Cipher Mining Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. The filing is by Cipher Mining Inc. (Nasdaq: CIFR), notwithstanding the request metadata naming Cipher Digital Inc. The company is an early-stage U.S. Bitcoin-mining developer; mining began at its Alborz, Texas facility in February 2022. The filing reports no company revenue to date.
Financial performance and position
| Metric | Q2 2022 | Comparable period | Six months 2022 |
|---|---|---|---|
| Revenue | $0 | $0 in Q2 2021 | $0 |
| General and administrative expense | $16.7 million | $0.5 million in Q2 2021 | $34.1 million |
| Operating loss | $29.3 million | $0.5 million in Q2 2021 | $46.9 million |
| Net loss | $29.2 million | $0.5 million in Q2 2021 | $46.7 million |
| Basic and diluted loss per share | $0.12 | Reported as nil in Q2 2021 | $0.19 |
| Cash used in operating activities | Quarterly figure not provided in the summarized cash flow statement | — | $9.9 million |
- Q2 costs included $10.1 million of share-based compensation, $12.1 million of equity-method investment losses and $0.5 million of cryptocurrency impairment. The investment loss included an $11.6 million charge when miners contributed to Alborz were valued below Cipher’s cost.
- Six-month investing cash outflow was $159.8 million, mainly $156.8 million of equipment deposits and $13.1 million of property and equipment purchases, partly offset by $10.1 million of Alborz distributions. Financing cash outflow was $3.1 million, for employee tax withholding on vested stock awards.
- At June 30, cash and cash equivalents were $37.0 million, down from $209.8 million at December 31, 2021. Working capital was $24.3 million; total assets were $342.0 million, total liabilities $28.6 million and stockholders’ equity $313.3 million. Accumulated deficit was $118.9 million.
- Current liabilities were $23.6 million, including $12.0 million payable to a related party. The balance sheet reported $6.0 million of operating lease liabilities and a $26,000 warrant liability. No corporate borrowings were reported at quarter-end; Alborz’s separate secured financing is described below.
- No operating margin is meaningful because revenue was zero. Management’s non-GAAP six-month net loss was $27.0 million, excluding depreciation, warrant fair-value changes and share-based compensation; these exclusions include recurring costs, as the company cautions.
Material developments and outlook
- G&A rose sharply from the prior comparable periods, reflecting the company’s buildout and public-company costs, including $19.6 million of share-based compensation for the first half. Prior-year results reflect a pre-operational company and are not fully comparable; the six-month 2021 comparison covers five months.
- Equipment deposits reached $196.7 million. Open purchase commitments at June 30 totaled $336.0 million maximum, including $222.4 million for 60,000 SuperAcme miners and $69.9 million for remaining Bitmain orders. The company remains responsible for delivery logistics and related costs.
- Management said available resources, potential equipment-order delays, projected joint-venture distributions and expected mining proceeds should cover operating and capital needs for at least 12 months from issuance of the statements. It also said the active buildout will require additional capital; financing may be unavailable or dilutive, and failure to obtain it could delay or alter the plan.
- In August 2022, Alborz was completed with installed capacity of about 1.3 EH/s; Cipher expected to own about 0.64 EH/s. Bear and Chief facilities were nearing completion and together were expected to add about 0.65 EH/s, of which Cipher expected to own about 0.32 EH/s. The company targeted about 265 MW and 7.9 EH/s total deployed capacity by early 2023, with approximately 6.9 EH/s attributable to Cipher. These are forward-looking targets, not reported results.
- After quarter-end, Cipher reported approximately $101 million paid toward the estimated $200 million SuperAcme agreement and was discussing changes to payment and delivery schedules. It warned that failure to agree could risk forfeiture of certain deposits. It also paid $11.1 million to SuperAcme after quarter-end.
- Alborz had a secured BlockFi facility with up to $46.9 million available; it completed three disbursements, with loan principal of $26.8 million. Cipher consented to the mining equipment and mined digital currency being used as collateral. This is a joint-venture obligation, not reported as Cipher’s own balance-sheet debt.
- The company expects access across its planned sites to average electricity costs of approximately 2.7 cents per kWh under its power and hosting arrangements. Actual costs and performance remain subject to execution, power markets and facility ramp-up.
- Bitcoin price and volatility, mining economics, construction and equipment delivery, power costs, financing availability and broader economic conditions are key risks. A COVID-related construction pause at Alborz in January lasted less than a week. The filing reported no material pending legal proceedings and no material change to previously disclosed risk factors beyond updates in its Q1 2022 filing.
- Bitfury beneficially owned about 81.6% of common stock and controlled the company. Disclosure controls were assessed as effective at the reasonable-assurance level; management reported no material quarterly change in internal control over financial reporting.
Most important facts for investors to verify
- Current liquidity and funding needs against the large equipment commitments, remaining deposits, and the timing of expected mining cash flows.
- Outcome of SuperAcme schedule and payment negotiations, delivery progress, and any potential deposit forfeiture.
- Actual operational capacity and Cipher’s attributable share at Alborz, Bear and Chief versus the early-2023 targets.
- Bitcoin prices, mining difficulty, power costs and facility utilization underlying projected mining economics and the stated electricity-cost estimate.
- Related-party balances and arrangements with Bitfury, including the company’s controlled status and associated governance implications.
- Impact of equity-based compensation, recurring cash operating costs and the $11.6 million miner-contribution loss on future reported results.