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,~~March 31, ~~2023~~2024


☐	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~~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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

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

As of ~~August 4, 2023,~~May 6, 2024, the registrant had ~~250,955,743~~310,029,275 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	87
	Notes to Unaudited Condensed Consolidated Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2324
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3231
Item 4.	Controls and Procedures	3231

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3433
Item 1A.	Risk Factors	3433
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds ~~and Issuer Purchases of Equity Securities~~	3433
Item 3.	Defaults Upon Senior Securities	3433
Item 4.	Mine Safety Disclosures	3433
Item 5.	Other Information	3433
Item 6.	Exhibits	3534
Signatures		3635

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,” “seeks,” “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~~: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~~Any unfavorable global economic, business or political conditions, such as geopolitical tensions, military conflicts, acts of ~~economic uncertainty~~terrorism, natural disasters, pandemics (like the COVID-19 pandemic), and ~~capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our~~similar events could adversely affect our business, financial condition and results of ~~operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.~~operations.

•

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 the performance of the Odessa Facility and changes in the regulatory environment, market conditions and natural disasters in ~~this state.~~Texas.

•

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~~including electric grid operators, electric utility providers and manufacturers of 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 or mechanical failures, 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 properties in our mining network may experience damages, including damages that are not covered by insurance.

•

Our business is subject to the impact of global market, economic and political conditions that are beyond our control and that could significantly impact our business and make our financial results more volatile.

•

We maintain our cash and cash equivalents at financial institutions, often in balances that exceed federally insured limits.

•

Cybersecurity threats, such as cyber-attacks, data breaches, hacking attacks or malware, targeting us or our third-party service providers may disrupt our operations and trigger significant liability for us, which could harm our operating results and financial condition, and damage our reputation or otherwise materially harm our business.

•

The value of bitcoin has historically been subject to wide swings, and our operating results may be adversely affected by our hedging activity.

•

There is a potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof.

•

Regulatory changes or actions may restrict the use of bitcoin in a manner that adversely affects our business, prospects or operations.

•

We have identified a material weakness in our internal control over financial reporting which, if not timely remediated, may adversely affect the accuracy and reliability of our future financial statements, and our reputation, business and the price of our common stock, as well as may lead to a loss of investor confidence in us.

•

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~~2023 filed with the Securities and Exchange Commission (the “SEC”) on March ~~14, 2023~~5, 2024 (the ~~“2022~~“2023 Form 10-K”) and our ~~future~~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)


	June 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
	(unaudited)						(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,741		$	11,927		$	88,675		$	86,105
Accounts receivable		380			98			680			622
Receivables, related party		1,614			1,102			430			245
Prepaid expenses and other current assets		2,260			7,254			2,910			3,670
Bitcoin		10,536			6,283			123,307			32,978
Derivative asset		25,786			21,071			34,228			31,878
Total current assets		42,317			47,735			250,230			155,498
Property and equipment, net		267,790			191,784			238,541			243,815
Deposits on equipment		1,675			73,018			30,187			30,812
Intangible assets, net								8,162			8,109
Investment in equity investees		33,098			37,478			52,621			35,258
Derivative asset		49,466			45,631			66,722			61,713
Operating lease right-of-use asset		4,635			5,087			6,823			7,077
Security deposits		17,742			17,730			23,855			23,855
Total assets	$	416,723		$	418,463		$	677,141		$	566,137
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	2,053		$	14,286		$	7,520		$	4,980
Accounts payable, related party		1,554			3,083			-			1,554
Accrued expenses and other current liabilities		22,746			19,353			18,661			22,439
Finance lease liability, current portion		11,189			2,567			3,595			3,404
Operating lease liability, current portion		1,087			1,030			1,204			1,166
Warrant liability		66			7			-			250
Total current liabilities		38,695			40,326			30,980			33,793
Asset retirement obligation		17,538			16,682			18,708			18,394
Finance lease liability		10,836			12,229			10,121			11,128
Operating lease liability		3,936			4,494			6,025			6,280
Deferred tax liability		2,508			1,840			10,383			5,206
Total liabilities		73,513			75,571			76,217			74,801
Commitments and contingencies (Note 12)
Commitments and contingencies (Note 13)
Stockholders’ equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding as of June 30, 2023 and December 31, 2022		-			-
Common stock, $0.001 par value, 500,000,000 shares authorized, 254,795,626 and 251,095,305 shares issued as of June 30, 2023 and December 31, 2022, respectively, and 250,413,891 and 247,551,958 shares outstanding as of June 30, 2023 and December 31, 2022, respectively		254			251
Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding as of March 31, 2024 and December 31, 2023								-			-
Common stock, $0.001 par value, 500,000,000 shares authorized, 312,649,102 and 296,276,536 shares issued as of March 31, 2024 and December 31, 2023, respectively, and 306,543,330 and 290,957,862 shares outstanding as of March 31, 2024, and December 31, 2023, respectively								313			296
Additional paid-in capital		473,471			453,854			697,494			627,822
Accumulated deficit		(130,511	)		(111,209	)		(96,877	)		(136,777	)
Treasury stock, at par, 4,381,735 and 3,543,347 shares at June 30, 2023 and December 31, 2022, respectively		(4	)		(4	)
Treasury stock, at par, 6,105,772 and 5,318,674 shares at March 31, 2024 and December 31, 2023, respectively								(6	)		(5	)
Total stockholders’ equity		343,210			342,892			600,924			491,336
Total liabilities and stockholders’ equity	$	416,723		$	418,463		$	677,141		$	566,137

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 June 30,						Six Months Ended June 30,						Three months ended March 31,
	2023			2022			2023			2022			2024			2023
Revenue - bitcoin mining	$	31,224		$	-		$	53,119		$	-		$	48,137		$	21,895
Costs and operating expenses (income)
Cost of revenue		15,868			-			24,009			-			14,820			8,141
Compensation and benefits														13,036			11,937
General and administrative		21,335			16,704			38,755			34,094			6,077			5,483
Depreciation		14,412			8			26,067			15
Depreciation and amortization														17,244			11,655
Change in fair value of derivative asset		(3,222	)		-			(8,550	)		-			(7,359	)		(5,328	)
Power sales		(5,651	)		-			(5,749	)		-			(1,173	)		(98	)
Equity in losses of equity investees		1,431			12,079			2,181			12,232
Realized gain on sale of bitcoin		(4,185	)		-			(8,206	)		-
Impairment of bitcoin		2,828			535			4,633			539
Equity in (gains) losses of equity investees														(738	)		750
Gains on fair value of bitcoin														(40,556	)		(4,264	)
Other gains		-			-			(2,260	)		-			-			(2,260	)
Total costs and operating expenses		42,816			29,326			70,880			46,880
Operating loss		(11,592	)		(29,326	)		(17,761	)		(46,880	)
Total costs and operating expenses (income)														1,351			26,016
Operating income (loss)														46,786			(4,121	)
Other income (expense)
Interest income		25			44			101			51			786			76
Interest expense		(485	)		-			(886	)		-			(400	)		(401	)
Change in fair value of warrant liability		(22	)		63			(59	)		111			250			(37	)
Other expense		(12	)		-			(12	)		-			(1,958	)		-
Total other income (expense)		(494	)		107			(856	)		162			(1,322	)		(362	)
Loss before taxes		(12,086	)		(29,219	)		(18,617	)		(46,718	)
Income (loss) before taxes														45,464			(4,483	)
Current income tax expense		(31	)		-			(48	)		-			(386	)		(17	)
Deferred income tax expense		(584	)		-			(637	)		-			(5,178	)		(53	)
Total income tax expense		(615	)		-			(685	)		-			(5,564	)		(70	)
Net loss	$	(12,701	)	$	(29,219	)	$	(19,302	)	$	(46,718	)
Net loss per share - basic and diluted	$	(0.05	)	$	(0.12	)	$	(0.08	)	$	(0.19	)
Weighted average shares outstanding - basic and diluted		249,127,664			247,730,410			248,892,181			248,945,581
Net income (loss)													$	39,900		$	(4,553	)
Net income (loss) per share - basic and diluted													$	0.13		$	(0.02	)
Weighted average shares outstanding - basic														296,641,499			248,654,082
Weighted average shares outstanding - diluted														304,397,979			248,654,082

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 ~~June 30, 2023~~March 31, 2024

Common Stock

Additional

Accumulated

Treasury Stock

Total

Shares

Amount

Paid-in Capital

Deficit

Shares

Amount

Stockholders’ Equity

Balance as of March 31, 2023

253,050,088

$
253

$
462,181

$
(117,810
)

(4,144,081
)

$
(4
)

$
344,620

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

978,207

1

2,744

-

-

-

2,745

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

674,817

-

(632
)

-

(237,654
)

-

(632
)
Share-based compensation

92,514

-

9,178

-

-

-

9,178

Net loss

-

-

-

(12,701
)

-

-

(12,701
)
Balance as of June 30, 2023

254,795,626

$
254

$
473,471

$
(130,511
)

(4,381,735
)

$
(4
)

$
343,210


	Common Stock				Additional						Treasury Stock						Total
	Shares		Amount		Paid-in Capital			Accumulated Deficit			Shares			Amount			Stockholders’ Equity
Balance as of December 31, 2023		296,276,536	$	296	$	627,822		$	(136,777	)		(5,318,674	)	$	(5	)	$	491,336
Issuance of common shares, net of offering costs - At-the-market offering		14,246,235		14		64,532			-			-			-			64,546
Delivery of common stock underlying restricted stock units, net of shares settled for tax withholding settlement		2,059,390		3		(3,177	)		-			(787,098	)		(1	)		(3,175	)
Share-based compensation		66,941		-		8,317			-			-			-			8,317
Net income		-		-		-			39,900			-			-			39,900
Balance as of March 31, 2024		312,649,102	$	313	$	697,494		$	(96,877	)		(6,105,772	)	$	(6	)	$	600,924

Three Months Ended ~~June 30, 2022~~March 31, 2023

Common Stock

Additional

Accumulated

Treasury Stock

Total

Shares

Amount

Paid-in Capital

Deficit

Shares

Amount

Stockholders’ Equity

Balance as of March 31, 2022

253,685,763

$
254

$
431,899

$
(89,655
)

(3,511,490
)

$
(4
)

$
342,494

Common stock cancelled

(2,890,173
)

(3
)

(9,997
)

-

-

-

(10,000
)
Delivery of common stock underlying restricted stock units

205,482

-

-

-

-

-

-

Share-based compensation

-

-

10,064

-

-

-

10,064

Net loss

-

-

-

(29,219
)

-

-

(29,219
)
Balance as of June 30, 2022

251,001,072

$
251

$
431,966

$
(118,874
)

$
(3,511,490
)

$
(4
)

$
313,339


	Common Stock				Additional						Treasury Stock						Total
	Shares		Amount		Paid-in Capital			Accumulated Deficit			Shares			Amount			Stockholders’ Equity
Balance as of December 31, 2022		251,095,305	$	251	$	453,854		$	(111,209	)		(3,543,347	)	$	(4	)	$	342,892
Cumulative effect upon adoption of ASU 2023-08		-		-		-			209			-			-			209
Delivery of common stock underlying restricted stock units, net of shares settled for tax withholding settlement		1,954,783		2		(483	)		-			(600,734	)		-			(481	)
Share-based compensation		-		-		8,810			-			-			-			8,810
Net loss		-		-		-			(4,553	)		-			-			(4,553	)
Balance as of March 31, 2023		253,050,088	$	253	$	462,181		$	(115,553	)		(4,144,081	)	$	(4	)	$	346,877

~~CIPHER MINING INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY~~

~~(in thousands, except for share amounts)~~

~~(unaudited)~~

~~Six Months Ended June 30, 2023~~

Common Stock

Additional

Accumulated

Treasury Stock

Total

Shares

Amount

Paid-in Capital

Deficit

Shares

Amount

Stockholders’ Equity

Balance as of January 1, 2023

251,095,305

$
251

$
453,854

$
(111,209
)

(3,543,347
)

$
(4
)

$
342,892

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

978,207

1

2,744

-

-

-

2,745

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

2,473,756

2

(1,115
)

-

(838,388
)

-

(1,113
)
Share-based compensation

248,358

-

17,988

-

-

-

17,988

Net loss

-

-

-

(19,302
)

-

-

(19,302
)
Balance as of June 30, 2023

254,795,626

$
254

$
473,471

$
(130,511
)

(4,381,735
)

$
(4
)

$
343,210

~~Six Months Ended June 30, 2022~~

Common Stock

Additional

Accumulated

Treasury Stock

Total

Shares

Amount

Paid-in Capital

Deficit

Shares

Amount

Stockholders’ Equity

Balance as of January 1, 2022

252,131,679

$
252

$
425,438

$
(72,156
)

(2,852,259
)

$
(3
)

$
353,531

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

1,759,546

2

(3,053
)

-

(659,231
)

(1
)

(3,052
)
Common stock cancelled

20

-

-

-

-

-

-

Warrants exercised

(2,890,173
)

(3
)

(9,997
)

-

-

-

(10,000
)
Share-based compensation

-

-

19,578

-

-

-

19,578

Net loss

-

-

-

(46,718
)

-

-

(46,718
)
Balance as of June 30, 2022

251,001,072

$
251

$
431,966

$
(118,874
)

(3,511,490
)

$
(4
)

$
313,339

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

CIPHER MINING INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three months ended March 31,
	2024			2023
Cash flows from operating activities
Net income (loss)	$	39,900		$	(4,553	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		17,097			11,655
Amortization of intangible assets		147			-
Amortization of operating right-of-use asset		254			222
Share-based compensation		8,317			8,810
Equity in (gains) losses of equity investees		(738	)		750
Non-cash lease expense		392			401
Other operating activities		1,958			-
Income taxes		5,564			53
Bitcoin received as payment for services		(48,079	)		(21,717	)
Change in fair value of derivative asset		(7,359	)		(5,328	)
Change in fair value of warrant liability		(250	)		37
Gains on fair value of bitcoin		(40,556	)		(4,264	)
Changes in assets and liabilities:
Accounts receivable		(58	)		(183	)
Receivables, related party		(185	)		(189	)
Prepaid expenses and other current assets		760			2,975
Security deposits		-			(12	)
Accounts payable		2,540			2,913
Accounts payable, related party		-			(1,529	)
Accrued expenses and other current liabilities		(6,123	)		65
Lease liabilities		(217	)		(248	)
Net cash used in operating activities		(26,636	)		(10,142	)
Cash flows from investing activities
Proceeds from sale of bitcoin		-			20,958
Deposits on equipment		(4,536	)		(1,106	)
Purchases of property and equipment		(7,902	)		(17,947	)
Purchases and development of software		(200	)		-
Capital distributions from equity investees		-			3,807
Investment in equity investees		(18,319	)		(3,094	)
Net cash (used in) provided by investing activities		(30,957	)		2,618
Cash flows from financing activities
Proceeds from the issuance of common stock		66,171			-
Offering costs paid for the issuance of common stock		(1,623	)		-
Repurchase of common shares to pay employee withholding taxes		(3,177	)		(481	)
Principal payments on financing lease		(1,208	)		-
Net cash provided by (used in) financing activities		60,163			(481	)
Net increase (decrease) in cash and cash equivalents		2,570			(8,005	)
Cash and cash equivalents, beginning of the period		86,105			11,927
Cash and cash equivalents, end of the period	$	88,675		$	3,922

Six Months Ended June 30,

2023

2022

Cash flows from operating activities

Net loss
$
(19,302
)

$
(46,718
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation

26,067

15

Amortization of operating right-of-use asset

452

347

Share-based compensation

17,988

19,578

Equity in losses of equity investees

2,181

12,232

Impairment of bitcoin

4,633

539

Non-cash lease expense

878

-

Deferred income taxes

637

-

Bitcoin received as payment for services

(52,836
)

-

Change in fair value of derivative asset

(8,550
)

-

Change in fair value of warrant liability

59

(111
)
Realized gain on sale of bitcoin

(8,206
)

-

Changes in assets and liabilities:

Proceeds from sale of bitcoin

52,474

-

Accounts receivable

(282
)

-

Receivables, related party

(512
)

(467
)
Prepaid expenses and other current assets

4,994

4,134

Security deposits

(12
)

(1,065
)
Accounts payable

(184
)

104

Accounts payable, related party

(1,529
)

-

Accrued expenses and other current liabilities

6,323

1,209

Lease liabilities

(594
)

271

Net cash provided by (used in) operating activities

24,679

(9,932
)
Cash flows from investing activities

Deposits on equipment

(2,932
)

(156,811
)
Purchases of property and equipment

(28,541
)

(13,069
)
Capital distributions from equity investees

3,807

10,065

Investment in equity investees

(3,095
)

-

Prepayments on financing lease

(3,676
)

-

Net cash used in investing activities

(34,437
)

(159,815
)
Cash flows from financing activities

Proceeds from the issuance of common stock

2,821

-

Offering costs paid for the issuance of common stock

(76
)

-

Repurchase of common shares to pay employee withholding taxes

(1,114
)

(3,052
)
Principal payments on financing lease

(2,059
)

-

Net cash used in financing activities

(428
)

(3,052
)
Net decrease in cash and cash equivalents

(10,186
)

(172,799
)
Cash and cash equivalents, beginning of the period

11,927

209,841

Cash and cash equivalents, end of the period
$
1,741

$
37,042

Supplemental disclosure of noncash investing and financing activities

Reclassification of deposits on equipment to property and equipment
$
72,130

-

Right-of-use asset obtained in exchange for finance lease liability
$
14,212

-

Finance lease costs in accrued expenses
$
2,034

-

Equity method investment acquired for non-cash consideration
$
1,926

75,933

Sales tax accruals reversed due to exemption
$
1,837

-

Bitcoin received from equity investees
$
317

1,326

Property and equipment purchases in accounts payable, accounts payable, related party and accrued expenses
$
-

5,459

Deposits on equipment in accounts payable and accounts payable, related party
$
-

10,972

Common stock cancelled
$
-

10,000

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

5,859

Investment in equity investees in accrued expenses
$
-

4,345

Reclassification of deferred investment costs to investment in equity investees
$
-

174


	Three months ended March 31,
	2024		2023
Supplemental disclosure of noncash investing and financing activities
Reclassification of deposits on equipment to property and equipment	$	5,161	$	71,533
Bitcoin received from equity investees	$	1,694	$	317
Settlement of related party payable related to master services and supply agreement	$	1,554	$	-
Equity method investment acquired for non-cash consideration	$	-	$	1,925
Property and equipment purchases in accounts payable, accounts payable, related party and accrued expenses	$	-	$	5,940
Deposits on equipment in accounts payable, accounts payable, related party and accrued expenses	$	-	$	691
Finance lease cost in accrued expenses	$	-	$	1,017

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

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. ORGANIZATION

Nature of operations

Cipher Mining Inc. (“Cipher” or the “Company”) is an emerging technology company that develops and operates industrial scale bitcoin mining data centers. The Company operates or jointly operates four bitcoin mining data centers in Texas including one wholly-owned data center and three partially-owned data centers that were acquired through investments in joint ventures. Bitcoin mining is the Company’s principal revenue generating business activity. The Company began deployment of capacity in the first quarter of 2022, with mining operations beginning at the partially-owned Alborz facility in February 2022 (the “Alborz Facility”). In August 2022, installation of the last mining rigs delivered to the Alborz Facility was completed. In October 2022, installation at the partially-owned Bear facility (the “Bear Facility”) and the partially-owned Chief facility (the “Chief Facility”) ~~was~~were also completed. In November 2022, the Company began bitcoin mining operations at the wholly-owned Odessa facility (the “Odessa Facility”) ~~and~~. In September 2023, the Company finalized the buildout of the operations at the Odessa Facility. In December 2023, the Company announced the acquisition of a site for a new wholly-owned data center in Winkler County, Texas, the “Black Pearl Facility”, which is ~~continuing~~expected to ~~expand those operations.~~commence operations in 2025.

Cipher Mining Technologies Inc. (“CMTI”) 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”). 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 ~~80.6~~38.8% of the Company’s common stock, $0.001 par value per share (“Common Stock”), as of June 30, 2023, with sole voting and sole dispositive power over those shares and, as a result, Bitfury Top HoldCo has control of the Company as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, ~~Consolidation~~ ~~(“ASC 810”). As of August 4, 2023, pursuant to that certain Lock-up Agreement, dated as of August 26, 2021, by and between GWAC and Bitfury Top HoldCo,~~ ~~129,017,513~~ of Bitfury Top HoldCo’s shares of the Company’s Common Stock remain subject to lock-up which, subject to any potential modifications under the waiver agreement with Bitfury Top HoldCo entered into on April 8, 2022, is expected to expire on ~~August 27, 2023~~.March 31, 2024.

Out-of-period-adjustments

Cost of revenue and power sales for the ~~six~~three months ended ~~June 30,~~March 31, 2023 included out-of-period adjustments of approximately $~~2.0~~1.0 million and $~~1.6~~0.6 million, respectively, that increased both cost of revenue and power sales on the unaudited condensed consolidated statements of operations for the ~~six~~three months ended ~~June 30,~~March 31, 2023, and resulted in net increases to operating loss and loss before taxes of approximately $0.4 million during the same period. These out-of-period adjustments related to power costs and power sales for the year ended December 31, 2022 at the Company’s Odessa Facility, which are invoiced on a net basis by the Company’s power provider. Management evaluated the impact of this error on the Company’s previously issued audited consolidated financial statements for the year ended December 31, 2022, as well as on its unaudited condensed consolidated financial statements for the ~~six~~three months ended ~~June 30,~~March 31, 2023, assessing the error both quantitatively and qualitatively, and concluded that the error was not material to the financial statements for either period.

Risks and uncertainties

Liquidity, capital resources and limited business history

The Company has historically experienced net losses and negative cash flows from operations. As of ~~June 30, 2023,~~March 31, 2024, the Company had approximate balances of cash and cash equivalents of $~~1.7~~88.7 million, working capital of $~~3.6~~219.3 million, total stockholders’ equity of $~~343.2~~600.9 million and an accumulated deficit of $~~130.5~~96.9 million. ~~For fiscal~~In prior years, ~~ended December 31, 2022 and 2021,~~ the Company, in large part, relied on proceeds from the consummation of its business combination with ~~Good Works Acquisition Corp. (“GWAC”)~~GWAC to fund its operations; however, during the ~~six months~~fiscal year ended ~~June 30,~~December 31, 2023, the Company ~~utilized~~used proceeds from sales of bitcoin earned by or received from its bitcoin mining data centers, as well as strategic sales of shares through “at-the-market” offerings to support its operating ~~expenses.~~expenses and capital expenditures. During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company has used “at-the-market” offerings at strategic times to raise cash, but has not sold~~2,063~~ bitcoin for ~~proceeds of approximately $52.5~~ million. Additionally, in January 2023, the Company was approached by a third party that offered to purchase coupons that the Company had received from Bitmain Technologies Limited (“Bitmain”) during fiscal year 2022. These transferrable coupons provided the Company with potential discounts of approximately $~~10.9~~ ~~million that could only be redeemed with the purchase of~~ additional ~~miners from Bitmain prior to the coupons’~~ ~~April 2023~~ expiration date. As the Company did not intend to purchase additional Bitmain miners prior to the expiration date of the coupons, it sold the coupons to the interested third party for proceeds of approximately $~~2.3~~ ~~million, which it recorded in other gains within costs and operating expenses (income) on its unaudited condensed consolidated statement of operations during the six months ended June 30, 2023.~~

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

funds.

The Company monitors its balance sheet on an ongoing basis to determine the proper mix of bitcoin retention and bitcoin sales to support its cash requirements, ongoing operations, and ~~ongoing operations.~~capital expenditures. Bitcoin is classified as a current asset on the Company’s balance sheets due to its intent and ability to sell bitcoin to support operations when needed. ~~Operating activities provided approximately~~Approximately $~~24.7~~26.6 million of cash was used for operating activities during the ~~six~~three months ended ~~June 30, 2023.~~March 31, 2024.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company paid approximately $~~2.9~~4.5 million offor deposits on equipment in connection with new miner purchases for ~~mining equipment~~its Odessa Facility, and reclassified approximately $~~72.1~~5.2 million to property and equipment ~~in connection~~related to these miners being placed into service.

On August 14, 2023, the Company, through CMTI, entered into a master loan agreement with Coinbase Credit, Inc., as lender, and Coinbase, Inc., as lending service provider, for a secured credit line up to $10.0 million (the “Credit Facility”). See Note 13.

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Commitments and Contingencies for additional information regarding the ~~receipt of miners and other equipment at the Odessa~~Credit Facility. As of ~~June 30, 2023,~~March 31, 2024, the Company ~~had~~has ~~61,024~~no ~~miners located at~~t drawn upon the ~~Odessa Facility and had~~ Credit Facility.~~12,953~~, ~~3,254~~ ~~and~~ ~~3,254~~ ~~contributed miners at its partially-owned Alborz Facility, Bear Facility and Chief Facility, respectively.~~

~~As of June 30, 2023, the Company had approximately $1.7~~ million of deposits on equipment on its unaudited condensed consolidated balance sheet, primarily related to shipping costs associated with miners to be delivered under the Canaan Agreement (defined below). On May 4, 2023, the Company entered into an agreement with Canaan Creative Global Pte. Ltd. (“Canaan”) to purchase ~~11,000~~ new A1346 model miners (the “Canaan Agreement”), all of which were delivered prior to June 30, 2023 and have been installed at the Odessa Facility. Because the Company is paying for the Canaan miners over time, the Company does not yet hold title to the miners. The Company paid an initial 10~~% deposit plus~~ 18% of the total purchase price prior to delivery, and is required to pay monthly installment payments for the Canaan miners through November 2023, at which time title to the miners will transfer to the Company. The Company expects to fund its ongoing payment obligations for the purchase through its ongoing operations, including by selling bitcoin generated at its data centers.

~~Management intends to continue with the infrastructure buildout at the Odessa Facility to get the site to full capacity in support of the Company’s current business plans.~~ Management believes that the Company’s existing financial resources, including access to the Credit Facility, combined with projected cash and bitcoin inflows from its data centers and its ~~intent and~~ ability to sell bitcoin received or earned, will be sufficient to enable the Company 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. 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. ~~The Company’s management has no current intention of entering into a merger or acquisition within the next 12 months.~~ The Company may require additional capital to pursue certain business opportunities or respond to technological advancements, competitive dynamics or technologies, challenges, acquisitions or unforeseen circumstances. Additionally, the Company has incurred and expects to continue to incur significant costs related to operating as 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, which may adversely affect the Company’s business plan.

~~Macroeconomic conditions: COVID-19 and other economic, business and political conditions~~

The Company’s 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 any epidemics, pandemics or disease outbreaks or other public health conditions. For example, the COVID-19 pandemic (“COVID-19”) that was declared on March 11, 2020 has caused significant economic dislocation in the United States (“U.S.”) and globally as governments across the world, including the U.S., introduced measures aimed at preventing the spread of COVID-19. While most policies and regulations implemented by governments in response to COVID-19 have been lifted, they have had a significant impact, both directly and indirectly, on global business and commerce.

The Company may experience disruptions to its business operations resulting from supply 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. If the Company is unable to effectively set up and service its miners, its ability to mine bitcoin will be adversely affected. There is no assurance that COVID-19 or any other pandemic, or other unfavorable global economic, business or political conditions, such as a rise in energy prices, a slowdown in the

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~U.S. or international economy, high inflation rates or other factors, 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 U.S. (“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,~~subsidiaries, including CMTI. All intercompany transactions and balances have been eliminated.

Certain prior year amounts have been reclassified for consistency with the current period presentation. Effective for the quarter ended March 31, 2024, the Company changed the presentation of its condensed consolidated income statement to separately disclose Compensation and benefits from General and administrative. The Company believes this presentation provides increased transparency on the nature of the respective financial statement line items. As a result, the Company reported $11.9 million as Compensation and benefits for the three months ended March 31, 2023 which was previously reported in General and administrative.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

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, ~~valuations~~valuation of its derivative asset and warrant liability under Level 3 of the fair value hierarchy, useful lives of property

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

and equipment, the asset retirement obligation 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, the actual results could differ significantly from those estimates.

Unaudited condensed consolidated financial statements

The accompanying unaudited 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 the Company’s management, these unaudited 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 condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period.

A description of the Company’s significant accounting policies is included in the Company’s ~~2022~~2023 Form 10-K. You should read the unaudited condensed consolidated financial statements in conjunction with the Company’s audited consolidated financial statements and accompanying notes in the Company’s ~~2022~~2023 Form 10-K. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the Company’s audited consolidated financial statements included in the Company’s ~~2022~~2023 Form 10-K.

Segment information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is comprised of several members of its executive management team. The Company views its operations and manages its business in one segment.

~~Net loss~~Income (loss) per share

Basic net ~~loss~~income (loss) per share is computed by dividing net ~~loss~~income (loss) allocated to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net ~~loss~~income (loss) per common share adjusts net ~~loss~~income (loss) and net ~~loss~~income (loss) per common share for the effect of all potentially dilutive shares of Common Stock. Potential common shares consist of the Company’s outstanding ~~public and private placement~~ warrants to purchase Common Stock, as well as unvested restricted stock units (“RSUs”). ~~Basic net loss per~~

The dilutive effect of RSUs was calculated using the treasury stock method. For warrants that are liability-classified, during periods when the impact is dilutive, the Company assumes share settlement of the instruments as of the beginning of the reporting period and adjusts the numerator to remove the change in fair value of the warrant liability and adjusts the denominator to include the dilutive shares calculated using the treasury stock method.

The Company’s potential common ~~share is~~shares have been excluded from the ~~same as dilutive~~computation of diluted net loss per common share for ~~all periods presented~~the three months ended March 31, 2023, as the ~~inclusion of all potential~~effect would be to reduce the net loss per common ~~shares would have been antidilutive.~~share.

The following is a reconciliation of the numerator and denominator of the diluted net income (loss) per share computations for the periods indicated below:

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	Three Months Ended March 31,
	2024		2023
Basic and diluted income (loss) per share:
Net income (loss)	$	39,900	$	(4,553	)

Weighted average shares outstanding - basic		296,641,499		248,654,082
Add:
RSUs		7,756,480		-
Weighted average shares outstanding - diluted		304,397,979		248,654,082

Net income (loss) per share - basic	$	0.13	$	(0.02	)
Net income (loss) per share - diluted	$	0.13	$	(0.02	)

The following table presents the common shares that are excluded from the computation of diluted net ~~loss~~income (loss) per common share at ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ because including them would have been antidilutive.


	June 30,				March 31,
	2023		2022		2024		2023
Public warrants		8,499,980		8,499,980		8,613,980		8,499,980
Private placement warrants		114,000		114,000		-		114,000
Unvested RSUs		23,134,869		12,975,614		-		18,541,618
		31,748,849		21,589,594		8,613,980		27,155,598

Recently issued and adopted accounting pronouncements

In ~~June 2016,~~December 2023, the FASB issued ASU 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting ~~Standards Update~~ for and Disclosure of Crypto Assets (“ASU ~~No.~~2023-08”). The Company ~~2016‑13~~adopted, ~~Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was codified with its subsequent amendments as ASC Topic 326,~~ ~~Financial Instruments – Credit Losses~~ (“ASC 326”). ASC 326 seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by a reporting entity at each reporting date. The amendments require an entity to replace the incurred loss impairment methodology in other GAAP with a methodology that reflects current expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of this guidance on ASU 2023-08 effective January 1, 2023 ~~did~~ ~~not~~ ~~have a material impact on~~, as reflected in the Company’s ~~unaudited condensed consolidated financial statements~~Form 10-K for the year ended December 31, 2023. The adoption resulted in a $0.2 million adjustment to opening Retained earnings on January 1, 2023, as well as a reduction of Operating loss, and ~~disclosures.~~Net loss of $2.0 million, and a reduction of Basic and diluted net loss per share of $0.01 as reported for the three months ended March 31, 2023.

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes to determine the consequences of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financial statements properly reflect the change. The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on its condensed consolidated financial statements.

NOTE 3. BITCOIN

The following table presents information about the Company’s bitcoin (in thousands):

Balance as of January 1, 2023

$
6,283

Bitcoin received from equity investees

317

Revenue recognized from bitcoin mined, net of receivable

52,836

Proceeds from sale of bitcoin, net of realized gain

(44,267
)
Impairment of bitcoin

(4,633
)
Balance as of June 30, 2023

$
10,536


	March 31,
	2024		2023
Opening balance	$	32,978	$	6,283
Cumulative effect upon adoption of ASU 2023-08		-		209
Bitcoin received from equity investees		1,694		317
Revenue recognized from bitcoin mined, net of receivable		48,079		21,717
Proceeds from sale of bitcoin		-		(20,958	)
Change in fair value of bitcoin		40,556		4,265
Ending balance	$	123,307	$	11,833

The Company held approximately 1,730, and 780 bitcoin at March 31, 2024, and December 31, 2023, respectively. The associated fair value and cost basis of ~~the Company’s~~ bitcoin ~~as of June 30, 2023~~held was ~~approximately~~ $~~12.3~~123.3 million, and ~~was~~$80.7 million, respectively, at March 31, 2024, and $33.0 million, and $30.9 million, respectively at December 31, 2023. Fair value of bitcoin is estimated using the closing price of bitcoin, which is a Level 1 input (i.e., an observable input such as a quoted price in an active market for an identical asset).

~~During the three and six months ended June 30, 2023, the~~11

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company ~~recorded impairment charges on its~~may pledge bitcoin ~~holdings~~as collateral related to bitcoin trading strategies. As of ~~approximately~~March 31, 2024, 67 bitcoin with a fair value of $~~2.8~~4.8 million ~~and~~were pledged. Restrictions on that collateral lapsed on April 1, 2024. As of December 31, 2023, 10 bitcoin with a fair value of $~~4.6~~0.4 million ~~respectively. Impairment charges~~ were ~~approximately $0.5~~ ~~million for both the three and six months ended June 30, 2022.~~pledged. Restrictions on that collateral lapsed on January 26, 2024.

NOTE 4. DERIVATIVE ASSET

Luminant Power Agreement

On June 23, 2021, the Company entered into a power purchase agreement with Luminant ET Services Company LLC (“Luminant”), which was subsequently amended and restated on July 9, 2021, and further amended on February 28, 2022, August 26, 2022 and August ~~26, 2022~~23, 2023 (as amended, the “Luminant Power Agreement”), for the supply of a fixed amount of electric power to the Odessa Facility at a fixed price for a term of five years, subject to certain early termination ~~exemptions.~~provisions. The Luminant Power Agreement provides for a subsequent automatic annual renewal unless either party provides written notice to the other party of its intent to terminate the agreement at least six months prior to the expiration of the then current term. Starting from July 1, 2022, and prior to the receipt of interconnection

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

approval from the Electric Reliability Council of Texas (“ERCOT”), under the take or pay framework of the Luminant Power Agreement and pursuant to the ramp-up schedule agreed to between Luminant and Cipher, Luminant began sales of the scheduled energy in the ERCOT market.

Because ERCOT allows for net settlement, the Company’s management determined that, as of July 1, 2022, the Luminant Power Agreement met the definition of a derivative under ASC 815, Derivatives and Hedging (“ASC 815”). Because the Company has the ability to sell its electricity in the ERCOT market rather than take physical delivery, physical delivery is not probable through the entirety of the contract and therefore, the Company’s management does not believe the normal purchases and normal sales scope exception applies to the Luminant Power Agreement. Accordingly, the Luminant Power Agreement (the non-hedging derivative contract) is recorded at its estimated fair value each reporting period with the change in the fair value recorded in change in fair value of derivative asset in the consolidated statements of operations. See additional information regarding valuation of the Luminant Power Agreement derivative in Note ~~16.~~17. Fair Value Measurements.

Depending on the spot market price of electricity, the Company may opportunistically sell electricity in the ERCOT market in exchange for cash payments, rather than utilizing the power to mine for bitcoin at the Odessa Facility during peak times in order to most efficiently manage the Company’s operating costs. The Company earned approximately $~~5.7~~1.2 million and $~~5.7~~0.1 million, ~~respectively~~ from power sales for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024, and 2023, respectively, and recorded this amount in power sales within costs and operating expenses (income) on the unaudited condensed consolidated statement of operations, with the corresponding cost of the power sold recorded in cost of revenue. See Note 1. Organization for information regarding the out-of-period adjustments recorded during the ~~six~~three months ended ~~June 30,~~March 31, 2023, which affected cost of power, power sales, net operating loss and net loss on the Company’s unaudited condensed consolidated statement of operations.

NOTE 5. PROPERTY AND EQUIPMENT

Property and equipment, net consisted of the following (in thousands):


	June 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
Miners and mining equipment	$	158,318		$	79,909		$	168,684		$	163,523
Leasehold improvements		135,209			94,807			137,496			138,883
Software		1,054			596
Office and computer equipment		279			88			279			279
Autos		73			73			73			73
Furniture and fixtures		88			69			88			88
Construction-in-progress		2,167			20,437			7,784			49
Total cost of property and equipment		297,188			195,979			314,404			302,895
Less: accumulated depreciation		(29,398	)		(4,195	)		(75,863	)		(59,080	)
Property and equipment, net	$	267,790		$	191,784		$	238,541		$	243,815

During the ~~six~~three months ended ~~June 30, 2023 and 2022,~~March 31, 2024, the Company ~~placed~~added approximately $~~34.4~~7.7 million ~~and~~ ~~nil, respectively,~~ of construction-in-progress ~~into service at~~related to the ~~Odessa~~Black Pearl Facility. Depreciation expense was approximately $~~14.4~~17.1 million and $~~26.1~~11.7 million, respectively, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023, and included approximately $~~0.4~~0.8 million, and $~~0.9~~0.4 million respectively, of accretion expense related to the Company’s asset retirement obligation. ~~Depreciation expense was immaterial for the three and six months ended June 30, 2022.~~

~~During the first quarter of fiscal 2023, the Company received the remaining~~ ~~17,094~~ MicroBT M30S, M30S+ and M30S++ miners (“MicroBT miners”) related to the framework agreement of September 2021 with SuperAcme Technology (Hong Kong) Limited (“SuperAcme”), which was amended and restated by the Amended and Restated Framework Agreement on Supply of Blockchain Servers (the “Amended and Restated Framework Agreement”), dated as of May 6, 2022, and subject to the Supplementary Agreement of the Framework Agreement on Supply of Blockchain Servers (the “Supplementary Agreement). These MicroBT miners received during the first quarter of fiscal 2023 had an aggregate cost of approximately $~~50.7~~ ~~million and were purchased by the Company at the new fixed and floating price terms set forth in the Supplementary Agreement. The Company also received~~ ~~4,622~~ ~~Antminer S19j Pro (100 TH/s) (“S19j Pro”) miners from Bitmain with a cost basis of approximately $1.6~~ ~~million during the first quarter of fiscal 2023. As of June 30, 2023, the Company had a total of~~ ~~35,117~~ ~~MicroBT miners,~~ ~~14,907~~ ~~S19j Pro miners and~~ ~~11,000~~ ~~Canaan A1346 model miners for a total of~~ ~~61,024~~ ~~miners at its Odessa Facility. See additional information regarding the Canaan miners in Note 1.~~ ~~Organization~~ ~~and Note 11.~~ ~~Leases~~.

1312

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 6. DEPOSITS ON EQUIPMENT

~~In November and December 2022,~~On October 4, 2023, the Company ~~agreed~~entered into an agreement with Bitmain to purchase 1.2 EH/s worth of miners for a total purchase price of $~~5,000~~24.0 ~~and~~ ~~2,200, respectively, S19j Pro miners from Bitmain. The Company utilized accumulated Bitmain credits~~million to be paid in cash and coupons, ~~for~~or $16.8 million in cash after applying coupons. Related to this agreement, the ~~majority~~Company has made installment payments of ~~the purchase price for these miners~~$13.0 million, $5.2 million of which has been placed into service and has no further payments due in respect of these orders. Information regarding the quantity of Bitmain miners received pursuant to these agreements during the six months ended June 30, 2023 is disclosed in Note 5. reclassified into Property and ~~Equipment. As~~equipment as of March 31, 2024. The remaining batches of miners are expected to be delivered by June ~~30,~~2024.

On December 18, 2023, the Company ~~did not have material open~~entered into a second agreement with Bitmain to purchase ~~agreement commitments.~~

As7.1 EH/s of ~~June 30, 2023, deposits on equipment was~~the latest generation miners to be delivered in the first half of 2025. The Company paid a deposit of $~~1.7~~9.9 million ~~primarily related~~upon execution of the agreement. The agreement has an option to ~~shipping costs and peripheral cables associated with~~purchase an additional 8.7 EH/s in 2024. The Company paid $12.2 million as a deposit, which can be used towards purchases under this option. As of March 31, 2024, the ~~equipment from the Canaan Agreement described in Note 1.~~option has ~~Organization~~no ~~and further in Note 11.~~ ~~Leases~~.t been exercised.

NOTE 7. INVESTMENTS IN EQUITY INVESTEES

The Company uses the equity method of accounting to account for its 49% equity interest in its partially owned mining operations Alborz LLC, Bear LLC and Chief, LLC (the “Data Center LLCs”). ~~The Company recognized a total of approximately $1.4~~ ~~million and $2.2~~ ~~million of net losses in equity in losses of equity investees within the condensed consolidated statements of operations during the three and six months ended June 30, 2023, respectively, and $12.1~~ ~~million and $12.2~~ million of net losses in equity in losses of equity investees during the three and six months ended June 30, 2022, respectively. Cryptocurrency mining operations for the Data Center LLCs consisted only of minimal activity at the Alborz Facility for the six months ended June 30, 2022.

During fiscal year 2022, the Company contributed miners and mining equipment to the Alborz, Bear and Chief Facilities. The majority of these contributed miners had a fair value that was lower than the cost paid by the Company to obtain them, and the Company recognized losses at the time of the contributions, resulting in basis differences related to the Company’s investments in ~~Alborz LLC, Bear LLC and Chief LLC, all of~~the Data Center LLCs, which recorded the contributions of equipment from the Company at the historical cost paid by the Company to obtain the equipment. As ~~Alborz LLC, Bear LLC and Chief LLC~~the Data Center LLCs depreciate the historical cost of these miners on their respective financial statements over the expected depreciation period of five years, the Company accretes these basis differences over the same period and records the accretion amount for each reporting period within equity in losses of equity investees on its statements of operations until these miners are fully depreciated and the corresponding basis differences are fully accreted. As of ~~June 30, 2023,~~March 31, 2024, the Company had remaining basis differences totaling approximately $~~28.1~~23.1 million that have not yet been accreted. ~~Accretion recorded by the Company during the six months ended June 30, 2023 is shown in the table below and was recorded within equity in losses of equity investees on the statement of operations.~~

Activity in the Company’s investments in equity investees during the ~~six~~three months ended ~~June 30,~~March 31, 2024, and 2023, consisted of the following (in thousands):


Balance as of January 1, 2023	$	37,478
Cost of miners and mining equipment contributed		1,925
Balance as of December 31, 2022				$	37,478
Cost of contributed mining equipment and other capital contributions					1,925
Accretion of basis differences related to miner contributions		3,340			1,670
Capital distributions		(3,807	)		(3,807	)
Bitcoin received from equity investees		(317	)		(317	)
Equity in net losses of equity investees		(5,521	)		(2,420	)
Balance as of June 30, 2023	$	33,098
Balance as of March 31, 2023				$	34,529

Balance as of December 31, 2023				$	35,258
Cost of contributed mining equipment and other capital contributions					18,319
Accretion of basis differences related to miner contributions					1,671
Capital distributions					-
Bitcoin received from equity investees					(1,694	)
Equity in net losses of equity investees					(933	)
Balance as of March 31, 2024				$	52,621

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 8. INTANGIBLE ASSETS

The Company’s intangible assets consisted of the following for the dates indicated (in thousands):


			March 31, 2024
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Strategic contract	$	7,000	$	(117	)	$	6,883
Capitalized software		1,432		(153	)		1,279
Total	$	8,432	$	(270	)	$	8,162


			December 31, 2023
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Strategic contract	$	7,000	$	(28	)	$	6,972
Capitalized software		1,230		(93	)		1,137
Total	$	8,230	$	(121	)	$	8,109

The Company recorded amortization expense related to intangible assets of $0.1 million and nil in the three months ended March 31, 2024 and 2023, respectively. The Company expects to record amortization expense as follows over the next five subsequent years (in thousands):



Remaining Year Ended December 31, 2024	$	450
Year Ended December 31, 2025		599
Year Ended December 31, 2026		599
Year Ended December 31, 2027		599
Year Ended December 31, 2028		508

NOTE 8.9. SECURITY DEPOSITS

The Company’s security deposits consisted of the following (in thousands):

June 30, 2023

December 31, 2022

Luminant Power Purchase Agreement Independent Collateral Amount

$
12,554

$
12,554

Luminant Purchase and Sale Agreement collateral

3,063

3,063

Operating lease security deposits

967

960

Other deposits

1,158

1,153

Total security deposits

$
17,742

$
17,730

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~


	March 31, 2024		December 31, 2023
Luminant Power Purchase Agreement collateral	$	12,554	$	12,554
Luminant Purchase and Sale Agreement collateral		3,063		3,063
Operating lease security deposits		960		960
Oncor Facility Extension security deposit related to Black Pearl		6,269		6,269
Other deposits		1,009		1,009
Total security deposits	$	23,855	$	23,855

NOTE 9.10. SUPPLEMENTAL FINANCIAL INFORMATION

~~As of June 30, 2023~~Prepaid expenses and ~~December 31, 2022, the Company had approximately~~other current assets were $~~2.3~~2.9 million and $~~7.3~~3.7 million as of March 31, 2024 and December 31, 2023, respectively, primarily consisting of prepaid ~~expenses and other current assets, which was primarily related to prepaid~~ insurance ~~other than approximately $~~in both periods.

~~1.2~~14

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~million of bitcoin temporarily held for the Company’s joint venture partner, WindHQ LLC (“WindHQ”), as of December 31, 2022.~~

The Company’s accrued expenses and other current liabilities consisted of the following (in thousands):


	June 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Taxes (primarily sales tax)	$	12,929	$	18,798	$	13,804	$	15,184
Power costs		3,374		-		-		139
Finance lease (1)		2,373		339
Due to broker						1,958		-
Employee compensation						1,768		5,800
Legal settlement ~~(2)~~(1)		2,000		-		500		1,000
Employee compensation		1,045		-
Legal fees		376		215
Other		649		1		631		316
Total accrued expenses and other current liabilities	$	22,746	$	19,353	$	18,661	$	22,439

__________

(1) ~~See Note 11.~~ ~~Leases~~ ~~for additional information regarding the Company’s finance leases.~~

~~(2)~~ See Note ~~12.~~13. Commitments and Contingencies for additional information regarding the legal settlement accrual as of ~~June 30, 2023.~~March 31, 2024.

NOTE ~~10.~~11. RELATED PARTY TRANSACTIONS

Related party receivables

~~The Company recorded related~~Related party receivables ~~of approximately~~were $~~1.6~~0.4 million, and $~~1.1~~0.2 million as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, ~~related to~~consisting of expenses paid on behalf of the Data Center ~~LLCs for which it expects to be reimbursed.~~LLCs.

Purchase commitments, deposits on equipment and related party payables

~~The~~On April 8, 2022, the Company entered into two agreements with Bitfury USA Inc. (“Bitfury USA”), made under, and as a part of, the Master Services and Supply Agreement to purchase ~~BBACs.~~BlockBox air-cooled containers. Additionally, Bitfury USA contracted with third-party vendors for the purchase of equipment and the receipt of services related to Cipher’s future mining operations. Pursuant to one of these arrangements between Bitfury USA and a third-party vendor, Paradigm Controls of Texas, LLC (“Paradigm”), the Company made payments directly to Paradigm in place of Bitfury USA, in respect of manufacturing services for BBACs, totaling approximately $5.8 million during the ~~six months~~year ended ~~June 30,~~December 31, 2023 and the Company’s obligations to Bitfury USA under the Master Services and Supply Agreement were reduced by the same amount.

~~As of December 31, 2022, in relation to~~ The Company and Bitfury Top HoldCo terminated the ~~Company assisting WindHQ with the liquidation of some of WindHQ’s bitcoin holdings, the Company had approximately $1.2~~ ~~million of bitcoin~~Master Services and ~~approximately $0.3~~ ~~million of proceeds received, but not yet transferred to WindHQ, respectively, recorded in accounts payable, related party~~Supply Agreement on its consolidated balance sheet. During the six months ended June 30, 2023, all of the bitcoin held by the Company on behalf of WindHQ was liquidated and all proceeds received from the liquidation were forwarded to WindHQ, leavingFebruary 28, 2024, for no ~~remaining amount payable to WindHQ in accounts payable, related party as of June 30, 2023 on the Company’s unaudited condensed consolidated balance sheet.~~additional consideration.

NOTE ~~11.~~12. LEASES

Combined Luminant Lease Agreement

The Company entered into a series of agreements with affiliates of Luminant, including the Lease Agreement dated June 29, 2021, with amendment and restatement on July 9, 2021 and August 23, 2023 (as amended and restated, the “Luminant Lease Agreement”). The Luminant Lease Agreement leases a plot of land to the Company for the data center, ancillary infrastructure and electrical system (the “Interconnection Electrical Facilities” or “substation”) of the Odessa Facility. The Company entered into the Luminant Lease Agreement and the

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Luminant Purchase and Sale Agreement to build the infrastructure necessary to support its Odessa Facility operations. The Company determined that the Luminant Lease Agreement and the Luminant Purchase and Sale Agreement should be combined for accounting purposes under ASC 842 (collectively, the “Combined Luminant Lease Agreement”) and that amounts exchanged under the combined contract should be allocated to the various components of the overall transaction based on relative fair values.

The Company’s management determined that the Combined Luminant Lease Agreement contains two lease components; and the components should be accounted for together as a single lease component, because the effect of accounting for the land lease separately would be insignificant. ~~Financing for use of the land and substation is provided by Luminant affiliates, with monthly installments of principal and interest due over a~~ ~~five-year~~ ~~period starting upon transfer of legal title of the substation to the Company (estimated total undiscounted principal payments of $15.0~~ ~~million).~~

On July 11, 2023, the Company ~~has not been required by~~entered into an amendment of the payment schedule to the Luminant ~~to make any lease payments for~~Purchase and Sale Agreement, reflecting monthly installments of principal and interest totaling $19.7 million on an undiscounted basis, due over the ~~substation, therefore~~remaining four-year period starting in July 2023. On August 23, 2023, the Company ~~is continuing to accrue amounts due under~~entered into a second amendment of the ~~Combined~~ Luminant Lease

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Agreement, ~~in accrued expenses and other current liabilities~~the terms of which included confirming the initial term will end on ~~its~~July 31, 2027. These amendments did not have a material impact on the Company’s unaudited condensed consolidated ~~balance sheet. The Company expects to begin making monthly lease payments in August 2023.~~ financial statements.

At the end of the lease term for the Interconnection Electrical Facilities, the substation will be sold back to Luminant’s affiliate, Vistra Operations Company, LLC at a price to be determined based upon bids obtained in the secondary market.

~~Canaan Agreement~~

~~As described in Note 1.~~ ~~Organization, the Company entered into the Canaan Agreement to purchase~~ ~~11,000~~ ~~new A1346 model miners, all of which were received prior to June 30, 2023 and have been installed at the Odessa Facility. The Company was required to pay a total of approximately $4.1~~ ~~million prior to delivery of the miners. The Company will also make six monthly installment payments of approximately $1.7~~ million each month, through November 2023, at which time the Company will obtain title to the miners. The Company determined that the Canaan Agreement contains embedded leases as defined in ASC 842, one for each batch of miners delivered. Based on the terms of the arrangement and intent of the parties, the Company has classified the leases of the Canaan miners as finance leases. Each lease commences upon delivery of the associated batch, as the delivery date represents the date upon which the Company obtains the right to use the assets for a period of time in exchange for consideration. As a result of all ~~11,000~~ miners being delivered to the Company in June 2023, the Company determined there will effectively be a single lease commencement date for all of the underlying right-of-use assets. The lease term for the Canaan miners will be six months, aligning with the final payment and title transfer date. Upon title transfer, the Company will continue depreciating the residual value of the miners over their remaining useful life.

Office headquarters lease

The Company entered into an operating lease for office space located in New York. The lease has an initial term of 64 months and commenced on February 1, 2022. The lease does not provide the Company with renewal options.

Additional lease information

Components of the Company’s lease expenses are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three months ended March 31,
	2023		2022		2023		2022		2024		2023
Finance leases:
Amortization of ROU assets (1)	$	1,027	$	-	$	1,816	$	-	$	761	$	789
Interest on lease liability		477		-		878		-		392		401
Total finance lease expense		1,504		-		2,694		-		1,153		1,190
Operating leases:
Operating lease expense		467		371		921		618		439		371
Variable lease cost		-		-		-		-
Short-term lease rent expense										-		83
Total operating lease expense		467		371		921		618		439		454
Total lease expense	$	1,971	$	371	$	3,615	$	618	$	1,592	$	1,644

__________

(1) Amortization of finance lease ROU assets is included within depreciation expense.

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

The Company did not incur any variable lease costs during any of the periods presented.

Other information related to the Company’s leases is shown below (dollar amounts in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Operating cash flows - operating lease

$
396

$
-

$
791

$
-

Right-of-use assets obtained in exchange for operating lease liabilities

$
-

$
-

$
-

$
5,859


	Three months ended March 31,
	2024		2023
Operating cash flows - operating lease	$	401	$	395


	June 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
Weighted-average remaining lease term – finance lease (in years)		2.7			4.7			3.4			3.7
Weighted-average remaining lease term – operating lease (in years)		3.9			4.4			5.7			5.8
Weighted-average discount rate – finance lease		11.0	%		11.0	%		11.0	%		11.0	%
Weighted-average discount rate – operating lease		10.9	%		10.9	%		9.9	%		10.0	%
Finance lease ROU assets (1)	$	26,868		$	14,471		$	10,399		$	11,160

__________

(1) As of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the Company had recorded accumulated amortization of approximately $~~2.3~~2.0 million and $~~0.5~~1.3 million, respectively, for the finance lease ROU assets. Finance lease ROU assets are recorded within property and equipment, net on the Company’s consolidated balance sheets.

As of ~~June 30, 2023,~~March 31, 2024, future minimum lease payments during the next five years are as follows (in thousands):

Finance Lease

Operating Lease

Total

Remaining Period Ended December 31, 2023

$
10,511

$
790

$
11,301

Year Ended December 31, 2024

4,068

1,581

5,649

Year Ended December 31, 2025

4,068

1,581

5,649

Year Ended December 31, 2026

4,068

1,581

5,649

Year Ended December 31, 2027

2,712

659

3,371

Total lease payments

25,427

6,192

31,619

Less present value discount

(3,402
)

(1,169
)

(4,571
)
Total

$
22,025

$
5,023

$
27,048

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	Finance Lease			Operating Lease			Total
Year Ended December 31, 2024	$	3,626		$	1,428		$	5,054
Year Ended December 31, 2025		4,834			3,383			8,217
Year Ended December 31, 2026		4,834			1,668			6,502
Year Ended December 31, 2027		3,223			699			3,922
Year Ended December 31, 2028		-			-			-
Thereafter		-			2,520			2,520
Total lease payments		16,517			9,698			26,215
Less present value discount		(2,801	)		(2,469	)		(5,270	)
Total	$	13,716		$	7,229		$	20,945

NOTE ~~12.~~13. COMMITMENTS AND CONTINGENCIES

Commitments

In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers. The Company’s maximum exposure under these arrangements, if any, is unknown as of ~~June 30, 2023.~~March 31, 2024. The Company does not anticipate recognizing any significant losses relating to these arrangements.

On August 14, 2023, the Company, through CMTI, entered into a master loan agreement with Coinbase Credit, Inc., as lender, and Coinbase, Inc., as lending service provider. Pursuant to the master loan agreement, the Company established a secured line of credit up to $10.0 million (the “Credit Facility”). The Company will not incur commitment fees for unused portions of the Credit Facility. The borrowing rate on amounts drawn against the Credit Facility is determined on the basis of the Federal Funds Target Rate - Upper Bound, plus 2.5%, calculated daily based on a 365-day year and payable monthly for the duration of the loan. Borrowings under the Credit Facility are available on demand, open term, and collateralized by bitcoin transferred to the lending service provider’s platform. As of March 31, 2024 the Company has not drawn upon the Credit Facility.

Contingencies

The Company, and its subsidiaries, are subject at times to various claims, lawsuits and governmental proceedings relating to the Company’s business and transactions arising in the ordinary course of business. The Company cannot predict the final outcome of such proceedings. Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings. Some of these claims, lawsuits and proceedings seek damages, including consequential, exemplary or punitive damages, in amounts that could, if awarded, be significant. Certain of the claims, lawsuits and proceedings arising in the ordinary course of business are covered by the Company’s insurance program. The Company maintains property and various types of liability insurance in an effort to protect the Company from such claims. In terms of any matters where there is no insurance coverage available to the Company, or where coverage is available and the Company maintains a retention or deductible associated with such insurance, the Company may establish an accrual for such loss, retention or deductible based on current available information. In accordance with accounting guidance, if it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements, and the amount of loss is reasonably

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

estimable, then an accrual for the cost to resolve or settle these claims is recorded by the Company in the accompanying unaudited condensed consolidated balance sheets. If it is reasonably possible that an asset may be impaired as of the date of the financial statements, then the Company discloses the range of possible loss. Expenses related to the defense of such claims are recorded by the Company as incurred and included in the accompanying unaudited condensed consolidated statements of operations. Management, with the assistance of outside counsel, may from time to time adjust such accruals according to new developments in the matter, court rulings, or changes in the strategy affecting the Company’s defense of such matters. On the basis of current information, the Company does not believe there is a reasonable possibility that a material loss, if any, will result from any claims, lawsuits and proceedings to which the Company is subject to either individually, or in the aggregate.

Litigation

Luminant Power Agreement

On November 18, 2022, Luminant filed suit against CMTI in the 95th95th District Court of Dallas County, Texas, asserting Texas state law claims for declaratory judgment and “money had and received”, seeking recoupment and return of money previously paid by Luminant to CMTI in connection with Luminant’s (and its affiliates’) construction and energization of Cipher’s bitcoin mining data

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

center in Odessa, Texas. These prior payments were (i) the sum of $5.1 million paid to CMTI in September 2022 pursuant to a contractual provision requiring such payment in the parties’ written and executed August 25, 2022 Third Amendment to the Luminant Power Agreement, and (ii) the sum of $1.7 million also paid to CMTI in September 2022, as agreed by the parties, for electrical power sold by Luminant for CMTI’s benefit into the open market prior to the final energization of the ~~Company’s facility.~~Odessa Facility. Luminant ~~contends~~contended that such payments were mistaken because, although voluntarily made by Luminant, they were not actually due under the terms of the Luminant Power Agreement, as amended. The Company filed its answer on January 17, 2023, denying any liability to Luminant. Cipher ~~has~~did not ~~received~~receive payment from Luminant for electricity sold in the ERCOT market in September 2022 and October 2022.

The Company wholly disputes the claims made by Luminant and intends to contest the case vigorously. The parties have exchanged basic discovery disclosures, and discovery and motion practice have not substantively commenced. An initial trial date has been set. The parties continue to discuss a potential resolution and, while the Company does not yet know how or when this matter will be resolved, it has established a $2.0 million accrual for the cost of resolving the ~~claims.~~claims in the second quarter of 2023, $1.5 million of which has been paid as of March 31, 2024 in connection with the Luminant Settlement (defined below).

On July 11, 2023, the Company entered into an amendment of the payment schedule to the Luminant Purchase and Sale Agreement, reflecting monthly installments of principal and interest totaling $19.7 million on an undiscounted basis, due over the remaining four-year period starting in July 2023.

On August 23, 2023, the Company settled the dispute with Luminant (the “Luminant Settlement”). In connection with the Luminant Settlement, the Company, through CMTI, entered into (i) a Fourth Amendment to the Power Purchase Agreement (the “Amended PPA”) with Luminant, which amended the Luminant Power Agreement and (ii) a Second Amendment to the Lease Agreement (the "Amended Lease") with an affiliate of Luminant, which amended the Luminant Lease Agreement.

The Amended PPA, among other items, reduces the notice requirements that CMTI must satisfy in connection with changes to its energy consumption at the Odessa Facility and the Amended Lease provides that the initial term of the agreement shall end on July 31, 2027.

NOTE ~~13.~~14. STOCKHOLDERS’ EQUITY

As of ~~June 30, 2023,~~March 31, 2024, 510,000,000 shares with a par value of $0.001 per share are authorized, of which, 500,000,000 shares are designated as Common Stock and 10,000,000 shares are designated as preferred stock (“Preferred Stock”).

Common Stock

Holders of each share of Common Stock are entitled to dividends when, as and if declared by the Board. As of the issuance of these unaudited condensed consolidated financial statements, the Company had not declared any dividends. The holder of each share of Common Stock is entitled to one vote. The voting, dividend, liquidation and other rights and powers of the Common Stock are subject to and qualified by the rights, powers and preferences of any outstanding series of Preferred Stock, for which there currently are none outstanding.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company issued ~~2,473,759~~2,059,390 shares of Common Stock to officers, employees and consultants in settlement of an equal number of fully vested RSUs awarded to these individuals, and ~~248,358~~66,941 shares of Common Stock to directors, pursuant to grants made under the Cipher Mining Inc. 2021 Incentive Award Plan (the “Incentive Award Plan”). The Company immediately repurchased ~~838,388~~787,098 of these shares of Common Stock from officers and employees, with a fair value of approximately $~~1.1~~3.2 million, to cover taxes related to the settlement of vested RSUs, as permitted by the Incentive Award Plan. The Company placed the repurchased shares in treasury stock.

At-the-Market Sales Agreement

On September 21, 2022, the Company filed with the SEC a shelf registration statement on Form S-3, which was declared effective on October 6, 2022 (the “Registration Statement”). In connection with the filing of the Registration Statement, the Company also entered into an at the market offering agreement (the “Prior Sales Agreement”) with H.C. Wainwright & Co., LLC (the “Prior Agent”), under which the Company may, from time to time, sell shares of its Common Stock having an aggregate offering price of up to $250.0 million in “at the market” offerings through the Prior Agent. ~~During the six months ended June 30, 2023, in connection with the Prior Sales Agreement, the Company received proceeds of approximately $2.7~~ ~~million, net of issuance costs, from the sale of~~

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~978,207~~ ~~shares of common stock, with an average fair value of $2.78~~ ~~per share.~~ Effective August 1, 2023, the Company terminated the Prior Sales Agreement.

On August 3, 2023, the Company entered into a Controlled Equity ~~OfferingSM~~OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC and Compass Point Research & Trading, ~~LLC. See Note 18.~~ LLC (each, an “Original Agent” and, together, the “Original Agents”), pursuant to which the Company may offer and sell, from time to time through or to the Agents, shares of its Common Stock, for aggregate gross proceeds of up to $~~Subsequent Events~~250.0 ~~for additional information related~~million (the “Shares”). The offering and

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

sale of up to $250.0 million of the Shares has been registered under the Registration Statement, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on August 4, 2023 (the “Prospectus Supplement”).

On March 6, 2024, the Company 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, the Company 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.

Pursuant to the Sales Agreement, the Agent selected by the Company (such Agent, the “Designated Agent”) may sell the Shares in sales deemed to be “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act. The Company has no obligation to sell any of the Shares under the Sales Agreement and may at any time suspend or terminate the offering of the Shares pursuant to the Sales Agreement upon notice and subject to other conditions. The Agents will act as sales agents and will use commercially reasonable efforts to sell on the Company’s behalf all of the Shares requested to be sold by it, on mutually agreed terms between the Agents and the Company. Under the terms of the Sales Agreement, the Company agreed to pay the Designated Agent a commission up to 3.0% of the aggregate gross proceeds from any Shares sold through such Designated Agent pursuant to the Sales Agreement. In addition, the Company agreed to reimburse certain expenses incurred by the Agents in connection with the Sales Agreement. During the three months ended March 31, 2024, in connection with the Prior Sales Agreement and the Sales Agreement, the Company received proceeds of approximately $64.5 million, net of issuance costs, from the sale of 14,246,235 shares of common stock, with an average net selling price of $4.53 per share. Subsequent to March 31, 2024, the Company received additional proceeds of $17.8 million, net of issuance costs, from the sale of 3,362,680 shares of common stock, with an average net selling price of $5.29 per share.

NOTE ~~14.~~15. WARRANTS

Upon consummation of the business combination, the Company assumed Common Stock warrants that were originally issued in GWAC’s initial public offering (the “Public Warrants”), as well as warrants that were issued in a private placement that closed concurrently with GWAC’s initial public offering (the “Private Placement Warrants”). The Public and Private Placement Warrants entitle the holder to purchase one share of Common Stock at an exercise price of $11.50 per share, subject to adjustment. There were 8,499,980 Public Warrants and 114,000 Private Placement Warrants outstanding as of ~~both June 30,~~December 31, 2023, and ~~December~~8,613,980 Public Warrants and no Private Placement Warrants outstanding as of March 31, ~~2022.~~2024. The exercise price and number of shares of Common Stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or the Company’s recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of shares of Common Stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the warrants.

NOTE ~~15.~~16. SHARE-BASED COMPENSATION

The Incentive Award Plan provides for the grant of stock options, including incentive stock options and nonqualified stock options, stock appreciation rights, RSUs and other stock or cash-based awards to employees, consultants and directors. Upon vesting of an award, the Company may either issue new shares or reissue treasury shares.

Initially, up to 19,869,312 shares of Common Stock were available for issuance under awards granted pursuant to the Incentive Award Plan. In addition, the number of shares of Common Stock available for issuance under the Incentive Equity Plan is increased on January 1 of each calendar year beginning in 2022 and ending in 2031 by an amount equal to ~~the lesser of~~ (a) three percent (3%) of the total number of shares of Common Stock outstanding on the final day of the immediately preceding calendar year ~~and~~or (b) such smaller number of shares determined by the Board. On January 1, ~~2023,~~2024, this resulted in an increase of ~~7,426,559~~8,728,736 shares of Common Stock available for issuance under the Incentive Award Plan. As of ~~June 30, 2023,~~March 31, 2024, ~~5,694,657~~4,732,483 shares of Common Stock were available for issuance under the Incentive Award Plan.

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company recognized total share-based compensation expense in ~~general~~Compensation and ~~administrative expenses~~benefits on the unaudited condensed consolidated statements of operations for the following categories of awards as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three months ended March 31,
	2023		2022		2023		2022		2024		2023
Service-based RSUs	$	5,580	$	6,685	$	10,827	$	12,858	$	6,136	$	5,468
Performance-based RSUs		3,378		3,379		6,720		6,720		1,947		3,342
Common stock, fully-vested		220		-		441		-		234		-
Total share-based compensation expense	$	9,178	$	10,064	$	17,988	$	19,578	$	8,317	$	8,810

Service-based RSUs

A summary of the Company’s unvested Service-based RSU activity for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 is shown below:


	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Unvested at January 1, 2023		14,441,044		$	3.96
Unvested at December 31, 2023							17,047,242		$	3.23
Granted		6,909,873		$	2.25		10,550,154		$	3.19
Vested		(2,473,758	)	$	5.91		(2,059,390	)	$	6.73
Unvested at June 30, 2023		18,877,159		$	3.08
Unvested at March 31, 2024							25,538,006		$	2.93

As of ~~June 30, 2023,~~March 31, 2024, there was approximately $~~32.7~~48.5 million of unrecognized compensation expense related to unvested Service-based RSUs, which is expected to be recognized over a weighted-average vesting period of approximately ~~1.6~~1.4 years.

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

If not fully vested upon grant, Service-based RSUs awarded generally vest over a period ranging from two to four years in equal installments on the award’s anniversary of the vesting commencement date, which will generally coincide with the timing when the employee or consultant began to provide services to the Company, as determined by the Board, and which may precede the grant date. Vesting is subject to the award recipient’s continuous service on the applicable vesting date; provided, that if the award recipient’s employment is terminated by the Company without “cause”, by award recipient for “good reason” (if applicable, as such term or similar term may be defined in any employment, consulting or similar service agreement between award recipient and the Company) or due to award recipient’s death or permanent disability, all unvested Service-based RSUs will vest in full. In addition, in the event of a change in control, any unvested Service-based RSUs will vest subject to the award recipient’s continuous service to the Company through such change in control. In addition, if the Company achieves a $10 billion market capitalization milestone (described further below) and the Chief Executive Officer (“CEO”) remains in continuous service through such achievement, any then-unvested Service-based RSUs awarded to the CEO will also vest.

Performance-based RSUs

There was no new activity for unvested Performance-based RSUs during the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024. There were 4,257,710 unvested Performance-based RSUs with a weighted average grant date fair value of $7.76 as of both ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023. As of ~~June 30, 2023,~~March 31, 2024, there was approximately $~~11.1~~3.2 million of unrecognized compensation expense related to unvested Performance-based RSUs, which is expected to be recognized over a weighted-average derived service period of approximately ~~0.9~~0.3 years.

One-third of the outstanding Performance-based RSUs will vest upon the Company achieving a market capitalization equal to or exceeding $5 billion, $7.5 billion and $10 billion, in each case over a 30-day lookback period and subject to the CEO’s continuous service through the end of the applicable 30-day period. In the event of a change in control and CEO’s continuous service through such change in control, the per share price (plus the per share value of any other consideration) received by the Company’s stockholders in such change in control will be used to determine whether any of the market capitalization milestones are achieved (without regard to the 30-day lookback period). Any Performance-based RSUs that do not vest prior to the CEO’s termination of service or, if earlier, in connection with a change in control will be forfeited for no consideration.

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE ~~16.~~17. FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities subject to fair value measurement on a recurring basis and the level of inputs used for such measurements were as follows as of the dates indicated (in thousands):


	Fair Value Measured as of June 30, 2023								Fair Value Measured as of March 31, 2024
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets included in:
Cash and cash equivalents
Money market securities	$	175	$	-	$	-	$	175	$	77,378	$	-	$	-	$	77,378
Bitcoin										123,307		-		-		123,307
Accounts receivable		380		-		-		380		680		-		-		680
Derivative asset		-		-		75,252		75,252		-		-		100,950		100,950
	$	555	$	-	$	75,252	$	75,807	$	201,365	$	-	$	100,950	$	302,315
Liabilities included in:
Warrant liability	$	-	$	-	$	66	$	66
	$	-	$	-	$	66	$	66

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~


	Fair Value Measured as of December 31, 2022								Fair Value Measured as of December 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets included in:
Cash and cash equivalents
Money market securities	$	10,943	$	-	$	-	$	10,943	$	65,945	$	-	$	-	$	65,945
Bitcoin										32,978		-		-		32,978
Accounts receivable		98		-		-		98		622		-		-		622
Derivative asset		-		-		66,702		66,702		-		-		93,591		93,591
	$	11,041	$	-	$	66,702	$	77,743	$	99,545	$	-	$	93,591	$	193,136
Liabilities included in:
Warrant liability	$	-	$	-	$	7	$	7	$	-	$	-	$	250	$	250
	$	-	$	-	$	7	$	7	$	-	$	-	$	250	$	250

The carrying values reported in the Company’s consolidated balance sheets for cash (excluding cash equivalents which are recorded at fair value on a recurring basis), accounts payable and accrued expenses and other current liabilities are reasonable estimates of their fair values due to the short-term nature of these items.

There were no transfers of financial instruments between Level 1, Level 2 and Level 3 during the periods presented.

Level 3 asset

The Company’s derivative asset, related to the Luminant Power Agreement, is divided between current and noncurrent assets, and was initially recorded on its unaudited condensed consolidated balance sheets on the derivative asset’s effective date of July 1, 2022, with an offsetting amount recorded to change in fair value of derivative asset in costs and operating expenses on the unaudited condensed consolidated statements of operations. Subsequent changes in fair value are also recorded to change in fair value of derivative asset. The Luminant Power Agreement was not designated as a hedging instrument. The estimated fair value of the Company’s derivative asset was derived from Level 2 and Level 3 inputs (i.e., unobservable inputs) due to a lack of quoted prices for similar type assets and as such, is classified in Level 3 of the fair value hierarchy. Specifically, the discounted cash flow estimation models contain quoted spot and forward prices for electricity, as well as estimated usage rates consistent with the terms of the Luminant Power Agreement, which has a remaining term of approximately ~~4.0~~3.3 years. The valuations performed by the third-party valuation firm engaged by the Company utilized pre-tax discount rates of ~~6.94~~6.23% and ~~6.83~~6.11% as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, and include observable market inputs, but also include unobservable inputs based on qualitative judgment related to company-specific risk factors. Unrealized gains associated with the derivative asset within the Level 3 category include changes in fair value that were attributable to changes to the quoted forward electricity rates, as well as unobservable inputs (e.g., changes in estimated usage rates and discount rate assumptions).

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table presents the changes in the estimated fair value of the derivative asset measured using significant unobservable inputs (Level 3) for the ~~six~~three months ended ~~June 30,~~March 31, 2024, and 2023 (in thousands):

Balance as of January 1, 2023

$
66,702

Change in fair value

8,549

Balance as of June 30, 2023

$
75,251


Balance as of December 31, 2022		66,702
Change in fair value		5,328
Balance as of March 31, 2023	$	72,030

Balance as of December 31, 2023		93,591
Change in fair value		7,359
Balance as of March 31, 2024	$	100,950

Level 3 liability

The Company’s Private Placement Warrants (as defined in Note ~~14.~~15. Warrants) are its only liability classified within Level 3 of the fair value hierarchy because the fair value is based on significant inputs that are unobservable in the market. The valuation of the Private Placement Warrants uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained.

~~CIPHER MINING INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

As of March 31, 2024, all Private Placement Warrants were converted to Public Warrants, and as such no Private Placement Warrants were outstanding as of March 31, 2024.

The Company engaged a valuation firm to determine the fair value of the Private Placement Warrants using a Black-Scholes option-pricing model and the quoted price of its Common Stock. The following table presents significant assumptions utilized in the valuations of the Private Placement Warrants as of the dates indicated:



	June 30, 2023			December 31, 2022			December 31, 2023
Risk-free rate		4.36	%		4.06	%		4.00	%
Dividend yield rate		0.00	%		0.00	%		0.00	%
Volatility		74.7	%		90.0	%		124.0	%
Contractual term (in years)		3.2			3.7			2.7
Exercise price	$	11.50		$	11.50		$	11.50

The following table presents changes in the estimated fair value of the Private Placement Warrants for the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023 (in thousands):

Balance as of January 1, 2023

$
7

Change in fair value

59

Balance as of June 30, 2023

$
66


Balance as of December 31, 2022	$	7
Change in fair value		37
Balance as of March 31, 2023	$	44

Balance as of December 31, 2023	$	250
Change in fair value		(250	)
Balance as of March 31, 2024	$	-

NOTE ~~17.~~18. INCOME TAXES

The determination of income tax expense in the unaudited condensed consolidated statements of operations is based upon 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. The Company recorded an income tax expense of approximately ~~3.7~~12.2% of income before taxes for the three months ended March 31, 2024 and an income tax expense of approximately (~~nil~~1.6%) of loss before taxes for ~~each of~~ the ~~six~~three months ended ~~June 30, 2023 and 2022, respectively.~~March 31, 2023.

CIPHER MINING INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE ~~18.~~19. SUBSEQUENT EVENTS

~~At-the-Market Sales Agreement~~

~~On August 3, 2023,~~In April 2024, the ~~Company entered into~~Bitcoin protocol underwent a ~~Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC and Compass Point Research & Trading, LLC (each,~~halving. A halving is an ~~“Agent” and, together,~~event where the ~~“Agents”), pursuant~~bitcoin reward produced upon mining a block is reduced by 50%. Halvings are scheduled to ~~which the Company may offer and sell, from time to time through or to the Agents, shares of its Common Stock, for aggregate gross proceeds of up to $~~occur once every ~~250.0~~210,000 ~~million (the “Shares”). The offering and sale of up to $250.0~~ million of the Shares has been registered under the Registration Statement, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on August 4, 2023 (the “Prospectus Supplement”).blocks are mined, which occurs roughly every four years.

~~Pursuant to~~As noted in the ~~Sales Agreement,~~“Risk Factors” section of the ~~Agent selected~~Company’s 2023 Form 10-K, a halving reduces the number of new bitcoin being generated by the ~~Company (such Agent,~~network. While the ~~“Designated Agent”) may sell~~effect is to slow the ~~Shares in sales deemed to be “at~~pace of the ~~market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act. The Company~~release of new coins, it has no obligation to sell any of the Shares under the Sales Agreement and may at any time suspend or terminate the offering of the Shares pursuant to the Sales Agreement upon notice and subject to other conditions. The Agents will act as sales agents and will use commercially reasonable efforts to sellimpact on the quantity of total bitcoin already outstanding. As a result, the price of bitcoin could rise or fall based on overall investor and consumer demand. Given a stable network hashrate, should the price of bitcoin remain unchanged after the halving, the Company’s ~~behalf all of the Shares requested~~revenue related to mining new coins would be ~~sold~~reduced by ~~it, on mutually agreed terms between the Agents and the Company. Under the terms of the Sales Agreement, the Company agreed to pay the Designated Agent a commission up to~~ ~~3.0~~50% of the aggregate gross proceeds from any Shares sold through such Designated Agent pursuant to the Sales Agreement. In addition, the Company agreed to reimburse certain expenses incurred by the Agents in connection, with ~~the Sales Agreement.~~a significant impact on profit.

2223

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, as well as our audited consolidated financial statements and related notes disclosed in our ~~2022~~2023 Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” sections of our ~~2022~~2023 Form 10-K and this Quarterly Report and ~~other factors set forth~~ in other parts of this Quarterly Report.

Unless the context otherwise requires, references in this Quarterly Report to the “Company,” “Cipher,” “Cipher Mining,” “we,” “us” or “our” refers to Cipher Mining Inc. and its consolidated subsidiaries, unless otherwise indicated.

Overview

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.

Our current intention is to continue to expand our bitcoin mining business by developing additional data centers, expanding capacity at our current data centers and entering into other arrangements, such as joint ventures or data center hosting agreements.

Our key mission is to expand and strengthen the Bitcoin network’s critical infrastructure. As of July 31, 2023, we operated approximately 76,322 miners, with an aggregate hashrate capacity of approximately 7.8 EH/s, deploying approximately 253 MW of electricity, of which we owned approximately 66,397 miners, with an aggregate hashrate capacity of approximately 6.8 EH/s, deploying approximately 222 MW of electricity.

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. ByOur fifth data center, Black Pearl, is expected to commence operations in 2025.

Our current intention is to continue to expand our bitcoin mining business by developing additional data centers, expanding capacity at our current data centers, developing our treasury management platform and entering into other arrangements, such as joint ventures, data center hosting agreements, or software licensing arrangements.

Our key mission is to expand and strengthen the ~~end~~Bitcoin network’s critical infrastructure. As of ~~the third quarter 2023,~~April 30, 2024, we ~~anticipate operating~~operated an aggregate hashrate capacity of approximately ~~80,500 miners, capable~~8.7 EH/s, deploying approximately 267 MW of ~~generating approximately 8.2 EH/s across our sites,~~electricity, of which we ~~will own~~owned an aggregate hashrate capacity of approximately ~~70,500 miners, representing~~7.7 EH/s, deploying approximately ~~7.2 EH/s.~~236 MW of electricity.

Recent Developments

~~At-the-Market Sales Agreement~~

~~On September 21, 2022, we filed with~~In April 2024, the ~~SEC~~Bitcoin protocol underwent a ~~shelf registration statement on Form S-3,~~halving. A halving is an event where the bitcoin reward produced upon mining a block is reduced by 50%. Halvings are scheduled to occur once every 210,000 blocks are mined, which was declared effective on October 6, 2022 (the “Registration Statement”). 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 Prior Agent. During the six months ended June 30, 2023, in connection with the Prior Sales Agreement, we received proceeds of approximately $2.7 million, net of issuance costs, from the sale of 978,207 shares of common stock, with an average fair value of $2.78 per share. Effective August 1, 2023, we terminated the Prior Sales Agreement.occurs roughly every four years.

~~On August 3, 2023, we entered into a Controlled Equity Offering~~SM ~~Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC and Compass Point Research & Trading, LLC (each, an “Agent” and, together,~~As noted in the ~~“Agents”), pursuant to which we may offer and sell, from time to time through or to the Agents, shares~~“Risk Factors” section of our ~~Common Stock, for aggregate gross proceeds~~2023 Form 10-K, a halving reduces the number of upnew bitcoin being generated by the network. While the effect is to ~~$250.0 million (the “Shares”). The offering and sale of up to $250.0 million~~slow the pace of the ~~Shares~~release of new coins, it has ~~been registered under~~no impact on the ~~Registration Statement,~~quantity of total bitcoin already outstanding. As a result, the ~~base prospectus contained within~~price of bitcoin could rise or fall based on overall investor and consumer demand. Given a stable network hashrate, should the ~~Registration Statement, and~~price of bitcoin remain unchanged after the halving, our revenue related to mining new coins would be reduced by 50%, with a ~~prospectus supplement that was filed with the SEC~~significant impact on ~~August 4, 2023 (the “Prospectus Supplement”).~~

Pursuant to the Sales Agreement, the Agent selected by us (such Agent, the “Designated Agent”) may sell the Shares in sales deemed to be “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act. We have no obligation to sell any of the Shares under the Sales Agreement and may at any time suspend or terminate the offering of the Shares pursuant to the Sales

Agreement upon notice and subject to other conditions. The Agents will act as sales agents and will use commercially reasonable efforts to sell on our behalf all of the Shares requested to be sold by us, on mutually agreed terms between the Agents and us. Under the terms of the Sales Agreement, we agreed to pay the Designated Agent a commission up to 3.0% of the aggregate gross proceeds from any Shares sold through such Designated Agent pursuant to the Sales Agreement. In addition, we agreed to reimburse certain expenses incurred by the Agents in connection with the Sales Agreement.profit.

Factors Affecting Our Results of Operations

There have been no material changes to the “Factors Affecting Our Results of Operations” in the ~~Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our ~~2022~~2023 Form 10-K. Our financial position and results of operations depend to a significant extent on those factors.

Summary of Bitcoin Mining Results

The following table presents information about our Bitcoin mining activities, including bitcoin production and sales of bitcoin (dollar amounts in thousands):

Quantity

Amounts

Balance as of January 1, 2023

394

$
6,283

Bitcoin received from equity investees

18

317

Revenue recognized from bitcoin mined, net of receivable

2,055

52,836

Proceeds from sale of bitcoin, net of realized gain

(2,063
)

(44,267
)
Impairment of bitcoin

-

(4,633
)
Balance as of June 30, 2023

404

$
10,536


	Quantity		Amounts
Balance as of December 31, 2023		780	$	32,978
Bitcoin received from equity investees		26		1,694
Revenue recognized from bitcoin mined, net of receivable		924		48,079
Change in fair value of bitcoin		-		40,556
Balance as of March 31, 2024		1,730	$	123,307

Components of our Results of Operations

For a description of the components of our results of operations, refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2023 Form 10-K.

Results of Operations

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Revenue - bitcoin mining

$
31,224

$
-

$
53,119

$
-

Costs and operating expenses (income)

Cost of revenue

15,868

-

24,009

-

General and administrative

21,335

16,704

38,755

34,094

Depreciation

14,412

8

26,067

15

Change in fair value of derivative asset

(3,222
)

-

(8,550
)

-

Power sales

(5,651
)

-

(5,749
)

-

Equity in losses of equity investees

1,431

12,079

2,181

12,232

Realized gain on sale of bitcoin

(4,185
)

-

(8,206
)

-

Impairment of bitcoin

2,828

535

4,633

539

Other gains

-

-

(2,260
)

-

Total costs and operating expenses

42,816

29,326

70,880

46,880

Operating loss

(11,592
)

(29,326
)

(17,761
)

(46,880
)
Other income (expense)

Interest income

25

44

101

51

Interest expense

(485
)

-

(886
)

-

Change in fair value of warrant liability

(22
)

63

(59
)

111

Other expense

(12
)

-

(12
)

-

Total other income (expense)

(494
)

107

(856
)

162

Loss before taxes

(12,086
)

(29,219
)

(18,617
)

(46,718
)
Current income tax expense

(31
)

-

(48
)

-

Deferred income tax expense

(584
)

-

(637
)

-

Total income tax expense

(615
)

-

(685
)

-

Net loss

$
(12,701
)

$
(29,219
)

$
(19,302
)

$
(46,718
)


	Three months ended March 31,
	2024			2023
Revenue - bitcoin mining	$	48,137		$	21,895
Costs and operating expenses (income)
Cost of revenue		14,820			8,141
Compensation and benefits		13,036			11,937
General and administrative		6,077			5,483
Depreciation and amortization		17,244			11,655
Change in fair value of derivative asset		(7,359	)		(5,328	)
Power sales		(1,173	)		(98	)
Equity in (gains) losses of equity investees		(738	)		750
Gains on fair value of bitcoin		(40,556	)		(4,264	)
Other gains		-			(2,260	)
Total costs and operating expenses		1,351			26,016
Operating income (loss)		46,786			(4,121	)
Other income (expense)
Interest income		786			76
Interest expense		(400	)		(401	)
Change in fair value of warrant liability		250			(37	)
Other expense		(1,958	)		-
Total other income (expense)		(1,322	)		(362	)
Income (loss) before taxes		45,464			(4,483	)
Current income tax expense		(386	)		(17	)
Deferred income tax expense		(5,178	)		(53	)
Total income tax expense		(5,564	)		(70	)
Net income (loss)	$	39,900		$	(4,553	)

Comparative Results for the Three Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~

Revenue

Bitcoin mining operations at our Odessa Facility mined ~~1,112~~924 bitcoin, ~~and generated~~generating revenue of ~~$31.2~~$48.1 million for the three months ended ~~June 30,~~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 ~~$28,009.~~approximately $23.2 thousand. The ~~Odessa Facility began mining operations~~increase in ~~mid-November 2022, therefore, we did not earn~~ revenue ~~from~~in the current period was primarily driven by the increase in bitcoin ~~mining during the three months ended June 30, 2022.~~price and our ability to maintain production despite an increase in network hashrate.

Cost of revenue

Cost of revenue for the three months ended ~~June 30,~~March 31, 2024 was $14.8 million, compared to $8.1 million for the three months ended March 31, 2023 ~~was $15.9 million~~ 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. ~~We incurred no costs~~

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 ~~during~~included $1.1 million of non-recurring costs to purchase upgraded parts to increase the efficiency of our miners.

Compensation and benefits

Compensation and benefits increased to $13.0 million for the three months ended ~~June 30, 2022 as~~March 31, 2024 compared to $11.9 million for the ~~Odessa Facility did not begin its bitcoin mining operations until mid-November 2022.~~three months ended March 31, 2023. The increase is primarily driven by an increase in headcount throughout 2023.

General and administrative

General and administrative expenses were ~~$21.3~~$6.1 million for the three months ended ~~June 30, 2023,~~March 31, 2024 compared to ~~$16.7~~$5.5 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The increase was primarily driven by ~~increases of $2.5 million for payroll and payroll-related benefits due to increasing headcount, a $2.0 million accrual for the cost of resolving legal claims, and a $0.8 million~~an increase in ~~office supplies and software costs, partially offset by a decrease of $0.9 million~~professional fees in preparation for ~~share-based compensation costs.~~transitioning away from emerging growth company status during the three months ended March 31, 2024.

Depreciation and amortization

Depreciation and amortization for the three months ended ~~June 30, 2023~~March 31, 2024 was ~~$14.4~~$17.2 million, compared to $11.7 million for the three months ended March 31, 2023. Depreciation and amortization primarily ~~related~~relates to miners, mining equipment and leasehold improvements at the Odessa Facility being placed into service beginning in November 2022, with additional miners and mining-related assets placed into service during the three months ended June 30, 2023 as we continued to expand capacity 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 ofon our ~~finance lease right-of-use~~intangible assets, ~~representing mining equipment from the Canaan Agreement (as defined below),~~ and accretion of our estimated asset retirement obligation related to the Odessa Facility and depreciation of the associated capitalized costs. ~~Depreciation for~~The increase in depreciation in the ~~three months ended June 30, 2022 was immaterial.~~current period primarily relates to increased assets placed into service in late 2023 to finish the build-out at the Odessa Facility.

Change in fair value of derivative asset

The change in the fair value of our derivative asset related to the Luminant Power Agreement resulted in a gain of ~~$3.2~~$7.4 million during the three months ended ~~June 30,~~March 31, 2024 compared to $5.3 million for the three months ended March 31, 2023. The ~~gain was~~gains in both periods were primarily due to the change in the power market forward curve over the respective periods as ~~compared~~power prices in the futures market continue to ~~the curve as of March 31, 2023. The Luminant Power Agreement was not in effect during the three months ended June 30, 2022.~~increase.

Power sales

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 ~~$5.7~~$1.2 million for the three months ended ~~June 30,~~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.

Equity in (gains) losses of equity investees

Equity in ~~losses~~gains of equity investees totaled approximately ~~$1.4~~$0.7 million for the three months ended ~~June 30, 2023, a decrease~~March 31, 2024, compared to Equity in losses of ~~$10.7 million from approximately $12.1~~equity investees of $0.8 million for the three months ended ~~June 30, 2022.~~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 ~~also includes~~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. ~~Our share~~We recognized an expense of ~~the losses in the mining operations of Alborz LLC, Bear LLC and Chief LLC increased to~~ approximately ~~$3.1~~$1.7 million for the three months ended ~~June 30,~~March 31, 2024 and 2023, from approximately $0.5 million for the three months ended June 30, 2022. During the current three month period, all three sites were fully operational, whereas in the prior year period, only Alborz LLC had begun mining operations with a limited number of miners prior to June 30, 2022. We recognized approximately $1.7 million and nil for the three months ended June 30, 2023 and 2022, respectively, for the accretion of basis differences.

~~Realized gain~~Gains on ~~sale~~fair value of bitcoin

~~Realized gain~~Pursuant to the adoption of ASC 2023-08, which we adopted as of January 1, 2023, crypto assets are required to be presented at fair value on ~~sale~~the balance sheet, with changes in fair value recorded to the statement of operations. On January 1, 2023, upon adoption of ASC 2023-08, we recorded an opening retained earnings adjustment of $0.2 million, which represents the difference between the carrying value (presented as cost less impairment prior to the adoption of ASC 2023-08) and the fair value of our bitcoin holdings. Gains on fair value of bitcoin was ~~$4.2~~$40.6 million during the three months ended June 30, 2023. We began selling a portion of our bitcoin holdings at the start of 2023 to support our operations and cash requirements. We did not sell any bitcoin during the three months ended June 30, 2022.

~~Impairment of bitcoin~~

~~We recognized a total of approximately $2.8 million of impairment on our bitcoin holdings during the three months ended June 30, 2023,~~March 31, 2024, compared to ~~$0.5~~$4.3 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The increase in the current period was primarily driven by an increase in bitcoin held at higher prices by the Company with a bitcoin inventory of 1730 held at $71.3 thousand per bitcoin at March 31, 2024, compared to 416 bitcoin held at roughly $28.5 thousand per bitcoin at March 31, 2023.

Other gains

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.

Other income (expense)

Other expense totaled ~~$0.5~~$1.3 million for the three months ended ~~June 30, 2023,~~March 31, 2024, consisting ~~primarily~~ of ~~$0.5~~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 ~~leases~~lease for the Interconnection Electrical Facilities, partially offset by $0.8 million of interest income earned on Cash and ~~Canaan Agreement.~~cash equivalent balances held in interest bearing accounts. Other income ~~and expense~~ for the three months ended ~~June 30, 2022~~March 31, 2023 was not significant.

Income tax expense

Income tax expense totaled ~~$0.6~~$5.6 million, or ~~-5.1%~~12.2% of ~~loss~~income before taxes, and ~~nil~~$0.1 million, or (1.6%) of a loss before taxes for the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ 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.

~~Comparative Results for the Six Months Ended June 30, 2023 and 2022~~

~~Revenue~~

Bitcoin mining operations at our Odessa Facility mined 2,055 bitcoin and generated revenue of $53.1 million for the six months ended June 30, 2023, at an average price per bitcoin of $25,390. The Odessa Facility began mining operations in mid-November 2022, therefore, we did not earn revenue from bitcoin mining during the six months ended June 30, 2022.

~~Cost of revenue~~

Cost of revenue for the six months ended June 30, 2023 was $24.0 million 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. Power costs for the six months ended June 30, 2023 included $2.1 million of power costs related to the year ended December 31, 2022 that were recorded as an out-of-period adjustment during the current reporting period. We incurred no costs of revenue during the six months ended June 30, 2022 as the Odessa Facility did not begin its bitcoin mining operations until mid-November 2022.

~~General and administrative~~

General and administrative expenses were $38.8 million for the six months ended June 30, 2023 compared to $34.1 million for the six months ended June 30, 2022. The increase was primarily driven by increases of $4.8 million for payroll and payroll-related benefits due to increasing headcount, a $2.0 million accrual for the cost of resolving legal claims, and a $1.4 million increase in office supplies and software costs. These increases were partially offset by decreases of $1.6 million for state and franchise taxes, $1.6 million for share-based compensation costs, $0.8 million for legal expenses, and $0.4 million for business insurance. Legal and consulting expenses were higher during the six months ended June 30, 2022 in part due to legal expenses associated with the waiver, lock-up and board observer agreements that we entered into in early April 2022.

~~Depreciation~~

Depreciation for the six months ended June 30, 2023 was $26.1 million, primarily related to miners, mining equipment and leasehold improvements at the Odessa Facility being placed into service beginning in November 2022, with additional miners and mining-related assets placed into service during the six months ended June 30, 2023 as we continued to expand capacity 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 of our finance lease right-of-use assets representing mining equipment from the Canaan Agreement, and accretion of our estimated asset retirement obligation related to the Odessa Facility and depreciation of the associated capitalized costs. Depreciation for the six months ended June 30, 2022 was immaterial.

~~Change in fair value of derivative asset~~

The change in the fair value of our derivative asset related to the Luminant Power Agreement resulted in a gain of $8.6 million during the six months ended June 30, 2023. The gain was primarily due to the change in the power market forward curve as compared to the curve as of December 31, 2022. The Luminant Power Agreement was not effective during the six months ended June 30, 2022.

~~Power sales~~

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 $5.7 million for the six months ended June 30, 2023. Power sales for the six months ended June 30, 2023 included $1.6 million for sales of power that occurred during the year ended December 31, 2022 that were recorded as an out-of-period adjustment during the current reporting period.

~~Equity in losses of equity investees~~

Equity in losses of equity investees totaled approximately $2.2 million for the six months ended June 30, 2023, a decrease of $10.0 million from approximately $12.2 million for the six months ended June 30, 2022. Equity in losses of equity investees consists of our 49% share in the earnings (losses) generated by our three partially-owned mining sites and also includes 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. Our share of the losses in the mining operations of Alborz LLC, Bear LLC and Chief LLC increased to approximately $5.5 million for the six months ended June 30, 2023 from approximately $0.6 million for the six months ended June 30, 2022. During the current six month period, all three sites were fully operational, whereas in the prior year period, only Alborz LLC had begun mining operations with a limited number of miners prior to June 30, 2022. We recognized approximately $3.3 million and nil for the six months ended June 30, 2023 and 2022, respectively, for the accretion of basis differences.

~~Realized gain on sale of bitcoin~~

Realized gain on sale of bitcoin was $8.2 million during the six months ended June 30, 2023. We began selling a portion of our bitcoin holdings at the start of 2023 to support our operations and cash requirements. We did not sell any bitcoin during the six months ended June 30, 2022.

~~Impairment of bitcoin~~

~~We recognized a total of approximately $4.6 million of impairment on our bitcoin holdings during the six months ended June 30, 2023, compared to $0.5 million for the six months ended June 30, 2022.~~

~~Other gains~~

We recognized proceeds of approximately $2.3 million during the six months ended June 30, 2023 related to the sale of transferrable coupons received from Bitmain Technologies Limited (“Bitmain”) during fiscal year 2022. 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.

~~Other income (expense)~~

Other expense totaled $0.9 million for the six months ended June 30, 2023, consisting mainly of $0.9 million of interest expense recognized related to our finance lease for the Interconnection Electrical Facilities. Other income for the six months ended June 30, 2023 was not significant.

~~Income tax expense~~

Income tax expense totaled $0.7 million, or -3.7% of loss before taxes, and nil for the six months ended June 30, 2023 and 2022, 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.

Liquidity and Capital Resources

We ~~generated~~used cash flows from operations of ~~$24.7~~$26.6 million for the ~~six~~three months ended ~~June 30, 2023.~~March 31, 2024. As of ~~June 30, 2023,~~March 31, 2024, we had cash and cash equivalents of ~~$1.7~~$88.7 million, total stockholders’ equity of ~~$343.2~~$600.9 million and an accumulated deficit of ~~$130.5~~$96.9 million. For our fiscal years ~~ended December 31, 2022 and 2021,~~prior to 2023, we relied in large part ~~we relied~~ on proceeds from the consummation of our business combination with Good Works Acquisition Corp. (“~~GWAC’~~GWAC”) to fund our ~~operations; however, during~~operations. During fiscal year 2023, we funded operations through a combination of at-the-market stock issuances and bitcoin sales. During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, we ~~utilized proceeds from sales of~~have not needed to sell our bitcoin ~~earned by or received from its bitcoin mining data centers~~inventory to support operating expenses. ~~During the six months ended June 30, 2023, we sold 2,063 bitcoin for proceeds of approximately $52.5 million.~~

On ~~May 4,~~August 14, 2023, we entered into ana master loan agreement with ~~Canaan Creative Global Pte. Ltd. (“Canaan”)~~Coinbase Credit, Inc., as lender, and Coinbase, Inc., as lending service provider. Pursuant to ~~purchase 11,000 new A1346 model miners~~the master loan agreement, we established a secured line of credit up to $10.0 million (the ~~“Canaan Agreement”~~“Credit Facility”). We will not incur commitment fees for unused portions of the Credit Facility. The borrowing rate on amounts drawn against the Credit Facility is determined on the basis of the Federal Funds Target Rate - Upper Bound, plus 2.5%, ~~all of which were delivered prior to June 30, 2023~~calculated daily based on a 365-day year and ~~have been installed at the Odessa Facility. Because we are paying~~payable monthly for the ~~Canaan miners over time, we do not yet hold title~~duration of the loan. Borrowings under the Credit Facility are available on demand, open term, and collateralized by bitcoin transferred to the ~~miners. We paid an initial 10% deposit plus 18%~~lending service provider’s platform. As of March 31, 2024 we have not drawn upon the Credit Facility.

On September 21, 2022, we filed the Registration Statement with the SEC. In connection with the filing of the ~~total purchase~~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 ~~prior~~of up to ~~delivery, and are required to pay monthly installment payments for~~$250.0 million in “at-the-market” offerings through the ~~Canaan miners through November 2023, at~~Agent, which ~~time title~~is included in the $500.0 million of securities that may be offered pursuant to the ~~miners will transfer~~Registration Statement. Effective August 1, 2023, the Company terminated the Prior Sales Agreement.

On August 3, 2023, we entered into a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC and Compass Point Research & Trading, LLC (each, an “Original Agent” and, together, the “Original Agents”), pursuant to ~~us. We expect~~which we may offer and sell pursuant to ~~fund~~a prospectus supplement, from time to time through or to the Original Agents, shares of our ~~ongoing payment obligations~~Common Stock, for aggregate gross proceeds of up to $250.0 million. The offering and sale of up to $250.0 million of the ~~purchase through our ongoing operations, including by selling bitcoin generated at our data centers.~~Shares has been registered under the Registration Statement, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on August 4, 2023 (the “Prospectus Supplement”).

~~Management intends~~

On March 6, 2024, we entered into an amendment (the “Amendment”) to ~~continue with~~ the ~~infrastructure buildout~~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 ~~the Odessa Facility to get the site to full capacity in support~~a weighted average price of ~~our current business plans.~~ $4.53.

Management believes that our existing financial resources, combined with projected cash and bitcoin inflows from ~~its~~our data centers and ~~its~~our intent and ability to sell bitcoin received or earned, will be sufficient to enable us to meet our operating and capital requirements for at least 12 months from the date these unaudited condensed consolidated financial statements are issued.

On September 21, 2022, the Company filed with the SEC a shelf registration statement on Form S-3, which was declared effective on October 6, 2022 (the “Registration Statement”). In connection with the filing of the Registration Statement, the Company also entered into an at-the market offering agreement (the “Sales Agreement”) with H.C. Wainwright & Co., LLC (the “Agent”), under which the Company may, from time to time, sell shares of its 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. As of June 30, 2023, the Company had received net proceeds on sales of 1.0 million shares of common stock under the Prior Sales Agreement of approximately $2.7 million (net of commissions and expenses) at a weighted average price of $2.78.

Cash Flows

The following table summarizes our sources and uses of cash (in thousands):

Six Months Ended June 30,

2023

2022

Net cash provided by (used in) operating activities

$
24,679

$
(9,932
)
Net cash used in investing activities

(34,437
)

(159,815
)
Net cash used in financing activities

(428
)

(3,052
)
Net decrease in cash and cash equivalents

$
(10,186
)

$
(172,799
)


	Three months ended March 31,
	2024			2023
Net cash used in operating activities	$	(26,636	)	$	(10,142	)
Net cash (used in) provided by investing activities		(30,957	)		2,618
Net cash provided by (used in) financing activities		60,163			(481	)
Net increase (decrease) in cash and cash equivalents	$	2,570		$	(8,005	)

Operating Activities

Net cash ~~provided by~~used in operating activities increased by ~~$34.6~~$16.5 million to ~~$24.7~~$26.6 million for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 from ~~net cash used of $9.9~~$10.1 million for the ~~six~~three months ended ~~June 30, 2022. Net loss improved by $27.4 million to $19.3~~March 31, 2023. We earned net income of $39.9 million for the ~~six~~three months ended ~~June 30, 2023 from $46.7~~March 31, 2024, compared to a net loss of $4.6 million for the ~~six~~three months ended ~~June 30, 2022. Net loss impact to cash~~March 31, 2023, representing an increase of $44.5 million. Cash flows from operating activities was ~~affected~~impacted by a ~~$49.2~~$53.9 million ~~decrease~~increase in non-cash items, primarily driven by ~~$52.8~~a $26.4 million ~~for~~increase in bitcoin received as payment from our mining pool operator, ~~(with no comparable activity in the prior year period),~~and a $10.1 million decrease in equity in losses of equity investees, $8.6 million change in fair value of the Luminant Power Agreement derivative asset, $8.2 million realized gain on the sale of bitcoin (with no comparable activity in the prior year period), partially offset by an increase of $26.1 million of depreciation and $4.1$36.3 million increase in gains on the ~~impairment~~fair value of bitcoin. Additionally, changes in assets and liabilities resulted in ~~an increase~~a decrease in cash ~~provided~~used of ~~$56.4~~$7.1 million between the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 and 2022. This increase in cash provided was due primarily to proceeds of $52.5 million from the sale of bitcoin, and a $5.1 million increase in accrued expenses and other current liabilities, partially offset by the $1.5 million decrease in accounts payable to related parties.2023.

Investing Activities

~~Net~~Cash flows from investing activities decreased by $33.6 million to $31.0 million of net cash used in investing activities ~~decreased by $125.4 million to $34.4 million~~ for the ~~six~~three months ended ~~June 30, 2023 from $159.8~~March 31, 2024 compared to $2.6 million of net cash provided by investing activities for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, primarily related to a ~~$153.9~~$21.0 million decrease ~~of deposits for miners~~in proceeds from bitcoin sales as we build bitcoin inventory, and ~~mining equipment,~~a $15.2 million increase in contributions to equity investees related to expansions at the Bear and Chief facilities, partially offset by a ~~$15.5~~$10.0 million ~~increase~~decrease in purchases of property and equipment which in the prior period related to ~~our continued build~~building out of the ~~infrastructure at our~~ Odessa ~~Facility, $6.3 million decrease in capital distributions from equitee investees.~~

facility.

Financing Activities

~~Net~~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 ~~decreased to $0.4 million~~ for the ~~six~~three months ended ~~June 30,~~March 31, 2023, ~~from $3.1 million for the six months ended June 30, 2022,~~ primarily driven by ~~$2.8~~$66.2 million of proceeds from the issuance of common stock ~~(with~~during the three months ended March 31, 2024, with no comparable activity in the prior year period), a $1.9 million decrease in the repurchase of shares to cover tax obligations of employees resulting from the vesting of RSUs during the respective periods, partially offset by $2.1 million in principal payments on finance leases.period.

Limited Business History; Need for Additional Capital

There is limited historical financial information about us upon which to base an evaluation of our performance. Our 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. ~~We have no current intention of entering into a merger or acquisition within the next 12 months.~~ We may 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, we have incurred and expect to continue to incur significant costs related to becoming a public company. Accordingly, we may engage in equity or debt financings or enter into credit facilities for the above-mentioned or other reasons; however, we may not be able to timely secure additional debt or equity financings on favorable terms, if at all. If we raise additional funds through equity financing, our existing stockholders could experience significant dilution. Furthermore, any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. If we are unable to obtain adequate financing on terms that are satisfactory to us, when we require it, our ability to continue to grow or support the business and to respond to business challenges could be significantly limited, which may adversely affect our business plan. For risks associated with this, see “Risks Factors—Risks Related to Our Business, Industry and Operations—We may need to raise additional capital, which may not be available on terms acceptable to us, or at all” in our ~~2022~~2023 Form 10-K.

Contractual Obligations and Other Commitments

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.

We also entered into a series of agreements with affiliates of Luminant ET Services Company LLC ( “Luminant”), including the Lease Agreement dated June 29, 2021, with amendment and restatement on July 9, 2021 (as amended and restated, the “Luminant Lease Agreement”). The Luminant Lease Agreement leases a plot of land to us where our data center, ancillary infrastructure and electrical system (the “Interconnection Electrical Facilities” or “substation”) have been set up for our Odessa Facility. We entered into the Luminant Lease Agreement and the Luminant Purchase and Sale Agreement to build the infrastructure necessary to support our planned operations. Management determined that the Luminant Lease Agreement and the Luminant Purchase and Sale Agreement should be combined for accounting purposes under ASC 842 (collectively, the “Combined Luminant Lease Agreement”) and that amounts exchanged under the combined contract should be allocated to the various components of the overall transaction based on relative fair values.

Our management determined that the Combined Luminant Lease Agreement contains two lease components; and the components should be accounted for together as a single lease component, because the effect of accounting for the land lease separately would be insignificant. Financing for use of the land and substation is provided by Luminant affiliates, with monthly installments of principal and interest due over a five-year period starting upon transfer of legal title of the substation to us (estimated total undiscounted principal payments of approximately $15.0 million).

The Combined Luminant Lease Agreement commenced on November 22, 2022 and has an initial term of five years, with renewal provisions that are aligned with the Luminant Power Agreement. ~~Since~~Financing for use of the land and substation is provided by Luminant affiliates. Despite lease commencement in November 2022, we ~~have~~had not ~~made~~been required by Luminant to make any lease payments for ~~rent of~~ the ~~Interconnection Electrical Facilities, but~~substation prior to July 2023, therefore we ~~have recorded an accrual of approximately $2.4 million for the estimated payments~~accrued amounts due under the Combined Luminant Lease ~~Agreement. The Company expects to begin making~~Agreement in accrued expenses and other current liabilities on its unaudited condensed consolidated balance sheet.

On August 23, 2023, we entered into a second amendment of the Luminant Lease Agreement, the terms of which included an amended payment schedule, reflecting monthly ~~lease payments~~installments of principal and interest totaling $19.7 million on an undiscounted basis, due over the remaining four-year period starting in ~~August~~July 2023. This amendment did not have a material impact on our unaudited condensed consolidated financial statements.

~~Mining and Mining Equipment~~

In November and December 2022, we agreed to purchase 5,000 and 2,200, respectively, Antminer S19j Pro (100 TH/s) (“S19j Pro”) miners from Bitmain. For these miners, we paid an average price of $2.35 per terahash, covering the majority of the purchase price by using accumulated Bitmain coupons from previous orders. We have no further payments due in respect of those orders. As of April 2023, all of those miners have been delivered to us in Texas.

On May 4, 2023, we entered into the Canaan Agreement with Canaan to purchase 11,000 new A1346 model miners, all of which were delivered prior to June 30, 2023 and have been installed at the Odessa Facility. Because the Company is paying for the Canaan miners over time, the Company does not yet hold title to the miners. We paid an initial 10% deposit plus 18% of the total purchase price prior to delivery, and we are required to pay monthly installment payments for the Canaan miners through November 2023, at which time title to the miners will transfer to us. We expect to fund our ongoing payment obligations for the purchase through our ongoing operations, including by selling bitcoin generated at our data centers.

Non-GAAP Financial Measures

We are providing supplemental financial measures for ~~(i) non-GAAP loss from operations~~Adjusted Earnings that excludes the impact of depreciation and amortization, the non-cash change in ~~the~~ fair value of ~~our~~ derivative asset, share-based compensation expense and nonrecurring gains, which in the six months ended June 30, 2023 were associated with the sale of Bitmain coupons and (ii) non-GAAP net income (loss) and non-GAAP basic and diluted income (loss) per share that exclude the impact of depreciation and amortization, the non-cash change in ~~the fair value of our derivative asset, share-based compensation expense, nonrecurring gains, the change in the~~ fair value of the warrant liability, nonrecurring gains and losses, deferred income ~~tax~~taxes, and share-based compensation expense. ~~These~~This supplemental financial ~~measures are~~measure is not ~~measurements~~a measurement of financial performance under accounting principles generally accepted in the United ~~States~~Stated (“GAAP”) and, as a result, ~~these~~this supplemental financial ~~measures~~measure may not be comparable to similarly titled measures of other companies. Management uses ~~these~~this non-GAAP financial ~~measures~~measure internally to help understand, manage, and evaluate our business performance and to help make operating decisions.

We believe that these non-GAAP financial measures are also useful to investors in comparing our performance across reporting periods on a consistent basis. Non-GAAP loss from operations excludes non-cash operational expenses that we believe are not reflective of our general business performance such as (i) depreciation and amortization, (ii) the non-cash change in the fair value of our derivative asset (iii) share-based compensation expense and (iv) nonrecurring gains, which could vary significantly in comparison to other companies.

Non-GAAP net income (loss) and non-GAAP basic and diluted income (loss) per share exclude the impact of (i) depreciation and amortization, (ii) the non-cash change in the fair value of our derivative asset, (iii) share-based compensation expense, (iv) nonrecurring gains, (v) the non-cash change in the fair value of our warrant liability and (vi) deferred income tax expense. We believe the use of ~~these~~this non-GAAP financial ~~measures~~measure can also facilitate comparison of our operating results to those of our competitors.

Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. For example, we expect that share-based compensation expense, which is excluded from the non-GAAP financial ~~measures,~~measure, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers and directors. Similarly, we expect that depreciation and amortization will continue to be a recurring expense over the term of the useful ~~lives~~life of the related assets. Our non-GAAP financial ~~measures are~~measure is not meant to be considered in isolation and should be read only in conjunction with our ~~unaudited~~ condensed consolidated financial statements included elsewhere in this Quarterly Report, which have been prepared in accordance with GAAP. We rely primarily on such ~~unaudited~~ condensed

consolidated financial statements to understand, manage and evaluate our business performance and use the non-GAAP financial measures only supplementally.

The following is a reconciliation of our ~~non-GAAP loss from operations, which excludes~~Adjusted Earnings to the ~~impact of (i) depreciation and amortization, (ii) the non-cash change in the fair value of our derivative asset (iii) share-based compensation expense and (iv) nonrecurring gains, to its~~ most directly comparable GAAP measure for the periods indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Reconciliation of non-GAAP income (loss) from operations:

Operating loss

$
(11,592
)

$
(29,326
)

$
(17,761
)

$
(46,880
)
Depreciation and amortization

14,642

8

26,519

15

Change in fair value of derivative asset

(3,222
)

-

(8,550
)

-

Share-based compensation expense

9,178

10,064

17,988

19,578

Other gains - nonrecurring

-

-

(2,255
)

-

Non-GAAP income (loss) from operations

$
9,006

$
(19,254
)

$
15,941

$
(27,287
)

The following are reconciliations of our non-GAAP net income (loss) and non-GAAP basic and diluted net income (loss) per share, in each case excluding the impact of (i) depreciation and amortization (ii) the non-cash change in the fair value of our derivative asset,

(iii) share-based compensation expense, (iv) nonrecurring gains, (v) the non-cash change in the fair value of our warrant liability and (vi) deferred income tax expense, to the most directly comparable GAAP measures for the periods indicated:

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Reconciliation of non-GAAP net income (loss):

Net loss

$
(12,701
)

$
(29,219
)

$
(19,302
)

$
(46,718
)
Non-cash adjustments to net loss:

Depreciation and amortization

14,642

8

26,519

15

Change in fair value of derivative asset

(3,222
)

-

(8,550
)

-

Share-based compensation expense

9,178

10,064

17,988

19,578

Other gains - nonrecurring

-

-

(2,255
)

-

Change in fair value of warrant liability

(22
)

63

(59
)

111

Deferred income tax expense

(584
)

-

(637
)

-

Total non-cash adjustments to net loss

19,992

10,135

33,006

19,704

Non-GAAP net income (loss)

$
7,291

$
(19,084
)

$
13,704

$
(27,014
)

Reconciliation of non-GAAP basic and diluted net income (loss) per share:

Basic and diluted net loss per share

$
(0.05
)

$
(0.12
)

$
(0.08
)

$
(0.19
)
Depreciation and amortization (per share)

$
0.06

-

0.11

-

Change in fair value of derivative asset (per share)

$
(0.01
)

-

(0.03
)

-

Share-based compensation expense (per share)

$
0.04

0.04

0.07

0.08

Other gains - nonrecurring (per share)

$
-

-

(0.01
)

-

Change in fair value of warrant liability (per share)

$
-

-

-

-

Deferred income tax expense (per share)

$
-

-

-

-

Non-GAAP basic and diluted net income (loss) per share

$
0.04

$
(0.08
)

$
0.06

$
(0.11
)


	Three months ended March 31,
	2024			2023
Reconciliation of Adjusted Earnings:
Net income (loss)	$	39,900		$	(4,553	)
Change in fair value of derivative asset		(7,359	)		(5,328	)
Share-based compensation expense		8,317			8,810
Depreciation and amortization		17,244			11,655
Deferred income tax expense		5,178			53
Other gains - nonrecurring		-			(2,260	)
Change in fair value of warrant liability		(250	)		37
Adjusted earnings		63,030			8,414

Critical Accounting Policies and 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 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 ~~2022~~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 ~~2022~~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 ~~2022~~2023 Form 10-K.

Recent accounting pronouncements

Information regarding recent accounting pronouncements applicable to us, adopted and not yet adopted as of the date of this report, is included in Note 2 to our unaudited condensed consolidated financial statements located in “Part I - Financial Information, Item 1. Financial Statements” in this Quarterly Report.

31Emerging Growth Company

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of ~~June 30, 2023,~~March 31, 2024, the end of the period covered by this Quarterly Report. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, with the goal being that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, our disclosure controls and procedures were not effective at the reasonable assurance level as of ~~June 30, 2023.~~March 31, 2024.

Remediation of Material Weakness

As noted in the ~~2022~~2023 Form 10-K, during management’s assessment of internal controls over financial reporting, a material weakness was identified related to certain Information Technology General Controls over user access, segregation of duties and change management controls.

As management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, we understand the importance of developing a resolution plan aligned with management and overseen by the Audit Committee of our Board of Directors. Since the material weakness was identified, management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. Our plan includes the following:

•

Enhance our remediation efforts by continuing to devote resources in ~~2023~~2024 in key financial reporting and information technology ~~areas.~~areas, including hiring additional employees.

•

Continue to utilize an external third-party internal audit and SOX 404 implementation firm to work to improve the Company’s controls related to our material weaknesses, specifically relating to user access and change management surrounding the Company’s IT systems and applications.

•

Continue to implement new processes and controls and engage external resources when required in connection with remediating this material weakness, such that these controls are designed, implemented, and operating effectively.

•

Continue to formalize our policies and processes ~~over~~ including those over outside service providers with a specific focus on enhancing design and documentation related to (i) developing and communicating additional policies and procedures to govern the areas of IT change management and user access processes and related control activities and (ii) develop robust processes to validate data received from third-parties and relied upon to generate financial statements isthat are complete and accurate.

We recognize that the material weaknesses in our internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and can be tested and concluded by management to be designed and operating

effectively. Because our remediation efforts involve our outsourced service providers, we cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.

We continue to evaluate and work to improve our internal control over financial reporting related to the identified material weaknesses and management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. In addition, we report the progress and status of the above remediation efforts to the Audit Committee on a periodic basis.

Changes in Internal Control over Financial Reporting

~~There~~Other than the remediation efforts described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended ~~June 30, 2023~~March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3332

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to any material pending legal proceedings. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business. There have been no material changes to such proceedings previously disclosed in our ~~2022~~2023 Form 10-K.

Item 1A. Risk Factors.

Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to the risk factors as previously disclosed in Part I, Item 1A, “Risk Factors” of our ~~2022~~2023 Form 10-K, which is incorporated herein by reference. There have been no material changes to the risk factors previously disclosed in our ~~2022~~2023 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds, and Issuer Purchases of Equity Securities.~~Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

(a) Disclosure in lieu of reporting on a Current Report on Form 8-K.

None.

(b) Material changes to the procedures by which security holders may recommend nominees to the board of directors.

None.

During the three months ended ~~June 30, 2023,~~March 31, 2024, no director or “officer” (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

3433

Item 6. Exhibits.

Incorporated by Reference
Filed/
Exhibit Number
Exhibit Description

From

File No.

Exhibit

Filing Date
Furnished
Herewith
2.1†

Agreement and Plan of Merger, dated as of March 4, 2021, by and among Good Works Acquisition Corp., Currency Merger Sub, Inc. and Cipher Mining Technologies Inc.

8-K

001-39625

2.1

3/5/2021

3.1

Second Amended and Restated Certificate of Incorporation of Cipher Mining Inc.

8-K

001-39625

3.1

8/31/2021

3.2

Amended and Restated Bylaws of Cipher Mining Inc.

8-K

001-39625

3.2

8/31/2021

4.1

Specimen Warrant Certificate of Good Works Acquisition Corp.

S-1/A

333-248333

4.3

10/9/2020

4.2

Warrant Agreement, dated as of October 19, 2020, by and between Continental Stock Transfer & Trust Company and Good Works Acquisition Corp.

8-K

001-39625

4.1

10/28/2020

10.1

Controlled Equity OfferingSM Sales Agreement by and between Cipher Mining Inc. and Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC and Compass Point Research & Trading, LLC, dated August 3, 2023.

8-K

001-39625

1.1

8/4/2023

10.2

Amended and Restated Non-Employee Directors Compensation Policy.

*
31.1
Certification of Chief Executive Officer pursuant to Rule 13a‑14(a)/15d‑14(a).
*
31.2
Certification of Chief Financial Officer pursuant to Rule 13a‑14(a)/15d‑14(a).
*
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
**
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
**
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
*
101.SCH
Inline XBRL Taxonomy Extension Schema Document
*
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
*
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
*
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
*
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
*
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*

Incorporated by Reference

Filed/

Exhibit Number

Exhibit Description

From

File No.

Exhibit

Filing Date

Furnished

Herewith

2.1†

Agreement and Plan of Merger, dated as of March 4, 2021, by and among Good Works Acquisition Corp., Currency Merger Sub, Inc. and Cipher Mining Technologies Inc.

8-K

001-39625

2.1

3/5/2021

3.1

Second Amended and Restated Certificate of Incorporation of Cipher Mining Inc.

8-K

001-39625

3.1

8/31/2021

3.2

Amended and Restated Bylaws of Cipher Mining Inc.

8-K

001-39625

3.2

8/31/2021

4.1

Specimen Warrant Certificate of Good Works Acquisition Corp.

S-1/A

333-248333

4.3

10/9/2020

4.2

Warrant Agreement, dated as of October 19, 2020, by and between Continental Stock Transfer & Trust Company and Good Works Acquisition Corp.

8-K

001-39625

4.1

10/28/2020

10.1

Amendment No. 1 to Controlled Equity OfferingSM Sales Agreement by and among Cipher Mining Inc. and Cantor Fitzgerald & Co., Canaccord Genuity LLC, Compass Point Research & Trading, LLC, Needham & Company, LLC, Stifel, Nicolaus & Company, Incorporated and Virtu Americas LLC, dated March 6, 2024.

8-K

001-39625

1.1

3/6/2024

31.1

Certification of Chief Executive Officer pursuant to Rule 13a‑14(a)/15d‑14(a).

31.2

Certification of Chief Financial Officer pursuant to Rule 13a‑14(a)/15d‑14(a).

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

† Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

3534

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CIPHER MINING INC.

Date: ~~August 8, 2023~~May 7, 2024	By:	/s/ Tyler Page
		Tyler Page
		Chief Executive Officer
		(Principal Executive Officer)



Date: ~~August 8, 2023~~May 7, 2024	By:	/s/ Edward Farrell
		Edward Farrell
		Chief Financial Officer
		(Principal Financial Officer)

3635


	Common Stock				Additional			Accumulated			Treasury Stock						Total
	Shares		Amount		Paid-in Capital			Deficit			Shares			Amount			Stockholders’ Equity
Balance as of March 31, 2023		253,050,088	$	253	$	462,181		$	(117,810	)		(4,144,081	)	$	(4	)	$	344,620
Issuance of common shares, net of offering costs - At-the-market offering		978,207		1		2,744			-			-			-			2,745
Delivery of common stock underlying restricted stock units, net of shares settled for tax withholding settlement		674,817		-		(632	)		-			(237,654	)		-			(632	)
Share-based compensation		92,514		-		9,178			-			-			-			9,178
Net loss		-		-		-			(12,701	)		-			-			(12,701	)
Balance as of June 30, 2023		254,795,626	$	254	$	473,471		$	(130,511	)		(4,381,735	)	$	(4	)	$	343,210


	June 30, 2023		December 31, 2022
Luminant Power Purchase Agreement Independent Collateral Amount	$	12,554	$	12,554
Luminant Purchase and Sale Agreement collateral		3,063		3,063
Operating lease security deposits		967		960
Other deposits		1,158		1,153
Total security deposits	$	17,742	$	17,730