Cipher Mining (CIFR) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides an overview of the company's financial statements, management's analysis, market risk, and internal controls Item 1. Financial Statements (Unaudited) The company reported a $46.7 million net loss with no revenue for the six months ended June 30, 2022, as it progressed its Bitcoin mining buildout Condensed Consolidated Balance Sheets Total assets decreased slightly to $342.0 million by June 30, 2022, driven by a cash reduction reallocated to equipment deposits and equity investments Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $37,042 | $209,841 | | Deposits on equipment | $196,707 | $114,857 | | Investment in equity investee | $56,828 | $0 | | Total Assets | $341,951 | $354,167 | | Liabilities & Equity | | | | Total current liabilities | $23,563 | $499 | | Total liabilities | $28,612 | $636 | | Total stockholders' equity | $313,339 | $353,531 | | Total Liabilities and Stockholders' Equity | $341,951 | $354,167 | Condensed Consolidated Statements of Operations The company reported no revenue, with a net loss of $46.7 million for the six months ended June 30, 2022, due to increased G&A and equity investment losses Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Five Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $16,704 | $546 | $34,094 | $659 | | Equity in loss of equity investment | $12,079 | - | $12,232 | - | | Operating loss | $(29,326) | $(547) | $(46,880) | $(660) | | Net loss | $(29,219) | $(548) | $(46,718) | $(661) | | Basic and diluted net loss per share | $(0.12) | - | $(0.19) | - | Condensed Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $172.8 million, primarily due to $159.8 million used in investing activities for equipment deposits Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Five Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(9,932) | $(1,003) | | Net cash used in investing activities | $(159,815) | - | | Net cash (used in) provided by financing activities | $(3,052) | $4,168 | | Net (decrease) increase in cash | $(172,799) | $3,165 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail Bitcoin mining operations, significant equipment commitments, joint venture accounting, and management's assessment of sufficient liquidity for the next 12 months - The company began its Bitcoin mining operations in February 2022 at the Alborz facility in Texas, which is operated through a joint venture[40] - As of June 30, 2022, the company had $196.7 million in deposits on equipment, primarily for miners, with significant future commitments remaining[43] - Management believes existing financial resources, along with projected cash distributions and the ability to delay certain equipment orders, will be sufficient to meet capital requirements for at least the next 12 months[45][46] - A loss of $11.6 million was recognized within 'equity in loss of equity investment' during Q2 2022. This occurred because miners contributed to the Alborz joint venture had a fair value lower than their original cost[97][104] - In April 2022, the company cancelled 2,890,173 shares of its common stock held by related party Bitfury Top HoldCo as repayment for a $10.0 million deposit on a mining rig order that was not fulfilled[95][108][149] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Bitcoin mining buildout, increased operating expenses, liquidity, and plans to deploy 6.9 EH/s of hashrate by early 2023 Overview and Recent Developments Cipher, a US-based Bitcoin miner, commenced operations in February 2022, targeting 6.9 EH/s owned hashrate by early 2023 with low electricity costs - The company's key mission is to become a leading Bitcoin mining company in the United States, leveraging power agreements expected to provide an average electricity cost of approximately 2.7 c/kWh[171][173] - The Alborz facility was completed in August 2022, with installed rigs capable of generating approximately 1.3 EH/s (Cipher's share is ~0.64 EH/s)[191] - By early 2023, the company plans to deploy a total hashrate of approximately 7.9 EH/s, with its ownership portion being approximately 6.9 EH/s[192] - The company is in discussions with supplier SuperAcme to adjust payment and delivery schedules for mining rigs originally scheduled for late 2022[193] Results of Operations No revenue was generated, with a $46.7 million net loss driven by $34.1 million in G&A expenses, including $19.6 million in share-based compensation Comparison of Operating Results (in millions) | Item | Six Months Ended June 30, 2022 | Five Months Ended June 30, 2021 | | :--- | :--- | :--- | | Revenue | $0 | $0 | | General & Administrative Expenses | $34.1 | $0.7 | | Share-based compensation (included in G&A) | $19.6 | $0 | | Equity in loss of equity investment | $12.2 | $0 | | Net Loss | $46.7 | $0.7 | Liquidity and Capital Resources The company held $37.0 million in cash, used $156.8 million for equipment deposits, and believes current resources are sufficient for the next 12 months - The company's cash and cash equivalents stood at $37.0 million as of June 30, 2022, with an accumulated deficit of $118.9 million[209] - Net cash used in investing activities was $159.8 million for the first six months of 2022, primarily for deposits on mining equipment[212][215] Contractual Obligations for Mining Equipment (as of June 30, 2022, in thousands) | Vendor | Open Purchase Commitment | Deposits Paid | | :--- | :--- | :--- | | Bitmain Technologies Limited | $69,885 | $69,885 | | SuperAcme Technology | $222,401 | $88,868 | | Bitfury USA Inc. and others | $43,746 | $37,954 | | Total | $336,032 | $196,707 | Non-GAAP Financial Measures Non-GAAP net loss was $27.0 million for the six months ended June 30, 2022, excluding non-cash items like stock compensation and depreciation Reconciliation of GAAP to Non-GAAP Net Loss (Six Months Ended June 30, 2022, in thousands) | Metric | Amount | | :--- | :--- | | Net loss (GAAP) | $(46,718) | | Stock compensation expense | $19,578 | | Change in fair value of warrant liability | $111 | | Depreciation | $15 | | Non-GAAP net loss | $(27,014) | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Cipher Mining Inc. is exempt from providing quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[255] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level[257] - No changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[258] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered equity sales, and a list of filed exhibits Item 1. Legal Proceedings The company is not currently a party to any material pending legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[261] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2021 Form 10-K - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021[262] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred, and the use of IPO proceeds remains consistent with prior disclosures - No unregistered sales of equity securities occurred during the reporting period[263] Item 6. Exhibits This section provides a comprehensive list of all exhibits filed with the Form 10-Q, including key agreements and certifications