Facility noted above, there are no material
encumbrances on any of our owned facilities.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of our legal proceedings, see Note 17. Commitments and Contingencies to our Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information
Our common stock trades on the Nasdaq Capital Market under the symbol "RIOT”.
Holders of our Common Stock
As of February 20, 2025, there were approximately 1,676 registered holders of record of our common stock. The actual number of stockholders is greater
than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other
nominees.
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Dividend Policy
We have historically not declared or paid cash dividends on our capital stock, and do not intend to pay cash dividends in the foreseeable future. Any
future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our Board and will depend on then-existing
conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our
Board may deem relevant.
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Stock Performance Graph
This performance graph shall not be deemed "filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of Riot
Platforms, Inc. under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
The following graph shows a comparison over a five-year period from December 31, 2019 through December 31, 2024, of the cumulative total return on (a)
our common stock (RIOT), (b) our self-constructed Peer Group Index, and (c) the RUSSELL 3000 Index ("RUSSELL 3000”), assuming an aggregate initial
investment in each of $100 as of market close on December 31, 2019 (and weighted based on the market cap of each peer in the Peer Group Index as of the
market close on December 31, 2019), including reinvestments of any dividends. Such returns are based on historical results and are not intended to
suggest future performance. Historically, we have not declared or paid cash dividends on our common stock.
Our self-constructed Peer Group Index consists of publicly traded Bitcoin miners with available publicly traded market data as of, and subsequent to,
December 31, 2019, and consists of:, Bitfarms Ltd. (BITF), CleanSpark, Inc. (CLSK), HIVE Digital Technologies, Ltd. (HIVE), Hut 8 Corp. (HUT), Marathon
Digital Holdings, Inc. (MARA), Mawson Infrastructure Group, Inc. (MIGI), and TeraWulf Inc. (WULF).
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Issuer Purchases of Securities
The following table presents the repurchases by us of our common stock during the three months ended December 31, 2024:
Total Number
Maximum
of Shares
Number of
Purchased as
Shares that
Total
Part of
May Yet Be
Number of
Average
Publicly
Purchased
Shares
Price Paid
Announced Plans
Under the Plans
Period
Purchased (a)
per Share (b)
or Programs
or Programs
October 1, 2024 through October 31, 2024
2,233
$
7.08
N/A
N/A
November 1, 2024 through November 30, 2024
-
-
N/A
N/A
December 1, 2024 through December 31, 2024
6,716
10.21
N/A
N/A
Total
8,949
$
9.43
(a) During the quarter ended December 31, 2024, pursuant to our 2019 Equity Incentive Plan, certain of our employees surrendered shares of
common stock to us to satisfy statutory minimum federal and state tax obligations associated with the vesting of restricted stock awards.
(b) The price paid per share is based on the closing price of our common stock as of the date of the determination of the statutory minimum for
federal and state tax obligations.
Recent Sales of Unregistered Equity Securities
On July 23, 2024, we issued 7,240,623 shares of our common stock to the sellers in connection with the Block Mining Acquisition. The shares of common
stock in connection with the Block Mining Acquisition were issued in reliance upon an exemption from registration provided by Section 4(a)(2) of the
Securities Act and/or the private offering safe harbor provision of Rule 506 of Regulation D promulgated thereunder.
On December 1, 2021, we issued 715,413 shares of our common stock, subject to a holdback of 70,165 shares to the sellers in connection with the
acquisition of ESS Metron ("ESS Metron Acquisition”). The shares of common stock in connection with the ESS Metron Acquisition were issued in
reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act. Subsequently, we registered for resale the 645,248 shares
issued to the sellers at the closing of the ESS Metron Acquisition and the 70,165 shares to the sellers upon expiration of the holdback period during 2023.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A”) provides information that will assist
the reader in understanding our results of operations and financial condition. This MD&A should be read in conjunction with our Consolidated Financial
Statements and the related notes (the "Notes”) that are included in Part II, Item 8. "Financial Statements and Supplementary Data” of this Annual Report.
This MD&A generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. As a result of the elimination of the Data
Center Hosting reportable segment during 2024, year-to-year comparisons between 2023 and 2022 are also presented within Results of Operations.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 not impacted by the elimination of the Data Center Hosting reportable
segment are not included in this MD&A, and can be found in "Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Our MD&A is organized as follows:
●
Business Overview and Trends. Highlights of events in 2024 that impacted our financial position.
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●
Results of Operations. Analysis of our financial results comparing fiscal years 2024 and 2023 and fiscal years 2023 and 2022.
●
Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows and discussion of our financial condition, including
potential sources of liquidity, material cash requirements and their general purpose.
●
Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions
and judgments incorporated in our reported financial results.
For a discussion of our business, see Part I, Item 1. "Business” of this Annual Report.
Forward Looking Statements
This MD&A includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,
expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as
a result of a number of factors. See "Cautionary Note Regarding Forward-Looking Statements.”
BUSINESS OVERVIEW AND TRENDS
General
We are a leading Bitcoin mining company focused on utilizing our vertical integration strategy to mine Bitcoin in support of the Bitcoin blockchain. We
own and operate multiple Bitcoin mining sites in the United States with two locations in Texas, consisting of the Rockdale Facility and the Corsicana
Facility, and the Kentucky Facility. The Rockdale Facility is believed to be the largest Bitcoin mining facility in North America, as measured by developed
capacity, and currently provides 700 MW in total developed capacity. Additionally, we are developing our second large-scale Bitcoin mining facility, the
Corsicana Facility, which currently provides 400 MW in developed capacity. Upon completion, the Corsicana Facility is expected to have approximately
one GW of capacity available. During 2024, we capitalized on our positioning within the market and acquired Block Mining, a Kentucky-based vertically-
integrated Bitcoin miner and E4A Solutions, a leading provider of electrical engineering services to a diverse customer base of energy developers and data
center operators. The Block Mining Acquisition added 60 MW of operational capacity for self-mining operations, which we are working to expand to 110
MW in 2025, and provided us with access to a secondary electrical grid. The acquisition of E4A Solutions adds engineering expertise to service our own
existing and future electrical infrastructure, as well as provides solutions and services to the rapidly growing market for electrical infrastructure.
Our market environment is highly competitive globally and regionally. We compete against other large-scale Bitcoin miners and individuals to receive the
Bitcoin reward that is the heart of our operations. Our industry frequently evolves based on the proliferation of Bitcoin and cryptocurrencies in general,
and we believe we are well positioned in the digital commodities industry in which we operate.
We are organized in two business segments: Bitcoin Mining and Engineering.
Bitcoin Mining
During the year ended December 31, 2024, we continued development activities at the Corsicana Facility, acquired the Kentucky Facility and deployed
miners at all our Facilities, with the objective of increasing our operational efficiency and performance in the future. As of December 31, 2024, we had a
total deployed hash rate capacity of 31.5 EH/s, as compared to 12.4 EH/s as of December 31, 2023, an increase of 154.0%.
During the year ended December 31, 2024, we mined 4,828 Bitcoin, as compared to 6,626 Bitcoin mined during the year ended December 31, 2023. The
decrease of 1,798 Bitcoin was primarily due to the April 2024 halving event, which was partially offset by our increase in deployed hash rate.
We are targeting a total self-mining hash rate capacity of 38.4 EH/s by the end of 2025.
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Custodians
As Bitcoin is a decentralized cryptocurrency, it is not required that Bitcoin be held by a custodian, and we may elect to self-custody. However, we believe
our private keys relating to our Bitcoin are better safeguarded by the secure environment provided by custodians. Self-custody poses an increased risk to
our private keys and we may not have the same level of protection as custody providers who are well versed in industry best practices to protect digital
assets from potential theft, loss, or destruction.
Pursuant to the Digital Asset Custodial Agreement, dated as of November 1, 2023, between us and NYDIG (as may be amended, modified or supplemented
from time to time, the "NYDIG Custodial Agreement”), NYDIG, a well-known U.S.-based third-party digital asset-focused custodian, holds our Bitcoin in
cold storage wallets in a digital asset account in our name. In exchange for its custodial services, NYDIG charges an annual fee equal to a percentage of
our custodied Bitcoin based on the daily average value in U.S. dollars of the Bitcoin we custody with NYDIG. Our Bitcoin held in such digital asset
accounts does not constitute "deposits” within the meaning of U.S. federal or state banking law and the digital asset accounts are not subject to Federal
Deposit Insurance Corporation or Securities Investor Protection Corporation protections. The cold storage wallets in which our Bitcoin is held with
NYDIG are all located in the United States. The NYDIG Custodial Agreement is for a term of one-year, and automatically renews for successive one-year
periods, unless either the Company or NYDIG provides thirty days’ notice of termination, in writing, except that either the Company or NYDIG may
terminate the NYDIG Custodial Agreement in writing, effective immediately, in the event that either NYDIG or the Company are adjudged bankrupt or
insolvent or files an application for an arrangement with its creditors, or there is a material misstatement or failure of a party to perform its obligations
under the NYDIG Custodial Agreement, a change in applicable law that has a material adverse effect on the services provided for in the NYDIG Custodial
Agreement, or a substantial change in ownership or control or material adverse change in the financial condition of NYDIG or the Company.
The NYDIG Custodial Agreement contains certain mutual indemnification provisions, including that NYDIG will indemnify us against direct claims for loss
of custodied assets that arise directly from NYDIG’s or NYDIG’s nominees’ grossly negligent action, grossly negligent failure to act, bad faith or willful
misconduct. Additionally, the Company shall indemnify NYDIG against all claims and liabilities incurred or assessed against NYDIG in connection with
the NYDIG Custodial Agreement, except as may arise from certain of NYDIG or its nominees’ own actions or conduct.
For more information on the NYDIG Custodial Agreement, see the full text of the NYDIG Custodial Agreement filed herewith as Exhibit 10.22, which
qualifies the forgoing descriptions of the NYDIG Custodial Agreement in its entirety.
We are also a party to a Digital Asset Execution Agreement with NYDIG Execution LLC ("NYDIG Execution”), pursuant to which NYDIG Execution
executes or arranges transactions of our Bitcoin ("Orders”) as our agent. NYDIG Execution earns a commission on each trade determined by the net trade
proceeds in U.S. dollars. NYDIG Execution does not charge us additional fees for principal trades. We deliver our Orders to NYDIG Execution via a
designated security procedure, and each Order is affirmatively accepted by NYDIG Execution. While our Bitcoin may temporarily be processed through a
NYDIG Execution customer account, NYDIG has covenanted that our assets will not be commingled with the assets of NYDIG Execution. NYDIG
Execution is required to deposit any cash from the sale of our Bitcoin into our bank account at a U.S. depositary institution, less any applicable
commissions. NYDIG Execution does not guarantee the value of our Bitcoin and is not responsible for any delay or failure to complete any Order caused
by a digital asset network. If NYDIG Execution fails to (1) execute a properly executable Order and (2) give us notice of such failure, NYDIG Execution will
only be liable for our actual damages.
The Company also engaged Coinbase, a well-known U.S.-based third-party digital asset-focused custodian through the Coinbase Prime Broker
Agreement, which includes the Coinbase Custody Services Agreement, and the Coinbase Master Trading Agreement (together, the "Coinbase Prime
Broker Agreement”) for custodial and prime broker services, including, but not limited to, the storing of digital assets, trade execution, lending, post-trade
credit, and other services. In exchange for its custodial services, Coinbase charges an initial storage fee and an annualized custodial service fee based on
the total value of the digital assets the Company custodies with Coinbase. Our Bitcoin held in such digital asset accounts does not constitute "deposits”
within the meaning of U.S. federal or state banking law and the digital asset accounts are not subject to Federal Deposit Insurance Corporation or
Securities Investor Protection Corporation protections. The cold storage wallets in which our Bitcoin is held with Coinbase are located in the United
States.
The Coinbase Prime Broker Agreement shall remain in effect until terminated by Coinbase or the Company for any reason upon providing thirty days
written notice to the other party. However, Coinbase may, in its sole discretion, suspend, restrict or terminate the Coinbase Prime Broker Agreement,
including by suspending, restricting or closing the Company’s accounts or any provision of credit (as applicable), immediately upon the occurrence of an
Event of Default (as defined in the Coinbase Prime Broker Agreement), without prior notice to the Company.
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The Coinbase Prime Broker Agreement contains certain mutual indemnification provisions, including that Coinbase will indemnify the Company from and
against direct claims and losses arising out of or relating to any (i) violation, misappropriation, or infringement upon any United States patent, copyright,
trademark, trade secret or other intellectual property right of a third party or (ii) violation of applicable law, unless such claims or losses arise out of or
relate to the Company’s gross negligence, fraud, willful misconduct, or breach of the Coinbase Prime Broker Agreement. The Company will indemnify
Coinbase from and against any and all third-party claims and losses arising out of or relating to the Company’s breach of the Coinbase Prime Broker
Agreement, the Company’s violation of any law, rule, or regulation, or rights of any third party, or the Company’s gross negligence, fraud, or willful
misconduct, except to the extent such third-party claims and losses resulted from the gross negligence, fraud or willful misconduct of Coinbase.
Additionally, under the Coinbase Prime Broker Agreement, Coinbase may execute or arrange transactions of our Bitcoin as our agent. The Company will
pay a fixed rate as commission and transaction fees associated with the Order executed. The Company delivers Orders to Coinbase, and Coinbase
executes Orders by using automated trade routing services or by filling Orders on Coinbase’s over-the-counter trading service. Coinbase may accept or
reject any Order, at its sole discretion. Coinbase does not guarantee the value of our Bitcoin and is not responsible for any delay or failure to complete
any Order caused by a digital asset network.
For more information on the Coinbase Prime Broker Agreement, see the full text of the Coinbase Prime Broker Agreement included herein as Exhibit 10.23,
which qualifies the forgoing descriptions of the Coinbase Prime Broker Agreement in its entirety.
Our custodian and brokerage services relationships are non-exclusive, and we may change our Bitcoin custodian and brokerage relationships at any time.
We continually monitor our Bitcoin assets held by our Custodians, and in the case of NYDIG we have unlimited audit rights with respect to such
custodial accounts. The Company performs monthly reconciliations of our Bitcoin assets held by our custodian(s) and the records of our mining pool,
and our independent auditors verify the location and quantity of our Bitcoin assets annually, as part of the year-end audit process of our financial
statements and internal controls over financial reporting. The Company’s insurance providers do not have inspection rights associated with our Bitcoin
assets held in cold storage.
Bitcoin Mining Metrics
The following table presents our key Bitcoin Mining metrics:
Years Ended December 31,
2024
2023
2022
Hash rate, average operating (EH/s)(1)
Rockdale Facility
9.2
8.6
3.1
Corsicana Facility
5.1
—
—
Kentucky Facility
0.6
—
—
Combined hash rate, average operating
15.0
8.6
3.1
All-in power cost (cents/kilowatt-hour)(2)
Rockdale Facility
3.2
4.1
3.0
Corsicana Facility
3.7
—
—
Kentucky Facility
4.1
—
—
Combined all-in power cost
3.4
4.1
3.0
As of December 31,
2024
2023
2022
Hash rate, deployed (EH/s)(1)
Rockdale Facility
15.0
12.4
9.7
Corsicana Facility
14.1
—
—
Kentucky Facility
2.4
—
—
Combined hash rate, deployed
31.5
12.4
9.7
Developed power capacity (MW)(3)
Rockdale Facility
700
700
630
Corsicana Facility
400
—
—
Kentucky Facility
60
—
—
Total power capacity
1,160
700
630
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(1) Hash rate, deployed, represents the total potential hash rate of all our deployed miners as of the end of the period, whereas hash rate, average
operating, represents the average total hash rate our deployed miners provided throughout the period. The difference between deployed hash
rate and operating hash rate is attributable to down time of all or some of miners for power curtailments, or repairs and maintenance of Bitcoin
miners or supporting infrastructure. The difference between deployed and operating hash rate is a key measure in determining the efficiency of
our Bitcoin Mining operations.
(2) All-in power cost is the price we paid throughout the period for our power, net of power curtailments received. Power is overwhelmingly the
largest marginal input cost in mining Bitcoin and a significant contributor to profitability. Miners with a low cost of power are also able to
profitability mine in a wider range of Bitcoin price.
(3) Developed power is the total amount of electricity our Facilities can utilize for Bitcoin Mining as of the end of the period.
The following table presents our cost to mine one Bitcoin (amounts in thousands, except value of one Bitcoin amounts):
Years Ended December 31,
2024
2023
2022
Cost of power for self-mining operations
$
149,019
$
89,134
$
54,294
Other direct cost of revenue for self-mining operations(1)(2), excluding Bitcoin miner
depreciation
40,205
7,463
20,041
Cost of revenue for self-mining operations, excluding Bitcoin miner depreciation
189,224
96,597
74,335
Less: power curtailment credits(3)
(33,685)
(71,215)
(27,345)
Cost of revenue for self-mining operations, net of power curtailment credits, excluding
Bitcoin miner depreciation
155,539
25,382
46,990
Bitcoin miner depreciation(4)(5)
155,487
216,605
89,423
Cost of revenue for self-mining operations, net of power curtailment credits, including
Bitcoin miner depreciation
$
311,026
$
241,987
$
136,413
Quantity of Bitcoin mined
4,828
6,626
5,554
Production value of one Bitcoin mined(6)
$
66,488
$
28,523
$
28,245
Cost to mine one Bitcoin, excluding Bitcoin miner depreciation
$
32,216
$
3,831
$
8,461
Cost to mine one Bitcoin, excluding Bitcoin miner depreciation, as a % of production
value of one Bitcoin mined
48.5 %
13.4 %
30.0 %
Cost to mine one Bitcoin, including Bitcoin miner depreciation
$
64,421
$
36,521
$
24,561
Cost to mine one Bitcoin, including Bitcoin miner depreciation, as a % of production
value of one Bitcoin mined
96.9 %
128.0 %
87.0 %
(1) Other direct cost of revenue includes compensation, insurance, repairs, and ground lease rent and related property tax.
(2) During the years ended December 31, 2024, 2023 and 2022, we paid cash of approximately $342.4 million, $247.7 million, and $195.1 million,
respectively, in total deposits and payments for the purchase of miners. Costs to finance the purchase of miners were zero as the miners were
paid for with cash from our cash balance. The seller did not provide any financing, nor did we borrow from a third-party to purchase the miners.
We do not have any current plans to finance miners we may purchase in the future.
(3) Power curtailment credits are credited against our power invoices as a result of temporarily pausing our operations to participate in ERCOT’s
Demand Response Service Programs. Our fixed-price power purchase contracts enable us to strategically curtail our mining operations and
participate in these programs, which significantly lower our cost to mine Bitcoin. These credits are recognized in Power curtailment credits on
our Consolidated Statements of Operations, outside of cost of revenue, but significantly reduce our overall cost to mine Bitcoin.
(4) We capitalize the acquisition cost of our miners and include these costs in Property and equipment, net on our Consolidated Balance Sheets.
The miners are depreciated over an estimated useful life of three years, during which time, the miners are expected to generate Bitcoin revenue.
We do not consider depreciation expense in determining whether it is economical to
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operate our miners since depreciation is a non-cash expense and is not a variable operating cost that can be avoided even if we curtail operations
temporarily. Depreciation expense incurred is disclosed for each respective period in the table above.
(5) The following table presents the future depreciation expense of all our Bitcoin miners:
2025
$
245,899
2026
203,508
2027
143,156
Total
$
592,563
(6) Computed as revenue recognized from Bitcoin mined divided by the quantity of Bitcoin mined during the same period.
During 2023, we entered into purchase orders under the Master Agreement to acquire new immersion miners from MicroBT. These purchase orders
represented a total hash rate of 25.6 EH/s, for a total purchase price of approximately $453.4 million, subject to downward price adjustment as provided by
the Master Agreement. These miners are primarily for use at the Corsicana Facility, which commenced operations in April 2024. Delivery of these miners
began in 2023 and all miners are expected to be received and deployed by mid-2025. The Master Agreement provides us with four additional annual
options to purchase miners, on the same or more favorable terms as the second purchase order executed under the Master Agreement. These additional
miners represent a total hash rate of approximately 75.0 EH/s, assuming exercise of all four annual purchase options.
During the year ended December 31, 2024, we executed an additional purchase order with MicroBT under the Master Agreement to acquire new air-cooled
miners with a total hash rate of 5.9 EH/s, for a total purchase price of approximately $96.7 million. This purchase order is in addition to the four additional
purchase options remaining under the Master Agreement. Delivery of these miners occurred in the third quarter of 2024, and deployment commenced
upon delivery.
For the year ended December 31, 2024, Bitcoin Mining revenue was approximately $321.0 million.
Summary of Bitcoin Activity
The following tables present additional information about our own Bitcoin Mining activities, including Bitcoin production, purchases, and sales:
Quantity
Amounts
Balance as of January 1, 2022
4,884
$
150,593
Revenue recognized from Bitcoin mined
5,554
156,870
Proceeds from sale of Bitcoin
(3,425)
(79,529)
Exchange of Bitcoin for employee compensation
(39)
(1,495)
Realized gain on sale/exchange of Bitcoin
—
30,346
Impairment of Bitcoin
—
(147,365)
Balance as of December 31, 2022
6,974
109,420
Cumulative effect upon adoption of ASU 2023-08
—
5,994
Revenue recognized from Bitcoin mined
6,626
188,996
Bitcoin receivable
(21)
(878)
Proceeds from sale of Bitcoin
(6,185)
(176,219)
Exchange of Bitcoin for employee compensation
(32)
(869)
Change in fair value of Bitcoin
—
184,734
Balance as of December 31, 2023
7,362
311,178
Revenue recognized from Bitcoin mined
4,828
321,002
Bitcoin receivable
5
(625)
Acquisitions of Bitcoin
5,784
577,500
Proceeds from sale of Bitcoin
(212)
(9,518)
Exchange of Bitcoin for employee compensation
(45)
(2,478)
Change in fair value of Bitcoin
—
457,409
Balance as of December 31, 2024
17,722
$
1,654,468
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Data Center Hosting
In 2023, we made the decision to stop pursuing new hosting contracts and end our legacy contracts, to focus on our self-mining efforts. During the year
ended December 31, 2024, all agreements with Data Center Hosting customers were terminated, and we have no plans to offer data center hosting services
to new customers. We no longer report Data Center Hosting as a separate reportable segment.
Engineering
Our Engineering business designs and manufactures power distribution equipment and custom engineered electrical products. The products allow us to
vertically-integrate many critical electrical components and engineering services necessary for our site developments and to reduce our execution and
counter-party risk in ongoing and future expansion projects. The specialized talent employed in our Engineering business allows us the opportunity to
explore new methods to optimize and develop best-in-class Bitcoin Mining operations and have been instrumental in the development of our industrial-
scale immersion-cooled Bitcoin mining hardware.
Our Engineering business also provides electricity distribution product design, manufacturing, and installation services primarily focused on large-scale
commercial and governmental customers and serves a broad scope of clients across a wide range of markets including data center, power generation,
utility, water, industrial, and alternative energy.
Engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified
performance obligation. Engineering revenue is recognized over time as performance creates or enhances an asset with no alternative use, and for which
we have an enforceable right to receive compensation as defined under the contract.
In December 2024, we acquired E4A Solutions, a leading provider of electrical engineering services to a diverse customer base of energy developers and
data center operators (the "E4A Solutions Acquisition”). This acquisition adds to our vertically integrated strategy by adding engineering expertise to
service its own existing and future electrical infrastructure as well as provide solutions and services to the rapidly growing market for electrical
infrastructure.
For the year ended December 31, 2024, Engineering revenue was approximately $38.5 million.
Strategic Goals and Initiatives
Bitcoin Treasury Strategy
Our Bitcoin acquisition strategy involves mining Bitcoin utilizing vertical integration, and from time to time, subject to market conditions, purchasing
Bitcoin with our liquid assets derived from issuing debt or equity securities. Our vertical integration strategy has supported our stability during market
fluctuations and allows us to capitalize on industry consolidation while building on our liquidity position.
We view our Bitcoin holdings as long-term holdings, and during the year ended December 31, 2024, made the strategic decision to halt the sale of Bitcoin,
and instead increase our Bitcoin holdings.
Power Strategy
Long-term power contracts form the basis of our power strategy. We utilize our Power Purchase Agreements ("PPA”) in place at the Rockdale Facility (the
"Rockdale PPA”) and Kentucky Facility (the "Kentucky PPA”) in the following ways:
Manual Curtailment
We power down operations and return power to the utility when market prices for electricity provide the potential for us to receive more power curtailment
credits than the Bitcoin Mining revenues we would have generated had we not curtailed our mining operations. We receive power credits for the
difference in the market power price and our fixed power price, which provides us the ability to maximize our overall profitability between Bitcoin Mining
and supporting the grid by not drawing power from the grid when electricity is most scarce.
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Ancillary Services
We competitively bid to sell ERCOT and MISO the option to control our electrical load during certain hours. ERCOT and MISO compensate us in the form
of Demand Response Credits, which are received whether or not we are called on to power down.
ERCOT’s 4CP Program
At the Rockdale Facility, we voluntarily power down operations during times of peak demand in summer months. Participation provides us substantial
savings on transmission costs in the subsequent year’s power bills, reducing our overall power costs.
The following table presents our power curtailment credits at the Rockdale Facility and the Kentucky Facility:
Years Ended December 31,
2024
2023
2022
Manual curtailment power credits
$
26,001
$
52,644
$
22,793
Demand response power credits
7,684
18,571
4,552
Total power curtailment credits
$
33,685
$
71,215
$
27,345
The following graph presents the primary decision points that guide our decision to curtail power usage or power down our mining operations at the
Rockdale Facility, and when we might resume mining operations:
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Challenges, Risks, and Industry Trends
Increased Competition and Network Difficulty
The price of Bitcoin increased during the first quarter of 2024 due to a new source of demand, the eleven Bitcoin spot ETFs, which were approved to begin
trading by the SEC on January 11, 2024. The ETFs, as investment vehicles, provide a new access point for investors to gain exposure to Bitcoin through
more traditional markets.
During 2023 and 2024, the Bitcoin mining industry saw record growth as the price of Bitcoin increased from the lows experienced in early 2023. The
increasing Bitcoin price renewed opportunities to access capital markets to fund growth, leading to unprecedented expansion in mining operations and
resulting in a doubling in the size of provisioned hash calculation services on the network, as measured by total hash rate. Many Bitcoin mining
companies heavily invested in implementing vertically-integrated business models, infrastructure, and upgrading and expanding mining fleets in advance
of the April 2024 Bitcoin network halving. Competition on the Bitcoin network has expanded in kind and we expect competition within the mining industry
to continue as long as Bitcoin prices remain elevated or increase further.
We have observed that when the market price for Bitcoin experiences a sustained increase (as it did across 2024), new miners are introduced onto the
Bitcoin network, increasing its network difficulty. Despite increasing our hash rate by approximately 154.0% from December 31, 2023, to
December 31, 2024, the halving in April 2024 and increased network difficulty following increased network hash rate across the periods resulted in a
decrease of approximately 27.1% in the number of Bitcoin we mined in 2024 as compared to the same period in 2023.
Accordingly, as network difficulty continues to increase, existing miners will need to increase their hash rate to maintain and improve their chances of
earning a Bitcoin mining reward. To do this, we seek out new Bitcoin mining capacity, including through our acquisition and development of new Bitcoin
mining facilities (such as the Corsicana Facility and the Block Mining Acquisition) and electricity supply and distribution facilities to service them, as well
as other strategic growth opportunities. Further, we have adopted new and improved technology to increase both our mining power and efficiency,
including our industrial-scale adoption of immersion cooling and our strategic acquisitions of large quantities of the newest and most powerful and
efficient miners available.
Increased Transaction Fees
The Bitcoin mining industry recently experienced an increase in transaction fees on the Bitcoin network, as well as an increase in overall demand for
Bitcoin. Various protocols on the Bitcoin network gained popularity during 2023, and at times temporarily resulted in a significant increase in the
transaction fees paid to add a certain Bitcoin transaction to the blockchain. These transaction fees are volatile in nature but are paid directly to miners and
are representative of public interest in transacting in Bitcoin. Transaction fees are packaged with the block subsidy issued by the Bitcoin network to
combine for the total reward paid to miners upon solving a block.
We have led the industry by focusing on a vertically-integrated business model since 2021. We continue to focus on building long-term stockholder
value by taking strategic actions to further vertically-integrate our business at the current Rockdale Facility, developing the Corsicana Facility, and having
acquired the Kentucky Facility and E4A Solutions. Management believes a focus on vertical integration will positively affect each of our business
segments by providing increased capacity for our Bitcoin Mining operations, more opportunities for implementing our proprietary power strategy, and by
positioning us to capitalize on supply chain efficiencies and electrical engineering services garnered through our Engineering segment. We continue to
focus on deploying our efficient Bitcoin mining fleet, at scale, while realizing the benefits of being an owner and operator of our Bitcoin Mining facilities.
Grid Curtailment
The PUCT, ERCOT, and Oncor collectively oversee the regulatory, administrative, and delivery aspects of our power supply in Texas; MISO oversees our
power supply in Kentucky. In recent years, regulatory scrutiny on Bitcoin mining facilities and their energy consumption has intensified as the industry
has grown.
As the grid operator, ERCOT is responsible for monitoring and testing market participants, including our Bitcoin mining facilities in Rockdale and
Corsicana, to evaluate their impact on grid reliability. During this process, ERCOT may issue curtailment notices to reduce the power usage at our Texas
operations. We are periodically tested and monitored, and have experienced curtailment of power based on instructions we receive from Oncor and
ERCOT. Due to the uncertainties regarding the duration or extent of power curtailments and testing procedures, we are currently unable to reasonably
estimate any potential impacts to our business. If we
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cannot secure adequate access to electrical power, we may be forced to reduce or shut down our operations, which would have a material adverse effect
on our business, prospects, financial condition, and operating results.
See Part I, Item 1A. "Risk Factors” of this Annual Report for additional discussion regarding potential impacts our competitive and evolving industry may
have on our business.
Recent Events Affecting the Company
For the year ended December 31, 2024, we continued to experience an inflationary environment and global supply chain logistics issues across all
channels of distribution. We have experienced delays in certain of our miner delivery schedules and in our infrastructure development schedules due to
constraints on globalized supply chains for miners, electricity distribution equipment, and construction materials. We have also experienced delays in our
Engineering business segment’s manufacturing and delivery schedule, and in our infrastructure development schedules, resulting from constraints on the
globalized supply chains for miners, electricity distribution equipment and construction materials.
Through the date of this Annual Report, we have been able to effectively and efficiently mitigate delivery delays to avoid materially impacting our miner
deployment schedule, however, we cannot guarantee that we will be able to continue to mitigate any such delivery delays in the future. Additionally, the
development and potential expansions of our Facilities require large quantities of construction materials, specialized electricity distribution equipment, and
other component parts that are in high demand and can be difficult to source. To help mitigate the impacts of global supply chain constraints and
increasing demand for these goods, including any inflationary pricing concerns that may result, we have procured and already hold many of the electrical
infrastructure components and materials required for development of the next 600 MW phase of our development of the Corsicana Facility, as well as
replacement components and parts for our existing systems, to help shorten the impact of potential damage to installed equipment.
RESULTS OF OPERATIONS
Results of Operations Comparative Results for the Years Ended December 31, 2024 and 2023
Revenue
Our total revenue for the years ended December 31, 2024 and 2023, was $376.7 million and $280.7 million, respectively, and consisted of Bitcoin Mining
revenue, Engineering revenue, and Other revenue. Other revenue consists almost entirely of residual activity related to our ceased Data Center Hosting
segment.
For the years ended December 31, 2024 and 2023, Bitcoin Mining revenue was $321.0 million and $189.0 million, respectively. The increase of $132.0 million
was primarily due to an increase in price of Bitcoin in the 2024 period, which averaged $66,488 per Bitcoin, as compared to $28,523 per Bitcoin for the 2023
period, partially offset by decreased production resulting from the increase in the Bitcoin network difficulty and the April 2024 halving.
For the years ended December 31, 2024 and 2023, Engineering revenue was $38.5 million and $64.3 million, respectively. The decrease of $25.8 million was
primarily attributable to supply chain constraints resulting in decreased receipts of materials, delaying the completion of certain custom products, and
therefore, the recognition of revenue. Our custom electrical products are used as important components in data center development and in power
generation and distribution facilities. There continues to be significant demand for these products due to the escalated interest in data center
construction, as well as the growing worldwide demand for power.
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Costs and expenses
For the years ended December 31, 2024 and 2023, Cost of revenue for Bitcoin Mining consisted of the following:
Years Ended December 31,
2024
2023
Power
$
149,019
$
89,134
Compensation
13,294
—
Insurance on miners
6,992
3,768
Ground rent and related water and property tax
5,945
—
Other(1)
13,974
3,695
Total Bitcoin Mining cost of revenue
$
189,224
$
96,597
(1) All amounts included within Other are individually not material.
This increase of approximately $92.6 million was primarily due to the increase in Bitcoin Mining capacity at the Rockdale Facility and commencement of
Bitcoin Mining activities at the Corsicana Facility, both of which require additional headcount and direct costs necessary to maintain and support our
expanded Bitcoin Mining operations, as well as the absorption of other costs previously included in our former Data Center Hosting segment. Cost of
revenue for Bitcoin Mining excludes depreciation and amortization, which are stated separately on our Consolidated Statements of Operations.
Cost of revenue for Engineering for the years ended December 31, 2024 and 2023 was $41.7 million and $60.6 million, respectively. The costs consisted
primarily of direct materials and labor, as well as indirect manufacturing costs. Consistent with the causes of decreased Engineering revenue noted above,
the decrease of approximately $18.9 million was primarily due to decreased receipts of materials resulting from increased competition for direct materials
due to supply chain constraints.
Selling, general and administrative expenses for the years ended December 31, 2024 and 2023, totaled $266.9 million and $100.3 million, respectively.
Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees, and other personnel and related costs. The
increase of approximately $166.6 million was primarily due to increases in stock compensation expenses of $93.0 million, which was primarily due to new
grants under our long-term incentive program, compensation expenses of $22.8 million as a result of hiring additional employees to support our ongoing
growth, legal and professional fees of $29.4 million primarily related to ongoing litigation, public company compliance, and ongoing due diligence, and
$21.2 million for additional insurance and other costs primarily attributable to ongoing growth.
Depreciation and amortization expense during the years ended December 31, 2024 and 2023 totaled $212.1 million and $252.4 million, respectively, a
decrease of $40.3 million. The decrease was primarily due to the change in the estimated lives of our Bitcoin miners from 2 years to 3 years, partially offset
by increased depreciation from the Corsicana Facility coming online in April 2024 and additional miners being deployed.
The changes in fair value of Bitcoin for the years ended December 31, 2024 and 2023 were gains of $457.4 million and $184.7 million, respectively, and were
recognized to adjust the fair value of our Bitcoin held at the end of each period.
The changes in fair value of our derivative asset for the years ended December 31, 2024 and 2023 were gains of $45.3 million and $6.7 million, respectively,
and were recorded to adjust the fair values of the Rockdale PPA and 25 MW Power Purchase Agreement in place at the Corsicana Facility ("Corsicana
PPA”), which are classified as a derivative assets and measured at fair value. The changes in fair value were primarily due to changes in future power
prices over the applicable period. The gain incurred during the year ended December 31, 2024, was primarily attributable to the average of the forward
prices utilized in the discounted cash flow estimation models increasing from $45.15 per megawatt hours ("mWh”) as of December 31, 2023, to $51.70 per
mWh as of December 31, 2024.
Power curtailment credits during the years ended December 31, 2024 and 2023 were $33.7 million and $71.2 million, respectively, and represent sales of
unused power under the Rockdale PPA and the Kentucky PPA and participation in ancillary services under ERCOT and MISO Demand Response
Services Programs. The amount of these credits varies from period to period depending on various factors impacting the supply of power to, and the
demand for power on, the power grids, such as weather and global fuel costs.
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Loss on the sale/exchange of equipment during the years ended December 31, 2024 and 2023, were $17.4 million and $5.3 million, respectively. The loss on
sale during the year ended December 31, 2024, was attributable to the sale of 19,817 Antminer model S19 XP miners for proceeds of $14.3 million. The loss
on sale during the year ended December 31, 2023 was attributable to the sale of 2,700 Antminer model S19 XP miners for proceeds of $6.4 million.
Casualty-related recoveries (charges), net during the years ended December 31, 2024 and 2023 were $2.8 million and $6.0 million, respectively. In December
2022, the Rockdale Facility was damaged during severe winter storms in Texas, resulting in casualty-related charges being recognized in 2023 and 2022.
The recoveries recognized during the years ended December 31, 2024 and 2023, were primarily the result of cash recoveries from insurance claims related
to the December 2022 winter storms.
Other income (expense)
For the years ended December 31, 2024 and 2023, total other income (expense) was ($43.4) million and $8.5 million, respectively. The net expense
recognized during the year ended December 31, 2024, was primarily attributable to unrealized losses on marketable securities of $69.5 million, partially
offset by higher interest income earned as a result of higher cash balances and increased interest rates. The income recognized during the year ended
December 31, 2023, was primarily attributable to interest income.
Income Taxes
For the years ended December 31, 2024 and 2023, total income tax benefit (expense) was ($0.7) million and $5.1 million, respectively. The decrease in
income tax benefit of $5.8 million was primarily attributable to the change in the contingent consideration liability.
Results of Operations Comparative Results for the Years Ended December 31, 2023 and 2022
Revenue
Total revenue for the years ended December 31, 2023 and 2022 was $280.7 million and $259.2 million, respectively, and consisted of Bitcoin Mining
revenue, Engineering revenue, and Other revenue. Other revenue consists almost entirely of residual activity related to our ceased Data Center Hosting
segment.
For the years ended December 31, 2023 and 2022, Bitcoin Mining revenue was $189.0 million and $156.9 million, respectively. The increase of $32.1 million
was primarily due to a 19.3% increase in the number of Bitcoin mined in the 2023 period as compared to the 2022 period, which was primarily the result of
an increase in miners deployed, partially offset by an increase in the Bitcoin network difficulty.
For the years ended December 31, 2023 and 2022, Engineering revenue was $64.3 million and $65.3 million, respectively. The decrease of $1.0 million was
primarily attributable to supply chain constraints resulting in decreased receipts of materials, delaying the completion of certain custom products, and
therefore, the recognition of revenue. Our custom electrical products are used as important components in data center development and in power
generation and distribution facilities. There has been increased demand for these products due to the escalated interest in data center construction, as
well as the growing worldwide demand for power.
Costs and expenses
For the years ended December 31, 2023 and 2022, Cost of revenue for Bitcoin Mining consisted of the following:
Years Ended December 31,
2023
2022
Power
$
89,134
$
54,294
Insurance on miners
3,768
234
Third-party hosting fees paid
—
19,001
Other(1)
3,695
806
Total Bitcoin Mining cost of revenue
$
96,597
$
74,335
(1) All amounts included within Other are individually not material.
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This increase of approximately $22.3 million was primarily due to the increase in Bitcoin Mining capacity at the Rockdale Facility, which requires additional
headcount and direct costs necessary to maintain and support our expanded Bitcoin Mining operations. Cost of revenue for Bitcoin Mining excludes
depreciation and amortization, which are stated separately on our Consolidated Statements of Operations.
Cost of revenue for Engineering for the years ended December 31, 2023 and 2022 was $60.6 million and $57.5 million, respectively, an increase of
approximately $3.1 million. The costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. The increase was primarily
due to increased cost of labor and materials, partially offset by decreased receipts of materials resulting from increased competition for direct materials due
to supply chain constraints.
Selling, general and administrative expenses for the years ended December 31, 2023 and 2022, totaled $100.3 million and $67.5 million, respectively, an
increase of approximately $32.8 million. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees, and
other personnel and related costs. The increase was primarily attributable to an increase in compensation expense, which increased by $12.2 million as a
result of hiring additional employees to support our ongoing growth, increased stock-based compensation of $7.6 million due to the adoption of the long-
term incentive plan and additional headcount, increased legal and professional fees of $8.1 million primarily related to ongoing litigation and public
company compliance, and an increase of $5.0 million in other general operating costs such as insurance and information technology projects to support
our growth.
Depreciation and amortization expense during the years ended December 31, 2023 and 2022 totaled $252.4 million and $108.0 million, respectively, an
increase of $144.4 million. The increase was primarily due to higher depreciation expense recognized for the Rockdale Facility and the significant increase
in the number of recently acquired and deployed miners.
The change in fair value of Bitcoin for the year ended December 31, 2023 was a gain of $184.7 million, and was recognized as a result of adopting
Accounting Standards Update ("ASU”) No. 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure
of Crypto Assets ("ASU 2023-08”), effective January 1, 2023, under which Bitcoin is recognized at fair value with changes in fair value recognized in net
income. The gain recognized was attributable to increases in the price of Bitcoin and the increased quantity of Bitcoin held as of December 31, 2023, as
compared to December 31, 2022.
The changes in fair value of our derivative asset for the years ended December 31, 2023 and 2022 were gains of $6.7 million and $71.4 million, respectively,
and were recorded to adjust the fair value of the Rockdale PPA, which is classified as a derivative asset and measured at fair value. The changes in fair
value were primarily due to changes in future power prices over the applicable period. The gain incurred during the year ended December 31, 2023, was
primarily attributable to the average of the forward prices utilized in the discounted cash flow estimation models increasing from $43.59 per mWh as of
December 31, 2022 to $45.15 per mWh as of December 31, 2023.
Power curtailment credits during the years ended December 31, 2023 and 2022 were $71.2 million and $27.3 million, respectively, and represent sales of
unused power under the Rockdale PPA and participation in ancillary services under ERCOT Demand Response Services Programs. The amount of these
credits varies from period to period depending on various factors impacting the supply of power to, and the demand for power on, the ERCOT power grid,
such as weather and global fuel costs.
Realized gains on sale/exchange of Bitcoin for the years ended December 31, 2023 and 2022 were zero and $30.3 million, respectively, and impairment of
Bitcoin was zero and $147.4 million, respectively. As a result of adopting ASU 2023-08 effective January 1, 2023, under which Bitcoin is recognized at fair
value, gains on the sale/exchange of Bitcoin and impairment of Bitcoin are no longer recognized.
Casualty-related (charges) recoveries, net during the years ended December 31, 2023 and 2022 were $6.0 million and ($9.7) million, respectively. In
December 2022, the Rockdale Facility was damaged during severe winter storms in Texas, resulting in casualty-related charges being recognized in 2023
and 2022. The income recognized during the year ended December 31, 2023, was the result of cash recoveries from insurance claims related to the
December 2022 winter storms.
Gain (loss) on the sale/exchange of equipment during the years ended December 31, 2023 and 2022 was $(5.3) million and $16.3 million, respectively. The
loss on sale during the year ended December 31, 2023 was attributable to the sale of 2,700 Antminer model S19 XP miners for gross proceeds of $6.4
million. The gain on sale during the year ended December 31, 2022 was attributable to us exchanging approximately 5,700 Antminer model S19 Pro miners
previously deployed at the Coinmint Facility for 5,000 factory-new Antminer model S19j Pro miners.
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Other income (expense)
For the years ended December 31, 2023 and 2022, total other income (expense) was $8.5 million and ($8.6) million, respectively. The income recognized
during the year ended December 31, 2023 was primarily attributable to interest income earned as a result of higher cash balances and increased interest
rates. The loss incurred in 2022 primarily consisted of realized losses on marketable equity securities of $9.0 million upon the sale of all of our marketable
equity securities.
Income Taxes
For the years ended December 31, 2023 and 2022, total income tax benefit (expense) was $5.1 million and $11.7 million, respectively. The decrease in income
tax benefit of $6.6 million was primarily attributable to the change in the contingent consideration liability.
Non-GAAP Measures
In addition to financial measures presented under generally accepted accounting principles in the United States ("GAAP”), we consistently evaluate our
use of and calculation of non-GAAP financial measures such as "Adjusted EBITDA.” EBITDA is computed as net income before interest, taxes,
depreciation, and amortization. Adjusted EBITDA is a financial measure defined as EBITDA adjusted to eliminate the effects of certain non-cash and/or
non-recurring items that do not reflect our ongoing strategic business operations, which management believes results in a performance measurement that
represents a key indicator of our core business operations of Bitcoin mining. The adjustments include fair value adjustments such as derivative power
contract adjustments, equity securities value changes, and non-cash stock-based compensation expense, in addition to financing and legacy business
income and expense items.
We believe Adjusted EBITDA can be an important financial measure because it allows management, investors, and our Board to evaluate and compare
our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments. Additionally,
Adjusted EBITDA is used as a performance metric in our share-based compensation plan.
Adjusted EBITDA is provided in addition to, and should not be considered to be a substitute for, or superior to, net income, the most comparable
measure under GAAP to Adjusted EBITDA. Further, Adjusted EBITDA should not be considered as an alternative to revenue growth, net income, diluted
earnings per share or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a
measure of our liquidity. Adjusted EBITDA has limitations as an analytical tool, and you should not consider this financial measure either in isolation or
as a substitute for analyzing our results as reported under GAAP.
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The following table reconciles Adjusted EBITDA to Net income (loss), the most comparable GAAP financial measure:
Years Ended December 31,
2024
2023
2022
Net income (loss)
$
109,401
$
(49,472)
$
(509,553)
Interest income
(27,166)
(11,076)
(1,763)
Interest expense
1,985
2,854
1,309
Income tax expense (benefit)
744
(5,093)
(11,749)
Depreciation and amortization
212,053
252,354
107,950
EBITDA
297,017
189,567
(413,806)
Adjustments:
Stock-based compensation expense
125,204
32,170
24,555
Acquisition-related costs
5,541
—
78
Change in fair value of derivative asset
(45,277)
(6,721)
(71,418)
Change in fair value of contingent consideration
(2,459)
—
(159)
Unrealized loss (gain) on equity method investment - marketable securities
69,489
—
8,996
Loss (gain) on sale/exchange of equipment
17,429
5,336
(16,281)
Casualty-related charges (recoveries), net
(2,795)
(5,974)
9,688
Impairment of goodwill
—
—
335,648
Impairment of miners
—
—
55,544
Other (income) expense
(863)
(260)
59
License fees
(97)
(97)
(97)
Adjusted EBITDA
$
463,189
$
214,021
$
(67,193)
LIQUIDITY AND CAPITAL RESOURCES
We generate non-cash revenue through mining Bitcoin at our Facilities, which we retain based on our Bitcoin Treasury Strategy, while financing
operations and other expenses with cash typically raised through the issuance of our common stock under our ATM offering program. Additionally, in
the year ended December 31, 2024, we used nearly all of our cash proceeds from our 0.75% Convertible Senior Notes due 2030, to acquire Bitcoin. During
the year ended December 31, 2024 and 2023, we issued and sold approximately 90.6 million shares and 62.2 million shares, respectively, of our common
stock under our ATM offering program for aggregate net proceeds (net of sales commissions and expenses) of $956.6 million and $761.8 million,
respectively.
As of December 31, 2024, our net working capital totaled approximately $439.1 million, including cash and cash equivalents of $277.9 million, and
marketable securities of $134.3 million. During the year ended December 31, 2024, we reported net income of $109.4 million, which included $395.7 million in
non-cash net gains, primarily consisting of revenue recognized from Bitcoin mined of $321.0 million, $457.4 million in change in fair value of Bitcoin, and
the change in fair value of the derivative asset of $45.3 million, partially offset by depreciation and amortization of $212.1 million, stock-based
compensation of $125.2 million, and the unrealized loss on marketable securities of $69.5 million.
During the year ended December 31, 2024, we sold 212 Bitcoin for proceeds of approximately $9.5 million. Subsequent to those sales, we made the
strategic decision to temporarily halt the sale of all our Bitcoin production and instead, increase our Bitcoin holdings. We monitor our balance sheet on an
ongoing basis and evaluate the level of Bitcoin retained from monthly production in consideration of our cash requirements for ongoing operations and
expansion.
Contractual Commitments and Obligations
As of December 31, 2024, we had a remaining commitment of approximately $1.0 million due to MicroBT for the contractual purchase of miners, which was
paid in full in January 2025.
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50
Development of the Corsicana Facility
During the year ended December 31, 2022, we announced our planned development of the Corsicana Facility, our second large-scale Bitcoin Mining
facility located on a 265-acre site in Navarro County, Texas. The Corsicana Facility is expected, upon completion, to have 1.0 GW of developed capacity,
with an additional 200 MW of electrical capacity available for development, at our discretion, which is securely supplied with power by a substation being
developed for us on the premises that will be interconnected with the nearby Navarro Switch. The strategic decision to locate the Corsicana Facility next
to the Navarro Switch was made to limit electricity lost in transmission and maximize the efficiency of our substation’s power distribution facilities. The
initial phase of the development of the Corsicana Facility involved the construction of a 400 MW substation and an equal amount of immersion-cooled
Bitcoin Mining infrastructure spread across multiple buildings, as well as construction of various utilities, offices, warehouses, and infrastructure to
support the facility’s operations. Our Bitcoin Mining operations commenced in April 2024, following commissioning of the substation. As of December
31, 2024, we deployed 400 MW of Bitcoin Mining infrastructure comprised of four completed 100 MW buildings, Buildings A1, A2, B1, and B2.
Through December 31, 2024, we incurred costs of approximately $415.9 million related to the development of the first phase of the Corsicana Facility,
which consisted of $10.1 million for land and $405.8 million of initial developments costs and equipment.
Revenue from Operations
Bitcoin Mining
We expect to generate ongoing revenue from Bitcoin rewards in connection with our Bitcoin Mining operations and our ability to liquidate Bitcoin
rewards at future values will be regularly evaluated to generate cash for operations.
Generating Bitcoin rewards which exceed our production and overhead costs will determine our ability to report profit margins related to such Bitcoin
Mining operations, although accounting for our reported profitability is significantly complex. Furthermore, regardless of our ability to generate proceeds
from the sale of our Bitcoin produced from our Bitcoin Mining business, we may need to raise additional capital in the form of equity or debt to fund our
operations and pursue our business strategy.
The ability to raise funds through the sale of equity, debt financings, or the sale of Bitcoin to maintain our operations is subject to many risks and
uncertainties and any future equity issuances or convertible debt offerings could result in dilution to our existing stockholders and any future debt or
debt securities may contain covenants that limit our operations or ability to enter into certain transactions. Our ability to realize revenue through Bitcoin
production and successfully convert Bitcoin into cash or fund overhead with Bitcoin is subject to a number of risks, including regulatory, financial and
business risks, many of which are beyond our control. Additionally, we have observed significant historical volatility in the market price of Bitcoin and, as
such, future prices cannot be predicted. See the discussion of risks affecting our business under Part I, Item 1A. "Risk Factors” of this Annual Report.
Engineering
Substantially all Engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts. Revenue
is recognized over time as performance creates or enhances an asset with no alternative use, and for which we have an enforceable right to receive
compensation as defined under the contract. The length of time required to complete a custom product varies but is typically between four to 12 weeks.
Customers are typically required to make periodic progress payments based on contractually agreed-upon milestones.
If we are unable to generate sufficient revenue from our Bitcoin Mining or Engineering operations when needed or secure additional sources of funding, it
may be necessary to significantly reduce our current rate of spending or explore other strategic alternatives.
Long-term Debt
In December 2024, we issued $594.4 million aggregate principal amount of the Convertible Senior Notes maturing in 2030 ("2030 Notes”) and used $577.5
million of the net proceeds from the 2030 Notes to acquire 5,784 Bitcoin.
As part of the Block Mining Acquisition, we acquired a $5.7 million note payable with a fixed interest rate of 8.81%. The note payable matures in December
2035, with annual principal and interest payments due beginning on December 31, 2024.
See Note 12. Debt, for additional descriptions of the long-term debt instruments described above.
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51
ATM Equity Offerings
During 2024, 2023 and 2022, we offered and sold shares of our common stock through at-the-market equity offering ("ATM Offerings”) programs pursuant
to sales agreements with sales agents (each, an "ATM Program”). See Note 14, Stockholders’ Equity for the terms and provisions of each sales
agreement.
The following table sets forth shares sold and net proceeds received (net of sales commissions and expenses) from shares sold under each ATM Program
during the years ended December 31, 2024 and 2023 (in thousands, except number of shares):
Years Ended December 31,
2024
2023
Shares
Net Proceeds
Shares
Net Proceeds
2022 ATM Program
-
$
-
16,447,645
$
191,248
2023 ATM Program
8,644,100
114,836
45,758,400
570,525
February 2024 ATM Program
40,646,055
462,102
-
-
August 2024 ATM Program
41,336,261
379,699
-
-
Total
90,626,416
$
956,637
62,206,045
$
761,773
As of December 31, 2024, approximately $362.2 million of our common stock remained available for issuance and sale pursuant to the August 2024 ATM
Program. The remaining sales agreements were terminated as of August 9, 2024.
Legal Proceedings
We have been named a defendant in several lawsuits as more fully described in Note 17. Commitments and Contingencies.
Cash Flows
The following table presents a summary of our cash flows:
Years Ended December 31,
2024
2023
Net cash provided by (used in) operating activities
$
(255,052)
$
33,085
Net cash used in investing activities
$
(1,508,805)
$
(414,766)
Net cash provided by financing activities
$
1,517,989
$
748,522
Operating Activities
The increase in cash used in operating activities during the year ended December 31, 2024, as compared to the year ended December 31, 2023, was
primarily attributable to a $166.7 million reduction in proceeds from the sale of Bitcoin due to our ceasing of sales of Bitcoin early in 2024, increased power
costs of $59.8 million, and a $73.5 million increase in selling, general, and administrative costs, excluding stock-based compensation, all of which were
primarily driven by our increased mining capacity and headcount, combined with other general operating costs such as insurance and information
technology projects to support our growth.
Investing Activities
Cash used in investing activities during the years ended December 31, 2024 and 2023, was primarily attributable to purchases of Bitcoin and purchases
and deposits paid for miners and purchases of property and equipment for our ongoing expansions, as we continue towards our anticipated 38.4 EH/s of
total self-mining hash rate capacity by the end of 2025. During 2024, we acquired 5,784 Bitcoin for approximately $577.5 million. We completed our
expansion of the Rockdale Facility during the year ended December 31, 2023, and continued to develop the Corsicana Facility, which commenced self-
mining operations during the second quarter of 2024, and the first phase of which was completed in the fourth quarter of 2024. During the years ended
December 31, 2024 and 2023, we paid $442.5 million and $230.4 million, respectively, in deposits and payments for the purchase of miners and paid $240.3
million and $193.7 million, respectively, for the purchases of property and equipment, including construction in process. During 2024, we also purchased
90.1 million shares of Bitfarms common stock for $203.8 million, acquired E4A Solutions for $50.9 million in cash (net of cash acquired), and acquired Block
Mining for $7.2 million in cash (net of cash acquired).
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52
Financing Activities
For the years ended December 31, 2024 and 2023, net cash provided by financing activities primarily consisted of net proceeds from our ATM Offerings of
$956.6 million and $761.8 million, respectively. During the year ended December 31, 2024, we received proceeds of $594.4 million from the issuance of the
2030 Notes, for which we paid debt issuance costs of approximately $15.2 million. In addition to the 2030 Notes, we assumed approximately $5.3 million in
debt as part of the Block Mining Acquisition. We have primarily financed our strategic growth through proceeds from our ATM Offerings and issuances
of our common stock. It is reasonably likely that we will continue to finance our ongoing growth with proceeds from current and future ATM Offerings
and may utilize additional convertible debt offerings.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In preparing our financial statements in accordance with GAAP, there are certain accounting policies that may require a choice between acceptable
accounting methods or may require substantial judgment or estimation in their application. The methods, estimates and judgments we use in applying our
most critical accounting policies have a significant impact on the results we report in our Consolidated Financial Statements. An accounting estimate is
considered critical if both (i) the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment involved, and (ii) the
impact within a reasonable range of outcomes of the estimates and assumptions is material to our Consolidated Financial Statements. These include:
business combinations, valuation of the Rockdale PPA and the Corsicana PPA, long-lived assets and stock-based compensation. We believe these and
other accounting policies set forth in Note 1. Basis of Presentation and Summary of Significant Accounting Policies should be reviewed as they are
integral to understanding our results of operations and financial condition.
We have discussed the selection of critical accounting policies and the effect of estimates with the Audit Committee of our Board.
Business combinations
Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including
estimates for property and equipment and contingent consideration, where applicable. Although we believe our assumptions and estimates have been
reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are
inherently uncertain. Estimates used in determining the value of property and equipment included the estimated replacement costs, which included
replacement cost new, remaining life, and effective age. Estimates primarily used in determining the value of the contingent consideration included the
timing and probability of achieving milestones and discount rates.
Rockdale PPA and Corsicana PPA Valuation
The Rockdale PPA and the Corsicana PPA are accounted for as derivatives, the valuations of which are based on significant unobservable inputs utilized
in the valuations, which include discounted cash flow estimation models containing quoted commodity exchange spot and forward prices and are
adjusted for basis spreads for load zone-to-hub differentials through the respective terms of the Rockdale PPA and the Corsicana PPA. Significant
judgement and estimations are required when creating the discounted cash flow estimation models. Should our discounted cash flow estimation models
change significantly, potentially material changes to the fair value of the derivative asset may result, which could have a material impact on our financial
statements.
See Note 9. Power Supply Agreements for a discussion of the unobservable inputs and their impact on the valuation.
Long-lived assets
Long-lived assets are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Judgment is necessary in
estimating our various assets’ useful lives. This includes evaluating our own usage experience with our currently owned assets, the quality of materials
used in construction-related projects, and for its miners, the rate of technological advancement and market-related factors such as the price of Bitcoin and
the Bitcoin network hash rate, which impact the value of the miners. Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable, which is determined based on a comparison of the carrying amount of
an asset to undiscounted future cash flows expected to be generated by the asset. Significant judgment is used when estimating future cash flows,
particularly the price of Bitcoin and the Bitcoin network hash rate. If such assets are considered impaired, an impairment is recognized based on the
amount by which the carrying amount exceeds the estimated fair value of the assets.
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53
Should our estimates of useful lives, undiscounted future cash flows, or asset fair values change, additional and potentially material impairments may be
required, which could have a material impact on our reported financial results.
Stock-based Compensation
Stock-based compensation expense related to share-based payment awards is recognized at the grant date of the award and is estimated based on the fair
market value of our common stock on the date of the grant. Compensation cost for performance-based, share-based payment awards is recognized over
the performance period when achievement of the milestones and targets becomes probable. We use significant judgment in determining the likelihood of
meeting milestones and market conditions. Inputs into valuation models such as Monte Carlo simulations include both the Company’s and the Russell
3000’s historical and expected annual volatilities, and depending on the inputs selected, we could calculate significantly different estimated grant date fair
values, materially impacting the valuation of our stock-based awards and the stock-based compensation expense we recognize in future periods.
Recently Issued and Adopted Accounting Pronouncements
See Note 2. Significant Accounting Policies and Recent Accounting Pronouncements for a description of applicable recent accounting pronouncements
and any material impact on our financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk exposures involves forward-looking statements. Actual results could differ materially from those projected
in our forward-looking statements. For more information regarding the forward-looking statements used in this section and elsewhere in this Annual
Report, see the "Cautionary Note Regarding Forward-Looking Statements” at the forepart of this Annual Report.
The sensitivity analyses disclosed below provide only a limited, point-in-time view of the market risk of the financial instruments discussed. The actual
impact of the respective underlying rates and price changes on the financial instruments may differ significantly from those shown in the sensitivity
analyses.
Risk Regarding the Price of Bitcoin.
Our business and development strategy is focused on maintaining and expanding our Bitcoin Mining operations to maximize the amount of new Bitcoin
rewards we earn. As of December 31, 2024, we held 17,722 Bitcoin that was recognized at its fair value of $1.7 billion. Of our Bitcoin held 11,938 were
produced from our Bitcoin Mining operations and 5,784 were acquired using proceeds of approximately $577.5 million from the offering of the 2030 Notes.
We cannot accurately predict the future market price of Bitcoin, the future value of which will affect revenue from our operations, and any future declines
in the fair value of the Bitcoin we mine and hold for our account would be reported in our financial statements and results of operations as a charge
against net income, which could have a material adverse effect on the market price for our securities.
The following table presents the impact of 10% changes in the price of Bitcoin on our Bitcoin holdings during the applicable year:
For the year ended December 31, 2024
For the year ended December 31, 2023
10% Increase in
10% Decrease in
10% Increase in
10% Decrease in
Price of Bitcoin
Price of Bitcoin
Price of Bitcoin
Price of Bitcoin
Increase/(Decrease) in Net Income
$
108,907
$
(108,907)
$
48,922
$
(48,922)
The increased sensitivity to price changes in 2024 as compared to 2023 was primarily due to the significant increase in Bitcoin throughout 2024 and as of
December 31, 2024 as compared to December 31, 2023.
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54
Risk Regarding the Price of Power
The following table presents the impact of 10% changes in the future power prices (taking into account the dates of maturity of our various fixed price
PPAs) used to derive the fair value of the Rockdale PPA and the Corsicana PPA derivative assets:
For the year ended December 31, 2024
For the year ended December 31, 2023
10% Increase in
10% Decrease in
10% Increase in
10% Decrease in
Future Power Prices
Future Power Prices
Future Power Prices
Future Power Prices
Increase/(Decrease) in Net Income
$
44,438
$
(44,438)
$
43,217
$
(43,217)
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55
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reports of Independent Registered Public Accounting Firms*
F-1
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-4
Consolidated Statements of Operations for the years ended December 31, 2024, 2023, and 2022
F-5
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023, and 2022
F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023, and 2022
F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022
F-8
Notes to Consolidated Financial Statements
F-10
* Deloitte & Touche LLP, PCAOB Firm ID No. 34
Table of Contents
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Riot Platforms, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Riot Platforms, Inc. and subsidiaries (the "Company") as of December 31, 2024 and
2023, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows, for the years then ended, and
the related notes (collectively referred to as the "financial statements"). In our opinion, the 2024 and 2023 financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United States of America.
The consolidated financial statements of the Company for the year ended December 31, 2022, before the effects of the retrospective adjustments to the
disclosures for a change in the composition of reportable segments and the adoption of ASU 2023-07, Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures (ASU 2023-07), discussed in Notes 2 and 20 to the financial statements, were audited by predecessor auditors whose
report, dated March 2, 2023, expressed an unqualified opinion on those statements. We have also audited the adjustments to the 2022 consolidated
financial statements to retrospectively adjust the disclosures for a change in the composition of reportable segments and apply the change in accounting
for the adoption of ASU 2023-07 in 2024, as discussed in Notes 2 and 20 to the financial statements. Our procedures included (1) comparing the amounts
of segment revenues, segment costs of revenue, and gross profit (loss) for both the change in composition of reportable segments and the adoption of
ASU 2023-07 to the Company’s underlying accounting analysis, (2) comparing the previously reported segment information per the Company’s
accounting analysis to the adjustments for the adoption of ASU 2023-07, and (3) recalculating the mathematical accuracy of the reconciliations of segment
amounts to the consolidated financial statements. In our opinion, such retrospective adjustments are appropriate and have been properly applied.
However, we were not engaged to audit, review, or apply any procedures to the 2022 consolidated financial statements of the Company other than with
respect to these retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2022 consolidated
financial statements taken as a whole.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2025, expressed an unqualified opinion on
the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.
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F-2
Mining Revenue – Refer to Notes 2 to the financial statements
Critical Audit Matter Description
The Company participates in a digital asset mining pool ("the mining pool”) by executing agreements with mining pool operators for the provision of hash
calculation services to the mining pool. The Company decides when to provide hash calculation services under the agreements and the Company’s
enforceable rights to compensation begins only when and lasts as long as the Company provides hash calculation services to the mining pool operator
and is created as power is provided over time. In exchange for providing hash calculation services, the Company is entitled to a payout of Bitcoin based
on a contractual formula, which primarily calculates the hash rate provided to the mining pool as a percentage of total network hash rate, and other inputs.
Revenue is recognized on the same day that control of the contracted service transfers to the mining pool operator, which is the same day as contract
inception. For the years ended December 31, 2024, and 2023, Bitcoin Mining revenue was $321.0 million, and $189.0 million, respectively.
We identified the auditing of Bitcoin Mining revenue as a critical audit matter due to the extent of audit effort required to perform audit procedures over
the Company’s hash calculation services provided to the mining pool operator, the associated contractual payouts including the blockchain contractual
inputs, the Company’s valuation of Bitcoin received from the mining pool operator and evaluating the results of those procedures.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s process for recording Bitcoin Mining revenue included the following, among others:
●
With the assistance of our Information Technology (IT) specialists, we identified the significant systems used to monitor hash calculation
services and tested the general IT controls over each of these systems.
●
We tested the effectiveness of controls over the Company’s Bitcoin Mining revenue calculation.
●
We tested the amount of the Bitcoin Mining revenue recorded by developing an expectation for the amount recorded based on the hash
calculation services provided to the mining pool operator and the payout method prescribed in the contract with the mining pool operator and
comparing our expectation to the amount recorded by the Company.
●
We confirmed with the mining pool operator the significant contractual terms utilized in the determination of Bitcoin Mining revenue, total mining
rewards earned, and the digital asset wallet addresses in which the rewards are deposited.
●
We utilized our proprietary audit tool to independently obtain evidence from the Bitcoin blockchain to test the occurrence and accuracy of
Bitcoin Mining revenue.
●
With the assistance of our Valuation specialists, we evaluated the reasonableness of the prices utilized by the Company to value Bitcoin by
obtaining independent Bitcoin prices and comparing those to the prices selected by the Company.
/s/ DELOITTE & TOUCHE LLP
Houston, TX
February 27, 2025
We have served as the Company’s auditor since 2023.
Table of Contents
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Riot Platforms, Inc.
Opinion on the Financial Statements
We have audited, before the effects of the retrospective adjustments to the disclosures for a change in the composition of reportable segments and the
adoption of ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07”) discussed in Note 2 and
Note 20 to the consolidated financial statements, comprising of the consolidated statements of operations, comprehensive loss, stockholders’ equity and
cash flows of Riot Platforms, Inc. (the "Company”) for the year ended December 31, 2022, and the related notes (collectively referred to as the "financial
statements”) (the 2022 consolidated financial statements before the effects of the adjustments discussed in Note 2 and Note 20 to the financial statements
are not presented herein). In our opinion, the 2022 financial statements, before the effects of the retrospective adjustments to the disclosures for a change
in the composition of reportable segments and adoption of ASU 2023-07 discussed in Note 2 and Note 20 to the financial statements, present fairly, in all
material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2022, in conformity with accounting
principles generally accepted in the United States of America.
We were not engaged to audit, review, or apply any procedures to the retrospective adjustments to the disclosures for a change in the composition of
reportable segments and adoption of ASU 2023-07 discussed in Note 2 and Note 20 to the consolidated financial statements, and accordingly, we do not
express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those
retrospective adjustments were audited by other auditors.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor from 2019 through May 18, 2023.
Los Angeles, CA
March 2, 2023
Table of Contents
F-4
Riot Platforms, Inc.
Consolidated Balance Sheets
(in thousands, except for share and per share amounts)
December 31, 2024
December 31, 2023
ASSETS
Current assets
Cash and cash equivalents
$
277,860
$
597,169
Restricted cash
73,441
—
Accounts receivable, net
27,124
24,706
Contract assets
6,478
15,359
Prepaid expenses and other current assets
40,288
29,107
Bitcoin
—
311,178
Derivative asset, current portion
40,020
30,781
Equity method investment - marketable securities, at fair value
134,265
—
Future power credits, current portion
—
271
Total current assets
599,476
1,008,571
Property and equipment, net
1,338,787
704,194
Bitcoin
1,654,468
—
Deposits
30,115
215,009
Finite-lived intangible assets, net
34,053
15,697
Derivative asset, less current portion
109,475
73,437
Operating lease right-of-use assets
27,492
20,413
Future power credits, less current portion
589
638
Goodwill
121,887
—
Other long-term assets
18,965
13,121
Total assets
$
3,935,307
$
2,051,080
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$
17,609
$
23,157
Contract liabilities
9,644
4,073
Accrued expenses
75,672
62,371
Deferred gain on acquisition post-close dispute settlement
26,007
26,007
Deferred revenue, current portion
2,892
2,458
Contingent consideration liabilities, current portion
23,626
271
Current portion of long-term debt
314
257
Operating lease liability, current portion
4,621
2,421
Total current liabilities
160,385
121,015
Deferred revenue, less current portion
13,590
15,801
Operating lease liability, less current portion
23,915
18,924
Contingent consideration liabilities, less current portion
3,229
638
Long-term debt, less current portion
584,311
526
Other long-term liabilities
6,192
6,154
Total liabilities
791,622
163,058
Commitments and contingencies - Note 17
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
December 31, 2024 and 2023
—
—
0% Series B Convertible Preferred stock, 1,750,001 shares authorized; no shares issued and outstanding as of
December 31, 2024 and 2023
—
—
Common stock, no par value; 680,000,000 shares authorized; 344,890,208 and 230,836,624 shares issued and outstanding
as of December 31, 2024 and 2023, respectively
3,833,882
2,687,692
Accumulated deficit
(690,419)
(799,820)
Accumulated other comprehensive income (loss), net
222
150
Total stockholders’ equity
3,143,685
1,888,022
Total liabilities and stockholders’ equity
$
3,935,307
$
2,051,080
See accompanying Notes to Consolidated Financial Statements.
Table of Contents
F-5
Riot Platforms, Inc.
Consolidated Statements of Operations
(in thousands, except for share and per share amounts)
Years Ended December 31,
2024
2023
2022
Revenue:
Bitcoin Mining
$
321,002
$
188,996
$
156,870
Engineering
38,491
64,303
65,342
Other
17,165
27,379
36,959
Total revenue
376,658
280,678
259,171
Costs and expenses:
Cost of revenue (excludes depreciation and amortization presented below):
Bitcoin Mining
189,224
96,597
74,335
Engineering
41,731
60,614
57,455
Other
31,800
97,122
61,906
Acquisition-related costs
5,541
—
78
Selling, general, and administrative
266,915
100,346
67,452
Depreciation and amortization
212,053
252,354
107,950
Change in fair value of Bitcoin
(457,409)
(184,734)
—
Change in fair value of derivative asset
(45,277)
(6,721)
(71,418)
Power curtailment credits
(33,685)
(71,215)
(27,345)
Change in fair value of contingent consideration
(2,459)
—
(159)
Realized gain on sale of Bitcoin
—
—
(30,346)
Loss (gain) on sale/exchange of equipment
17,429
5,336
(16,281)
Casualty-related charges (recoveries), net
(2,795)
(5,974)
9,688
Impairment of Bitcoin
—
—
147,365
Impairment of goodwill
—
—
335,648
Impairment of miners
—
—
55,544
Total costs and expenses
223,068
343,725
771,872
Operating income (loss)
153,590
(63,047)
(512,701)
Other income (expense):
Interest income
27,166
11,076
1,763
Interest expense
(1,985)
(2,854)
(1,309)
Unrealized gain (loss) on equity method investment - marketable securities
(69,489)
—
(8,996)
Other income (expense)
863
260
(59)
Total other income (expense)
(43,445)
8,482
(8,601)
Net income (loss) before taxes
110,145
(54,565)
(521,302)
Current income tax benefit (expense)
(744)
48
(789)
Deferred income tax benefit (expense)
—
5,045
12,538
Total income tax benefit (expense)
(744)
5,093
11,749
Net income (loss)
$
109,401
$
(49,472)
(509,553)
Basic net income (loss) per share
0.40
(0.28)
(3.65)
Diluted net income (loss) per share
0.34
(0.28)
(3.65)
Basic weighted average number of shares outstanding
275,980,010
175,026,051
139,433,901
Diluted weighted average number of shares outstanding
318,925,961
175,026,051
139,433,901
See accompanying Notes to Consolidated Financial Statements.
Table of Contents
F-6
Riot Platforms, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Years Ended December 31,
2024
2023
2022
Net income (loss)
$
109,401
$
(49,472)
$
(509,553)
Other comprehensive income (loss):
Unrealized holding gains (losses) on convertible note
72
150
—
Comprehensive income (loss)
$
109,473
$
(49,322)
$
(509,553)
See accompanying Notes to Consolidated Financial Statements.
Table of Contents
F-7
Riot Platforms, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except for share and per share amounts)
Accumulated other
Total
Preferred Stock
Common Stock
Accumulated
comprehensive
stockholders’
Shares
Amount
Shares
Amount
deficit
income (loss)
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
—
—
13,947,829
(10,138)
—
—
(10,138)
Issuance of common stock/At-the-market offering, net of offering costs
—
—
37,052,612
298,209
—
—
298,209
Conversion of preferred stock to common stock
(2,199)
(11)
2,199
11
—
—
—
Stock-based compensation
—
—
—
24,555
—
—
24,555
Net income (loss)
—
—
—
—
(509,553)
— (509,553)
Balance as of December 31, 2022
—
—
167,751,112
1,907,784
(756,342)
— 1,151,442
Cumulative effect upon adoption of ASU 2023-08
—
—
—
—
5,994
—
5,994
Issuance of restricted stock, net of forfeitures and delivery of common
stock underlying stock awards, net of tax withholding
—
—
809,302
(14,035)
—
—
(14,035)
Issuance of common stock/At-the-market offering, net of offering costs
—
—
62,206,045
761,773
—
—
761,773
Issuance of common stock in connection with acquisition of ESS Metron
—
—
70,165
—
—
—
—
Stock-based compensation
—
—
—
32,170
—
—
32,170
Net income (loss)
—
—
—
—
(49,472)
—
(49,472)
Other comprehensive income (loss)
—
—
—
—
—
150
150
Balance as of December 31, 2023
—
—
230,836,624
2,687,692
(799,820)
150 1,888,022
Issuance of restricted stock, net of forfeitures and delivery of common
stock underlying stock awards, net of tax withholding
—
—
16,006,545
(11,562)
—
—
(11,562)
Issuance of common stock/At-the-market offering, net of offering costs
—
—
90,626,416
956,637
—
—
956,637
Issuance of common stock in connection with the Block Mining
Acquisition
—
—
7,240,623
73,999
—
—
73,999
Issuance of common stock to a third-party advisor
—
—
180,000
1,912
—
—
1,912
Stock-based compensation
—
—
—
125,204
—
—
125,204
Net income (loss)
—
—
—
—
109,401
—
109,401
Other comprehensive income (loss)
—
—
—
—
—
72
72
Balance as of December 31, 2024
— $
—
344,890,208
$
3,833,882
$
(690,419) $
222 $3,143,685
See accompanying Notes to Consolidated Financial Statements.
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F-8
Riot Platforms, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31,
2024
2023
2022
Operating activities
Net income (loss)
$
109,401
$
(49,472)
$
(509,553)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock-based compensation
125,204
32,170
24,555
Issuance of common stock to a third-party advisor
1,912
—
—
Depreciation and amortization
212,053
252,354
107,950
Amortization of license fee revenue
(97)
(97)
(97)
Noncash lease expense
3,908
2,509
12,181
Amortization of debt issuance costs
250
—
—
Deferred income tax expense (benefit)
—
(5,045)
(11,749)
Impairment of Bitcoin
—
—
147,365
Impairment of goodwill
—
—
335,648
Impairment of miners
—
—
55,544
Change in fair value of Bitcoin
(457,409)
(184,734)
—
Change in fair value of derivative asset
(45,277)
(6,721)
(71,418)
Change in fair value of contingent consideration
(2,459)
—
(159)
Unrealized (gain) loss on equity method investment - marketable securities
69,489
—
8,996
Realized gain on sale of Bitcoin
—
—
(30,346)
Loss (gain) on sale/exchange of equipment
17,429
5,336
(16,281)
Casualty-related charges
310
1,526
9,688
Revenue recognized from Bitcoin mined
(321,002)
(188,996)
(156,870)
Proceeds from sale of Bitcoin
9,518
176,219
79,529
Changes in assets and liabilities:
(Increase)/decrease in operating assets
7,839
6,352
12,058
Increase/(decrease) in operating liabilities
13,879
(8,316)
3,489
Net cash provided by (used in) operating activities
(255,052)
33,085
530
Investing activities
Proceeds from the sale of marketable equity securities
—
—
1,808
Block Mining Acquisition, net of cash acquired
(7,203)
—
—
E4A Solutions Acquisition, net of cash acquired
(50,861)
—
—
Acquisition of Bitcoin
(577,500)
—
—
Deposits on equipment
(442,473)
(230,397)
(194,923)
Security deposits
(4,095)
—
(3,809)
Investment in equity method investment - marketable securities
(203,754)
—
—
Investment in convertible debt
—
(4,500)
—
Purchases of property and equipment, including construction in progress
(240,340)
(193,704)
(148,412)
Casualty-related recoveries
3,105
7,500
—
Proceeds from the sale of equipment
14,316
6,369
—
Patent costs incurred
—
(34)
(9,527)
Net cash provided by (used in) investing activities
(1,508,805)
(414,766)
(354,863)
Financing activities
Proceeds from the issuance of common stock / At-the-market offering
977,030
778,430
304,849
Offering costs for the issuance of common stock / At-the-market offering
(20,393)
(16,657)
(6,640)
Proceeds from issuance of convertible notes
594,383
—
—
Payments on contingent consideration liability - future power credits
—
—
(15,725)
Proceeds from Credit and Security Facility
—
6,920
—
Repayments of Credit and Security Facility
(866)
(6,059)
—
Debt issuance costs
(15,249)
(77)
—
Repayment of debt assumed in Block Mining Acquisition
(5,002)
—
—
Repayment of note payable
(352)
—
—
Repurchase of common shares to pay employee withholding taxes
(11,562)
(14,035)
(10,138)
Net cash provided by (used in) financing activities
1,517,989
748,522
272,346
Net increase (decrease) in cash and cash equivalents and restricted cash
(245,868)
366,841
(81,987)
Cash and cash equivalents and restricted cash at beginning of period
597,169
230,328
312,315
Cash and cash equivalents and restricted cash at end of period
$
351,301
$
597,169
$
230,328
See accompanying Notes to Consolidated Financial Statements.
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F-9
Riot Platforms, Inc.
Consolidated Statements of Cash Flows - continued
(in thousands)
Years Ended December 31,
2024
2023
2022
Supplemental information:
Cash paid for interest
$
45
$
84
$
—
Cash paid for taxes
$
107
$
680
$
—
Non-cash transactions
Issuance of common stock for the Block Mining Acquisition
$
73,999
$
—
$
—
Contingent liability entered into for the Block Mining Acquisition
$
26,085
$
—
$
—
Contingent liability entered into for the E4A Solutions Acquisition
$
2,640
$
—
$
—
Reclassification of deposits to property and equipment
$
623,316
$
78,376
$
422,865
Construction in progress included in accrued expenses
$
15,146
$
23,451
$
16,621
Bitcoin exchanged for employee compensation
$
2,478
$
869
$
1,495
Conversion of preferred stock to common stock
$
—
$
—
$
11
Cumulative effect upon adoption of ASU 2023-08
$
—
$
5,994
$
—
Right of use assets exchanged for new operating lease liabilities
$
10,987
$
1,249
$
10,333
Property and equipment obtained in exchange transaction
$
—
$
—
$
10,409
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
$
597,169
$
230,328
$
312,315
Restricted cash
—
—
—
Total cash, cash equivalents, and restricted cash as presented above
$
597,169
$
230,328
$
312,315
Cash, cash equivalents, and restricted cash, end of the period:
Cash and cash equivalents
$
277,860
$
597,169
$
230,328
Restricted cash
73,441
—
—
Total cash, cash equivalents, and restricted cash as presented above
$
351,301
$
597,169
$
230,328
See accompanying Notes to Consolidated Financial Statements.
Table of Contents
Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-10
Note 1. Organization and Basis of Presentation
Organization
Riot Platforms is a vertically-integrated Bitcoin mining company principally engaged in enhancing our capabilities to mine Bitcoin in support of the Bitcoin
blockchain. The Rockdale Facility is a large-scale Bitcoin mining facility in Rockdale, Texas and we completed Phase I of development of a second large-
scale Bitcoin mining facility, the Corsicana Facility, which is currently equipped to provide up to 400 MW of capacity for our Bitcoin Mining. Upon
completion, the Corsicana Facility is expected to have approximately 1 GW of capacity available. During 2024, the Company acquired the Kentucky
Facility, which has existing operational Bitcoin mining capacity and the potential for significant expansion. Also, during 2024, the Company acquired E4A
Solutions, a leading provider of electrical engineering services to a diverse customer base of energy developers and data center operators.
Basis of presentation and principles of consolidation
The accompanying consolidated financial statements ("Consolidated Financial Statements”) and these notes (these "Notes”) have been prepared in
accordance with GAAP. In the opinion of management, the Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring
adjustments, considered necessary for a fair presentation of such results.
The accompanying audited Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
Unless otherwise indicated, amounts are stated in thousands of U.S. Dollars except for: share, per share, and miner amounts; Bitcoin quantities, prices,
and hash rate; cost to mine one Bitcoin; and production value of one Bitcoin mined.
As described in Note 20. Segment Information, we operate in two reportable business segments: Bitcoin Mining and Engineering.
Note 2. Significant Accounting Policies and Recent Accounting Pronouncements
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 may differ materially from those estimates. The most significant accounting estimates inherent in the
preparation of the Company’s financial statements include revenue recognition; valuation of the derivative asset classified under Level 3 on the fair value
hierarchy; determination of the useful lives and recoverability of long-lived assets; impairment analysis of fixed assets and finite-lived intangibles;
impairment analysis of goodwill; allocating the fair value of purchase consideration to assets acquired and liabilities assumed in business acquisitions;
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. The reclassifications did not have a material impact on
the Company’s Consolidated Financial Statements and related disclosures. The impact on any prior period disclosures was immaterial.
Cash and cash equivalents
Cash and cash equivalents consists of cash on hand and highly liquid investments. We consider any highly liquid investments with an original maturity
of three months or less at acquisition to be cash equivalents. From time to time, the Company’s cash account balances exceed the balances as covered by
the FDIC. The Company has never suffered a loss due to such excess balances.
Accounts receivable
The Company’s accounts receivable balance consists of amounts due from its mining pool operator and engineering customers. The Company records
accounts receivable at the invoiced amount less an allowance for any potentially uncollectable accounts under the current expected credit loss ("CECL”)
impairment model and presents the net amount of the receivable expected to be collected.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-11
The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers forecasts
of future economic conditions in addition to information about past events and current conditions. Based on this model, the Company considers many
factors, including the age of the balance, collection history, and current economic trends. Bad debts are written off after all collection efforts have ceased.
Allowances for credit losses are recorded as a direct reduction from an asset’s amortized cost basis. Credit losses and recoveries are recorded in Selling,
general and administrative expenses in the Consolidated Statements of Operations. Recoveries of financial assets previously written off are recorded
when received. For the years ended December 31, 2024, 2023, and 2022, the Company recognized $0.1 million, $0.0 million, and $0.0 million respectively, in
bad debt expense.
Based on the Company’s current and historical collection experience, management recorded allowances for doubtful accounts of $2.9 million and $1.5
million as of December 31, 2024 and December 31, 2023, respectively.
As of December 31, 2024 and 2023, retainage of $1.0 million and $3.2 million, respectively, was included in Accounts receivable, net, on the Consolidated
Balance Sheets.
Bitcoin
The Company’s Bitcoin is recorded at fair value, as determined using the period-end closing price of Bitcoin on the Company’s principal market, Coinbase
(the "Principal Market”), and changes in fair value are recognized in Change in fair value of Bitcoin, in Operating income (loss) on the Consolidated
Statements of Operations.
During 2024, Riot made the strategic decision to temporarily halt the sale of its Bitcoin production and instead, increase its Bitcoin holdings. As a result of
its intent to hold its Bitcoin, the Company began classifying its Bitcoin held as a non-current asset on its Consolidated Balance Sheet. For all periods
presented, all sales of Bitcoin occurred before the strategic decision and, as such Bitcoin was sold nearly immediately after receipt by the Company, the
proceeds were recognized within Operating activities on the Consolidated Statements of Cash Flows.
Long-term investments
For equity investments, the Company initially records equity investments at cost then adjusts the carrying value of such equity investments through
earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment.
For debt investments, such as convertible notes, the Company classifies them as available-for-sale debt instruments and recognizes the investments at
fair value in Other long-term assets on the Consolidated Balance Sheets. Unrealized changes in the fair value of the convertible note are recognized
in Other comprehensive income (loss) on the Consolidated Statements of Comprehensive Income (Loss). Interest income is recognized within Interest
income (expense) on the Consolidated Statements of Operations.
Revenue recognition
Bitcoin Mining
The Company participates in digital asset mining pools by executing agreements with mining pool operators for the provision of hash calculation services
to the mining pool. Currently, the Company only participates in a Full-Pay-Per-Share ("FPPS”) mining pool. The Company decides when to provide hash
calculation services under the agreements and the Company’s enforceable right to compensation begins only when, and lasts as long as, the Company
provides hash calculation services to the mining pool operator and is created as power is provided over time. The only consideration due to the Company
relates to the provision of hash calculation services. Such agreements are freely terminable at any time by the Company or by the pool operator, without
penalty to either party. Providing hash calculation services in digital asset transaction verification services is an output of the Company’s ordinary
activities and is the only performance obligation in the agreements with mining pool operators.
The transaction consideration received, if any, is noncash consideration in the form of Bitcoin. Changes in the fair value of the noncash consideration
after contract inception due to the form of the consideration (changes in the market price of Bitcoin) are not included in the transaction price and,
therefore, are not included in revenue. Certain mining pool operators charge fees to cover the costs of maintaining the pool. These fees are deducted from
amounts we may otherwise earn and are treated as a reduction to the
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-12
consideration received. Fees fluctuate and historically have averaged no more than approximately 2% per reward earned. Under the agreements neither
party can dispute settlement terms after approximately 35 days following settlement.
In exchange for providing hash calculation services, the Company is entitled to a FPPS payout of Bitcoin based on a contractual formula, which primarily
calculates the hash rate provided to the mining pool as a percentage of total network hash rate, and other inputs.
The Company is entitled to consideration even if a block is not successfully placed by the mining pool operator. Bitcoin network block subsidies are
based on the total amount of block subsidies that are expected to be generated on the Bitcoin network as a whole during the 24-hour period beginning at
0:00:00 UTC daily (i.e., the "measurement period”), while network transaction fees are based on the total amount of transaction fees and block rewards that
are actually generated on the blockchain network as a whole during the measurement period. The Company is also entitled to a fractional share of the
Bitcoin award and transaction fees from the mining pool operator as determined based on the hash rate provided by the Company to the mining pool as a
percentage of the total expected Bitcoin network hash rate based on the current network difficulty. The Company is entitled to its relative share of
consideration at the end of each measurement period, even if a block is not successfully placed by the mining pool.
For accounting purposes, the agreement by and between the Company and the mining pool operator has a duration of less than 24 hours as a result of the
agreement being continually renewed at the beginning of each measurement period. However, the continual renewal of the agreement does not represent a
material right requiring separate performance obligations, as the FPPS formula remains the same upon each renewal.
Consideration is all variable. Revenue is recognized on the same day that control of the contracted service transfers to the mining pool operator, which is
the same day as contract inception. As it is probable that a significant reversal of cumulative revenue will not occur and we are able to calculate the
payout based on the contractual formula, revenue is estimated and recognized based on the spot price of Bitcoin determined using the Company’s
Principal Market at the beginning of each measurement period, which the Company considers to be 0:00:00 UTC on the date of contract inception.
Noncash consideration is measured at fair value at agreement inception. The fair value of the crypto asset consideration is determined using the quoted
price per the Principal Market at the beginning of each measurement period at the single Bitcoin level (one Bitcoin).
There is no significant financing component in these transactions, due to the performance obligations and settlement of the transactions being on a daily
basis.
Engineering
Substantially all revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified
performance obligation. Revenue is recognized over time as performance creates or enhances an asset with no alternative use, and for which the Company
has an enforceable right to receive compensation as defined under the contract.
To determine the amount of revenue to recognize over time, the Company utilizes the cost-to-cost method as management believes cost incurred best
represents the amount of work completed and remaining on projects. As the cost-to-cost method is driven by incurred cost, the Company calculates
the percentage of completion by dividing costs incurred to date by the total estimated cost. The percentage of completion is then multiplied by the
estimated contract amount to determine inception-to-date revenue. Approved changes to design plans are generally recognized as a cumulative
adjustment to the percentage of completion calculation. Revenue recognized for the period is the current inception-to-date recognized revenue less the
prior period inception-to-date recognized revenue. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the
loss was first determined, and any additional losses incurred subsequently are recognized in the subsequent reporting periods as they are identified.
Additionally, contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract.
Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment of total contract value
and the total estimated costs to complete those contracts, and therefore, profit and revenue recognition. Any costs to obtain a contract are not material to
the Company’s financial statements and would be expensed as incurred. Because of the inherent uncertainties in estimating costs, it is at least reasonably
possible that the estimates used will change within the near term. The length of time for the Company to complete a custom product varies but is typically
between four to 12 weeks.
Customers are typically required to make periodic progress payments to the Company based on contractually agreed-upon milestones. Invoices are due
net, 30 days, and retainage, if any, is generally due 30 days after delivery. Taxes collected from
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-13
customers and remitted to governmental authorities are excluded from revenue. Shipping and handling costs are treated as fulfillment costs and are
included in cost of sales.
Fair value measurement
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that
market participants would use in pricing an asset or a liability.
Fair value measurements are classified and disclosed in one of the following three categories:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined
using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value
requires significant judgment or estimation.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement.
The Company will update its assumptions each reporting period based on new developments and record such amounts at fair value based on the revised
assumptions until the agreements expire or contingency is resolved, as applicable.
Property and equipment
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Estimated useful
lives for leasehold improvements are typically the lesser of the estimated useful life of the asset or the life of the term of the lease. The estimated useful
lives for all the Company’s property and equipment are as follows:
Life (Years)
Buildings and building improvements
10-25
Miners and mining equipment
3
Machinery and facility equipment
5-10
Office and computer equipment
3
Impairment of long-lived assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future
cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the assets.
Goodwill
Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. Goodwill is not amortized and is reviewed for
impairment annually as of December 31, or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount, including goodwill. We use both qualitative and quantitative analyses in making this determination. The
Company determined that it has two reporting units for goodwill impairment testing purposes, Bitcoin Mining and Engineering, which are consistent with
internal management reporting and management’s oversight of operations. Our analyses require significant assumptions and judgments, including
assumptions about future economic conditions, revenue growth, and operating margins, among other factors. Examples of events or changes in
circumstances considered in the qualitative analysis, many of which are subjective in nature, include: a significant negative trend in our industry or overall
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-14
economic trends, a significant change in how we use the acquired assets, a significant change in our business strategy, a significant decrease in the
market value of the asset, a significant change in regulations or in the industry that could affect the value of the asset, and a change in segments. If it is
more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs the quantitative test to identify and
measure the amount of goodwill impairment loss by comparing the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds
the fair value, goodwill of the reporting unit is considered impaired and that excess is recognized as a goodwill impairment loss.
Finite-lived intangible assets
Intangible assets with finite lives are comprised of customer contracts, trademarks, UL Listings, and patents that are amortized on a straight-line basis
over their expected useful lives, which is their contractual term or estimated useful life. Patent costs consisting of filing and legal fees incurred are initially
recorded at cost. The Company performs assessments to determine whether finite-lived classification is still appropriate at least annually. The carrying
value of finite-lived assets and their remaining useful lives are also reviewed at least annually to determine if circumstances exist which may indicate a
potential impairment or revision to the amortization period. A finite-lived intangible asset is considered to be impaired if its carrying value exceeds the
estimated future undiscounted cash flows to be derived from it. We exercise judgment in selecting the assumptions used in the estimated future
undiscounted cash flows analysis. Impairment is measured by the amount that the carrying value exceeds fair value.
The use of different estimates or assumptions could result in significantly different fair values for our reporting units and intangible assets.
Business combinations
The Company uses the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed,
and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as
the excess of consideration transferred over the aforementioned amounts. Contingent consideration is included within the purchase price and is
recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value as of each reporting date
until the contingency is resolved, and subsequent changes in fair value are recognized in earnings. Contingent consideration is recorded in current and
long-term liabilities on our Consolidated Balance Sheets.
While we use our best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date
as well as contingent consideration, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the
measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the
corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities
assumed, whichever comes first, any subsequent adjustments are recorded in the Consolidated Statements of Operations.
Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including
estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies, and contingent consideration, where applicable. The fair
value assigned to acquired assets and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled
by management, including valuations that utilize customary valuation procedures and techniques. Critical estimates in valuing certain of the intangible
assets we have acquired include future expected cash flows from customer contracts, discount rates, and estimated market changes in the value of the
Rockdale PPA, which is accounted for as a nonhedged derivative contract. Unanticipated events and circumstances may occur that may affect the
accuracy or validity of such assumptions, estimates, or actual results.
Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
Investment in marketable equity securities
For investments in marketable equity securities in which the Company has the ability to exercise significant influence, but not control, over the operating
and financial policies of the investee, the Company accounts for its investment using the equity method of accounting. Determining the ability of an
investor to exercise significant influence is not always clear and applying judgment is necessary to assess the status of each investment.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-15
The Company has elected to measure its equity method marketable equity securities at fair value at each balance sheet date, with unrealized holding gains
and losses recorded in other income (expense), as the shares have a readily determinable fair value since they are publicly traded and have significant
average daily volume traded.
Convertible Debt Arrangements
Convertible debt securities contain embedded conversion options that must be first evaluated to determine if bifurcation and separate accounting would
be required for the embedded feature. As a result, the Company is required: (1) to analyze whether the conversion feature meets the definition of a
derivative and is not eligible for an exception from this guidance (otherwise, the conversion feature will be recognized as a derivative) and (2) to analyze
whether there is a significant premium associated with the convertible debt instrument (otherwise, the Company will allocate the debt proceeds with the
premium being allocated to equity). If neither condition is met, the entire instrument will be accounted for as debt (i.e., no bifurcation is needed). The
embedded conversion features in the Company’s convertible debt securities are deemed to be indexed to the Company’s common stock and meet the
criteria for classification in stockholders’ equity, and therefore derivative accounting does not apply. Therefore, the Company recognizes its convertible
debt securities as long-term debt on its Consolidated Balance Sheets, net of unamortized debt issuance costs. The associated debt issuance costs are
amortized into interest expense on the Consolidated Statements of Operations using the effective interest method over the term of the debt.
Leases
The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the term of such
lease is assessed based on the date on which the underlying asset is made available for the Company’s use by the lessor. The Company’s assessment of
the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which
the Company is reasonably certain of not exercising, as well as periods covered by renewal options which the Company is reasonably certain of
exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense
recognition and the presentation reflected on the Consolidated Statements of Operations over the lease term. For all periods presented, the Company only
had operating leases.
For leases with a term exceeding 12 months, an operating lease liability is recorded on the Company’s consolidated balance sheet at lease commencement
reflecting the present value of its fixed minimum payment obligations over the lease term. A corresponding operating lease right-of-use asset equal to the
initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced
by any lease incentives received. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its
incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in its leasing arrangements are typically
not readily determinable. The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term
and economic environment of the associated lease.
For the Company’s operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For leases with a
term of 12 months or less, any fixed lease payments are recognized on a straight-line basis over the lease term and are not recognized on the Consolidated
Balance Sheets as an accounting policy election. Leases qualifying for the short-term lease exception were insignificant. Variable lease costs are
recognized as incurred and primarily consist of common area maintenance and utility charges not included in the measurement of right of use assets and
operating lease liabilities.
Operating segments
Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the chief
operating decision maker ("CODM”), which is comprised of several members of its executive management team, including the CEO, Executive Chairman,
EVO-CFO, EVP-Head of Corporate Development & Strategy, and COO. The CODM uses segment gross profit (loss) to assess the performance of, manage
the operations of, and allocate capital and operational resources to the Company’s two reportable segments.
Change in Reportable Segments
Previously, the Company operated in three reportable business segments: Bitcoin Mining, Data Center Hosting, and Engineering. As of January 1, 2024,
the Company has terminated all contracts with its legacy data center hosting customers and made the strategic decision to no longer offer data center
hosting services to customers. Commencing with the three months ended March 31, 2024, the
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-16
Data Center Hosting Segment no longer met the quantitative requirements as a reportable segment, and the CODM ceased analyzing the performance of
the Company’s legacy data center hosting operations. As such, the Data Center Hosting Segment has been eliminated as a separate reportable segment.
Bitcoin Mining and Engineering are the Company’s two remaining reportable business segments. See Note 20. Segment Information for more information.
Income taxes
The Company accounts for income taxes under the asset and liability method, in which deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is required to the extent any deferred
tax assets may not be realizable.
Contract balances
Contract assets consist of costs and estimated earnings in excess of billings on uncompleted engineering contracts.
Deferred revenue relates to upfront payments and consideration received from customers for the upfront license fee generated from our legacy animal
health business. Contract liabilities consist of billings in excess of costs and estimated earnings on uncompleted engineering contracts.
Remaining performance obligations
Remaining performance obligations represent the transaction price of contracts for work that has not yet been performed. The Company elected the
practical expedient to not adjust the transaction price for the existence of a significant financing component if the timing difference between a customer’s
payment and our performance is one year or less.
Stock-based compensation
The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award, which is based on the
fair market value of the Company’s common stock at the time of the grant. For performance-based share-based payment awards, the Company recognizes
compensation cost over the performance period when achievement of the milestones and targets is probable.
The Company has elected to account for forfeitures of awards as they occur.
Recently issued accounting pronouncements
The Company continually assesses 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 such change to its
Consolidated Financial Statements and assures that there are proper controls in place to ascertain that the Company’s Consolidated Financial Statements
properly reflect the change.
In December 2023, the Financial Accounting Standards Board ("FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income
Tax Disclosures ("ASU 2023-09”). ASU 2023-09 expands existing income tax disclosures for rate reconciliations by requiring disclosure of certain specific
categories and additional reconciling items that meet quantitative thresholds and expands disclosures for income taxes paid by requiring disaggregation
by certain jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024; early adoption is permitted. The Company is
evaluating the impact the updated guidance will have on its disclosures.
In December 2023, the FASB issued ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure
of Crypto Assets, which establishes accounting guidance for crypto assets meeting certain criteria. Bitcoin meets this criteria. The amendments require
crypto assets meeting the criteria to be recognized at fair value with changes recognized in net income for each reporting period. Upon adoption, a
cumulative-effect adjustment is made to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption. ASU
2023-08 is effective for fiscal years beginning after December
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-17
15, 2024, including interim periods within those fiscal years. Early adoption is permitted. The Company elected to early adopt ASU 2023-08 for the year
ended December 31, 2023. As a result of the adoption, the Company recorded a cumulative effect adjustment to its Accumulated deficit balance of
approximately $6.0 million as of January 1, 2023, as a result of recognizing its Bitcoin held as of January 1, 2023, at fair value.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07”).
ASU 2023-07 is intended to enhance reportable segment disclosures by requiring disclosures of significant segment expenses regularly provided to the
CODM, requiring disclosure of the title and position of the CODM and explanation of how the reported measures of segment profit and loss are used by
the CODM in assessing segment performance and allocation of resources. ASU 2023-07 is effective for the Company for annual periods beginning after
December 31, 2023. The Company adopted ASU 2023-07 for the year ended December 31, 2024. As a result of the adoption, the Company expanded its
disclosures in Note 20. Segment Information, to present significant expenses that are included within cost of revenue, by reportable segment, which are
presented to the CODM.
In December 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures
(Subtopic 220-40) ("ASU 2024-03”). ASU 2024-03 requires, in the notes to the financial statements, disclosures of specified information about certain
costs and expenses specified in the updated guidance. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and
interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact the updated guidance will
have on its disclosures.
Note 3. Acquisitions
E4A Solutions Acquisition
On December 16, 2024, the Company acquired 100% of the equity interests of E4A Solutions, a Texas-based electrical engineering solutions company, for
total consideration of approximately $54.4 million, which was comprised of $51.8 million paid for using the Company’s existing cash and a contingent
purchase price payable to the sellers with an estimated fair value of $2.6 million. Under the contingent purchase price payable, the sellers are eligible to
earn potential earn-out targets based on E4A Solutions’ Adjusted EBITDA during the two years ending December 31, 2026, payable in cash or Riot
common stock at the Company’s discretion. The potential earnout is calculated as 2.65 times the amount the average adjusted EBITDA exceeds the
Earnout threshold, as defined in the purchase agreement.
E4A Solutions is a provider of electrical engineering services to a diverse customer base of energy developers and data center operators. This acquisition
adds to Riot’s vertically integrated strategy by adding engineering expertise to service its own existing and future electrical infrastructure as well as
provide solutions and services to the rapidly growing market for electrical infrastructure.
The acquisition was accounted for as an acquisition of a business using the acquisition method of accounting, which requires recognition of assets
acquired and liabilities assumed at their respective fair values on the date of acquisition. As of December 31, 2024, the Company has completed a
preliminary allocation of the purchase consideration. Therefore, the allocation of the purchase price to assets acquired and liabilities assumed is based on
provisional estimates and is subject to continuing management analysis, with assistance from third party valuation advisors. The Company expects to
finalize the valuation of these assets and liabilities, and consideration transferred, as soon as practicable, but not later than one year from the acquisition
date. Any changes to the preliminary estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments to those
assets and liabilities and residual amounts will be allocated to goodwill.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-18
The following table presents the preliminary allocation of the purchase consideration:
Cash and cash equivalents
$
915
Accounts receivable
3,961
Prepaid expenses and other current assets
169
Contract assets
2,135
Property and equipment
136
Operating lease right-of-use asset
612
Finite-lived intangible assets:
Customer contracts
23,100
Trademark
1,100
Other long-term assets
44
Accounts payable
(1,497)
Deferred revenue, current portion
(374)
Accrued expenses
(242)
Operating lease liability, current portion
(323)
Operating lease liability, less current portion
(289)
Other long-term liabilities
(53)
Total identifiable assets and liabilities acquired
29,394
Goodwill
25,022
Total purchase consideration
$
54,416
The fair values of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, other long-term assets, accounts payable,
contract liabilities, accrued expenses, and other long-term liabilities were determined to be the carrying values due to the immaterial and/or short-term
nature of the assets and liabilities.
The finite-lived intangible assets consist of a trademark and customer relationships. The fair value of the trademark was estimated using the relief from
royalty rate method, which estimated future royalty charges attributable to the trademark. The fair value of the customer relationships was estimated using
the income approach, which estimated future revenues and costs of the existing customer relationships. The estimated fair values of the trademark and
customer relationship utilized a discount rate of 13.4%.
The right of use asset and operating lease liabilities consisted of an operating lease of office and commercial space in Houston, Texas. The lease has
annual payments of approximately $0.4 million and a remaining lease term of approximately two years as of acquisition.
Goodwill was attributable to the assembled workforce of experienced personnel at E4A Solutions and synergies expected to be achieved from the
combined operations of Riot and E4A Solutions. The goodwill recognized is not expected to be deductible for tax purposes. We assigned the goodwill to
our Engineering reportable segment.
The operating results of E4A Solutions have been included in the Company’s Consolidated Statements of Operations since the acquisition date. Through
December 31, 2024, the Company recognized approximately $2.7 million of acquisition-related costs related to this acquisition that were expensed as
incurred.
From the acquisition date through December 31, 2024, E4A Solution’s total revenue and net income was approximately $0.8 million and less than $0.1
million, respectively.
Block Mining Acquisition
On July 23, 2024, the Company acquired 100% of the equity interests of Block Mining, for total consideration of approximately $113.6 million, which was
comprised of $13.5 million in cash (adjusted for net working capital acquired and other items, excluding the payoff of debt of $5.0 million, which was
accounted for as a transaction separate from the acquisition) from the Company’s existing cash, 7.2 million shares of Riot common stock valued at
approximately $74.0 million, and a contingent purchase price payable to the sellers with an estimated fair value of $26.1 million. Under the contingent
purchase price payable, the sellers are eligible to earn up to $32.5 million in potential earn-out targets if certain milestones are reached by December 31,
2025.
The Block Mining Acquisition immediately increased Riot’s hash rate, expanded Riot’s footprint geographically, and provided exposure to additional
energy markets outside of ERCOT, including the Paducah Power Systems, Tennessee Valley Authority (TVA)
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-19
and Big Rivers Electric Corporation in the MISO region. Block Mining is a vertically-integrated Bitcoin miner consisting of two operational sites, both in
Kentucky, which consist of existing operational Bitcoin mining capacity, with the potential to expand. Additionally, Block Mining owns a separate
greenfield expansion opportunity in Kentucky, adjacent to an existing substation, presenting the opportunity for further expansion. Block Mining is a
capital efficient developer and operator of Bitcoin mining facilities with an experienced management team that will add to Riot’s ability to execute on its
vertically-integrated strategy.
The acquisition was accounted for as an acquisition of a business using the acquisition method of accounting, which requires recognition of assets
acquired and liabilities assumed at their respective fair values on the date of acquisition. As of December 31, 2024, the Company has completed a
preliminary allocation of the purchase consideration. Therefore, the allocation of the purchase price to assets acquired and liabilities assumed is based on
provisional estimates and is subject to continuing management analysis, with assistance from third party valuation advisors. The Company expects to
finalize the valuation of these assets and liabilities, and consideration transferred, as soon as practicable, but not later than one year from the acquisition
date. Any changes to the preliminary estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments to those
assets and liabilities and residual amounts will be allocated to goodwill.
The following table presents the preliminary allocation of the purchase consideration:
Cash and cash equivalents
$
6,295
Accounts receivable
362
Prepaid expenses and other current assets
2,877
Property and equipment
20,165
Operating lease right-of-use asset
3,733
Accounts payable
(1,471)
Accrued expenses
(833)
Operating lease liability, current portion
(2,410)
Operating lease liability, less current portion
(1,323)
Long-term debt
(10,678)
Total identifiable assets and liabilities acquired
16,717
Goodwill
96,865
Total purchase consideration
$
113,582
The fair values of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses
were determined to be the carrying values due to the short-term nature of the assets and liabilities.
The fair value of property and equipment was estimated by applying the cost approach, which uses the replacement cost as an indicator of fair value. The
assumptions of the cost approach include replacement cost new and physical deterioration factors including remaining life and effective age. The
replacement cost new was based on a price per terahash consistent with prices the Company pays for new Bitcoin miners and an effective age of three
years, consistent with the Company’s current estimated useful life of Bitcoin miners.
The right of use asset and operating lease liabilities consisted of an operating lease of a data center in Calvert City, Kentucky. The lease has annual
payments of approximately $1.4 million and a remaining lease term of approximately 3.0 years as of acquisition.
The assumed debt consisted of a $5.0 million secured loan and a $5.7 million note payable. The secured loan was paid off on the date of acquisition. The
note payable carries a fixed rate of 8.81%, and matures in December 2035, with annual principal and accrued interest payments beginning on December 31,
2024. The fair value of the debt at acquisition of $5.7 million was determined to equal its carrying value due at acquisition, as the interest rate is reasonably
consistent with rates the Company would expect to incur for similar debt instruments.
Goodwill was attributable to the assembled workforce of experienced personnel at Block Mining and synergies expected to be achieved from the combined
operations of Riot and Block Mining. The goodwill recognized is not expected to be deductible for tax purposes. We assigned the goodwill to our Bitcoin
Mining reportable segment.
The operating results of Block Mining have been included in the Company’s Consolidated Statements of Operations since the acquisition date. Through
December 31, 2024, the Company recognized $2.8 million of acquisition-related costs related to this acquisition that were expensed as incurred.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-20
From the acquisition date through December 31, 2024, Block Mining’s total revenue and net loss were approximately $13.3 million and $20.9 million,
respectively.
Pro-forma financial information
The following unaudited pro forma financial information summarizes the combined results of operations for Riot, Block Mining, and E4A Solutions, as if
the companies were combined as of January 1, 2023. The unaudited pro forma information does not reflect the effect of costs or synergies that may result
from the acquisition and excludes acquisition-related costs of $5.5 million incurred during the year ended December 31, 2024. This unaudited pro forma
information is presented for informational purposes only and is not necessarily indicative of future operating results of the combined company. This
information should not be used as a predictive measure of the Company’s future financial position, results of operations, or liquidity.
Year Ended
December 31,
2024
2023
Revenue
$
423,602
$
330,820
Net income (loss)
$
121,891
$
(41,330)
Acquisition of Corsicana Facility land site
During the year ended December 31, 2022, the Company initiated a large-scale development to expand its Bitcoin mining capabilities with the acquisition
of a 265-acre site in Navarro County, Texas, strategically located next to the Navarro switch, for $10.1 million. See Note 7. Property and Equipment, for
more information about the Corsicana Facility.
Note 4. Revenue from Contracts with Customers
Disaggregated revenue
Revenue disaggregated by reportable segment is presented in See Note 20. Segments Information.
Contract balances
Contract assets relate to uncompleted Engineering contracts. As of December 31, 2024 and 2023, contract assets were $6.5 million and $15.4 million,
respectively.
Contract liabilities primarily relate to upfront payments and consideration received from a legacy data center hosting customer and uncompleted
Engineering contracts. As of December 31, 2024 and 2023, contract liabilities and deferred revenue were $26.1 million and $22.3 million, respectively.
During the years ended December 31, 2024 and 2023, $6.1 million and $11.2 million, respectively, of the beginning balance of contract liabilities and
deferred revenue was recognized as revenue.
During the years ended December 31, 2024 and 2023, $3.5 million and $0.7 million, respectively, was recognized as revenue as a result of satisfying
performance obligations in previous periods.
Remaining performance obligation
The following table presents the estimated future recognition of the Company’s remaining performance obligations, which represent the transaction price
of current contracts for work to be performed.
2025
2026
2027
2028
2029
Thereafter
Total
Legacy data center hosting contract
$
2,422 $
2,362 $
2,362 $
2,362
$
2,362 $
3,850 $
15,720
Engineering
62,210
7,601
—
—
—
—
69,811
Other
97
97
97
97
—
—
388
Total contract liabilities
$
64,729
$
10,060
$
2,459
$
2,459
$
2,362
$
3,850
$
85,919
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-21
Note 5. Bitcoin
The following table presents information about the Company’s Bitcoin balance held:
Quantity
Amounts
Balance as of December 31, 2023
7,362
$
311,178
Revenue recognized from Bitcoin mined
4,828
321,002
Change in Bitcoin receivable
5
(625)
Acquisition of Bitcoin
5,784
577,500
Proceeds from sale of Bitcoin
(212)
(9,518)
Exchange of Bitcoin for employee compensation
(45)
(2,478)
Change in fair value of Bitcoin
—
457,409
Balance as of December 31, 2024
17,722
$
1,654,468
Carrying value of Bitcoin as of December 31, 2024 (a)
$
1,093,793
Realized gains on the sale or exchange of Bitcoin for the year ended December 31, 2024 (b)
$
7,983
Balance as of December 31, 2022
6,974
$
109,420
Cumulative effect upon adoption of ASU 2023-08
—
5,994
Revenue recognized from Bitcoin mined
6,626
188,996
Change in Bitcoin receivable
(21)
(878)
Proceeds from sale of Bitcoin
(6,185)
(176,219)
Exchange of Bitcoin for employee compensation
(32)
(869)
Change in fair value of Bitcoin
—
184,734
Balance as of December 31, 2023
7,362
$
311,178
Carrying value of Bitcoin as of December 31, 2023 (a)
$
199,928
Realized gains on the sale or exchange of Bitcoin for the year ended December 31, 2023 (b)
$
80,174
(a) The carrying value of Bitcoin is equal to the post-impairment value of all Bitcoin held as of the adoption of ASU 2023-08 on January 1, 2023; for
Bitcoin produced subsequent to the adoption ASU 2023-08, the initial value of the Bitcoin as determined for revenue recognition purposes; and,
for Bitcoin acquired, the acquisition value.
(b) Bitcoin is sold on a first in, first out (FIFO) basis. For all periods presented, gains were recognized on all sales of Bitcoin and exchanges of
Bitcoin for employee compensation and are included in Change in fair value of Bitcoin on the Consolidated Statements of Operations.
All additions of Bitcoin were the result of Bitcoin generated by the Company’s Bitcoin Mining operations (see Note 4. Revenue from Contracts with
Customers) and acquisitions on the open market. All dispositions of Bitcoin were the result of sales on the open market to fund Company operations and
for compensation for certain employees.
Note 6. Investments
Equity method investment - marketable securities
During the year ended December 31, 2024, the Company acquired approximately 90.1 million common shares of Bitfarms Ltd. ("Bitfarms”) on the open
market for approximately $203.8 million. As of December 31, 2024, the Company’s investment in Bitfarms was equal to approximately 19.9% of all
outstanding Bitfarms common stock.
In September 2024, the Company and Bitfarms entered into a settlement agreement, under which the Company intends to review its investment in Bitfarms
on a continuing basis and, subject to the terms of the settlement agreement, depending upon various factors, including without limitation, any discussion
between the Company, Bitfarms and/or the Board of Bitfarms and Bitfarms’ advisors regarding, among other things, Bitfarms’ financial position and
strategic direction, overall market conditions, other investment opportunities available to the Company, and the availability of securities of Bitfarms at
prices that would make the purchase or sale of such securities desirable, the Company may (i) increase or decrease its position in Bitfarms through, among
other things, the purchase or sale of securities of Bitfarms, including through transactions involving its common shares and/or other equity, debt,
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-22
notes, other securities, or derivative or other instruments that are based upon or relate to the value of securities of Bitfarms in the open market or
otherwise, (ii) enter into transactions that increase or hedge its economic exposure to its investment without affecting its beneficial ownership of Bitfarms
common stock or (iii) consider or propose other actions, including submitting a revised proposal to acquire Bitfarms.
On September 23, 2024, Bitfarms appointed an independent director to its board of directors that the Company proposed to be nominated and supported.
As a result, for accounting purposes, the Company determined it obtained the ability to exercise significant influence over its investment. Therefore, the
Company began accounting for its investment under the equity method of accounting and elected to account for it at fair value. There have been no intra-
entity transactions, and therefore, no intra-entity profits or losses. Unrealized gains and losses are recognized in Other income (expense) on the
Consolidated Statements of Operations. The fair value measurement of the Company’s investment in Bitfarms is based on quoted prices in an active
market and valued at the closing price reported at the end of each period and thus represents a Level 1 measurement on the fair value hierarchy.
The following table presents information about the equity method investment - marketable securities ("marketable securities):
Investment, at cost
$
203,754
Unrealized losses
(69,489)
Fair value as of December 31, 2024
$
134,265
Convertible note
During the year ended December 31, 2023, the Company invested in a $4.5 million convertible note at face value. The convertible note has a three-year
term and earns interest at a rate of 12% per annum, which may be paid in cash or in-kind, and converts into equity of the issuer of the convertible note at
the end of the three-year term.
The convertible note is accounted for as an available-for-sale debt instrument and is recognized at fair value in Other long-term assets on the
Consolidated Balance Sheets. Unrealized changes in the fair value of the convertible note are recognized in Other comprehensive income (loss) on the
Consolidated Statements of Comprehensive Income (Loss). Interest income is recognized within Interest income (expense) on the Consolidated
Statements of Operations.
The fair value measurement of the convertible note is based on significant inputs not observable in the market and thus represents a Level 3 measurement
on the fair value hierarchy. The significant assumptions used to estimate fair value of the convertible note as of December 31, 2024, primarily consisted of
a discount rate of 12.4%, which reflected the issuance date spread premium over the selected yield for the remaining time to maturity.
The following table presents information about the convertible note:
Fair value as of December 31, 2023
$
4,709
Accrued interest
564
Amortized costs basis
5,273
Unrealized holding gains (losses) in accumulated other comprehensive income
72
Fair value as of December 31, 2024
$
5,345
The Company determined that the issuer of the convertible preferred note was a variable interest entity ("VIE”) and that the Company held a variable
interest in the issuer of the convertible preferred note. The Company has considered the amount it is contributing to the issuer, its lack of decision-making
rights and control, among other factors, and has concluded that it does not hold a controlling financial interest and does not have majority decision-
making control. Therefore, the Company is not the primary beneficiary of the VIE, and as a result, the Company is not required to consolidate the VIE. The
entire $4.5 million investment is at risk of loss.
Coinsquare and Mogo
In September 2017, and February 2018, the Company acquired a minority interest for $9.4 million in Coinsquare Ltd., a Canadian cryptocurrency exchange
("Coinsquare”), which operates a digital cryptocurrency exchange platform in Canada. The investment resulted in an approximately 11.7% ownership in
Coinsquare by the Company on a fully diluted basis. The Company elected to account for the investment using the measurement alternative as the equity
securities are without a readily determinable fair value
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-23
and do not give the Company significant influence over Coinsquare. Per the measurement alternative, the investment is recorded at cost, less any
impairment, plus or minus changes resulting from observable price changes.
During the year ended December 31, 2021, under agreements between Coinsquare, Coinsquare’s shareholders (including Riot) and Mogo Inc. (NASDAQ:
MOGO), a digital payments and financial technology company ("Mogo”), Riot sold all 3.4 million common shares of Coinsquare in exchange for
approximately 3.2 million common shares of Mogo and approximately $1.8 million in cash.
During the year ended December 31, 2022, the Company sold all 3.2 million shares of its shares of Mogo for proceeds of $1.8 million, resulting in realized
losses of approximately $9.0 million.
Note 7. Property and Equipment
The following table presents the Company’s property and equipment:
December 31,
December 31,
2024
2023
Buildings and building improvements
$
715,862
$
348,865
Land rights and land improvements
10,904
10,320
Miners and mining equipment
927,866
496,230
Machinery and facility equipment
44,377
39,144
Office and computer equipment
3,081
2,108
Construction in progress
82,965
166,970
Total cost of property and equipment
1,785,055
1,063,637
Less accumulated depreciation
(446,268)
(359,443)
Property and equipment, net
$
1,338,787
$
704,194
Depreciation and amortization expense related to property and equipment totaled approximately $206.2 million, $246.5 million, and $105.9 million, for the
years ended December 31, 2024, 2023, and 2022, respectively.
The Company recognized an impairment charge for its miners and mining equipment during the year ended December 31, 2022, as described below, but did
not incur any other impairment charges for its property and equipment for the years ended December 31, 2024 and 2023.
Miners and mining equipment
As of December 31, 2024, the Company had deployed miners in its Bitcoin Mining operations at its Rockdale Facility, Corsicana Facility, and Kentucky
Facility. As of December 31, 2023, all the Company’s deployed miners were at its Rockdale Facility.
During the year ended December 31, 2023, the Company entered into the Master Agreement to acquire miners from MicroBT. In 2023, we executed
purchase orders with MicroBT to acquire U.S.-manufactured miners with a total hash rate of 25.6 EH/s, for a total purchase price of approximately $453.4
million, subject to downward adjustment, as provided under the Master Agreement. Delivery of these miners to the Corsicana Facility, for deployment in
immersion cooling systems, began in 2023, and all miners under these purchase orders are expected to be received and deployed by mid-2025. The Master
Agreement also provides the Company with an option to purchase additional miners with a total hash rate of approximately 75.0 EH/s, on the same terms
as the initial order.
During the year ended December 31, 2024, the Company entered into an additional purchase order with MicroBT under the Master Agreement to acquire
31,500 air-cooled miners with a total hash rate of 5.9 EH/s for a total purchase price of approximately $96.7 million. This purchase order is in addition to
existing purchase options under the Master Agreement. Delivery of these miners occurred during the year ended December 31, 2024.
During the years ended December 31, 2024 and 2023, we sold 19,817 and 2,700, underperforming Antminer model S19 XP miners, respectively, for which we
recognized losses of $17.4 million and $5.3 million during the years ended December 31, 2024 and 2023, respectively.
Effective January 1, 2024, as a result of new information about the useful lives of Bitcoin miners, the Company determined the estimated useful life of its
Bitcoin miners will be increased from two years to three years. In making this determination, the Company
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-24
took into consideration its first-hand experience of miners remaining in service beyond a two-year period, as well as its increased use of immersion-based
mining, which the Company anticipates will extend the useful life of miners, due to improved heat removal and reduced exposure to particulates, as
compared to traditional air-cooled mining. For the year ended December 31, 2024, the effect of this change in estimate was a reduction in depreciation
expense and an increase in net income of approximately $78.3 million, and increases in basic earnings per share of $0.28 and diluted earnings per share of
$0.25.
Impairment of miners
During the year ended December 31, 2022, adverse changes in business climate, including decreases in the price of Bitcoin and resulting decrease in the
market price of miners, indicated that an impairment triggering event had occurred. Testing performed indicated the estimated fair value of the Company’s
miners to be less than their net carrying value as of December 31, 2022, and an impairment charge of $55.5 million was recognized, decreasing the net
carrying value of the Company’s miners to their estimated fair value. The estimated fair value of the Company’s miners was classified in Level 2 of the fair
value hierarchy due to the quoted market prices for similar assets.
Casualty-related charges (recoveries), net
In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas. As of December 31, 2024, the Company estimated that total
damages of $10.3 million had been incurred. During the year ended December 31, 2024, the Company received net insurance recoveries of $2.8 million, in
addition to the $7.5 million recovered during the year ended December 31, 2023, primarily related to the damage incurred at Rockdale Facility. Recoveries
are recognized when they are probable of being received.
Construction in progress
In 2022, the Company initiated development of the Corsicana Facility to expand its Bitcoin Mining capabilities, on a 265-acre site in Navarro County,
Texas, located near the Navarro Switch.
The initial phase of development of the Corsicana Facility involves the construction of immersion-cooled Bitcoin Mining infrastructure, including a high-
voltage power substation and electrical and water transmission facilities to supply power and water to the facility. Operations of this initial phase of the
development commenced in April 2024, following energization of the substation. As of December 31, 2024, the initial phase of Corsicana was complete
with deployed Bitcoin Mining infrastructure comprising of four operational buildings, Buildings A1, A2, B1, and B2.
During the year ended December 31, 2023, the Company entered into a purchase agreement to acquire immersion cooling systems for use in Bitcoin
Mining facilities developed at the Corsicana Facility. Delivery and installation of these immersion cooling systems was completed during the year ended
December 31, 2024, with miner installation and operations commencing progressively as the systems were installed. The purchase agreement also
provides the Company an option to purchase additional immersion cooling systems from the same manufacturer, on the same terms as the initial order,
through December 31, 2025.
During the year ended December 31, 2024, the Company entered into a second purchase agreement to acquire immersion cooling systems from a different
manufacturer for use in the Bitcoin Mining facilities at the Corsicana Facility. Delivery of these immersion cooling systems was completed during the year
ended December 31, 2024.
Through December 31, 2024, the Company incurred total costs of approximately $415.9 million related to the development of the first phase of the
Corsicana Facility (exclusive of miners), including $10.1 million paid to acquire the land on which the facility was developed.
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. During the year ended December 31, 2023, Riot completed its acquisition of 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. At the time of the transaction, Mr. Theriot was part of the
management team at Riot and was considered a related party of Riot. The transaction was accounted for as an asset acquisition.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-25
Note 8. Goodwill and Intangible Assets
Goodwill
The goodwill balance of $121.9 million as of December 31, 2024, was attributable to the assembled workforces of experienced personnel at Block Mining
and E4A Solutions and synergies expected to be achieved as a result of the Company’s acquisitions. See Note 3. Acquisitions.
During the second quarter of 2022, adverse changes in business climate, including decreases in the price of Bitcoin and increased volatility of equity
markets, as evidenced by declines in the market price of the Company’s securities, those of its peers, and major market indices, reduced market multiples
and increased weighted-average costs of capital, primarily driven by an increase in interest rates. Market concerns related to inflation, supply chain
disruption issues and other macroeconomic factors were some of the primary causes for these declines. Additionally, the price of Bitcoin had declined
significantly, notably during the second quarter of 2022.
Due to these factors, the Company determined that a triggering event had occurred, and therefore, performed a goodwill impairment assessment as of June
30, 2022. The valuation of the Company’s reporting units was determined with the assistance of an independent valuation specialist firm using a market
approach. The market approach was based on the Guideline Public Company Method, which is derived from metrics of publicly traded companies or
historically completed transactions of comparable businesses. The selection of comparable businesses was based on the markets in which the reporting
units operated, giving consideration to risk profiles, size, geography, and diversity of products and services. Under the market approach, the Company
evaluated the fair value based on trailing and forward-looking earnings and revenue multiples derived from comparable publicly traded companies with
similar market position and size as the Company’s reporting units. The unobservable inputs used to measure the fair value included projected revenue
growth rates, the price of Bitcoin, the global Bitcoin network hash rate, the timing of miner shipments under currently executed contracts and their
subsequent deployment, and the determination of appropriate market comparison companies. The trailing-twelve-month and next-twelve-month enterprise
value-to-revenue multiples assumed in the analysis ranged from approximately 0.7x to approximately 3.9x. The resulting estimated fair values of the
combined reporting units were reconciled to the Company’s market capitalization, including an estimated implied control premium of approximately 30%.
The results of the quantitative test indicated the fair value of the reporting units did not exceed their carrying amounts, including goodwill, in excess of
the carrying value of the goodwill. As a result, the entire carrying amount of the goodwill was recognized as a non-cash impairment charge during the year
ended December 31, 2022.
Finite-lived intangible assets
The following table presents the Company’s finite-lived intangible assets as of December 31, 2024:
Weighted-
Gross
Accumulated
Net book
average life
book value amortization
value
(years)
Customer contracts
$
29,400
$
(1,911) $
27,489
10
Trademark
6,100
(1,542)
4,558
10
UL Listings
2,700
(694)
2,006
12
Patents
10,060
(10,060)
—
Various
Finite-lived intangible assets
$
48,260
$
(14,207) $
34,053
The customer contracts and trademark were recognized as the result of the E4A Solutions Acquisition in December 2024 and the ESS Metron acquisition
which occurred during the year ended December 31, 2021. The UL listings were recognized as the result of the ESS Metron acquisition which occurred
during the year ended December 31, 2021.
During the year ended December 31, 2022, the Company paid $9.5 million to license a patent for technology being used in the development of the
Corsicana Facility. The amount paid was amortized over the term of the license, which expired on December 31, 2024.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-26
The following table presents the Company’s finite-lived intangible assets as of December 31, 2023:
Weighted-
Gross
Accumulated
Net book
average life
book value amortization
value
(years)
Customer contracts
$
6,300
$
(1,292) $
5,008
10
Trademark
5,000
(1,042)
3,958
10
UL Listings
2,700
(469)
2,231
12
Patents
10,060
(5,560)
4,500
Various
Finite-lived intangible assets
$
24,060
$
(8,363) $
15,697
During the years ended December 31, 2024, 2023, and 2022, amortization expense related to finite-lived intangible assets was $5.8 million, $5.8 million, and
$2.1 million, respectively.
The following table presents the estimated future amortization of the Company’s finite-lived intangible assets as of December 31, 2024:
2025
$
3,775
2026
3,775
2027
3,775
2028
3,775
2029
3,775
Thereafter
15,178
Total
$
34,053
The Company did not identify any impairment of its finite-lived intangible assets during the years ended December 31, 2024, 2023, and 2022.
Note 9. Power Supply Agreements
Rockdale Facility
Power Purchase Agreement
In May 2020, the Company, through its subsidiary, Whinstone, entered into the Rockdale PPA to provide for the delivery of power to its Rockdale
Facility, via the nearby Sandow Switch. Pursuant to the Rockdale PPA, the Company has agreed to acquire a total of 345 MW of long-term, fixed-price
power, in multiple blocks, as follows: 130 MW contracted in May 2020, at fixed prices through April 30, 2030; 65 MW contracted in March 2022, at fixed
prices through April 30, 2030; and 150 MW contracted in November 2022, at fixed prices through October 31, 2027. Additionally, under the Rockdale PPA,
the Company has the option to purchase additional power at market prices, as needed.
Under the Rockdale PPA, the Company may also elect not to utilize its long-term, fixed-price power for its operations, and instead elect to sell that power
in exchange for credits against future power costs 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, as described below, participation in ERCOT’s Four
Coincident Peak ("4CP”) program, and sales of power, to attempt to manage operating costs most efficiently.
During the years ended December 31, 2024, 2023, and 2022, the Company earned credits against future power costs in exchange for power resold of
approximately $33.7 million, $71.2 million, and $27.3 million, respectively. These amounts are recorded in Power curtailment credits on the Consolidated
Statements of Operations.
The Company determined the Rockdale PPA meets the definition of a derivative because it allows for net settlement. However, because the Company has
the ability to offer the power back for sale outside of the Rockdale PPA, rather than taking physical delivery, the Company determined that 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 Rockdale PPA. Accordingly, the Rockdale PPA (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 Consolidated Balance Sheets with the change in the fair value recorded in
Change in fair
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-27
value of derivative asset on the Consolidated Statements of Operations. The Rockdale PPA is not designated as a hedging instrument. The Facilities
Agreement, Demand Response Service Programs, and the 4CP program are not part of the Rockdale PPA, and are therefore not subject to treatment and
valuation as a derivative along with Rockdale PPA.
The terms of the Rockdale PPA 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 December 31, 2024, 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 back unused or uneconomical power, the Company
does not consider such actions to be trading activities.
Demand Response Services Programs
Concurrently with the Rockdale PPA, Whinstone entered into an interconnection agreement for the extension of delivery system transmission/substation
facilities to facilitate delivery of 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 ERCOT and are recorded in Cost of revenue on the Consolidated Statements of
Operations. During the year ended December 31, 2024, the construction of the interconnection was completed and power costs under the Facilities
Agreement are no longer being incurred.
ERCOT has implemented Demand Response Services Programs for customers like the Company that have the ability to reduce or modify electricity use in
response to ERCOT instructions or signals. These Demand Response Services Programs provide the ERCOT market with valuable grid stability and
economic services by helping to preserve system reliability, enhancing competition and load predictability, mitigating price spikes, and stabilizing the grid
by encouraging the demand side of the market to give more visibility and control of their power consumption to grid operators. Market participants with
flexible electrical loads, like the Company, may participate in these Demand Response Service Programs directly by offering their electrical loads into the
ERCOT markets, or indirectly by voluntarily reducing their energy usage in response to increasing power demand in the ERCOT marketplace. The Demand
Response Services Programs run concurrent with the Rockdale PPA.
Under these Demand Response Services Programs, the Company can participate in a variety of programs known as "ancillary services” by electing to
designate a portion of its available electrical load for participation in such programs on a forward basis. For each respective Demand Response Services
Program, the Company receives compensation based on hourly rates for power and the amount of electrical load which it has bid into the program.
Through ancillary services, the Company competitively bids amongst other market participants to sell ERCOT the ability to control the Company’s
electrical load on demand, which requires the Company to remain powered on during the times in which its power is bid into ancillary services, and giving
ERCOT the ability to direct the Company to power down the amount of power bid into the program. The Company receives compensation for its
participation in ancillary services whether or not the Company is actually called to power down.
The Company also participates in the 4CP program, which refers to the highest-load settlement intervals in each of the four summer months (June, July,
August, and September), during which time, demand for power is typically at its highest across the ERCOT grid. The 4CP program participants may
voluntarily power down operations during these times and in doing so, reduce the electrical load demand on the ERCOT 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 for
the year. As a result of participation in the 4CP program in 2023, the Company’s transmission charges in its ongoing 2024 monthly power bills are
substantially reduced. The 4CP program has an indefinite life.
Corsicana Facility
During the year ended December 31, 2024, the Company’s subsidiary, Riot Corsicana, LLC, entered into an agreement with ICE Futures U.S., Inc., a
subsidiary of the InterContinental Exchange to access the exchange for the execution of electricity futures contracts. The Company intends to purchase
agreements up to the amount of power used at the Corsicana Facility. These financial instruments meet the definition of derivatives, but are not
designated as hedging instruments, and will be recognized at fair value, with any gains or losses recognized in Net income (loss) on the Consolidated
Statements of Operations.
The Company has entered into the electricity futures contracts to manage electricity price risk and reduce the variability of cash flows associated with
purchases of electricity used for the Company’s Bitcoin Mining operations at the Corsicana Facility.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-28
As of December 31, 2024, the Company held outstanding electricity futures contracts for 26,992 mWh with a combined fair value of $0.3 million included in
Prepaid expenses and other current assets on the Consolidated Balance Sheets. During the year ended December 31, 2024, realized and unrealized gains
of $0.3 million were recognized in Other income (expense) on the Consolidated Statements of Operations.
During the year ended December 31, 2024, the Company’s subsidiary, Riot Corsicana, LLC, also entered into a requirements contract with MEMS
Industrial Supply ("MEMSIS” or "Mitsui”) under which it will purchase retail power to meet the consumption requirements of the Corsicana Facility.
Electric power will be invoiced by MEMSIS based upon the market price for electric power at the ERCOT North Load Zone, plus a retail adder
corresponding to the peak consumption threshold of the Corsicana Facility, and pass through charges (ex., ancillary charges, taxes, congestion, and line
loss), based on the actual variable consumption of the Corsicana Facility. The contract, dated November 12, 2024, has a 3-year term ending November 25,
2027. Although this contract does not require the supply of power at a fixed price, it allows the parties to enter into fixed-price contracts.
Under the requirements contract with MEMSIS, during the year ended December 31, 2024, Riot and MEMSIS entered into the Corsicana PPA, a 3-year
contract (January 1, 2025 through December 31, 2027, but excluding July and August contracts during the period) for a fixed quantity of 25 MW at a fixed
price of $43.95 per mWh.
The Company determined the Corsicana PPA with MEMSIS meets the definition of a derivative and, accordingly, the Corsicana PPA (a non-hedging
derivative contract) is recorded at its estimated fair value each reporting period in Derivative asset on the Consolidated Balance Sheets with the change in
the fair value recorded in Change in fair value of derivative asset on the Consolidated Statements of Operations. The requirements contract is not
designated as a hedging instrument.
Kentucky Facility
In April 2021, the Company’s subsidiary, Block Mining, entered into the Kentucky PPA, a long-term power purchase agreement to provide power to one
of its locations in Kentucky. Pursuant to the Kentucky PPA, the Company has the ability, but not the obligation, to acquire up to a total of 60 MW of
power at one of its facilities through mid-April 2041. The all-in power rate includes a portion of the total fee that is at a fixed rate and another portion that
adjusts annually. The Company determined the Kentucky PPA does not meet the definition of a derivative because it does not contain a notional amount.
Under the Kentucky PPA, the Company may also elect not to utilize its long-term, fixed-price power for its operations, and instead elect to sell that power
back into the MISO grid in exchange for credits against future power costs 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, to attempt to manage
operating costs most efficiently.
Derivative Asset
The following table presents the unobservable inputs used in the valuation of the Derivative asset:
Valuation Date
Significant Unobservable Input
Range
Average
December 31, 2024
Forward prices (per mWh)
$
31.22
-
$
95.58
$
51.98
December 31, 2023
Forward prices (per mWh)
$
26.35
-
$
83.60
$
43.80
The following table presents changes in the estimated fair value of the Derivative asset:
Balance as of December 31, 2023
$
104,218
Change in fair value of derivative asset:
Change due to future price curve
60,186
Change due to passage of time and settlements
(14,909)
Total change in fair value of derivative assets
45,277
Balance as of December 31, 2024
$
149,495
The estimated fair values of the Rockdale PPA and Corsicana PPA are classified under Level 3 of the fair value hierarchy due to the significant
unobservable inputs utilized in the valuation, which include the fixed price of each block for all 345 MW of power to be delivered per the Rockdale PPA
and 25 MW of power to be delivered per the Corsicana PPA, discounted cash flow estimation models containing quoted commodity exchange spot and
forward prices in mWh and are adjusted for basis spreads for load zone-to-hub differentials through the term of the Rockdale PPA, which is scheduled to
end as of April 30, 2030, and the term of the Corsicana
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Notes to Consolidated Financial Statements
F-29
PPA, which is scheduled to end as of December 31, 2027, and a discount rate of 23.8%. Actual power usage is not a variable input in the determination of
the fair value as the price and quantity of power to be delivered per the Rockdale PPA and the Corsicana PPA are fixed despite the existence of multiple
blocks with separate power amounts.
The discount rate reflects 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, risk-
free rate of return, which is determined from United States Treasury Bond yields, estimated cost of debt, which includes a Moody’s rating, and an equity
risk premium based upon market data provided by a global cost of capital service provider. The discount rate includes observable market inputs, but also
includes unobservable inputs based on qualitative judgment related to Company credit risk.
Note 10. Deposits
The following table presents the activity of the Company’s deposits paid:
Deposits on equipment:
Balance as of December 31, 2023
$
185,294
Additions
442,517
Reclassifications to property and equipment
(623,316)
Balance as of December 31, 2024
4,495
Security deposits
25,620
Total long-term deposits
$
30,115
Deposits on equipment
During the year ended December 31, 2024, the Company made deposits and advance payments of $364.8 million to MicroBT for the purchase of miners
and made deposits of $77.7 million for the purchases of other property and equipment, primarily consisting of electrical components and immersion tanks
used in the development of the Corsicana Facility. During the year ended December 31, 2024, the Company reclassified $540.4 million of deposits made to
MicroBT and $82.9 million of other deposits to property and equipment in connection with the receipt of the equipment. See Note 7. Property and
Equipment.
Security deposits
During the year ended December 31, 2023, the Company paid $23.0 million, all of which remains held as a deposit as of December 31, 2024, as a security
deposit in connection with its 215 MW increase to the long-term, fixed-price power secured under the Rockdale PPA, resulting in a total of 345 MW under
contract at fixed prices at the Rockdale Facility. See Note 9. Power Supply Agreements.
The Company has other security deposits totaling approximately $2.6 million for its offices and facilities, including $1.8 million associated with its ground
lease.
Note 11. Accrued Expenses
The following table presents the Company’s accrued expenses:
December 31,
December 31,
2024
2023
Property and equipment
$
15,146
$
23,451
Power related costs and remittances
19,636
11,114
Compensation
21,218
14,888
Insurance
11,672
7,490
Other
8,000
5,428
Total accrued expenses
$
75,672
$
62,371
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-30
Note 12. Debt
2030 Notes
In December 2024, the Company sold $594.4 million aggregate principal of 0.75% Convertible Senior Notes (the "2030 Notes”). Interest is payable
semiannually in arrears on January 15 and July 15 of each year, beginning on July 15, 2025. The notes will mature on January 15, 2030, unless earlier
repurchased, redeemed, or converted.
Until July 15, 2029, the 2030 Notes may be converted at the option of the holder only upon the occurrence of certain events. On or after July 15, 2029, until
the close of business on the second trading day immediately preceding the maturity date, the 2030 Notes may be converted at the option of the holder at
the conversion rate then in effect. The Company may not redeem the 2030 Notes prior to January 20, 2028, at which time the Company may redeem the
2030 Notes upon the occurrence of certain events.
The Company will settle any conversions of the 2030 Notes by paying or delivering cash, shares of common shares, or a combination of cash and shares
of common shares, at the Company’s election. The 2030 Notes are convertible based upon an initial conversion rate of 67.2767 shares of the Company's
common stocks per $1,000 principal amount of the 2030 Notes, equivalent to an initial conversion price of approximately $14.86 per share of Company
common stock. The conversion rate is subject to adjustment upon the occurrence of certain anti-dilutive events.
The Company incurred $15.2 million of issuance costs related to the 2030 Notes, which it will amortize into Interest expense, (income) on the Consolidated
Statements of Operations over the term of the 2030 Notes. The 2030 Notes are recognized as long-term debt on the Consolidated Balance Sheets, net of
unamortized debt issuance costs, and as of December 31, 2024, the amount recognized was $579.3 million ($594.4 million principal less $15.1 million of
unamortized debt issuance costs).
During the year ended December 31, 2024, the Company recognized $0.2 million of amortization of the deferred issuance costs.
As of December 31, 2024, the 2030 Notes had an estimated fair value of approximately $548.6 million. The estimated fair value is based on quoted prices in
an active market and valued at the closing price reported at the end of the period and thus represents a Level 1 measurement on the fair value hierarchy.
Revolving Credit Facilities
$50 Million Credit Facility
In July 2024, the Company entered into a one-year $50.0 million Revolving Credit Facility ("$50 Million Credit Facility”). Revolving Loans borrowed by the
Company under the $50 Million Credit Facility carry a per annum interest rate of 1.25% plus the Secured Overnight Financing Rate. Letters of Credit issued
under the $50 Million Credit Facility have a one-year term and incur fees of 1.25% per annum on the amount of Letters of Credit outstanding. Letters of
Credit require the issuance of cash collateral by the Company equal to 105% of the Letter of Credit exposure.
Concurrent with entry into the $50 Million Credit Facility, as required by the agreement, the Company funded the entire $50.0 million amount of the credit
facility as security into a control account maintained by the lender to serve as collateral. The balance maintained in the control account is included in
Restricted cash on the Consolidated Balance Sheets. Variable interest, equal to approximately 5.6% per annum as of December 31, 2024, is earned by the
Company on the amount held in the control account.
During the year ended December 31, 2024, the Company issued $8.4 million in Letters of Credit against the $50 Million Credit Facility.
$20 Million Credit Facility
In August 2024, the Company entered into a two-year $20.0 million Revolving Credit Facility ("$20 Million Credit Facility”). Revolving Loans borrowed by
the Company under the $20 Million Credit Facility carry a per annum interest rate of 1.60% plus the Secured Overnight Financing Rate. Letters of Credit
issued under the $20 Million Credit Facility have a one-year term and incur
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-31
fees of 1.5% per annum on the amount of Letters of Credit outstanding. Letters of Credit require the issuance of cash collateral by the Company equal to
105% of the Letter of Credit exposure.
Concurrent with entry into the $20 Million Credit Facility, as required by the agreement, the Company funded the entire $20.0 million amount as security
into a control account maintained by the lender to serve as collateral. The balance maintained in the control account is included in Restricted cash on the
Consolidated Balance Sheets. Variable interest, equal to approximately 3.96% per annum as of December 31, 2024, is earned by the Company on the
amount held in the control account.
During the year ended December 31, 2024, the Company did not issue any Letters of Credit against the $20 Million Credit Facility.
Note Payable
As part of the Block Mining Acquisition, the Company assumed a $5.7 million note payable with a fixed rate of 8.81%. The note matures in December 2035,
with annual principal and accrued interest payments due beginning on December 31, 2024.
The following table presents the future minimum principal payments due on the note payable as of December 31, 2024:
2025
$
314
2026
343
2027
373
2028
405
2029
443
Thereafter
3,445
Total
$
5,323
As of December, 31, 2024, the note payable had an estimated fair value of approximately $5.1 million. The fair value measurement of the note payable is
based on significant inputs not observable in the market and thus represents a Level 3 measurement on the fair value hierarchy. The significant
assumptions used to estimate fair value of the convertible note as of December 31, 2024, primarily consisted of management’s best estimate of both the
probability and timing of a conversion event and an interest rate range of 8.9% to 10.5%, which reflected the issuance date spread premium over the
selected yield for the remaining time to maturity.
Credit and Security Facility
The Company’s subsidiary, ESS Metron, had a Credit and Security Facility Agreement, as amended, which provided for a $10.0 million credit and security
facility consisting of a $6.0 million revolving line of credit (the "Revolving Line of Credit”) and a $4.0 million equipment guidance line (the "Equipment
Guidance Line”).
The Revolving Line of Credit matured in December 2024 and had interest due monthly and principal due at maturity. Upon maturity, the Revolving Line of
Credit was not renewed or extended. All amounts borrowed under the Revolving Line of Credit carried a variable interest of not less than 4.0% and were
secured by the assets of ESS Metron. There were no borrowings under the Revolving Line of Credit during the year ended December 31, 2024. As of
December 31, 2023, the outstanding balance on the Revolving Line of Credit was $0.
The Equipment Guidance Line also matured in December 2024 and permitted the Company to finance up to 80.0% of certain equipment purchases. Upon
maturity, the Equipment Guidance Line was not renewed or extended. All amounts borrowed under the Equipment Guidance Line carried a variable interest
of not less than 4.0% and were secured by the assets of ESS Metron. During the year ended December 31, 2024, there were no borrowings under the
Equipment Guidance Line and approximately $0.5 million outstanding under the Equipment Guidance Line converted to a fixed rate term loan (see below).
As of December 31, 2023, the outstanding balance on the Equipment Guidance Line was $0.5 million.
All borrowings and accrued interest under the Equipment Guidance Line converted to fixed rate term loans every six months, which had 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 made upon the first conversion
of guidance line loans carried interest at a fixed rate equal to the five-year treasury rate plus 2.5% as of conversion and the Equipment Term Loans made
upon the first conversion of guidance line loans carried interest at a fixed rate equal to the three-year treasury rate plus 2.5% as of conversion. All
subsequent conversions to Manufacturing Term Loans and Equipment Term Loans carried interest at a fluctuating rate equal to the lender’s prime rate.
Table of Contents
Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-32
During the year ended December 31, 2024, approximately $0.5 million outstanding under the Equipment Guidance Line was converted into a three-
year Equipment Term Loan with a fixed interest rate of 6.6%. The outstanding Equipment Term Loan principal of $0.8 million was paid in full during the
year ended December 31, 2024. As of December 31, 2023, the outstanding balance on the Equipment Term Loan was $0.3 million.
Note 13. Leases
As of December 31, 2024, the Company had operating leases primarily for its various offices, the manufacturing facilities of ESS Metron and E4A
Solutions, a ground lease for the Rockdale Facility, and the Kentucky Facility data center, all of which expire on various dates through January 2032.
During the year ended December 31, 2024, the Company acquired an operating lease of a data center in Calvert City, Kentucky as part of the Block Mining
Acquisition and an office and commercial space in Houston, Texas as part of the E4A Solutions Acquisition. See Note. 3. Acquisitions. Subsequent to the
Block Mining Acquisition, the data center lease capacity was further expanded and the term of the expanded lease was extended from three years to five
years.
During the year ended December 31, 2022, the Company executed an amendment to the ground lease for the Rockdale Facility to add a second 100-acre
tract of land, adjacent to the land subject to the original ground lease, for an additional $0.9 million in annual payments. The term of the amended lease is
scheduled to expire on January 31, 2032, followed by three ten-year renewal periods at the Company’s option, unless terminated earlier. Concurrent with
the amendment to the ground lease, the Company extended the term of its Water Reservation Agreement for the Rockdale Facility (see Note 17.
Commitments and Contingencies).
As of December 31, 2024 and 2023, operating lease right of use assets were $27.5 million and $20.4 million, respectively, and operating lease liabilities were
$28.5 million and $21.3 million, respectively.
The following table presents the components of the Company’s lease expense. Ground and facilities lease expenses are included in Cost of revenue and
office lease expenses are included in Selling, general, and administrative on the Consolidated Statements of Operations:
Years Ended December 31,
2024
2023
2022
Operating lease cost
$
4,965
$
3,747
$
3,193
Variable lease cost
646
240
182
Operating lease expense
$
5,611
$
3,987
$
3,375
The following table presents supplemental lease information:
2024
2023
2022
Operating leases net operating cash outflows
$
5,498
$
3,522
$
2,789
Right of use assets exchanged for new operating lease liabilities
$
10,987
$
1,249
$
10,333
Weighted-average remaining lease term – operating leases
6.0
7.5
8.5
Weighted-average discount rate – operating leases
7.1 %
6.7 %
6.6 %
The following table presents the Company’s future minimum operating lease payments as of December 31, 2024:
Ground lease Office and other leases
Total
2025
$
2,058
$
4,457
$
6,515
2026
2,119
4,028
6,147
2027
2,183
3,433
5,616
2028
2,249
2,989
5,238
2029
2,316
2,275
4,591
Thereafter
5,053
2,106
7,159
Total undiscounted lease payments
15,978
19,288
35,266
Less present value discount
(3,724)
(3,006)
(6,730)
Present value of lease liabilities
$
12,254
$
16,282
$
28,536
Table of Contents
Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-33
Note 14. Stockholders’ Equity
Preferred Stock
0% Series B Convertible Preferred Stock
On November 3, 2017, the Company designated 1,750,001 shares of preferred stock as "0% Series B Convertible Preferred Stock.”
The shares of 0% Series B Convertible Preferred Stock are non-voting and convertible into shares of common stock based on a conversion calculation
equal to the stated value of the 0% Series B Convertible Preferred Stock, plus all accrued and unpaid dividends, if any, as of such date of determination,
divided by the conversion price. The stated value of each share of 0% Series B Convertible Preferred Stock is $6.80 and the initial conversion price is $6.80
per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. Holders of 0%
Series B Convertible Preferred Stock are entitled to receive dividends if and when declared by the Company’s Board. The 0% Series B Convertible
Preferred Stock is also subject to beneficial ownership limitations and conversion limitations.
During the year ended December 31, 2022, the remaining 2,199 shares outstanding of the Company’s 0% Series B Convertible Preferred Stock were
converted to 2,199 shares of its common stock. As of December 31, 2024 and 2023, no shares of the Company’s 0% Series B Convertible Preferred Stock
were outstanding.
Common Stock
The Company is authorized to issue up to 680,000,000 shares of Common Stock, without any par value per share.
Each holder of Common Stock is entitled to one vote for each share held of record on all matters to be voted on by such holders. Holders of Common
Stock are entitled to receive dividends, if declared. Upon liquidation, dissolution or winding-up, holders of Common Stock are entitled to share ratably in
the net assets legally available for distribution after payment of all debts and other liabilities, subject to any preferential rights of the holders of Preferred
Stock, if any.
ATM Equity Offerings
August 2024 ATM Program
In August 2024, the Company established the August 2024 ATM Program, under which it could offer and sell up to $ 750.0 million in shares of the
Company’s common stock.
During the year ended December 31, 2024, the Company received net proceeds of approximately $380.0 million ($387.8 million of gross proceeds, net of
$7.8 million in commissions and expenses) from the sale of 41,336,261 shares of its common stock at a weighted average fair value of $9.38 per share under
the August 2024 ATM Program. As of December 31, 2024, approximately $ 362.2 million of shares of the Company’s common stock were available for sale
under the August 2024 ATM Program.
February 2024 ATM Program
In February 2024, the Company established the February 2024 ATM Program, under which it could offer and sell up to $750.0 million in shares of the
Company’s common stock.
During the year ended December 31, 2024, the Company received net proceeds of approximately $462.5 million ($471.9 million of gross proceeds, net of
$9.4 million in commissions and expenses) from the sale of 40,646,055 shares of its common stock at a weighted average fair value of $11.61 per share
under the February 2024 ATM Program. With the sale and issuance of those shares, no additional shares of common stock will be offered or sold under
the February 2024 ATM Program.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-34
2023 ATM Program
In August 2023, the Company established the 2023 ATM Program, under which it could offer and sell up to $ 750.0 million in shares of the Company’s
common stock.
During the year ended December 31, 2023, the Company received net proceeds of approximately $571.6 million ($583.3 million of gross proceeds, net of
$11.7 million in commissions and expenses) from the sale of 45,758,400 shares of its common stock at a weighted average fair value of $13.07 per share
under the 2023 ATM Program.
During the year ended December 31, 2024, the Company received net proceeds of approximately $114.9 million ($117.3 million of gross proceeds, net of
$2.4 million in commissions and expenses) from the sale of 8,644,100 shares of its common stock at a weighted average fair value of $13.57 per share under
the 2023 ATM Program. With the sale and issuance of those shares, no additional shares of common stock will be offered or sold under the 2023 ATM
Program.
2022 ATM Program
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 year ended December 31, 2022, the Company received gross proceeds of approximately $304.8 million ($298.2 million, net of $6.6 million in
commissions and expenses), from the sale of 37,052,612 shares of common stock at an average fair value of $8.23 per share under the 2022 ATM Program.
During the year ended December 31, 2023, the Company received net proceeds of approximately $191.2 million ($195.2 million of gross proceeds, net of
$3.9 million in commissions and expenses) from the sale of 16,447,645 shares of its common stock at a weighted average fair value of $11.86 per share
under its 2022 ATM Program. With the sale and issuance of these shares, all $500.0 million in shares of the Company’s common stock available for sale
under its 2022 ATM Program had been issued.
Under the terms of the August 2024, February 2024, 2023, and 2022 ATM Programs, the Company only issued shares of its common stock.
Warrants
During the year ended December 31, 2021, the Company issued warrants to XMS Capital Partners, LLC as partial payment for its advisory services in
connection with the acquisition of Whinstone. The warrants entitle XMS to purchase up to 63,000 shares of the Company’s common stock at a purchase
price of $48.37 per share. The warrants may be exercised at any time through August 12, 2026.
The warrants are recognized as a liability with a fair value of zero upon issuance and a redemption value of zero as of December 31, 2024 and 2023.
2024 Transactions
During the year ended December 31, 2024, the Company increased its authorized shares of common stock from 340.0 million shares to 680.0 million shares.
During the year ended December 31, 2024, the Company issued approximately 7.2 million shares of common stock with a value of approximately $74.0
million as consideration for the Block Mining Acquisition (see Note 3. Acquisitions).
During the year ended December 31, 2024, approximately 16.0 million shares of restricted stock, net of forfeitures and delivery of common stock underlying
stock awards, and net of tax withholding, were issued. The Company withheld approximately 1.1 million shares of the common stock issued upon vesting,
with a fair value of approximately $11.6 million, to cover the withholding taxes related to the settlement of these vested restricted stock awards, as
permitted by the 2019 Equity Incentive Plan. See Note 15. Stock-Based Compensation, for a complete description of the 2019 Equity Incentive Plan.
Table of Contents
Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-35
In June 2024, the Company’s stockholders approved the Sixth Amendment to the 2019 Equity Incentive Plan, which increased the shares of common stock
reserved for issuance by 15.0 million shares.
2023 Transactions
During the year ended December 31, 2023, approximately 5.0 million shares of restricted stock, net of forfeitures and delivery of common stock underlying
the stock awards, and net of tax withholding, were issued. The Company withheld approximately 1.3 million shares of the common stock issued upon
vesting, with a fair value of approximately $14.0 million, to cover the withholding taxes related to the settlement of these vested restricted stock awards, as
permitted by the 2019 Equity Incentive Plan.
In June 2023, the Company’s stockholders approved the Fourth Amendment to the 2019 Equity Incentive Plan, which increased the shares of common
stock reserved for issuance under the 2019 Equity Incentive Plan by 4.0 million shares.
In December 2023, the Company’s stockholders approved the Fifth Amendment to the 2019 Equity Incentive Plan, which increased the shares of common
stock reserved for issuance under the 2019 Equity Inventive Plan by 13.0 million shares.
On December 1, 2021, the Company acquired 100% of the equity interests in ESS Metron for consideration that included 715,413 shares of the Company’s
common stock, 70,165 shares of which were withheld as security for the sellers’ indemnification obligations for 18 months. During the year ended
December 31, 2023, the indemnification period ended and all 70,165 of the withheld shares were issued to the ESS Metron sellers.
2022 Transactions
During the year ended December 31, 2022, the Company increased its authorized shares of common stock from 170.0 million shares to 340.0 million shares.
During the year ended December 31, 2022, approximately 1.8 million shares of restricted stock, net of forfeitures and delivery of common stock underlying
stock awards, and net of tax withholding, were issued. The Company withheld approximately 0.7 million shares of the common stock issued upon vesting,
with a fair value of approximately $10.1 million, to cover the withholding taxes related to the settlement of these vested restricted stock units, as permitted
by the 2019 Equity Incentive Plan.
During the year ended December 31, 2022, 2,199 shares of the Company’s 0% Series B Convertible Preferred Stock were converted into 2,199 shares of its
common stock, leaving no shares outstanding.
In July 2022, the Company’s stockholders approved the Third Amendment to its 2019 Equity Incentive Plan, which increased the number of shares of the
Company’s common stock reserved for issuance by 10.0 million shares.
Note 15. Stock-Based Compensation
The 2019 Equity Incentive Plan authorizes the granting of stock-based compensation awards to directors, officers, employees, and advisors of the
Company in the form of restricted stock awards ("RSAs”), restricted stock units ("RSUs”), or stock options, all of which settle in shares of the Company’s
common stock upon vesting.
In July 2023, the Company adopted a new long-term incentive program under its 2019 Equity Incentive Plan, under which employees are eligible to receive
performance-based RSAs or RSUs and service-based RSAs or RSUs. The performance-based awards are eligible to vest based on the relative
performance of the Company’s common stock ("Total Stockholder Return” or "TSR”), compared to the performance of the Russell 3000 Index (the "Index
TSR”), during the three-year performance period commencing as of the grant date of the TSR award (collectively, the "TSR Awards”). The TSR Awards
have a vesting range of 0% to 200% of the recipient’s target award, which is calculated based on the difference between the Company’s TSR and the
Index TSR over the three-year performance period, subject to the recipient’s continuous employment with the Company through the third anniversary of
the award’s grant date. The service-based awards are eligible to vest in one-third annual installments over a three-year service period commencing on the
award’s grant date, subject to the recipient’s continuous employment with the Company through the applicable vesting dates.
As of December 31, 2024, the Company had 14,666,096 shares of common stock reserved for issuance under the 2019 Equity Incentive Plan.
Table of Contents
Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-36
The following table presents the Company’s stock-based compensation expense by category:
Years Ended December 31,
2024
2023
2022
Performance-based stock awards and units
$
99,178
$
(4,703) $
16,444
Service-based stock awards and units
26,026
36,873
8,111
Total stock-based compensation
$
125,204
$
32,170
$
24,555
Stock-based compensation expense is recognized within Selling, general and administrative on the Consolidated Statements of Operations.
Performance-Based Awards and Units
Performance-based RSAs and RSUs and units are eligible to vest over a three-year performance period based on the Company’s TSR as compared to the
performance of the Index TSR.
The following table presents a summary of the activity of the performance-based RSAs:
Weighted Average
Grant-Date
Per Share
Number of Shares
Fair Value
Balance as of January 1, 2024
4,928,526
$
21.71
Granted
18,089,198
$
12.39
Vested
(252,380)
$
23.30
Forfeited
(3,149,956)
$
22.08
Balance as of December 31, 2024
19,615,388
$
13.03
During the year ended December 31, 2023, the Company granted 2,076,340 with a grant-date fair value of $36.3 million. During the year ended
December 31, 2022, the Company granted 245,266 performance-based RSAs with a grant date fair value of $1.7 million.
As of December 31, 2024, there was approximately $159.1 million of unrecognized compensation cost related to the performance-based RSAs, which is
expected to be recognized over a remaining weighted-average vesting period of approximately 1.8 years.
The following table presents a summary of the activity of the performance-based RSUs:
Weighted Average
Grant-Date
Per Share
Number of Units
Fair Value
Balance as of January 1, 2024
246,426
$
19.59
Granted
1,522,612
$
11.41
Vested
—
—
Forfeited
—
—
Balance as of December 31, 2024
1,769,038
$
12.55
During the year ended December 31, 2023, the Company granted 246,426 performance-based RSUs with a grant date fair value of $4.8 million. During
the year ended December 31, 2022, the Company granted 1,412,299 performance-based RSUs with a grant date fair value of $15.1 million and all
outstanding performance-based RSUs were converted into performance-based RSAs.
As of December 31, 2024, there was approximately $13.9 million of unrecognized compensation cost related to the performance-based RSUs, which is
expected to be recognized over a remaining weighted-average vesting period of approximately 1.9 years.
Table of Contents
Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-37
Service-Based Awards and Units
Service-based awards vest over a one, two, and three-year service periods.
The following table presents a summary of the activity of the service-based RSAs:
Weighted Average
Grant-Date
Per Share
Number of Shares
Fair Value
Balance as of January 1, 2024
4,897,894
$
9.14
Granted
8,172,345
$
10.02
Vested
(4,280,308)
$
7.88
Forfeited
(6,077,072)
$
11.98
Balance as of December 31, 2024
2,712,859
$
11.76
During the year ended December 31, 2023, the Company awarded 1,313,925 service-based RSAs with a grant date fair value of $20.3 million. During
the year ended December 31, 2022, the Company awarded 10,310,115 service-based RSAs with a grant date fair value of $69.4 million.
As of December 31, 2024, there was approximately $25.6 million of unrecognized compensation cost related to the service-based RSAs, which is expected
to be recognized over a remaining weighted-average vesting period of approximately 2.2 years.
The following table presents a summary of the activity of the service-based RSUs:
Weighted Average
Grant-Date
Per Share
Number of Units
Fair Value
Balance as of January 1, 2024
155,213
$
19.30
Granted
294,608
$
9.95
Vested
(87,396)
$
16.83
Forfeited
—
—
Balance as of December 31, 2024
362,425
$
12.29
During the year ended December 31, 2023, the Company awarded 155,213 service-based RSUs with a grant date fair value of $3.0 million. During the year
ended December 31, 2022, the Company awarded 922,552 service-based RSUs with a grant date fair value of $6.4 million and all outstanding service-based
RSUs were converted into service-based RSAs.
As of December 31, 2024, there was approximately $3.6 million of unrecognized compensation cost related to the service-based RSUs, which is expected to
be recognized over a remaining weighted-average vesting period of approximately 2.2 years.
Table of Contents
Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-38
Note 16. Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis
The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis:
Fair value measured as of December 31, 2024
Significant
Quoted prices in
Significant other
unobservable
Total carrying
active markets
observable inputs
inputs
Value
(Level 1)
(Level 2)
(Level 3)
Bitcoin(a)
$
1,654,468
$
1,654,468
$
—
$
—
Equity method investment - marketable securities(b)
$
134,265
$
134,265
$
—
$
—
Convertible note(b)
$
5,345
$
—
$
—
$
5,345
Derivative asset(c)
$
149,495
$
—
$
—
$
149,495
Contingent consideration liabilities(d)
$
26,855
$
—
$
—
$
26,855
Fair value measured as of December 31, 2023
Significant
Quoted prices in
Significant other
unobservable
Total carrying
active markets
observable inputs
inputs
Value
(Level 1)
(Level 2)
(Level 3)
Bitcoin(a)
$
311,178
$
311,178
$
—
$
—
Convertible note(b)
$
4,709
$
—
$
—
$
4,709
Derivative asset(c)
$
104,218
$
—
$
—
$
104,218
Contingent consideration liability(d)
$
909
$
—
$
—
$
909
(a) See Note 5. Bitcoin
(b) See Note 6. Investments
(c) See Note 9. Power Supply Agreements
(d) See Note 17. Commitments and Contingencies
There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.
Assets and liabilities not measured at fair value on a recurring basis
In addition to assets and liabilities that are measured at fair value on a recurring basis, we also measure certain assets and liabilities at fair value on a
nonrecurring basis. Our non-financial assets, including goodwill, intangible assets, operating lease right of use assets, and property, plant and equipment,
are measured at fair value when there is an indication of impairment and the carrying amount exceeds the asset’s projected undiscounted cash flows.
These assets are recorded at fair value only when an impairment charge is recognized.
As of December 31, 2024 and 2023, the fair values of cash and cash equivalents, restricted cash, accounts receivable, contract assets, prepaid expenses
and other current assets, accounts payable, contract liabilities, and accrued expenses approximated their carrying values because of the short-term nature
of these instruments.
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-39
Note 17. Commitments and Contingencies
Commitments
Miners and mining equipment
During the years ended December 31, 2024 and 2023, the Company paid a total of $555.9 million in deposits and payments to MicroBT for the purchase of
miners pursuant to the Master Agreement described herein. The remaining commitment of approximately $1.0 million due as of December 31, 2024, was
paid in January 2025.
Infrastructure
During 2024, the Company entered into agreements related to water supply infrastructure for the Corsicana Facility resulting in total remaining
commitments of approximately $16.8 million. The Company expects to incur these costs throughout 2026.
Operating leases
The Company leases its primary office locations and Kentucky Facility data center and has a ground lease for its Rockdale Facility under noncancelable
lease agreements that expire on varying dates through 2032. For additional information see Note 13. Leases.
Water reservation agreement
The Company has a water reservation agreement, as amended, with the lessor of its ground lease to secure a certain quantity of non-potable water from a
nearby lake to be used by the Company at the Rockdale Facility. The water reservation agreement runs through January 2032 and requires annual
payments of approximately $2.4 million.
The Company concluded that the water reservation agreement was not a lease or a derivative instrument. Because the Company obtained an additional
right of use for the reserved water amount, and the charges were increased by a standalone price commensurate with the additional water use rights and at
market rates, the water reservation agreement was determined to be a lease modification accounted for as a separate contract. As such, the fees of the
water reservation agreement were excluded from the lease payments of the ground lease and the water reservation agreement was accounted for as a
separate executory contract.
Contingent consideration liabilities
Block Mining
As part of the Block Mining Acquisition, the sellers are eligible to earn an additional $32.5 million in potential earn-out targets, payable in cash or stock, if
certain milestones are reached by December 31, 2025 (See Note 3. Acquisitions). This contingent consideration was recognized as the acquisition date fair
value of $26.1 million and is recognized on the Consolidated Balance Sheets in Contingent consideration liabilities, current portion. The fair value
measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement on the fair value hierarchy. These
inputs include management’s best estimate of both the probability and timing of achieving the milestones, a risk-free interest rate of approximately 5%
based on the U.S. Treasury rate for the corresponding time periods and a credit spread of approximately 1% based on the median of Investment Grade
High Yield Debt Instruments with a Standard & Poor’s BB credit rating. This credit rating was selected based on an independently-produced synthetic
credit rating analysis.
As of December 31, 2024, the Block Mining contingent consideration had an estimated fair value of $23.6 million.
E4A Solutions
As part of the E4A Solutions Acquisition, the sellers are eligible to earn potential earn-out targets based on E4A Solutions’ Adjusted EBITDA, calculated
as 2.65 times the amount the average adjusted EBITDA exceeds the Earnout threshold, as defined in the purchase agreement, during the two years ending
December 31, 2026, payable in cash or Riot common stock at the Company’s discretion. This contingent consideration was recognized as the acquisition
date fair value of $2.6 million and is recognized on the Consolidated Balance Sheets in Contingent consideration liabilities, less current portion. The fair
value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement on the fair value hierarchy.
These inputs include management’s best estimate of both the probability and timing of achieving the milestones, a risk-free interest rate of
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-40
approximately 4.25% based on the U.S. Treasury rate for the corresponding time periods and a credit spread of approximately 1% based on the median of
Investment Grade and High Yield Debt Instruments with a Standard & Poor’s BB credit rating. This credit rating was selected based on an independently-
produced synthetic credit rating analysis.
Whinstone
In February 2021, the State of Texas experienced an extreme and unprecedented winter weather event that resulted in prolonged freezing temperatures and
caused an electricity generation shortage that was severely disruptive to the whole state. While demand for electricity reached extraordinary levels due to
the extreme cold, the supply of electricity significantly decreased in part because of the inability of certain power generation facilities to supply electric
power to the grid. Due to the extreme market price of electricity during this time, at the request of ERCOT, the Company stopped supplying power to its
customers and instead sold power back to the grid.
In April 2021, under the provisions of the Rockdale PPA, and as a result of the weather event, the Company entered into a Qualified Scheduling Entity
("QSE”) Letter Agreement, which resulted in the Company being entitled to receive approximately $125.1 million for its power sales during the
February winter storm, all under the terms and conditions of the QSE Letter Agreement. The Company received cash of $29.0 million in April 2021 (after
deducting $10.0 million in power management fees owed by Whinstone), approximately $59.7 million was credited against power bills of the Company
during 2022, with the remaining $26.3 million being contingent upon ERCOT’s future remittance. These amounts are recognized gross before fair value
adjustments and expenses incurred by the Company for power management fees noted above and customer settlements. The fair value of the settlement
agreement was estimated and recognized as an asset as part of acquisition accounting.
As part of the acquisition of Whinstone, the Company is obligated to pay the seller up to $86.0 million, net of income taxes, (undiscounted) of additional
consideration if certain power credits are received or realized by the Company arising from the February 2021 weather event. Upon the acquisition of
Whinstone, the estimated fair value of the contingent consideration was approximately $83.0 million.
The estimated fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.
Upon the acquisition of Whinstone, the Company estimated the fair value of the contingent consideration using a discounted cash flow analysis, which
included estimates of both the timing and amounts of potential future power credits. These estimates were determined using the Company’s historical
consumption quantities and patterns combined with management’s expectations of its future consumption requirements, which required significant
judgment and depend on various factors outside the Company’s control, such as construction delays. The discount rate of approximately 2.5% included
observable market inputs, but also included unobservable inputs such as interest rate spreads, which were estimated based on qualitative judgment
related to company-specific risk factors. Specifically, the Company used S&P Global’s B credit rating in the yield curve to estimate a reasonable interest
rate spread to determine the cost of debt input because the power credits are subordinated obligations of the Company’s counterparty. Although these
estimates are based on management’s best knowledge of current events, the estimates could change significantly from period to period.
Approximately $1.2 million of remaining future power credits to be received are estimated to be received over a period of 12 years. The Company
determined the value of the contingent consideration as of December 31, 2024, using a discount rate of approximately 8.0%, which was based on the
factors above, including the recent increase in interest rates.
The following table presents the changes in the estimated fair value of the Company’s contingent consideration liabilities:
Balance as of December 31, 2023
$
909
Block Mining Acquisition
26,085
E4A Solutions Acquisition
2,640
Change in contingent consideration
(320)
Change in fair value of contingent consideration
(2,459)
Balance as of December 31, 2024
$
26,855
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Notes to Consolidated Financial Statements
F-41
Contingencies
Legal Proceedings
The Company, and our subsidiaries, are subject at times to various claims, lawsuits and governmental proceedings relating to our business and
transactions arising in the ordinary course of business. We cannot predict the final outcome of such proceedings. Where appropriate, we vigorously
defend such claims, lawsuits and proceedings. Some of these claims, lawsuits and proceedings seek damages, including, direct, consequential, exemplary,
and/or punitive damages, in amounts that could, if awarded, be significant. Certain of the claims, lawsuits and proceedings arising in ordinary course of
business are covered by our insurance program. We maintain property, and various types of liability insurance in an effort to protect ourselves from such
claims. In terms of any matters where there is no insurance coverage available to us, or where coverage is available and we maintain a retention or
deductible associated with such insurance, we may establish an accrual for such loss, retention or deductible based on current available information. In
accordance with accounting guidance, if it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial
statements, and the amount of loss is reasonably estimable, then an accrual for the cost to resolve or settle these claims is recorded by us on the
Consolidated Balance Sheets. If it is reasonably possible that an asset may be impaired as of the date of the financial statement, then we disclose the
range of possible loss. Costs related to the defense of such claims are recorded by us as they are incurred. Management, with the assistance of outside
counsel, may from time to time adjust such accruals according to new developments in the matter, court rulings, or changes in the strategy affecting our
defense of such matters. On the basis of current information, we do not believe there is a reasonable possibility that any material loss, if any, will result
from any claims, lawsuits and proceedings to which we are subject to either individually, or in the aggregate.
Green Revolution Cooling Patent Dispute
On March 22, 2024, GRC filed a complaint against the Company in Case No. 6:24-CV-152 in the Western District of Texas for patent infringement. More
specifically, GRC has alleged that the immersion cooling systems provided to the Company by third parties infringe GRC’s U.S. Patent Nos. 9,992,914 ("the
’914 Patent”) and 10,123,463 ("the ’463 Patent”). In the complaint, GRC seeks unspecified damages and an injunction against all products that allegedly
infringe the ’914 Patent and the ’463 Patent (or in lieu of an injunction, an award of a compulsory forward royalty). The Company has engaged counsel
and is working with its counsel to evaluate and defend the Company from this infringement claim. While a preliminary investigation of GRC’s claims is
underway, the Company cannot reasonably predict the outcome of such ongoing litigation, or the magnitude of such outcome, at this time.
Northern Data Working Capital Disputes
On September 7, 2022, the Company filed a complaint against Northern Data AG ("Northern Data”) in the Delaware Court of Chancery (Case No. C.A. No.
2022-0792-LWW) disputing the purchase price of Whinstone and seeking declaratory relief and specific performance of the stock purchase agreement.
On March 31, 2023, the parties filed a stipulation agreeing to dismiss all claims without prejudice and to submit the dispute for final determination to an
independent accountant. The Company placed approximately $29.5 million in escrow pending the final determination of the independent accountant, and,
on June 9, 2023, the independent accountant rendered a written final determination finding in favor of the Company on disputed issues totaling
approximately $27.1 million. Accordingly, approximately $27.1 million of the escrowed amount was released from escrow and distributed to the Company
on June 13, 2023, with the remaining approximately $2.4 million held in escrow allocated to Northern Data. As a result, the Company recognized a Deferred
gain on acquisition post-close dispute settlement of $26.0 million on the Condensed Consolidated Balance Sheets.
Following the final determination, Northern Data filed a complaint against the Company in the Delaware Court of Chancery (the "Chancery Court”) on
June 23, 2023 (Case No. C.A. No. 2023-0650-LWW) challenging the independent accountant’s written final determination and seeking to re-litigate the
purchase price adjustment process. The Company contests the legal and factual basis of Northern Data’s claims and filed a motion to dismiss the
complaint on July 17, 2023, which the Chancery Court heard on February 13, 2024. The Chancery Court denied the motion to dismiss on May 17, 2024, at
which time the court advised the parties that summary judgment briefing after focused discovery may be a worthwhile endeavor. Both the Company and
Northern Data moved for summary judgment on November 6, 2024. On February 17, 2025, the Chancery Court heard the parties motions for summary
judgment and took the matter under advisement. The Chancery Court has not yet issued a ruling on the motions. While the Company intends to
vigorously oppose such complaint, the Company cannot accurately predict the outcome of the ongoing litigation, estimate the magnitude of such
outcome, or forecast when such litigation will be resolved, at this time.
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Notes to Consolidated Financial Statements
F-42
Legacy Hosting Customer Disputes
Rhodium
On May 2, 2023, Whinstone filed a petition against Rhodium 30MW, LLC ("Rhodium 30MW”), Rhodium JV, LLC ("Rhodium JV”), Air HPC LLC ("Air
HPC”), and Jordan HPC, LLC ("Jordan HPC” and, together with Rhodium 30MW, Rhodium JV, and Air HPC, collectively, the "Defendants”) in Case No.
CV41873 in the 20th District Court (the "District Court”) of Milam County, Texas. In its amended petition filed May 3, 2023, Whinstone asserted breach of
contract claims for Rhodium JV and Air HPC’s failure to pay certain hosting and service fees under the now-terminated Whinstone-Rhodium hosting
agreements ("Hosting Agreements”) and sought a declaration regarding the rights and obligations under certain hosting agreements with the Defendants
and that no power credits are owed to any Rhodium entity under any agreement. Whinstone sought recovery of more than $26 million, plus reasonable
attorneys’ fees and costs, expenses, and pre- and post-judgment interest. On June 12, 2023, Defendants answered and, along with non-parties Rhodium
Encore LLC, Rhodium 2.0 LLC, and Rhodium 10mw LLC (collectively, the "Rhodium Non-Parties” and, together with Defendants, collectively, "Rhodium”),
filed contingent counterclaims for breach of contract and moved to compel arbitration for alleged unpaid energy sale credits and lost profits. On August
14, 2023, Whinstone filed a second amended petition to include a declaration regarding the rights and obligations under the now-terminated water
agreement between Whinstone and various Rhodium entities.
On September 13, 2023, the District Court compelled Whinstone’s claims against Defendants to arbitration over Whinstone’s objection and stayed the
lawsuit pending such arbitration.
On December 11, 2023, Rhodium submitted an arbitration demand to the American Arbitration Association ("AAA”), seeking damages and specific
performance of unspecified contracts. Rhodium amended its demand on June 4, 2024 to include additional claims and disclosed it seeks at least $67 million
in damages. Whinstone does not believe Rhodium’s claims have any merit, and will vigorously contest such claims, as appropriate. Whinstone objected
to the AAA’s jurisdiction and authority to entertain the claims and decide any issues of arbitrability. Subject to those objections, Whinstone submitted
counterclaims to the AAA on December 29, 2023 against Rhodium JV and Air HPC for breach of contract, seeking recovery of at least $20 million in past-
due revenue share payments, plus reasonable attorneys’ fees and costs, expenses, and pre- and post-judgment interest.
After a permanent arbitrator was appointed and written discovery commenced, Rhodium filed for bankruptcy protection on August 24, 2024 and August
29, 2024 in a now jointly administered proceeding styled In re: Rhodium Encore LLC, et al., Case No. 24-90448 (ARP), in the United States Bankruptcy
Court for the Southern District of Texas—Houston Division (the "Bankruptcy Court"). Therein, Rhodium filed a motion to assume the Hosting
Agreements, and the Bankruptcy Court set a contested hearing on the matter for November 12-29, 2024.
On October 3, 2024, Whinstone filed a motion for partial summary judgment and on October 16, 2024, Rhodium filed its own motion for partial summary
judgment. The Bankruptcy Court denied both motions on November 8, 2024. From November 11, 2024 to November 14, 2024, the Bankruptcy Court heard
phase one of Rhodium's Motion to Assume, which the Court granted in an interim order on December 16, 2024. Phase two of Rhodium’s Motion to
Assume is set for February 26, 2025. The Company anticipates appealing the Bankruptcy Court’s decision and cannot reasonably predict the outcome of
such ongoing proceedings, or the magnitude of such an outcome, at this time.
On February 11, 2025, Rhodium Encore LLC, Rhodium JV LLC, Rhodium 30MW LLC, Rhodium 2.0 LLC, Rhodium 10MW LLC, Air HPC LLC, Jordan HPC
LLC, Rhodium Industries LLC and Rhodium Renewables LLC (collectively, "Plaintiffs") filed a complaint against Riot and Whinstone in the United States
Bankruptcy Court for the Southern District of Texas, Houston Division. Plaintiffs allege damages for breach of contract and tortious interference, and
requests an application for permanent injunctive relief seeking more than $300 million in damages. Riot and Whinstone believe Plaintiff's claims are
without merit and intends to vigorously contest them, as appropriate. Because this litigation is still at this early stage, the Company cannot reasonably
estimate the likelihood of an unfavorable outcome or the magnitude of such an outcome, if any.
SBI Crypto Co.
On April 5, 2023, SBI Crypto Co., Ltd. ("SBI”) filed a complaint in the United States District Court for the Western District of Texas (Case No. 6:23-cv-252),
which it later amended, against Whinstone alleging breach of contract, fraud, and negligent bailment claims related to a colocation services agreement
between Whinstone and SBI that was terminated in 2021. On July 21, 2023, Whinstone filed a motion to dismiss the amended complaint, which was denied
on October 25, 2023. SBI seeks recovery of at least $15.0 million in lost profits and at least $16.0 million for equipment damage, plus reasonable attorneys’
fees and costs, expenses, costs, and pre-
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Notes to Consolidated Financial Statements
F-43
and post-judgment interest. Whinstone believes many of the claims are barred or waived, and that all of SBI’s claims substantively lack merit, and
Whinstone plans to vigorously contest the same, as appropriate. While a preliminary investigation of the merits of SBI’s claims has commenced and
because this litigation is still at this early stage, the Company cannot reasonably estimate the outcome of such ongoing litigation, or the magnitude of
such an outcome, at this time.
GMO
On June 13, 2022, GMO Gamecenter USA, Inc. and its parent, GMO Internet Group, Inc., (collectively "GMO”) filed a complaint against Whinstone
alleging breach of a colocation services agreement between GMO and Whinstone, which has since been terminated, seeking damages in excess
of $150.0 million for lost profit and profit sharing payments GMO alleges it was owed from Whinstone. The case is pending in the United States District
Court for the Southern District of New York (Case No. 1:22-cv-05974-JPC). Whinstone has responded to GMO’s claims and raised counterclaims of its
own, alleging GMO itself breached the colocation services agreement, seeking a declaratory judgment and damages in excess of $25.0 million. On October
19, 2023, GMO filed its fourth amended complaint claiming an additional $496.0 million in damages, for loss of future profits and future profit
sharing payments GMO alleges would have been received through the term of the agreement, based on Whinstone’s allegedly wrongful termination of
the colocation services agreement as of June 29, 2023. The Company cannot reasonably estimate the outcome of such ongoing litigation, or the
magnitude of such an outcome, at this time.
Note 18. Income taxes
The following table presents the components of the loss before provision for income taxes:
For the years ended December 31,
2024
2023
2022
Domestic
$
110,145
$
(54,565) $
(521,302)
Foreign
—
—
—
Loss before provision for income taxes
$
110,145
$
(54,565) $
(521,302)
The following table presents the components of income tax benefit (expense):
As of December 31,
2024
2023
2022
Current:
US Federal
$
—
$
—
$
—
US State
(744)
48
(789)
Foreign
—
—
—
Total current benefit (expense)
$
(744) $
48
$
(789)
Deferred:
US Federal
$
—
$
5,045
$
12,538
US State
—
—
—
Foreign
—
—
—
Total deferred benefit
—
5,045
12,538
Total benefit (expense) for income taxes
$
(744) $
5,093
$
11,749
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Notes to Consolidated Financial Statements
F-44
The following table presents the tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred
tax assets and liabilities:
As of December 31,
2024
2023
Deferred income tax assets:
Operating lease liability
$
6,372
$
4,485
Deferred revenue
3,497
3,735
Stock compensation
4,799
2,348
Bitcoin
—
—
Intangible assets
7,079
6,523
Net operating losses
202,871
116,872
Other deferred tax assets
2,515
2,058
Total deferred tax assets
227,133
136,021
Valuation allowance
(12,508)
(65,600)
Net deferred tax assets
214,625
70,421
Deferred income tax liabilities:
Derivative asset
(33,379)
(21,898)
Right of use asset
(6,139)
(4,289)
Fixed assets
(30,725)
(19,189)
Bitcoin
(125,471)
(23,300)
LT Investments
(3,281)
—
Unrealized G/L
(15,499)
—
Other deferred tax liabilities
(131)
(1,745)
Total deferred tax liabilities
(214,625)
(70,421)
Net deferred tax assets (liabilities)
$
—
$
—
The Company has approximately $896.0 million and $289.0 million of federal and state tax Net Operating Losses ("NOLs”), respectively, that may be
available to offset future taxable income. Federal and state net operating loss carryforwards of $130.0 million and $159.0 million, respectively, if not utilized,
expire between 2026 and 2037. Under the Tax Cuts and Jobs Act, $766.0 million federal and $130.0 million state NOLs incurred after December 31, 2017 are
carried forward indefinitely, but may be limited in utilization to 80% of taxable income.
Furthermore, as a result of changes in the ownership of our common stock and changes in our business operations, our ability to use our federal and state
NOLs may be subject to annual limitations limited under Internal Revenue Code Section 382 and 383. The annual limitations may result in the expiration of
net operating losses and credits before they are able to be utilized. The Company does not expect any previous ownership changes, as defined under
Section 382 and 383 of the Internal Revenue Code, to result in an ultimate limitation that will materially reduce the total amount of net operating loss
carryforwards and credits that can be utilized.
The statute of limitations for assessment by the IRS and state tax authorities is open for tax years ending December 31, 2018 through 2023, although
carryforward attributes that were generated prior to tax year 2018 may still be adjusted upon examination by the IRS or state tax authorities if they either
have been or will be used in a future period. Currently, no federal or state income tax returns are under examination by the respective taxing authorities.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which
those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income
and taxing strategies in making this assessment. In case the deferred tax assets will not be realized in future periods, the Company has provided a
valuation allowance for the full amount of the deferred tax assets as of December 31, 2024 and 2023. The valuation allowance decreased by approximately
$53.0 million during the year ended December 31, 2024.
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Notes to Consolidated Financial Statements
F-45
The following table reconciles the income tax benefit (expense) based on the U.S. federal statutory rate with actual income tax benefit (expense):
For the years ended December 31,
2024
2023
2022
Federal statutory rate
$
(23,410)
21.3% $
11,459
21.0% $
109,376
21.0%
State and local taxes, net of federal taxes
(2,087)
(1.9)%
42
(0.1)%
3,403
0.7%
Goodwill impairment
—
0.0%
—
0.0%
(64,295) (12.3)%
Contingent payment
—
0.0%
5,045
9.2%
12,538
2.4%
Section 162m compensation
(25,093)
22.8%
(21,315) (39.1)%
(11,433)
(2.2)%
Stock compensation
(7)
0.0%
2,648
4.9%
2,904
0.6%
Return to provision
285
(0.3)%
(2,760)
(5.1)%
9,026
1.7%
Rate change on deferreds
(3,441)
3.1%
3,919
7.2%
(3,321)
(0.6)%
Deferred adjustment
—
0.0%
(36,159) (66.3)%
—
0.0%
Other
(84)
(0.1)%
(244)
0.4%
—
0.0%
Change in valuation allowance
53,093
(48.2)%
42,458
77.8%
(46,449)
(8.9)%
Income tax benefit (expense)
$
(744)
0.7%
$
5,093
9.3%
$
11,749
2.3%
The Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2023 and 2022. The Company’s policy is to recognize
interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. The
Company did not accrue either interest or penalties for the years ended December 31, 2023 and 2022.
The Company is subject to U.S. federal income tax and primarily Florida, Colorado, and Texas state income tax. The Company has not been under tax
examination in any jurisdiction for the years ended December 31, 2023 and 2022.
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Notes to Consolidated Financial Statements
F-46
Note 19. Earnings Per Share
The following table presents the computation of basic and diluted earnings per share ("EPS”):
Years Ended December 31,
2024
2023
2022
Numerator:
Net income (loss)
$
109,401
$
(49,472)
$
(509,553)
Interest incurred on the 2030 Notes, net of income taxes
382
—
—
Numerator for diluted EPS
$
109,783
$
(49,472)
$
(509,553)
Denominator:
Denominator for basic EPS - weighted average shares outstanding
275,980,010
175,026,051
139,433,901
Effect of dilutive securities:
Unvested RSAs
2,553,095
—
—
Unvested RSUs
404,730
—
—
2030 Notes
39,988,127
—
—
Dilutive potential common shares
42,945,951
—
—
Denominator for diluted EPS - adjusted weighted average shares outstanding
318,925,961
175,026,051
139,433,901
Basic EPS
$
0.40
$
(0.28)
$
(3.65)
Diluted EPS
$
0.34
$
(0.28)
$
(3.65)
The following table presents potentially dilutive securities that are not included in the computation of diluted net income (loss) per share as their inclusion
would be anti-dilutive:
December 31,
2024
2023
2022
Warrants to purchase common stock
63,000
63,000
63,000
Unvested RSAs(a)
—
9,824,546
—
Unvested RSUs
—
401,639
—
Total
63,000
10,289,185
63,000
(a) Unvested restricted stock awards are included in total common shares outstanding but are excluded from the calculation of basic earnings per
share.
Note 20. Segment Information
The Company has two reportable segments: Bitcoin Mining and Engineering. The reportable segments are identified based on the types of service
performed. No operating segments have been aggregated to form the reportable segments.
Gross profit (loss) is the segment performance measure the CODM uses to assess the Company’s reportable segments, and is before elimination of
intersegment profits.
Prior to 2024, the Company had a Data Center Hosting reportable segment but has since terminated all contracts with its Data Center Hosting customers.
Commencing with the three months ended March 31, 2024, the CODM ceased analyzing the performance of the Data Center Hosting operations and the
Company ceased reporting Data Center Hosting as a separate reportable business segment. The Company has no plans to offer data center hosting
services to new customers. All residual revenue and costs of revenue related to Data Center Hosting incurred during the year ended December 31, 2024,
are included in Revenue: Other and Cost of Revenue: Other. Prior period amounts related to Data Center Hosting have been recast into Revenue: Other
and Cost of Revenue: Other.
Other than the $96.9 million of goodwill from the Block Mining Acquisition allocated to the Bitcoin Mining segment, and $25.0 million of goodwill from the
E4A Solutions Acquisition allocated to the Engineering segment, the Company does not allocate assets
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Notes to Consolidated Financial Statements
F-47
to the reporting segments because its assets are managed on an entity-wide basis and, therefore, does not separately disclose the total assets of its
reportable operating segments.
The Bitcoin Mining segment generates revenue from the Bitcoin the Company earns through its Bitcoin Mining activities. The Engineering segment
generates revenue through customer contracts for custom engineered electrical products. All Revenue: Other revenue is from external customers.
All revenue and cost of revenue from intersegment transactions have been eliminated in the Consolidated Statements of Operations.
The following tables present segment revenue and segment gross profit (loss), including the significant expense items reviewed by the CODM:
Year ended December 31, 2024
Bitcoin Mining
Engineering
Total
Revenue from external customers
$
321,002
$
38,491
$
359,493
Intersegment revenue
—
7,979
7,979
Segment revenue
321,002
46,470
367,472
Reconciliation of revenue
Other revenue(a)
17,165
Elimination of intersegment revenue
(7,979)
Total consolidated revenue
376,658
Less:
Power
149,019
—
149,019
Compensation
13,294
—
13,294
Insurance on miners
6,992
—
6,992
Ground rent and related water and property tax
5,945
—
5,945
Materials
—
24,272
24,272
Labor
—
4,926
4,926
Other segment items(b)
13,974
18,399
32,373
Segment gross profit (loss)
$
131,778
$
(1,127)
$
130,651
Year ended December 31, 2023
Bitcoin Mining
Engineering
Total
Revenue from external customers
$
188,996
$
64,303
$
253,299
Intersegment revenue
—
8,522
8,522
Segment revenue
188,996
72,825
261,821
Reconciliation of revenue
Other revenue(a)
27,379
Elimination of intersegment revenue
(8,522)
Total consolidated revenue
280,678
Segment cost of revenue:
Power
89,134
—
89,134
Insurance on miners
3,768
—
3,768
Materials
—
42,729
42,729
Labor
—
4,214
4,214
Other segment items(b)
3,695
19,334
23,029
Segment gross profit (loss)
$
92,399
$
6,548
$
98,947
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-48
Year ended December 31, 2022
Bitcoin Mining
Engineering
Total
Revenue from external customers
$
156,870
$
65,342
$
222,212
Intersegment revenue
—
20,016
20,016
Segment revenue
156,870
85,358
242,228
Reconciliation of revenue
Other revenue(a)
36,959
Elimination of intersegment revenue
(20,016)
Total consolidated revenue
259,171
Segment cost of revenue:
Power
54,294
—
54,294
Insurance on miners
234
—
234
Third-party hosting fees paid
19,002
—
19,002
Materials
—
53,179
53,179
Labor
—
4,177
4,177
Other segment items(b)
805
12,927
13,732
Segment gross profit (loss)
$
82,535
$
15,075
$
97,610
(a) Other revenue is primarily attributable to Data Center Hosting revenue and is therefore not included in the total for segment gross profit (loss).
(b) For each reportable segment, the other segment items category primarily consists of:
Bitcoin Mining – Bitcoin miner and network repair and maintenance costs.
Engineering – Manufacturing overhead costs.
The following table presents the reconciliation of segment gross profit (loss) to net income (loss) before taxes:
Years Ended December 31,
2024
2023
2022
Segment gross profit (loss)
$
130,651
$
98,947
$
97,610
Reconciling Items:
Other profit (loss)(a)
(14,635)
(69,743)
(24,947)
Elimination of intersegment profits
(2,113)
(2,859)
(7,188)
Acquisition-related costs
(5,541)
—
(78)
Selling, general, and administrative
(266,915)
(100,346)
(67,452)
Depreciation and amortization
(212,053)
(252,354)
(107,950)
Change in fair value of Bitcoin
457,409
184,734
—
Change in fair value of derivative asset
45,277
6,721
71,418
Power curtailment credits
33,685
71,215
27,345
Change in fair value of contingent consideration
2,459
—
159
Realized gain on sale of Bitcoin
—
—
30,346
(Loss) gain on sale/exchange of equipment
(17,429)
(5,336)
16,281
Casualty-related (charges) recoveries, net
2,795
5,974
(9,688)
Impairment of Bitcoin
—
—
(147,365)
Impairment of goodwill
—
—
(335,648)
Impairment of miners
—
—
(55,544)
Interest income
27,166
11,076
1,763
Interest expense
(1,985)
(2,854)
(1,309)
Unrealized gain (loss) on equity method investment - marketable securities
(69,489)
—
(8,996)
Other income (expense)
863
260
(59)
Net income (loss) before taxes
$
110,145
$
(54,565)
$
(521,302)
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Riot Platforms, Inc.
Notes to Consolidated Financial Statements
F-49
(a) Other profit (loss) is primarily attributable to Data Center Hosting activity and is therefore not included in the total for segment gross profit
(loss).
Concentrations
During the years ended December 31, 2024 and 2023, aside from the Bitcoin Mining revenue generated as a result of the Company’s participation in a
mining pool, no single customer or related group of customers contributed 10% or more of the Company’s total consolidated revenue.
During the year ended December 31, 2022, aside from the Bitcoin Mining revenue generated as a result of the Company’s participation in a mining pool,
the Company earned revenue of approximately $29.7 million from one customer, representing 11.4% of the Company’s total consolidated revenue, in its
Engineering segment. No other individual customer accounted for more than 10% of total revenue for the year ended December 31, 2022.
As of December 31, 2024 and 2023, six customers accounted for more than 50% and 70%, respectively, of consolidated accounts receivable, net.
During the years ended December 31, 2024 and 2023, Bitcoin Mining power was primarily obtained from ERCOT.
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67
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As of May 18, 2023, the Company dismissed Marcum LLP ("Marcum”) as its independent registered public accounting firm, not as a result of any
disagreement on any matter of accounting principles or practices, financial statement disclosure, or audit scope or procedure.
During the Company’s fiscal year ended December 31, 2022, as well as the subsequent interim periods through Marcum’s dismissal, there were no
disagreements within the meaning of Item 304(a)(1)(iv) of Regulation S-K with Marcum on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to Marcum’s satisfaction, would have caused Marcum to make reference to
the subject matter of the disagreements in connection with its reports on the Company’s financial statements for such fiscal years. There was a reportable
event within the meaning of Item 304(a)(1)(v) of Regulation S-K during the fiscal year ended December 31, 2022, taking the form of an adverse opinion on
the effectiveness of the Company’s internal control over financial reporting related to the existence of a material weakness for the fiscal year ended
December 31, 2022. Specifically, Marcum’s report contained an adverse opinion regarding the Company’s control pertaining to the review of its Bitcoin for
potential impairment.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial
officer), has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of December 31, 2024, to ensure that the information required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information
required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. It should be noted that the design of any
system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Based on this evaluation, our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer
(principal financial officer), concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31,
2024.
Changes in internal control
We periodically review our internal control over financial reporting as part of our efforts to ensure compliance with the requirements of Section 404 of the
Sarbanes-Oxley Act. In addition, we routinely review our system of internal control over financial reporting to identify potential changes to our processes
and systems that may improve controls and increase efficiency, with the goal of establishing and maintaining an effective internal control environment.
Changes may include such activities as implementing new, more efficient systems, consolidating the activities of business units, migrating certain
processes to our shared services organizations, formalizing policies and procedures, improving segregation of duties and increasing monitoring controls.
In July and December 2024, we acquired 100% of the equity interests of Block Mining and E4A Solutions, respectively. The Company has not yet
completed an assessment of the design and/or operating effectiveness of Block Mining or E4A Solutions’ internal control over financial reporting. As part
of our ongoing integration activities, we are incorporating our controls and procedures into these recently acquired businesses.
Other than those changes made in connection with the acquisitions of Block Mining and E4A Solutions, there were no changes in our internal control
over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. We are currently in the process of integrating the Block Mining and E4A Solutions operations, control processes, and
information systems into our systems and control environment and expect to include them in the scope of design and operation of our internal control
over financial reporting for the year ending December 31, 2025. We believe that we have taken the necessary steps to monitor and maintain appropriate
internal control over financial reporting during this integration.
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68
Management’s report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of our internal control over financial reporting as of December 31, 2024. Our management excluded from its assessment of the effectiveness
of our internal control over financial reporting the internal controls of Block Mining and E4A Solutions, which we acquired in July and December of 2024,
respectively, and whose financial statements represent, on a combined basis, 5.8% of our consolidated total assets and 0.6% of our consolidated total
revenue as of and for our fiscal year ended December 31, 2024. We are currently in the process of integrating the Block Mining and E4A Solutions
operations, control processes, and information systems into our systems and control environment and expect to include them in the scope of design and
operation of our internal control over financial reporting for the year ending December 31, 2025. We believe that we have taken the necessary steps to
monitor and maintain appropriate internal control over financial reporting during this integration.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Management utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) to assess the effectiveness of our internal control over financial reporting as of December 31, 2024. Based on our
management’s assessment and those criteria, our management concluded that our internal control over financial reporting was effective as of December
31, 2024.
Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an audit report on management’s assessment of internal control
over financial reporting as of December 31, 2024. The report of Deloitte & Touche LLP is included below in this Item 9A. controls and Procedures under
the heading "Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting”.
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69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Riot Platforms, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Riot Platforms, Inc. (the "Company”) and subsidiaries as of December 31, 2024, based on
criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based
on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 27, 2025, expressed an unqualified
opinion on those financial statements.
As described in Management’s report on internal control over financial reporting, management excluded from its assessment the internal control over
financial reporting at Block Mining, Inc. and E4A Solutions, LLC, which were acquired on July 23, 2024 and December 16, 2024, respectively, and whose
financial statements constitute 5.8% of the consolidated total assets and 0.6% of the consolidated total revenue of the consolidated financial statement
amounts as of and for the year ended December 31, 2024. Accordingly, our audit did not include the internal control over financial reporting at Block
Mining, Inc. and E4A Solutions, LLC.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s report on internal control over financial reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 27, 2025
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70
ITEM 9B. OTHER INFORMATION
During the three months ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted,
modified, or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative
defense conditions of Rule 10b5-1(c) under the Exchange Act or any "non-Rule 10b5-1 arrangement” as defined in Item 408(c) of Regulation S-K , except
as follows:
On December 13, 2024, Ryan Werner, Chief Accounting Officer of the Company, entered into a 10b5-1 Plan providing for the potential sale of up
to 101,484 shares of our common stock so long as the market price of our common stock is higher than certain minimum threshold prices between the first
potential sale date of July 7, 2025 and the scheduled expiration date of the 10b5-1 Plan of December 6, 2025.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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71
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this Part III, Item 10 is included in our definitive proxy statement for our 2025 annual meeting of stockholders (our "2025 Proxy
Statement”), which will be filed no later than 120 days after the end of our fiscal year ended December 31, 2024.
a)
Identification of Directors: The information required by this Part III, Item 10 with respect to our directors is incorporated herein by reference to the
discussion under the heading "Proposal No. 1: Election of Directors—Information Regarding Directors” in our 2025 Proxy Statement.
b)
Identification of Executive Officers: The information required by this Part III, Item 10 with respect to our executive officers is included in Part I of this
Annual Report under the heading "Information About Our Executive Officers” in accordance with General Instruction G(3) of Form 10-K.
c)
Audit Committee Information; Financial Expert: The information required by this Part III, Item 10 with respect to the Audit Committee of our Board and
"audit committee financial experts” is incorporated herein by reference to the discussion under the heading "Committees of the Board of Directors—
Audit Committee” in our 2025 Proxy Statement.
d)
Delinquent Section 16(a) Reports: The information required by this Part III, Item 10 with respect to compliance with Section 16(a) of the Exchange Act
is incorporated herein by reference to the discussion under the heading "Delinquent Section 16(a) Reports” in our 2025 Proxy Statement.
e)
Code of Ethics: All of our directors and employees, including our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and other
senior accounting and financial officers, are required to abide by our Code of Ethics and Business Conduct. Our Code of Ethics and Business
Conduct is filed as an exhibit to this Annual Report and is posted on our website at https://www.riotplatforms.com/investors/corporate-
governance/governance-documents. We also intend to disclose on our website at https://www.riotplatforms.com/investors/corporate-
governance/governance-documents any amendment to, or waiver from, our Code of Ethics and Business Conduct that is required to be disclosed to
stockholders, within four business days following such amendment or waiver. The information required by this Part III, Item 10 with respect to codes
of ethics is incorporated herein by reference to the discussion under the heading "Corporate Governance—Corporate Governance Guidelines, Code
of Ethics and Business Conduct, and Committee Charters” in our 2025 Proxy Statement.
f)
Policy for Nominees: The information required by this Part III, Item 10 with respect to the procedures by which stockholders may recommend
nominees to our Board is incorporated herein by reference to the discussion under the heading "General Information—When are stockholder
proposals due for next year’s annual general meeting?” in our 2025 Proxy Statement. No material changes to those procedures have occurred since
the disclosure regarding those procedures in Part II, Item 5 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.
g)
Insider Trading Policy: We have adopted an Insider Trading Policy which governs the purchase, sale, and/or other dispositions of our securities by
directors, officers, employees, and other covered persons and is designed to promote compliance with insider trading laws, rules, and regulations,
and listing standards applicable to us. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Part III, Item 11 is incorporated herein by reference to the discussion in the section entitled "Executive Compensation” in
our 2025 Proxy Statement.
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72
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Except as set forth below regarding securities authorized under our equity compensation plans, the information required to be disclosed by this Part III,
Item 12 is incorporated herein by reference to the discussion in the section entitled "Security Ownership of Certain Beneficial Owners and Management”
in our 2025 Proxy Statement.
Securities authorized for issuance under equity compensation plans
In October 2019, the Company’s stockholders approved the 2019 Equity Incentive Plan. The 2019 Equity Incentive Plan authorized the granting of stock-
based compensation awards to directors, employees, and consultants in the form of time-based and performance based restricted stock awards, restricted
stock unit awards, or stock options that settled in shares of the Company’s common stock upon vesting. There were 3.6 million shares of common stock
initially reserved for issuance under the 2019 Equity Incentive Plan.
In November 2020, the Company’s stockholders approved the First Amendment to the 2019 Equity Incentive Plan, which increased the shares of common
stock reserved for issuance by 3.5 million shares.
In October 2021, the Company’s stockholders approved the Second Amendment to the 2019 Equity Incentive Plan, which increased the shares of common
stock reserved for issuance by 4.4 million shares.
In July 2022, the Company’s stockholders approved the Third Amendment to the 2019 Equity Incentive Plan, which increased the shares of common stock
reserved for issuance by 10.0 million shares.
In June 2023, the Company’s stockholders approved the Fourth Amendment to the 2019 Equity Incentive Plan, which increased the shares of common
stock reserved for issuance by 4.0 million shares.
In December 2023, the Company’s stockholders approved the Fifth Amendment to the 2019 Equity Incentive Plan, which increased the shares of common
stock reserved for issuance by 13.0 million shares.
In June 2024, the Company’s stockholders approved the Sixth Amendment to the 2019 Equity Incentive Plan, which increased the shares of common stock
reserved for issuance by 15.0 million shares.
As of December 31, 2024, the Company had 14,666,096 shares of common stock reserved for issuance under the 2019 Equity Incentive Plan.
The following table provides information as of December 31, 2024, about the shares of common stock that may be issued upon the vesting of performance
and non-performance based restricted common stock under the 2019 Equity Incentive Plan:
Number of
securities
remaining
available for
Number of
future issuance
securities to be
Weighted
under equity
issued upon
average exercise
compensation
exercise of
price of
plans
outstanding
outstanding
(excluding
options,
options,
securities
warrants,
warrants,
reflected in
Plan Category
and rights (a)
and rights (b)
column (a))(c)
Equity compensation plans approved by security holders
2,131,463
$
-
14,666,096
Equity compensation plans not approved by security holders
-
-
-
Total
2,131,463
$
-
14,666,096
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73
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Part III, Item 13 is incorporated herein by reference to the sections entitled "Certain Relationships and Related-Party
Transactions” and "Director Independence” in our 2025 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Part III, Item 14 is incorporated herein by reference to the sections entitled "Audit Fees” and "Policy on Audit Committee
Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors” in our 2025 Proxy Statement.
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74
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
We have filed the following documents as part of this Annual Report:
1.
Consolidated financial statements
Reports of Independent Registered Public Accounting Firms
F-1
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-4
Consolidated Statements of Operations for the years ended December 31, 2024, 2023, and 2022
F-5
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023, and 2022
F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023, and 2022
F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022
F-8
Notes to Consolidated Financial Statements
F-10
2.
Financial statement schedules
All schedules are omitted because they are not applicable, not required, or the information has been otherwise included in the Consolidated Financial
Statements or Notes to Consolidated Financial Statements.
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75
3.
Index of exhibits
Exhibit
Description
Location*
3.1
Articles of Incorporation, dated September 19, 2017.
Exhibit 3.1 of the Current Report on Form 8-K filed September 25,
2017.
3.2
Articles of Merger between Bioptix, Inc., and Riot Blockchain,
Inc.
Exhibit 3.1 of the Current Report on Form 8-K filed October 4, 2017.
3.3
Certificate of Amendment to the Articles of Incorporation of
Riot Blockchain, Inc., dated November 21, 2022.
Exhibit 3.1 of the Current Report on Form 8-K filed November 23, 2022.
3.4
Certificate of Amendment to the Articles of Incorporation of
Riot Platforms, Inc. dated June 13, 2024.
Exhibit 3.1 of the Current Report on Form 8-K filed June 18, 2024.
3.5
Articles of Merger between Riot Blockchain, Inc. and Riot
Platforms, Inc., effective December 30, 2022.
Exhibit 3.1 of the Current Report on Form 8-K filed January 3, 2023.
3.6
Amended and Restated Bylaws of Riot Platforms, Inc. effective
June 27, 2023.
,
Exhibit 3.1 of the Current Report on Form 8-K filed June 30, 2023.
4.1
Certificate of Designations, Preferences and Rights of the 0%
Series B Convertible Preferred Stock of the Company.
Exhibit 3.1 of the Current Report on Form 8-K filed November 3, 2017.
4.2
Amendment to Certificate of Designation of 0% Series B
Convertible Preferred Stock of the Company.
Exhibit 3.1 of the Current Report on Form 8-K filed December 21, 2017.
4.3
Indenture, dated as of December 11, 2024, by and between Riot
Platforms, Inc. and U.S. Bank Trust Company, National
Association, as trustee.
Exhibit 4.1 of the Current Report on Form 8-K filed December 11, 2024.
4.4
Form of 0.75% Convertible Senior Note due 2030.
Exhibit 4.2 (included within Exhibit 4.1) of the Current Report on Form
8-K filed December 11, 2024.
4.5 +
2019 Equity Incentive Plan.
Appendix A to the Definitive Proxy Statement on Schedule DEF 14A
filed September 20, 2019.
4.6 +
First Amendment to the 2019 Equity Incentive Plan.
Appendix A to the Definitive Proxy Statement on Schedule DEF 14A
filed October 14, 2020.
4.7 +
Second Amendment to the 2019 Equity Incentive Plan.
Exhibit 10.1 of the Current Report on Form 8-K filed October 22, 2021.
4.8 +
Third Amendment to the 2019 Equity Incentive Plan.
Exhibit 10.1 of the Current Report on Form 8-K filed August 2, 2022.
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76
Exhibit
Description
Location*
4.9 +
Fourth Amendment to the 2019 Equity Incentive Plan.
Exhibit 4.1 of the Current Report on Form 8-K filed June 30, 2023.
4.10 +
Fifth Amendment to the 2019 Equity Incentive Plan.
Exhibit 4.1 of the Current Report on Form 8-K filed December 20, 2023.
4.11 +
Sixth Amendment to the 2019 Equity Incentive Plan of Riot
Platforms, Inc.
Exhibit 4.1 of the Current Report on Form 8-K filed June 18, 2024.
4.12 +
2019 Equity Incentive Plan of Riot Platforms, Inc., as
amended.
Exhibit 4.2 of the Current Report on Form 8-K filed June 18, 2024.
4.13 +
Form of Time-Based Restricted Stock Unit Award Agreement
under the 2019 Equity Incentive Plan.
Exhibit 4.7 of the Registration Statement on Form S-8 filed November
15, 2021.
4.14 +
Form of Performance-Based Restricted Stock Unit Award
Agreement under the 2019 Equity Incentive Plan.
Exhibit 10.1 of the Current Report on Form 8-K filed August 16, 2021.
4.15 +
Form of Service-Based Restricted Stock Award Agreement.
Exhibit 10.1 of the Current Report on Form 8-K filed October 3, 2022.
4.16 +
Form of Performance-Based Restricted Stock Award
Agreement.
Exhibit 10.2 of the Current Report on Form 8-K filed October 3, 2022.
4.17 +
Form of Riot Platforms, Inc. Long-Term Incentive Program
Award Agreement.
Exhibit 10.1 of the Current Report on Form 8-K filed July 19, 2023.
4.18
Form of Senior Secured Convertible Promissory Note dated
as of January 28, 2019.
Exhibit 4.1 of the Current Report on Form 8-K filed February 1, 2019.
4.19
Form of Common Stock Purchase Warrant Agreement, dated
as of January 28, 2019.
Exhibit 4.2 of the Current Report on Form 8-K filed February 1, 2019.
4.20
Form of Registration Rights Agreement, dated as of January
28, 2019.
Exhibit 10.03 of the Current Report on Form 8-K filed February 1, 2019.
4.21
Form of Escrow Deposit Agreement.
Exhibit 10.2 of the Current Report on Form 8-K filed February 16, 2018.
4.22
Shareholder Agreement, dated as of May 26, 2021, by and
between Riot Blockchain, Inc. and Northern Data AG.
Exhibit 10.1 of the Current Report on Form 8-K filed May 26, 2021.
4.23
Description of Securities.
Exhibit 4.20 of the Annual Report on Form 10-K filed February 23,
2024.
10.1 +
Executive Employment Agreement, by and between Riot
Blockchain, Inc. and Jason Les, dated as of February 8, 2021.
Exhibit 10.1 of the Current Report on Form 8-K filed February 10, 2021.
10.2 +
Executive Employment Agreement, by and between Riot
Blockchain, Inc. and Benjamin Yi, dated as of May 24, 2021.
Exhibit 10.1 of the Current Report on Form 8-K filed May 24, 2021.
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77
Exhibit
Description
Location*
10.3 +
Form of Executive Employment Agreement.
Exhibit 10.3 of the Current Report on Form 8-K filed October 3, 2022.
10.4 +
Form of Amended and Restated Executive Employment
Agreement.
Exhibit 10.1 of the Current Report on Form 8-K filed November 26,
2024.
10.5 +
Indemnification Agreement of Riot Platforms, Inc.
Exhibit 10.1 of the Current Report on Form 8-K filed June 18, 2024.
10.6
Stock Purchase Agreement dated as of April 8, 2021, by and
among Riot Blockchain, Inc., Whinstone US, Inc., and
Northern Data AG.
Exhibit 2.1 of the Current Report on Form 8-K filed April 9, 2021.
10.7
Membership Interest Purchase Agreement dated as of
December 1, 2021 by and among Riot Blockchain, Inc.,
Electrode Acquisition Corp., and Steven R. Ferrie and David
P. Franzmann.
Exhibit 2.1 of the Current Report on Form 8-K filed December 1, 2021.
10.8 †
Master Purchase and Sale Agreement between Riot
Platforms, Inc. and MicroBT, dated as of June 23, 2023.
Exhibit 10.1 of the Current Report on Form 8-K filed June 30, 2023.
10.9 †
Purchase Order No. 01, dated as of June 23, 2023, executed
under that certain Master Purchase and Sales Agreement,
dated as of June 23, 2023, by and between Riot Platforms, Inc.
and MicroBT.
Exhibit 10.1, Appendix 3.1.2, of the Current Report on Form 8-K filed
June 30, 2023.
10.10 †
Purchase Order No. 02, dated as of December 1, 2023,
executed under that certain Master Purchase and Sales
Agreement, dated as of June 23, 2023, by and between Riot
Platforms, Inc. and MicroBT.
Exhibit 10.1 of the Current Report on Form 8-K filed December 6, 2023.
10.11
Purchase Order No. 03, dated as of February 23, 2024,
executed under that certain Master Purchase and Sales
Agreement, dated as of June 23, 2023, by and between Riot
Platforms, Inc. and MicroBT.
Exhibit 10.1 of the Current Report on Form 8-K filed February 27, 2024.
10.12 **
Controlled Equity OfferingSM Sales Agreement, dated as of
August 9, 2024, by and among Riot Platforms, Inc. and the
Sales Agents.
Exhibit 1.2 of the Form S-3ASR August 9, 2024.
10.13 †**
NYDIG Digital Asset Custodial Agreement, dated as of
November 1, 2023, between NYDIG Trust Company LLC and
Riot Platforms, Inc.
Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2024, filed November 4, 2024.
10.14 †
Coinbase Prime Broker Agreement, dated as of December 16,
2024, between Coinbase, Inc., on behalf of itself and certain
affiliates, and Riot Platforms, Inc.
Exhibit 10.1 of the Current Report on Form 8-K filed December 20,
2024.
10.15
Settlement Agreement by and between Riot Platforms, Inc.
and Bitfarms Ltd., dated September 23, 2024.
Exhibit 1 of the Schedule 13D/A filed September 23, 2024.
14.1
Riot Platforms, Inc. Code of Ethics and Business Conduct
Adopted June 27, 2023.
Exhibit 14.1 of the Current Report on Form 8-K filed June 30, 2023.
Table of Contents
78
Exhibit
Description
Location*
16.1
Letter of Marcum LLP to the Securities and Exchange
Commission, dated May 22, 2023.
Exhibit 16.1 of the Current Report on Form 8-K filed May 22, 2023.
19.1
Insider Trading Policy.
Filed herewith.
21.1
List of Subsidiaries of Riot Platforms, Inc.
Filed herewith.
23.1
Consent of Marcum LLP.
Filed herewith.
23.2
Consent of Deloitte & Touche LLP.
Filed herewith.
24.1
Power of Attorney.
Incorporated by reference to the signature page of this Annual
Report.
31.1
Rule 13a-14(a)/15d-14(a) - Certification of Chief Executive
Officer (principal executive officer).
Filed herewith.
31.2
Rule 13a-14(a)/15d-14(a) - Certification of Chief Financial
Officer (principal financial officer).
Filed herewith.
32.1
Section 1350 Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Principal Executive Officer).
Furnished herewith.
32.2
Section 1350 Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Principal Financial Officer).
Furnished herewith.
97.1
Riot Platforms Inc. Policy for the Recovery of Erroneously
Awarded Compensation.
Exhibit 97 of the Annual Report on Form 10-K filed February 23, 2024.
101
Inline XBRL (Extensible Business Reporting Language). The
following from this Annual Report, formatted in iXBRL (inline
XBRL): (i) Consolidated Balance Sheets as of December 31,
2024 and 2023; (ii) Consolidated Statements of Operations for
the Years Ended December 31, 2024, 2023, and 2022; (iii)
Consolidated Statements of Comprehensive Income (Loss)
for the Years Ended December 31, 2024, 2023, and 2022; (iv)
Consolidated Statements of Stockholders’ Equity for the
Years Ended December 31, 2024, 2023, and 2022; (v)
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2024, 2023, and 2022; and (vi) Notes to
Consolidated Financial Statements.
Filed herewith.
104
Cover Page Interactive Data File - the cover page XBRL tags
are embedded within the iXBRL document.
Filed herewith.
*
Where an exhibit is indicated, that document has been previously filed with the SEC and the applicable exhibit is incorporated herein by
reference.
†
Portions of this exhibit have been omitted in accordance with Item 601(b)(10)(iv) of Regulation S-K.
Table of Contents
79
Exhibit
Description
Location*
**
Certain schedules and appendices have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant hereby undertakes to
furnish to the SEC, upon request, copies of any such instruments.
+
Indicates a management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
Table of Contents
80
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: February 27, 2025
RIOT PLATFORMS, INC.
/s/ Jason Les
Jason Les
Chief Executive Officer
(Principal Executive Officer)
/s/ Colin Yee
Colin Yee
Chief Financial Officer
(Principal Financial Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jason Les and Colin Yee,
jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to
this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Jason Les
February 27, 2025
Jason Les
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Colin Yee
February 27, 2025
Colin Yee
Chief Financial Officer
(Principal Financial Officer)
/s/ Ryan Werner
February 27, 2025
Ryan Werner
Chief Accounting Officer
(Principal Accounting Officer)
/s/ Benjamin Yi
February 27, 2025
Benjamin Yi
Director & Executive Chairman
/s/ Lance D’Ambrosio
February 27, 2025
Lance D’Ambrosio
Director
/s/ Jaime Leverton
February 27, 2025
Jaime Leverton
Director
/s/ Douglas Mouton
February 27, 2025
Douglas Mouton
Director
/s/ Michael Turner
February 27, 2025
Michael Turner
Director
Exhibit 19.1
RIOT PLATFORMS, INC.
INSIDER TRADING POLICY
Amended June 12, 2024
INTRODUCTION
This Insider Trading Policy (this "Policy”) provides guidelines with respect to purchases, sales, hedges, shorts or any
other direct or indirect action taken (collectively, "Transactions”) in the securities of Riot Platforms, Inc. and its subsidiaries
(the "Company”). It also provides guidance on the handling of confidential information about the Company and the
companies with which the Company does business. This Policy explains some of the obligations, to the Company and under
the law, of persons covered by this Policy, regarding the prevention of actual, or the appearance of, insider trading, which
protects our reputation for integrity and ethical conduct.
Additional information about this Policy may be found in Appendix 1, which contains responses to frequently asked
questions regarding the Policy. Please read this Policy and its Appendices in their entirety. All employees, officers and
directors of the Company will be required to certify to the Company that they have read, understood, and agree to comply
with this Policy by signing and returning to the Company the form of certification attached as Appendix 2.
APPLICABILITY
A. Persons Subject to the Policy. This Policy applies to (i) directors, officers and employees (including
temporary employees) of the Company and its subsidiaries; (ii) such persons’ Family Members (as defined below) and other
members of such person’s household; (iii) such persons’ entities that he influences or controls, including any corporations,
partnerships or trusts; (iv) consultants and contractors of the Company and its subsidiaries; and (v) any persons in
possession of Material Non-Public Information (as defined below) as shall be identified by the Officer of the General
Counsel from time to time (collectively, "Insiders”). This Policy also applies to any person who receives Material Non-
Public Information from an Insider. Any person, including contractors or consultants, who possesses Material Non-Public
Information regarding the Company is an Insider for so long as the information is not publicly known.
For purposes of this Policy, "Family Members” means any family members who reside with an Insider (including a
spouse, a child, stepchildren, grandchildren, parents, stepparents, grandparents, siblings and in-laws) and anyone else who
lives in the same household as the Insider. Family Members shall include those who do not live in the same household as the
Insider but whose Transactions in Company Securities (each as defined below) are directed by the Insider or are subject to
the Insider’s influence or control, such as parents or children who consult with the Insider before they trade in Company
Securities.
B. Transactions Subject to the Policy. This Policy applies to any Transaction involving Company Securities. For
purposes of this Policy, "Company Securities” include the Company’s common stock, options to purchase common stock or
any other securities that the Company may issue, including, but not limited to, preferred stock, warrants and convertible
debentures, as well as derivative securities that are not issued by the Company, such as exchange-traded put or call options
or swaps relating to the Company’s Securities (collectively, "Company Securities”). Such Transactions include, but are not
limited to, purchases and sales of Company Securities, as well as stock option exercises, sale of restricted stock awards,
401(k) Plan elections, and other Transactions as contemplated in this Insider Trading Policy.
ADMINISTRATION
The Board has designated the Company’s General Counsel as the Compliance Officer for the purposes of this
Policy, and in his or her absence, another employee designated by the Compliance Officer shall be responsible for
administration of this Policy. All determinations and interpretations by the Compliance Officer shall be final and not subject
to further review.
INDIVIDUAL RESPONSIBILITY
Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information about
the Company and to not engage in Transactions in Company Securities while in possession of Material Non-Public
Information. Persons subject to this Policy must not engage in illegal trading and must avoid any appearance of improper
trading. Each individual is responsible for making sure that he or she complies with this Policy, and that any Family Member,
household member or entity whose Transactions are subject to this Policy, as discussed below, also complies with this
Policy. In all cases, the responsibility for determining whether an individual is in possession of Material Non-Public
Information rests with that individual, and any action on the part of the Company, the Compliance Officer, or any other
employee or director of the Company pursuant to this Policy (or otherwise) does not in any way constitute legal advice or
insulate an individual from liability under applicable securities laws. You could be subject to severe legal penalties and
disciplinary action by the Company for any conduct prohibited by this Policy or applicable securities laws, as described
below in more detail under the heading "Potential Criminal and Civil Liability.”
MATERIAL NON-PUBLIC INFORMATION DEFINED
For purposes of this Policy, "Material Non-Public Information” means any information about or pertaining to the
Company in any way which is both "Material” and "Non-Public” as set forth in Appendix 1 hereto. This Policy also
applies to Material Non-Public Information relating to other companies, including ones with which the Company is discussing
a proposed transaction, and the Company’s distributors, vendors or suppliers (collectively, "Other Companies”). Insiders
should treat Material Non-Public Information about Other Companies with the same care as information related directly to
the Company.
NOTE: THIS DEFINITION OF MATERIAL NON-PUBLIC INFORMATION IS ILLUSTRATIVE AND NOT
LIMITING. INSIDERS OR ANYONE WHO BELIEVES THEY MAY BE IN POSSESSION OF MATERIAL
NON-PUBLIC INFORMATION SHOULD CONTACT THE COMPLIANCE OFFICER BEFORE MAKING
ANY TRANSACTION(S) WHILE IN POSSESSION OF SUCH INFORMATION.
TRADING GUIDELINES AND REQUIREMENTS
A. Prohibition Against Insider Trading. Unlawful insider trading occurs when a person uses Material Non-
Public Information, whether about the Company or other companies, obtained through their employment or other
involvement with the Company to make decisions to purchase, sell or otherwise engage in Transactions in Company
Securities or to provide that information to others outside the Company. The prohibitions against insider trading apply to
trading or otherwise transacting in the Company’s Securities, tipping and making recommendations to engage in transactions
by virtually any person, including all persons associated with the company, if the information involved is "material” and "non-
public.” These terms are defined in Appendix 1.
Do not use Material Non-Public Information to buy or sell Company Securities. It is the policy of the Company that
no Insider of the Company, or any other person designated by this Policy or by the
Riot Platforms, Inc. – Insider Trading Policy
Page | 2
Compliance Officer as subject to this Policy, who is aware of Material Non-Public Information relating to the Company,
may, directly or indirectly through Family Members or other persons or entities: (i) engage in Transactions in Company
Securities, except as otherwise specified in this Policy under the heading "Exceptions;” (ii) recommend the purchase or sale
of any Company Security; (iii) Disclose Material Non-Public Information to persons within the Company whose jobs do not
require them to have that information, or outside of the Company to other persons, including, but not limited to, family,
friends, business associates, investors and expert consulting firms, unless any such disclosure is made in accordance with the
Company’s policies regarding the protection or authorized external disclosure of information regarding the Company; or (iv)
assist anyone engaged in the above activities.
B. Applicability of Restriction. In addition to Transactions and those activities with respect to Company
Securities prohibited by this Policy, any person subject to this policy may not trade on Material Non-Public Information of
Other Companies. It is the policy of the Company that no Insider of the Company, or any other person subject to this Policy,
who learns of Material Non-Public Information about any Other Companies may engage in any of the activities prohibited by
this Policy with respect to the securities of such Other Companies as if such Other Companies’ securities were Company
Securities covered by this Policy.
C. Duration of Restriction. These trading restrictions begin on the date the Material Non-Public Information is
acquired and ends at the earlier of (i) the end of the second (2nd) full Trading Day after public disclosure of the information,
or (ii) at such time as such Material Non-Public Information is no longer material. "Trading Day” means a day on which the
Nasdaq Stock Market ("Nasdaq”) is open for trading. These trading restrictions also apply during the Black-Out Periods
described below.
D. Black-Out Periods. The period beginning near the end of each fiscal quarter and lasting until after the release
of the Company’s financial results is a particularly sensitive period of time for Transactions in the Company’s stock. This is
because directors, executive officers, and certain key employees, will often possess Material Non-Public Information about
the Company’s financial results for the quarter. This period of time is referred to as a "Black-Out Period,” during which
time all directors, executive officers, direct reports of directors and executive officers, and all employees familiar with the
financial results of the Company are prohibited from completing any Transactions. Consultants and contractors working for
these individuals are also subject to this prohibition. The Company requires that directors, executive officers, and key
employees refrain from Transactions involving the Company’s Securities during any Black-out Period.
The quarterly Black-Out Period is as follows:
The trading window is closed beginning fourteen (14) calendar days before the end of each fiscal
quarter and reopens after two (2) Trading Days have occurred after the day on which the
information is released to the public.
The Company may institute other Black-Out Periods and may extend a Black-Out Period to a broader group, when there
are developments (including impending developments) that are known to the Company and considered "Material Non-Public
Information” under this Policy. Such Black-Out Periods begin as soon as persons subject to this Policy become aware of
such a material development or the Company makes an internal announcement that a Black-Out Period has been
initiated, and ends after the second (2nd) Trading Day on which public disclosure of such material development has been
made (i.e., two (2) Trading Days after the date on which the Company files the Form 8-K report disclosing such
material development), or at such time as the material development is no longer considered "Material Non-Public
Information” under this Policy.
Riot Platforms, Inc. – Insider Trading Policy
Page | 3
E. Trading Window. The "Trading Window” is a term which is used to describe whether Insiders can complete
Transactions. When the Trading Window is "open”, directors, executive officers, and certain key employees may complete
Transactions. When the Trading Window is "closed”, such as during Black-Out Periods or at any time that a person
possesses Material Non-Public Information, Transactions may not be completed. All persons covered by this Policy should
ensure they are not in a Black-Out Period before completing any Transaction. Even when the Trading Window is open, any
person possessing Material Non-Public Information concerning the Company may not engage in any Transactions until after
the second (2nd) Trading Day after the date on which the Material Non-Public Information is made public, whether or not
the Company has recommended a suspension of trading to that person. Transactions in the Company’s securities when the
Trading Window is "open” should not be considered a "safe harbor,” and persons covered by this Policy remain subject to
the general prohibitions against trading on Material Non-Public Information set forth in this Policy and under applicable law.
Such persons should always use good judgment when engaging in or considering any Transactions in Company Securities.
SPECIFIC GUIDELINES
A. Transactions by Family Members and Others. Persons covered by this Policy are responsible for the
Transactions of these other persons and therefore should make them aware of the need to confer with the applicable person
before they trade in Company Securities, and the applicable person should treat all such Transactions for the purposes of this
Policy and applicable securities laws as if the Transactions were for the account of the applicable person. This Policy does
not, however, apply to personal securities Transactions of Family Members where the purchase or sale decision is made by
a third party not controlled by, influenced by or related to persons to whom this policy applies or their Family Members.
B. Transactions by Entities that Insiders Influence or Control. Transactions by an Insider’s entity that the
Insider influences or controls, including any corporations, partnerships or trusts, should be treated for the purposes of this
Policy and applicable securities laws as if they were for the Insider’s account.
C. Confidentiality and Safeguarding of Material Non-Public Information. Material Non-Public Information
relating to the Company or its business is the property of the Company, and the unauthorized disclosure of such information
is prohibited. The following practices should help prevent the misuse of confidential information: (i) avoid discussing
confidential information in places where you may be overheard such as on elevators, in restaurants and on airplanes; (ii)
avoid discussing confidential information on cellular or speaker phones; (iii) do not discuss Company information with
relatives or social acquaintances; (iv) do not give your computer IDs and passwords to any other person, password-protect
computers and log off when they are not in use; (iv) always put confidential documents in a locked desk or office when not
being used; (v) be aware that the internet and other external electronic mail carriers are not secure environments for the
transmission of confidential information; (vi) comply with the specific terms of any confidentiality agreement; (vii) all
physical (including electronic) copies of confidential information must be returned upon termination of employment. Copies
of Company information may not be retained; and (viii) any inquiry received from outside the Company, such as from a
stock analyst or shareholder, should be referred to the Compliance Officer.
OTHER SPECIAL AND PROHIBITED TRANSACTIONS
The Company has determined that there is a heightened legal risk to the Company and Insiders and/or the potential
for the appearance of improper or inappropriate conduct if the persons subject to this Policy engage in certain types of
Transactions. It therefore is the Company’s policy that any persons covered by this Policy may not engage in any of the
following Transactions or otherwise engage in the following activity, except as noted herein:
Riot Platforms, Inc. – Insider Trading Policy
Page | 4
A. Short Sales. Short Sales are never permitted. A short sale is a sale of securities not owned by the seller or, if
owned, not delivered against such sale within twenty (20) days thereafter (a "short against the box”). Transactions in
certain put and call options are also considered a short sale and are therefore prohibited by this Policy.
B. Tipping. No Insider shall disclose ("Tip”) Material Non-Public Information to any other person (including
family members, co-workers or other business associates) where such information may be used for profit by trading in the
securities of companies to which such information relates.
C. Short-Term Trading. Short-term trading of Company Securities may be distracting to the person and may
unduly focus the person on the Company’s short-term stock market performance instead of the Company’s long-term
business objectives. Further, certain short-term Transactions may be deemed "Short-Swing” Transactions subject to
Section 16(b) of the Exchange Act and the penalties established thereunder. For these reasons, any director, officer or other
employee of the Company, or any other person covered by the Short-Swing rules who purchases Company Securities in the
open market may not sell any Company Securities of the same class during the six months following the purchase (or vice
versa).
D. Publicly Traded Options. Given the relatively short term of publicly traded options, Transactions in options
may create the appearance that an Insider is trading based on Material Non-Public Information and focus the Insider’s
attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, Transactions in put
options, call options or other derivative securities relating to Company Securities, whether on an exchange or otherwise, are
prohibited by this Policy.
E. Hedging Transactions. Hedging or monetization Transactions can be accomplished through a number of
possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps,
collars and exchange funds. Such Transactions may permit an Insider to continue to own Company Securities obtained
through employee benefit plans or otherwise, but without the full risks and rewards of ownership thereof. When that occurs,
the Insider may no longer have the same objectives as the Company’s other shareholders. Therefore, the Company strongly
discourages you from engaging in such Transactions. Any Insider wishing to enter into such an arrangement must first
submit the proposed Transaction for approval by the Compliance Officer. Any request for preclearance of a hedging or
similar arrangement must be submitted to the Compliance Officer at least two weeks prior to the proposed execution of
documents evidencing the proposed Transaction and must set forth a justification for the proposed Transaction. The
Compliance Officer may, on advice of Company securities counsel, deny any such request in his or her sole and absolute
discretion. Notwithstanding anything herein to the contrary, no person shall enter into any Transaction where any possibility
of a sale or trade of securities could occur (other than pursuant to a Rule 10b5-1 Plan (as defined below) approved by the
Company) when the person possesses Material Non-Public Information or during a Black-Out Period.
F. Margin Accounts. Securities held in a margin account as collateral for a margin loan may be sold by the
broker without the customer’s consent if the customer fails to meet a margin call. Because a margin sale may occur at a
time when the customer is aware of Material Non-Public Information or otherwise is not permitted to trade in Company
Securities, and the customer may not be aware of the occurrence of the sale, Insiders are prohibited from holding Company
Securities in a margin account.
G. Pledged Securities. Directors and executive officers may prefer to pledge Company stock as collateral for a
loan or investment rather than selling Company stock to meet cash needs. Pledging stock creates a risk, however, that the
Company stock price will be adversely impacted in the event of a forced sale. To mitigate this risk, directors and executive
officers are permitted to pledge Company Securities (exclusive of options, warrants, restricted stock units and other rights to
purchase Company stock) as collateral for loans and investments only if the maximum aggregate loan or investment amount
Riot Platforms, Inc. – Insider Trading Policy
Page | 5
collateralized by such pledged Company Securities does not exceed twenty-five percent (25%) of the total value of the
pledged Company Securities.
H. Standing and Limit Orders. Standing and limit orders, except standing and limit orders under approved Rule
10b5-1 Plans, create heightened risks for insider trading violations similar to the use of margin accounts. There is no control
over the timing of purchases or sales that result from standing instructions to a broker, and as a result the broker could
execute a transaction when the Insider is in possession of Material Non-Public Information. As a result, other than standing
and limit orders under approved Rule 10b5-1 Plans, Insiders are prohibited from placing standing or limit orders on Company
Securities.
MANDATORY PRECLEARANCE PROCEDURES
Directors, executive officers, and key accounting and finance, investor relations and legal department personnel
must receive preclearance from the Compliance Officer prior to executing any Transactions in the Company’s Securities
permitted by this Policy. Preclearance is not legal advice. Those individuals subject to these procedures, as well as the
Family Members and entities that such person influences or controls, may not engage in any Transaction in Company
Securities without first obtaining preclearance of the Transaction from the Compliance Officer. A request for preclearance
should be submitted to the Compliance Officer at least two (2) Trading Days in advance of the proposed Transaction.
The Compliance Officer is under no obligation to approve a Transaction submitted for preclearance and may
determine not to permit the Transaction in his or her sole and absolute discretion. If a person seeks preclearance and
permission to engage in the Transaction is granted, then he or she may make the trade at any time, but not after three (3)
Trading Days of receipt of preclearance. If the requestor becomes aware of Material Non-Public Information concerning
the Company or if a Black-Out Period commences before the trade is executed, the preclearance shall be void and the trade
must not be completed. If a person seeks preclearance and permission to engage in the transaction is denied, then he should
refrain from initiating any transaction in Company Securities and should not inform any other person of the restriction.
You are responsible for your own conduct. Preclearance in no way relieves you of your own legal obligation to
refrain from trading while in possession of material nonpublic information.
EXCEPTIONS
Except as specifically noted in this Policy, and subject to the Mandator Preclearance Procedures established under
this Policy, this Policy does not apply in the case of the following Transactions:
A. Stock Option Exercise. This Policy does not apply to the exercise of an employee stock option acquired
pursuant to Company equity incentive plans registered with the SEC, or to the exercise of a tax withholding right pursuant to
which a person has elected to have the Company withhold shares subject to an option to satisfy tax withholding
requirements. This Policy does apply, however, to any sale of stock as part of a broker-assisted cashless exercise of an
option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option.
B. Bona Fide Gifts. This Policy does not apply to bona fide gifts of Company Securities.
C. Transactions under Company Plans. This Policy generally does not apply to non-discretionary Transactions
in Company Securities between you and the Company with respect to any employee equity incentive compensation plans
adopted by the Company from time to time (each, a "Compensation Plan”). A Transaction will be considered "non-
discretionary” if you do not have the ability
Riot Platforms, Inc. – Insider Trading Policy
Page | 6
to control the timing and amount of shares issued to you under a Compensation Plan, including, for example, the granting,
vesting, or settlement of Company Securities issued to you under such Compensation Plan (including the exercise of any tax
withholding right pursuant to which you elect to have the Company withhold shares of stock to satisfy tax withholding
requirements upon the vesting of any Company Securities issued to you under such Compensation Plan). However, this
Policy does apply to any discretionary Transactions in Company Securities between you and the Company with respect to
such Compensation Plan, as well as any Transactions involving Company Securities between you and any third party with
respect to any Company Securities issued or issuable to you under such Compensation Plan. A Transaction will be
considered "discretionary” with respect to any Compensation Plan to the extent you have the ability control or affect: (i) the
number of Company Securities issued or issuable to you; (ii) the price at which such Company Securities are issued to you;
or (iii), the timing of such issuance. Examples of discretionary Transactions include: (i) an election to increase or decrease
the percentage of your periodic contributions that will be allocated to you under such Compensation Plan; (ii) an election to
make an intra-plan transfer of an existing account balance into or out of such Compensation Plan; (c) an election to borrow
money against Company Securities issued or issuable to you under such Compensation Plan; and (d) an election to pre-pay a
plan loan if the pre-payment will result in allocation of loan proceeds to such Compensation Plan. It should be noted that
sales of Company Securities issued or issuable to you under a Compensation Plan are also subject to SEC Rule 144;
therefore, affiliates should ensure that a Form 144 is filed when required.
D. Rule 10b5-1 Trading Plans. Rule 10b5-1 under the Exchange Act provides a defense from insider trading
liability under very specific and limited circumstances. To be eligible to rely on this defense, a person subject to this Policy
must enter into a formal written plan in compliance with the requirements Rule 10b5-1 for contemplated Transactions in
Company Securities that meets certain conditions specified in the Rule (a "Rule 10b5-1 Plan”).
The Company has adopted Rule 10b5-1 Plan Guidelines setting forth the Company’s general approval requirements
for Rule 10b5-1 Plans (the "Rule 10b5-1 Plan Guidelines”), which may be amended from time to time by the Company at
the Board’s discretion. Persons subject to this Policy are advised to contact the Compliance Officer to obtain a current
copy of the Rule 10b5-1 Plan Guidelines as early as possible in their Rule 10b5-1 Plan considerations.
Any Rule 10b5-1 Plan proposed by a person subject to this Policy must be approved by the Compliance Officer,
prior to the plan’s enactment; provided, however, the Company’s approval of a Rule 10b5-1 Plan may not be relied upon by
the person requesting such approval either (i) as the Company’s endorsement of the Rule 10b5-1 Plan or (ii) of its
compliance with applicable securities laws. Following approval of a proposed Rule 10b5-1 Plan by the Compliance Officer,
Company Securities may be purchased or sold pursuant to such Rule 10b5-1 Plan, without regard to certain insider trading
restrictions set forth in this Policy, but only if (A) such plan continuously satisfies the requirements of Rule 10b5-1 under the
Exchange Act at all times while Transactions in Company Securities will occur and (B) the person covered by this Policy
associated with such Rule 10b5-1 Plan does not otherwise violate legal prohibitions on Insider Trading with respect to such
Transactions in Company Securities pursuant to a Rule 10b5-1 Plan.
Unless otherwise approved by the Compliance Officer, persons covered by this Policy may not enter into, modify or
terminate a Rule 10b5-1 Plan during a Black-Out Period. Persons with an approved Rule 10b5-1 Plan are also required to
notify the Compliance Officer of the termination of a Rule 10b5-1 Plan. When a Rule 10b5-1 Plan is in effect, the
applicable person is prohibited from trading in the Company’s securities outside of the Rule 10b5-1 Plan.
E. No Further Exceptions to Policy. Except as specifically noted herein, there are no exceptions to this Policy.
Insiders may consider Transactions to be necessary or justifiable for independent reasons
Riot Platforms, Inc. – Insider Trading Policy
Page | 7
(such as the need to raise money for an emergency expenditure), or small Transactions; however, such Transactions are not
excepted from this Policy. The securities laws do not recognize any mitigating circumstances, and, in any event, even the
appearance of an improper Transaction must be avoided to preserve the Company’s reputation and to avoid potential civil
and criminal liability.
POST-TERMINATION TRANSACTIONS
This Policy continues to apply to Transactions in Company Securities even after termination of service to the
Company. If an individual is in possession of Material Non-Public Information when his or her service terminates, that
individual may not trade in Company Securities until that information has become public or is no longer material according to
this Policy. The Mandatory Preclearance Procedures provided herein, however, will cease to apply to Transactions in
Company Securities upon the expiration of any Blackout Period or other Company-imposed trading restrictions applicable at
the time of the termination of service.
POTENTIAL CRIMINAL AND CIVIL LIABILITY
A. Liability - Generally. The purchase or sale of Company Securities while aware of Material Non-Public
Information, or the disclosure of Material Non-Public Information to others who then trade in Company Securities, is
prohibited by federal and state laws as "Insider Trading Violations.” Insider Trading Violations are pursued vigorously by
the Securities and Exchange Commission (the "SEC”), U.S. Attorneys and state enforcement authorities, as well as under
the laws of foreign jurisdictions. While U.S. regulatory authorities concentrate their efforts on the individuals who trade, or
who tip Material Non-Public Information to others who trade, federal securities laws also impose potential liability on
companies and other "controlling persons” if they fail to take reasonable steps to prevent Insider Trading Violations by their
personnel.
B. Specific Enforcement Actions. The SEC, Nasdaq, federal enforcement agencies, and state regulators use
sophisticated techniques to uncover Insider Trading Violations. Violations of this Policy can result in significant financial
penalties and other enforcement actions, including those described below:
i.
Liability for Insider Trading Violations. Pursuant to federal and state securities laws, Insiders may be
subject to criminal penalties of up to $1,000,000 and up to ten years in jail, plus civil penalties of up to three-times the
profit gained, or loss avoided, for engaging in Transactions in Company Securities when in possession of Material Non-
Public Information.
ii.
Liability for Tipping. Insiders may be liable for improper Transactions by any person (commonly referred to
as a "tippee”) to whom they have disclosed Material Non-Public Information or to whom they have made
recommendations or expressed opinions based on such Material Non-Public Information. The SEC has imposed large
penalties even when the disclosing person did not profit from the trading.
iii. Enforcement. The Company will take disciplinary action to cause the disgorgement of any gains made in
violation of the Policy. Further disciplinary action may include the termination of employment.
C. Company-Imposed Sanctions. In addition to penalties and sanctions imposed on a person committing Insider
Trading Violations, an individual’s failure to comply with this Policy may subject the individual to Company-imposed
sanctions, including dismissal for cause, whether or not the employee’s failure to comply results in a violation of law.
Needless to say, a violation of law, or even an SEC
Riot Platforms, Inc. – Insider Trading Policy
Page | 8
investigation that does not result in prosecution, can tarnish a person’s reputation and irreparably damage a career.
INQUIRIES
Inquiries regarding this Policy should be directed to the Compliance Officer.
Amendment effective June 12, 2024, as adopted by the of the Board of Directors of Riot Platforms, Inc.
* * * * *
Riot Platforms, Inc. – Insider Trading Policy
Page | 9
Riot Platforms, Inc. – Insider Trading Policy
Appendix 1, Page 1
RIOT PLATFORMS, INC.
INSIDER TRADING POLICY
APPENDIX 1
FREQUENTLY ASKED QUESTIONS
Q:
Why did the Company adopt this Policy?
A:
The Company’s Board of Directors has adopted this Policy to promote compliance with federal, state and foreign
securities laws that prohibit certain persons who are aware of Material Non-Public Information (defined below)
about or pertaining to the Company from: (i) trading in securities of the Company; or (ii) providing Material Non-
Public Information to other persons who may trade on the basis of that information.
Q:
What information is considered "material” for purposes of this Policy?
A:
Information is considered "material” if a reasonable investor would consider that information important in deciding to
buy, hold or sell securities. Any information that could be expected to affect a company’s stock price, whether it is
positive or negative, should be considered material. Any information that could reasonably be expected to affect the
price of the security is material. There is no bright-line standard for assessing materiality; rather, materiality is based
on an assessment of all of the facts and circumstances and is often evaluated by enforcement authorities with the
benefit of hindsight. Material information includes both favorable and unfavorable information.
While it is not possible to define all categories of material information, some examples of information that ordinarily
would be regarded as material are:
●
Projections of future earnings or losses, or other earnings guidance;
●
Changes to previously announced earnings guidance, or the decision to suspend earnings guidance;
●
Execution or termination of significant contracts;
●
A patent or other intellectual property milestone;
●
A pending or proposed merger, acquisition or tender offer;
●
A pending or proposed acquisition or disposition of a significant asset;
●
A pending or proposed joint venture;
●
A Company restructuring;
●
Significant related party Transactions;
●
A change in dividend policy, the declaration of a stock split or an offering of additional securities;
●
Bank borrowings or other financing Transactions out of the ordinary course;
●
The establishment of a repurchase program for Company Securities;
●
A change in management;
●
A change in auditors or notification that the auditor’s reports may no longer be relied upon;
●
Development of a significant new product, process or service;
●
Pending or threatened significant litigation or the resolution of such litigation;
●
Impending bankruptcy or the existence of severe liquidity problems;
Riot Platforms, Inc. – Insider Trading Policy
Appendix 1, Page 2
●
The gain or loss of a significant customer or supplier;
●
A significant cybersecurity incident, such as a data breach, or any other significant disruption in the company’s
operations or loss, potential loss, breach or unauthorized access of its property or assets, whether at its facilities
or through its information technology infrastructure; or
●
The imposition of an event-specific restriction on trading in Company Securities or the securities of another
company or the extension or termination of such restriction.
Q:
What is "Non-Public Information” for purposes of this Policy?
A:
For purposes of this Policy, information is generally considered "non-public” if it has not been disclosed to the public.
Information may cease to be "non-public” if it has been "widely disseminated.” Information generally would be
considered "widely disseminated” if it has been disclosed through newswire services, a broadcast on widely
available radio or television programs, publication in a widely available newspaper, magazine or news website, or
public disclosure documents filed with the SEC that are available on the SEC’s website. By contrast, for purposes of
this Policy, information would not be considered widely disseminated if it is available only to Insiders or their Family
Members, or if it is only available to a select group of analysts, brokers and institutional investors. Once information
has become "widely disseminated,” it is still necessary to provide the investing public with sufficient time to absorb
the information. As a general rule, information should not be considered fully absorbed by the marketplace until two
Trading Days have occurred after the day on which the information is released to the public; thereafter, unless
otherwise determined by the Company, the information will no longer be considered Material Non-Public
Information for purposes of this Policy. For example, if the Company were to make an announcement of Material
Non-Public Information on a Monday (post-market), an Insider should consider such information Material Non-
Public Information subject to this Policy until close of market on Wednesday (provided there are no intervening non-
Trading Days). Depending on the particular circumstances, the Company may determine that a longer period should
apply to the release of specific Material Non-Public Information.
Q:
What if I can’t tell whether information is material or non-public?
A:
If you are unsure whether information of which you are aware is material or non-public, you should consult with the
Compliance Officer prior to trading. If you are an Insider, you must always consult with the Compliance Officer
before trading, as outlined in this policy.
Q:
Whose Transactions may be attributable to me?
A:
As discussed elsewhere in this Policy, this Policy applies to you, any Family Member and any other person who has
a relationship with you (legal, personal, or otherwise) that might reasonably result in that person’s Transactions being
attributable to you. This includes any legal entities that are influenced or controlled by you or other persons who
have a relationship with you and are subject to this Policy, such any corporations, partnerships, or trusts. You may
also be responsible for Transactions by other persons with whom you share a residence or who consult with you
before they trade in securities where those persons’ Transactions might reasonably be attributable to you. In all
cases, you must ensure that persons whose trading activities you directly or indirectly influence, or those whose
trading activities would reasonably be perceived by others to be under your influence, comply with the terms of this
Policy.
Riot Platforms, Inc. – Insider Trading Policy
Appendix 1, Page 3
Q:
What are the reasons for maintaining confidentiality?
A:
Your failure to maintain the confidentiality of material non-public information could greatly harm our ability to
conduct business. In addition, you could be exposed to significant civil and criminal penalties and legal action.
Federal securities laws strictly prohibit any person who obtains material inside information and who has a duty not to
disclose it from using the information in connection with the purchase and sale of Company Securities. It does not
matter how that information has been obtained, whether in the course of employment or Board service, from friends,
relatives, acquaintances, or strangers, or from overhearing the conversations of others. Congress enacted this
prohibition because the integrity of the securities markets would be seriously undermined if the "deck were stacked”
against persons who are not privy to this information.
Q:
What are some of the consequences of violating this Policy?
A:
Federal and state laws prohibit the purchase or sale of securities while aware of material non-public information, or
the disclosure of material non-public information to others who then trade in Company Securities. The SEC, US
Attorneys and state and foreign enforcement authorities vigorously pursue insider trading violations. Punishment for
insider trading violations is severe and could include significant fines and imprisonment.
Individuals also may be prohibited from serving as directors or officers of the Company or any other public
company. Keep in mind that there are no limits on the size of a Transaction that will trigger insider trading liability;
relatively small trades have in the past occasioned SEC investigations and lawsuits. The federal securities laws also
impose potential liability on companies and other "controlling persons” who fail to take appropriate steps to prevent
illegal trading. Directors, officers, and certain managerial personnel could become controlling persons subject to
liability if they knew of, or recklessly disregarded, a likely insider trading violation by an employee or other personnel
under their control.
In addition to the possible imposition of civil damages and criminal penalties on violators and their controlling persons,
any appearance of impropriety could not only damage our reputation for integrity and ethical conduct but also impair
investor confidence in us. For this reason, if you violate this Policy, then we may take disciplinary action against you,
including dismissal or removal for cause. Thus, even if the SEC does not prosecute a case, involvement in an
investigation (by the SEC or us) can tarnish your reputation and damage your career.
Q:
What should I do to safeguard Material Non-Public Information?
A:
So long as Material Non-Public Information relating to us or our business is unavailable to the general public, it must
be kept in strict confidence. Accordingly, you should discuss this information only with persons who have a "need to
know;” it should be confined to as small a group as possible, and it should be disclosed only in a setting in which
confidentiality can be maintained.
You are expected to exercise utmost care and circumspection at all times and limit conversations in public places
(such as elevators, restaurants, and airplanes) to topics that do not involve sensitive or confidential information. Use
care in discussing sensitive or confidential information on cell phones, video chats and other internet-based
communication platforms. As set forth in the Company’s Social Media Policy, you are not permitted to post
information about the Company on your social media platforms, except as specifically authorized by the Company.
Any unauthorized social media posts containing Material Non-Public Information are a violation of this Policy, and
you may be subject you to consequences for such violation, as outlined above. In addition, all
Riot Platforms, Inc. – Insider Trading Policy
Appendix 1, Page 4
emails containing sensitive or confidential information should be encrypted before being sent, and consideration
should be given to making these emails non-copyable and non-forwardable.
To protect our confidences to the maximum extent possible, no individuals other than specifically authorized
personnel may release material information to the public or respond to inquiries about material information from the
media, analysts, or others outside the Company’s Social Media Policy and other communications policies.
* * * * *
Riot Platforms, Inc. – Insider Trading Policy
Appendix 2, Page 1
RIOT PLATFORMS, INC.
INSIDER TRADING POLICY
APPENDIX 2
CERTIFICATION
IN WITNESS WHEREOF, I, the undersigned individual, hereby certify and confirm that:
1. I have received a copy of the Riot Platforms, Inc. Insider Trading Policy as of the date of this certification (the
"Policy”);
2. I have read and I understand the Policy and have been given sufficient opportunity to ask questions of the Company
regarding my responsibilities under the Policy to my satisfaction;
3. I acknowledge and understand that the Policy (a) does not constitute legal advice by Riot Platforms, Inc. or any of
its representatives, (b) provides no legal protection from illegal Insider Trading activities I may engage in while I am subject
to the Policy, and (c) is not a promise, representation, or guarantee that any Transaction in Company Securities I engage in
while I am subject to the Policy will be permissible under applicable state and federal securities laws;
4. I acknowledge and understand that my employment relationship with Riot Platforms, Inc. is terminable at will, by
Riot Platforms, Inc. or me, at any time, for any reason, with or without cause;
5. Since the date this Policy became effective, or such shorter period of time that I have been an employee of Riot
Platforms, Inc., or otherwise a person covered by the Policy, I have complied with the Policy in all respects, and that, so long
as I am subject to the Policy, I will continue to comply with the Insider Trading Policy; and
6. I understand that failure to comply with the Insider Trading Policy will lead to disciplinary action, which may include
termination of employment, as well as possible civil and criminal liability.
Capitalized terms not otherwise defined herein have the meanings ascribed to them in the Policy.
(Signature)
(Date)
(Print Name)
(Company)
(Primary Office)
(Position Title)
Exhibit 21.1
SUBSIDIARIES OF RIOT PLATFORMS, INC.
The following is a list of subsidiaries of the registrant, Riot Platforms, Inc., a Nevada corporation (Nasdaq: RIOT), omitting subsidiaries which, considered in
the aggregate as a single subsidiary, would not constitute a significant subsidiary of the registrant as of December 31, 2024:
Name of Subsidiary
Place of Formation
Whinstone US, Inc.
Delaware
ESS Metron, LLC
Colorado
Riot Corsicana, LLC
Texas
Block Mining, Inc.
Kentucky
We also have additional operating and holding company subsidiaries that, if considered in the aggregate as a single subsidiary, do not constitute a significant
subsidiary.
All of the above listed subsidiaries have been consolidated in our consolidated financial statements.
Exhibit 23.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statements of Riot Platforms, Inc. on Form S-3 (File No. 333-259039, File No. 333-259212 and
File No. 333-281454) and Form S-8 (File No. 333-261086, File No. 333-235355, File No. 333-267567, File No. 333-273235, File No. 333-276207 and File No. 333-
280587) of our report dated March 2, 2023, with respect to our audit of the consolidated financial statements of Riot Platforms, Inc. and Subsidiaries for the
year ended December 31, 2022, which report is included in this Annual Report on Form 10-K of Riot Platforms, Inc. for the year ended December 31, 2024.
We were dismissed as auditors on May 18, 2023 and, accordingly we have not performed any audit or review procedures with respect to any financial
statements for the periods after the date of our dismissal.
/s/ Marcum llp
Marcum llp
Costa Mesa, California
February 27, 2025
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-259039, 333-259212, and 333-281454 on Form S-3 and
Registration Statement Nos. 333-261086, 333-235355, 333-267567, 333-273235, 333-276207 and 333-280587 on Form S-8 of our reports dated
February 26, 2025, relating to the consolidated financial statements of Riot Platforms, Inc. and subsidiaries and the effectiveness of Riot
Platforms, Inc. and subsidiaries' internal control over financial reporting appearing in this Annual Report on Form 10-K for the year ended
December 31, 2024.
/s/ Deloitte & Touche LLP
Houston, Texas
February 27, 2025
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Jason Les, certify that:
1)
I have reviewed this annual report on Form 10-K of Riot Platforms, Inc. for the year ended December 31, 2024;
2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4)
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5)
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
February 27, 2025
/s/ Jason Les
Jason Les
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Colin Yee, certify that:
1)
I have reviewed this annual report on Form 10-K of Riot Platforms, Inc. for the year ended December 31, 2024;
2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4)
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5)
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
February 27, 2025
/s/ Colin Yee
Colin Yee
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Riot Platforms, Inc. (the "Company”) on Form 10-K for the year ended December 31, 2024, as filed with the Securities
and Exchange Commission on the date hereof (the "Report”), the undersigned Chief Executive Officer (principal executive officer) of the Company, Jason Les,
hereby certifies, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1)
the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
February 27, 2025
/s/ Jason Les
Jason Les
Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Riot Platforms, Inc. (the "Company”) on Form 10-K for the year ended December 31, 2024, as filed with the Securities
and Exchange Commission on the date hereof (the "Report”), the undersigned Chief Financial Officer (principal financial officer) of the Company, Colin Yee,
hereby certifies, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1)
the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
February 27, 2025
/s/ Colin Yee
Colin Yee
Chief Financial Officer
(Principal Financial Officer)