SEC Filing | Cipher Mining Inc.

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10-Q

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, 2023


☐	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 November 6, 2023, the registrant had 254,660,072 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	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	39
Signatures		40

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 or additional 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, such as the ongoing military conflict between Russia and Ukraine, and the armed conflict in Israel and its surrounding regions. 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, Israel 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.

•

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 other 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.

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.

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, 2023			December 31, 2022
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	3,342		$	11,927
Accounts receivable		360			98
Receivables, related party		-			1,102
Prepaid expenses and other current assets		3,962			7,254
Bitcoin		13,667			6,283
Derivative asset		33,087			21,071
Total current assets		54,418			47,735
Property and equipment, net		258,295			191,784
Deposits on equipment		1,220			73,018
Investment in equity investees		33,609			37,478
Derivative asset		46,963			45,631
Operating lease right-of-use asset		4,399			5,087
Security deposits		17,586			17,730
Total assets	$	416,490		$	418,463
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	4,604		$	14,286
Accounts payable, related party		1,554			3,083
Accrued expenses and other current liabilities		24,813			19,353
Finance lease liability, current portion		6,749			2,567
Operating lease liability, current portion		1,117			1,030
Warrant liability		56			7
Total current liabilities		38,893			40,326
Asset retirement obligation		17,966			16,682
Finance lease liability		12,014			12,229
Operating lease liability		3,645			4,494
Deferred tax liability		1,285			1,840
Total liabilities		73,803			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 September 30, 2023 and December 31, 2022		-			-
Common stock, $0.001 par value, 500,000,000 shares authorized, 259,682,742 and 251,095,305 shares issued as of September 30, 2023 and December 31, 2022, respectively, and 254,558,178 and 247,551,958 shares outstanding as of September 30, 2023 and December 31, 2022, respectively		259			251
Additional paid-in capital		490,655			453,854
Accumulated deficit		(148,222	)		(111,209	)
Treasury stock, at par, 5,124,564 and 3,543,347 shares at September 30, 2023 and December 31, 2022, respectively		(5	)		(4	)
Total stockholders’ equity		342,687			342,892
Total liabilities and stockholders’ equity	$	416,490		$	418,463

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

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 September 30,
	2023			2022			2023			2022
Revenue - bitcoin mining	$	30,304		$	-		$	83,423		$	-
Costs and operating expenses (income)
Cost of revenue		13,008			-			37,017			-
General and administrative		23,898			17,755			62,653			51,849
Depreciation		16,217			11			42,284			26
Change in fair value of derivative asset		(4,744	)		(85,658	)		(13,294	)		(85,658	)
Power sales		(2,720	)		-			(8,469	)		-
Equity in losses of equity investees		1,998			8,345			4,179			20,577
Realized gain on sale of bitcoin		(2,505	)		(6	)		(10,711	)		(6	)
Impairment of bitcoin		3,443			320			8,076			859
Other gains		(95	)		-			(2,355	)		-
Total costs and operating expenses (income)		48,500			(59,233	)		119,380			(12,353	)
Operating (loss) income		(18,196	)		59,233			(35,957	)		12,353
Other income (expense)
Interest income		11			55			112			106
Interest expense		(627	)		-			(1,513	)		-
Change in fair value of warrant liability		10			4			(49	)		115
Other expense		(6	)		-			(18	)		-
Total other (expense) income		(612	)		59			(1,468	)		221
(Loss) income before taxes		(18,808	)		59,292			(37,425	)		12,574
Current income tax expense		(95	)		-			(143	)		-
Deferred income tax benefit		1,192			-			555			-
Total income tax benefit		1,097			-			412			-
Net (loss) income	$	(17,711	)	$	59,292		$	(37,013	)	$	12,574
Net (loss) income per share - basic	$	(0.07	)	$	0.24		$	(0.15	)	$	0.05
Net (loss) income per share - diluted	$	(0.07	)	$	0.24		$	(0.15	)	$	0.05
Weighted average shares outstanding - basic		251,789,350			247,508,745			249,858,033			248,461,373
Weighted average shares outstanding - diluted		251,789,350			248,342,200			249,858,033			248,782,665

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

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except for share amounts)

(unaudited)

Three Months Ended September 30, 2023


	Common Stock				Additional			Accumulated			Treasury Stock						Total
	Shares		Amount		Paid-in Capital			Deficit			Shares			Amount			Stockholders’ Equity
Balance as of June 30, 2023		254,795,626	$	254	$	473,471		$	(130,511	)		(4,381,735	)	$	(4	)	$	343,210
Issuance of common shares, net of offering costs - At-the-market offering		2,831,736		4		8,597			-			-			-			8,601
Delivery of common stock underlying restricted stock units, net of shares settled for tax withholding settlement		1,983,952		1		(2,112	)		-			(742,829	)		(1	)		(2,112	)
Share-based compensation		71,428		-		10,699			-			-			-			10,699
Net loss		-		-		-			(17,711	)		-			-			(17,711	)
Balance as of September 30, 2023		259,682,742	$	259	$	490,655		$	(148,222	)		(5,124,564	)	$	(5	)	$	342,687

Three Months Ended September 30, 2022


	Common Stock				Additional			Accumulated			Treasury Stock						Total
	Shares		Amount		Paid-in Capital			Deficit			Shares			Amount			Stockholders’ Equity
Balance as of June 30, 2022		251,001,072	$	251	$	431,966		$	(118,874	)		(3,511,490	)	$	(4	)	$	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		$	(59,582	)		(3,524,683	)	$	(4	)	$	383,100

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except for share amounts)

(unaudited)

Nine Months Ended September 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		3,809,943		4		11,341			-			-			-			11,345
Delivery of common stock underlying restricted stock units, net of shares settled for tax withholding settlement		4,457,708		4		(3,227	)		-			(1,581,217	)		(1	)		(3,224	)
Share-based compensation		319,786		-		28,687			-			-			-			28,687
Net loss		-		-		-			(37,013	)		-			-			(37,013	)
Balance as of September 30, 2023		259,682,742	$	259	$	490,655		$	(148,222	)		(5,124,564	)	$	(5	)	$	342,687

Nine Months Ended September 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		1,802,123			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		$	(59,582	)		(3,524,683	)	$	(4	)	$	383,100

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

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities
Net (loss) income	$	(37,013	)	$	12,574
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		42,284			26
Amortization of operating right-of-use asset		688			556
Share-based compensation		28,687			30,072
Equity in losses of equity investees		4,179			20,577
Impairment of bitcoin		8,076			859
Non-cash lease expense		1,477			-
Deferred income taxes		(555	)		-
Bitcoin received as payment for services		(83,161	)		-
Change in fair value of derivative asset		(13,294	)		(85,658	)
Change in fair value of warrant liability		49			(115	)
Realized gain on sale of bitcoin		(10,711	)		(6	)
Changes in assets and liabilities:
Proceeds from sale of bitcoin		78,729			23
Proceeds from power sales		-			1,722
Proceeds from reduction of scheduled power		-			5,056
Accounts receivable		(262	)		-
Receivables, related party		(958	)		(731	)
Prepaid expenses and other current assets		3,238			5,412
Security deposits		144			(1,103	)
Accounts payable		2,366			400
Accounts payable, related party		(1,529	)		-
Accrued expenses and other current liabilities		10,732			1,408
Lease liabilities		(762	)		37
Net cash provided by (used in) operating activities		32,404			(8,891	)
Cash flows from investing activities
Deposits on equipment		(4,533