10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-396251

 

CIPHER MINING INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

85-1614529

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1 Vanderbilt Avenue, Floor 54, Suite C

New York, New York

10017

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (332) 262-2300

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

CIFR

 

The Nasdaq Stock Market LLC

Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per whole share

 

CIFRW

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of November 11, 2022, the registrant had 247,518,966, shares of Common Stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations

4

 

Condensed Consolidated Statement of Changes in Stockholder's Equity (Deficit)

5

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

39

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

Defaults Upon Senior Securities

40

Item 4.

Mine Safety Disclosures

41

Item 5.

Other Information

41

Item 6.

Exhibits

42

Signatures

43

 

i


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to statements regarding:

our planned buildout of cryptocurrency mining sites;
future milestones, conditions and payments under a series of agreements with Luminant ET Services Company LLC and its affiliates, as well as our discussions with Luminant related to such agreements;
our ability to raise financing in the future;
our future results of operations and financial position, industry and business trends, equity compensation, business strategy, plans, market growth and our objectives for future operations;
our commercial partnerships and supply agreements;
the ability to maintain the listing of our common stock and warrants on Nasdaq, and the potential liquidity and trading of such securities;
our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
the effects of competition and regulation on our business;
the effects of price fluctuations in the wholesale and retail power markets;
the effects of global economic, business or political conditions, such as the global coronavirus (“COVID-19”) pandemic and the disruption caused by various countermeasures to reduce its spread;
the value and volatility of Bitcoin and other cryptocurrencies; and
other factors discussed in other sections of this Quarterly Report, including the section titled “Risk Factors.”

The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2022 (the “2021 Form 10-K”), Part II, Item 1A, “Risk Factors” in this Quarterly Report and our future reports filed with the SEC. The forward-looking statements in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.

1


 

WHERE YOU CAN FIND MORE INFORMATION

Our corporate website address is https://www.ciphermining.com/ (“Corporate Website”). The contents of, or information accessible through, our Corporate Website are not part of this Quarterly Report.

The company maintains a dedicated investor website at https://investors.ciphermining.com/investors (“Investors’ Website”) which is similarly not part of this Quarterly Report. We make our filings with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, available free of charge on our Investors’ Website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC.

We may use our Investors’ Website as a distribution channel of material information about the Company including through press releases, investor presentations, sustainability reports, and notices of upcoming events. We intend to utilize our Investors’ Website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD.

Any reference to our Corporate Website or Investors’ Website addresses do not constitute incorporation by reference of the information contained on or available through those websites, and you should not consider such information to be a part of this Quarterly Report or any other filings we make with the SEC.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

CIPHER MINING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

 

September 30, 2022

 

 

December 31, 2021

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

28,111

 

 

$

209,841

 

Receivables, related party

 

731

 

 

 

-

 

Prepaid expenses and other current assets

 

8,276

 

 

 

13,819

 

Cryptocurrencies

 

2,263

 

 

 

-

 

Derivative asset

 

30,393

 

 

 

-

 

Total current assets

 

69,774

 

 

 

223,660

 

Deposits on equipment

 

200,033

 

 

 

114,857

 

Property and equipment, net

 

40,751

 

 

 

5,124

 

Security deposits

 

11,455

 

 

 

10,352

 

Investment in equity investee

 

31,690

 

 

 

-

 

Right-of-use asset

 

5,303

 

 

 

-

 

Derivative asset

 

48,487

 

 

 

-

 

Deferred investment costs

 

-

 

 

 

174

 

Total assets

$

407,493

 

 

$

354,167

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

4,665

 

 

$

242

 

Accounts payable, related party

 

3,216

 

 

 

-

 

Operating lease liability, current portion

 

1,002

 

 

 

-

 

Accrued expenses

 

10,726

 

 

 

257

 

Total current liabilities

 

19,609

 

 

 

499

 

Operating lease liability, net of current portion

 

4,762

 

 

 

-

 

Warrant liability

 

22

 

 

 

137

 

Total liabilities

 

24,393

 

 

 

636

 

Commitments and contingencies (Note 11)

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding as of September 30, 2022 and December 31, 2021

 

-

 

 

 

-

 

Common stock, $0.001 par value, 500,000,000 shares authorized, 251,043,649 and 252,131,679 shares issued as of September 30, 2022 and December 31, 2021, respectively, and 247,518,966 and 249,279,420 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

 

251

 

 

 

252

 

Additional paid-in capital

 

442,435

 

 

 

425,438

 

Treasury stock, at par, 3,524,683 and 2,852,259 shares at September 30, 2022 and December 31, 2021, respectively

 

(4

)

 

 

(3

)

Accumulated deficit

 

(59,582

)

 

 

(72,156

)

Total stockholders’ equity

 

383,100

 

 

 

353,531

 

Total liabilities and stockholders’ equity

$

407,493

 

 

$

354,167

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3


 

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended

 

 

Eight Months Ended

 

 

2022

 

 

2021

 

 

September 30, 2022

 

 

September 30, 2021

 

Costs and operating expenses (income)

 

 

 

 

 

 

 

 

 

 

 

 General and administrative

$

17,755

 

 

$

2,283

 

 

$

51,849

 

 

$

2,942

 

 Depreciation

 

11

 

 

 

-

 

 

 

26

 

 

 

1

 

 Change in fair value of derivative asset

 

(85,658

)

 

 

-

 

 

 

(85,658

)

 

 

-

 

 Realized gain on sale of cryptocurrencies

 

(6

)

 

 

-

 

 

 

(6

)

 

 

-

 

 Impairment of cryptocurrencies

 

320

 

 

 

-

 

 

 

859

 

 

 

-

 

 Equity in loss of equity investment

 

8,345

 

 

 

-

 

 

 

20,577

 

 

 

-

 

 Total costs and operating expenses (income)

 

(59,233

)

 

 

2,283

 

 

 

(12,353

)

 

 

2,943

 

Operating income (loss)

 

59,233

 

 

 

(2,283

)

 

 

12,353

 

 

 

(2,943

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 Interest income

 

55

 

 

 

1

 

 

 

106

 

 

 

1

 

 Interest expense

 

-

 

 

 

(26

)

 

 

-

 

 

 

(27

)

 Change in fair value of warrant liability

 

4

 

 

 

(113

)

 

 

115

 

 

 

(113

)

 Total other income (expense)

 

59

 

 

 

(138

)

 

 

221

 

 

 

(139

)

Net income (loss)

$

59,292

 

 

$

(2,421

)

 

$

12,574

 

 

$

(3,082

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - basic

$

0.24

 

 

$

(0.01

)

 

$

0.05

 

 

$

(0.01

)

Net income (loss) per share - diluted

$

0.24

 

 

$

(0.01

)

 

$

0.05

 

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

247,508,745

 

 

 

217,644,991

 

 

 

248,461,373

 

 

 

206,708,013

 

Weighted average shares outstanding - diluted

 

248,342,200

 

 

 

217,644,991

 

 

 

248,782,665

 

 

 

206,708,013

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except for share amounts)

(unaudited)

 

Three Months Ended September 30, 2022

 

 

Common Stock

 

 

Additional

 

 

Treasury Stock

 

 

Accumulated

 

 

Total Stockholders’

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Equity

 

Balance as of June 30, 2022

 

251,001,072

 

 

$

251

 

 

$

431,966

 

 

 

(3,511,490

)

 

$

(4

)

 

$

(118,874

)

 

$

313,339

 

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

 

42,577

 

 

 

-

 

 

 

(25

)

 

 

(13,193

)

 

 

-

 

 

 

-

 

 

 

(25

)

Share-based compensation

 

-

 

 

 

-

 

 

 

10,494

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,494

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

59,292

 

 

 

59,292

 

Balance as of September 30, 2022

 

251,043,649

 

 

$

251

 

 

$

442,435

 

 

 

(3,524,683

)

 

$

(4

)

 

$

(59,582

)

 

$

383,100

 

 

 

Three Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Subscription

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Receivable

 

 

Paid-in Capital

 

 

Deficit

 

 

Equity (Deficit)

 

Balance as of June 30, 2021

 

200,000,000

 

 

$

200

 

 

$

-

 

 

$

(200

)

 

$

(664

)

 

$

(664

)

Business Combination, net of redemptions and equity issuance costs of $41.0 million

 

46,381,119

 

 

 

46

 

 

 

(1,690

)

 

 

384,708

 

 

 

-

 

 

 

383,064

 

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,421

)

 

 

(2,421

)

Balance as of September 30, 2021

 

246,381,119

 

 

$

246

 

 

$

(1,690

)

 

$

384,508

 

 

$

(3,085

)

 

$

379,979

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

5


 

 

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except for share amounts)

(unaudited)

 

Nine Months Ended September 30, 2022

 

 

Common Stock

 

 

Additional

 

 

Treasury Stock

 

 

Accumulated

 

 

Total Stockholders’

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

252,131,679

 

 

$

252

 

 

$

425,438

 

 

 

(2,852,259

)

 

$

(3

)

 

$

(72,156

)

 

$

353,531

 

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

 

1,802,123

 

 

 

2

 

 

 

(3,078

)

 

 

(672,424

)

 

 

(1

)

 

 

-

 

 

 

(3,077

)

Warrants exercised

 

20

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Common stock cancelled

 

(2,890,173

)

 

 

(3

)

 

 

(9,997

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,000

)

Share-based compensation

 

-

 

 

 

-

 

 

 

30,072

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,072

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,574

 

 

 

12,574

 

Balance as of September 30, 2022

 

251,043,649

 

 

$

251

 

 

$

442,435

 

 

 

(3,524,683

)

 

$

(4

)

 

$

(59,582

)

 

$

383,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eight Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Subscription

 

 

Additional

 

 

Accumulated

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Receivable

 

 

Paid-in Capital

 

 

Deficit

 

 

Equity (Deficit)

 

Balance as of January 31, 2021

 

200,000,000

 

 

$

200

 

 

$

-

 

 

$

(200

)

 

$

(3

)

 

$

(3

)

Business Combination, net of redemptions and equity issuance costs of $41.0 million

 

46,381,119

 

 

 

46

 

 

 

(1,690

)

 

 

384,708

 

 

 

-

 

 

 

383,064

 

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,082

)

 

 

(3,082

)

Balance as of September 30, 2021

 

246,381,119

 

 

$

246

 

 

$

(1,690

)

 

$

384,508

 

 

$

(3,085

)

 

$

379,979

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


 

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Nine Months Ended

 

 

Eight Months Ended

 

 

September 30, 2022

 

 

September 30, 2021

 

Cash flows from operating activities

 

 

 

 

 

Net income (loss)

$

12,574

 

 

$

(3,082

)

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

 

 

 

 

 

 Depreciation

 

26

 

 

 

1

 

 Amortization of right-of-use assets

 

556

 

 

 

-

 

 Change in fair value of derivative asset

 

(85,658

)

 

 

-

 

 Change in fair value of warrant liability

 

(115

)

 

 

113

 

 Share-based compensation

 

30,072

 

 

 

-

 

 Equity in loss of equity investment

 

20,577

 

 

 

-

 

 Realized gain on sale of cryptocurrencies

 

(6

)

 

 

-

 

 Impairment of cryptocurrencies

 

859

 

 

 

-

 

 Changes in assets and liabilities:

 

 

 

 

 

 Proceeds from power sales

 

1,722

 

 

 

-

 

 Proceeds from reduction of scheduled power

 

5,056

 

 

 

-

 

 Proceeds from sale of cryptocurrencies

 

23

 

 

 

-

 

 Receivables, related party

 

(731

)

 

 

-

 

 Prepaid expenses and other current assets

 

5,412

 

 

 

(14,916

)

 Security deposits

 

(1,103

)

 

 

(9,381

)

 Accounts payable

 

400

 

 

 

87

 

 Accrued expenses

 

1,408