Cipher Mining Inc

Previous wording

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.

Current wording

Our current intention is to continue expanding our business by developing and operating industrial-scale data centers for bitcoin mining and HPC, expanding capacity at our current data centers, developing our treasury management platform and entering into other strategic arrangements, such as joint ventures, data center hosting and leasing agreements, or software licensing arrangements. We aim to be a market leader in innovation, including in bitcoin mining growth, data center construction and as a hosting partner to HPC companies.

Previous wording

Our revenues are directly impacted by changes in the market value of bitcoin. For example, the average bitcoin price for 2021 and 2022 was $47,385 and $16,526, respectively. Bitcoin price generally increased throughout 2023. As at December 31, 2023, the price of bitcoin was $42,288. Furthermore, block rewards are fixed and the Bitcoin network is designed to periodically reduce them through halving. Currently the block rewards are fixed at 6.25 bitcoin per block, and it is estimated that it will halve again to 3.125 bitcoin per block in April 2024. The halving events happen without any regard to ongoing demand, meaning that if the ongoing demand remains the same after a halving event, whatever demand was being met by new supply will be restricted, which may necessitate an adjustment of the price of bitcoin, though there is no definitive evidence of a causal link between bitcoin’s programmatic decrease in supply and broadening demand. Once the halving occurs, we expect that it could have a negative impact on our revenues as the reward for each bitcoin mined will be reduced.

Current wording

Our revenues are directly impacted by changes in the market value of bitcoin. For example, the market price of one bitcoin in our principal market ranged from approximately $38,501 to $108,389 during the fiscal year ended December 31, 2024 and $16,490 to $45,000 during the fiscal year ended December 31, 2023. Furthermore, block rewards are fixed and the Bitcoin network is designed to periodically reduce them through halving. Currently the block rewards are fixed at 3.125 bitcoin per block after the latest halving in April 2024. The halving events happen without any regard to ongoing demand, meaning that if the ongoing demand remains the same after a halving event, whatever demand was being met by new supply will be restricted, which may necessitate an adjustment of the price of bitcoin, though there is no definitive evidence of a causal link between bitcoin’s programmatic decrease in supply and broadening demand.

Previous wording

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. Miners are not forced to confirm any specific transaction, but they are economically incentivized to confirm valid transactions as a means of collecting fees. Miners have historically accepted relatively low transaction confirmation fees, because miners have a very low marginal cost of validating unconfirmed transactions; however, unlike the fixed block rewards, transaction fees may vary, depending on the consensus set within the network.

Current wording

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. Miners are not forced to confirm any specific transaction, but they are economically incentivized to confirm valid transactions as a means of collecting fees. Miners have historically accepted relatively low transaction confirmation fees, but transaction fees vary and it is difficult to predict what transaction fees will be in the future.

Previous wording

Because the number of bitcoin mined is directly related to the size and efficiency of a bitcoin mining company’s fleet of miners, we believe miners need to deploy increasingly sophisticated miners in ever greater quantities to remain competitive. To remain competitive, we will need to increase our hashing power to maintain market share as the overall hashrate and difficulty of the Bitcoin network increases.

Current wording

Because the number of bitcoin mined is directly related to the size and efficiency of a bitcoin mining company’s fleet of miners, we believe we need to deploy increasingly sophisticated miners in ever greater quantities to remain competitive as the overall hashrate and difficulty of the Bitcoin network increases.

Previous wording

We believe that our commitment to cost and mining efficiency remains our competitive advantage. The majority of our capital expenditures have been directed towards the latest models of mining machines and technology featuring industry-leading capacity, speed and efficiency. We believe that we operate one of the most efficient mining rig fleets in the global market. In some periods, the industry has experienced, and we expect may experience again in the future, a scarcity of advanced mining rigs. We believe that to maintain our competitive advantage over the long term, we must develop and maintain strong relationships across the mining rig supply chain, and strategically invest in state-of-the art miners at attractive prices, while effectively managing our fleet as it ages along the obsolescence curve.

Current wording

We believe that our commitment to cost and mining efficiency remains our competitive advantage. The majority of our capital expenditures have been directed towards the latest models of mining machines and technology featuring industry-leading capacity, speed and efficiency. We believe that we operate one of the most efficient mining rig fleets in the global market. We believe that to maintain our competitive advantage over the long term, we must develop and maintain strong relationships across the mining rig supply chain, and strategically invest in state-of-the art miners at attractive prices, while effectively managing our fleet as it ages along the obsolescence curve.

Previous wording

Mining bitcoin is a highly power-intensive process, with large amounts of electrical power required to operate the mining rigs. We believe that cost efficiency, and particularly, maintaining cost of power efficiency in bitcoin mining over the long term, will be necessary for success. We currently have a portfolio of competitively priced electrical power. However, there is no guarantee that we will be able to negotiate additional power agreements on similar terms, or at all. See “Risk Factors—Risks Related to Our Business, Industry and Operations—We may be affected by price fluctuations in the wholesale and retail power markets” and “—Risks Related to Bitcoin Mining—We may not adequately respond to price fluctuations and rapidly changing technology, which may negatively affect our business.” Our four data centers are all located in west Texas and the Texas Panhandle, which are areas that we believe have site development potential with access to competitively priced electrical power, whether through grid connection, through solar and wind generation facilities, or otherwise. Where we can, we anticipate that we will, either directly, or through our power providers, participate in demand response programs offered by ERCOT. We believe these strategic investments will generate long-term returns in the form of controlled access to low cost, responsible sources of power and differentiate us from our competitors. However, after the initial terms of our current power purchase arrangements end, we may not be able to secure similarly competitively priced access to the electrical power needed for out data centers to mine bitcoin profitably.

Current wording

Mining bitcoin is a highly power-intensive process, with large amounts of electrical power required to operate the mining rigs. We believe that cost efficiency, and particularly, maintaining cost of power efficiency in bitcoin mining over the long term, are necessary for success. We currently have a portfolio of competitively priced electrical power. However, there is no guarantee that we will be able to negotiate additional power agreements on similar terms, or at all. See “Risk Factors—Risks Related to Our Business, Industry and Operations—We may be affected by price fluctuations in the wholesale and retail power markets.” Our four currently operational data centers are all located in west Texas and the Texas Panhandle, which are areas that we believe have site development potential with access to competitively priced electrical power, whether through grid connection, through solar and wind generation facilities, or otherwise. We believe these strategic investments will generate long-term returns in the form of controlled access to low cost, responsible sources of power and differentiate us from our competitors. However, after the initial terms of our current power purchase arrangements end, we may not be able to secure similarly competitively priced access to the electrical power needed for our data centers to mine bitcoin profitably.

Previous wording

Our business environment is constantly evolving, and bitcoin miners can range from individual enthusiasts to professional mining operations with dedicated mining facilities. We compete with other companies that focus all or a portion of their activities on mining activities at scale. In the past few years there have been many new entrants and existing competitors in the space and a general increase in the competition for industrial scale bitcoin mining companies.

Current wording

Our business environment is constantly evolving. In the past few years there have been many new entrants and existing competitors in the bitcoin mining space and a general increase in the competition for industrial-scale bitcoin mining companies with whom we compete over aspects of our industry, such as hashrate and power capacity. Additionally, there have been new entrants in the data center space, such as HPC companies, with whom we may compete over power availability. As thecompetition for power capacity and data center locations continues to increase, we have been able to capitalize on our commitment to innovation and flexibility by expanding our business to include data center construction for industries beyond bitcoin mining, such as HPC hosting.

Previous wording

The operations of our facilities, including the development of the Black Pearl Facility and our other expansion plans, require specialized equipment, large quantities of construction materials and other component parts that can be difficult to source. We may experience disruptions to our business operations resulting from delays in construction and obtaining necessary equipment in a timely fashion due to global supply chain delays caused by geopolitical unrest, global pandemics like COVID-19 or other factors. Global supply logistics have caused delays across all channels of distribution, and we have also experienced delays in certain of our miner delivery schedules. Additionally, the global supply chain for data center construction equipment, such as transformers and substations, is presently further constrained due to unprecedented demand. Based on our current assessments, we do not expect any material impact on long-term development, operations, or liquidity. However, we continue to monitor developments in the global supply chain and assess their potential impact on our operations and expansion plans. For further discussion, see “Risk Factors — Risks Related to Our Business, Industry and Operations — We are exposed to risks related to disruptions or other failures in the supply chain for bitcoin mining hardware and related data center hardware, and difficulties in obtaining new hardware.

Current wording

The operations of our facilities and our other expansion plans, require specialized equipment, large quantities of construction materials and other component parts that can be difficult to source. We may experience disruptions to our business operations resulting from delays in construction and obtaining necessary equipment in a timely fashion due to global supply chain delays caused by geopolitical unrest, global pandemics, or other factors. Global supply logistics have caused delays across all channels of distribution, and we have also experienced delays in certain of our miner delivery schedules. Additionally, the global supply chain for data center construction equipment, such as transformers and substations, is presently further constrained due to unprecedented demand. Based on our current assessments, we do not expect any material impact on long-term development, operations, or liquidity. However, we continue to monitor developments in the global supply chain and assess their potential impact on our operations and expansion plans.

Previous wording

We operate in a complex and rapidly evolving regulatory environment and we are subject to a wide range of laws and regulations enacted by U.S. federal, state and local governments, governmental agencies and regulatory authorities, including 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, as well as similar entities in other countries. Other regulatory bodies, governmental or semi-governmental, have shown an interest in regulating or investigating companies engaged in the blockchain or cryptocurrency businesses.

Current wording

As a company operating at the intersection of data center, bitcoin mining and HPC hosting services, we are committed to maintaining a proactive and adaptive approach to regulatory compliance. We closely monitor legislative and regulatory developments and engage in dialogue with relevant stakeholders to ensure our business practices align with the evolving legal and regulatory framework. Despite uncertainties posed by a changing regulatory landscape, we remain committed to maintaining innovative and responsible business practices in data center, bitcoin mining and HPC hosting markets. We operate in a complex and rapidly evolving regulatory environment and we are subject to a wide range of laws and regulations enacted by U.S. federal, state and local governments, governmental agencies and regulatory authorities, including the SEC, the CFTC, the FTC and FinCEN, as well as similar entities in other countries. Other regulatory bodies, governmental or semi-governmental, have shown an interest in regulating or investigating companies engaged in the blockchain or cryptocurrency businesses.

Previous wording

Furthermore, because we may strategically expand our operations, see “Business—Our Strategy— Retain flexibility in considering strategically adjacent opportunities complimentary to our business model,” we may become subject to additional regulatory requirements.

Current wording

Furthermore, because we may strategically expand our operations into new areas, see “Business—Our Strategy— Commitment to growth, innovation and retaining flexibility to consider strategically adjacent opportunities to expand our business model,” we may become subject to additional regulatory requirements.

Previous wording

The following table presents information about our Bitcoin mining activities, including bitcoin production and sales of bitcoin (dollar amounts in thousands):

Current wording

The following table presents information about our Bitcoin mining activities for the year ended December 31, 2024, including bitcoin production and sales of bitcoin (dollar amounts in thousands):

Previous wording

Our revenue consists of bitcoin earned through mining activities at the Odessa Facility. We currently participate in third-party mining pools, including Foundry and Luxor, to mine bitcoin. The provision of computing power in accordance with the mining pool operator’s terms of service is the only performance obligation in our contract with the mining pool operator. We are entitled to a fractional share of the fixed cryptocurrency award from the mining pool operator (referred to as a “block reward”) and potentially transaction fees generated from blockchain users and distributed to individual miners by the mining pool operator.

Current wording

Our revenue consists of bitcoin earned through mining activities at the Odessa Facility. We currently participate in third-party mining pools to mine bitcoin. The provision of computing power in accordance with the mining pool operator’s terms of service is the only performance obligation in our contract with the mining pool operator. We are entitled to a fractional share of the fixed cryptocurrency award from the mining pool operator (referred to as a “block reward”) and potentially transaction fees generated from blockchain users and distributed to individual miners by the mining pool operator.

Previous wording

Cost of revenue consists primarily of direct production costs of bitcoin mining operations, consisting mainly of electricity expenses, as well as other facilities costs associated with our wholly-owned Odessa Facility, but excludes depreciation which is separately stated.

Current wording

Cost of revenue consists of direct production costs of bitcoin mining operations, primarily electricity expenses, as well as other facilities costs associated with our wholly-owned Odessa Facility, but excludes depreciation which is separately stated.

Previous wording

General and administrative expenses represent salary and other employee costs including stock-based compensation, insurance expense, rent expense for non-mining locations, professional fees, including accounting and audit, consulting, legal, public relations and/or investor relations expenses, non-income taxes and licenses, travel, and other expenses. We expect our administrative fees to remain high as we incur the ongoing costs of operating as a public company, including increased director and officer insurance costs, potential increases in the number of employees at the Company, and increased travel and conference participation expenses.

Current wording

General and administrative expenses represent insurance expense, rent expense, professional fees, including accounting and audit, consulting, legal, public relations and/or investor relations expenses, non-income taxes and licenses, travel, and other expenses. We expect our administrative fees to remain high as we incur the ongoing costs of operating as a public company, including increased director and officer insurance costs, and increased travel and conference participation expenses.

Previous wording

Our depreciation expense consists mainly of depreciation for our miners and mining equipment, as well as depreciation associated with leasehold improvements and other capitalized assets associated with the Odessa Facility. It also includes an immaterial amount of depreciation for other property and equipment not directly associated with our mining activities. We capitalize the cost of our mining machines and record depreciation expense on a straight-line basis over the estimated useful life of the machines, which is generally 5 years. Leasehold improvements include capitalized asset retirement costs, which are amortized over the estimated useful life of the related asset. All other leasehold improvements are depreciated over the lesser of the estimated useful life of the asset or the remaining life of the related lease.

Current wording

Our depreciation expense consists mainly of depreciation for our miners and mining equipment, as well as depreciation associated with leasehold improvements and other capitalized assets. We capitalize the cost of our mining machines and record depreciation expense on a straight-line basis over the estimated useful life of the machines, which is generally 3 years. Leasehold improvements include capitalized asset retirement costs, which are amortized over the estimated useful life of the related asset. All other leasehold improvements are depreciated over the lesser of the estimated useful life of the asset or the remaining life of the related lease.

Previous wording

The change in fair value of derivative asset primarily represents the initial fair value recorded for the derivative asset related to the Luminant Power Agreement on July 1, 2022, and includes the subsequent changes in fair value recorded during the reporting period.

Current wording

The change in fair value of derivative asset represents the changes in fair value of the Luminant Power Agreement recorded during the reporting period.

Previous wording

Equity in losses of equity investees includes our share of the losses recorded by Alborz LLC, Bear LLC and Chief LLC. Additionally, it includes the losses that we recognized upon our contributions of miners to these equity investees, due to the miners having a lower fair value at the time of the contributions than our costs paid to obtain them, which resulted in basis differences between the cost of the investments on our consolidated balance sheet and the amount of our underlying equity in the net assets of the investee attributed to the miners. We are accreting these basis differences and recognizing the accretion as a reduction to our share of the losses recognized by Alborz LLC, Bear LLC and Chief LLC within the equity in losses of equity investees on the consolidated statement of operations over the depreciation period for the miners.

Current wording

Equity in losses of equity investees includes our share of the losses recorded by Alborz LLC, Bear LLC and Chief Mountain LLC. Additionally, it includes the losses that we recognized upon our contributions of miners to these equity investees, due to the miners having a lower fair value at the time of the contributions than our costs paid to obtain them, which resulted in basis differences between the cost of the investments on our consolidated balance sheet and the amount of our underlying equity in the net assets of the investee attributed to the miners. We are accreting these basis differences and recognizing the accretion as a reduction to our share of the losses recognized by Alborz LLC, Bear LLC and Chief Mountain LLC within the equity in losses of equity investees on the consolidated statement of operations over the depreciation period for the miners.

Previous wording

During 2023, we mined bitcoin and received bitcoin as distributions-in-kind from our equity investees, Alborz LLC, Bear LLC and Chief LLC. All of our bitcoin is recorded as a current asset on our consolidated balance sheet as we expect to begin regularly exchanging our bitcoin held for fiat currency to fund our operating expenses. We adopted of ASU 2023-08 effective January 1, 2023, which requires cryptocurrencies to be measured at fair value each reporting period with changes in fair value being reported in net income. Prior to adoption of this ASU, our bitcoin were accounted for as intangible assets with indefinite useful lives, and as such assessed for impairment on a daily basis. Impairment was recognized when the carrying amount of bitcoin exceeded its fair value, which was determined based on the lowest daily trading price of bitcoin based on quoted prices on the active trading platform that management has determined is our principal market for bitcoin.

Current wording

All of our bitcoin is recorded as a current asset on our consolidated balance sheet as we expect to begin regularly exchanging our bitcoin held for fiat currency to fund our operating expenses. We adopted ASU 2023-08 effective January 1, 2023, which requires cryptocurrencies to be measured at fair value each reporting period with changes in fair value being reported in net income.

Previous wording

The following table sets forth our results of operations for the periods indicated (in thousands):

Current wording

The following table presents sets forth our results of operations for the periods indicated (in thousands):

Previous wording

Revenue for the year ended December 31, 2023 was $126.8 million and was generated entirely from bitcoin mining operations at the Odessa Facility, which began mining for bitcoin on November 22, 2022. The increase year over year was primarily driven by 2023 being a full year of mining, coupled with the overall increase in bitcoin price. For the period from November 22, 2022 through December 31, 2022, we recognized revenue of $3.0 million.

Current wording

Revenue for the year ended December 31, 2024 was $151.3 million, compared to $126.8 million for the year ended December 31, 2023, and was generated entirely from bitcoin mining operations at the Odessa Facility. The increase year over year was primarily driven by an overall increase in bitcoin price in the current year, partially offset by the halving in April 2024 which reduced the bitcoin reward per block from 6.25 to 3.125.

Previous wording

Cost of revenue for the year ended December 31, 2023 was $50.3 million, compared with $0.7 million for the year ended December 31, 2022, and consisted primarily of power costs at the Odessa Facility under the Luminant Power Agreement, which began operations in November, 2022. The Odessa Facility operated for the full year in 2023, compared to less than two months in the prior year.

Current wording

Cost of revenue for the year ended December 31, 2024 was $62.4 million, compared with $50.3 million for the year ended December 31, 2023, and consisted primarily of power costs at the Odessa Facility. The increase in the current year period was primarily due to expenses incurred related to the fleet upgrade at the Odessa Facility, in addition to drawing power from the grid at Odessa when our power provider curtailed us under our Power Purchase Agreement.

Previous wording

Change in fair value of derivative asset was $26.8 million for the year ended December 31, 2023 and was driven by the fair value of the Luminant Power Agreement. The estimated fair value of our derivative asset was derived from Level 2 and Level 3 inputs, and, due to a lack of quoted prices for similar type assets, is classified in Level 3 of the fair value hierarchy. Specifically, the discounted cash flow estimation models contain quoted spot and forward prices for electricity, as well as estimated usage rates consistent with the terms of the Luminant Power Agreement, the initial term of which is five years.

Current wording

Change in fair value of derivative asset was a $7.9 million decrease for the year ended December 31, 2024 and was driven by the fair value of the Luminant Power Agreement. The estimated fair value of our derivative asset was derived from Level 2 and Level 3 inputs, and, due to a lack of quoted prices for similar type assets, is classified in Level 3 of the fair value hierarchy. Specifically, the discounted cash flow estimation models contain quoted spot and forward prices for electricity, as well as estimated usage rates consistent with the terms of the Luminant Power Agreement, the initial term of which is five years.

Previous wording

After the start of mining operations at the Odessa Facility on November 22, 2022, we sold excess electricity that was available under the Luminant Power Agreement, but not needed in our mining operations at the Odessa Facility, back to the ERCOT market through Luminant. We sold power for proceeds of $9.9 million and $0.5 million for the years ended December 31, 2023, and December 31, 2022, respectively. Power sales increased in 2023 because that year had a full year of operations at the Odessa Facility compared to under two months of operations in the prior year.

Current wording

At our Odessa Facility, we sell excess electricity that was available under the Luminant Power Agreement, but not needed in our mining operations, back to the ERCOT market through Luminant. We sold power for proceeds of $5.4 million and $9.9 million for the year ended December 31, 2024, and 2023, respectively. Power sales fluctuate each period based on power and bitcoin prices which are volatile.

Previous wording

Equity in losses of equity investees totaled $2.5 million for the year ended December 31, 2023 compared to $37.0 million for the year ended December 31, 2022. Equity in losses of equity investees for the year ended December 31, 2022 primarily consisted of losses totaling $33.4 million recognized by us in relation to miners contributed between June 2022 and October 2022 to Alborz LLC, Bear LLC and Chief LLC that had fair values at the time of the contributions that were less than the costs we paid to obtain the miners. These losses created basis differences in our investments in the equity investees, which we are accreting over the five-year useful life of the miners. There was no loss on contribution for the year ended December 31, 2023.

Current wording

Equity in losses of equity investees totaled $0.4 million for the year ended December 31, 2024 compared to losses of $2.5 million for the year ended December 31, 2023. Equity in losses of equity investees consists of our 49% share in the earnings (losses) generated by our three partially-owned mining sites, and the accretion of the basis differences in our investments in the equity investees that resulted from contributions of miners during the year ended December 31, 2022. We are accreting these basis differences over the five-year useful life of the miners.

Previous wording

Gains on fair value of bitcoin

Current wording

Unrealized gains on fair value of bitcoin

Previous wording

For the year ended December 31, 2023, we recorded a provision for income taxes of $3.6 million primarily driven by an increase in the valuation allowance resulting from an increase in net operating loss carryforwards generated in the current period. For the year ended December 31, 2022, we recorded a provision for income taxes of $1.8 million.

Current wording

For the year ended December 31, 2024, we recorded a provision for income taxes of $0.3 million as a result of projected income for the current year in the jurisdictions which we operate. For the year ended December 31, 2023, we recorded a benefit for income taxes of $3.6 million.

Previous wording

On August 3, 2023, the Company entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC and Compass Point Research & Trading, LLC (each, an “Agent” and, together, the “Agents”), pursuant to which the Company may offer and sell, from time to time through or to the Agents, shares of its Common Stock, for aggregate gross proceeds of up to $250.0 million. As of December 31, 2023, we received gross proceeds on sales of 37,433,923 shares of common stock under the Prior Sales Agreement and the Sales Agreement of approximately $135.8 million at a weighted average price of $3.79.

Current wording

We have established an at-the-market sales agreement with Cantor Fitzgerald & Co., Canaccord Genuity LLC, Needham & Company, LLC, Compass Point Research & Trading, LLC, Keefe, Bruyette & Woods, Inc., Virtu Americas LLC, and BTIG, LLC (each, an “Agent” and, together, the “Agents”), pursuant to which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $725.7 million. For the year ended December 31, 2024, we received net proceeds on sales of 52.8 million shares of common stock under the Amended and Restated Sales Agreement of approximately $221.7 million (net of commissions and expenses) at an average net selling price of $4.20 per share. For more information on our at-the-market sales agreement and our at-the-market offerings, see “Note 15, Stockholders’ Equity — At-the-Market Sales Agreement.”

Previous wording

On August 14, 2023, we entered into a master loan agreement with Coinbase Credit, Inc., as lender, and Coinbase, Inc., as lending service provider. Pursuant to the master loan agreement, we established a secured line of credit up to $10.0 million (the “Credit Facility”). We will not incur commitment fees for unused portions of the Credit Facility. The borrowing rate on amounts drawn against the Credit Facility is determined on the basis of the Federal Funds Target Rate - Upper Bound, plus 2.5%, calculated daily based on a 365-day year and payable monthly for the duration of the loan. Borrowings under the Credit Facility are available on demand, open term, and collateralized by bitcoin transferred to the lending service provider’s platform. As of December 31, 2023, we have not drawn upon the Credit Facility.

Current wording

On August 14, 2023, we entered into a master loan agreement with Coinbase Credit, Inc., as lender, and Coinbase, Inc., as lending service provider. Pursuant to the master loan agreement, we currently have a secured line of credit up to $25.0 million (the “Coinbase Overnight Credit Facility”). We will not incur commitment fees for unused portions of the Coinbase Overnight Credit Facility. The borrowing rate on amounts drawn against the Coinbase Overnight Credit Facility is determined on the basis of the Federal Funds Target Rate - Upper Bound, plus 2.5%, calculated daily based on a 365-day year and payable monthly for the duration of the loan. Borrowings under the Coinbase Overnight Credit Facility are available on demand, open term, and collateralized by bitcoin transferred to the lending service provider’s platform. As of December 31, 2024 we had $25.0 million drawn from the Coinbase Overnight Credit Facility, $15 million of which was repaid prior to February 25, 2025. Additionally, we established a term loan facility with Coinbase with a limit of $35.0 million and maximum period of one year (the “Term Loan Facility”). Coinbase has the right to terminate loans under the Term Loan Facility if the price of bitcoin falls below $40,000. As of December 31, 2024, we were in compliance with the covenants under the Coinbase Overnight Credit Facility.

Previous wording

Management believes that our existing financial resources, combined with projected cash and bitcoin inflows from our data centers and our intent and ability to sell bitcoin received or earned, will be sufficient to enable us to meet our operating and capital requirements for at least 12 months from the date these unaudited condensed consolidated financial statements are issued.

Current wording

Management believes that our existing financial resources, combined with projected cash and bitcoin inflows from our data centers, our intent and ability to sell bitcoin received or earned, and our intent and ability to sell common stock through at-the-market offerings will be sufficient to enable us to meet our operating and capital requirements for at least 12 months from the date the consolidated financial statements included in this Annual Report are issued and the foreseeable future.

Previous wording

Net cash provided by investing activities increased by $226.7 million to $52.8 million for the year ended December 31, 2023 compared to net cash used in investing activities of $173.9 million for the year ended December 31, 2022. This was primarily due to a decrease of $154.0 million of deposits paid for miners and mining equipment, and an increase of $111.2 million in proceeds from sale of bitcoin, partially offset by a decrease of $50.2 million of capital distributions from equity investees.

Current wording

Cash flows used in investing activities increased by $245 million to $192.1 million of net cash used in investing activities for the year ended December 31, 2024 compared to $52.8 million of net cash provided by investing activities for the year ended December 31, 2023. This change primarily related to $129.1 million of deposits primarily related to new miner purchases, and a $33.6 million increase in contributions to equity investees related to capital expenditures and operations at the Bear and Chief facilities, partially offset by a $119.0 million increase in purchases of property and equipment related to building out the Black Pearl facility, and acquisition of the Barber Lake Facility.

Previous wording

Net cash provided by financing activities increased by $118.8 million to $115.7 million for the year ended December 31, 2023 from net cash used in financing activities of $3.1 million for the year ended December 31, 2022. The increase was primarily due to the cash proceeds from common stock issuances in the year ended December 31, 2023.

Current wording

Cash flows provided by financing activities increased by $97.8 million to $213.5 million net cash provided by financing activities for the year ended December 31, 2024 from $115.7 million net cash used in financing activities for the year ended December 31, 2023. This change was primarily driven by $89.3 million increase in proceeds from the issuance of common stock during the year ended December 31, 2024.

Previous wording

We also entered into a series of agreements with affiliates of Luminant, including the Lease Agreement dated June 29, 2021, with amendment and restatement on July 9, 2021, with amendment and restatement on July 9, 2021 and August 23, 2023 (as amended and restated, the “Luminant Lease Agreement”). The Luminant Lease Agreement leases a plot of land to us where our data center, ancillary infrastructure and electrical system (the “Interconnection Electrical Facilities” or “substation”) have been set up for the Odessa Facility. We entered into the Luminant Lease Agreement and the Luminant Purchase and Sale Agreement to build the infrastructure necessary to support our planned operations. Management determined that the Luminant Lease Agreement and the Luminant Purchase and Sale Agreement should be combined for accounting purposes under ASC 842 (collectively, the “Combined Luminant Lease Agreement”) and that amounts exchanged under the combined contract should be allocated to the various components of the overall transaction based on relative fair values.

Current wording

We also entered into a series of agreements with affiliates of Luminant ET Services Company LLC ( “Luminant”), including the Lease Agreement dated June 29, 2021, with amendment and restatement on July 9, 2021 (as amended and restated, the “Luminant Lease Agreement”). The Luminant Lease Agreement leases a plot of land to us where our data center, ancillary infrastructure and electrical system (the “Interconnection Electrical Facilities” or “substation”) have been set up for our Odessa Facility. We entered into the Luminant Lease Agreement and the Luminant Purchase and Sale Agreement to build the infrastructure necessary to support our planned operations. Management determined that the Luminant Lease Agreement and the Luminant Purchase and Sale Agreement should be combined for accounting purposes under ASC 842 (collectively, the “Combined Luminant Lease Agreement”) and that amounts exchanged under the combined contract should be allocated to the various components of the overall transaction based on relative fair values.

Previous wording

Our management determined that the Combined Luminant Lease Agreement contains two lease components; and the components should be accounted for together as a single lease component, because the effect of accounting for the land lease separately would be insignificant. Despite the lease commencement in November 2022, the Company had not been required by Luminant to make any lease payments for the substation prior to July 2023, therefore the Company accrued amounts due under the Combined Luminant Lease Agreement in accrued expenses and other current liabilities on its consolidated balance sheet.

Current wording

The Combined Luminant Lease Agreement commenced on November 22, 2022 and has an initial term of five years, with renewal provisions that are aligned with the Luminant Power Agreement. Financing for use of the land and substation is provided by Luminant affiliates. Despite lease commencement in November 2022, we had not been required by Luminant to make any lease payments for the substation prior to July 2023, therefore we accrued amounts due under the Combined Luminant Lease Agreement in accrued expenses and other current liabilities on its consolidated balance sheet.

Previous wording

On July 11, 2023, the Company entered into an amendment of the payment schedule to the Luminant Purchase and Sale Agreement, reflecting monthly installments of principal and interest totaling $19.7 million on an undiscounted basis, due over the remaining four-year period starting in July 2023. On August 23, 2023, the Company entered into a second amendment of the Luminant Lease Agreement, the terms of which included confirming the initial term will end on July 31, 2027. These amendments did not have a material impact on the Company’s consolidated financial statements.

Current wording

On August 23, 2023, we entered into a second amendment of the Luminant Lease Agreement, the terms of which included an amended payment schedule, reflecting monthly installments of principal and interest totaling $19.7 million on an undiscounted basis, due over the remaining four-year period starting in July 2023. This amendment did not have a material impact on our consolidated financial statements.

Previous wording

The Combined Luminant Lease Agreement commenced on November 22, 2022 and has an initial term of five years, with renewal provisions that are aligned with the Luminant Power Agreement. At the end of the lease term for the Interconnection Electrical Facilities, the substation will be sold back to Luminant’s affiliate, Vistra Operations Company, LLC at a price to be determined based upon bids obtained in the secondary market.

Current wording

At the end of the lease term for the Interconnection Electrical Facilities, the substation will be sold back to Luminant’s affiliate, Vistra Operations Company, LLC at a price to be determined based upon bids obtained in the secondary market.

Previous wording

We are providing supplemental financial measures for Adjusted Earnings that excludes the impact of depreciation and amortization, the non-cash change in fair value of derivative asset, the non-cash change in fair value of the warrant liability, nonrecurring gains and losses, deferred income taxes, and share-based compensation expense. This supplemental financial measure are not measurements of financial performance under accounting principles generally accepted in the United Stated (“GAAP”) and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate our business performance and to help make operating decisions. We believe the use of these non-GAAP financial measures can also facilitate comparison of our operating results to those of our competitors.

Current wording

We are providing supplemental financial measures for Adjusted Earnings (Loss) and Adjusted Earnings (Loss) per share - diluted, in each case that exclude the impact of (i) the non-cash change in fair value of derivative asset, (ii) share-based compensation expense, (iii) depreciation and amortization, (iv) deferred income tax expense, (v) nonrecurring gains and losses and (vi) the non-cash change in fair value of warrant liability. These supplemental financial measures are not measurements of financial performance under accounting principles generally accepted in the United Stated (“GAAP”) and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate our business performance and to help make operating decisions. We believe the use of these non-GAAP financial measures can also facilitate comparison of our operating results to those of our competitors by excluding certain items that vary in our industry based on company policy.

Previous wording

Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. For example, we expect that share-based compensation expense, which is excluded from the non-GAAP financial measures, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers and directors. Similarly, we expect that depreciation and amortization will continue to be a recurring expense over the term of the useful life of the related assets. Our non-GAAP financial measures are not meant to be considered in isolation and should be read only in conjunction with our consolidated financial statements included elsewhere in this Annual Report, which have been prepared in accordance with GAAP. We rely primarily on such consolidated financial statements to understand, manage and evaluate our business performance and use the non-GAAP financial measures only supplementally.

Current wording

Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. For example, we expect that share-based compensation expense, which is excluded from the non-GAAP financial measure, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers and directors. Similarly, we expect that depreciation and amortization will continue to be a recurring expense over the term of the useful life of the related assets. Our non-GAAP financial measures are not meant to be considered in isolation and should be read only in conjunction with our consolidated financial statements included elsewhere in this Annual Report, which have been prepared in accordance with GAAP. We rely primarily on such consolidated financial statements to understand, manage and evaluate our business performance and use the non-GAAP financial measures only supplementally.

Previous wording

The following are reconciliations of our Adjusted Earnings to the most directly comparable GAAP measures for the periods indicated (in thousands):

Current wording

The following is a reconciliation of our Adjusted Earnings to the most directly comparable GAAP measure for the periods indicated (in thousands):

Previous wording

Critical Accounting Policies, Significant Judgments and Use of Estimates

Current wording

Critical Accounting Policies, and Use of Estimates

Previous wording

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. As of and for the year ended December 31, 2023, the most significant estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, those related to equity instruments issued in share-based compensation arrangements, valuations of the derivative asset, determination of our asset retirement obligation and the valuation allowance associated with our deferred tax assets. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Current wording

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. As of, and for the year ended December 31, 2024, the most significant estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, those related to equity instruments issued in share-based compensation arrangements, valuations of the derivative asset, determination of our asset retirement obligations and the valuation allowance associated with our deferred tax assets. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.