Quarterly report pursuant to Section 13 or 15(d)

Organization

v3.20.2
Organization
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization

Note 1. Organization

Nature of operations:

Riot Blockchain, Inc. operates a cryptocurrency mining operation, which utilizes specialized computers (also known as “Miners”) that generate cryptocurrency (primarily bitcoin) from the Blockchain. The Company was originally organized on July 24, 2000, as a Colorado corporation. Effective October 19, 2017, the Company's name was changed to Riot Blockchain, Inc., from Bioptix, Inc., and effective October 19, 2017, the Company changed its state of incorporation to Nevada from Colorado.

Mining equipment:

During the three months ended June 30, 2020 the Company reached agreements for the purchase of 3,040 next generation Bitmain Antminer S19 Miners (“S19 Miners”) and 2,000 next generation Bitmain Antminer S19 Pro Miners (“S19 Pro Miners”) directly from their manufacturer, BitmainTech PTE. LTD. (“Bitmain”), and paid an aggregate purchase price of approximately $7.0 million. In December 2019, the Company purchased 4,000 next generation Bitmain Antminer S17 Pro Miners (“S17 Pro Miners”) directly from Bitmain, for approximately $6.3 million.

During the three and six months ended June 30, 2020, the Company retired all of the approximately 8,000 Bitmain Antminer S9 Miners it had historically acquired through its acquisition of Kairos Global Technology, Inc., (“Kairos”) in November 2017, and from Prive Technologies, Inc. (“Prive”) and Blockchain Mining Supply & Services Ltd. (“BMSS”) in February 2018. The Company discontinued its use of these older model Miners in favor of the 4,000 S17 Miners, the 1,040 S19 Miners, and 2,000 S19 Pro Miners it acquired from Bitmain, which offer greater electricity usage efficiency and hash rate power than the retired models.

Mining facility:

After evaluating the Company’s lease arrangement and power costs at the Oklahoma mining facility (the “OKC Facility”), the Company made the strategic decision to explore alternative mining locations to reduce its overhead and operating costs. On April 8, 2020, the Company and Coinmint, LLC (“Coinmint”) entered into a co-location mining services agreement (the “Coinmint Agreement”) which enabled the Company to relocate all of its Miners from the OKC Facility to Coinmint’s Massena, New York facility (the “Coinmint Facility”) and to terminate its lease of the OKC Facility as of June 30, 2020.

Pursuant to the terms of the Coinmint Agreement, Coinmint agreed to provide up to approximately 9.5 megawatts (“MW”) of power and to perform all maintenance necessary to operate Riot’s Miners at the Coinmint Facility. In exchange, Coinmint will receive a performance fee based on the net cryptocurrencies generated by Riot’s Miners deployed at the Coinmint Facility and be reimbursed for direct production expenses. Riot expects that the relocation to the Coinmint Facility will reduce its overhead and operating costs, increase the overall uptime of its Miners, and provide it with the opportunity to continue to expand its total hash rate capacity with potential access to additional MWs of power. The initial six (6) month term of the Coinmint Agreement expires on October 8, 2020, unless it is terminated earlier by Riot or Coinmint upon ninety (90) days’ notice to the other party. After the expiration of the initial term, the Coinmint Agreement automatically renews for subsequent three (3) month terms until terminated. The Company is currently discussing an amendment to the Coinmint Agreement to revise, among other provisions, the total available electricity power and the total number of Miners it may deploy at the Coinmint Facility under the Coinmint Agreement.