Item
8.01 - Other Events.
On
December 4, 2019, the Corporation issued a press release announcing the purchase of 3,000 Antminer S17 Pro digital currency miners
from Bitmain, as disclosed under Item 1.01 of this Current Report on Form 8-K. A copy of the Corporation’s press release
announcing the purchase is attached hereto as Exhibit 99.1.
About
Riot Blockchain
Information
reported in this Current Report on Form 8-K is limited to the scope of the information reportable under a Current Report on Form
8-K under the rules and regulations of the Commission. Please refer to the additional information concerning the Corporation referenced
in the following notices and safe harbor provision for material risks and other uncertainties.
Investor
Notice
An
investment in the Corporation’s common stock involves a high degree of risk, and an investor should only purchase the Corporation’s
securities if he or she can afford to suffer the loss of his or her entire investment. In determining whether to purchase the
Corporation’s common stock, an investor should carefully consider all of the material risks described in this Current Report
on Form 8-K below, together with the factors described under Item 1A under the heading “Risk Factors” in our most
recent Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the
“SEC”) on April 2, 2019, as amended on Form 10-K/A, filed with the SEC on April 23, 2019, as supplemented and updated
by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, together with the financial or other information
contained or incorporated by reference in such reports. In addition to the risks discussed below, other risks not presently known
to us or that we currently believe to be immaterial may also adversely affect our business, financial condition and results of
operations, perhaps materially. The risks discussed below also include forward-looking statements, and actual results and events
may differ substantially from those discussed or highlighted in those forward-looking statements. See also the Section entitled
“Forward-Looking Statements” herein.
In
connection with the purchase of the Bitmain Antminer S17 Pro digital currency miners described in Item 1.01 above, the Corporation
has identified the following risk factors which, if the come to pass, may have a negative impact on our business and the results
of our operations:
We have expended
significant cash resources in connection with the acquisition of new more efficient mining equipment; however, we may never become
profitable even with this new mining equipment.
Our primary
operations are at our digital currency mining facility in Oklahoma City, Oklahoma. Our acquisition of 3,000 new Antminer S17 Pro
digital currency miners represents a substantial outlay of our available cash resources and, despite projected improved efficiency
and hash rate production from these new miners, we may never recoup our investment and our cryptocurrency mining operations may
never become profitable. This purchase represents our continued commitment to producing bitcoin at costs below retail in order
to generate cash and cash equivalents to fund our operations. We have not, however, historically been able to fund our operations
from the production of bitcoin and, accordingly, this strategy may not be successful, and we may never become profitable. Further,
even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.
Our mining
operating costs may outpace our mining revenues, which could seriously harm our business or increase our losses; our investment
in these new Antminer S17 Pro digital currency miners is significant and there is no guarantee that we will recoup our investment.
Our mining operations
are costly, and we expect our expenses may increase in the future. Our expenses may be greater than we anticipate, and our investments
to make our business more efficient may not succeed and may outpace monetization efforts. Despite projected increased hash rates
and power efficiency projections for our new Antminer S17 Pro digital currency miners, our mining operating costs may continue
to outpace our mining revenues if the trading price of bitcoin does not rebound. Increases in our costs without a corresponding
increase in our revenue would increase our losses and could seriously harm our business and financial performance.
Political
and economic uncertainty may delay or otherwise prevent the delivery of our new Antminer S17 Pro digital currency miners, which
could materially and adversely affect our business and results of operations.
Continuing political
and global macroeconomic uncertainty, including escalating trade disputes between the United States and China, may result in delayed
or failed delivery of the Antminer S17 Pro digital currency miners we purchased from Bitmain. If the United States or China imposes
increased tariffs or erects additional trade barriers, our new miners may never be delivered, and we may have difficulty recovering
the purchase price. Further, delays in the delivery and installation of the miners will alter our estimations regarding the pace
of cost recovery for these miners, which may materially harm our business. Moreover, nations and multinational organizations,
such as the European Union, may impose restrictions or bans on the use of cryptocurrencies, which may depress the value of bitcoin
and other key cryptocurrencies which we mine, which would do material harm to our business and financial performance.
We have little
control over the timely delivery of our new Antminer S17 Pro digital currency miners and delays may negatively impact our projections.
The terms of
our agreement with Bitmain do not provide assurance of timely delivery of our new Antminer S17 Pro digital currency miners and
we may not be able to deploy them in our Oklahoma City, OK mine according to our expected timeline. Our projections are based
on the anticipated timeline of delivery set forth in our agreement with Bitmain, and our anticipated returns on our investment
may be delayed due to any delay in their deliver, which could negatively affect our operations and financial performance.
The primary
digital currency for which we mine, bitcoin, is subject to halving; the digital currency reward for successfully uncovering a
block will halve several times in the future and their value may not adjust to compensate us for the reduction in the rewards
we receive from our mining efforts, which may negatively affect our projections.
Halving is a
process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus
algorithm. At a predetermined block, the mining reward is cut in half, hence the term “halving.” For bitcoin, the
reward was initially set at 50 bitcoin currency rewards per block and this was cut in half to 25 in November 28, 2012 at block
210,000 and again to 12.5 on July 9, 2016 at block 420,000. The next halving for bitcoin is expected in May 2020 at block 630,000
when the reward will reduce to 6.25. This process will reoccur until the total amount of bitcoin currency rewards issued reaches
21 million, which is expected around 2140.
While bitcoin
prices have had a history of price fluctuations around the halving of their respective digital currency rewards, there is no guarantee
that the price change will be favorable or would compensate for the reduction in mining reward. Our projections for the return
on our investment in these new Antiminer S17 Pro digital currency miners accounts for these anticipated halving events, but our
projections may not be accurate. For instance, the halving event may occur sooner than anticipated, or a corresponding and proportionate
increase in the trading price of these digital currencies may not follow these anticipated halving events. In such event, our
projections would be inaccurate and the revenue we earn from our mining operations would be less than our projections, which would
have a material adverse effect on our business and operations.
Nonconforming
delivery or failed implementation of our new Antminer S17 Pro digital currency miners could negatively impact our business.
Our investment
in our 3,000 new Bitmain Antminer S17 Pro digital currency miners anticipates prompt delivery of conforming miners and the rapid
roll out of these new miners once they are delivered; however, we cannot guarantee that conforming and timely delivery, or successful
integration of the new miners once they are delivered, will occur. Bitmain may be delayed in its delivery of our new miners, we
may encounter latent technical issues with the new miners once they are delivered, or we may discover that our Oklahoma City mine
is not suitable for our new miners, which would impair our ability to roll out our new miners in a timely fashion. If we encounter
any of these issues with regard to the implementation of our new miners, or if we encounter any unforeseen issues with the same,
we may not meet our projections regarding our production of bitcoin and other cryptocurrencies from our mining activities and
our business and financial position may suffer as a result.
Safe Harbor
The information
provided in this report may include forward -looking statements relating to future events or the future financial performance
of the Corporation. Because such statements are subject to risks and uncertainties, actual results may differ materially from
those expressed or implied by such forward-looking statements. Words such as “anticipates,” “plans,” “expects,”
“intends,” “will,” “potential,” “hope” and similar expressions are intended to
identify forward-looking statements. These forward-looking statements are based upon current expectations of the Corporation and
involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ
materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties. Detailed
information regarding factors that may cause actual results to differ materially from the results expressed or implied by statements
in report relating to the Corporation may be found in the Corporation’s periodic filings with the Commission, including
the factors described in the sections entitled “Risk Factors”, copies of which may be obtained from the SEC’s
website at www.sec.gov. The Corporation does not undertake any obligation to update forward-looking statements contained in this
report.