SEC filing summary: Good Works Acquisition Corp. (10-Q)
Entity clarification: Despite the request metadata naming Cipher Digital Inc., this filing is for Good Works Acquisition Corp., a blank-check SPAC. Its proposed target was Cipher Mining Technologies Inc.; the filing does not report Cipher Mining’s operating results. Reporting period ended June 30, 2021; filed August 10, 2021. Financial statements are unaudited.
Business context and transaction
Good Works had not commenced operations and reported no operating revenue. Its activity was formation, the October 2020 IPO and pursuing a business combination. On March 5, 2021, it agreed to merge with Cipher Mining Technologies, with the combined company expected to be renamed Cipher Mining Inc. The filing described closing as expected in Q2 2021, subject to approvals and other conditions; it does not establish that the transaction had closed by the filing date.
Merger consideration was 200 million Good Works shares valued at $10 per share. A proposed $375 million PIPE and a Bitfury subscription for 5 million shares were also described. The merger required at least $400 million in aggregate trust-account and PIPE cash after redemptions and specified expenses, among other conditions. On July 8, the Bitfury arrangement was amended: its consideration was to be a $50 million cash payment at closing, payable in cash and/or forgiveness of Cipher debt, rather than a services discount.
Financial results and position
| Metric | Reported amount |
|---|---|
| Revenue | None; the company reported no operating revenue. |
| Net loss, three months ended June 30, 2021 | $1,043,472; non-redeemable loss per share was $0.23. |
| Net loss, six months ended June 30, 2021 | $2,058,982 in the financial statements; MD&A gives $2,058,979, a $3 discrepancy. Non-redeemable loss per share was $0.44. |
| Six-month operating and business-combination expenses | $462,987 and $1,569,432, respectively. |
| Six-month interest income | $49,769. Warrant-liability remeasurement was a $76,332 expense in the financial statements; MD&A reports $76,329. |
| Cash and trust assets at June 30 | $127,722 outside the trust; $170,032,591 in the trust account. |
| Cash flow, six months ended June 30 | $1,148,642 net cash used in operating activities; cash declined from $1,276,364 to $127,722. |
| Liquidity and liabilities at June 30 | Working-capital deficit of $543,552; current liabilities of $918,867; warrant liability of $199,402. No long-term debt was reported. |
| Equity | Stockholders’ deficit of $710,363; 17 million shares were classified as redeemable temporary equity. |
The $170 million trust balance was principally reserved for a business combination and was not ordinary operating cash. No material market or interest-rate risk was reported given the short-term nature of trust investments.
Changes, outlook and key risks
- Compared with the six months ended June 30, 2020, the 2021 period had substantially higher expenses and losses; the prior-period net loss was $2,000 and there was no 2020 operating revenue. The company was formed in June 2020, so the comparison covers different stages of the SPAC’s life.
- At June 30, cash was limited and the company had a working-capital deficit. Management said these conditions raised substantial doubt about its ability to continue as a going concern within one year after issuance of the financial statements. Success depended on completing a business combination or obtaining capital; neither was assured.
- The SPAC had 21 months from the IPO closing to complete a business combination. If unsuccessful, it was required to cease operations and redeem public shares, subject to applicable law and creditor claims; warrants could expire worthless.
- Management cited uncertainty from COVID-19 but said its specific effects were not determinable. No additional guidance on future operating revenue, profit or margins was provided.
- The merger remained contingent on approvals, regulatory waiting periods, an effective registration statement, minimum cash proceeds, Nasdaq listing approval and other customary conditions. Redemptions, expenses and financing availability could affect closing and cash proceeds.
- The filing disclosed a material weakness in disclosure controls related to warrant accounting and prior financial-statement restatements. Controls were deemed ineffective at June 30; management described remediation efforts but gave no assurance they would succeed.
- Potential transaction-related costs included an I-Bankers fee equal to 4.5% of IPO gross proceeds and $321,545 of additional legal fees that would have been due if the transaction had closed by June 30. Administrative support was $10,000 per month; estimated annual franchise taxes were up to $200,000.
- A July 15 subsequent event was a $100,000 unsecured, non-interest-bearing loan from I-Bankers to fund operating expenses, due by December 31, 2021 or upon transaction closing, whichever came first.
Important facts for investors to verify
- Whether and when the Cipher Mining transaction closed, and its final terms, approvals, redemptions and net cash proceeds.
- The conflicting net-loss and warrant-remeasurement amounts in the statements and MD&A, and the effects of prior warrant-accounting restatements.
- Liquidity available outside the trust, subsequent financing, and whether the going-concern uncertainty was resolved.
- The final treatment and payment of the $50 million Bitfury commitment, Cipher-related indebtedness and transaction expenses.
- Remediation of the material weakness and any subsequent changes in disclosure controls or financial reporting.