Cipher Mining Inc

Previous wording

We are an emerging technology company that develops and operates industrial scale bitcoin mining data centers. Cipher Mining Inc., through itself and its consolidated subsidiaries, including Cipher Mining Technologies Inc. (“CMTI”), currently operates four bitcoin mining data centers in Texas. We are also developing an additional wholly-owned data center in Winkler County, TX (“Black Pearl” or the “Black Pearl Facility”) for up to 300 MW, and we expect to energize 300 MW in 2025. Bitcoin mining is our principal revenue generating business activity.

Current wording

We are an emerging technology company that develops and operates industrial scale bitcoin mining data centers. Bitcoin mining is our principal revenue generating business activity.

Previous wording

We operate four bitcoin mining data centers in Texas, including one wholly-owned and three partially-owned data centers acquired through investments in joint ventures. Our largest data center is our Odessa data center (the “Odessa Facility”), which is our wholly-owned 207 MW facility located in Odessa, Texas. We also operate our Alborz data center (the “Alborz Facility”), which is located near Happy, Texas and is partially-owned through a joint venture with WindHQ LLC (“WindHQ”). Our Bear data center (the “Bear Facility”) and our Chief data center (the “Chief Facility”) are both located near Andrews, Texas and are also partially-owned through separate joint ventures with WindHQ. We have a 49% membership interest in Alborz LLC, Bear LLC and Chief LLC, which own the Alborz Facility, the Bear Facility and the Chief Facility, respectively. Our fifth data center, Black Pearl, is expected to commence operations in 2025.

Current wording

We currently operate four bitcoin mining data centers in Texas, including one wholly-owned and three partially-owned data centers acquired through investments in joint ventures. Our largest data center is the Odessa data center (the “Odessa Facility”), which is our wholly-owned 207 MW facility located in Odessa, Texas. We also jointly operate the Alborz data center (the “Alborz Facility”) located near Happy, Texas, Bear data center (the “Bear Facility”) and our Chief data center (the “Chief Facility”) are both located near Andrews, Texas which are partially-owned through joint ventures with WindHQ LLC (“WindHQ”). We are also developing an additional wholly-owned data center in Winkler County, TX (“Black Pearl” or the “Black Pearl Facility”) for up to 300 MW, and we expect to energize 300 MW in 2025.

Previous wording

Our key mission is to expand and strengthen the Bitcoin network’s critical infrastructure. As of April 30, 2024, we operated an aggregate hashrate capacity of approximately 8.7 EH/s, deploying approximately 267 MW of electricity, of which we owned an aggregate hashrate capacity of approximately 7.7 EH/s, deploying approximately 236 MW of electricity.

Current wording

Our key mission is to expand and strengthen the Bitcoin network’s critical infrastructure. As of July 31, 2024, we operated an aggregate hashrate capacity of approximately 10.6 EH/s, utilizing approximately 310 MW of electricity, of which we owned an aggregate hashrate capacity of approximately 8.7 EH/s, utilizing approximately 257 MW of electricity.

Previous wording

Cost of revenue for the three months ended March 31, 2024 was $14.8 million, compared to $8.1 million for the three months ended March 31, 2023 and consisted primarily of power costs at the Odessa Facility as delivered under our power purchase agreement with Luminant ET Services Company LLC (the “Luminant Power Agreement”), as well as maintenance expenses for mining equipment.

Current wording

Cost of revenue for the three months ended June 30, 2024 was $14.3 million, compared to $15.9 million for the three months ended June 30, 2023 and consisted primarily of power costs at the Odessa Facility as delivered under our power purchase agreement with Luminant ET Services Company LLC (the “Luminant Power Agreement”), as well as maintenance expenses for mining equipment. The decrease was primarily driven by decreased power costs at the Odessa Facility in the current year period.

Previous wording

Compensation and benefits increased to $13.0 million for the three months ended March 31, 2024 compared to $11.9 million for the three months ended March 31, 2023. The increase is primarily driven by an increase in headcount throughout 2023.

Current wording

Compensation and benefits increased to $16.3 million for the three months ended June 30, 2024 compared to $12.7 million for the three months ended June 30, 2023. The increase is primarily driven by an increase in headcount and share-based compensation expense.

Previous wording

Depreciation and amortization for the three months ended March 31, 2024 was $17.2 million, compared to $11.7 million for the three months ended March 31, 2023. Depreciation and amortization primarily relates to miners, mining equipment and leasehold improvements at the Odessa Facility. Also included in depreciation is the amortization of our finance lease right-of-use asset for our Interconnection Electrical Facilities (as defined below) that provides power to the Odessa Facility, amortization on our intangible assets, and accretion of our estimated asset retirement obligation related to the Odessa Facility and depreciation of the associated capitalized costs. The increase in depreciation in the current period primarily relates to increased assets placed into service in late 2023 to finish the build-out at the Odessa Facility.

Current wording

Depreciation and amortization for the three months ended June 30, 2024 was $20.3 million, compared to $14.4 million for the three months ended June 30, 2023. Depreciation and amortization primarily relates to miners, mining equipment and leasehold improvements at the Odessa Facility. Also included in depreciation is the amortization of our finance lease right-of-use asset for our Interconnection Electrical Facilities (as defined below) that provides power to the Odessa Facility, amortization on our intangible assets, and accretion of our estimated asset retirement obligation related to the Odessa Facility and depreciation of the associated capitalized costs. The increase in depreciation in the current period primarily relates to increased assets placed into service in late 2023 to finish the build-out at the Odessa Facility, in addition to changing the estimated useful life of our miners from five years to three years effective June 1, 2024, increasing Depreciation and amortization by $3 million per month.

Previous wording

The change in the fair value of our derivative asset related to the Luminant Power Agreement resulted in a gain of $7.4 million during the three months ended March 31, 2024 compared to $5.3 million for the three months ended March 31, 2023. The gains in both periods were primarily due to the change in the power market forward curve over the respective periods as power prices in the futures market continue to increase.

Current wording

The change in the fair value of our derivative asset related to the Luminant Power Agreement resulted in a gain of $22.0 million during the three months ended June 30, 2024 compared to $3.2 million for the three months ended June 30, 2023. The gains in both periods were primarily due to the change in the power market forward curve over the respective periods as power prices in the futures market continue to increase, outpacing the reduction of benefit from future periods.

Previous wording

In accordance with the Luminant Power Agreement, we sold excess electricity that is available under the Luminant Power Agreement, but not needed in our mining operations at the Odessa Facility, back to the ERCOT market through Luminant for which we received proceeds of $1.2 million for the three months ended March 31, 2024 compared to $0.1 million for the three months ended March 31, 2023. Power sales vary each period due to changes in the opportunity cost of selling power instead of mining bitcoin.

Current wording

In accordance with the Luminant Power Agreement, we sold excess electricity that is available under the Luminant Power Agreement, but not needed in our mining operations at the Odessa Facility, back to the ERCOT market through Luminant for which we received proceeds of $1.1 million for the three months ended June 30, 2024 compared to $5.7 million for the three months ended June 30, 2023. Power sales vary each period due to changes in the opportunity cost of selling power instead of mining bitcoin.

Previous wording

Other expense totaled $1.3 million for the three months ended March 31, 2024, consisting of a realized loss on derivative trading on the expiry of options of $1.9 million, $0.4 million of interest expense recognized related to our finance lease for the Interconnection Electrical Facilities, partially offset by $0.8 million of interest income earned on Cash and cash equivalent balances held in interest bearing accounts. Other income for the three months ended March 31, 2023 was not significant.

Current wording

Other income totaled $1.4 million for the three months ended June 30, 2024, primarily consisting of interest income earned on Cash and cash equivalent balances held in interest bearing accounts, gains and losses on derivative trading related to managing our bitcoin treasury, and interest expense on our finance lease related to our Interconnection Electrical Facilities. Other expense for the three months ended June 30, 2023 totaled $0.5 million and consisted primarily interest expense on our finance lease related to our Interconnection Electrical Facilities.

Previous wording

Income tax expense totaled $5.6 million, or 12.2% of income before taxes, and $0.1 million, or (1.6%) of a loss before taxes for the three months ended March 31, 2024 and 2023, respectively, and was determined using the estimated effective tax rate for the year, adjusted for the impact of any discrete items which are accounted for in the period in which they occur.

Current wording

Income tax expense totaled $0.5 million, or (3.6%) of income before taxes, and $0.6 million or (4.9%) of a loss before taxes for the three months ended June 30, 2024 and 2023, respectively, and was determined using the estimated effective tax rate for the year, adjusted for the impact of any discrete items which are accounted for in the period in which they occur.

Previous wording

Bitcoin mining operations at our Odessa Facility mined 924 bitcoin, generating revenue of $48.1 million for the three months ended March 31, 2024, at an average price per bitcoin of approximately $52.1 thousand, compared to 943 bitcoin, generating revenue of $21.9 million for the three months ended March 31, 2023, at an average price per bitcoin of approximately $23.2 thousand. The increase in revenue in the current period was primarily driven by the increase in bitcoin price and our ability to maintain production despite an increase in network hashrate.

Current wording

Bitcoin mining operations at our Odessa Facility mined 1,477 bitcoin, generating revenue of $84.9 million for the six months ended June 30, 2024, at an average price per bitcoin of approximately $57.5 thousand, compared to 2,055 bitcoin, generating revenue of $53.1 million for the six months ended June 30, 2023, at an average price per bitcoin of approximately $25.8 thousand. The increase in revenue in the current period was primarily driven by the increase in bitcoin price, partially offset by impact of the halving in April 2024.

Previous wording

The increase was primarily driven by increased maintenance expenses as a result of the Odessa Facility being fully operational. In the current quarter, Cost of revenue included $1.1 million of non-recurring costs to purchase upgraded parts to increase the efficiency of our miners.

Current wording

Cost of revenue for the six months ended June 30, 2024 was $29.1 million, compared to $24.0 million for the six months ended June 30, 2023 and consisted primarily of power costs at the Odessa Facility as delivered under the Luminant Power Agreement, as well as maintenance expenses for mining equipment. The increase was primarily driven by increased maintenance expenses as a result of the Odessa Facility being fully operational. In the current period, Cost of revenue included $1.1 million of non-recurring costs to purchase parts intended to increase the efficiency of our miners.

Previous wording

Equity in gains of equity investees totaled approximately $0.7 million for the three months ended March 31, 2024, compared to Equity in losses of equity investees of $0.8 million for the three months ended March 31, 2023. Equity in losses of equity investees consists of our 49% share in the earnings (losses) generated by our three partially-owned mining sites, and the accretion of the basis differences in our investments in the equity investees that resulted from contributions of miners during the year ended December 31, 2022 with values at the time of the contributions that were less than the costs we paid to obtain the miners. We are accreting these basis differences over the five-year useful life of the miners. We recognized an expense of approximately $1.7 million for the three months ended March 31, 2024 and 2023, respectively, for the accretion of basis differences.

Current wording

Equity in gains of equity investees totaled approximately $0.2 million for the six months ended June 30, 2024, compared to Equity in losses of equity investees of $2.2 million for the six months ended June 30, 2023. Equity in losses of equity investees consists of our 49% share in the earnings (losses) generated by our three partially-owned mining sites, and the accretion of the basis differences in our investments in the equity investees that resulted from contributions of miners during the year ended December 31, 2022. We are accreting these basis differences over the five-year useful life of the miners. We recognized approximately $3.3 million for the six months ended June 30, 2024 and 2023, respectively, for the accretion of basis differences.

Previous wording

We recognized proceeds of approximately $2.3 million during the three months ended March 31, 2023 related to the sale of transferable coupons received from Bitmain Technologies Limited (“Bitmain”), with no comparable activity for the three months ended March 31, 2024. These coupons could be redeemed by us only through the purchase of additional miners from Bitmain prior to the April 2023 expiration date; however, we did not expect to use them and instead sold the coupons to a third party that approached us with interest to purchase them.

Current wording

We recognized proceeds of approximately $2.3 million during the six months ended June 30, 2023 related to the sale of transferable coupons received from Bitmain Technologies Limited, with no comparable activity for the six months ended June 30, 2024.

Previous wording

We used cash flows from operations of $26.6 million for the three months ended March 31, 2024. As of March 31, 2024, we had cash and cash equivalents of $88.7 million, total stockholders’ equity of $600.9 million and an accumulated deficit of $96.9 million. For our fiscal years prior to 2023, we relied in large part on proceeds from the consummation of our business combination with Good Works Acquisition Corp. (“GWAC”) to fund our operations. During fiscal year 2023, we funded operations through a combination of at-the-market stock issuances and bitcoin sales. During the three months ended March 31, 2024, we have not needed to sell our bitcoin inventory to support operating expenses.

Current wording

We used cash flows from operations of $52.0 million for the six months ended June 30, 2024. As of June 30, 2024, we had cash and cash equivalents of $122.6 million, total stockholders’ equity of $690.8 million and an accumulated deficit of $112.2 million. For our fiscal years prior to 2023, we relied in large part on proceeds from the consummation of our business combination with Good Works Acquisition Corp. (“GWAC”) to fund our operations. During fiscal year 2023, we funded operations through a combination of at-the-market stock issuances and bitcoin sales. During the six months ended June 30, 2024, we have not needed to sell our bitcoin inventory to support operating expenses.

Previous wording

On September 21, 2022, we filed the Registration Statement with the SEC. In connection with the filing of the Registration Statement, we also entered into an at-the market offering agreement (the “Prior Sales Agreement”) with H.C. Wainwright & Co., LLC (the “Prior Agent”), under which we may, from time to time, sell shares of our Common Stock having an aggregate offering price of up to $250.0 million in “at-the-market” offerings through the Agent, which is included in the $500.0 million of securities that may be offered pursuant to the Registration Statement. Effective August 1, 2023, the Company terminated the Prior Sales Agreement.

Current wording

Agent”), under which we may, from time to time, sell shares of our Common Stock having an aggregate offering price of up to $250.0 million in “at-the-market” offerings through the Agent, which is included in the $500.0 million of securities that may be offered pursuant to the Registration Statement. Effective August 1, 2023, the Company terminated the Prior Sales Agreement.

Previous wording

On March 6, 2024, we entered into an amendment (the “Amendment”) to the Sales Agreement (as amended, the “Amended Sales Agreement”) by and among the Original Agents, Stifel, Nicolaus & Company, Incorporated (“Stifel”) and Virtu Americas LLC (“Virtu”) (each of the Original Agents, Stifel and Virtu, an “Agent” and, together, the “Agents”). The Amendment modifies the Sales Agreement to include Stifel and Virtu as additional agents under the Amended Sales Agreement. On March 6, 2024, we also filed an amendment to the Prospectus Supplement (i) increasing the dollar amount of shares available to be sold pursuant to the Amended Sales Agreement, to $296,560,661, which consists of $96,560,661 remaining as originally authorized under the Prospectus Supplement and an additional $200,000,000, and (ii) including Stifel, Nicolaus & Company, Incorporated and Virtu Americas LLC as additional Agents. For the quarter ended March 31, 2024, we received net proceeds on sales of 14.2 million shares of common stock under the Prior Sales Agreement and the Amended Sales Agreement of approximately $64.5 million (net of commissions and expenses) at a weighted average price of $4.53.

Current wording

On March 6, 2024, we entered into an amendment (the “Amendment”) to the Sales Agreement (as amended, the “Amended Sales Agreement”) by and among the Original Agents, Stifel, Nicolaus & Company, Incorporated (“Stifel”) and Virtu Americas LLC (“Virtu”) (each of the Original Agents, Stifel and Virtu, an “Agent” and, together, the “Agents”). The Amendment modifies the Sales Agreement to include Stifel and Virtu as additional agents under the Amended Sales Agreement. On March 6, 2024, we also filed an amendment to the Prospectus Supplement (i) increasing the dollar amount of shares available to be sold pursuant to the Amended Sales Agreement, to $296,560,661, which consists of $96,560,661 remaining as originally authorized under the Prospectus Supplement and an additional $200,000,000, and (ii) including Stifel, Nicolaus & Company, Incorporated and Virtu Americas LLC as additional Agents. For the quarter ended June 30, 2024, we received net proceeds on sales of 20.6 million shares of common stock under the the Amended Sales Agreement of approximately $95.9 million (net of commissions and expenses) at an average net selling price of $4.65.

Previous wording

Net cash used in operating activities increased by $16.5 million to $26.6 million for the three months ended March 31, 2024 from $10.1 million for the three months ended March 31, 2023. We earned net income of $39.9 million for the three months ended March 31, 2024, compared to a net loss of $4.6 million for the three months ended March 31, 2023, representing an increase of $44.5 million. Cash flows from operating activities was impacted by a $53.9 million increase in non-cash items, primarily driven by a $26.4 million increase in bitcoin received as payment from our mining pool operator, and a $36.3 million increase in gains on the fair value of bitcoin. Additionally, changes in assets and liabilities resulted in a decrease in cash used of $7.1 million between the three months ended March 31, 2024 and 2023.

Current wording

Net cash used in operating activities increased by $24.2 million to $52.0 million for the six months ended June 30, 2024 from $27.8 million for the six months ended June 30, 2023. We earned net income of $24.6 million for the six months ended June 30, 2024, compared to a net loss of $17.8 million for the six months ended June 30, 2023, representing an increase of $42.4 million. Cash flows from operating activities was impacted by a $57.0 million increase in non-cash items, primarily driven by a $32.4 million increase in bitcoin received as payment from our mining pool operator, $20.8 million gain on our derivative asset, and a $19.1 million increase in gains on the fair value of bitcoin. Additionally, changes in assets and liabilities resulted in a decrease in cash used of $9.5 million between the six months ended June 30, 2024 and 2023.

Previous wording

Cash flows from investing activities decreased by $33.6 million to $31.0 million of net cash used in investing activities for the three months ended March 31, 2024 compared to $2.6 million of net cash provided by investing activities for the three months ended March 31, 2023, primarily related to a $21.0 million decrease in proceeds from bitcoin sales as we build bitcoin inventory, and a $15.2 million increase in contributions to equity investees related to expansions at the Bear and Chief facilities, partially offset by a $10.0 million decrease in purchases of property and equipment which in the prior period related to building out the Odessa facility.

Current wording

2023, primarily related to a $42.1 million decrease in proceeds from bitcoin sales as we increased our bitcoin inventory, $32.8 million of deposits primarily related to new miner purchases, and a $17.3 million increase in contributions to equity investees related to expansions at the Bear and Chief facilities, partially offset by a $12.8 million decrease in purchases of property and equipment which in the prior period related to building out the Odessa facility.

Previous wording

Cash flows from financing activities increased by $60.6 million to $60.2 million net cash provided by financing activities for the three months ended March 31, 2024 from $0.5 million net cash used in financing activities for the three months ended March 31, 2023, primarily driven by $66.2 million of proceeds from the issuance of common stock during the three months ended March 31, 2024, with no comparable activity in the prior year period.

Current wording

Cash flows from financing activities increased by $151.2 million to $150.8 million net cash provided by financing activities for the six months ended June 30, 2024 from $0.4 million net cash used in financing activities for the six months ended June 30, 2023, primarily driven by $160.5 million increase in proceeds from the issuance of common stock during the six months ended June 30, 2024.

Previous wording

On December 17, 2021, we entered into a lease agreement for executive office space, with an effective term that commenced on February 1, 2022 and monthly rent payments of approximately $0.1 million. The initial lease term is for a period of five years and four months.

Current wording

On December 17, 2021, we entered into a lease agreement for executive office space, with an effective term that commenced on February 1, 2022 and monthly rent payments of approximately $0.1 million. The initial lease term was for a period of five years and four months. During the second quarter of 2024, we entered into an amendment to the lease agreement commencing on May 15, 2024, to increase the leased office space and extend the term through May 2029. Monthly rent payments associated with the amended lease are approximately $0.2 million.

Previous wording

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 unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period. A description of our significant accounting policies in included in our 2023 Form 10-K. You should read the accompanying unaudited condensed consolidated financial statements in conjunction with our audited consolidated financial statements and accompanying notes in our 2023 Form 10-K. There have been no material changes in the information disclosed in the notes to our audited consolidated financial statements included in our 2023 Form 10-K.

Current wording

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 unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period. A description of our significant accounting policies in included in our 2023 Form 10-K. You should read the accompanying unaudited condensed consolidated financial statements in conjunction with our audited consolidated financial statements and accompanying notes in our 2023 Form 10-K. There have been no material changes in the information disclosed in the notes to our audited consolidated financial statements included in our 2023 Form 10-K, except the change in estimated useful life of our miners from five years to three years, as described in Note 5. Property and Equipment of Item 1. Financial Statements in this Form 10-Q.