Filing summary
Registrant: The filing is by Cipher Mining Inc. (Nasdaq: CIFR; warrants: CIFRW), not “Cipher Digital Inc.” The 10-Q covers the quarter ended March 31, 2022 and was filed May 10, 2022. Its comparison period is the two months ended March 31, 2021, so the periods are not directly comparable.
Business context and results
Cipher is an early-stage U.S. Bitcoin mining company focused on building mining sites. It began deploying capacity in Q1 2022, with mining operations starting at the Alborz, Texas facility in February. It reported no revenue in either period.
| Metric | Q1 2022 | Comparison period |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $17.4 million | $0.1 million |
| Operating loss | $17.4 million | $0.1 million |
| Net loss | $17.5 million | $0.1 million |
| Basic and diluted loss per share | $0.07 | Less than $0.01, reported as “—” |
| Net cash used in operating activities | $3.3 million | $45,000 |
| Net cash used in investing activities | $104.0 million | $0 |
Q1 G&A included $9.5 million of share-based compensation. Management’s supplemental non-GAAP net loss was $7.9 million; this measure excludes specified non-cash items and is not a substitute for GAAP results. Operating margins are not meaningful because the company had no revenue.
Financial position and liquidity
- At March 31, cash and cash equivalents were $99.5 million, down from $209.8 million at year-end 2021. This included $71.0 million in money-market securities.
- Working capital was approximately $101.1 million; total assets were $357.9 million and stockholders’ equity was $342.5 million. Accumulated deficit was $89.7 million.
- Total liabilities were $15.4 million, including $5.8 million of operating lease liabilities and an $89,000 warrant liability. The balance sheet reported no borrowings at quarter-end.
- Equipment deposits were $207.2 million. The company reported aggregate maximum equipment purchase commitments of approximately $434.8 million; some contemplated Bitfury miner purchases were nonbinding absent order confirmations.
- Investing cash outflow primarily reflected $96.9 million of equipment deposits and $7.1 million of property and equipment purchases. Financing outflow of $3.1 million was for shares withheld to cover employee tax obligations.
Management said existing resources, together with the ability to delay or change the buildout, should cover operating and capital requirements for at least 12 months from issuance of the statements. It also expects additional capital will be needed for its planned buildout and cautioned that financing may not be available on acceptable terms.
Material developments, outlook, and risks
- The company contributed 970 miners and other equipment to Alborz LLC, in which it holds a 49% interest, accounted for under the equity method. It recorded $153,000 of equity-method loss and received approximately $195,000 of Bitcoin distributions in Q1.
- Management expects power and hosting arrangements covering at least four sites to provide an average electricity cost of approximately 2.7 cents per kWh for at least five years. This is an expectation, not a reported realized cost.
- Only one monthly Bitmain miner shipment had been received by March 31, versus an anticipated nine batches. Deliveries and installation schedules, construction, power availability, supply-chain constraints, and cost overruns could delay or affect deployment.
- After quarter-end, SuperAcme’s miner supply agreement was amended; final pricing includes fixed and floating terms, and payments are due before delivery. The company also disclosed a secured facility of up to $46.9 million to Alborz LLC from BlockFi, maturing May 2, 2024; this is a post-period facility to the joint venture, not a quarter-end Cipher borrowing.
- On April 8, Bitfury received permission, subject to conditions, to pledge certain locked-up shares; the related agreement also provided for cancellation of 2,890,173 Bitfury-held shares in exchange for the return of a $10 million miner deposit for which no order confirmation had been made. Bitfury and an affiliate held approximately 82.1% of the common stock as of May 6, creating concentrated-control and related-party risks.
- Other key exposures include Bitcoin price and network competition, energy prices and availability, regulatory changes, dependence on timely site buildout and equipment delivery, and possible future financing needs and dilution. A COVID-related construction pause at Alborz lasted less than a week. The company reported no material pending legal proceedings and said disclosure controls were effective.
Important facts for investors to verify
- Whether miner deliveries, site construction, and power interconnections are meeting updated schedules, and the eventual cost and capacity of each site.
- How much of the reported equipment commitments remains binding and payable, including updated SuperAcme pricing and delivery terms.
- Liquidity needs and financing plans as buildout spending continues; assess the BlockFi facility’s collateral and implications for Alborz and Cipher.
- Whether expected power costs and mining economics remain competitive as Bitcoin prices, network difficulty, and energy markets change.
- Governance and potential share-market effects of Bitfury’s control, related-party agreements, permitted share pledges, and the post-quarter share cancellation.