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 June 30, 2023

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: 001-39625

 

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 August 4, 2023, the registrant had 250,955,743 shares of Common Stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

4

 

 

 

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statement of Changes in Stockholder’s Equity

6

 

Condensed Consolidated Statements of Cash Flows

8

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

32

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

34

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

34

Item 6.

Exhibits

35

Signatures

36

 

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 contained in this Quarterly Report, other than statements of historical fact, including, without limitation, statements regarding our future results of operations and financial position, business strategy, timing and likelihood of success, potential expansion of bitcoin mining data centers, expectations regarding the operations of mining centers, and management plans and objectives are 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, although not all forward-looking statements use these words or expressions. The forward-looking statements in this Quarterly Report are only predictions and are largely based on our current expectations and projections about future events and 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 following :

The further development and acceptance of digital asset networks and other digital assets, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of digital asset systems may adversely affect an investment in us.
We may face several risks due to disruptions in the crypto asset markets, including but not limited to, the risk from depreciation in our stock price, financing risk, risk of increased losses or impairments in our investments or other assets, risks of legal proceedings and government investigations, and risks from price declines or price volatility of crypto assets.
Our business and the markets in which we operate are new and rapidly evolving, which makes it difficult to evaluate our future prospects and the risks and challenges we may encounter.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.
If we fail to grow our hashrate, we may be unable to compete, and our results of operations could suffer.
Bitcoin mining activities are energy-intensive, which may restrict the geographic locations of miners and have a negative environmental impact. Government regulators may potentially restrict the ability of electricity suppliers to provide electricity to mining operations, such as ours, increase taxes on the purchase of electricity used to mine bitcoin, or even fully or partially ban mining operations.
We have concentrated our operations in Texas and, thus, are particularly exposed to changes in the regulatory environment, market conditions and natural disasters in this state.
Our operating results may fluctuate due to the highly volatile nature of cryptocurrencies in general and, specifically, bitcoin.
We depend on third parties to provide us with certain critical equipment and may rely on components and raw materials that may be subject to price fluctuations or shortages, including ASIC chips that have been subject to periods of significant shortage and high innovation pace.
We may be affected by price fluctuations in the wholesale and retail power markets.
We are vulnerable to severe weather conditions and natural disasters, including severe heat, winter weather events, earthquakes, fires, floods, hurricanes, as well as power outages and other industrial incidents, which could severely disrupt the normal operation of our business and adversely affect our results of operations.
We are exposed to risks related to disruptions or other failures in the supply chain for bitcoin mining hardware and related data center hardware, and difficulties in obtaining new hardware.
Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence and physical degradation.
Our automated processes with respect to curtailment may adversely affect our operations.

1


 

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, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2023 (the “2022 Form 10-K”) 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.

2


 

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.

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

CIPHER MINING INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

 

June 30, 2023

 

 

December 31, 2022

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

1,741

 

 

$

11,927

 

Accounts receivable

 

380

 

 

 

98

 

Receivables, related party

 

1,614

 

 

 

1,102

 

Prepaid expenses and other current assets

 

2,260

 

 

 

7,254

 

Bitcoin

 

10,536

 

 

 

6,283

 

Derivative asset

 

25,786

 

 

 

21,071

 

Total current assets

 

42,317

 

 

 

47,735

 

Property and equipment, net

 

267,790

 

 

 

191,784

 

Deposits on equipment

 

1,675

 

 

 

73,018

 

Investment in equity investees

 

33,098

 

 

 

37,478

 

Derivative asset

 

49,466

 

 

 

45,631

 

Operating lease right-of-use asset

 

4,635

 

 

 

5,087

 

Security deposits

 

17,742

 

 

 

17,730

 

Total assets

$

416,723

 

 

$

418,463

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

2,053

 

 

$

14,286

 

Accounts payable, related party

 

1,554

 

 

 

3,083

 

Accrued expenses and other current liabilities

 

22,746

 

 

 

19,353

 

Finance lease liability, current portion

 

11,189

 

 

 

2,567

 

Operating lease liability, current portion

 

1,087

 

 

 

1,030

 

Warrant liability

 

66

 

 

 

7

 

Total current liabilities

 

38,695

 

 

 

40,326

 

Asset retirement obligation

 

17,538

 

 

 

16,682

 

Finance lease liability

 

10,836

 

 

 

12,229

 

Operating lease liability

 

3,936

 

 

 

4,494

 

Deferred tax liability

 

2,508

 

 

 

1,840

 

Total liabilities

 

73,513

 

 

 

75,571

 

Commitments and contingencies (Note 12)

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding as of June 30, 2023 and December 31, 2022

 

-

 

 

 

-

 

Common stock, $0.001 par value, 500,000,000 shares authorized, 254,795,626 and 251,095,305 shares issued as of June 30, 2023 and December 31, 2022, respectively, and 250,413,891 and 247,551,958 shares outstanding as of June 30, 2023 and December 31, 2022, respectively

 

254

 

 

 

251

 

Additional paid-in capital

 

473,471

 

 

 

453,854

 

Accumulated deficit

 

(130,511

)

 

 

(111,209

)

Treasury stock, at par, 4,381,735 and 3,543,347 shares at June 30, 2023 and December 31, 2022, respectively

 

(4

)

 

 

(4

)

Total stockholders’ equity

 

343,210

 

 

 

342,892

 

Total liabilities and stockholders’ equity

$

416,723

 

 

$

418,463

 

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

4


 

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 Revenue - bitcoin mining

$

31,224

 

 

$

-

 

 

$

53,119

 

 

$

-

 

 Costs and operating expenses (income)

 

 

 

 

 

 

 

 

 

 

 

 Cost of revenue

 

15,868

 

 

 

-

 

 

 

24,009

 

 

 

-

 

 General and administrative

 

21,335

 

 

 

16,704

 

 

 

38,755

 

 

 

34,094

 

 Depreciation

 

14,412

 

 

 

8

 

 

 

26,067

 

 

 

15

 

 Change in fair value of derivative asset

 

(3,222

)

 

 

-

 

 

 

(8,550

)

 

 

-

 

 Power sales

 

(5,651

)

 

 

-

 

 

 

(5,749

)

 

 

-

 

 Equity in losses of equity investees

 

1,431

 

 

 

12,079

 

 

 

2,181

 

 

 

12,232

 

 Realized gain on sale of bitcoin

 

(4,185

)

 

 

-

 

 

 

(8,206

)

 

 

-

 

 Impairment of bitcoin

 

2,828

 

 

 

535

 

 

 

4,633

 

 

 

539

 

 Other gains

 

-

 

 

 

-

 

 

 

(2,260

)

 

 

-

 

 Total costs and operating expenses

 

42,816

 

 

 

29,326

 

 

 

70,880

 

 

 

46,880

 

 Operating loss

 

(11,592

)

 

 

(29,326

)

 

 

(17,761

)

 

 

(46,880

)

 Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 Interest income

 

25

 

 

 

44

 

 

 

101

 

 

 

51

 

 Interest expense

 

(485

)

 

 

-

 

 

 

(886

)

 

 

-

 

 Change in fair value of warrant liability

 

(22

)

 

 

63

 

 

 

(59

)

 

 

111

 

 Other expense

 

(12

)

 

 

-

 

 

 

(12

)

 

 

-

 

 Total other income (expense)

 

(494

)

 

 

107

 

 

 

(856

)

 

 

162

 

 Loss before taxes

 

(12,086

)

 

 

(29,219

)

 

 

(18,617

)

 

 

(46,718

)

 Current income tax expense

 

(31

)

 

 

-

 

 

 

(48

)

 

 

-

 

 Deferred income tax expense

 

(584

)

 

 

-

 

 

 

(637

)

 

 

-

 

 Total income tax expense

 

(615

)

 

 

-

 

 

 

(685

)

 

 

-

 

 Net loss

$

(12,701

)

 

$

(29,219

)

 

$

(19,302

)

 

$

(46,718

)

 Net loss per share - basic and diluted

$

(0.05

)

 

$

(0.12

)

 

$

(0.08

)

 

$

(0.19

)

 Weighted average shares outstanding - basic and diluted

 

249,127,664

 

 

 

247,730,410

 

 

 

248,892,181

 

 

 

248,945,581

 

 

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

(in thousands, except for share amounts)

(unaudited)

 

 

Three Months Ended June 30, 2023

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Treasury Stock

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Stockholders’ Equity

 

Balance as of March 31, 2023

 

253,050,088

 

 

$

253

 

 

$

462,181

 

 

$

(117,810

)

 

 

(4,144,081

)

 

$

(4

)

 

$

344,620

 

Issuance of common shares, net of offering costs - At-the-market offering

 

978,207

 

 

 

1

 

 

 

2,744

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,745

 

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

 

674,817

 

 

 

-

 

 

 

(632

)

 

 

-

 

 

 

(237,654

)

 

 

-

 

 

 

(632

)

Share-based compensation

 

92,514

 

 

 

-

 

 

 

9,178

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,178

 

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

(12,701

)

 

 

-

 

 

 

-

 

 

 

(12,701

)

Balance as of June 30, 2023

 

254,795,626

 

 

$

254

 

 

$

473,471

 

 

$

(130,511

)

 

 

(4,381,735

)

 

$

(4

)

 

$

343,210

 

 

 

Three Months Ended June 30, 2022

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Treasury Stock

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Stockholders’ Equity

 

Balance as of March 31, 2022

 

253,685,763

 

 

$

254

 

 

$

431,899

 

 

$

(89,655

)

 

 

(3,511,490

)

 

$

(4

)

 

$

342,494

 

Common stock cancelled

 

(2,890,173

)

 

 

(3

)

 

 

(9,997

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,000

)

Delivery of common stock underlying restricted stock units

 

205,482

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation

 

-

 

 

 

-

 

 

 

10,064

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,064

 

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

(29,219

)

 

 

-

 

 

 

-

 

 

 

(29,219

)

Balance as of June 30, 2022

 

251,001,072

 

 

$

251

 

 

$

431,966

 

 

$

(118,874

)

 

$

(3,511,490

)

 

$

(4

)

 

$

313,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6


 

 

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except for share amounts)

(unaudited)

 

 

Six Months Ended June 30, 2023

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Treasury Stock

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Stockholders’ Equity

 

Balance as of January 1, 2023

 

251,095,305

 

 

$

251

 

 

$

453,854

 

 

$

(111,209

)

 

 

(3,543,347

)

 

$

(4

)

 

$

342,892

 

Issuance of common shares, net of offering costs - At-the-market offering

 

978,207

 

 

 

1

 

 

 

2,744

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,745

 

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

 

2,473,756

 

 

 

2

 

 

 

(1,115

)

 

 

-

 

 

 

(838,388

)

 

 

-

 

 

 

(1,113

)

Share-based compensation

 

248,358

 

 

 

-

 

 

 

17,988

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,988

 

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

(19,302

)

 

 

-

 

 

 

-

 

 

 

(19,302

)

Balance as of June 30, 2023

 

254,795,626

 

 

$

254

 

 

$

473,471

 

 

$

(130,511

)

 

 

(4,381,735

)

 

$

(4

)

 

$

343,210

 

 

 

Six Months Ended June 30, 2022

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Treasury Stock

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Stockholders’ Equity

 

Balance as of January 1, 2022

 

252,131,679

 

 

$

252

 

 

$

425,438

 

 

$

(72,156

)

 

 

(2,852,259

)

 

$

(3

)

 

$

353,531

 

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

 

1,759,546

 

 

 

2

 

 

 

(3,053

)

 

 

-

 

 

 

(659,231

)

 

 

(1

)

 

 

(3,052

)

Common stock cancelled

 

20

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Warrants exercised

 

(2,890,173

)

 

 

(3

)

 

 

(9,997

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,000

)

Share-based compensation

 

-

 

 

 

-

 

 

 

19,578

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19,578

 

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

(46,718

)

 

 

-

 

 

 

-

 

 

 

(46,718

)

Balance as of June 30, 2022

 

251,001,072

 

 

$

251

 

 

$

431,966

 

 

$

(118,874

)

 

 

(3,511,490

)

 

$

(4

)

 

$

313,339

 

 

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

7


 

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Six Months Ended June 30,

 

 

2023

 

 

2022

 

 Cash flows from operating activities

 

 

 

 

 

 Net loss

$

(