What changed in Cipher Mining Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Cipher Mining Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+362 added−665 removedSource: 10-K (2024-03-05) vs 10-K (2023-03-14)
Top changes in Cipher Mining Inc.'s 2023 10-K
362 paragraphs added · 665 removed · 265 edited across 2 sections
- Item 1A. Risk Factors+279 / −581 · 212 edited
- Item 1. Business+83 / −84 · 53 edited
Item 1. Business
Business — how the company describes what it does
53 edited+30 added−31 removed43 unchanged
Item 1. Business
Business — how the company describes what it does
53 edited+30 added−31 removed43 unchanged
2022 filing
2023 filing
Biggest changeChief Facility Our Chief data center (the “Chief Facility”) is also located near Andrews, Texas and is also partially-owned through a joint venture with WindHQ. We have a 49% membership interest in Chief LLC, which owns the Chief Facility. The Chief Facility is a 10 MW data center that is connected to the local electrical grid.
Biggest changeThe Bear Facility has approval to expand to 40 MW, and the capacity to expand up to 115 MW, subject to applicable regulatory approvals. Chief Facility Our Chief data center (the “Chief Facility”) is also located near Andrews, Texas and is also partially-owned through a joint venture with WindHQ.
For further details, see “ Risk Factors—Risks Related to Our Business, Industry and Operations—Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence and physical degradation .” 6 The overall hashrate of the Bitcoin network is generally correlated with bitcoin price, and any significant fall in bitcoin price may force high-cost miners to cease their mining activities, which would typically result in a decrease of the network power.
For further details, see “ Risk Factors—Risks Related to Our Business, Industry and Operations—Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence and physical degradation .” The overall hashrate of the Bitcoin network is generally correlated with bitcoin price, and any significant fall in bitcoin price may force high-cost miners to cease their mining activities, which would typically result in a decrease of the network power.
Other parts of our electrical power portfolio do not have fixed costs, may be sourced from renewable sources, or may be purchased from the electrical grid applicable to the relevant data center. We may, from time to time, seek to hedge the cost of electrical power at data centers for which we do not have a fixed cost.
Other parts of our electrical power portfolio do not have fixed costs, may be sourced from renewable sources, or may be purchased from the electrical grid applicable to the relevant data center. Additionally, from time to time, we may seek to hedge the cost of electrical power at data centers for which we do not have a fixed cost.
We believe that we operate one of the most efficient mining rig fleets in the global market by using leading technology and mining equipment to maximize computing power output per MW while attempting to minimize downtime and repair costs.
We believe that we operate one of the most efficient mining rig fleets in the global market by using leading technology and mining equipment to maximize computing power output per MW while attempting to minimize unintentional downtime and repair costs.
Intellectual Property We use specific hardware and software for our cryptocurrency mining operations. In certain cases, source code and other software assets may be subject to an open source license, as much technology development underway in this sector is open source. For these works, we intend to adhere to the terms of any license agreements that may be in place.
Intellectual Property We use specific hardware and software for our bitcoin mining operations. In certain cases, source code and other software assets may be subject to an open source license, as much technology development underway in this sector is open source. For these works, we intend to adhere to the terms of any license agreements that may be in place.
For further details on our power purchase agreement with Luminant, see “ —Business Agreements—Power and Hosting Agreements—Luminant .” Alborz Facility Our Alborz data center (the “Alborz Facility”) is located near Happy, Texas and is partially-owned through a joint venture with WindHQ LLC (“WindHQ”). We have a 49% membership interest in Alborz LLC, which owns the Alborz Facility.
For further details on our power purchase agreement with Luminant, see “ —Business Agreements—Luminant Power Agreement .” 2 Alborz Facility Our Alborz data center (the “Alborz Facility”) is located near Happy, Texas and is partially-owned through a joint venture with WindHQ LLC (“WindHQ”). We have a 49% membership interest in Alborz LLC, which owns the Alborz Facility.
In addition, we have developed and continue to refine certain proprietary software applications to enhance the efficiency of our bitcoin mining operations and may continue to develop those applications or others in the future. Human Capital Management As of the date of this filing, we have 26 full-time employees and officers. We believe our employee relations to be good.
In addition, we have developed and continue to refine certain proprietary software applications to enhance the efficiency of our bitcoin mining operations and may continue to develop those applications or others in the future. Human Capital Management As of the date of this filing, we have 35 full-time employees and officers. We believe our employee relations to be good.
We hold or sell the bitcoin that we mine as part of our normal treasury management processes. We will, from time to time, sell some or all of the bitcoin that we have mined to generate US dollars for operating expenses, capital expenditures, or other general corporate purposes.
We hold, sell or hedge the bitcoin that we mine as part of our normal treasury management processes. From time to time, we sell some or all of the bitcoin that we have mined to generate US dollars for operating expenses, capital expenditures, or other general corporate purposes.
Most recently, in May 2020, the block reward was reduced from 12.5 to 6.25 bitcoin, and it is estimated that it will halve again, to 3.125 bitcoin in April 2024. Bitcoin miners also collect transaction fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactions to new blocks in the blockchain.
Most recently, in May 2020, the block reward was reduced from 12.5 to 6.25 bitcoin, and it will halve again, to 3.125 bitcoin, which is estimated to occur in April 2024. Bitcoin miners also collect transaction fees for each transaction they confirm. Miners validate unconfirmed transactions by adding the previously unconfirmed transactions to new blocks in the blockchain.
We have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to changes in local electrical power prices at the Bear Facility.
Similar to the Odessa Facility, we have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to changes in local electrical power prices at the Bear Facility.
It is powered solely by Falvez Energy’s Astra Wind Project (the “Astra Wind Farm”), owned by an affiliate of WindHQ, next to which it is collocated. The Alborz Facility’s capacity is approximately 1.3 EH/s, of which we own approximately 0.64 EH/s under the WindHQ Joint Venture Agreement.
It is powered solely by Falvez Energy’s Astra Wind Project (the “Astra Wind Farm”), owned by an affiliate of WindHQ, next to which it is co-located. The Alborz Facility’s capacity is approximately 1.3 EH/s, of which we own approximately 0.64 EH/s under the WindHQ Joint Venture Agreement.
Similar to the Bear Facility, we have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to changes in local electrical power prices at the 3 Chief Facility.
Similar to the Odessa and Bear Facilities, we have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to changes in local electrical power prices at the Chief Facility.
For further details on those arrangements, see “ Business—Business Agreements—Power and Hosting Arrangements .” We have access, until at least 2027, to competitive electricity costs, with an average cost of electricity of approximately 2.7 c/kWh.
For further details on those arrangements, see “ Business—Business Agreements—Luminant Power Agreement .” We have access, until at least 2027, to competitive electricity costs, with an average cost of electricity of approximately 2.7 c/kWh.
See “ Risk Factors—Risks Related to Our Business, Industry and Operations—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” and “Our lack of insurance protection exposes us and our shareholders to the risk of loss of our bitcoin for which no person is liable.” 1 We use a third-party mining pool, the Foundry USA Pool (“Foundry”), to mine bitcoin.
See “ Risk Factors—Risks Related to Our Business, Industry and Operations—There is a potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be 1 determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof” and “Our limited insurance protection exposes us and our shareholders to the risk of loss of our bitcoin for which no person is liable.” We use third-party mining pools, including the Foundry USA Pool (“Foundry”) and Luxor Technology Corporation (“Luxor”), to mine bitcoin.
Strategic adjacencies with potential long-term opportunities We believe we are strategically well positioned to develop our bitcoin mining business, and also to enhance it through other long-term opportunities in the Bitcoin ecosystem.
Strategic adjacencies with potential long-term opportunities We believe we are strategically well positioned to continue developing and expanding our bitcoin mining business, and also to enhance it through other long-term opportunities in the Bitcoin ecosystem.
We have a 49% membership in Bear LLC, which owns the Bear Facility. The Bear Facility is a 10 MW data center that is connected to the local electrical grid. It was completed in October 2022 and has approximately 3,250 S19j Pro miners, capable of hashing at a rate of up to approximately 0.3 EH/s.
We have a 49% membership in Bear LLC, which owns the Bear Facility. The Bear Facility is a 10 MW data center that is connected to the local electrical grid. It was completed in October 2022 and is capable of hashing at a rate of up to approximately 0.325 EH/s.
Focus on building our operations in the United States We believe that the North American market, and specifically the United States, represents a particularly attractive geographic region for bitcoin mining. Two key drivers for this are the attractive market dynamics and its stable regulatory environment.
We believe that the North American market, and specifically the United States, represents a particularly attractive geographic region for bitcoin mining. Two key drivers for this are the attractive market dynamics and its stable regulatory environment.
As further discussed in “— Our Strategy ”, we plan to deploy an additional approximately 60 MW for a total of approximately 327 MW of electrical capacity by the end of 2023, and a corresponding hashrate of approximately 10.2 EH/s, of which we expect to own approximately 8.2 EH/s, with the remainder being owned by WindHQ, our JV partner.
As further discussed in “— Our Strategy ”, we plan to deploy an additional approximately 60 MW for a total of approximately 327 MW of electrical capacity by the end of 2024, and a corresponding hashrate of approximately 11.6 EH/s, of which we expect to own approximately 9.3 EH/s, with the remainder being owned by WindHQ, our JV partner.
Our goal is to maximize the time our miners are mining bitcoin at favorable prices and, in contrast, to avoid consuming electrical power when the cost of that power is significantly higher than our anticipated bitcoin mining revenues. The Chief Facility has expansion potential up to 135 MW, subject to applicable regulatory approvals.
Our goal is to maximize the time our miners are mining bitcoin at favorable prices and, in contrast, to avoid consuming electrical power when the cost of that power is significantly higher than our anticipated bitcoin mining revenues. 3 The Chief Facility has approval to expand to 40 MW, and the capacity to expand up to 115 MW, subject to applicable regulatory approvals.
We may have the opportunity to expand the capacity of the Alborz Facility up to 165 MW, subject to applicable regulatory approvals.
Separately, we may also have the opportunity to expand the capacity of the Alborz Facility up to 163 MW, subject to applicable regulatory approvals.
For example, we could consider initiatives such as: (i) lending out bitcoin as an additional line of revenue; (ii) engaging into strategic acquisitions or joint ventures; (iii) leveraging our expected bitcoin holdings to enter into strategic partnerships in the fintech space; (iv) engaging in asset management products; and (v) providing operational support or mining-as-a-service products, which may involve working with infrastructure investors on managed bitcoin mining deployments and other potential projects.
For example, we have enhanced our treasury management platform by engaging market counterparties with which we can hedge some or all of the value of our bitcoin inventory or the value of our expected forward production, and we could consider initiatives such as: (i) lending out bitcoin as an additional line of revenue; (ii) engaging into strategic acquisitions or joint ventures; (iii) leveraging our expected bitcoin holdings to enter into strategic partnerships in the fintech space; (iv) engaging in asset management products; and (v) providing operational support or mining-as-a-service products, which may involve working with infrastructure investors on managed bitcoin mining deployments and other potential projects.
We plan to use cash flows that we expect to generate from our operations and potentially additional sources of financing, or joint venture or other arrangements, to fund the required capital expenditures associated with any potential expansion. Furthermore, we expect that our focus on U.S. operations will further support our potential.
We plan to use cash flows that we expect to generate from our operations and potentially additional sources of financing, or joint venture or other arrangements, to fund the required capital expenditures associated with any potential expansion.
Business Agreements Joint Ventures On June 10, 2021, we and WindHQ signed a framework agreement for a joint venture for the construction, buildout, deployment and operation of one or more data centers in the United States (the “WindHQ Joint Venture Agreement”).
For further details on our miners, see “ —Business Agreements—Miner Purchases—2023 Purchases .” Business Agreements Joint Ventures On June 10, 2021, we and WindHQ signed a framework agreement for a joint venture for the construction, buildout, deployment and operation of one or more data centers in the United States (the “WindHQ Joint Venture Agreement”).
Scale potential to become a leading bitcoin mining operation We believe that scale can be a key factor in driving cost and margin improvements in the bitcoin mining business, as well as providing a degree of protection against the price volatility associated with bitcoin.
Scalable operations with attractive opportunities to deploy additional hashrate We believe that scale can be a key factor in driving cost and margin improvements in the bitcoin mining business, as well as providing a degree of protection against the price volatility associated with bitcoin.
Our goal is to maximize the time our miners are mining bitcoin at favorable prices and, in contrast, to avoid consuming electrical power when the cost of that power is significantly higher than our anticipated bitcoin mining revenues. The Bear Facility has expansion potential up to 135 MW, subject to applicable regulatory approvals.
Our goal is to maximize the time our miners are mining bitcoin at favorable prices and, in contrast, to avoid consuming electrical power when the cost of that power is significantly higher than our anticipated bitcoin mining revenues.
As part of our regular treasury management, we consider market conditions and our financial obligations to determine if any portion of newly mined or stored bitcoin should be transferred to the hot wallet for liquidation.
We periodically re-evaluate these services and, in the future, we may also decide to use additional or other custodians. As part of our regular treasury management, we consider market conditions and our financial obligations to determine if any portion of newly mined or stored bitcoin should be transferred to the hot wallet for liquidation.
This means that we send our computing power, or hashrate, to Foundry in exchange for a proportionate share of bitcoin mined by the pool. To date, we have not had to pay fees to use third-party mining pools, but that could change in the future. We have no immediate plans to establish our own mining pool.
This means that we send our computing power, or hashrate, to the mining pool in exchange for a proportionate share of bitcoin mined by the pool. We have no immediate plans to establish our own mining pool.
For instance, various bills have been proposed in the U.S. Congress related to our business, which may be adopted and have an impact on us. Additionally, governmental agencies and regulatory authorities, such as the SEC, the Commodity Futures Trading Commission, the Federal Trade Commission and the Financial Crimes Enforcement Network of the U.S.
Additionally, governmental 8 agencies and regulatory authorities, such as the SEC, the Commodity Futures Trading Commission, the Federal Trade Commission and the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, may also enact regulations related to our business, which may have an impact on us.
Luminant On June 23, 2021, we and Luminant entered into a power purchase agreement for the supply of electric power to our Odessa Facility, which was subsequently amended and restated on July 9, 2021, and further amended on February 28, 2022 and August 26, 2022 (as amended, the “Luminant Power Agreement”).
Luminant Power Agreement On June 23, 2021, we entered into a power purchase agreement with Luminant for the supply of electric power to the Odessa Facility, which was subsequently amended and restated on July 9, 2021, and further amended on February 28, 2022, August 26, 2022 and August 23, 2023 (as amended, the “Luminant Power Agreement”), pursuant to which we have access, until at least 2027, to an average cost of electricity of approximately 2.7 c/kWh.
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.
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, developing our treasury management platform and entering into other arrangements, such as joint ventures, data center hosting agreements, or software licensing arrangements.
As of February 28, 2023, we have deployed approximately 203 MW of electrical capacity across our four data centers, with a corresponding hashrate of approximately 6.1 EH/s, of which we owned approximately 5.2 EH/s.
As of February 29, 2024, we have deployed approximately 267 MW of electrical capacity across our four data centers, with a corresponding hashrate of approximately 8.4 EH/s, of which we owned approximately 7.4 EH/s.
See “ Risk Factors—Risks 7 Related to Our Business, Industry and Operations—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” and “Our lack of insurance protection exposes us and our shareholders to the risk of loss of our bitcoin for which no person is liable.” Establish our cost leadership and maintain strong relationships with our industry partners We seek to structure relationships with our equipment and service providers, power suppliers and other potential partners as long-term relationships.
See “ Risk Factors—Risks Related to Our Business, Industry and Operations—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” and “Our limited insurance protection exposes us and our shareholders to the risk of loss of our bitcoin for which no person is liable.” Focus on building our operations in the United States Our operations are currently all within the United States.
We began bitcoin mining operations on this site in November 2022 and continue to expand operations. As of February 28, 2023, the Odessa Facility is capable of producing approximately 4.2 EH/s.
We began bitcoin mining operations on this site in November 2022 and completed the buildout of the site in September 2023. As of February 29, 2024, the Odessa Facility is capable of producing approximately 6.4 EH/s through the operation of approximately 60,000 miners.
Subject to certain early termination exceptions, the 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 then current term.
Subject to certain early termination exceptions, the 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 then current term. 4 Miner Purchases The substantial majority of our capital expenditures to date have been devoted to the development and construction of our bitcoin mining data centers and the acquisition of mining hardware.
We do not currently own, and do not have any current plans to seek, any patents in connection with our bitcoin mining operations. We rely upon trade secrets, trademarks, service marks, trade names, copyrights and other intellectual property rights and license the use of intellectual property rights owned and controlled by others.
We have patent applications pending for aspects of our bitcoin mining operations. We rely upon trade secrets, trademarks, service marks, trade names, copyrights and other intellectual property rights and license the use of intellectual property rights owned and controlled by others.
Data Centers We operate four bitcoin mining data centers in Texas, including one wholly-owned data center and three partially-owned data centers that we acquired through investments in joint ventures. Odessa Facility Our largest data center is our Odessa data center (the “Odessa Facility”), which is our wholly-owned 207 MW facility located in Odessa, Texas.
Data Centers We currently operate four bitcoin mining data centers in Texas, including one wholly-owned data center and three partially-owned data centers that we acquired through investments in joint ventures, and are developing one additional data center.
In the absence of any material breaches by either party, the WindHQ Joint Venture Agreement may only be terminated by mutual written consent of both parties. Power and Hosting Agreements We have entered into several power and hosting arrangements which, together, cover our data centers.
In the absence of any material breaches by either party, the WindHQ Joint Venture Agreement may only be terminated by mutual written consent of both parties.
As of February 28, 2023, we operated approximately 58,500 miners, with an aggregate hashrate capacity of approximately 6.1 exahash per second (“EH/s”), deploying approximately 203 megawatts (“MW”) of electricity, of which we owned approximately 48,500 miners, with an aggregate hashrate capacity of approximately 5.2 EH/s, deploying approximately 172 MW of electricity.
As of February 29, 2024, we operated approximately 80,000 miners, with an aggregate hashrate capacity of approximately 8.4 exahash per second (“EH/s”), deploying approximately 267 megawatts (“MW”) of electricity, of which we owned approximately 70,000 miners, with an aggregate hashrate capacity of approximately 7.4 EH/s, deploying approximately 236 MW of electricity.
We intend to periodically re-evaluate this as part of our overall strategy going forward and, in the future, we may also decide to stop using mining pools. We generally store the majority of our bitcoin in cold storage, unless we transfer it to a trading account to be sold.
We have no immediate plans to establish our own mining pool. We intend to periodically re-evaluate this as part of our overall strategy going forward and, in the future, we may also decide to stop using mining pools.
We currently use only one custodian to store our bitcoin, Coinbase Prime, but we intend to periodically re-evaluate this and, in the future, we may also decide to use additional or other custodians.
We periodically re-evaluate these services and, in the future, we may also decide to use additional or other custodians.
We believe this approach will help us expand our operations in a cost-effective manner that will contribute to the operational stability of our bitcoin mining business.
Establish our cost leadership and maintain strong relationships with our industry partners We seek to structure relationships with our equipment and service providers, power suppliers and other potential partners as long-term relationships. We believe this approach will help us expand our operations in a cost-effective manner that will contribute to the operational stability of our bitcoin mining business.
We contribute the computing power we produce to a mining pool verifying transactions on the Bitcoin blockchain in exchange for block rewards and transaction fees. In this way, we produce bitcoin. To the extent that we can produce bitcoin at a cost that is lower than the price of bitcoin, over the long term we expect to generate profits.
To the extent that we can produce bitcoin at a cost that is lower than the price of bitcoin, over the long term we expect to generate profits.
When there is not sufficient wind to generate enough electrical power for our miners, we curtail our mining activity.
Because the sole source of electricity for the Alborz Facility is the nearby wind farm, operating the Alborz miners involves frequent adjustments to the hashing power because of changes in the wind. When there is not sufficient wind to generate enough electrical power for our miners, we curtail our mining activity.
Furthermore, we believe that the U.S. digital asset ecosystem is more tightly regulated and may attract more compliance-oriented investors, which is expected to contribute to the overall stability of the ecosystem. As part of our operations, we use third-party mining pools and custodians that are based in the United States.
Furthermore, we believe that the U.S. digital asset ecosystem is more tightly regulated and may attract more compliance-oriented investors, which is expected to contribute to the overall stability of the ecosystem. We may in the future consider establishing operations in other countries, depending on the business opportunity and the relative risks associated with the relevant jurisdiction.
Pursuant to these agreements, we have access, until at least 2027, to an average cost of electricity of approximately 2.7 c/kWh.
The power at the Odessa Facility is supplied by Luminant ET Services Company LLC (“Luminant”) under a power purchase agreement, pursuant to which we have access, until at least 2027, to an average cost of electricity of approximately 2.7 c/kWh.
As of the date of this filing, approximately 4,600 of those miners have been delivered to us in Texas, and we expect the remainder to be delivered by the end of April 2023.
As of the date of this filing, approximately 1,760 of those miners have been delivered to us in Texas, and we have paid approximately $10.9 million of the total $16.8 million due.
Regulations may substantially change in the future and it is presently not possible to know how regulations will apply to our businesses, or when they will be effective. As the regulatory and legal environment evolves, we may become subject to new laws and further regulation by the SEC and other agencies, which may affect our mining and other activities.
It is unclear how the approval of spot bitcoin ETPs will affect the price of bitcoin going forward. Regulations may substantially change in the future and it is presently not possible to know how regulations will apply to our businesses, or when they will be effective.
For the second half of 2023, we plan to expand deployment of electrical capacity at our existing data centers and potentially also at new, yet to be secured, sites.
We also plan to deploy an additional 135 MW of rig capacity in 2025 for approximately an additional 7.1 EH/s in corresponding hashrate at our Black Pearl Facility. 5 In 2024 and 2025, we plan to expand deployment of electrical capacity at our existing data centers, at our new Black Pearl Facility, and potentially also at new, yet to be secured, sites.
We may conduct those bitcoin sales transactions through OTC providers or exchanges or through one or more custodians. We generally store the majority of our bitcoin in cold storage, unless we transfer it to a trading account to be sold.
We may conduct those bitcoin sales transactions through OTC providers or exchanges or through one or more custodians. From time to time, we may also hedge a portion of the value of our bitcoin inventory or a portion of the value of our expected forward production.
Additionally, extreme weather conditions may impact the efficiency and uptime of our mining operations which will have an impact on operating results. 9
Additionally, extreme weather conditions may affect the efficiency and uptime of our mining operations which will have an impact on operating results. Corporate Information Cipher Mining Inc. was incorporated as a Delaware corporation on August 27, 2021 in connection with the closing of a transaction (the “Business Combination”) pursuant to which Good Works Acquisition Corp.
Competition Bitcoin is mined all over the world by a variety of miners, including individuals, public and private companies, and mining pools. Our four existing sites are located in Texas, where we may face significant and increasing competition, because Texas, through its regulatory and economic incentives, has encouraged bitcoin mining companies, like ours, to locate their operations in the state.
Competition Bitcoin is mined all over the world by a variety of miners, including individuals, public and private companies, and mining pools. We define our principal competitors as other publicly traded bitcoin miners because 7 there is widely available information about their operations.
It was completed in October 2022 and has approximately 3,250 S19j Pro miners, capable of hashing at a rate of up to approximately 0.3 EH/s.
We have a 49% membership interest in Chief Mountain LLC, which owns the Chief Facility. The Chief Facility is a 10 MW data center that is connected to the local electrical grid. It was completed in October 2022 and is capable of hashing at a rate of up to approximately 0.325 EH/s.
Cipher Mining Inc., through itself and its consolidated subsidiaries, including Cipher Mining Technologies Inc. (“CMTI”), currently operates four bitcoin mining data centers in Texas. Bitcoin mining is our principal revenue generating business activity.
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 data center in Winkler County, TX (“Black Pearl” or the “Black Pearl Facility”) for up to 300 MW, and we expect to energize 150 MW in 2025.
Removed
The Odessa Facility is an approximately 52 acre site, located next to a natural gas power production facility, at which we, as of February 28, 2023, operate approximately 39,000 miners. By the end of the first quarter 2023, we anticipate operating approximately 47,000 miners, capable of generating approximately 4.7 EH/s.
Added
Our key mission is to expand and strengthen the Bitcoin network’s critical infrastructure.
Removed
At that point, of the entire 207 MW electrical power capacity at the Odessa Facility, we will have approximately 35 MW of electrical power capacity for which we could need to purchase approximately 10,800 additional miners, assuming MicroBT M50 mining rigs, to fully utilize the entire 207 MW under our power agreement to mine bitcoin.
Added
We contribute the computing power we produce to one or more mining pools verifying transactions on the Bitcoin blockchain in exchange for block rewards and transaction fees. In this way, we produce bitcoin.
Removed
We anticipate having appropriate non-mining rig infrastructure to deploy new miners to use that additional electrical power capacity. We anticipate purchasing additional miners to fill out that capacity before the end of 2023.
Added
We generally store the majority of our bitcoin in cold storage, unless we transfer it to a trading account to be sold. We primarily use Coinbase Prime as our custodian to store our bitcoin, but also have accounts at Anchorage Digital Bank N.A. and Fidelity Digital Assets Services.
Removed
Once built out to the full 207MW of its electrical power capacity, we anticipate the Odessa Site will operate approximately 60,000 miners, capable of generating approximately 6.2 EH/s. The power at our Odessa Facility is supplied by Luminant ET Services Company LLC (“Luminant”) under a power purchase agreement.
Added
Odessa Facility Our largest data center is our Odessa data center (the “Odessa Facility”), which is our wholly-owned 207 MW facility located in Odessa, Texas. The Odessa Facility is an approximately 52 acre site, located next to a natural gas power production facility.
Removed
The miners we operate at the Odessa Facility are a combination of Antminer S19j Pro (“S19j Pro”) miners that we purchased from Bitmain Technologies Limited (“Bitmain”) and MicroBT M30S++, M30S+, and M30S miners that we purchased from SuperAcme Technology (Hong Kong) Limited (“SuperAcme”).
Added
We have developed, and continue to refine, proprietary technology to increase the efficiency of our mining activity and associated curtailment due to changes in local electrical power prices at the Odessa Facility.
Removed
Until we have miners at the Odessa Facility capable of consuming the entire 207MW of electrical power capacity, 2 we plan either to sell the excess power that we don't consume for bitcoin mining and operating the data center into the ERCOT market, or we may request Luminant not to deliver this power, pursuant to the variable take-or-pay provision of our power purchase agreement.
Added
Our goal is to maximize the time our miners are mining bitcoin at favorable prices and, in contrast, to avoid consuming electrical power when the cost of that power is significantly higher than our anticipated bitcoin mining revenues.
Removed
The Alborz Facility has approximately 13,000 S19j Pro miners that in aggregate are capable of hashing at a rate of up to 1.3 EH/s. Because the sole source of electricity for the Alborz Facility is the nearby wind farm, operating the Alborz miners involves frequent adjustments to the hashing power because of changes in the wind.
Added
Black Pearl Facility Our newest facility at which we plan to build a data center is called Black Pearl, which is located in Winkler County, Texas. The Black Pearl Facility has conditional ERCOT interconnection approval of up to 300 MW. We expect to energize 150 MW of the Black Pearl Facility in 2025.
Removed
For further details, see “ Risk Factors—Risks Related to Our Business, Industry and Operations—We have an ongoing dispute with Luminant in Texas state court related to certain payments Luminant made to us under the Luminant Power Agreement .” Standard Power On February 3, 2021, we entered into a bitcoin mining hosting agreement (as amended and restated, the “Standard Power Hosting Agreement”) with 500 N 4th Street LLC, doing business as Standard Power (“Standard 4 Power”).
Added
With interconnection up to 300 MW, we expect Black Pearl to be the largest of our sites. In 2025, we anticipate operating approximately 37,396 Antminer T21 miners at the Black Pearl Facility, capable of generating approximately 7.1 EH/s.
Removed
Under the Standard Power Hosting Agreement, Standard Power agreed to provide hosting services, including the electric power infrastructure and containers necessary to operate miners with a specified energy utilization capacity, for miners we agreed to deliver to certain of Standard Power’s Ohio facilities upon the satisfaction of certain construction and regulatory conditions.
Added
If we exercise the Bitmain Antminer T21 purchase option and build out the full 300 MW of the Black Pearl Facility’s electrical power capacity, we anticipate such facility will operate approximately 76,946 Antminer T21 miners, capable of generating approximately 14.6 EH/s.
Removed
Those conditions were not satisfied and, as a result, the parties terminated the Standard Power Hosting Agreement on February 2, 2023. No consideration was exchanged between the parties related to the termination.
Added
We have purchased miners from Bitmain, SuperAcme, and Canaan. In January 2024, Bear LLC and Chief Mountain LLC each entered into agreements with Canaan to purchase 8,350 units of the latest generation Avalon A1466 miners for delivery in the second quarter of 2024.
Removed
Miner Purchases The substantial majority of our capital expenditures to date have been devoted to the development and construction of our bitcoin mining data centers and the acquisition of mining hardware. We have purchased miners from Bitmain and SuperAcme.
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Both Bear LLC and Chief Mountain LLC plan to install 8,350 miners, representing an expansion of approximately 30 MW, or approximately 1.25 EH/s at each facility. Payment terms allow Bear LLC and Chief Mountain LLC to deliver up to 30% of the total consideration in the 90 days after delivery.
Removed
Under our agreement of August 2021 with Bitmain, we purchased a total of 27,000 S19j Pro miners (100 TH/s), at an average price of $49.66 per terahash. As of the date of this filing, we have received all 27,000 of those miners at our data centers in Texas and we have no further payment obligations under that agreement.
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In December 2023, through our wholly-owned subsidiary Cipher Mining Infrastructure LLC, a Delaware limited liability company, we entered into a Future Sales and Purchase Agreement with Bitmain Technologies Delaware Limited to purchase 37,396 Antminer T21 miners (the “2025 Bitmain Miners”).
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In November and December 2022, we agreed to purchase an additional 5,000 and 2,200 S19j Pro miners, respectively, from Bitmain for delivery in February and March 2023, respectively.
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This purchase represents approximately 7.1 EH/s of self-mining capacity, and we expect the miners to be delivered in one batch in April 2025.
Removed
For these miners, we paid an average price of $19.79 per terahash, but we only had to pay an additional $1,720,000 because we covered 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.
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
212 edited+67 added−369 removed432 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
212 edited+67 added−369 removed432 unchanged
2022 filing
2023 filing
Biggest changeAlthough we had no direct exposure to FTX or any of the above-mentioned cryptocurrency companies, nor any material assets that may not be recovered or may otherwise be lost or misappropriated due to the bankruptcies, the failure or insolvency of large exchanges like FTX may cause the price of bitcoin to fall and decrease confidence in the ecosystem, which could adversely affect an investment in us.
Biggest changeAlthough we had no direct exposure to FTX or any of the above-mentioned cryptocurrency companies (with the exception of Coinbase, which is discussed in “— 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 ”), nor any material assets that may not be recovered or may otherwise be lost or misappropriated due to the bankruptcies, the failure or insolvency of large exchanges like FTX or other significant players in the digital asset space may cause the price of bitcoin to fall and decrease confidence in the ecosystem, which could adversely affect an investment in us.
In particular, our operating results may fluctuate as a result of a variety of factors, many of which are unpredictable and, in certain instances, outside of our control, including: • market conditions across the broader blockchain ecosystem; • investment and trading activities of highly active retail and institutional investors, cryptocurrency users, speculators and miners; • financial strength of market participants; • developments and innovations in bitcoin mining equipment, including ASIC chip designs; • changes in consumer preferences and perceived value of digital assets, including due to evolving cryptographic algorithms and emerging trends in the technology securing blockchains; • publicity and events relating to the blockchain ecosystem, including public perception of the impact of the blockchain ecosystem on the environment and geopolitical developments; • the correlation between the prices of digital assets, including the potential that a crash in one digital asset or widespread defaults on one digital asset exchange or trading venue may cause a crash in the price of other digital assets, or a series of defaults by counterparties on digital asset exchanges or trading venues; • fees and speed associated with processing bitcoin transactions; • level of interest rates and inflation; • changes in the legislative or regulatory environment, or actions by governments or regulators that impact monetary policies, fiat currency devaluations, trade restrictions, the digital assets industry generally, or mining operations specifically; • difficulty obtaining hardware and related installation costs; • access to cost-effective sources of electrical power; • adverse legal proceedings or regulatory enforcement actions, judgments, settlements or other legal proceeding and enforcement-related costs; • increases in operating expenses that we expect to incur to build-up and expand our operations and to remain competitive; • system failure or outages, including with respect to our mining hardware, power supply and third-party networks; • breaches of security or data privacy; • loss of trust in the network due to a latent fault in the Bitcoin network; 16 • our ability to attract and retain talent; • our ability to hedge risks related to our ownership of digital assets; • the introduction of new digital assets, leading to a decreased adoption of bitcoin; and • our ability to compete with our existing and new competitors.
In particular, our operating results may fluctuate as a result of a variety of factors, many of which are unpredictable and, in certain instances, outside of our control, including: • market conditions across the broader blockchain ecosystem; • investment and trading activities of highly active retail and institutional investors, cryptocurrency users, speculators and miners; • financial strength of market participants; • developments and innovations in bitcoin mining equipment, including ASIC chip designs; • changes in consumer preferences and perceived value of digital assets, including due to evolving cryptographic algorithms and emerging trends in the technology securing blockchains; • publicity and events relating to the blockchain ecosystem, including public perception of the impact of the blockchain ecosystem on the environment and geopolitical developments; • the correlation between the prices of digital assets, including the potential that a crash in one digital asset or widespread defaults on one digital asset exchange or trading venue may cause a crash in the price of other digital assets, or a series of defaults by counterparties on digital asset exchanges or trading venues; • fees and speed associated with processing bitcoin transactions; • level of interest rates and inflation; • changes in the legislative or regulatory environment, or actions by governments or regulators that impact monetary policies, fiat currency devaluations, trade restrictions, the digital assets industry generally, or mining operations specifically; • difficulty obtaining hardware and related installation costs; • access to cost-effective sources of electrical power; 16 • adverse legal proceedings or regulatory enforcement actions, judgments, settlements or other legal proceeding and enforcement-related costs; • increases in operating expenses that we expect to incur to build-up and expand our operations and to remain competitive; • system failure or outages, including with respect to our mining hardware, power supply and third-party networks; • breaches of security or data privacy; • loss of trust in the network due to a latent fault in the Bitcoin network; • our ability to attract and retain talent; • our ability to hedge risks related to our ownership of digital assets; • the introduction of new digital assets, leading to a decreased adoption of bitcoin; and • our ability to compete with our existing and new competitors.
Declines in the condition of our miners and other hardware require us, over time, to repair or replace those miners or other hardware. See “— Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence .” Additionally, as the technology evolves, we may be required to acquire newer models of miners to remain competitive in the market.
Declines in the condition of our miners and other hardware require us, over time, to repair or replace those miners or other hardware. See “— Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence .” Additionally, as technology evolves, we may be required to acquire newer models of miners to remain competitive in the market.
Overall, we cannot anticipate all the ways in which this regulatory action and any additional restrictions could adversely impact our industry and business. If further regulation or government action follows, for example, in the form of prohibition on production or exports of the mining equipment, it is possible that our industry may be severely affected.
Overall, we cannot anticipate all the ways in which this regulatory action and any additional restrictions could adversely impact our industry and business. If further regulation or government action follows, for example, in the form of prohibition on production or exports of mining equipment, it is possible that our industry may be severely affected.
Our success and future growth, to a significant degree, depends on the skills and services of our management. Our loss of any of our management team, our inability to execute an effective succession plan, or our inability to attract and retain qualified personnel, could adversely affect our business.
The loss of any of our management team, our inability to execute an effective succession plan, or our inability to attract and retain qualified personnel, could adversely affect our business. Our success and future growth, to a significant degree, depends on the skills and services of our management team.
For example, China’s CBDC project was made available to consumers in January 2022, and governments from Russia to the European Union have been discussing potential creation of new digital currencies.
For example, China’s CBDC project was made available to consumers in January 2022, and governments from Russia to the European Union have been discussing potential creation of new digital currencies.
Among other things, these provisions include: • the limitation of the liability of, and the indemnification of, its directors and officers; • a prohibition on actions by its stockholders except at an annual or special meeting of stockholders; • a prohibition on actions by its stockholders by written consent; and 58 • the ability of the Board to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by the Board.
Among other things, these provisions include: • the limitation of the liability of, and the indemnification of, its directors and officers; • a prohibition on actions by its stockholders except at an annual or special meeting of stockholders; 58 • a prohibition on actions by its stockholders by written consent; and • the ability of the Board to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by the Board.
Our business may be adversely affected if the markets for bitcoin deteriorate or if its prices decline, including as a result of the following factors: • the reduction in mining rewards of bitcoin, including block reward halving events, which are events that occur after a specific period of time which reduces the block reward earned by miners; • disruptions, hacks, “forks”, 51% attacks, or other similar incidents affecting the Bitcoin blockchain network; • hard “forks” resulting in the creation of and divergence into multiple separate networks; • informal governance led by bitcoin’s core developers that lead to revisions to the underlying source code or inactions that prevent network scaling, and which evolve over time largely based on self- 45 determined participation, which may result in new changes or updates that affect their speed, security, usability, or value; • the ability for Bitcoin blockchain network to resolve significant scaling challenges and increase the volume and speed of transactions; • the ability to attract and retain developers and customers to use bitcoin for payment, store of value, unit of accounting, and other intended uses; • transaction congestion and fees associated with processing transactions on the Bitcoin network; • the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed bitcoin, or the transfer of Satoshi’s bitcoin assets; • negative public perception of bitcoin or other cryptocurrencies or their reputation within the fintech influencer community or the general publicity around them; • development in mathematics, technology, including in digital computing, algebraic geometry, and quantum computing that could result in the cryptography being used by bitcoin becoming insecure or ineffective; and • laws and regulations affecting the Bitcoin network or access to this network, including a determination that bitcoin constitutes a security or other regulated financial instrument under the laws of any jurisdiction.
Our business may be adversely affected if the markets for bitcoin deteriorate or if its prices decline, including as a result of the following factors: • the reduction in mining rewards of bitcoin, including block reward halving events, which are events that occur after a specific period of time which reduces the block reward earned by miners; • disruptions, hacks, “forks”, 51% attacks, or other similar incidents affecting the Bitcoin blockchain network; • hard “forks” resulting in the creation of and divergence into multiple separate networks; • informal governance led by bitcoin’s core developers that lead to revisions to the underlying source code or inactions that prevent network scaling, and which evolve over time largely based on self- determined participation, which may result in new changes or updates that affect their speed, security, usability, or value; • the ability for Bitcoin blockchain network to resolve significant scaling challenges and increase the volume and speed of transactions; • the ability to attract and retain developers and customers to use bitcoin for payment, store of value, unit of accounting, and other intended uses; • transaction congestion and fees associated with processing transactions on the Bitcoin network; • the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed bitcoin, or the transfer of Satoshi’s bitcoin assets; • negative public perception of bitcoin or other cryptocurrencies or their reputation within the fintech influencer community or the general publicity around them; • development in mathematics, technology, including in digital computing, algebraic geometry, and quantum computing that could result in the cryptography being used by bitcoin becoming insecure or ineffective; and • laws and regulations affecting the Bitcoin network or access to this network, including a determination that bitcoin constitutes a security or other regulated financial instrument under the laws of any jurisdiction.
In the future, we expect competition to further intensify with existing and new competitors, within and outside the United States, which may have various advantages over us, such as: • greater mining capabilities; • more timely introduction or adoption of new technologies; • preferred relationships with suppliers of mining machines and other equipment; • access to more competitively priced power; • greater financial resources to make acquisitions; • lower labor, compliance, risk mitigation and research and development costs; • larger and more mature intellectual property portfolios; • greater number of applicable licenses or similar authorizations; • established core business models outside of the mining or trading of digital assets, allowing them to operate on lesser margins or at a loss; 14 • operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and • substantially greater financial, technical and other resources.
In the future, we expect competition to further intensify with existing and new competitors, within and outside the United States, which may have various advantages over us, such as: • greater mining capabilities; • more timely introduction or adoption of new technologies; • preferred relationships with suppliers of mining machines and other equipment; • access to more competitively priced power; • greater financial resources to make acquisitions; • lower labor, compliance, risk mitigation and research and development costs; • larger and more mature intellectual property portfolios; • greater number of applicable licenses or similar authorizations; • established core business models outside of the mining or trading of digital assets, allowing them to operate on lesser margins or at a loss; • operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and • substantially greater financial, technical and other resources.
The factors affecting the further development of the digital asset industry, as well as the digital asset networks, include: • worldwide growth in the adoption and use of bitcoin and other digital assets; • government and quasi-government regulation of bitcoin and other digital assets and their use, or restrictions on or regulation of access to and operation of the digital asset network or similar digital assets systems; • the maintenance and development of the open-source software protocol of the Bitcoin network and other digital asset block-chains; • changes in consumer demographics and public tastes and preferences; • the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; • general economic conditions and the regulatory environment relating to digital assets; and • the impact of regulators focusing on digital assets and digital securities and the costs associated with such regulatory oversight.
The factors affecting the further development of the digital asset industry, as well as the digital asset networks, include: • worldwide growth in the adoption and use of bitcoin and other digital assets; • government and quasi-government regulation of bitcoin and other digital assets and their use, or restrictions on or regulation of access to and operation of the digital asset network or similar digital assets systems; 43 • the maintenance and development of the open-source software protocol of the Bitcoin network and other digital asset block-chains; • changes in consumer demographics and public tastes and preferences; • the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; • general economic conditions and the regulatory environment relating to digital assets; and • the impact of regulators focusing on digital assets and digital securities and the costs associated with such regulatory oversight.
See “— Risks Related to Regulatory Framework— Regulatory changes or actions may restrict the use of bitcoin in a manner that adversely affects our business, prospects or operations .” Other factors that could affect further development and acceptance of digital asset networks and other digital assets include, but are not limited to: • worldwide growth in the adoption and use of bitcoin as a medium to exchange; • governmental and quasi-governmental regulation of bitcoin and its use, or restrictions on or regulation of access to and operation of the Bitcoin network or similar cryptocurrency systems; • changes in consumer demographics and public tastes and preferences; 10 • the maintenance and development of the open-source software protocol of the Bitcoin network; • the increased consolidation of contributors to the Bitcoin blockchain through bitcoin mining pools; • the availability and popularity of other cryptocurrencies and other forms or methods of buying and selling goods and services, including new means of using fiat currencies; • the use of the networks supporting cryptocurrencies for developing smart contracts and distributed applications; • general economic conditions and the regulatory environment relating to cryptocurrencies; • environmental or tax restrictions, excise taxes or other additional costs on the use of electricity to mine bitcoin; • an increase in bitcoin transaction costs and any related reduction in the use of and demand for bitcoin; and • negative consumer sentiment and perception of bitcoin specifically or cryptocurrencies generally.
See “— Risks Related to Regulatory Framework— Regulatory changes or actions may restrict the use of bitcoin in a manner that adversely affects our business, prospects or operations .” Other factors that could affect further development and acceptance of digital asset networks and other digital assets include, but are not limited to: • worldwide growth in the adoption and use of bitcoin as a medium to exchange; • governmental and quasi-governmental regulation of bitcoin and its use, or restrictions on or regulation of access to and operation of the Bitcoin network or similar cryptocurrency systems; • changes in consumer demographics and public tastes and preferences; 11 • the maintenance and development of the open-source software protocol of the Bitcoin network; • the increased consolidation of contributors to the Bitcoin blockchain through bitcoin mining pools; • the availability and popularity of other cryptocurrencies and other forms or methods of buying and selling goods and services, including new means of using fiat currencies; • the use of the networks supporting cryptocurrencies for developing smart contracts and distributed applications; • general economic conditions and the regulatory environment relating to cryptocurrencies; • environmental or tax restrictions, excise taxes or other additional costs on the use of electricity to mine bitcoin; • an increase in bitcoin transaction costs and any related reduction in the use of and demand for bitcoin; and • negative consumer sentiment and perception of bitcoin specifically or cryptocurrencies generally.
If a digital asset is determined or asserted to be a security, it is likely to become difficult or impossible for the digital asset to be traded, cleared or custodied in the United States and elsewhere through the same channels used by non-security digital assets, which in addition to materially and adversely affecting the trading value of the digital asset is likely to significantly impact its liquidity and market participants’ ability to convert the digital asset into U.S. dollars and other currencies.
If a digital asset is determined or asserted to be a 36 security, it is likely to become difficult or impossible for the digital asset to be traded, cleared or custodied in the United States and elsewhere through the same channels used by non-security digital assets, which in addition to materially and adversely affecting the trading value of the digital asset is likely to significantly impact its liquidity and market participants’ ability to convert the digital asset into U.S. dollars and other currencies.
We are putting in place policies that we expect will work to keep the investment securities held by us at less than 40% of our total assets, which may include acquiring assets with our cash, liquidating our investment securities or seeking no-action relief or exemptive relief 31 from the SEC if we are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner.
We are putting in place policies that we expect will work to keep the investment securities held by us at less than 40% of our total assets, which may include acquiring assets with our cash, liquidating our investment securities or seeking no-action relief or exemptive relief from the SEC if we are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner.
If a court were to find either exclusive-forum provision in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business. We may be subject to securities litigation, which is expensive and could divert management attention.
If a court were to find either exclusive-forum provision in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business. 59 We may be subject to securities litigation, which is expensive and could divert management attention.
In the course of the normal operation of our bitcoin mining data centers, our miners and other critical equipment and materials related to data center construction and maintenance, such as containers, switch gear, transformers and cables, experience ordinary wear and tear and may also face more significant malfunctions caused by a number of extraneous factors beyond our control.
In the course of the normal operation of our bitcoin mining data centers, our miners and other critical equipment and materials related to data center construction and maintenance, such as containers, switch gear, transformers and cables, experience ordinary wear and tear and 19 may also face more significant malfunctions caused by a number of extraneous factors beyond our control.
Our automated processes with respect to curtailment may adversely affect our operations. 20 Our data centers are subject to curtailment, meaning we automatically turn the miners on and off depending on wind conditions, power prices, bitcoin prices and other factors. Additionally, at our Odessa Facility, we must curtail in certain instances when our power provider instructs us to do so.
Our automated processes with respect to curtailment may adversely affect our operations. Our data centers are subject to curtailment, meaning we automatically turn the miners on and off depending on wind conditions, power prices, bitcoin prices and other factors. Additionally, at the Odessa Facility, we must curtail in certain instances when our power provider instructs us to do so.
The taskforce has been tasked to develop policy recommendations for consideration by ERCOT relating to network planning, markets, operations, and large load interconnection processes for large flexible loads in the ERCOT network. We experienced delays in the energization of our Odessa Facility due to ERCOT’s new process, and may face additional obligations in the future.
The taskforce has been tasked to develop policy recommendations for consideration by ERCOT relating to network planning, markets, operations, and large load interconnection processes for large flexible loads in the ERCOT network. We experienced delays in the energization of the Odessa Facility due to ERCOT’s new process, and may face additional delays and obligations in the future.
This concentrated control may have the effect of delaying, preventing or deterring a change in control of Cipher, could deprive Cipher’s stockholders of an opportunity to receive a premium for their capital stock as part of a sale of Cipher, and might ultimately affect the market price of shares of our common stock.
This concentrated ownership may have the effect of delaying, preventing or deterring a change in control of Cipher, could deprive Cipher’s stockholders of an opportunity to receive a premium for their capital stock as part of a sale of Cipher, and might ultimately affect the market price of shares of our common stock.
Unfavorable press about, or ratings or assessments of, our ESG strategies or practices, regardless of whether or not 25 we comply with applicable legal requirements, may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to and cost of capital.
Unfavorable press about, or ratings or assessments of, our ESG strategies or practices, regardless of whether or not we comply with applicable legal requirements, may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to and cost of capital.
As Rule 3a-2 is available to an issuer no more than once every three years, and assuming no other exclusion were available to us, we would have to keep within the 40% limit for at least three years after we cease being an inadvertent investment company.
As Rule 3a-2 is available to an issuer no more than once every three years, and assuming no other exclusion 34 were available to us, we would have to keep within the 40% limit for at least three years after we cease being an inadvertent investment company.
This, in turn, could materially and adversely affect the price of our stock, our business, prospects, financial condition, and operating results. The open-source structure of the Bitcoin network protocol means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol.
This, in turn, could 41 materially and adversely affect the price of our stock, our business, prospects, financial condition, and operating results. The open-source structure of the Bitcoin network protocol means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol.
These laws, regulations, and standards are subject to varying interpretations, in 55 many cases due to their lack of specificity, and, as a result, their application in practice may evolve or otherwise change over time as new guidance is provided by regulatory and governing bodies.
These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve or otherwise change over time as new guidance is provided by regulatory and governing bodies.
In the event of an uninsured loss, including a loss in excess of insured limits, at any of the mines in our network, such mines may not be adequately repaired in a timely manner or at all and we may lose some or all of the future revenues anticipated to be derived from such mines.
In the event of an uninsured loss, including a loss in excess of insured limits, 21 at any of the mines in our network, such mines may not be adequately repaired in a timely manner or at all and we may lose some or all of the future revenues anticipated to be derived from such mines.
If the award of new units of bitcoin for solving blocks declines and/or the difficulty of solving blocks increases, and transaction fees voluntarily paid by participants are not sufficiently high, miners may not have an adequate incentive to continue mining and may cease their mining operations.
If the award of new units of bitcoin for solving blocks declines and/or the difficulty of solving 48 blocks increases, and transaction fees voluntarily paid by participants are not sufficiently high, miners may not have an adequate incentive to continue mining and may cease their mining operations.
Such 48 events could have a material adverse effect on our business, prospects, financial condition, and operating results, including our ability to continue as a going concern. We may not adequately respond to price fluctuations and rapidly changing technology, which may negatively affect our business.
Such events could have a material adverse effect on our business, prospects, financial condition, and operating results, including our ability to continue as a going concern. We may not adequately respond to price fluctuations and rapidly changing technology, which may negatively affect our business.
We also expect that being a public company and the associated rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
We also expect that being a public company and the associated rules and regulations will make it more expensive for us to obtain director and 56 officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
We are taking the following actions to remediate this material weakness: • Enhance our remediation efforts by continuing to devote resources in 2023 in key financial reporting and information technology areas. • 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. 56 • 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 is complete and accurate.
We are taking the following actions to remediate this material weakness: • Enhance our remediation efforts by continuing to devote resources in 2023 in key financial reporting and information technology 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 is complete and accurate.
The consumption of electricity by mining operators may also have a negative environmental impact, including contribution to climate change, which could set the public opinion against allowing the use of electricity for bitcoin mining activities or create a negative consumer sentiment and perception of bitcoin.
The consumption of electricity by mining operators may also have a negative environmental impact, including 14 contribution to climate change, which could set the public opinion against allowing the use of electricity for bitcoin mining activities or create a negative consumer sentiment and perception of bitcoin.
A perceived lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may 39 reduce confidence in digital asset networks and result in greater volatility in cryptocurrency values.
A perceived lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce confidence in digital asset networks and result in greater volatility in cryptocurrency values.
Alternatively, as an emerging asset class with limited acceptance as a payment 44 system or commodity, global crises and general economic downturn may discourage investment in cryptocurrencies as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.
Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in cryptocurrencies as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.
We 47 believe that from time to time there may be further considerations and adjustments to the Bitcoin network regarding the difficulty for block solutions. More significant reductions in the aggregate hashrate on the Bitcoin network could result in material, though temporary, delays in block solution confirmation time.
We believe that from time to time there may be further considerations and adjustments to the Bitcoin network regarding the difficulty for block solutions. More significant reductions in the aggregate hashrate on the Bitcoin network could result in material, though temporary, delays in block solution confirmation time.
Furthermore, if we fail to execute an effective contingency or succession plan with the loss of any member of management, the loss of such management personnel may significantly disrupt our business. Furthermore, the loss of key members of our management or other employees could inhibit our growth prospects.
Furthermore, if we fail to execute an effective contingency or succession plan with the loss of any member of management, the loss of such management personnel may significantly disrupt our business. 24 Furthermore, the loss of key members of our management or other employees could inhibit our growth prospects.
Additionally, a “hard fork” will decrease the number of users and miners available to each fork of the blockchain as the users and miners on each fork blockchain will not be 40 accessible to the other blockchain and, consequently, there will be fewer block rewards and transaction fees may decline in value.
Additionally, a “hard fork” will decrease the number of users and miners available to each fork of the blockchain as the users and miners on each fork blockchain will not be accessible to the other blockchain and, consequently, there will be fewer block rewards and transaction fees may decline in value.
Depending on the 19 magnitude of such effects on our supply chain, shipments of parts for our miners, or any new miners that we order or other equipment necessary to operate our data centers, may be delayed or costs could increase.
Depending on the magnitude of such effects on our supply chain, shipments of parts for our miners, or any new miners that we order or other equipment necessary to operate our data centers, may be delayed or costs could increase.
The emergence of other financial vehicles and exchange-traded funds have increased scrutiny on cryptocurrencies, and such scrutiny could be applicable to us and impact our ability to successfully establish or maintain a public market for our 28 securities.
The emergence of other financial vehicles and exchange-traded funds have increased scrutiny on cryptocurrencies, and such scrutiny could be applicable to us and impact our ability to successfully establish or maintain a public market for our securities.
Such circumstances could have a material adverse effect on the amount of bitcoin that we may be able to mine as well as the value of bitcoin and, consequently, our business, prospects, financial condition and operating results.
Such circumstances could have a 33 material adverse effect on the amount of bitcoin that we may be able to mine as well as the value of bitcoin and, consequently, our business, prospects, financial condition and operating results.
We cannot predict how that cycling on and off process will affect the efficiency of our miners over time or whether they will age faster than machines that are not turned on and off as frequently.
We cannot predict how that cycling on and off process will affect the efficiency of our miners over time or whether they will age faster than machines that are not 20 turned on and off as frequently.
We may not grow as we expect, if we fail to manage our growth effectively or to develop and expand our managerial, operational and financial resources and systems, our business, prospects, financial condition and operating results could be adversely affected.
We may not grow as we expect, if we fail to manage our growth effectively or to develop 25 and expand our managerial, operational and financial resources and systems, our business, prospects, financial condition and operating results could be adversely affected.
Some of our competitors may enter into supply arrangements for mining equipment, which may have greater capabilities or lower costs compared to ours, which could substantially harm our competitive position and results of operations.
Some of our competitors may enter into supply arrangements for mining equipment, which may have greater 17 capabilities or lower costs compared to ours, which could substantially harm our competitive position and results of operations.
These risks and challenges include, among others, our ability to: • operate our bitcoin data centers in a cost-effective manner; 11 • maintain or establish new commercial and supply partnerships, including our power and hosting arrangements as well as our arrangements for the supply of mining equipment and other data center construction items; • react to challenges from existing and new competitors; • comply with existing and new laws and regulations applicable to our business and in our industry; and • anticipate and respond to macroeconomic changes, and industry benchmarks and changes in the markets in which we operate.
These risks and challenges include, among others, our ability to: • operate our bitcoin data centers in a cost-effective manner; • maintain or establish new commercial and supply partnerships, including our power arrangements as well as our arrangements for the supply of mining equipment and other data center construction items; • react to challenges from existing and new competitors; • comply with existing and new laws and regulations applicable to our business and in our industry; and • anticipate and respond to macroeconomic changes, and industry benchmarks and changes in the markets in which we operate.
If our management, including any new hires that we may make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business could be significantly harmed.
If our management team, including any new hires that we may make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business could be significantly harmed.
The value of the newly created Bitcoin Cash and the other similar digital assets may or may not have value in the long run and may affect the price of bitcoin if interest is shifted away from bitcoin to these newly created digital assets.
The value of the newly created Bitcoin Cash and the other similar digital assets may or may not have value in the long run and may affect the price of bitcoin if interest is shifted away from bitcoin to these newly created digital 42 assets.
The market price of our securities may be volatile and, in the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of 59 this type of litigation in the future.
The market price of our securities may be volatile and, in the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; 35 • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations or interpretations thereof; or • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; 38 • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations or interpretations thereof; or • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
It is possible that, through computer or human error, 38 or through theft or criminal action, our cryptocurrency rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts.
It is possible that, through computer or human error, or through theft or criminal action, our cryptocurrency rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts.
Some market observers have asserted that the bitcoin market is experiencing a “bubble” and have predicted that, in time, the value of bitcoin will fall to a fraction of its current value, or even to zero.
Some market observers have asserted that the bitcoin market is experiencing a “bubble” and have predicted that, in time, the value of bitcoin will fall to a fraction of its current value, or even to 47 zero.
For further details on how our operating results may be directly impacted by changes in the value of bitcoin, see “ —Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to bitcoin holdings. ” Furthermore, in our operations we intend to use ASIC chips and mining rigs, which are principally utilized for mining bitcoin.
For further details on how our operating 46 results may be directly impacted by changes in the value of bitcoin, see “ —Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to bitcoin holdings. ” Furthermore, in our operations we use ASIC chips and mining rigs, which are principally utilized for mining bitcoin.
In such alternate blocks, 43 the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new digital assets or transactions using such control.
In such alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new digital assets or transactions using such control.
Specifically, imposition of a tax or other regulatory fee in a jurisdiction where we operate or on electricity that we purchase could result in substantially higher energy costs, and due to the significant amount of electrical power required to operate bitcoin mining machines, could in turn put our facilities at a competitive disadvantage.
Specifically, imposition of a tax or other regulatory fee in jurisdictions where we operate or on electricity that we purchase could result in substantially higher energy costs, and due to the significant amount of electrical power required to operate bitcoin mining machines, could in turn put our facilities at a competitive disadvantage.
Note that although bitcoin is not currently treated as a security by the SEC, the exchanges on which bitcoin is traded typically provide trading services with respect to numerous other cryptocurrencies and digital assets, some of which may be deemed to be securities by the SEC, and some of them are currently under investigation by other regulators as well.
Although bitcoin is not currently treated as a security by the SEC, the exchanges on which bitcoin is traded typically provide trading services with respect to numerous other cryptocurrencies and digital assets, some of which may be deemed to be securities by the SEC, and some of them are currently under investigation by other regulators as well.
The world’s largest semiconductor chip manufacturer is located in Taiwan and a large part of equipment and materials for our cryptocurrency miners, including ASIC chips, is manufactured in Taiwan. A setback to the current state of relative peace and stability in the region could compromise existing semiconductor chip production and have downstream implications for our company.
The world’s largest semiconductor chip manufacturer is located in Taiwan and a large part of equipment and materials for our bitcoin miners, including ASIC chips, is manufactured in Taiwan. A setback to the current state of relative peace and stability in the region could compromise existing semiconductor chip production and have downstream implications for our company.
To extent the power prices increase significantly as result of severe weather conditions, natural disasters or any other causes, resulting in contract prices for power being significantly lower than current market prices, the counterparties under our power and hosting arrangements may refuse to supply power to us during that period of fluctuating prices.
To extent the power prices increase significantly as result of severe weather conditions, natural disasters or any other causes, resulting in contract prices for power being significantly lower than current market prices, the counterparties under our power arrangements may refuse to supply power to us during that period of fluctuating prices.
If one or more of our private keys are lost, destroyed, or otherwise compromised, we may be unable to access our bitcoin held in the related digital wallet which will 36 essentially be lost. If the private key is acquired by a third party, then this third party may be able to gain access to our bitcoin.
If one or more of our private keys are lost, destroyed, or otherwise compromised, we may be unable to access our bitcoin held in the related digital wallet which will essentially be lost. If the private key is acquired by a third party, then this third party may be able to gain access to 39 our bitcoin.
Any unfavorable publicity about us, including our technology, our personnel, our controlling shareholder or bitcoin and crypto assets generally could have an adverse effect on the engagement of our partners and suppliers and may result in our failure to maintain or expand our business and successfully execute our business model.
Any unfavorable publicity about us, including our technology, our personnel, our significant shareholder or bitcoin and crypto assets generally could have an adverse effect on the engagement of our partners and suppliers and may result in our failure to maintain or expand our business and successfully execute our business model.
Risks Related to Cryptocurrency The loss or destruction of our private keys to our digital wallets, causing a loss of some or all of our digital assets.
Risks Related to Cryptocurrency The loss or destruction of our private keys to our digital wallets, causing a loss of some or all of our bitcoin assets.
Recent events in the industry, such as filing for and seeking protection of Chapter 11 proceedings by major market participants, may have significant impact on further development and acceptance of digital asset networks and digital assets as they exposed how unpredictable and turbulent the digital assets industry can be.
Industry events, such as filing for and seeking protection of Chapter 11 proceedings by major market participants, may have significant impact on further development and acceptance of digital asset networks and digital assets as they exposed how unpredictable and turbulent the digital assets industry can be.
While the majority of our power and hosting arrangements contain fixed power prices, some portion of our power arrangements have merchant power prices, or power prices reflecting the market movements. In an event of a major power outage, such as the abovementioned power outage in Texas, the merchant power prices could be too high to make bitcoin mining profitable.
While the majority of our power arrangements contain fixed power prices, some portion of our power arrangements have merchant power prices, or power prices reflecting the market movements. In an event of a major power outage, such as the abovementioned power outage in Texas, the merchant power prices could be too high to make bitcoin mining profitable.
For example, our counterparties under our power and hosting arrangements may be unable or unwilling to deliver the required amount of power at the required time for a variety of technical or economic reasons. For example, in the past, we have experienced certain power availability postponements due to infrastructure supply delays.
For example, our counterparties under our power arrangements may be unable or unwilling to deliver the required amount of power at the required time for a variety of technical or economic reasons. For example, in the past, we have experienced certain power availability postponements due to infrastructure supply delays.
For example, our bitcoin data centers could be rendered inoperable, temporarily or permanently, as a result of, among others, a fire or other natural disasters. The security and other measures we anticipate to take to protect against these risks may not be sufficient.
For example, our bitcoin data centers could be rendered inoperable, temporarily or permanently, as a result of, among others, a fire or other natural disasters. The security and other measures we anticipate taking to protect against these risks may not be sufficient.
Generally, we would expect hashrate increases to be correlated with increases in bitcoin price, but that has not always been the case, including during recent periods of time during 2022. To the extent that hashrate increases but the price of bitcoin does not, the results of our bitcoin mining operations will suffer.
Generally, we would expect hashrate increases to be correlated with increases in bitcoin price, but that has not always been the case, including during recent periods of time during 2022 and 2023. To the extent that hashrate increases but the price of bitcoin does not, the results of our bitcoin mining operations will suffer.
As such, we may face increased competition in Texas for suitable bitcoin mining data center sites and skilled workers.
As such, we face increased competition in Texas for suitable bitcoin mining data center sites and skilled workers.
Commodities Exchange Act of 32 1936, as amended (the “CEA”), and the regulations promulgated by the CFTC thereunder (“CFTC Rules”). As a result, the CFTC has general enforcement authority to police against manipulation and fraud in the spot markets for bitcoin and other digital assets.
Commodities Exchange Act of 1936, as amended (the “CEA”), and the regulations promulgated by the CFTC thereunder (“CFTC Rules”). As a result, the CFTC has general enforcement authority to police against manipulation and fraud in the spot markets for 35 bitcoin and other digital assets.
The growth of the digital asset industry, in general, and the digital asset networks, in particular, are subject to a high 41 degree of uncertainty.
The growth of the digital asset industry, in general, and the digital asset networks, in particular, are subject to a high degree of uncertainty.
Additionally, in March 2022, President Biden signed an Executive Order calling on, among other things, various agencies and departments, including the EPA, to report on the connections between distributed ledger technology and energy transitions, and 13 the impact of such technology on climate change.
In March 2022, President Biden signed an Executive Order calling on, among other things, various agencies and departments, including the EPA, to report on the connections between distributed ledger technology and energy transitions, and the impact of such technology on climate change.
We do not hold our bitcoin with a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, our bitcoin is also not be subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.
We do not hold our bitcoin with a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, our bitcoin is not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.
We are exposed to risk of nonperformance by counterparties, including our counterparties under our power and hosting arrangements. We are exposed to risk of nonperformance by counterparties, whether contractual or otherwise. Risk of nonperformance includes inability or refusal of a counterparty to perform because of a counterparty’s financial condition and liquidity or for any other reason.
We are exposed to the risk of nonperformance by counterparties, including our counterparties under our power arrangements. We are exposed to the risk of nonperformance by counterparties, whether contractual or otherwise. Risk of nonperformance includes inability or refusal of a counterparty to perform because of a counterparty’s financial condition and liquidity or for any other reason.
While as part of our buildout we have already entered into certain arrangements for supply of miners and other equipment and services (for further details, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commitments ”), we cannot guarantee that we or our counterparties, under these or any other future arrangements, will be able to timely place or fulfill our purchase orders to ensure sufficient supply of the required equipment at prices acceptable to us or at all.
While we have already entered into certain arrangements for supply of miners and other equipment and services (for further details, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commitments ”), we cannot guarantee that we or our counterparties, under our supply arrangements or any other future arrangements, will be able to timely place or fulfill our purchase orders to ensure sufficient supply of the required equipment at prices acceptable to us or at all.
The recent developments in the digital assets industry, including several high-profile bankruptcies and escalation of regulatory oversight, could potentially lead to increase in the M&A activity in the industry among our competition and increasing consolidation.
The developments in the digital assets industry, including several high-profile bankruptcies and escalation of regulatory oversight, could potentially lead to increase in the M&A activity in the industry among our competition 29 and increasing consolidation.
See “—We are vulnerable to severe weather conditions and natural disasters, including severe heat, winter weather events, earthquakes, fires, floods, hurricanes, as well as power outages and other industrial incidents, which could severely disrupt the normal operation of our business and adversely affect our results of operations.” Texas, through its regulatory and economic incentives, has encouraged bitcoin mining companies, like ours, to locate their operations in the state.
See “—We are vulnerable to severe weather conditions and natural disasters, 15 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.” Texas, through its regulatory and economic incentives, has encouraged bitcoin mining companies, like ours, to locate their operations in the state.
Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm its business. It em 1B. Unresolved Staff Comments. None. It em 2. Properties.
Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm its business. It em 1B. Unresolved Staff Comments. None.
Specifically, FTX, being one of the largest and considered among safest digital asset trading platforms and exchanges, recently had to file for and seek protection of Chapter 11 court proceedings after it was not able to fulfill a larger number of customer withdrawal requests made at the same time.
FTX, one of the largest and considered among safest digital asset trading platforms and exchanges, had to file for and seek protection of Chapter 11 court proceedings after it was not able to fulfill a larger number of customer withdrawal requests made at the same time.
The SEC has recently proposed regulations which would require investment advisers (including fund managers of many funds) to custody all cryptocurrency they hold on behalf of clients with “qualified custodians.” Because the majority of cryptocurrency exchanges are not “qualified custodians,” and because these exchanges require users to prefund their trades (in effect requiring users to place cryptocurrency in custody with them), it may be practically impossible for investment advisers to hold cryptocurrency on behalf of their institutional clients or managed funds.
In February 2023, the SEC proposed regulations which would require investment advisers (including fund managers of many funds) to custody all cryptocurrency they hold on behalf of clients with “qualified custodians.” Because the majority of cryptocurrency exchanges are not “qualified custodians,” and because these exchanges require users to prefund their trades (in effect requiring users to place cryptocurrency in custody with them), it may be practically impossible for investment advisers to hold cryptocurrency on behalf of their institutional clients or managed funds.
A total of approximately 7.0% of the fully diluted shares of our common stock was initially reserved for future issuance under the Incentive Award Plan, which amount was increased by 7,478,382 shares on January 1, 2022 and again by another 7,426,559 shares on January 1, 2023, and is subject to increase annually or from time to time in the discretion of our compensation committee.
A total of approximately 7.0% of the fully diluted shares of our common stock was initially reserved for future issuance under the Incentive Award Plan, which amount was increased by 7,478,382 shares on January 1, 2022, by another 7,426,559 shares on January 1, 2023 and again by another 8,728,736 shares on January 1, 2024, and is subject to increase annually or from time to time in the discretion of our compensation committee.
Bitfury Top HoldCo is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Bitfury Top HoldCo and its affiliates may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.
Bitfury Group is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Bitfury Group and its affiliates may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.
“Controls and Procedures” below, as we prepared the consolidated financial statements for the year ended December 31, 2022, management has concluded that a material weakness in our internal control over financial reporting existed as of December 31, 2022. This material weakness is more fully described in Item 9A.
As described under Item 9A. “Controls and Procedures” below, as we prepared the consolidated financial statements for the year ended December 31, 2023, management has concluded that a material weakness in our internal control over financial reporting existed as of December 31, 2023. This material weakness is more fully described in Item 9A.
Pursuant to the Incentive Award Plan, we may issue an aggregate of approximately 7.0% of the fully diluted shares of our common stock, which amount was increased by 7,478,382 shares on January 1, 2022 and again by another 7,426,559 shares on January 1, 2023, and will be subject to increase annually or from time to time in the discretion of our compensation committee.
Pursuant to the Incentive Award Plan, we may issue an aggregate of approximately 7.0% of the fully diluted shares of our common stock, which amount was increased by 7,478,382 shares on January 1, 2022, by another 7,426,559 shares on January 1, 2023, and again by another 8,728,736 shares on January 1, 2024, and will be subject to increase annually or from time to time in the discretion of our compensation committee.
As of the date of this Annual Report, bitcoin was the largest digital asset by market capitalization and had the largest user base and largest combined mining power. Despite this first to market advantage, there are more than 9,000 alternative digital assets tracked by CoinMarketCap.com.
As of the date of this Annual Report, bitcoin was the largest digital asset by market capitalization and had the largest user base and largest combined mining power. Despite this first to market advantage, there are approximately 9,000 alternative digital assets tracked by CoinMarketCap.com.
Risks Related to our Common Stock and Warrants We are an emerging growth company and are able take advantage of reduced disclosure requirements applicable to “emerging growth companies,” which could make our common stock less attractive to investors. We are an “emerging growth company” as defined in the JOBS Act.
We are an emerging growth company and are able take advantage of reduced disclosure requirements applicable to “emerging growth companies,” which could make our common stock less attractive to investors. We are an “emerging growth company” as defined in the JOBS Act.
For example, in early January 2022, amid political protests in Kazakhstan, the local government ordered a temporary shut down of internet service, which took an estimated 15% of the world’s bitcoin miners offline. This, in turn, may have contributed to a decline in the price of the bitcoin from USD46,055 on January 3, 2022 to USD41,908 on January 7, 2022.
For example, in early January 2022, amid political protests in Kazakhstan, the local government ordered a temporary shut down of internet service, which took an estimated 15% of the world’s bitcoin miners offline. This, in turn, may have contributed to a decline in the price of the bitcoin from $46,055 on January 3, 2022 to $41,908 on January 7, 2022.
Furthermore, recent events related to one of the largest digital asset trading platforms and exchanges FTX exposed risks of digital asset trading platforms and exchanges being undercapitalized and/or overexposed in liabilities to the extent that they cannot survive a sudden “bank run” or significant amount of withdrawal requests submitted at the same time by multiple customers.
Furthermore, the collapse of FTX, one of the largest digital asset trading platforms and exchanges, exposed risks of digital asset trading platforms and exchanges being undercapitalized and/or overexposed in liabilities to the extent that they cannot survive a sudden “bank run” or significant amount of withdrawal requests submitted at the same time by multiple customers.
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