Quarterly report pursuant to Section 13 or 15(d)

Property and Equipment

v3.22.2.2
Property and Equipment
6 Months Ended
Jun. 30, 2022
Property, Plant and Equipment [Abstract]  
Property and Equipment

Note 8. Property and Equipment 

Property and equipment: 

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

    Life (Years)     June 30, 2022     December 31, 2021  
Buildings and building improvements     10-25     $ 154,960     $ 78,548  
Land rights and land improvements     n/a       10,089      
—  
 
Miners and mining equipment     2       193,486       87,921  
Machinery and facility equipment     5-7       16,848       12,373  
Office and computer equipment     3       1,088       1,007  
Construction in progress             93,375       113,598  
Total cost of property and equipment             469,846       293,447  
Less accumulated depreciation             (58,602 )     (30,467 )
Property and equipment, net           $ 411,244     $ 262,980  

During the six months ended June 30, 2022, the Company had deployed a total of 44,720 miners in its mining operation.

During the six months ended June 30, 2022, the Company paid approximately $192.5 million as deposits, primarily for ASIC miners, which are scheduled to be delivered monthly through December 2022. As of June 30, 2022, the Company reclassified $96.3 million to property and equipment in connection with the deployment of miners at the Whinstone Facility. During the six months ended June 30, 2022, the Company received 17,438 miners at the Whinstone Facility.

During the six months ended June 30, 2022, the Company elected not to renew its co-location mining services agreement with Coinmint, which was therefore terminated automatically by its terms, effective as of July 8, 2022. In connection with the termination of its agreement with Coinmint, the Company arranged for the transfer of the miners it was operating at Coinmint’s Massena, New York facility (the “Coinmint Facility”) to the Company’s Whinstone Facility. The Company also entered into an equipment exchange agreement (the “Swap Agreement”) with a third-party Bitcoin mining company (the “Counterparty”) whereby Riot transferred approximately 5,700 of the Antminer model S19 Pro miners it had previously deployed at the Coinmint Facility to the Counterparty in exchange for the Counterparty delivering 5,000 factory-new Antminer model S19j Pro miners to Riot at the Whinstone Facility. Pursuant to the Swap Agreement, the miner exchange occurred in two stages, with the first exchange occurring in June 2022, and the second exchange occurring in July 2022. After completing the transfer of the miners to the Counterparty under the Swap Agreement, the Company relocated the balance of the miners it had deployed at the Coinmint Facility to the Whinstone Facility. In accordance with ASC 610-20, Sales and transfers of nonfinancial assets, (“ASC 610-20”), during the three and six months ended June 30, 2022, the Company recognized a gain on exchange of equipment of $8.6 million associated with the miners exchanged in June.

During the year ended December 31, 2021, the Company entered into six additional purchase agreements with Bitmain Technologies Ltd. (“Bitmain”) to acquire 52,500 Antminer model S19j miners and 30,000 of their latest Antminer model S19XP miners for a combined total purchase price of approximately $535.0 million. Pursuant to these agreements and as of June 30, 2022, approximately $110.6 million remains payable to Bitmain in installments in advance of shipment of the miners, subject to future adjustments as provided in the contracts. Shipment is scheduled to occur on a monthly basis through December 2022.

Included with construction in progress as of June 30, 2022, are deposit payments of approximately $0.1 million that relate to a Whinstone initiative for providing certain on-site temporary housing for stakeholders, including partners, analysts, shareholders, etc. The initiative arose as a result of limited accommodations for visitors in the Rockdale, TX, area, which is generally a remote area. The transaction as contemplated would involve Whinstone developing the temporary housing on land owned by Lyle Theriot (indirectly, through a limited liability company), who is part of the management team at Whinstone and who is considered a related party of Whinstone and who is considered a related party of Whinstone.. The Company is evaluating certain related party implications of the initiative, under U.S. GAAP and other applicable regulatory reporting requirements such as the Sarbanes-Oxley Act of 2002.

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

Commitment:

As of June 30, 2022, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain for a total of approximately 26,361 new model S19j Pro miners and 30,000 new model S19XP miners. Miners are scheduled to be delivered through December 2022, and the Company paid a deposit of 68% of the total purchase price. A summary of the purchase agreement commitments, deposits paid and expected delivery timing (remaining balances are payable in advance of shipping) is summarized as follows (in thousands):

Agreement Date (1)   Original Purchase Commitment     Open Purchase Commitment     Deposit Balance     Expected Shipping
April 5, 2021   $ 138,506     $ 17,068     $ 85,095     Third Quarter 2022 – Fourth Quarter 2022
October 29, 2021   $ 56,250     $ 10,800     $ 41,864     Third Quarter 2022 – Fourth Quarter 2022
November 22, 2021   $ 32,550     $ 8,085     $ 21,402     Third Quarter 2022 – Fourth Quarter 2022
December 10, 2021   $ 97,650     $ 24,255     $ 68,124     Third Quarter 2022 – Fourth Quarter 2022
December 24, 2021   $ 202,860     $ 50,400     $ 140,868     Third Quarter 2022 – Fourth Quarter 2022
Total   $ 527,816     $ 110,608     $ 357,353      

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