What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-23 compared with 2023-03-02 · 645 added, 1207 removed, 775 unchanged (70% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm (PCAOB 00688);

Marcum LLP, Los Angeles, CA

Reports of Independent Registered Public Accounting Firms*

Consolidated Balance Sheets as of December 31, 2023 and 2022

Consolidated Statements of Operations for the years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022, and 2021

1 unchanged sentence

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 688)

* Deloitte & Touche LLP, PCAOB Firm ID No.

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 sheet of Riot Platforms, Inc.

and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statement of operations, comprehensive income (loss), stockholders' equity, and cash flows, for the year ended December 31, 2023 and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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, 2023, 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 22, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for Bitcoin to fair value, with changes in fair value recognized in net income, effective as of January 1, 2023 due to the adoption of 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”).

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 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.

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 the critical audit matter 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.

Bitcoin Mining Revenue – Refer to Notes 2 and 4 to the financial statements

Critical Audit Matter Description

The Company participates in a digital asset mining pool ("the mining pool”) by providing computing power to the mining pool operator.

The Company recognizes revenue as they fulfill their performance obligation over time by providing computing power in exchange for bitcoin.

Once the computing power is transferred to the mining pool operator, the mining pool operator will compensate

the Company for the computing power provided with a payout in bitcoin.

For the years ended December 31, 2023, and 2022, Bitcoin Mining Revenue was $189.0 million, and $156.9 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 computing power 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 computing power and tested the general IT controls over each of these systems.

● We tested the effectiveness of controls over the Company’s mining revenue calculation.

● We tested the amount of the mining revenue recorded by developing an expectation for the amount recorded based on the computing power provided to the mining pool operator per the calculation 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 mining revenue, total mining rewards earned, and the digital asset wallet addressesin 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 mining revenue.

● With the assistance of our fair value 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

February 22, 2024

We have served as the Company’s auditor since 2023.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

1 unchanged sentence

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, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have 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, 2022, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 2, 2023 , expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of a material weakness.

Restatement of Previously Issued Financial Statements

As discussed in Note 2 to the consolidated financial statements, the Company has restated its consolidated financial statements as of December 31, 2021 and for the years ended December 31, 2021 and 2020 to correct misstatements.

We have audited the accompanying consolidated balance sheet of Riot Platforms, Inc.

and Subsidiaries (the “Company”) as of December 31, 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

9 unchanged sentences

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 were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter 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 separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Evaluation of the Accounting for and Disclosure of Cryptocurrency Mining Revenue Recognized

We identified the accounting for and disclosure of revenue recognized from Bitcoin Mining as a critical audit matter due to the complexities involved in auditing the completeness and occurrence of this revenue recognized by the Company.

During the year ended December 31, 2022, the Company recognized revenue from Bitcoin Mining of approximately $156.9 million.

The Company’s management has exercised significant judgment in their determination of how existing accounting principles generally accepted in the United States should be applied to the accounting for and disclosure of revenue recognized from Bitcoin Mining.

In addition, the accounting for and disclosure of Bitcoin mining revenue recognized involved certain applications subject to the general controls over the information technology environment of the Company.

The primary procedures we performed to address this critical audit matter included the following:

● Evaluated the design and effectiveness of IT general controls over the Company’s IT environment and key financially relevant systems;

● Evaluated and tested the design and effectiveness of certain financial controls pertaining to the Company’s processes for recognizing revenue from Bitcoin Mining;

● Performed site visitations of the facilities where the Company’s mining hardware is located, which included an observation of the physical and environmental controls and mining equipment inventory observation procedures;

● On a sample basis, tested the hashing power contributed by the Company’s mining hardware;

● Evaluated management’s rationale for the application of ASC 606 to account for its Bitcoin earned, which included evaluating the provisions of the contract between the Company and the Mining Pool Operators;

● Evaluated management’s disclosures of its Bitcoin activity in the financial statement footnotes;

● Evaluated and tested management’s rationale and supporting documentation associated with the valuation of Bitcoin earned;

● Independently confirmed certain financial and performance data directly with the blockchain network and the Mining Pool Operators;

● Independently confirmed certain financial data directly with the Company’s third party wallet custodian;

● Compared the Company’s digital wallet and custody records to publicly available blockchain records;

● Performed certain substantive analytical procedures to determine completeness and occurrence of digital assets earned by the Company as consideration for services rendered.

/s/ Marcum llp

We have served as the Company’s auditor since 2019.

We have served as the Company’s auditor from 2019 through May 18, 2023.

Los Angeles, CA

3 unchanged sentences

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

(as restated)

Current assets

1 unchanged sentence

Accounts receivable, net

Costs and estimated earnings in excess of billings

Contract assets, including retainage of $ 3,166 and $ 3,012 , respectively

Prepaid expenses and other current assets

Derivative asset, current portion

Future power credits, current portion

Investments in marketable equity securities, at fair value

Total current assets

1 unchanged sentence

Finite-lived intangible assets, net

Derivative asset

Derivative asset, less current portion

Operating lease right-of-use assets

4 unchanged sentences

Accounts payable

Billings in excess of costs and estimated earnings

Contract liabilities

Accrued expenses

Deferred gain on acquisition post-close dispute settlement

Deferred revenue, current portion

11 unchanged sentences

2 % Series A Convertible Preferred stock, 2,000,000 shares authorized;

no shares issued and outstanding as of December 31, 2022 and 2021

no shares issued and outstanding as of December 31, 2023 and December 31, 2022

0 % Series B Convertible Preferred stock, 1,750,001 shares authorized;

no shares and 2,199 shares issued and outstanding as of December 31, 2022 and 2021, respectively, liquidation preference equal to carrying value

no shares issued and outstanding as of December 31, 2023 and December 31, 2022

Common stock, no par value;

2 unchanged sentences

Accumulated deficit

Accumulated other comprehensive income (loss), net

Total stockholders’ equity

5 unchanged sentences

Years Ended December 31,

(as restated)

Bitcoin Mining

9 unchanged sentences

Depreciation and amortization

Change in fair value of Bitcoin

Change in fair value of derivative asset

1 unchanged sentence

Change in fair value of contingent consideration

Realized gain on sale/exchange of Bitcoin

Gain on exchange of equipment

Realized gain on sale of Bitcoin

Loss (gain) on sale/exchange of equipment

Casualty-related charges (recoveries), net

2 unchanged sentences

Impairment of miners

Impairment of long-term investment

Total costs and expenses

1 unchanged sentence

Other income (expense):

Reversal of registration rights penalty

Interest income (expense)

1 unchanged sentence

Realized gain on sale/exchange of long-term investment

Unrealized loss on marketable equity securities

Unrealized gain (loss) on marketable equity securities

Other income (expense)

5 unchanged sentences

Net income (loss)

Net (income) loss attributable to non-controlling interest

Net income (loss) attributable to Riot Platforms, Inc.

Basic and diluted net income (loss) per share

2 unchanged sentences

Riot Platforms, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

Years Ended December 31,

Net income (loss)

Other comprehensive income (loss):

Unrealized holding gains (losses) on convertible note

Comprehensive income (loss)

See accompanying Notes to Consolidated Financial Statements.

Riot Platforms, Inc.

Consolidated Statements of Stockholders’ Equity

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

Accumulated other

Preferred Stock

stockholders’

comprehensive

stockholders’

income (loss)

Balance as of January 1, 2021

Issuance of common stock to settle executive compensation

Delivery of common stock underlying restricted stock units to settle executive compensation

Delivery of common stock underlying restricted stock units, net of tax withholding

Delivery of common stock underlying restricted stock units for consulting and advisory services

Issuance of common stock/At-the-market offering, net of offering costs

Issuance of common stock related to exercise of warrants

Cancellation of Prive Escrow shares

Stock-based compensation

Net income attributable to non-controlling interest

Net income (loss) (as restated)

Balance as of December 31, 2020 (as restated)

Delivery of common stock underlying restricted stock units, net of shares settled for tax withholding

8 unchanged sentences

Stock-based compensation

Net income (loss) (as restated)

Balance as of December 31, 2021 (as restated)

Net income (loss)

Balance as of December 31, 2021

Issuance of restricted stock, net of forfeitures and delivery of common stock underlying stock awards, net of tax withholding

4 unchanged sentences

Balance as of December 31, 2022

Cumulative effect upon adoption of ASU 2023-08

Issuance of restricted stock, net of forfeitures and delivery of common stock underlying stock awards, net of tax withholding

Issuance of common stock/At-the-market offering, net of offering costs

Issuance of common stock in connection with acquisition of ESS Metron, LLC

Stock-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance as of December 31, 2023

See accompanying Notes to Consolidated Financial Statements.

3 unchanged sentences

Years Ended December 31,

(as restated)

Cash flows from operating activities

Operating activities

Net income (loss)

3 unchanged sentences

Amortization of license fee revenue

Amortization of right of use assets

Income tax expense (benefit)

Noncash lease expense

Deferred income tax expense (benefit)

Issuance of common stock warrant for settlement of advisory fees

Impairment of long-term investment

Impairment of Bitcoin

1 unchanged sentence

Impairment of miners

Reversal of registration rights penalty

Change in fair value of Bitcoin

Change in fair value of derivative asset

2 unchanged sentences

Realized gain on sale/exchange of long-term investment

Realized gain on sale/exchange of Bitcoin

Realized gain on sale of Bitcoin

Unrealized loss on marketable equity securities

Gain on exchange of equipment

Loss (gain) on sale/exchange of equipment

Casualty-related charges

Bitcoin Mining revenue

Changes in assets and liabilities:

Proceeds from sale of Bitcoin

Accounts receivable

Costs and estimated earnings in excess of billings

Prepaid expenses and other current assets

Future power credits

Accounts payable

Billings in excess of costs and estimated earnings

Accrued expenses

Customer deposits

Deferred revenue

Lease liability

Changes in assets and liabilities:

(Increase)/decrease in operating assets

Increase/(decrease) in operating liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities

Investing activities

Proceeds from the sale of marketable equity securities

2 unchanged sentences

Proceeds from the sale of long-term investments

Proceeds from the sale of equipment

Deposits on equipment

Other deposits

Security deposits

Investment in convertible debt

Purchases of property and equipment, including construction in progress

Casualty-related recoveries

Proceeds from the sale of equipment

Patent costs incurred

Net cash used in investing activities

Cash flows from financing activities

Net cash provided by (used in) investing activities

Financing activities

Proceeds from the issuance of common stock / At-the-market offering

2 unchanged sentences

Payments on contingent consideration liability - future power credits

Proceeds from Credit and Security Facility

Repayments of Credit and Security Facility

Debt issuance costs

Repurchase of common shares to pay employee withholding taxes

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

See accompanying Notes to Consolidated Financial Statements.

3 unchanged sentences

Years Ended December 31,

Supplemental disclosure of cash flow information:

Supplemental information:

Cash paid for interest

Cash paid for taxes

Supplemental disclosure of noncash investing and financing activities:

Non-cash transactions

Issuance of common stock for business combination

Issuance of common stock to settle previously accrued executive compensation

Reclassification of deposits to property and equipment

Construction in progress included in accrued expenses

Bitcoin received from sale of equipment

Bitcoin exchanged for employee compensation

Conversion of preferred stock to common stock

Cumulative effect upon adoption of ASU 2023-08

Right of use assets exchanged for new operating lease liabilities

3 unchanged sentences

Notes to Consolidated Financial Statements

Nature of Operations

Organization and Basis of Presentation

Riot Platforms, Inc.

1 unchanged sentence

The Company also provides comprehensive and critical mining infrastructure for institutional-scale hosted clients to mine Bitcoin at its Rockdale Facility.

The Rockdale Facility currently provides 700 megawatts in total developed capacity for Bitcoin mining and data center hosting services for institutional-scale hosted clients.

The Rockdale Facility is believed to be the largest Bitcoin mining facility in North America, as measured by developed capacity, and the Company is currently growing its capacity.

The Rockdale Facility currently provides 700 MW in total developed capacity for Bitcoin mining and data center hosting services for institutional-scale hosted clients.

The Company is also developing the Corsicana Facility, a second large-scale Bitcoin mining data center facility, which, upon completion, is expected to have approximately one gigawatt of capacity available for Bitcoin mining and data center hosting services for institutional-scale hosted clients.

The Company operates in an environment that is constantly evolving based on the proliferation of Bitcoin and cryptocurrencies in general.

A significant component of our strategy is to effectively and efficiently allocate capital among opportunities that generate the highest return on our investment.

On November 21, 2022, the Company filed an amendment with the Secretary of State of Nevada increasing its number of authorized shares of common stock, no par value, from 170 million shares to 340 million shares.

As described in Note 20.

1 unchanged sentence

Bitcoin Mining, Data Center Hosting, and Engineering.

Restatement of Previously Issued Financial Statements

The Company accounts for its Bitcoin held as an intangible asset and tested it for impairment on a daily basis based on quoted prices of Bitcoin, historically utilizing the daily closing price of Bitcoin.

During the preparation of this Annual Report, the Company determined it has not been appropriately calculating its impairment of Bitcoin.

The Company determined that its method of calculating impairment of its Bitcoin assets, on a daily basis using a spot price at a standard cutoff time, was not in compliance with the ASC 350-30-35-19 requirement to recognize impairment whenever carrying value exceeds fair value.

Effectively, the Company determined that ASC 350-30-35-19 calls for the intraday low price of Bitcoin to be utilized in calculating impairment of the Company’s Bitcoin held as that metric is the most accurate indicator of whether it is more likely than not that the asset is impaired.

Updating of the Company’s historical calculations of Bitcoin impairment amounts resulted in correction of Impairment of Bitcoin and, in some cases, Realized gains on the sale of Bitcoin, with an offsetting correction of the book value of Bitcoin.

In accordance with Staff Accounting Bulletin (“SAB”) 99, Materiality , and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , the Company evaluated the materiality of the error from qualitative and quantitative perspectives, and concluded that the error was material to the Consolidated Balance Sheet as of December 31, 2021 and Consolidated Statements of Operations, Equity, and Cash Flows for the years ended December 31, 2021 and 2020.

Management restated the impacted financial statements as of December 31, 2021, and for the years ended December 31, 2021 and 2020, and related notes included herein to correct this error.

The following tables present the effects of correcting this error on the Company’s financial statements as of December 31, 2021, and for the years ended December 31, 2021 and 2020:

As of December 31, 2021

As previously

Consolidated Balance Sheet

Total current assets

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the year ended December 31, 2021

As previously

Consolidated Statements of Operations

Impairment of Bitcoin

Total costs and expenses

Operating loss

Net loss before taxes

Net loss attributable to Riot Platforms, Inc.

Basis and diluted net loss per share

For the year ended December 31, 2020

As previously

Consolidated Statements of Operations

Impairment of Bitcoin

Realized gain on sale/exchange of Bitcoin

Total costs and expenses

Operating loss

Net loss before taxes

Net loss attributable to Riot Platforms, Inc.

Basis and diluted net loss per share

For the year ended December 31, 2021

Platforms, Inc.

stockholders'

Consolidated Statements of Stockholders' Equity

Net loss (as previously reported)

Net loss (adjustment)

Net loss (as restated)

Balance as of December 31, 2021 (as previously reported)

Balance as of December 31, 2021 (adjustment)

Balance as of December 31, 2021 (as restated)

For the year ended December 31, 2020

Platforms, Inc.

stockholders'

Consolidated Statements of Stockholders' Equity

Net loss (as previously reported)

Net loss (adjustment)

Net loss (as restated)

Balance as of December 31, 2020 (as previously reported)

Balance as of December 31, 2020 (adjustment)

Balance as of December 31, 2020 (as restated)

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the year ended December 31, 2021

As previously

Consolidated Statements of Cash Flows

Impairment of Bitcoin

For the year ended December 31, 2020

As previously

Consolidated Statements of Cash Flows

Impairment of Bitcoin

Realized gain on sale/exchange of Bitcoin

The remainder of these notes to the consolidated financial statements have been updated, as applicable, to reflect the impacts of the revisions described above.

Liquidity and Financial Condition

As of December 31, 2022, the Company had approximate balances of cash and cash equivalents of $ 230.3 million, working capital of $ 321.8 million, total stockholders’ equity of $ 1.2 billion and an accumulated deficit of $ 756.3 million.

To date, the Company has relied, in large part, on equity financings and sales of Bitcoin earned from Bitcoin Mining to fund its operations.

During the year ended December 31, 2022, the Company sold 3,425 Bitcoin for proceeds of approximately $ 79.5 million.

The Company monitors its balance sheet on an ongoing basis and continuously evaluates the level of Bitcoin retained from monthly production in consideration of the cash requirements and its ongoing operations and expansion.

Bitcoin is classified on the balance sheet as a current asset due to the ability to sell it in a highly liquid marketplace and its intent to liquidate its Bitcoin to support operations when needed.

During the year ended December 31, 2022, the Company paid approximately $ 194.9 million as deposits primarily for miners and reclassified $ 422.9 million to property and equipment in connection with the receipt of miners at the Rockdale Facility.

As of December 31, 2022, all 88,556 of the Company’s miners were located at the Rockdale Facility.

During the year ended December 31, 2022, the Company issued 37,052,612 shares of common stock for net proceeds of approximately $ 298.2 million, at a weighted average price of $ 8.23 per share.

The COVID-19 global pandemic has been unprecedented and unpredictable, and its impact is likely to continue to result in significant national and global economic disruption, which may adversely affect our business.

Although the Company has experienced some changes to its miner shipments due to disruptions in the global supply chain, the Company does not expect any material impact on its long-term strategic plans, its operations, or its liquidity due to the impacts of COVID-19.

However, the Company is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, suppliers, and the industry.

In addition to the impacts of COVID-19 and ongoing global supply chain disruptions, we have experienced, and are experiencing, the impact of domestic and global inflationary pressures largely outside of our control.

This inflationary pressure impacts our cost structure, has contributed to adjustments in operations, and has increased the cost of, and adversely affected our ability to obtain, materials and retain talent, despite a continued focus on controlling our costs where possible.

Management is unable to accurately predict when, or if, these national and global inflationary pressures will subside, as well as their long-term impacts on our business and results of operations.

See the discussion under the heading “Risk Factors” under Part I, Item 1A of this Annual Report for additional discussion regarding potential impacts sustained elevated inflation may have on our operations and plans for expansion.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Basis of presentation and principles of consolidation

2 unchanged sentences

Intercompany investments, balances and transactions have been eliminated in consolidation.

Non–controlling interests represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest.

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.

Amounts disclosed are in thousands except for share, per share, Bitcoin, and miner amounts, or as noted.

Amounts disclosed are in thousands of U.S.

Dollars except for share, per share, and miner amounts, and Bitcoin quantities, prices and hash rate, or as otherwise noted.

Significant Accounting Policies and Recent Accounting Pronouncements

Use of estimates

1 unchanged sentence

Actual results could differ significantly from those estimates.

The most significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates associated with valuing contingent consideration for a business combination and periodic reassessment of its fair value, allocating the fair value of purchase consideration to assets acquired and liabilities assumed in business acquisitions, revenue recognition, valuing the derivative asset classified under Level 3 fair value hierarchy, determining the useful lives and recoverability of long-lived assets, impairment analysis of goodwill, fixed assets, and finite-lived intangibles, stock-based compensation, and the valuation allowance associated with the Company’s deferred tax assets.

The most significant accounting estimates inherent in the preparation of the Company’s financial statements include revenue recognition, valuing the derivative asset classified under Level 3 fair value hierarchy, determining the useful lives and recoverability of long-lived assets, impairment analysis of fixed assets and finite-lived intangibles, stock-based compensation, and the valuation allowance associated with the Company’s deferred tax assets.

Reclassifications

3 unchanged sentences

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments.

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 Federal Deposit Insurance System.

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.

For all periods presented, the Company had no cash equivalents.

Accounts receivable

The Company’s accounts receivable balance consists of amounts due from its data center hosting and engineering customers.

The Company’s accounts receivable balance consists of amounts due from its mining pool operator and data center hosting 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 financial instrument expected to be collected.

The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, that considers forecasts of future economic conditions in addition to information about past events and current conditions.

The CECL impairment model requires an estimate of expected credit losses, measured

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

over the contractual life of an instrument, that 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.

4 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021, the Company did no t record any credit losses or recoveries.

Based on the Company’s current and historical collection experience, management recorded an allowance for doubtful accounts of $ 1.9 million as of December 31, 2022.

No allowance was recorded as of December 31, 2021.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Bitcoin purchased are recorded at cost and Bitcoin awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy.

Bitcoin held are accounted for as intangible assets with indefinite useful lives.

Bitcoin is sold on a FIFO basis and measured for impairment whenever indicators of impairment are identified based on the intraday low quoted price of Bitcoin.

To the extent an impairment loss is recognized, the loss establishes the new cost basis of the Bitcoin.

Subsequent reversal of impairment losses is not permitted.

Bitcoin is classified on our balance sheet as a current asset due to the Company’s ability to sell it in a highly liquid marketplace and its intent to liquidate its Bitcoin to support operations when needed.

Purchases and sales of Bitcoin by the Company and Bitcoin awarded to the Company are included within Cash flows from operating activities on the Consolidated Statements of Cash Flows.

Any realized gains or losses from sales of Bitcoin are included in Operating income (expense) on the Consolidated Statements of Operations.

Based on the Company’s current and historical collection experience, management recorded allowances for doubtful accounts of $ 1.5 million and $ 1.9 million as of December 31, 2023 and December 31, 2022, respectively.

As a result of the adoption of ASU 2023-08, Bitcoin is recorded at fair value, and changes in fair value are recognized in Change in fair value of Bitcoin, in Operating income (loss) on the Consolidated Statements of Operations, as of, and for the year ended December 31, 2023.

Prior to the adoption of ASU 2023-08, Bitcoin was accounted for as intangible assets with an indefinite useful life.

Bitcoin was sold on a FIFO basis and measured for impairment whenever indicators of impairment are identified based on the intraday low quoted price of Bitcoin.

To the extent an impairment loss was recognized, the loss established the new cost basis of the Bitcoin.

Subsequent reversal of impairment losses was not permitted.

Bitcoin awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy.

Bitcoin is classified on the Company’s Consolidated Balance Sheet as a current asset due to the Company’s ability to sell it in a highly liquid marketplace and its intent to liquidate its Bitcoin to support operations when needed.

Purchases and sales of Bitcoin by the Company and Bitcoin awarded to the Company are included within Operating activities on the Consolidated Statements of Cash Flows as substantially all of the Company’s Bitcoin production is sold within days of being produced, but never more than the production on a monthly basis per the Company’s internal policy .

During 2024, the Company made a strategic decision to temporarily cease the sales of all its Bitcoin production and instead, increase its Bitcoin holdings.

The Company will continue to monitor its cash needs and expects to sell Bitcoin in the future to fund its cash expenditures.

Long-term investments

1 unchanged sentence

Revenue recognition

The Company recognizes revenue in a manner that depicts the transfer of promised goods or services to customers for amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the Company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, the Company assesses the promised goods or services in the contract and identifies each promised good or service that is distinct.

A performance obligation is a distinct good or service (or bundle of goods or services) if both of the following criteria are met:

The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the Company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer.

The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

When determining the transaction price, an entity must consider the effects of all of the following:

● Variable consideration

● Constraining estimates of variable consideration

● The existence of a significant financing component in the contract

● Noncash consideration

● Consideration payable to a customer

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Bitcoin Mining

2 unchanged sentences

The only consideration due to the Company relates to the provision of computing power.

The contracts are terminable at any time by and at no cost to the Company, and by the pool operator under certain conditions specified in the contract.

The contracts are terminable at any time by the Company, at no cost to the Company, or by the pool operator, under certain conditions specified in the contract.

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities.

2 unchanged sentences

Changes in the fair value of the noncash consideration due to 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 and are deducted from amounts we may otherwise earn and are treated as a reduction to the consideration received.

Certain mining pool operators charge fees to cover the costs of maintaining the pool, which are deducted from amounts we may otherwise earn and are treated as a reduction to the consideration

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Fees fluctuate and historically have been no more than approximately 2% per reward earned, on average.

5 unchanged sentences

● The consideration is all variable.

Because it is probable that a significant reversal of cumulative revenue will not occur and the Company is able to calculate the payout based on the contractual formula, noncash revenue is estimated and recognized based on the spot price of Bitcoin determined using the Company’s primary trading platform for Bitcoin at the inception of each contract, which is determined to be daily.

Because it is probable that a significant reversal of cumulative revenue will not occur and the Company is able to calculate the payout based on the contractual formula, noncash consideration is estimated and recognized based on the spot price of Bitcoin determined using the Company’s principal market for Bitcoin at the inception of each contract.

Noncash consideration is measured at fair value at contract inception.

Fair value of the crypto asset consideration is determined using the quoted price on the Company’s primary trading platform for Bitcoin at the beginning of the contract period at the single bitcoin level (one bitcoin).

This amount is estimated and recognized in revenue upon inception, which is when hash rate is provided.

● The Company transitioned completely to this mining pool in December 2022.

Fair value of the crypto asset consideration is determined using the quoted price on the Company’s principal market for Bitcoin at the beginning of the contract period at the single bitcoin level (one bitcoin).

This amount is recognized in revenue as hash rate is provided.

● The Company transitioned completely to this mining pool type in December 2022 and utilized it for the year ended December 31, 2023.

● a fractional share of the fixed Bitcoin award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are immaterial and are recorded as a deduction from revenue) for successfully adding a block to the blockchain based on a proportion of the Company’s “scoring hash rate” to the pool’s “scoring hash rate” where the scoring hash rate as defined by the pool is the exponential moving average of the hash power contributed by the Company or by all pool members combined.

3 unchanged sentences

Based on evaluation of likelihood and magnitude of a reversal in applying the constraint, the estimated variable noncash consideration is constrained from inclusion in revenue until the end of the contract term, when the underlying uncertainties have been resolved and number of Bitcoin to which the Company is entitled becomes known.

● Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized based on the spot rate of Bitcoin determined using the Company’s principal market for Bitcoin at the time of receipt.

● The Company utilized this mining pool type during the year ended December 31, 2021 and throughout 2022, until mid-December 2022.

There is no significant financing component in these transactions due to the performance obligations and settlement of the transactions being on a daily basis.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

● The Company utilized this mining pool during the years ended December 31, 2020, 2021 and throughout 2022 until mid-December 2022.

There is no significant financing component in these transactions.

Data Center Hosting

9 unchanged sentences

For the construction of assets owned by us but paid for and used by the customer during the term of their data center hosting contract, revenue is recognized on a straight-line basis over the remaining life of the contract.

Due to the long-term nature of the hosting contracts, there is a significant financing component in transactions where the customer paid for the construction of assets owned by the Company.

Maintenance services include cleaning, cabling, and other services to maintain customer equipment.

5 unchanged sentences

Substantially all revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation.

Revenues are 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.

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 estimated revenues to determine inception-to-date revenue.

The percentage of completion is then multiplied by estimated revenue 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.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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.

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.

3 unchanged sentences

The length of time for the Company to complete a custom product varies but is typically between four to 12 weeks.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Customers are typically required to make periodic progress payments to the Company based on contractually agreed-upon milestones.

2 unchanged sentences

Shipping and handling costs are treated as fulfillment costs and are included in cost of sales.

Other Revenue

Other revenue is recognized from an upfront license fee generated from our legacy animal health business.

The upfront fee was recorded as deferred revenue and is being amortized into revenue over the term of the agreement.

Fair value measurement

16 unchanged sentences

Office and computer equipment

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Impairment of long-lived assets

6 unchanged sentences

The Company determined that it has three reporting units for goodwill impairment testing purposes, Bitcoin Mining, Data Center Hosting, and Engineering, which is 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.

Our analyses require significant assumptions and judgments, including

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

assumptions about future economic conditions, revenue growth, and operating margins, among other factors.

Example events or changes in circumstances considered in the qualitative analysis, many of which are subjective in nature, include:

18 unchanged sentences

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 long-term liabilities in our consolidated balance sheets.

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.

1 unchanged sentence

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.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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.

1 unchanged sentence

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 Power Supply Agreement, which is accounted for as a nonhedged derivative contract.

future expected cash flows from customer contracts, discount rates, and estimated market changes in the value of the 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.

2 unchanged sentences

The Company measures its investments in 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.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The Company determines whether an arrangement contains a lease at the inception of the arrangement.

1 unchanged sentence

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 in the consolidated statements of operations over the lease term.

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.

3 unchanged sentences

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 Company’s consolidated balance sheet as an accounting policy election.

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.

2 unchanged sentences

Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the CODM in deciding how to allocate resources to an individual segment and in assessing performance.

The Company’s CODM is comprised of several members of its executive management team who use revenue and cost of revenues of our three reporting segments to assess the performance of the business of our reportable operating segments.

The Company’s CODM is comprised of several members of its executive management team who use revenue and cost of revenue of its three reporting segments to assess the performance of the business of our reportable operating segments.

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

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

in the period that includes the enactment date.

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 contracts and unearned revenue consists of billings in excess of costs and estimated earnings on uncompleted contracts.

Contract liabilities primarily relate to upfront payments and consideration received from customers for data center hosting, billings in excess of costs and estimated earnings on uncompleted engineering contracts, and the upfront license fee generated from our legacy animal health business.

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 data center hosting and 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.

Amounts related to Bitcoin Mining are not included as the Company elected the practical expedient to not disclose amounts related to contracts with a duration of one year or less.

Additionally, 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.

Cost of revenues

● Bitcoin Mining:

Cost of revenues consists primarily of direct production costs of mining operations, including electricity, labor, insurance, variable data center hosting fees, but excluding depreciation and amortization which are separately stated.

● Data Center Hosting:

Cost of revenues consists primarily of direct power costs, rent and compensation costs.

● Engineering:

Cost of revenues consists primarily of direct materials and labor, as well as indirect manufacturing costs.

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.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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 begins to recognize compensation cost over the performance period when achievement of the milestones and targets is probable.

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.

2 unchanged sentences

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 the 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 June 2016, the FASB issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

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 does note expect the updated guidance to have a material impact 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 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 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.

Impacts of Adoption of ASU 2023-08 for a summary of the impacts on the Company’s interim Condensed Consolidated Statements of Operations provided during the year ended December 31, 2023.

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;

early adoption is permitted.

The updated guidance is not expected to have a material impact on the Company’s disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which was codified with its subsequent amendments as Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments – Credit Losses (“ASC 326”).

5 unchanged sentences

Notes to Consolidated Financial Statements

In December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12” ), which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in ASC Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

The Company adopted this standard on January 1, 2020 and the adoption did not have a material impact on the financial statements and related disclosures.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) , (“ASU 2021-04”).

This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic.

It specifically addresses:

(1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange;

(2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange;

and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange.

This ASU will be effective for all entities for fiscal years beginning after December 15, 2021.

An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments.

Early adoption is permitted, including adoption in an interim period.

The adoption of ASU 2021-04 on January 1, 2022 did not have a material impact on the Company’s financial statements.

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 and data center hosting capabilities with the acquisition of a 265 -acre site in Navarro County, Texas, strategically located next to the Navarro switch, for $ 10.1 million, where its anticipated one -gigawatt Bitcoin mining and data center facility complex, the Corsicana Facility, is under development.

The initial phase of the development of the Corsicana Facility involves the construction of 400 megawatts of immersion-cooled Bitcoin mining and data center hosting infrastructure spread across multiple buildings, as well as a high-voltage power substation and transmission facilities to supply power and water to the facility.

Construction of the substation and the data centers is expected to be carried out concurrently, with Bitcoin Mining and Data Center Hosting operations expected to commence by the fourth quarter of 2023, following the commissioning of the substation, which is expected to be completed in the fourth quarter 2023.

This first phase of the development of the Corsicana Facility includes land acquisition, site preparation, substation development, and transmission construction, along with construction buildings utilizing the Company’s immersion-cooling infrastructure and technology, and ancillary buildings.

Through December 31, 2022, the Company has incurred costs of approximately $ 53.4 million related to the development of the Corsicana Facility, including $ 10.1 million for land, $ 38.6 million of initial developments costs and equipment, and a $ 4.7 million deposit for future power usage.

Property and Equipment , for more information about the Corsicana Facility.

Acquisition of ESS Metron

On December 1, 2021, the Company acquired 100 % of the equity interests of Ferrie Franzmann Industries, LLC (d/b/a ESS Metron).

On December 1, 2021, the Company acquired 100 % of the equity interests of ESS Metron.

ESS Metron is a power distribution and management systems manufacturing, design and engineering firm based in Denver, Colorado, operating from facilities totaling approximately 121,000 square feet of manufacturing, office, and warehouse space in the metropolitan Denver area.

3 unchanged sentences

Of the 715,413 shares of common stock, 645,248 were issued upon closing and the remaining 70,165 were withheld as security for the sellers’ indemnification obligations for 18 months following the transaction closing date.

Upon the conclusion of this post-closing indemnification period, the withheld shares will be issued to the ESS Metron sellers, subject to satisfaction of any indemnification obligations as may arise during the indemnification period.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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.

Other than an insignificant post-closing settlement of preliminary net working capital, there were no adjustments to the provisional purchase price and fair value estimates.

16 unchanged sentences

Total purchase consideration

Goodwill represents the excess of total purchase consideration over the preliminary fair value of the underlying assets acquired and liabilities assumed.

Goodwill is attributable to the assembled workforce of experienced personnel at ESS Metron and synergies expected to be achieved from the combined operations of Riot and ESS Metron.

Goodwill was attributable to the assembled workforce of experienced personnel at ESS Metron and synergies expected to be achieved from the combined operations of Riot and ESS Metron.

The goodwill recognized is expected to be deductible for tax purposes.

We assigned the goodwill to our Engineering segment.

See Note 22, Segment Information .

The Company determined that the 70,165 shares withheld meet the conditions necessary to be classified as equity because the consideration is indexed to the Company’s own equity, there are no exercise contingencies based on an observable market not based on its stock or operations, settlement is consistent with a fixed-for-fixed equity instrument, the agreement contains an explicit number of shares and there are no cash payment provisions.

Additionally, based on these assessments, the Company determined the shares be recorded at fair value on the acquisition date similar to escrowed shares or securities and accounted for them in total consideration transferred.

This consideration relates to representations and warranties of circumstances that existed as of the acquisition date and which the Company believes to be accurate, with future issuance of the share consideration deemed likely to occur.

The Company determined that the 70,165 shares withheld met the conditions necessary to be classified as equity because the consideration was indexed to the Company’s own equity, there were no exercise contingencies based on an observable market not based on its stock or operations, settlement was consistent with a fixed-for-fixed equity instrument, the agreement contained an explicit number of shares and there were no cash payment provisions.

Additionally, based on these assessments, the Company recorded the shares at fair value on the acquisition date, similar to escrowed shares or securities and accounted for them in total consideration transferred.

This consideration related to representations and warranties of circumstances that existed as of the

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

acquisition date and which the Company believed to be accurate, with future issuance of the share consideration deemed likely to occur.

The fair values of cash and cash equivalents, accounts receivable, prepaid and other current assets, inventory and work-in-progress, accounts payable, accrued expenses, and warranty liability were determined to be the carrying values due to the short-term nature of the assets and liabilities.

The fair value of the acquired trade receivables was determined to be the net realizable amount of the closing date book value of $ 9.9 million.

Contract assets consisted of costs and estimated earnings in excess of billings on uncompleted contracts and unearned revenue consists of billings in excess of costs and estimated earnings on uncompleted contracts.

The fair values of these assets and liabilities were determined to be the carrying values due to the short-term nature of the underlying project contracts incurring costs and the associated customer billings.

6 unchanged sentences

The fair value was determined by calculating the present value of estimated future operating cash flows generated from the existing customers less costs to realize the revenue.

The Company applied a discount rate of 21 % , which reflected the nature of the assets as they relate to the risk and uncertainty of the estimated

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

future operating cash flows.

Other significant assumptions used to estimate the fair value of the customer contracts include an assumed income tax rate of 25 % .

Although ESS Metron has been in business for over 60 years, the trademark was assigned a 10-year life due to the Company obtaining more data center customers where the longevity of the projects may be shorter than have been historically.

The Company applied a discount rate of 21 % , which reflected the nature of the assets as they relate to the risk and uncertainty of the estimated future operating cash flows.

Other significant assumptions used to estimate the fair value of the customer contracts included an assumed income tax rate of 25 % .

Although ESS Metron had been in business for over 60 years, the trademark was assigned a 10-year life due to the Company obtaining more data center customers where the longevity of the projects may be shorter than have been historically.

Fair value of the trademark was estimated by applying the relief from royalty rate method.

The fair value was determined by applying an estimated royalty rate to revenues, measuring the value the Company would pay in royalties to a market participant if it did not own the trademark and had to license it from a third party.

The fair value was determined by applying an estimated royalty rate to revenue, measuring the value the Company would pay in royalties to a market participant if it did not own the trademark and had to license it from a third party.

UL Listings were assigned a 12-year life.

A UL Listing means that UL, LLC has tested representative samples of a product and determined that the product meets specific, defined requirements.

A UL Listing means that independent safety organization UL, LLC has tested representative samples of a product and determined that the product meets specific, defined requirements.

These requirements are often based on UL’s published and nationally recognized Standards for Safety.

2 unchanged sentences

The Company applied a discount rate of 15 % , which reflected the short time necessary to re-acquire the asset.

The right of use asset and operating lease liabilities consist of two operating leases of the manufacturing facility in Denver, CO.

These leases have combined annual payments of approximately $ 0.9 million and had remaining lease terms of approximately 3.5 and 10 years as of acquisition.

The right of use asset and operating lease liabilities consisted of two operating leases of the manufacturing facility in Denver, Colorado.

These leases had combined annual payments of approximately $ 0.9 million and remaining lease terms of approximately 3.5 and 10 years as of acquisition.

The operating results of ESS Metron have been included in the Company’s Consolidated Statements of Operations since the acquisition date.

The Company recognized $ 2.1 million of acquisition-related costs related to this acquisition that were expensed as incurred.

The financial results of the acquisition have been included in the Company’s consolidated financial statements from the closing of the acquisition.

From the acquisition date through December 31, 2021, ESS Metron’s total revenue and net income was approximately $ 4.2 million and $ 0.2 million, respectively.

2 unchanged sentences

The assets and operations of Whinstone increased the scale and scope of Riot’s operations, which is a foundational element in the Company’s strategy to become an industry-leading Bitcoin mining platform on a global scale.

Total consideration transferred of $ 460.4 million was comprised of a $ 53.0 million cash payment (including $ 38.1 million of debt payoff and certain Seller transaction costs), 11.8 million shares of the Company’s common stock with an acquisition date fair value of approximately $ 326.2 million, an $ 83.0 million contingent purchase price payable to the Seller (see Note 19.

Total consideration transferred of $ 460.4 million was comprised of a $ 53.0 million cash payment (including $ 38.1 million of debt payoff and certain seller transaction costs), 11.8 million shares of the Company’s common stock with an acquisition date fair value

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

of approximately $ 326.2 million, an $ 83.0 million contingent purchase price payable to the Seller (see Note 17.

Commitments and Contingencies ), and other net items of $( 1.7 million).

1 unchanged sentence

The Company finalized the valuation of these assets and liabilities, and consideration transferred, in May 2022.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The following table presents the allocation of the purchase consideration:

9 unchanged sentences

Accrued expenses

Deferred revenues and customer deposits

Deferred revenue and customer deposits

Operating lease liabilities

1 unchanged sentence

Total purchase consideration

Goodwill represents the excess of total purchase consideration over the preliminary fair value of the underlying assets acquired and liabilities assumed.

Goodwill is attributable to the assembled workforce of experienced personnel at Whinstone and synergies expected to be achieved from the combined operations of Riot and Whinstone.

Goodwill represented the excess of total purchase consideration over the fair value of the underlying assets acquired and liabilities assumed.

Goodwill was attributable to the assembled workforce of experienced personnel at Whinstone and synergies expected to be achieved from the combined operations of Riot and Whinstone.

None of the goodwill recognized is expected to be deductible for tax purposes.

We assigned the goodwill to our Hosting segment.

See Note 22, Segment Information .

As part of the share purchase agreement Riot entered into with the Seller in connection with the Whinstone Acquisition, Riot is obligated to Seller to pay up to a maximum amount of $ 86 million, net of income taxes as defined under the stock purchase agreement (undiscounted) of additional consideration if certain power credits are received or realized by Whinstone.

We assigned the goodwill to our Data Center Hosting segment.

As part of the share purchase agreement Riot entered into with the seller in connection with the Whinstone Acquisition, Riot was obligated to the seller to pay up to a maximum amount of $ 86.0 million, net of income taxes, as defined under the stock purchase agreement (undiscounted) of additional consideration if certain power credits were received or realized by Whinstone.

Those power credits arose from the February 2021 weather event.

1 unchanged sentence

The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.

The significant assumptions used to estimate the fair value are described in Note 18, Fair Value Measurements .

These assumptions for the power credits whose utilization by Whinstone is contingent on ERCOT’s future power billings, include the timing of receipt or realization of the power credits, estimates of future power consumption, the discount rate and credit risk of the Company and the owing party (ERCOT).

These assumptions for the power credits whose utilization by Whinstone is contingent on ERCOT’s future power billings, included the timing of receipt or realization of the power credits, estimates of future power consumption, the discount rate and credit risk of the Company and the owing party (ERCOT).

The fair value of the acquired trade receivables was determined to be the net realizable amount of the closing date book value of $ 1.1 million.

The fair value of the acquired long-term other asset of approximately $ 83 million relates to the estimated amount of power credits due Whinstone from the February 2021 weather event.

The fair value of the acquired long-term other asset of approximately $ 83.0 million related to the estimated amount of power credits due Whinstone from the February 2021 weather event.

We estimated the fair value of the power credits to be the same as that of the contingent consideration arrangement because the Company is required to remit to the seller in cash as additional consideration the amount of such power credits received or realized by Whinstone.

See discussion above on contingent consideration.

The derivative asset acquired pertains to Whinstone’s Power Supply Agreement.

Fair value of the contract of approximately $ 14 million was estimated by applying a discounted debt-free cash flow approach.

This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820.

The significant assumptions used to estimate fair value of the derivative contract include a discount rate of 21 % , which reflected the nature of the contract as it relates to the risk and uncertainty of the estimated future mark-to-market adjustments, forward price curves of the power supply, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors.

The derivative asset acquired pertained to the PPA.

The fair value of the contract of approximately $ 14.0 million was estimated by applying a discounted debt-free cash flow approach.

This fair value measurement was based on significant inputs not observable in the market and thus represented a Level 3 measurement as defined in ASC 820.

The significant assumptions used to estimate fair value of the derivative contract included a discount rate of 21 % , which reflected the nature of the contract as it relates to the risk and uncertainty of the estimated future mark-to-market adjustments, forward price curves of the power supply, broker/dealer quotes, and other similar data obtained from quoted market prices or independent pricing vendors.

The fair value of property and equipment was estimated by applying the cost approach.

The cost approach uses the replacement or reproduction cost as an indicator of fair value.

The assumptions of the cost approach include replacement cost new, projected capital expenditures, and physical deterioration factors including economic useful life, remaining useful life, age, and effective age.

The operating results of Whinstone have been included in the Company’s consolidated statements of operations since the acquisition date.

The Company recognized $ 19.1 million of acquisition-related costs that were expensed as incurred.

The assumptions of the cost approach included replacement costs, projected capital expenditures, and physical deterioration factors including economic useful life, remaining useful life, age, and effective age.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The operating results of Whinstone have been included in the Company’s Consolidated Statements of Operations since the acquisition date.

The Company recognized $ 19.1 million of acquisition-related costs that were expensed as incurred.

The financial results of the acquisition have been included in the Company’s Consolidated Financial Statements from the closing of the acquisition.

From the acquisition date through December 31, 2021, Whinstone’s total revenue and net income was approximately $ 24.5 million and $ 1.2 million, respectively.

Pro Forma Information (Unaudited)

The following unaudited pro forma financial information summarizes the combined results of operations for Riot, Whinstone, and ESS Metron as if the companies were combined as of January 1, 2020.

The unaudited pro forma information does not reflect the effect of costs or synergies that may result from the acquisition.

The pro forma information excludes acquisition-related costs of $ 21.2 million during the year ended December 31, 2021.

The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred on January 1, 2020, or of future results of the consolidated entities.

This unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of future operating results of the combined company.

Years Ended December 31,

Total revenue

Revenue from Contracts with Customers

3 unchanged sentences

Contract balances

Contract assets consist of Costs and estimated earnings in excess of billings on uncompleted engineering contracts.

As of December 31, 2022 and 2021, contract assets were $ 19.7 million and $ 9.9 million, respectively, and were entirely attributable to the ESS Metron acquisition.

The following table presents changes in the total deferred revenue liability and billings in excess of costs and estimated earnings:

Contract assets relate to uncompleted Engineering contracts.

As of December 31, 2023 and 2022, contract assets were $ 15.4 million and $ 19.7 million, respectively.

Contract liabilities primarily relate to upfront payments and consideration received for Data Center Hosting services and Deferred revenue relates to uncompleted Engineering contracts.

The following table presents changes in contract liabilities and deferred revenue :

Years Ended December 31,

1 unchanged sentence

Revenue recognized

Billings in excess of costs and estimated earnings

Acquired contract balances

Termination of an acquired customer contract

Other changes in contract liabilities

Ending balance

Remaining performance obligation

The following table presents estimated revenue expected to be recognized in the future related to the unsatisfied portion of the performance obligation as of December 31, 2022:

Data Center Hosting (a)

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.

Data Center Hosting

Total contract liabilities

(a) Data Center Hosting deferred revenue primarily consists of upfront payments, which the Company generally recognizes as services are provided.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Concentrations

During the year ended December 31, 2022, the Company earned revenue of approximately $ 29.7 million from one customer, representing 11.4 % of 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.

During the years ended December 31, 2021 and 2020, no single customer or related group of customers contributed 10% or more of the Company’s total consolidated revenue.

As of December 31, 2022, five customers accounted for more than 80 % of consolidated accounts receivable.

As of December 31, 2021, seven customers accounted for more than 83 % of consolidated accounts receivable.

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

(as restated)

Beginning balance

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

Balance as of January 1, 2022

Revenue recognized from Bitcoin mined

3 unchanged sentences

Impairment of Bitcoin

Ending balance

During the years ended December 31, 2022, 2021, and 2020, the Company recorded impairment charges on its Bitcoin holdings of $ 147.4 million, $ 44.0 million, and $ 3.6 million, respectively.

Investments in Marketable Equity Securities

Balance as of December 31, 2022

Cumulative effect upon adoption of ASU 2023-08

Revenue recognized from Bitcoin mined

Bitcoin receivable

Proceeds from sale of Bitcoin

Exchange of Bitcoin for employee compensation

Change in fair value of Bitcoin

Balance as of December 31, 2023

Carrying value of Bitcoin as of December 31, 2023 (a)

Realized gains on the sale of Bitcoin for the year ended December 31, 2023 (b)

(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, and, for Bitcoin produced subsequent to the adoption ASU 2023-08, the initial value of the Bitcoin as determined for revenue recognition purposes.

(b) Bitcoin is sold on a FIFO basis.

During the year ended December 31, 2023, gains were recognized on all sales of Bitcoin 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 ).

All dispositions of Bitcoin were the result of sales on the open market to fund Company operations and for compensation for certain employees.

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.

The significant assumptions used to estimate fair value of the convertible note included a discount rate of 12.3 % , which reflected the issuance date spread premium over the selected yield for the remaining time to maturity.

The issuance date discount rate of 14.0 % reflected an estimated required return for mezzanine financing after taking into consideration the principal of the convertible note and the investee’s early stage of development.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The following table presents information about the convertible note:

Accrued interest

Amortized costs basis

Unrealized holding gains (losses) in accumulated other comprehensive income

Fair value as of December 31, 2023

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, which operates a digital cryptocurrency exchange platform in Canada.

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 ownership in Coinsquare by the Company of approximately 11.7 % ownership in Coinsquare on a fully diluted basis.

6 unchanged sentences

The Company thereupon determined there were indicators that would cause a 100 % impairment of the Coinsquare investment and observed price changes and recorded an impairment expense of $ 9.4 million for its investment in Coinsquare during the year ended December 31, 2020.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

During the year ended December 31, 2021, under agreements between Coinsquare, Coinsquare’s shareholders (including Riot) and Mogo Inc.

MOGO), a digital payments and financial technology company (“Mogo”), Riot sold its 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.

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, 2021, the Company recorded a gain on sale/exchange of long-term investments of $ 26.3 million for the sale of its shares of Coinsquare.

3 unchanged sentences

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.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Property and Equipment

Property and equipment consist of the following:

Property and equipment consists of the following:

Buildings and building improvements

7 unchanged sentences

Property and equipment, net

Depreciation and amortization expense related to property and equipment totaled approximately $ 246.5 million, $ 105.9 million, and $ 26.1 million, for the years ended December 31, 2023, 2022, and 2021, 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, 2023 and 2021.

1 unchanged sentence

As of December 31, 2023, the Company had deployed a total of 112,944 miners in its mining operation, all at the Rockdale Facility.

During the year ended December 31, 2022, the Company paid approximately $ 194.9 million as deposits, primarily for ASIC miners, which were shipped monthly through December 2022, except for 5,130 miners that were received in January 2023, and reclassified $ 422.9 million to property and equipment in connection with the receipt of 57,649 miners at the Rockdale Facility.

During the year ended December 31, 2021, the Company entered into six purchase agreements with Bitmain to acquire 52,500 Antminer model S19j miners and 30,000 of their latest Antminer model S19XP miners for a combined total purchase price of approximately $ 535.0 million.

As of December 31, 2022, no amounts remain payable to Bitmain.

Depreciation and amortization expense related to property and equipment totaled approximately $ 105.9 million, $ 26.1 million, and $ 4.3 million, for years ended December 31, 2022, 2021, and 2020, respectively.

During the year ended December 31, 2022, the Company elected to not renew its co-location mining services agreement with Coinmint, which was therefore terminated automatically per its terms, effective as of July 8, 2022.

During the year ended December 31, 2023, the Company entered into the Master Agreement to acquire 99,840 miners from MicroBT (consisting of 8,320 M56S+ model miners, 22,684 M56S++ model miners, 20,778 M66 model miners, and 48,058 M66S model miners), primarily for use at the Corsicana Facility, for a total purchase price of approximately $ 453.4 million, subject to adjustment.

Delivery of the miners began in the fourth quarter of 2023, with all miners expected to be received and deployed by mid-2025.

The Master Agreement also provides us an option to purchase up to an additional 265,000 additional miners, on the same terms as the initial order.

During the year ended December 31, 2023, the Company sold 2,700 Antminer model S19 XP miners for gross proceeds of $ 6.4 million, which resulted in a loss on sale of equipment of $ 5.3 million.

As of December 31, 2022, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain for a total of 5,130 S19 series miners, all of which were received in January 2023.

As of December 31, 2023, the Company did not have any outstanding purchase agreements for the purchase of miners from Bitmain.

During the year ended December 31, 2022, the Company elected not to renew its co-location mining services agreement with Coinmint, which was therefore terminated automatically per its terms.

In connection with the termination, the Company arranged for the transfer of the miners it was operating at Coinmint’s Massena, New York facility (the “Coinmint Facility”).

The Company then entered into an equipment exchange agreement with a third-party Bitcoin mining company (the “Counterparty”), whereby the Company transferred approximately 5,700 of the Antminer model S19 Pro miners it had previously deployed at the Coinmint Facility to the Counterparty in exchange for 5,000 factory-new Antminer model S19j Pro miners delivered to the Rockdale Facility.

After completing the transfer of the miners to the Counterparty, the Company relocated the balance of the

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

miners it had deployed at the Coinmint Facility to the Rockdale Facility.

As a result of the exchange with the Counterparty, during the year ended December 31, 2022, the Company recognized a gain on the exchange of equipment of approximately $ 16.3 million.

After completing the transfer of the miners to the Counterparty, the Company relocated the balance of the miners it had deployed at the Coinmint Facility to the Rockdale Facility.

As a result of the exchange with the Counterparty, the Company recognized a gain on the exchange of equipment of approximately $ 16.3 million during the year ended December 31, 2022.

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 is classified in Level 2 of the fair value hierarchy due to the quoted market prices for similar assets.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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, impacting approximately 2.5 EH/s of our hash rate capacity.

Repairs have been ongoing, and, in January 2023, the Company successfully brought approximately 0.6 EH/s of impacted hash rate capacity back online.

The Company has estimated that total damages of $ 9.7 million were incurred during 2022.

No insurance recoveries have been received.

Recoveries will be recognized when they are probable of being received.

In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas.

As of December 31, 2023, the Company estimated that total damages of $ 10.3 million had been incurred.

During the year ended December 31, 2023, the Company received net insurance recoveries of $ 7.5 million.

Recoveries are recognized when they are probable of being received.

Construction in progress

Upon completion of the Whinstone Acquisition, we commenced expansion of our Rockdale Facility to 700 MW, from its initial 300 MW of developed capacity.

As of December 31, 2022, our 400 MW expansion at the Rockdale Facility had achieved multiple progress milestones while navigating the challenges with the current state of the global supply chain, including the completion of the substation expansion to 700 MW, successful installation of the substation busbar, and 400 MW of high-voltage transformers.

We also completed construction of three new buildings in 2022, and a fourth is currently being constructed.

As of December 31, 2023, the Company’s expansion of the Rockdale Facility had been completed.

In 2022, the Company initiated development of the Corsicana Facility to expand its Bitcoin Mining and Data Center Hosting capabilities, on a 265 -acre site in Navarro County, Texas, located next to the Navarro Switch.

Once complete, the Company expects the Corsicana Facility to have one gigawatt of developed capacity for its Bitcoin Mining and Data Center Hosting operations.

The initial phase of the development of the Corsicana Facility involves the construction of 400 MW of immersion-cooled Bitcoin Mining and Data Center Hosting infrastructure, as well as a high-voltage power substation and transmission facilities to supply power and water to the facility.

Construction of the substation and the data centers is ongoing and operations are expected to commence by the end of the first quarter of 2024, following commissioning of the substation.

Through December 31, 2023, the Company had incurred costs of approximately $ 217.8 million related to the development of the Corsicana Facility, including $ 10.1 million paid to acquire the land on which the facility is being developed, $ 203.0 million of initial developments costs and equipment, and a $ 4.7 million deposit for future power usage.

During the year ended December 31, 2023, the Company entered into a purchase agreement with Midas for the purchase of 200 MW of immersion cooling systems for its Corsicana Facility.

Delivery of the immersion cooling systems began in the fourth quarter of 2023 and is expected to be completed in the first quarter of 2024.

The purchase agreement also provides the Company an option to purchase up to an additional 400 MW of immersion cooling systems from Midas, on the same terms as the initial order, through December 31, 2025.

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, etc.

The initiative arose as a result of limited accommodations for visitors in the Rockdale, Texas area, which is relatively remote.

During 2022 Riot purchased land for the development of temporary housing from Lyle Theriot (indirectly, through a limited liability company) for approximately $ 0.1 million.

Theriot is part of the management team at Whinstone and is considered a related party of Whinstone.

The Company evaluated certain related party implications of the purchase, under GAAP and other applicable regulatory reporting requirements including, but not limited to, the Sarbanes-Oxley Act of 2002, and determined the transaction occurred on an arm’s length basis.

As of December 31, 2022, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain for a total of 5,130 S19 series miners, which were received in January 2023.

A summary of the purchase agreement commitments, deposits paid, and delivery timing is summarized as follows:

Original Purchase

Open Purchase

Agreement Date

Deposit Balance

November 22, 2021

First Quarter 2023

December 10, 2021

First Quarter 2023

December 24, 2021

First Quarter 2023

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.

During the year ended December 31, 2023, the Company paid $ 191.1 million in deposits and payments to MicroBT for the purchase of miners pursuant to the Master Agreement described herein.

The remaining commitment of approximately $ 270.4 million is due in installments through approximately April 2025 based on the estimated miner delivery schedule.

Total payments of $ 220.0 million and $ 50.4 million are expected to be made in 2024 and 2025, respectively.

During the year ended December 31, 2023, the Company paid $ 31.2 million in deposits and payments to Midas for the purchase of immersion cooling systems described herein.

The remaining commitment of approximately $ 21.1 million is due in installments in early 2024, based on the estimated delivery schedule.

Riot Platforms, Inc.

1 unchanged sentence

Goodwill and Intangible Assets

The following table presents the changes in goodwill for the year ended December 31, 2022:

Balance as of January 1, 2022

ESS Metron purchase accounting adjustment

Balance as of December 31, 2022

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.

15 unchanged sentences

Finite-lived intangible assets

The customer contracts, trademark, and UL listings were recognized as the result of acquisitions during the year ended December 31, 2021 (see Note 3.

Acquisitions ).

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.

5 unchanged sentences

Finite-lived intangible assets

During the years ended December 31, 2023, 2022, and 2021, amortization expense related to finite-lived intangible assets was $ 5.8 million, $ 2.1 million, and $ 0.2 million, respectively.

The following table presents the estimated future amortization of the Company’s finite-lived intangible assets as of December 31, 2023:

The Company did not identify any impairment of its finite-lived intangible assets during the years ended December 31, 2023, 2022, and 2021.

Power Supply Contract and Demand Response Services Programs

In May 2020, the Company entered into a Power Supply Agreement with TXU Energy Retail Company LLC to provide the delivery of 130 MW of electricity by TXU to the Rockdale Facility, via the facility owned by Oncor Electric Delivery Company, LLC, at fixed prices through April 30, 2030.

In March and November 2022, the Company and TXU agreed to increase the amount of electricity to be provided under the Power Supply Agreement by 65 MW and 150 MW, respectively, of electricity at fixed prices through April 30, 2030 and October 31, 2027, respectively, for a total of 345 MW under contract at fixed prices.

If more electricity is used than is contracted, the cost of the excess is incurred at the current spot rate.

Concurrently with the Power Supply Agreement, the Company entered into a contract with Oncor for the extension of delivery system transmission/substation facilities to facilitate delivery of the electricity to the Rockdale Facility (the “Facilities Agreement”).

Power costs incurred under this contract are determined on an hourly basis using settlement information provided by the Electric Reliability Council of Texas (“ERCOT”) and are recorded in Cost of revenue:

Data Center Hosting on the Consolidated Statements of Operations.

In collaboration with market participants such as the Company, ERCOT has a Demand Response Services Program for customers that have the ability to reduce or modify electricity use in response to instructions or signals.

The Demand Response Services Program provides the ERCOT market with valuable reliability and economic services by helping to preserve system reliability, enhancing competition, mitigating price spikes, and encouraging the demand side of the market to respond better to wholesale price signals.

Market participants with electrical loads like the Company may participate in the Demand Response Service Program directly by offering their electrical loads into the ERCOT markets, or indirectly by voluntarily reducing their energy usage in response to increasing wholesale prices.

Under the Demand Response Services Program, depending on the spot market price of electricity, we may, when there is a benefit to our Company, offer electricity back to ERCOT in exchange for cash payments or credits against future power costs, rather than using the power for the Company’s operations during these peak times to most efficiently manage our operating costs.

During the years ended December 31, 2022 and 2021, we sold approximately $ 27.3 million and $ 6.5 million, respectively, in electricity back to ERCOT in exchange for credits against future power costs.

These sales back to ERCOT are recorded in Power curtailment credits on the Consolidated Statements of Operations.

Power Purchase Agreement

In May 2020, the Company, through its subsidiary, Whinstone, entered into the PPA to provide for the delivery of power to its Rockdale Facility, via the nearby Sandow Switch.

Pursuant to the 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 PPA, the Company has the option to purchase additional power at market prices, as needed.

If electricity used exceeds the amount contracted, the cost of the excess electricity is incurred at the then-current spot rate.

Concurrently with the PPA, the Company entered into an interconnection agreement for the extension of delivery system transmission/substation facilities to facilitate delivery of the electricity to the Rockdale Facility (the “Facilities Agreement”).

Power costs incurred under the Facilities Agreement are determined every 15 minutes using settlement information provided by the ERCOT and are recorded in Cost of revenue on the Consolidated Statements of Operations.

In collaboration with market participants such as the Company, ERCOT has implemented Demand Response Services Programs for customers 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 reliability and economic services by helping to preserve system reliability, enhancing competition, 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 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.

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 an hourly basis.

For each respective Demand Response Services Program, the Company receives a cash payment based on hourly rates for power, and the amount of electrical load into which it bids.

Through ancillary services, the Company competitively bids amongst other market participants to sell ERCOT the ability to control Riot’s electrical load on demand, and to power down when directed to by ERCOT,

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The Company determined the Power Supply Agreement meets the definition of a derivative because the Demand Response Services Program allows for net settlement.

However, because we have the ability to offer the power back to the grid rather than take physical delivery, physical delivery is not probable through the entirety of the contract and therefore, we do not believe the normal purchases and normal sales scope exception applies to the Power Supply Agreement.

Accordingly, the Power Supply Agreement (the 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 value of derivative asset on the Consolidated Statements of Operations.

The Power Supply Agreement is not designated as a hedging instrument.

The estimated fair value of the Company’s derivate asset is classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs utilized in the valuation.

Specifically, our discounted cash flow estimation models contain quoted commodity exchange spot and forward prices and are adjusted for basis spreads for load zone-to-hub differentials through the term of the Power Supply Agreement, which ends in December 2030.

The discount rate utilized of approximately 22.3 % includes observable market inputs, but also includes unobservable inputs based on qualitative judgment related to company-specific risk factors.

The terms of the Power Supply Agreement require margin-based collateral, calculated as exposure resulting from fluctuations in the market cost rate of electricity versus the fixed price stated in the contract.

as part of ERCOT’s efforts to stabilize the grid.

The Company receives compensation for its participation in ancillary services whether or not the Company is actually called to power down.

Riot also participates in ERCOT’s Four Coincident Peak (“4CP”) program, which refers to the highest-load settlement intervals in each of the four summer months (June, July, August, and September), during which time, demand for power is at its highest.

4CP 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.

As a result of Riot’s participation in 4CP in 2022, the Company’s transmission charges in its 2023 monthly power bills were substantially reduced.

Under the 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 and sales of power during times of peak demand, to attempt to manage operating costs most efficiently.

During the years ended December 31, 2023, 2022, and 2021, the Company earned credits against future power costs in exchange for power resold of approximately $ 71.2 million, $ 27.3 million, and $ 6.5 million, respectively.

These amounts are recorded in Power curtailment credits on the Consolidated Statements of Operations.

The Company determined the 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, 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 PPA.

Accordingly, the 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 value of derivative asset on the Consolidated Statements of Operations.

The PPA is not designated as a hedging instrument.

The estimated fair value of the Company’s Derivate asset is classified under Level 3 of the fair value hierarchy due to the significant unobservable inputs utilized in the valuation.

Specifically, the Company’s discounted cash flow estimation models contain quoted commodity exchange spot and forward prices and are adjusted for basis spreads for load zone-to-hub differentials through the term of the PPA, which is scheduled to end as of April 30, 2030.

The significant assumptions used to estimate fair value of the derivative contract include a discount rate of 23.1 %, which reflected the nature of the contract as it relates to the risk and uncertainty of the estimated future mark-to-market adjustments, forward price curves of the power supply, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors.

The discount rate includes observable market inputs, but also includes unobservable inputs based on qualitative judgment related to company-specific risk factors.

The terms of the PPA require margin-based collateral, calculated as exposure resulting from fluctuations in the market cost rate of electricity compared to the fixed price stated in the contract.

As of December 31, 2023, the margin-based collateral requirement of the Company was zero.

While we manage operating costs at the Rockdale Facility in part by periodically selling unused or uneconomical power in the market back to ERCOT, we do not consider such actions trading activities.

That is, we do not engage in speculation in the power market as part of our ordinary activities.

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.

The following table presents changes in the estimated fair value of the Derivative asset :

Balance as of January 1, 2021

Acquisition of Whinstone

Change in fair value of derivative asset

Balance as of December 31, 2022

1 unchanged sentence

Balance as of December 31, 2023

Long-Term Assets

Deposits consist of the following:

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The following table presents the activity of the Company’s deposits paid:

Deposits on equipment:

Beginning balance

Reclassification to property and equipment

Ending balance

Balance as of December 31, 2022

Reclassifications to property and equipment

Balance as of December 31, 2023

Security deposits

Total deposits

Total long-term deposits

Deposits on equipment

During the year ended December 31, 2022, the Company paid approximately $ 194.9 million as deposits, primarily for miners, and reclassified $ 422.9 million to property and equipment in connection with the receipt of 57,649 miners at the Rockdale Facility.

As of December 31, 2022, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain for a total of 5,130 S19 series miners, which were received in January 2023.

During the year ended December 31, 2023, the Company reclassified the outstanding deposit of $ 33.3 million to property and equipment in connection with the receipt of the miners at the Rockdale Facility.

Property and Equipment.

During the year ended December 31, 2021, the Company paid approximately $ 274.8 million as deposits, primarily for miners, and reclassified $ 46.7 million to property and equipment in connection with the receipt of 23,864 miners at the Coinmint Facility and the Rockdale Facility.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

During the year ended December 31, 2023, the Company paid deposits and advance payments of $ 191.1 million to MicroBT for the purchase of miners, paid a deposit of $ 20.8 million to Midas for the purchase of immersion cooling systems, and paid deposits of $ 18.5 million for other purchases of miners from various suppliers.

Property and Equipment.

During the year ended December 31, 2023, $ 12.6 million of the deposits made to MicroBT, all of the $ 20.8 million deposit made to Midas, and $ 11.7 million of the deposits for other purchases of miners were reclassified to property and equipment in connection with the receipt of the equipment.

Security deposits

During the year ended December 31, 2022, the Company paid approximately $ 4.7 million as a security deposit for the development of the Corsicana Facility.

As of December 31, 2022, $ 1.8 million of the amount paid to Oncor in 2021, as described below, remains held as a deposit and the Company has other security deposits totaling approximately $ 2.7 million, including its ground lease of $ 1.8 million.

During the year ended December 31, 2021, the Company paid approximately $ 3.1 million in connection with an amended and restated Transmission/Substation Facility Extension Agreement for the construction of the Oncor-owned Delivery System facilities to serve the expansion of the Rockdale Facility.

As of December 31, 2021, the Company had security deposits totaling approximately $ 5.0 million, including its ground lease of $ 1.8 million.

During the year ended December 31, 2023, the Company paid $ 23.0 million as a security deposit in connection with its 215 MW increase to the long-term, fixed-price power secured under the PPA, resulting in a total of 345 MW under contract at fixed prices.

Power Purchase Agreement .

During the year ended December 31, 2022, the Company paid approximately $ 4.7 million as a security deposit for the development of the Corsicana Facility, all of which remains held as a deposit as of December 31, 2023.

The Company has other security deposits totaling approximately $ 2.0 million for its offices and facilities, including $ 1.8 million associated with its ground lease.

Accrued Expenses

Accrued expenses consist of the following:

The Company’s accrued expenses consist of the following:

Construction in progress

Power related costs and remittances

Accrued compensation

Total accrued expenses

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Credit and security facility

During the year ended December 31, 2022, the Company entered into a $ 10.0 million Credit and Security Facility, which consists of a $ 6.0 million Revolving Line of Credit and a $ 4.0 Equipment Guidance Line.

The $ 6.0 million Revolving Line of Credit has a term of one year with interest due monthly and principal due at maturity.

The Company’s subsidiary, ESS Metron, has a Credit and Security Facility Agreement, as amended, which provides 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 has a term of two years with interest due monthly and principal due at maturity.

All amounts borrowed under the Revolving Line of Credit carry a variable interest of not less than 4.0 % and are secured by the assets of ESS Metron.

As of December 31, 2023, the interest rate was 8.5 %.

The $ 4.0 million Equipment Guidance Line has a term of one year and permits the Company to finance up to 80.0 % of certain equipment purchases.

Total borrowings under the Revolving Line of Credit during the year ended December 31, 2023, were $ 6.0 million and payments were $ 6.0 million.

As of December 31, 2023, the outstanding balance on the Revolving Line of Credit was $ 0 .

The Equipment Guidance Line has a term of two years and permits the Company to finance up to 80.0 % of certain equipment purchases.

All amounts borrowed under the Equipment Guidance Line carry a variable interest of not less than 4.0 % and are secured by the assets of ESS Metron.

As of December 31, 2023, the interest rate was 8.5 %.

Total borrowings under the Credit and Security Facility as of, and during the year ended, December 31, 2022, were less than $ 0.1 million.

Total borrowings under the Equipment Guidance Line during the year ended December 31, 2023, were approximately $ 0.9 million.

During the year ended December 31, 2023, approximately $ 0.4 million outstanding under the Equipment Guidance Line converted to a fixed rate term loan (see below).

A s of December 31, 2023, the outstanding balance on the Equipment Guidance Line was approximately $ 0.5 million.

All borrowings and accrued interest under the equipment guidance line convert to fixed rate term loans every six months, which have 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 carry interest at a fixed rate equal to the five-year treasury rate plus 2.5 % as of conversion and the Equipment Term Loans carry interest at a fixed rate equal to the three-year treasury rate plus 2.5 % as of conversion.

As of December 31, 2022, no amounts were due under Manufacturing Term Loans or Equipment Term Loans.

As of December 31, 2022, the Company was in compliance with all covenants of the Credit and Security Facility.

As of December 31, 2022, the Company had operating leases for its offices, manufacturing facilities of ESS Metron, and a ground lease for the Rockdale Facility, that expire on various dates through January 2032.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The Manufacturing Term Loans made upon the first conversion of guidance line loans carry 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 carry 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 carry interest at a fluctuating rate equal to the lender’s prime rate.

During the year ended December 31, 2023, approximately $ 0.4 million outstanding under the Equipment Guidance Line was converted into a three-year Equipment Term Loan with a fixed interest rate of 6.6 % .

As of December 31, 2023, the outstanding balance on the Equipment Term Loan was approximately $ 0.3 million.

As of December 31, 2023, the outstanding balance on the Equipment Guidance Line and Equipment Term Loans was recognized net of deferred financing costs of approximately $ 0.1 million.

The net current outstanding debt balance of $ 0.3 million was recognized within Accrued Expenses and the net long-term outstanding debt balance of $ 0.5 million was recognized within Other long-term liabilities on the Consolidated Balance Sheets.

As of December 31, 2023, the Company was in compliance with all covenants of the Credit and Security Facility Agreement.

As of December 31, 2023, the Company had operating leases primarily for its offices and the manufacturing facilities of ESS Metron, and a ground lease for the Rockdale Facility, all of which expire on various dates through January 2032.

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.

3 unchanged sentences

As of December 31, 2023 and 2022, operating lease right of use assets were $ 20.4 million and $ 21.7 million, respectively, and operating lease liabilities were $ 21.3 million and $ 22.3 million, respectively.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The following table presents the components of the Company’s lease expense, which the ground and facilities’ leases are included in Cost of revenue and the office leases are included in Selling, general, and administrative on the Consolidated Statements of Operations:

6 unchanged sentences

The following table presents supplemental lease information:

Years Ended December 31,

Operating cash outflows for operating leases

13 unchanged sentences

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.

The holders of 0 % Series B Convertible

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Preferred Stock are entitled to receive dividends if and when declared by the Company’s board of directors.

The holders of 0 % Series B Convertible Preferred Stock are entitled to receive dividends if and when declared by the Company’s board of directors.

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, 2023, no shares of the Company’s 0 % Series B Convertible Preferred Stock were outstanding.

The Company is authorized to issue up to 340,000,000 shares of Common Stock, without any par value per share.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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.

1 unchanged sentence

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.

At-the-Market (“ATM”) Equity Offerings

ATM Equity Offerings

2023 ATM Offering

In August 2023, the Company entered into the 2023 ATM Offering, 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 its 2023 ATM Offering.

Subsequent to December 31, 2023, and through February 20, 2024, the Company received net proceeds of approximately $ 114.9 million from the sale of 8,644,100 shares of its common stock at a weighted average fair value of $ 13.57 per share under its 2023 ATM Offering.

2022 ATM Offering

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 a weighted average fair value of $ 8.23 per share.

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 Offering.

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 Offering.

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 Offering had been issued.

2021 ATM Offering

3 unchanged sentences

2020 ATM Offering

In January 2021, the Company received gross proceeds of approximately $ 84.8 million ($ 82.7 million net, after $ 2.1 million in expenses) from the sale of 4,433,468 shares of common stock at an average fair value of $ 19.13 per share under an ATM agreement entered into in December 2020.

With the sale and issuance of these shares, and of the shares previously sold and issued during the year ended December 31, 2020, all $ 200 million in shares of Company common stock available for sale under the December 2020 ATM Offering had been issued.

In October 2020, the Company entered into an ATM sales agreement under which it received proceeds of approximately $ 100.0 million from the sale of common shares.

The Company incurred fees of up to 3.0 % of the gross proceeds received.

With the sale and issuance of these shares, all $ 200 million in shares of Company common stock available for sale under the December 2020 ATM Offering had been issued.

Under the terms of the 2023, 2022, 2021, and 2020 ATM Offerings, the Company only issued shares of its common stock.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

ESS Metron Holdback 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.

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 Whinstone Acquisition.

2 unchanged sentences

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, 2023.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

2023 Transactions

During the year ended December 31, 2023, approximately 5.0 million shares of common stock were issued to the Company’s board of directors, officers, employees, and advisors in settlement of an equal number of fully vested restricted stock awards awarded to such individuals by the Company under the 2019 Equity Incentive Plan.

The Company withheld approximately 1.3 million of these shares, 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.

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, 1,819,332 shares of common stock were issued to the Company’s board of directors, officers, employees, and advisors of the Company in settlement of an equal number of fully vested restricted stock units awarded to such individuals by the Company under the Company’s 2019 Equity Incentive Plan, as amended.

The Company withheld 685,781 of these shares, at 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, — shares of the Company’s 0 % Series B Convertible Preferred Stock were converted into 70,165 shares of its common stock, leaving no shares outstanding.

In July 2022, the Company’s shareholders 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.

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.

2021 Transactions

3 unchanged sentences

Acquisitions .

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

During the year ended December 31, 2021, 464,021 shares of common stock were issued to the Company’s board of directors, officers, employees and advisors of the Company in settlement of an equal number of fully vested restricted stock units awarded to such individuals by the Company pursuant to grants made under the Company’s 2019 Equity Incentive Plan, as amended.

4 unchanged sentences

During the year ended December 31, 2021, 2,000 shares of the Company’s 0 % Series B Convertible Preferred Stock were converted into 2,000 shares of its common stock, leaving 2,199 shares outstanding.

The Company currently has one equity compensation plan, The 2019 Equity Incentive Plan, as amended.

On October 19, 2021, the Company’s shareholders approved the second amendment to its 2019 Equity Incentive Plan, which increased the number of shares of the Company’s common stock reserved for issuance by 4,400,000 shares.

2020 Transactions

During the year ended December 31, 2020, the Company received net proceeds under the Sales Agreement, as amended with H.C.

Wainwright of approximately $ 257.5 million (after deducting $ 7.3 million in commissions and expenses), at a weighted average gross sales price of $ 5.30 per share, from sales of 49,932,051 shares of its common stock.

During the year ended December 31, 2020, the 200,000 shares of common stock held in escrow under the Escrow Deposit Agreement were voided and cancelled.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

During the year ended December 31, 2020, 122,377 shares of common stock were issued to a Company executive under an employment agreement in settlement of $ 175,000 of previously accrued compensation under the 2019 Equity Incentive Plan, as amended , and 5,000 shares of common stock were issued in settlement of fully vested restricted stock rights previously granted and previously expensed under the Company’s former 2017 Equity Incentive Plan.

During the year ended December 31, 2020, 2,048,096 shares of common stock were issued to the Company’s board of directors, officers and employees of the Company in settlement of an equal number of fully vested restricted stock units awarded to such individuals by the Company pursuant to grants made under the Company’s 2019 Equity Incentive Plan, as amended .

The Company withheld 193,881 of these shares at a fair value of approximately $ 0.45 million, to cover the withholding taxes related to the settlement of these vested restricted stock units.

The settlement of the fully vested restricted stock units included the accelerated vesting of 471,544 restricted stock units due to the resignation of a member of the Company’s Board, as permitted under the 2019 Equity Incentive Plan, as amended .

During the year ended December 31, 2020, the Company issued 40,634 shares of its common stock to a consultant and advisors in settlement of fully vested restricted stock units granted under the 2019 Equity Incentive Plan, as amended .

During the year ended December 31, 2020, the Company issued 1,492,487 shares of its common stock related to the exercise of 1,492,487 common stock warrants granted to the Investors in the January 2019 Private Financing for cash of approximately $ 2.9 million or $ 1.94 per share.

The Company currently has one equity compensation plan, the 2019 Equity Incentive Plan.

On October 19, 2021, the Company’s stockholders approved the Second Amendment to its 2019 Equity Incentive Plan, which increased the number of shares of the Company’s common stock reserved for issuance by 4.4 million shares .

Stock-Based Compensation

In October 2019, the Company’s stockholders approved the 2019 Equity Incentive Plan.

The 2019 Equity Incentive Plan authorizes the granting of stock-based compensation awards to directors, employees, and consultants in the form of restricted stock awards or stock options that settled in shares of the Company’s common stock upon vesting.

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.

3.6 million shares of common stock were initially reserved for issuance.

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.

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.

1 unchanged sentence

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.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2023, the Company had 18,517,831 shares of common stock reserved for issuance under the 2019 Equity Incentive Plan.

Stock-based Compensation

The following table presents stock-based compensation expense by category:

Years Ended December 31,

Performance-based stock awards

Service-based stock awards

Performance-based stock awards and units

Service-based stock awards and units

Total stock-based compensation

Stock-based compensation expense is recognized within Selling, general and administrative on the Consolidated Statements of Operations.

All restricted stock awards granted prior to January 1, 2022, and some granted during the year ended December 31, 2022, were granted in the form of Restricted Stock Units (“RSUs”).

During the year ended December 31, 2022, all outstanding RSUs were converted into an equivalent number of Restricted Stock Awards (“RSAs”), with substantially the same terms as the RSUs they replaced.

RSAs differ from RSUs in that outstanding RSAs have voting rights equivalent to the Company’s common stock and are recognized as outstanding common stock.

Performance-Based Awards and Units

Performance-based awards and units are eligible to vest either:

(i) over a three-year performance period ending December 31, 2023, based upon financial performance targets met during the performance period, and the completion of specified performance milestones related to development and monetization of added infrastructure capacity;

or (ii) based on the Company’s TSR as compared to the Index TSR through December 31, 2025.

The following table presents a summary of the activity of the performance-based RSAs:

Weighted Average

Number of Shares

Balance as of January 1, 2023

Balance as of December 31, 2023

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.

During the year ended December 31, 2021, no performance-based RSAs were awarded.

As of December 31, 2023, there was approximately $ 27.8 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 2.6 years.

The following table presents a summary of the activity of the performance-based RSUs:

Weighted Average

Number of Shares

Balance as of January 1, 2023

Balance as of December 31, 2023

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.

During the year ended December 31, 2021, the Company granted 4,033,159 performance-based RSUs with a grant date fair value of $ 148.0 million.

During the year ended December 31, 2022, all outstanding performance-based RSUs were converted into performance-based RSAs.

As of December 31, 2023, there was approximately $ 4.1 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 2.6 years.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Restricted Common Stock Awards

Performance-based awards

Performance-based awards vest over a three-year performance period upon the successful completion of specified milestones related to added infrastructure capacity and Adjusted EBITDA through December 31, 2023.

The following table presents a summary of the Company’s performance-based awards activity:

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

Number of Shares

RSU Balance as of January 1, 2022

RSUs Forfeited

RSUs converted to RSAs

Balance as of January 1, 2023

( 4,464,307 )

RSU Balance as of December 31, 2022

RSUs converted to RSAs

RSAs Forfeited

RSA Balance as of December 31, 2022

During the year ended December 31, 2021, the Company granted 4,033,159 performance-based awards with a grant date fair value of $ 148.0 million.

During the year ended December 31, 2020, no performance-based awards were awarded.

As of December 31, 2022, there was approximately $ 11.6 million of unrecognized compensation cost related to the performance-based awards, which is expected to be recognized over a remaining weighted-average vesting period of approximately 6 months .

Service-based awards

Service-based awards generally vest over a one -to- two-year service period.

The following table presents a summary of the Company’s service-based awards activity:

Balance as of December 31, 2023

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.

During the year ended December 31, 2021, no service-based RSAs were awarded.

As of December 31, 2023, there was approximately $ 29.0 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 10 months .

The following table presents a summary of the activity of the service-based RSUs:

Weighted Average

Number of Shares

RSU Balance as of January 1, 2022

RSUs Forfeited

RSUs converted to RSAs

RSU Balance as of December 31, 2022

RSUs converted to RSAs

RSAs Forfeited

( 2,002,400 )

RSA Balance as of December 31, 2022

During the year ended December 31, 2021, the Company awarded 212,189 service-based awards with a grant date fair value of $ 7.1 million.

During the year ended December 31, 2020, the Company awarded 1,544,359 service-based awards with a grant date fair value of $ 2.0 million.

Balance as of January 1, 2023

Balance as of December 31, 2023

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.

During the year ended December 31, 2021, the Company granted 212,189 service-based RSUs with a grant date fair value of $ 7.1 million.

During the year ended December 31, 2022, all outstanding service-based RSUs were converted into service-based RSAs.

As of December 31, 2023, there was approximately $ 2.6 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.

Subsequent Awards

In January 2024, the Company awarded 1,000,000 performance-based RSUs with a grant date fair value of approximately $ 14.1 million, 14,071,926 performance-based RSAs with a grant date fair value of approximately $ 199.5 million, and 38,707 service-based RSAs with a grant date fair value of approximately $ 0.6 million and a three-year service period.

The performance-based awards are eligible to vest based on the Company’s TSR as compared to the Index TSR through December 31, 2025.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2022, there was approximately $ 50.7 million of unrecognized compensation cost related to the service-based awards, which is expected to be recognized over a remaining weighted-average vesting period of approximately 10 months .

Fair Value Measurements

7 unchanged sentences

observable inputs

Derivative asset (a)

Contingent consideration liability (b)

Convertible note (b)

Derivative asset (c)

Contingent consideration liability (d)

Fair value measured as of December 31, 2022

4 unchanged sentences

observable inputs

Derivative asset (a)

Contingent consideration liability (b)

Derivative asset (b)

Contingent consideration liability (c)

(a) See Note 5.

Derivatives .

(b) See Note 6.

Power Purchase Agreement

(d) See Note 17.

Commitments and Contingencies

There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the period presented.

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

2 unchanged sentences

These assets are recorded at fair value only when an impairment charge is recognized.

As of December 31, 2022 and 2021, the fair values of cash and cash equivalents, accounts receivable, costs and estimated earnings in excess of billings, prepaid expenses and other current assets, accounts payable, billings in excess of costs and estimated earnings, and accrued expenses approximated their carrying values because of the short-term nature of these instruments.

Testing performed indicated the estimated fair value of the Company’s Miners and mining equipment 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 and mining equipment to their estimated fair value.

Applying the market price of one Bitcoin on December 31, 2022 of approximately $ 16,548 to the Company’s 6,974 Bitcoin held, results in an estimated fair value of the Company’s Bitcoin of $ 115.4 million as of December 31, 2022.

Applying the market price of one Bitcoin on December 31, 2021 of approximately $ 46,306 to the Company’s 4,884 Bitcoin held, results in an estimated fair value of the Company’s Bitcoin of $ 226.2 million as of December 31, 2021.

The valuation of Bitcoin held is classified in Level 1 of the fair value hierarchy as it is based on quoted prices in active markets for identical assets.

As of December 31, 2023 and 2022, the fair values of cash and cash equivalents, accounts receivable, contract assets, prepaid expenses and other current assets, accounts payable, contract liabilities, and accrued expenses approximated their carrying values because of their short-term nature.

Riot Platforms, Inc.

1 unchanged sentence

Commitments and Contingencies

Miners and mining equipment

During the year ended December 31, 2023, the Company paid $ 191.1 million in deposits and payments to MicroBT for the purchase of miners pursuant to the Master Agreement described herein.

The remaining commitment of approximately $ 270.4 million is due in installments through approximately April 2025 based on the estimated miner delivery schedule.

Total payments of $ 220.0 million and $ 50.4 million are expected to be made in 2024 and 2025, respectively.

During the year ended December 31, 2023, the Company paid $ 31.2 million in deposits and payments to Midas for the purchase of immersion cooling systems described herein.

The remaining commitment of approximately $ 21.1 million is due in installments in early 2024, based on the estimated delivery schedule.

Operating leases

The Company leases its primary office locations and data center hosting facilities, as well as a ground lease, under noncancelable lease agreements that expire on varying dates through 2032.

The Company leases its primary office locations 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.

Water reservation agreement

The Company has a water reservation agreement with the lessor of its ground lease to obtain a certain quantity of non-potable water from a nearby lake to be used by the Company for evaporative cooling purposes at our Rockdale Facility.

During the year ended December 31, 2022, concurrent with the amendment to its ground lease (see Note 15.

Leases ), the agreement was amended to increase the quantity of water to be obtained and extend the term of the agreement.

The term of the agreement, including the impact of the amendment, runs through January 2032, followed by three ten-year renewal periods, and requires annual payments of approximately $ 2.0 million.

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 its Rockdale Facility.

The water reservation agreement runs through January 2032 and requires annual payments of approximately $ 2.2 million.

The Company concluded that the water reservation agreement was not a lease or a derivative instrument.

1 unchanged sentence

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.

Business Combination Contingent Consideration

Contingent consideration liability

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.

1 unchanged sentence

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 Power Supply Agreement, 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.

In April 2021, under the provisions of the 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.

5 unchanged sentences

The estimated fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.

The Company estimated the fair value of the contingent consideration using a discounted cash flow analysis, which includes 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 require significant judgment and depend on various factors outside the Company’s control, such as construction delays.

The discount rate of approximately 2.5 % includes observable market inputs, such as TXU’s parent company’s Standard & Poor’s credit rating of BB, but also includes unobservable inputs such as interest rate spreads, which were estimated based on qualitative judgment related to company-specific risk factors.

Specifically, due to the power credits being subordinated obligations for TXU’s parent, we

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

used one credit rating lower than BB in our yield curve to estimate a reasonable interest rate spread to determine the cost of debt input.

The significant assumptions used to estimate fair value of the derivative contract include a discount rate of 21.0 %, which reflected the nature of the contract as it relates to the risk and uncertainty of the estimated future mark-to-market adjustments, forward price curves of the power supply, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors.

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.

The following table presents the changes in the estimated fair value of our contingent consideration liability:

Balance as of January 1, 2021

Acquisition of Whinstone

Change in fair value of contingent consideration

Balance as of December 31, 2022

2 unchanged sentences

Balance as of December 31, 2023

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, 2023, using a discount rate of approximately 8.0 % , which was based on the factors above, including the recent increase in interest rates.

Contingencies

The Company, and its subsidiaries, are subject at times to various claims, lawsuits and governmental proceedings relating to the Company’s business and transactions arising in the ordinary course of business.

The Company cannot predict the final outcome of such proceedings.

Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings.

Some of these claims, lawsuits and proceedings seek damages, including consequential, exemplary or punitive damages, in amounts that could, if awarded, be significant.

Certain of the claims, lawsuits and proceedings arising in the ordinary course of business are covered by the Company’s insurance program.

The Company maintains property and various types of liability insurance in an effort to protect the Company from such claims.

In terms of any matters where there is no insurance coverage available to the Company, or where coverage is available and the Company maintains a retention or deductible associated with such insurance, the Company 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 the Company in the accompanying consolidated balance sheets.

If it is reasonably possible that an asset may be impaired as of the date of the financial statement, then the Company discloses the range of possible loss.

Expenses related to the defense of such claims are recorded by the Company as incurred and included in the accompanying consolidated statements of operations.

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 the Company’s defense of such matters.

On the basis of current information, the Company does not believe there is a reasonable possibility that, other than with regard to the Class Action described below, any material loss, if any, will result from any claims, lawsuits and proceedings to which the Company is subject to either individually, or in the aggregate.

Northern Data Working Capital Dispute

Riot Blockchain, Inc.

Northern Data AG .

On September 7, 2022, the Company filed a complaint against Northern Data AG, a company organized under the laws of Germany (“Northern Data”) in the Court of Chancery of the State of Delaware for, among other things, breach of contract.

The complaint alleges Northern Data breached the terms of the Stock Purchase Agreement (the “SPA”), entered into, as of April 8, 2021, with Riot for the purchase of Whinstone by, among other things, refusing to engage in a contractually prescribed process to resolve disputes over the acquisition price of Whinstone.

Riot believes it is owed over $ 100 million for liabilities that Northern Data failed to disclose to Riot in its pre-closing calculations.

Riot has attempted to resolve the dispute, and, as a result of Northern Data’s refusal to engage in the dispute resolution process, seeks an order affirmatively declaring that Riot may terminate discussions and that unresolved matters, including the dispute regarding the over $ 100 million in liabilities Northern Data failed to disclose, must be submitted to an independent accounting firm for final resolution.

On September 26, 2022, Northern Data filed its Answer, Affirmative Defenses, and Verified Counterclaims and Third-Party Claims, which claim that Riot and Whinstone breached the SPA by allegedly failing to timely remit to Northern Data certain energy credit payments and that Riot is improperly seeking to introduce indemnification claims into the contractual process to resolve the parties’ dispute over purchase price.

Northern Data alleges that there are approximately $ 40 million in energy credits that remain unpaid.

Northern Data seeks damages in an unspecified amount, a declaration that Riot may not withhold payments for energy credits

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.

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.

Paid expenses related to the defense of such claims are recorded by us as incurred and paid.

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.

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.

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 Consolidated Balance Sheets.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

pending the resolution of the purchase price dispute, and specific performance that Riot may not introduce indemnification claims in connection with the process to resolve the purchase price dispute.

Northern Data filed a motion for partial summary judgment on its claims for specific performance of the SPA’s provision for payment of certain energy credits by the Company.

The Company filed its answering brief in opposition to the motion on February 3, 2023.

Northern Data in turn must file any reply on or before March 10, 2023.

Whinstone Customer Dispute

On June 13, 2022, GMO Gamecenter USA, Inc., a California corporation, and GMO Internet, Inc., a corporation organized and existing under the laws of Tokyo, Japan (collectively “GMO”), filed a complaint against Whinstone US, Inc.

in the Supreme Court of the State of New York, County of New York:

Commercial Division, Index No.:

656762/2022, subsequently removed to the United States District Court, S.D.N.Y., Case No.

1:22-cv-05974-JPC (the “Complaint”).

After extensive discussions and upon Whinstone demanding that GMO reasonably negotiate a new hosting agreement in good faith pursuant to the terms of its existing agreement, GMO filed the Complaint.

GMO alleges Whinstone breached the terms of the Colocation Services Agreement between GMO and Whinstone by failing to indemnify GMO for certain contractual loss of profit and causing certain other damages to GMO in the nature of loss of revenue, lost profits and loss of savings.

GMO is seeking – without substantiation - compensatory damages in excess of $ 50 million, and pre-judgment and post-judgment interest.

Whinstone’s Answer and Counterclaims were filed on August 22, 2022, and on September 12, 2022, GMO filed its answer and affirmative defenses to counterclaims raised by Whinstone, which included additional claims against Whinstone, as permitted under the applicable local rules.

Subsequent to the period ended September 30, 2022, on November 1, 2022, Whinstone filed supplementary answers and counterclaims to GMO’s answer and affirmative defenses.

Whinstone denies the substantive allegations of the Complaint and has asserted counterclaims seeking a declaratory judgment of GMO’s failure to negotiate in good faith in accordance with the terms of the Colocation Services Agreement, as well as compensatory damages in excess of $ 25 million, including damages from loss of revenue, breach of contract, pre- and post-judgment interest, and attorneys’ fees and costs in connection with GMO’s breach of the Colocation Services Agreement.

The Company intends to vigorously defend Whinstone against GMO’s claims, and to vigorously enforce Whinstone’s claims against GMO.

Shareholder Class Action Suit

On February 17, 2018, Creighton Takata filed an action asserting putative class action claims on behalf of the Company’s stockholders in the United District Court for the District of New Jersey, Takata v.

Riot Blockchain Inc., et al.

The complaint asserts violations of federal securities laws under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of stockholders that purchased stock from November 13, 2017 through February 15, 2018.

The complaint alleges that the Company and certain of its officers and directors made, caused to be made, or failed to correct false and/or misleading statements in press releases and public filings regarding its business plan in connection with its cryptocurrency business.

The complaint requests damages in unspecified amounts, costs and fees of bringing the action, and other unspecified relief.

On April 18, 2018, Joseph J.

Klapper, Jr., filed a complaint against Riot Blockchain, Inc., and certain of its officers and directors in the United District Court for the District of New Jersey ( Klapper v.

Riot Blockchain Inc., et al.

The complaint contained substantially similar allegations and the same claims as those filed by Mr.

Takata, and requests damages in unspecified amounts, costs and fees of bringing the action, and other unspecified relief.

On November 6, 2018, the court in the Takata action issued an order consolidating Takata with Klapper into a single putative class action.

The court also appointed Dr.

Golovac as Lead Plaintiff and Motely Rice as Lead Counsel of the consolidated class action.

Lead Plaintiff filed a consolidated complaint on January 15, 2019.

Defendants filed motions to dismiss on March 18, 2019.

In lieu of opposing defendants’ motions to dismiss, Lead Plaintiff filed another amended complaint on May 9, 2019.

Defendants filed multiple motions to dismiss the amended complaint starting on September 3, 2019.

On April 30, 2020, the court granted the motions to dismiss, which resulted in the dismissal of all claims without prejudice.

On December 24, 2020, Lead Plaintiff filed another amended complaint.

Defendants filed multiple motions to dismiss the amended complaint starting on February 8, 2021, which have been fully briefed.

On February 28, 2022, the court issued an order instructing the parties to submit supplemental briefing by March 14, 2022 on particular issues raised in the motions to dismiss.

On May 27, 2022, Lead Plaintiff filed the third amended consolidated complaint.

Defendants submitted motions to dismiss on July 18, 2022.

Briefing on the motions to dismiss was completed in October 2022.

Because this litigation is still at this early stage, we cannot reasonably estimate the likelihood of an unfavorable outcome or the magnitude of such an outcome, if any.

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.

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 took the matter under advisement and it is now pending a ruling.

While the Company intends to vigorously oppose such complaint, the Company cannot accurately predict the outcome of such ongoing litigation, or estimate the magnitude of such outcome, due to its early stage.

Legacy Hosting Customer Disputes

On May 2, 2023, Whinstone filed a petition in the District Court for the 20th Judicial District of Milam County, Texas (Case No.

CV41873), which it later amended, against Rhodium 30MW, LLC, Rhodium JV, LLC, Air HPC LLC, and Jordan HPC, LLC (collectively, “Rhodium”) asserting breach of contract claims for Rhodium’s failure to pay amounts due under Rhodium’s colocation agreements with Whinstone.

Whinstone seeks recovery of more than $ 26.0 million, plus reasonable attorneys’ fees and costs, expenses, and pre- and post-judgment interest.

On June 12, 2023, Rhodium answered and, along with non-parties Rhodium Encore LLC, Rhodium 2.0 LLC, and Rhodium 10mw LLC (collectively, the “Non-Parties”), moved to compel arbitration and filed counterclaims for breach of contract seeking recovery of at least $ 7.0 -$ 10.0 million in power credits allegedly owed to Rhodium under the superseded agreements, as well as lost profits.

On August 2, 2023, Rhodium disclosed the amount of damages it seeks to recover for these claims, which includes at least $ 42.0 million in alleged energy credits, at least $ 1.0 million in alleged lost profits for power diversion, and at least $ 0.7 million in alleged direct damages for breach of contract, plus lost profits and reasonable and necessary attorneys’ fees.

On August 28, 2023, the district court granted Rhodium’s motion to compel arbitration and stay litigation.

On November 27, 2023, Whinstone terminated the Rhodium JV, LLC and Air HPC LLC hosting agreements at the Rockdale Facility with immediate effect.

On December 11, 2023, Rhodium and the Non-Parties submitted an arbitration demand to the American Arbitration Association seeking approximately $ 55.0 million in damages and specific performance of unspecified contracts.

Whinstone believes Rhodium’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.

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, at least $ 16.0 million for equipment damage, reasonable attorneys’ fees and costs, expenses, costs, and pre- and post-judgment interest.

Whinstone believes many of the claims are barred or waived and 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, 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.

On June 13, 2022, GMO Gamecenter USA, Inc.

and its parent, GMO Internet, Inc., (collectively “GMO”) filed a complaint against Whinstone alleging breach of contract under the colocation services agreement between GMO and Whinstone, seeking damages in excess of $ 150.0 million.

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 profit and profit sharing, based on Whinstone’s alleged wrongful termination of the colocation services agreement as of June 29, 2023.

At this preliminary stage, the Company believes that GMO’s claims lack merit;

however, 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.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Shareholder Derivative Cases

On April 5, 2018, Michael Jackson filed a shareholder derivative complaint on behalf of the Company in the Supreme Court of the State of New York, County of Nassau, against certain of the Company’s officers and directors, as well as against an investor ( Jackson v.

Class Actions and Related Shareholder Derivative Actions

On August 25, 2023, the United States District Court for the District of New Jersey dismissed the Takata v.

Riot Blockchain action (Case No.

18-cv-02293, the “Takata Action”), with prejudice, dismissing all claims.

Following the dismissal of the Takata Action, all shareholder derivative complaints filed against the Company were subsequently dismissed without prejudice.

On October 23, 2023, the parties in Jackson v.

Riot Blockchain, Inc., et al.

The complaint contains similar allegations to those contained in the shareholder class action complaints and seeks recovery for alleged breaches of fiduciary duty, unjust enrichment, waste of corporate assets, abuse of control and gross mismanagement.

The complaint seeks unspecified monetary damages and corporate governance changes.

At the last preliminary conference, the court adjourned the conference until June 27, 2023 in lieu of staying the action.

Defendants do not anticipate any other activity on this case until the next preliminary conference.

On May 22, 2018, two additional shareholder derivative complaints were filed on behalf of the Company in the Eighth Judicial District Court of the State of Nevada in and for the County of Clark ( Kish v.

O’Rourke, et al.

A-18-774890-B & Gaft v.

O’Rourke, et al.

A-18-774896-8).

The two complaints make identical allegations, which are similar to the allegations contained in the shareholder class action complaints.

The shareholder derivative plaintiffs also seek recovery for alleged breaches of fiduciary duty, unjust enrichment, waste of corporate assets, and aiding abetting a breach of fiduciary duty.

The complaints seek unspecific monetary damages and corporate governance changes.

On September 24, 2018, the court entered an order consolidating the Gaft and Kish actions, which is now styled as In re Riot BlockChain, Inc.

604520/18) filed a joint stipulation of discontinuance dismissing all claims without prejudice.

On January 18, 2023, the Eighth Judicial District Court of the State of Nevada entered an order voluntarily dismissing In re Riot Blockchain, Inc.

Shareholder Derivative Litigation (Case No.

A-18-774890-B.

The plaintiffs filed a consolidated complaint on March 15, 2019.

The consolidated action has been temporarily stayed until the resolution of the motion(s) to dismiss in the securities class action pending in the United District Court for the District of New Jersey.

On October 9, 2018, another shareholder derivative complaint was filed on behalf of the Company in the United District Court for the Eastern District of New York ( Rotkowitz v.

O’Rourke, et al.

2:18-cv-05632).

As with the other shareholder derivative actions, the shareholder plaintiff alleges breach of fiduciary duty, waste of corporate assets, and unjust enrichment against certain of the Company’s officers, directors, and an investor.

The complaint’s allegations are substantially similar to those made in the other securities class action and shareholder derivative complaints filed in 2018.

The complaint seeks unspecific monetary damages and corporate governance changes.

The parties filed a motion with the court to temporarily stay this action until the resolution of the motion(s) to dismiss in the securities class action pending in the United District Court for the District of New Jersey.

In response, the court dismissed the action without prejudice with leave to refile a complaint following the resolution of the motion(s) to dismiss in the securities class action pending in the United District Court for the District of New Jersey.

On October 22, 2018, another shareholder derivative complaint was filed on behalf of the Company in the United District Court for the Southern District of New York ( Finitz v.

A-18-774890-B) without prejudice.

On October 6, 2023, plaintiff filed a notice in Finitz v.

O’Rourke, et al.

1:18-cv-09640).

The shareholder plaintiffs allege breach of fiduciary duty, waste of corporate assets, and unjust enrichment against certain of the Company’s officers, directors, and an investor.

The complaint’s allegations are substantially similar to those made in the other securities class action and shareholder derivative complaints filed in 2018.

The complaint seeks unspecific monetary damages and corporate governance changes.

Upon the parties’ stipulation, the court issued an order temporarily staying this action until the resolution of the motion(s) to dismiss in the securities class action pending in the United District Court for the District of New Jersey.

On December 13, 2018, another shareholder derivative complaint was filed on behalf of the Company in the United District Court for the Northern District of New York ( Monts v.

1:18-cv-09640) voluntarily dismissing all claims without prejudice.

On September 26, 2023, plaintiff filed a notice in Monts v.

O’Rourke, et al.

1:18-cv-01443).

The shareholder plaintiffs allege claims for violation of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, unjust enrichment, waste of corporate assets, and aiding and abetting against certain of the Company’s officers, directors, and an investor.

The complaint’s allegations are substantially similar to those made in the other securities class action and shareholder derivative complaints filed in 2018.

The complaint seeks unspecific monetary damages and corporate governance changes.

Defendants intend to vigorously contest plaintiffs’ allegations in the shareholder derivative actions and plaintiffs’ right to bring the action in the name of Riot Blockchain.

But because this litigation is still at this early stage, we cannot reasonably estimate the likelihood of an unfavorable outcome or the magnitude of such an outcome, if any.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The following table presents the components of the loss from continuing operations before income taxes:

1:18-cv-01443) voluntarily dismissing all claims without prejudice.

The following table presents the components of the loss before provision for income taxes:

For the years ended December 31,

Loss from Continuing Operations before Income Taxes

Loss before provision for income taxes

The following table presents the components of income tax benefit (expense):

3 unchanged sentences

Total benefit (expense) for income taxes

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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:

1 unchanged sentence

Deferred income tax assets:

Net operating loss carryforwards

Research and development credit carryforwards

Long-term investments

Operating lease liabilities

Stock option expense

Bitcoin assets

Intangible assets

Operating lease liability

Deferred revenue

Stock compensation

Intangible assets

Net operating losses

Other deferred tax assets

Total deferred tax assets

3 unchanged sentences

Derivative asset

Property and equipment and other

Right of use asset

Other deferred tax liabilities

Total deferred tax liabilities

Net deferred tax assets (liabilities)

2 unchanged sentences

Under the Tax Cuts and Jobs Act, $ 398.0 million federal and $ 70.0 million state NOLs incurred after December 31, 2017 are carried forward indefinitely, but may be limited in utilization to 80% of taxable income.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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 NOLs may be limited under Internal Revenue Code Section 382 and 383.

State NOLs are subject to similar limitations in many cases.

As a result, our substantial NOLs may not have any value to the Company.

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.

4 unchanged sentences

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, 2023 and 2022.

The valuation allowance increased by approximately $ 46.4 million during the year ended December 31, 2022.

The following table reconciles the tax expense (benefit) based on the U.S.

federal statutory rate with actual tax expense (benefit):

The valuation allowance decreased by approximately $ 42.5 million during the year ended December 31, 2023.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

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,

Statutory federal income tax expense (benefit)

State taxes, net of federal tax expense (benefit)

Federal statutory rate

State and local taxes, net of federal taxes

Goodwill impairment

Contingent payment

Section 162m compensation

Stock compensation

Other nondeductible expenses

Tax return to provision true-up

State tax rate change

Return to provision

Rate change on deferreds

Deferred adjustment

Change in valuation allowance

Income taxes expense (benefit)

Income tax benefit (expense)

The Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2023 and 2022.

2 unchanged sentences

The Company is subject to U.S.

federal income tax and primarily Florida, Colorado, Louisiana, and Texas state income tax.

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.

Earnings Per Share

The holdback of 70,165 shares as security for the ESS Metron sellers’ indemnification obligations (see Note 5.

Acquisitions ) is excluded from the basic and diluted net income (loss) per share calculations.

The following table presents potentially dilutive securities that were not included in the computation of diluted net income (loss) per share as their inclusion would be anti-dilutive:

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:

Warrants to purchase common stock

Options to purchase common stock

Unvested restricted stock awards

Unvested restricted stock awards (a)

Unvested restricted stock units

Convertible Series B preferred shares

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

(a) Unvested restricted stock awards are included in total common shares outstanding but are excluded from the calculation of basic earnings per share.

Segment Information

2 unchanged sentences

The reportable segments are identified based on the types of service performed.

The Bitcoin Mining segment generates revenue from the Bitcoin the Company earns through its mining activities.

Bitcoin Mining cost of revenue consists primarily of direct production costs of mining operations, including electricity, labor, insurance, variable data center hosting fees, but excluding depreciation and amortization.

The Data Center Hosting segment generates revenue from long-term customer contracts for the provision/consumption of electricity, construction of infrastructure, operation of data centers, and maintenance/management of computing capacity from the Company’s high performance data center facility in Rockdale, Texas.

Data Center Hosting cost of revenue consists primarily of direct power costs, rent and compensation costs.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The Engineering segment generates revenue through customer contracts for custom engineered electrical products.

Engineering cost of revenue consists primarily of direct materials and labor, as well as indirect manufacturing costs.

The CODM analyzes the performance of the segments based on reportable segment revenue and reportable segment cost of revenue.

2 unchanged sentences

Therefore, the Company 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 mining activities.

The Engineering segment generates revenue through customer contracts for custom engineered electrical products.

The Data Center Hosting segment purchases custom engineered electrical products from the Engineering segment in the ordinary course of business.

All revenue and cost of revenues from intersegment transactions have been eliminated in the consolidated statements of operations.

All revenue and cost of revenue from intersegment transactions have been eliminated in the Consolidated Statements of Operations.

All Other revenue is from external customers.

During the year ended December 31, 2022, 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.

Concentrations

During the years ended December 31, 2023 and 2021, 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.

During the years ended December 31, 2021 and 2020, no single customer or related group of customers contributed 10% or more of the Company’s total consolidated revenue.

As of December 31, 2023 and 2022, five customers accounted for more than 70 % and 80 %, respectively, of consolidated accounts receivable, net.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

The following table presents revenue and cost of revenues for the Company’s reportable segments, reconciled to the Consolidated Statements of Operations:

The following table presents revenue and cost of revenue for the Company’s reportable segments, reconciled to the Consolidated Statements of Operations:

Years Ended December 31,

(as restated)

Reportable segment revenue:

3 unchanged sentences

Total segment and consolidated revenue

Reportable segment cost of revenues:

Reportable segment cost of revenue:

Bitcoin Mining

Data Center Hosting

Total segment and consolidated cost of revenues

Total segment and consolidated cost of revenue

Reconciling Items:

2 unchanged sentences

Depreciation and amortization

Change in fair value of Bitcoin

Change in fair value of derivative asset

1 unchanged sentence

Change in fair value of contingent consideration

Realized gain on sale/exchange of Bitcoin

Gain on exchange of equipment

Realized gain on sale of Bitcoin

(Loss) gain on sale/exchange of equipment

Casualty-related (charges) recoveries, net

2 unchanged sentences

Impairment of miners

Impairment of long-term investment

Reversal of registration rights penalty

Interest income (expense)

6 unchanged sentences

Net income (loss)

Restatement of Previously Issued Interim Condensed Consolidated Financial Statements

The following tables present the impacts of the restatement adjustments, as described in Note 2.

Restatement of Previously Issued Financial Statements, to the previously reported financial information as of and for the periods ended March 31, 2022 and 2021, June 30, 2022 and 2021, and September 30, 2022 and 2021.

Restated Statements of Stockholders’ Equity are not presented as all impacted items on those statements, Net income (loss), Accumulated deficit, and Total stockholders’ equity, are presented within the following tables.

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Restated Condensed Consolidated Balance Sheets (Unaudited)

As of March 31, 2022 (unaudited)

As of March 31, 2021 (unaudited)

As previously

Current assets

Cash and cash equivalents

Accounts receivable, net

Costs and estimated earnings in excess of billings

Prepaid expenses and other current assets

Future power credits, current portion

Investments in marketable equity securities, at fair value

Total current assets

Property and equipment, net

Finite-lived intangible assets, net

Derivative asset

Operating lease right-of-use assets

Other long-term assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

Billings in excess of costs and estimated earnings

Accrued expenses

Deferred revenue, current portion

Contingent consideration liability - future power credits, current portion

Operating lease liability, current portion

Total current liabilities

Deferred revenue, less current portion

Operating lease liability, less current portion

Other long-term liabilities

Total liabilities

Stockholders’ equity

Preferred stock, no par value:

2 % Series A Convertible Preferred stock

0 % Series B Convertible Preferred stock

Common stock, no par value

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

As of June 30, 2022 (unaudited)

As of June 30, 2021 (unaudited)

As previously

Current assets

Cash and cash equivalents

Accounts receivable, net

Costs and estimated earnings in excess of billings

Prepaid expenses and other current assets

Future power credits, current portion

Investments in marketable equity securities, at fair value

Total current assets

Property and equipment, net

Finite-lived intangible assets, net

Derivative asset

Operating lease right-of-use assets

Future power credits, less current portion

Other long-term assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

Billings in excess of costs and estimated earnings

Accrued expenses

Deferred revenue, current portion

Contingent consideration liability - future power credits, current portion

Operating lease liability, current portion

Total current liabilities

Deferred revenue, less current portion

Operating lease liability, less current portion

Contingent consideration liability - future power credits, less current portion

Deferred tax liability

Other long-term liabilities

Total liabilities

Stockholders’ equity

Preferred stock, no par value:

2 % Series A Convertible Preferred stock

0 % Series B Convertible Preferred stock

Common stock, no par value

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

As of September 30, 2022 (unaudited)

As of September 30, 2021 (unaudited)

As previously

Current assets

Cash and cash equivalents

Accounts receivable, net

Costs and estimated earnings in excess of billings

Prepaid expenses and other current assets

Future power credits, current portion

Investments in marketable equity securities, at fair value

Total current assets

Property and equipment, net

Finite-lived intangible assets, net

Derivative asset

Operating lease right-of-use assets

Future power credits, less current portion

Other long-term assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

Billings in excess of costs and estimated earnings

Accrued expenses

Deferred revenue, current portion

Contingent consideration liability - future power credits, current portion

Operating lease liability, current portion

Total current liabilities

Deferred revenue, less current portion

Operating lease liability, less current portion

Contingent consideration liability - future power credits, less current portion

Deferred tax liability

Other long-term liabilities

Total liabilities

Stockholders’ equity

Preferred stock, no par value:

2 % Series A Convertible Preferred stock

0 % Series B Convertible Preferred stock

Common stock, no par value

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Restated Condensed Consolidated Statements of Operations (Unaudited)

For the three months ended March 31, 2022 (unaudited)

As previously

Bitcoin Mining

Data Center Hosting

Other revenue

Total revenue

Costs and expenses:

Cost of revenue:

Bitcoin Mining

Data Center Hosting

Selling, general, and administrative

Depreciation and amortization

Change in fair value of derivative asset

Change in fair value of contingent consideration

Realized gain on sale/exchange of Bitcoin

Impairment of Bitcoin

Total costs and expenses

Operating income (loss)

Other income (expense):

Interest income (expense)

Unrealized loss on marketable equity securities

Total other income (expense)

Net income (loss) before taxes

Current income tax benefit (expense)

Deferred income tax benefit (expense)

Total income tax benefit (expense)

Net income (loss)

Net (income) loss attributable to non-controlling interest

Net income (loss) attributable to Riot Platforms, Inc.

Basic and diluted net income (loss) per share

Basic and diluted weighted average number of shares outstanding

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the three months ended June 30, 2022 (unaudited)

For the six months ended June 30, 2022 (unaudited)

As previously

Bitcoin Mining

Data Center Hosting

Other revenue

Total revenue

Costs and expenses:

Cost of revenue:

Bitcoin Mining

Data Center Hosting

Acquisition-related costs

Selling, general, and administrative

Depreciation and amortization

Change in fair value of derivative asset

Power curtailment credits

Change in fair value of contingent consideration

Realized gain on sale/exchange of Bitcoin

Gain on exchange of equipment

Impairment of Bitcoin

Impairment of goodwill

Total costs and expenses

Operating income (loss)

Other income (expense):

Interest income (expense)

Realized loss on sale of marketable equity securities

Unrealized loss on marketable equity securities

Other income (expense)

Total other income (expense)

Net income (loss) before taxes

Current income tax benefit (expense)

Deferred income tax benefit (expense)

Total income tax benefit (expense)

Net income (loss)

Basic and diluted net income (loss) per share

Basic and diluted weighted average number of shares outstanding

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the three months ended September 30, 2022 (unaudited)

For the nine months ended September 30, 2022 (unaudited)

As previously

Bitcoin Mining

Data Center Hosting

Other revenue

Total revenue

Costs and expenses:

Cost of revenue:

Bitcoin Mining

Data Center Hosting

Acquisition-related costs

Selling, general, and administrative

Depreciation and amortization

Change in fair value of derivative asset

Power curtailment credits

Change in fair value of contingent consideration

Realized gain on sale/exchange of Bitcoin

Gain on exchange of equipment

Impairment of Bitcoin

Impairment of goodwill

Total costs and expenses

Operating income (loss)

Other income (expense):

Interest income (expense)

Realized loss on sale of marketable equity securities

Unrealized loss on marketable equity securities

Other income (expense)

Total other income (expense)

Net income (loss) before taxes

Current income tax benefit (expense)

Deferred income tax benefit (expense)

Total income tax benefit (expense)

Net income (loss)

Basic and diluted net income (loss) per share

Basic and diluted weighted average number of shares outstanding

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2021 (unaudited)

Impacts of Adoption of ASU 2023-08

The following tables present a summary of the impacts of the adoption of ASU 2023-08, effective January 1, 2023, on the Company’s interim Condensed Consolidated Statements of Operations provided during the year ended December 31, 2023 ( all amounts are unaudited ):

For the three months ended March 31, 2023

Consolidated Statements of Operations

As previously

Bitcoin Mining

Other revenue

Total revenue

Costs and expenses:

Cost of revenue:

Bitcoin Mining

Selling, general, and administrative

Depreciation and amortization

Realized gain on sale of Bitcoin

Impairment of Bitcoin

Total costs and expenses

Change in fair value of Bitcoin

Operating income (loss)

Interest income (expense)

Net income (loss) before taxes

Current income tax benefit (expense)

Net income (loss)

3 unchanged sentences

Diluted weighted average number of shares outstanding

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the three months ended June 30, 2021 (unaudited)

For the six months ended June 30, 2021 (unaudited)

For the three months ended June 30, 2023

For the six months ended June 30, 2023

Consolidated Statements of Operations

As previously

Bitcoin Mining

Data Center Hosting

Other revenue

Total revenue

Costs and expenses:

Cost of revenue:

Bitcoin Mining

Data Center Hosting

Acquisition-related costs

Selling, general, and administrative

Depreciation and amortization

Change in fair value of derivative asset

Power curtailment credits

Change in fair value of contingent consideration

Realized gain on sale/exchange of Bitcoin

Realized gain on sale of Bitcoin

Impairment of Bitcoin

Total costs and expenses

Change in fair value of Bitcoin

Operating income (loss)

Other income (expense):

Interest income (expense)

Realized gain on sale/exchange of long-term investment

Unrealized loss on marketable equity securities

Other income (expense)

Total other income (expense)

Net income (loss) before taxes

Current income tax benefit (expense)

Deferred income tax benefit (expense)

Total income tax benefit (expense)

Net income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

Basic weighted average number of shares outstanding

Diluted weighted average number of shares outstanding

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the three months ended September 30, 2021 (unaudited)

For the nine months ended September 30, 2021 (unaudited)

Basic and diluted net income (loss) per share

Basic and diluted weighted average number of shares outstanding

For the three months ended September 30, 2023

For the nine months ended September 30, 2023

Consolidated Statements of Operations

As previously

Bitcoin Mining

Data Center Hosting

Other revenue

Total revenue

Costs and expenses:

Cost of revenue:

Bitcoin Mining

Data Center Hosting

Acquisition-related costs

Selling, general, and administrative

Depreciation and amortization

Change in fair value of derivative asset

Power curtailment credits

Change in fair value of contingent consideration

Realized gain on sale/exchange of Bitcoin

Realized gain on sale of Bitcoin

Impairment of Bitcoin

Total costs and expenses

Change in fair value of Bitcoin

Operating income (loss)

Other income (expense):

Interest income (expense)

Realized gain on sale/exchange of long-term investment

Unrealized loss on marketable equity securities

Other income (expense)

Total other income (expense)

Net income (loss) before taxes

Current income tax benefit (expense)

Deferred income tax benefit (expense)

Total income tax benefit (expense)

Net income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

Basic weighted average number of shares outstanding

Diluted weighted average number of shares outstanding

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Restated Condensed Consolidated Statements of Cash Flow (Unaudited)

For the three months ended March 31, 2022 (unaudited)

For the three months ended March 31, 2021 (unaudited)

As previously

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Stock-based compensation

Depreciation and amortization

Amortization of license fee revenue

Amortization of right of use assets

Income tax expense (benefit)

Impairment of Bitcoin

Change in fair value of derivative asset

Change in fair value of contingent consideration

Realized gain on sale/exchange of Bitcoin

Unrealized loss on marketable equity securities

Bitcoin Mining revenue

Changes in assets and liabilities:

Proceeds from sale of Bitcoin

Accounts receivable

Costs and estimated earnings in excess of billings

Prepaid expenses and other current assets

Future power credits

Accounts payable

Billings in excess of costs and estimated earnings

Accrued expenses

Customer deposits

Deferred revenue

Lease liability

Net cash provided by (used in) operating activities

Cash flows from investing activities

Deposits on equipment

Purchases of property and equipment, including construction in progress

Patent costs incurred

Net cash used in investing activities

Cash flows from financing activities

Proceeds from the issuance of common stock / At-the-market offering

Offering costs for the issuance of common stock / At-the-market offering

Proceeds from exercise of common stock warrants

Payments on contingent consideration liability - future power credits

Repurchase of common shares to pay employee withholding taxes

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the six months ended June 30, 2022 (unaudited)

For the six months ended June 30, 2021 (unaudited)

As previously

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Stock-based compensation

Depreciation and amortization

Amortization of license fee revenue

Amortization of right of use assets

Income tax expense (benefit)

Impairment of Bitcoin

Impairment of goodwill

Change in fair value of derivative asset

Change in fair value of contingent consideration

Realized loss on sale of marketable equity securities

Realized gain on sale/exchange of long-term investment

Realized gain on sale/exchange of Bitcoin

Unrealized loss on marketable equity securities

Gain on exchange of equipment

Bitcoin Mining revenue

Changes in assets and liabilities:

Proceeds from sale of Bitcoin

Accounts receivable

Costs and estimated earnings in excess of billings

Prepaid expenses and other current assets

Future power credits

Accounts payable

Billings in excess of costs and estimated earnings

Accrued expenses

Customer deposits

Deferred revenue

Lease liability

Net cash provided by (used in) operating activities

Cash flows from investing activities

Proceeds from the sale of marketable equity securities

Acquisition of Whinstone, net of cash acquired

Proceeds from the sale of long-term investments

Deposits on equipment

Other deposits

Purchases of property and equipment, including construction in progress

Patent costs incurred

Net cash used in investing activities

Cash flows from financing activities

Proceeds from the issuance of common stock / At-the-market offering

Offering costs for the issuance of common stock / At-the-market offering

Proceeds from exercise of common stock warrants

Payments on contingent consideration liability - future power credits

Repurchase of common shares to pay employee withholding taxes

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

For the nine months ended September 30, 2022 (unaudited)

For the nine months ended September 30, 2021 (unaudited)

As previously

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Stock-based compensation

Depreciation and amortization

Amortization of license fee revenue

Amortization of right of use assets

Income tax expense (benefit)

Issuance of common stock warrant for settlement of advisory fees

Impairment of long-term investment

Impairment of Bitcoin

Impairment of goodwill

Impairment of miners

Reversal of registration rights penalty

Change in fair value of derivative asset

Change in fair value of contingent consideration

Realized loss on sale of marketable equity securities

Realized gain on sale/exchange of long-term investment

Realized gain on sale/exchange of Bitcoin

Unrealized loss on marketable equity securities

Gain on exchange of equipment

Casualty-related charges

Bitcoin Mining revenue

Changes in assets and liabilities:

Proceeds from sale of Bitcoin

Accounts receivable

Costs and estimated earnings in excess of billings

Prepaid expenses and other current assets

Future power credits

Accounts payable

Billings in excess of costs and estimated earnings

Accrued expenses

Customer deposits

Deferred revenue

Lease liability

Net cash provided by (used in) operating activities

Cash flows from investing activities

Proceeds from the sale of marketable equity securities

Acquisition of Whinstone, net of cash acquired

Acquisition of ESS Metron, net of cash acquired

Proceeds from the sale of long-term investments

Proceeds from the sale of equipment

Deposits on equipment

Other deposits

Purchases of property and equipment, including construction in progress

Patent costs incurred

Net cash used in investing activities

Cash flows from financing activities

Proceeds from the issuance of common stock / At-the-market offering

Offering costs for the issuance of common stock / At-the-market offering

Proceeds from exercise of common stock warrants

Payments on contingent consideration liability - future power credits

Repurchase of common shares to pay employee withholding taxes

Net cash provided by financing activities

Riot Platforms, Inc.

Notes to Consolidated Financial Statements

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Subsequent Events:

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued.

No significant recognized or non-recognized subsequent events were noted.

Basic and diluted net income (loss) per share

Basic and diluted weighted average number of shares outstanding

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

As of May 18, 2023, the Company dismissed Marcum LLP (“Marcum”) as it’s 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 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data