Close

Form 10-Q Cipher Mining Inc. For: Jun 30

August 9, 2022 9:23 AM EDT

Get instant alerts when news breaks on your stocks. Claim your 1-week free trial to StreetInsider Premium here.
0001819989--12-31falseQ2four year0001819989cifr:OfficeAndComputerEquipmentMember2021-12-3100018199892022-01-012022-06-300001819989cifr:BitfuryUsaIncAndOtherVendorsPrimarilyForBbacsMember2022-06-300001819989cifr:MinersAndMiningEquipmentMember2022-06-300001819989cifr:AlborzLlcMember2022-06-300001819989cifr:ServiceBasedRestrictedStockUnitsMember2022-01-012022-06-300001819989cifr:DepositsOnEquipmentMembercifr:BitfuryUSAIncMembercifr:PurchaseAgreementMember2022-06-300001819989cifr:LuminantPowerPurchaseAgreementIndependentMember2021-12-310001819989cifr:WarrantLiabilityMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001819989us-gaap:ConstructionInProgressMember2022-01-012022-06-300001819989cifr:WarrantLiabilityMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001819989us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001819989cifr:BitfuryTopHoldCoMember2021-08-270001819989cifr:CombinedLuminantLeaseAgreementsMember2022-01-012022-06-300001819989srt:MaximumMember2022-06-300001819989cifr:PurchaseAgreementMembercifr:BitfuryTopHoldcoAndParadigmControlsOfTexasLlcMember2022-06-300001819989us-gaap:CommonStockMember2022-04-012022-06-300001819989cifr:PublicWarrantsMember2021-08-270001819989cifr:SuperAcmeTechnologyHongKongMember2022-06-3000018199892022-06-300001819989us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001819989cifr:LuminantPurchaseAndSaleAgreementMember2021-12-3100018199892021-03-3100018199892021-01-310001819989cifr:BitfuryTopHoldCoMember2022-06-300001819989srt:MinimumMembercifr:BitfuryTopHoldCoMember2022-06-300001819989srt:MaximumMembercifr:BitfuryTopHoldCoMember2022-06-300001819989us-gaap:AdditionalPaidInCapitalMember2021-06-300001819989us-gaap:AdditionalPaidInCapitalMember2021-01-310001819989us-gaap:MeasurementInputExpectedDividendRateMemberus-gaap:WarrantMember2021-12-310001819989cifr:WindHQMember2022-01-012022-06-300001819989cifr:MasterServicesAndSupplyAgreementMembercifr:BitfuryTopHoldCoMember2022-01-012022-06-300001819989cifr:PrivatePlacementWarrantsMember2022-06-300001819989cifr:LuminantPowerPurchaseAgreementIndependentMember2022-06-300001819989cifr:PerformanceBasedRestrictedStockUnitsMember2022-06-300001819989cifr:BitfuryUSAIncMember2022-01-012022-06-300001819989cifr:SuperAcmeTechnologyHongKongMemberus-gaap:SubsequentEventMember2022-07-012022-08-080001819989cifr:MasterServicesAndSupplyAgreementMember2022-01-012022-06-300001819989cifr:ServiceBasedRestrictedStockUnitsMember2021-12-310001819989srt:MinimumMember2022-06-300001819989cifr:PrivatePlacementWarrantsMember2022-01-012022-06-300001819989cifr:SuperAcmeTechnologyHongKongMembercifr:AmendedSuperacmeAgreementMember2022-05-060001819989us-gaap:WarrantMember2022-06-300001819989cifr:PerformanceBasedRestrictedStockUnitsMember2022-01-012022-06-300001819989us-gaap:MeasurementInputExercisePriceMemberus-gaap:WarrantMember2021-12-310001819989cifr:BitfuryTopHoldCoMembercifr:PurchaseAgreementMemberus-gaap:ConstructionInProgressMember2021-12-310001819989us-gaap:RetainedEarningsMember2021-01-310001819989cifr:AlborzLlcMembercifr:MinersAndMiningEquipmentMember2022-01-012022-06-300001819989us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001819989cifr:MasterServicesAndSupplyAgreementMemberus-gaap:SubsequentEventMembercifr:BitfuryTopHoldcoAndParadigmControlsOfTexasLlcMember2022-07-012022-08-080001819989cifr:DepositsOnEquipmentMembercifr:PurchaseAgreementMembercifr:BitfuryUSAIncMember2021-02-012021-06-300001819989us-gaap:WarrantMember2021-12-310001819989us-gaap:AdditionalPaidInCapitalMember2022-03-310001819989us-gaap:RetainedEarningsMember2021-02-012021-06-300001819989us-gaap:SubsequentEventMembercifr:ParadigmControlsOfTexasLlcMember2022-07-012022-08-080001819989us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001819989cifr:SuperAcmeTechnologyHongKongMember2022-01-012022-06-300001819989us-gaap:RetainedEarningsMember2022-03-310001819989us-gaap:CommonStockMember2021-03-310001819989us-gaap:ConstructionInProgressMember2021-12-310001819989us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001819989cifr:BitfuryTopHoldCoMember2022-04-080001819989cifr:StandardPowerArrangementMember2022-01-012022-06-300001819989cifr:IncentiveAwardPlanMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMembercifr:PerformanceBasedRestrictedStockUnitsMembersrt:ChiefExecutiveOfficerMember2022-01-012022-06-300001819989cifr:PrivatePlacementWarrantsMember2022-01-012022-06-300001819989cifr:MinersAndMiningEquipmentMember2022-01-012022-06-300001819989cifr:DepositsOnEquipmentMembercifr:BitfuryUSAIncMembercifr:PurchaseAgreementMember2021-12-310001819989us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001819989cifr:BitmainTechnologiesLimitedMembercifr:AgreementTwoMember2022-01-012022-06-300001819989cifr:LockUpAgreementsMembercifr:BitfuryTopHoldCoMember2022-04-082022-04-080001819989us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-3000018199892022-08-050001819989cifr:LuminantPowerArrangementMember2021-07-090001819989cifr:BitfuryTopHoldCoMember2022-04-080001819989us-gaap:SoftwareDevelopmentMember2022-01-012022-06-300001819989us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001819989cifr:AlborzFacilityMember2022-04-012022-06-300001819989cifr:PerformanceBasedRestrictedStockUnitsMember2022-04-012022-06-300001819989us-gaap:AccountingStandardsUpdate201912Member2022-06-300001819989cifr:EquityIncentivePlanMembersrt:MaximumMemberus-gaap:CommonStockMember2021-08-270001819989us-gaap:FairValueMeasurementsRecurringMember2022-06-300001819989cifr:InitialDataCenterLLCMembercifr:WindHQMember2022-01-012022-06-300001819989cifr:IncentiveAwardPlanMembercifr:PerformanceBasedRestrictedStockUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheOneMembersrt:ChiefExecutiveOfficerMember2022-01-012022-06-300001819989cifr:ServiceBasedRestrictedStockUnitsMember2022-06-300001819989us-gaap:MeasurementInputPriceVolatilityMemberus-gaap:WarrantMember2022-06-300001819989cifr:PurchaseAgreementMembercifr:BitfuryUSAIncMember2022-01-012022-06-300001819989cifr:BitmainTechnologiesLimitedMember2022-01-012022-06-300001819989us-gaap:RetainedEarningsMember2021-12-310001819989cifr:OfficeAndComputerEquipmentMember2022-01-012022-06-300001819989us-gaap:CommonStockMember2021-12-310001819989cifr:LuminantPurchaseAndSaleAgreementMember2022-06-300001819989us-gaap:AdditionalPaidInCapitalMember2021-12-310001819989cifr:AlborzFacilityMember2022-01-012022-06-300001819989cifr:DepositsOnEquipmentMembercifr:PurchaseAgreementMembercifr:BitfuryUSAIncMember2022-01-012022-06-300001819989cifr:LuminantPowerArrangementMember2022-01-012022-06-300001819989us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001819989cifr:AgreementOneMembercifr:BitmainTechnologiesLimitedMember2022-01-012022-06-300001819989cifr:IncentiveAwardPlanMemberus-gaap:CommonStockMember2022-06-300001819989us-gaap:CommonStockMember2022-03-310001819989cifr:WarrantLiabilityMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-3100018199892021-04-012021-06-300001819989us-gaap:SoftwareDevelopmentMember2022-06-300001819989us-gaap:TreasuryStockMember2021-12-310001819989cifr:CombinedLuminantLeaseAgreementsMember2022-06-300001819989cifr:LuminantPowerArrangementMember2021-09-010001819989cifr:MasterServicesAndSupplyAgreementMembercifr:ParadigmControlsOfTexasLlcMembersrt:ScenarioForecastMember2022-08-012022-08-310001819989cifr:EquityIncentivePlanMember2021-08-272021-08-270001819989us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001819989cifr:PublicWarrantsMember2022-01-012022-06-300001819989us-gaap:AdditionalPaidInCapitalMember2022-06-300001819989us-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:WarrantMember2021-12-310001819989us-gaap:MeasurementInputPriceVolatilityMemberus-gaap:WarrantMember2021-12-310001819989us-gaap:ConstructionInProgressMember2022-06-300001819989cifr:WarrantLiabilityMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001819989cifr:BitfuryTopHoldCoMembercifr:PurchaseAgreementMember2021-01-012021-12-310001819989us-gaap:MeasurementInputExpectedDividendRateMemberus-gaap:WarrantMember2022-06-300001819989us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001819989cifr:BitfuryTopHoldCoMembercifr:PurchaseAgreementMember2021-12-310001819989us-gaap:AdditionalPaidInCapitalMember2021-03-310001819989us-gaap:ShareBasedCompensationAwardTrancheTwoMembercifr:IncentiveAwardPlanMembercifr:PerformanceBasedRestrictedStockUnitsMembersrt:ChiefExecutiveOfficerMember2022-01-012022-06-300001819989cifr:BitfuryTopHoldCoMember2022-06-300001819989cifr:BitfuryTopHoldCoMembercifr:DepositsOnEquipmentMembercifr:PurchaseAgreementMember2021-12-310001819989srt:MaximumMembercifr:FutureDateCenterLlcMember2022-01-012022-06-300001819989cifr:ServiceBasedRestrictedStockUnitsMember2022-04-012022-06-300001819989us-gaap:TreasuryStockMember2022-01-012022-06-300001819989cifr:AlborzFacilityMember2022-06-300001819989cifr:InitialDataCenterLLCMember2022-01-012022-06-300001819989us-gaap:TreasuryStockMember2022-06-300001819989srt:MinimumMembercifr:WindHQMembercifr:FutureDateCenterLlcMember2022-01-012022-06-3000018199892022-04-012022-06-300001819989us-gaap:AccountingStandardsUpdate202104Member2022-06-300001819989cifr:BitfuryTopHoldCoMember2022-04-082022-04-080001819989us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-3000018199892021-12-3100018199892021-06-300001819989cifr:OfficeAndComputerEquipmentMember2022-06-300001819989us-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:WarrantMember2022-06-300001819989us-gaap:CommonStockMember2022-01-012022-06-300001819989us-gaap:RetainedEarningsMember2022-06-300001819989cifr:SecurityDepositsMembercifr:LuminantPurchaseAndSaleAgreementMember2021-12-310001819989cifr:AlborzLlcMember2022-04-012022-06-300001819989cifr:BitmainTechnologiesLimitedMember2022-06-300001819989us-gaap:RetainedEarningsMember2021-04-012021-06-300001819989cifr:AlborzLlcMember2022-01-012022-06-300001819989us-gaap:FairValueMeasurementsRecurringMember2021-12-310001819989us-gaap:RetainedEarningsMember2021-03-310001819989us-gaap:CommonStockMember2022-06-300001819989us-gaap:WarrantMemberus-gaap:MeasurementInputExercisePriceMember2022-06-300001819989us-gaap:WarrantMember2022-01-012022-06-300001819989us-gaap:TreasuryStockMember2022-03-310001819989us-gaap:CommonStockMember2021-01-310001819989cifr:IncentiveAwardPlanMemberus-gaap:CommonStockMember2022-01-010001819989cifr:PurchaseAgreementMembercifr:BitfuryEntitiesMember2022-06-300001819989cifr:PrivatePlacementWarrantsMember2021-12-310001819989cifr:SuperAcmeTechnologyHongKongMembercifr:OriginalSuperacmeAgreementMember2021-09-020001819989us-gaap:CommonStockMember2021-06-300001819989us-gaap:SubsequentEventMembercifr:PurchaseAgreementMembercifr:BitfuryTopHoldcoAndParadigmControlsOfTexasLlcMember2022-08-080001819989us-gaap:RetainedEarningsMember2022-01-012022-06-300001819989us-gaap:RetainedEarningsMember2022-04-012022-06-3000018199892021-02-012021-06-300001819989us-gaap:FurnitureAndFixturesMember2022-06-300001819989us-gaap:RetainedEarningsMember2021-06-300001819989cifr:SecurityDepositsMembercifr:LuminantPurchaseAndSaleAgreementMember2022-06-300001819989us-gaap:PrivatePlacementMember2021-08-2700018199892022-03-31utr:MWcifr:Antminerxbrli:pureiso4217:USDxbrli:sharescifr:Containersxbrli:sharescifr:Miningiso4217:USDutr:MWiso4217:USD

 

 

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, 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: 001-39625

 

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 5, 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

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

Signatures

38

 

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;
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)

 

 

 

June 30, 2022

 

 

December 31, 2021

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

37,042

 

 

$

209,841

 

Receivables, related party

 

467

 

 

 

-

 

Prepaid expenses and other current assets

 

9,554

 

 

 

13,819

 

Cryptocurrencies

 

787

 

 

 

-

 

Total current assets

 

47,850

 

 

 

223,660

 

Deposits on equipment

 

196,707

 

 

 

114,857

 

Property and equipment, net

 

23,637

 

 

 

5,124

 

Security deposits

 

11,417

 

 

 

10,352

 

Investment in equity investee

 

56,828

 

 

 

-

 

Right-of-use asset

 

5,512

 

 

 

-

 

Deferred investment costs

 

-

 

 

 

174

 

Total assets

$

341,951

 

 

$

354,167

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

4,739

 

 

$

242

 

Accounts payable, related party

 

12,038

 

 

 

-

 

Operating lease liability, current portion

 

975

 

 

 

-

 

Accrued expenses

 

5,811

 

 

 

257

 

Total current liabilities

 

23,563

 

 

 

499

 

Operating lease liability, net of current portion

 

5,023

 

 

 

-

 

Warrant liability

 

26

 

 

 

137

 

Total liabilities

 

28,612

 

 

 

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 June 30, 2022 and December 31, 2021

 

-

 

 

 

-

 

Common stock, $0.001 par value, 500,000,000 shares authorized, 251,001,072 and 252,131,679 shares issued as of June 30, 2022 and December 31, 2021, respectively, and 247,489,582 and 249,279,420 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

 

251

 

 

 

252

 

Additional paid-in capital

 

431,966

 

 

 

425,438

 

Treasury stock, at par, 3,511,490 and 2,852,259 shares at June 30, 2022 and December 31, 2021, respectively

 

(4

)

 

 

(3

)

Accumulated deficit

 

(118,874

)

 

 

(72,156

)

Total stockholders’ equity

 

313,339

 

 

 

353,531

 

Total liabilities and stockholders’ equity

$

341,951

 

 

$

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

 

 

Six Months Ended

 

 

Five Months Ended

 

 

June 30, 2022

 

 

June 30, 2021

 

 

June 30, 2022

 

 

June 30, 2021

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 General and administrative

$

16,704

 

 

$

546

 

 

$

34,094

 

 

$

659

 

 Depreciation

 

8

 

 

 

1

 

 

 

15

 

 

 

1

 

 Impairment of cryptocurrencies

 

535

 

 

 

-

 

 

 

539

 

 

 

-

 

 Equity in loss of equity investment

 

12,079

 

 

 

-

 

 

 

12,232

 

 

 

-

 

 Total costs and expenses

 

29,326

 

 

 

547

 

 

 

46,880

 

 

 

660

 

Operating loss

 

(29,326

)

 

 

(547

)

 

 

(46,880

)

 

 

(660

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 Interest income

 

44

 

 

 

-

 

 

 

51

 

 

 

-

 

 Interest expense

 

-

 

 

 

(1

)

 

 

-

 

 

 

(1

)

 Change in fair value of warrant liability

 

63

 

 

 

-

 

 

 

111

 

 

 

-

 

 Total other income (expense)

 

107

 

 

 

(1

)

 

 

162

 

 

 

(1

)

Net loss

$

(29,219

)

 

$

(548

)

 

$

(46,718

)

 

$

(661

)

Basic and diluted net loss per share

$

(0.12

)

 

$

-

 

 

$

(0.19

)

 

$

-

 

Basic and diluted weighted average number of shares outstanding

 

247,730,410

 

 

 

200,000,000

 

 

 

248,945,581

 

 

 

200,000,000

 

 

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 June 30, 2022

 

 

Common Stock

 

 

Additional

 

 

Treasury Stock

 

 

Accumulated

 

 

Total Stockholders’

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2022

 

253,685,763

 

 

$

254

 

 

$

431,899

 

 

 

(3,511,490

)

 

$

(4

)

 

$

(89,655

)

 

$

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

 

 

 

(3,511,490

)

 

$

(4

)

 

$

(118,874

)

 

$

313,339

 

 

 

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Deficit

 

Balance as of March 31, 2021

 

200,000,000

 

 

$

200

 

 

$

(200

)

 

$

(116

)

 

$

(116

)

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

(548

)

 

 

(548

)

Balance as of June 30, 2021

 

200,000,000

 

 

$

200

 

 

$

(200

)

 

$

(664

)

 

$

(664

)

 

 

 

5


 

 

CIPHER MINING INC.

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

(in thousands except for share amounts)

(unaudited)

 

 

Six Months Ended June 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

 

1,759,546

 

 

 

2

 

 

 

(3,053

)

 

 

(659,231

)

 

 

(1

)

 

 

-

 

 

 

(3,052

)

Warrants exercised

 

20

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Common stock cancelled

 

(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

 

 

 

(3,511,490

)

 

$

(4

)

 

$

(118,874

)

 

$

313,339

 

 

 

Five Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Deficit

 

 

Deficit

 

Balance as of January 31, 2021

 

200,000,000

 

 

$

200

 

 

$

(200

)

 

$

(3

)

 

$

(3

)

Net loss

 

-

 

 

 

-

 

 

 

-

 

 

 

(661

)

 

 

(661

)

Balance as of June 30, 2021

 

200,000,000

 

 

$

200

 

 

$

(200

)

 

$

(664

)

 

$

(664

)

 

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)

 

 

Six Months Ended

 

 

Five Months Ended

 

 

June 30, 2022

 

 

June 30, 2021

 

Cash flows from operating activities

 

 

 

 

 

Net loss

$

(46,718

)

 

$

(661

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 Depreciation

 

15

 

 

 

-

 

 Amortization of right-of-use assets

 

347

 

 

 

-

 

 Change in fair value of warrant liability

 

(111

)

 

 

-

 

 Share-based compensation

 

19,578

 

 

 

-

 

 Equity in loss of equity investment

 

12,232

 

 

 

-

 

 Impairment of cryptocurrencies

 

539

 

 

 

-

 

 Changes in assets and liabilities:

 

 

 

 

 

 Receivables, related party

 

(467

)

 

 

-

 

 Prepaid expenses and other current assets

 

4,134

 

 

 

(18

)

 Security deposits

 

(1,065

)

 

 

(441

)

 Accounts payable

 

104

 

 

 

27

 

 Accounts payable, related party

 

-

 

 

 

44

 

 Accrued expenses

 

1,209

 

 

 

46

 

 Lease liability

 

271

 

 

 

-

 

 Net cash used in operating activities

 

(9,932

)

 

 

(1,003

)

Cash flows from investing activities

 

 

 

 

 

 Deposits on equipment

 

(156,811

)

 

 

-

 

 Purchases of property and equipment

 

(13,069

)

 

 

-

 

 Capital distribution from equity investee

 

10,065

 

 

 

-

 

 Net cash used in investing activities

 

(159,815

)

 

 

-

 

Cash flows from financing activities

 

 

 

 

 

 Repurchase of common shares to pay employee withholding taxes

 

(3,052

)

 

 

-

 

 Proceeds from borrowings on related party loan

 

-

 

 

 

4,300

 

 Payments for deferred offering costs

 

-

 

 

 

(132

)

 Net cash (used in) provided by financing activities

 

(3,052

)

 

 

4,168

 

Net (decrease) increase in cash and cash equivalents

 

(172,799

)

 

 

3,165

 

Cash and cash equivalents, beginning of the period

 

209,841

 

 

 

-

 

Cash and cash equivalents, end of the period

$

37,042

 

 

$

3,165

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 Cash paid for interest

$

-

 

 

$

-

 

 Cash paid for income taxes, net

$

-

 

 

$

-

 

Supplemental disclosure of noncash investing and financing activities

 

 

 

 

 

 Equity method investment acquired for non-cash consideration

$

75,933

 

 

$

-

 

 Common stock cancelled

$

10,000

 

 

$

-

 

 Deposits on equipment in accounts payable, related party

$

10,612

 

 

$

-

 

 Right-of-use asset obtained in exchange for operating lease liability

$

5,859

 

 

$

-

 

 Investment in equity investee in accrued expenses

$

4,345

 

 

$

-

 

 Property and equipment purchases in accounts payable

$

4,033

 

 

$

-

 

 Property and equipment purchases in accounts payable, related party

$

1,426

 

 

$

3

 

 Cryptocurrencies received from equity method investment

$

1,326

 

 

$

-

 

 Reclassification of deferred investment costs to equity method investment

$

174

 

 

$

-

 

 Property and equipment purchases in related party loan

$

-

 

 

$

109

 

 Deposits on equipment in accounts payable

$

360

 

 

$

-

 

 Deferred offering costs included in accrued expenses

$

-

 

 

$

1,791

 

 Deferred offering costs included in accounts payable

$

-

 

 

$

20

 

 Deferred investment costs included in accrued expenses

$

-

 

 

$

187

 

 

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

7


CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 1. ORGANIZATION AND BUSINESS

Organization

On August 27, 2021 (the “Closing Date”), Good Works Acquisition Corp. (“GWAC”), a special purpose acquisition company, consummated the Agreement and Plan of Merger dated as of March 4, 2021 (the “Merger Agreement”), by and among GWAC, Currency Merger Sub, Inc. (“Merger Sub”), a wholly owned direct subsidiary of GWAC, and Cipher Mining Technologies Inc. (“Cipher Mining Technologies”).

Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Cipher Mining Technologies, the separate corporate existence of Merger Sub ceasing and Cipher Mining Technologies being the surviving corporation and a wholly owned subsidiary of GWAC (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). Following the Business Combination, the combined company was named Cipher Mining Inc. (“Cipher” or the “Company”). The Company comprises all of GWAC’s and Cipher Mining Technologies’ operations.

Business

The Company is an emerging technology company that operates in the Bitcoin mining ecosystem in the United States. Specifically, the Company is developing and growing a cryptocurrency mining business specializing in Bitcoin. As a stand-alone, U.S.-based cryptocurrency mining business, the Company has begun its buildout of cryptocurrency mining sites in the United States that will include both wholly-owned sites and partially-owned sites acquired through investments in joint ventures. The Company began deployment of capacity in the first quarter of 2022, with mining operations beginning at the Alborz facility, located in Texas, in February 2022 (the “Alborz facility”). See additional information about the Alborz facility in Note 8.

Cipher Mining Technologies was established on January 7, 2021, in Delaware, by Bitfury Top Holdco B.V. and its subsidiaries (“Bitfury Top Holdco” and, with its subsidiaries, the “Bitfury Group”), a global full-service blockchain and technology specialist and one of the leading private infrastructure providers in the blockchain ecosystem. Bitfury Top HoldCo (together with Bitfury Holding B.V., a subsidiary of Bitfury Top HoldCo, and referred to herein as “Bitfury Holding”) beneficially owned approximately 81.6% and 83.4% of the Company’s common stock, $0.001 par value per share (”Common Stock”) as of June 30, 2022 and upon completion of the Business Combination (as defined above), respectively, with sole voting and sole dispositive power over those shares and, as a result, the Bitfury Group has control of the Company as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation.”

Risks and uncertainties

Liquidity and capital resources and limited business history

The Company incurred net losses of $46.7 million and cash flow used in operations of $9.9 million for the six months ended June 30, 2022. As of June 30, 2022, the Company had approximate balances of cash and cash equivalents of $37.0 million, working capital of $24.3 million, total stockholders’ equity of $313.3 and an accumulated deficit of $118.9 million. To date, the Company has, in large part, relied on proceeds from the consummation of the Business Combination to fund its operations. During the six months ended June 30, 2022, the Company paid approximately $156.8 million of deposits for miners and mining equipment. As of June 30, 2022, the Company had transferred equipment with a total cost of $75.9 million from deposits on equipment related to the contribution of a total of 10,578 miners and other mining equipment to the Alborz facility, which was recorded to investment in equity investee on its condensed consolidated balance sheet, with the exception of the $11.6 million loss discussed below. In June 2022, the Company contributed 6,629 miners to the Alborz facility, which are included in the 10,578 total of miners contributed. At the time of the June contribution, these miners had a fair value that was lower than the cost paid by the Company to obtain them and the Company recognized a loss of $11.6 million within equity in loss of equity investment on its condensed consolidated statement of operations during the three and six months ended June 30, 2022.

As of June 30, 2022, the Company had $196.7 million of deposits on equipment on its condensed consolidated balance sheet, primarily for miners, and has significant future commitments related to these deposits as detailed in Note 6, for which the Company will need additional capital in order to meet these commitments in accordance with the existing contractual terms. Management believes that the Company’s existing financial resources, combined with its ability to delay certain equipment orders, projected distributions of cash and cryptocurrencies from its partially-owned sites, projected revenues from cryptocurrency mining operations at

8


CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

its wholly-owned site, as well as the ability to sell cryptocurrency received or earned, will be sufficient to meet its operating and capital requirements for at least 12 months from the date these unaudited condensed consolidated financial statements are issued.

There is limited historical financial information about the Company upon which to base an evaluation of its performance and the Company has not generated any revenues from its business to date. The business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in exploration and/or development, and possible cost overruns due to price and cost increases in services. Management of the Company has no current intention of entering into a merger or acquisition within the next 12 months. The Company is in the process of an active operational buildout and anticipates that additional capital will be required to implement the buildout. The Company may also require additional capital to pursue certain business opportunities or respond to technological advancements, competitive dynamics or technologies, customer demands, challenges, acquisitions or unforeseen circumstances. Additionally, the Company has incurred and expects to continue to incur significant costs related to becoming a public company. Accordingly, the Company may engage in equity or debt financings or enter into credit facilities for the above-mentioned or other reasons; however, the Company may not be able to timely secure additional debt or equity financings on favorable terms, if at all. If the Company raises additional funds through equity financing, its existing stockholders could experience significant dilution. Furthermore, any debt financing obtained by the Company in the future could involve restrictive covenants relating to the Company’s capital raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital and to pursue business opportunities. If the Company is unable to obtain adequate financing on terms that are satisfactory to the Company, when the Company requires it, the Company’s ability to continue to grow or support the business and to respond to business challenges could be significantly limited. If the Company is unable to obtain adequate debt or equity financing for its planned buildout, the Company may be required to delay or change its planned buildout steps, which may adversely affect the Company's business plan.

COVID-19

Results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of the Company’s control, such as the outbreak and global spread of the coronavirus (“COVID-19”). The COVID-19 pandemic that was declared on March 11, 2020 has caused significant economic dislocation in the United States and globally as governments, including the United States, introduced measures aimed at preventing the spread of COVID-19. The spread of COVID-19 and the imposition of related public health measures have resulted in, and are expected to continue to result in, increased volatility and uncertainty in the cryptocurrency space. Any severe or prolonged economic downturn, as result of the COVID-19 pandemic or otherwise, could result in a variety of risks to the Company’s business and management cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact the Company’s business.

The Company may experience disruptions to its business operations resulting from supply delays or interruptions, quarantines, self-isolations, or other movement and restrictions on the ability of its employees or its counterparties to perform their jobs. The Company may also experience delays in construction and obtaining necessary equipment in a timely fashion. For example, in early January 2022, construction at the Alborz facility was temporarily shut down in response to employees being impacted by COVID-19. The temporary shut down was less than a week, and construction resumed at the site immediately after. If the Company is unable to effectively set up and service its miners, the Company’s ability to mine Bitcoin will be adversely affected. The future impact of the COVID-19 pandemic is still highly uncertain and there is no assurance that the COVID-19 pandemic or any other pandemic, or other unfavorable global economic, business or political conditions, will not materially and adversely affect the Company’s business, prospects, financial condition, and operating results.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The Company prepares its unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) as determined by the FASB and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”).

The unaudited condensed consolidated financial statements include the accounts of the Company and its controlled subsidiary, Cipher Mining Technologies. All intercompany transactions and balances have been eliminated.

9


CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates inherent in the preparation of the Company’s financial statements include, but are not limited to, those related to equity instruments issued in share-based compensation arrangements, valuation of the warrant liability, useful lives of property and equipment, and the valuation allowance associated with the Company’s deferred tax assets, among others. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, actual results could differ significantly from those estimates.

Unaudited interim condensed consolidated financial statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments, which consist of only normal recurring adjustments necessary for the fair presentation of the balances and results for the periods presented. These unaudited interim condensed consolidated financial statement results are not necessarily indicative of results to be expected for the