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Related Party Transactions | 9 Months Ended
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Sep. 30, 2022
Related Party Transactions [Abstract] |
Related Party Transactions | NOTE 9. RELATED PARTY TRANSACTIONS Waiver, Lock-up and Board Observer Agreements On April 8, 2022, the Company entered into a waiver agreement with Bitfury Top HoldCo (the “Waiver Agreement”), pursuant to which the Company waived certain restrictions on transfer of the Company’s Common Stock under (a) that certain Lock-up Agreement, dated as of August 26, 2021, by and between GWAC and Bitfury Top HoldCo and (b) those certain Lock-up Agreements, dated August 26, 2021, by and between GWAC and each of (i) I-B Goodworks, LLC, (ii) Magnetar Financial LLC, (iii) Mint Tower Capital Management B.V., (iv) Periscope Capital, Inc. and (v) Polar Asset Management Partners Inc., respectively (the stockholders contemplated by clauses (a)-(b), the “Stockholders”) imposing similar restrictions on the Stockholders (collectively, the “Lock-up Agreements” and each a “Lock-up Agreement”). The Waiver Agreement was negotiated and approved by an independent committee of the Board. The Waiver Agreement (i) permits each Stockholder to pledge or otherwise hypothecate the Lock-up Shares (as defined in the Lock-up Agreements) held by such Stockholder as of the date of the Waiver Agreement (the shares that are actually pledged or otherwise hypothecated, the “Pledged Shares”) as collateral or security in connection with any loan meeting certain criteria set forth in the Waiver Agreement and (ii) transfer the Pledged Shares upon foreclosure by such pledgee in accordance with the terms of the applicable pledge or hypothecation; provided that such waiver will only apply and be effective if certain conditions specified in the Waiver Agreement are satisfied or waived. Additionally, effective as of the date of consummation of any pledge or hypothecation, and solely in regard to any pledged shares, the Lock-up Period, as defined in the applicable Lock-up Agreement, shall be extended an additional three months to November 26, 2023. Furthermore, the Waiver Agreement provided for the cancellation of 2,890,173 shares of the Company’s Common Stock held by Bitfury Top HoldCo and subject to the Lock-up Agreements as consideration for the $10.0 million deposit paid by the Company for Bitfury Top HoldCo mining rigs under the agreement dated October 11, 2021, for which no order confirmation was made, as discussed in Note 6. On April 8, 2022, the Company also entered into an observer agreement (the “Board Observer Agreement”) with Bitfury Holding and Bitfury Top HoldCo (together with Bitfury Holding, the “Investors”), which provides that the Investors have the right to designate a representative to serve as an observer of the Board and any committees thereof (subject to exceptions and limitations specified in the Board Observer Agreement). The Board Observer Agreement was negotiated and approved by an independent committee of the Board. Master Services and Supply Agreement In connection with the Business Combination, Bitfury Top HoldCo and Cipher entered into the Master Services and Supply Agreement on August 26, 2021. The initial term of the agreement is 84 months, with automatic 12-month renewals thereafter (unless either party provides sufficient notice of non-renewal). Pursuant to this agreement, Cipher can request and Bitfury Top HoldCo is required to use commercially reasonable efforts to provide, or procure the provision of, certain equipment and/or services, such as construction, engineering and operations, in each case as may be required to launch and maintain Cipher’s mining centers in the United States. The Master Services and Supply Agreement is not exclusive to Bitfury Top HoldCo or any of its affiliates, and Cipher may retain any other parties to manufacture and deliver any equipment or perform any of the services required. Cipher is not obligated to order any equipment or services from the Bitfury Group under the Master Services and Supply Agreement. In addition to the Master Services and Supply Agreement, Cipher and Bitfury Holding also entered into a fee side letter, which sets out the basic pricing framework applicable under the Master Services and Supply Agreement for any services. Under the fee side letter, monthly fees for any potential future services, if any, would be determined by reference to two groups of services, which may be provided under the Master Services and Supply Agreement: (i) Bitfury Top HoldCo’s “onsite” services fee would be calculated on a straight cost +5% basis (plus applicable duties and taxes); and (ii) Bitfury Top HoldCo’s “remote services” would be calculated on a ratchet basis applying a management fee of $1,000/MW up to 445 MW (capped at $200,000/month) and $450 USD/MW above 445 MW (plus applicable duties and taxes). Purchase commitments, deposits on equipment and related party payables As discussed above in Note 6, the Company entered into two agreements with Bitfury USA made under, and as a part of, the Master Services and Supply Agreement to purchase a total of 240 units of BBACs, the modular data centers that house mining machines. During the nine months ended September 30, 2022, the Company paid a total of $21.7 million to Bitfury USA, which is recorded on the Company’s consolidated balance sheets as deposits on equipment until receipt and deployment of the equipment. As of September 30, 2022 and December 31, 2021, the Company had a total of $21.9 million and $5.1 million, respectively, of deposits on equipment on its condensed consolidated balance sheets related to the Bitfury USA agreements. Additionally, as of September 30, 2022, the Company had a total of $2.7 million of construction-in-progress on its condensed consolidated balance sheet related to the Bitfury USA agreements. Additionally, prior to the Business Combination, Bitfury USA contracted with third-party vendors for the purchase of equipment and the receipt of services related to Cipher’s future mining operations. Prior to December 31, 2021, Bitfury USA made payments under these arrangements totaling $2.4 million. The Company reimbursed Bitfury USA for these amounts plus a 7% service fee upon completion of the Business Combination and, as a result, recorded the amounts reimbursed to Bitfury (including the service fee) as follows: $2.5 million was recorded to deposits on equipment and $0.1 million was recorded to construction-in-progress on the Company’s consolidated balance sheet as of December 31, 2021. Pursuant to one of these arrangements between Bitfury USA and a third-party vendor, Paradigm Controls of Texas, LLC (“Paradigm”), the Company made payments directly to Paradigm in place of Bitfury USA, in respect of manufacturing services for BBACs, totaling $11.0 million during the three months ended September 30, 2022 and the Company’s obligations to Bitfury USA under the Master Services and Supply Agreement have been reduced by the same amount. Additionally, Cipher recorded additional invoices totaling $1.7 million, or $1.8 million including the 7% service fee owed to Bitfury USA, to accounts payable, related party during the three months ended September 30, 2022. These additional invoices related to mining equipment and services received by the Company prior to September 30, 2022 for which Bitfury USA had not yet paid Paradigm, and which Cipher intends to pay directly to the vendor in place of Bitfury USA. The total balance owed to Bitfury USA and recorded in accounts payable, related party on the condensed consolidated balance sheet was $3.2 million as of September 30, 2022. See Note 15 for additional information regarding the disposition of the additional $1.7 million in invoices after September 30, 2022. The Company is in discussions with Bitfury USA to assign Cipher Mining Technologies certain service contracts related to the production of BBACs originally entered into between Bitfury USA and Paradigm. The Company will continue to work directly with Paradigm or other vendors on any remaining BBACs that would have been purchased from Bitfury USA under the Master Services and Supply Agreement. Related party receivables The Company recorded a related party receivable of approximately $0.7 million as of September 30, 2022 related to expenses paid on behalf of the Data Center LLCs for which it expects to be reimbursed.

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