Riot Blockchain, Inc. (now Riot Platforms, Inc.) — FY2020 Form 10-K
Business context and reporting period. The filing covers the fiscal year ended December 31, 2020; it is an annual report, not a standalone Q4 report. The company generated substantially all revenue from cryptocurrency mining, primarily bitcoin, using Bitmain Antminers at Coinmint’s facility in Massena, New York. Unless noted, amounts below are in U.S. dollars.
Key financial metrics
| Metric | FY2020 / Dec. 31, 2020 | FY2019 / Dec. 31, 2019 |
|---|---|---|
| Total revenue | $12.1 million | $6.8 million |
| Cryptocurrency mining revenue | $12.0 million | $6.7 million |
| Operating loss | $19.3 million | $10.1 million |
| Net loss attributable to Riot | $12.7 million; $0.30 per share | $20.0 million; $1.02 per share |
| Cash and cash equivalents | $223.4 million | $7.4 million |
| Working capital | $233.9 million | Not clearly stated for comparison |
| Net cash used in operating activities | $11.1 million | $15.4 million |
| Net cash used in investing activities | $32.8 million | $3.2 million |
| Net cash provided by financing activities | $259.9 million | $25.9 million |
| Total liabilities | $3.1 million | $4.1 million |
| Stockholders’ equity | $277.1 million | $26.2 million |
Margins and other metrics. Cost of mining revenue was $6.3 million, or 52.2% of mining revenue, versus $6.1 million, or 90.4%, in 2019. The corresponding mining-revenue contribution before depreciation and other expenses was approximately $5.7 million. Cash increased substantially, primarily through equity issuance. The company reported no significant interest-bearing debt at year-end; its 2019 convertible notes had been converted to equity.
Material changes versus FY2019
- Bitcoin mined increased about 9.4%, to 1,033 BTC from 944 BTC. Mining revenue rose about 78%, largely reflecting higher average bitcoin prices; the company also curtailed litecoin and bitcoin cash mining.
- Operating loss widened, reflecting higher depreciation and a $9.4 million impairment of the Coinsquare investment. Net loss narrowed, partly because 2019 included substantial convertible-note and warrant fair-value losses.
- The company raised $257.5 million net through at-the-market equity sales during 2020, issuing 49.9 million shares. Shares outstanding rose to 78.5 million at year-end from 25.1 million a year earlier.
- Operations moved from the Oklahoma City facility to Coinmint in New York in 2020. Management cited lower overhead and power costs and improved uptime.
- At year-end, the fleet comprised 7,043 newer-generation miners with estimated capacity of 0.57 EH/s, compared with the company’s older fleet at the end of 2019.
Outlook, risks, contingencies and unusual items
- Expansion plans: Management estimated that full deployment of the miners ordered would bring the fleet to 39,146 machines and approximately 4.0 EH/s, using about 127 MW, by November 2021. These are estimates dependent on delivery, deployment, and access to power, not guaranteed results.
- Mining purchases and power: The 2020 miner commitments totaled approximately $76.1 million, with $37.6 million remaining payable in 2021 under the disclosed schedules. Coinmint’s written agreement provided for approximately 9.5 MW, while the filing says power access had increased without a formal written amendment sufficient to secure the expanded fleet.
- Liquidity and funding: Management said year-end cash was expected to fund operating and capital requirements for at least 12 months. The company continued to expect a need for capital to expand and remain competitive. After year-end it reported approximately $84.8 million gross proceeds from an ATM share sale, with approximately $82.7 million net proceeds also disclosed in the notes.
- Bitcoin and operating risks: Results depend heavily on bitcoin price, network hash rate and difficulty, electricity cost and availability, miner delivery and performance, and the block-reward halving. The May 2020 halving reduced the reward to 6.25 BTC per block. Management highlighted cryptocurrency-price volatility, supply-chain constraints, energy and environmental regulation, and reliance on Bitmain and third-party hosting and mining pools.
- Unusual items: The company recorded a $9.4 million impairment of its Coinsquare investment following the Ontario Securities Commission’s findings concerning Coinsquare; a $1.0 million cryptocurrency impairment; a $5.2 million realized gain on cryptocurrency sales/exchanges; and a $1.4 million reversal of a registration-rights penalty accrual.
- Controls and litigation: Management found material weaknesses in IT access controls, program-change controls, and validation of third-party data used in financial reporting. Disclosure controls were deemed ineffective at year-end; remediation was ongoing. The auditor gave an unqualified opinion on the financial statements but did not opine on internal-control effectiveness. Securities class-action and shareholder-derivative matters remained disclosed; the company said it could not estimate the class-action outcome. A separate SEC investigation concluded in January 2020 with no enforcement recommendation against Riot based on information then available.
- Other: The filing reports recurring operating losses and negative operating cash flow. No cash dividends were anticipated in the foreseeable future. A Texas pilot was evaluating immersion cooling and power-cost management; any larger deployment remained conditional on results.
Important facts for investors to verify
- Whether scheduled Bitmain deliveries occurred, and whether deployment achieved the stated hash-rate and timing estimates.
- Whether Riot secured binding, adequately priced power and hosting capacity for the planned fleet; reconcile the Coinmint agreement’s written power terms with actual access.
- How bitcoin price, network difficulty, electricity costs, and mining rewards affect realized production economics and cash generation.
- Subsequent equity issuance, dilution, cash use, and remaining capital commitments.
- Progress in remediating the reported material weaknesses, and developments in the pending litigation and other contingencies.
- The treatment and valuation of cryptocurrency holdings: the filing notes that authoritative U.S. GAAP guidance was limited and that impairment losses could not be reversed under the policy then applied.