Cipher Mining (CIFR) Risk Analysis

The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions and could adversely affect the option counterparties' performance under the capped call transactions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer more dilution, the effect of which would not be compensated for, than we currently anticipate with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparties. In addition, the terms of the capped call transactions are complex, and they may not operate as planned. For example, the terms of these may be subject to adjustment, modification or, in some cases, renegotiation in the event of certain corporate and other transactions. Accordingly, the capped call transactions may not operate as we intend in the event that we are required to adjust the terms of such instruments as a result of transactions in the future or in the event of other unanticipated developments that may adversely affect the functioning of the capped call transactions. The capped call transactions are separate transactions (in each case entered into between us and the option counterparties), are not part of the terms of the 2031 Convertible Notes and will not change the holders' rights under the 2031 Convertible Notes.

As of December 31, 2025, our total consolidated indebtedness amounted to $3,206 million. In May 2025 and September 2025, we completed offerings of our 2030 Convertible Notes and 2031 Convertible Notes, from which we incurred $172.5 million and $1,300.0 million of additional indebtedness, respectively. Additionally, in November 2025, Cipher Compute LLC, our wholly owned indirect subsidiary, incurred $1,733.0 million of indebtedness from offerings of $1,400.0 million and $333.0 million of our senior secured notes due 2030. Subsequent to December 31, 2025, Black Pearl Compute LLC, our wholly owned indirect subsidiary, incurred $2.0 billion of 6.125% senior secured notes due 2031. We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: - increasing our vulnerability to adverse economic and industry conditions;- limiting our ability to obtain additional financing, such as in the event of adverse changes to our credit ratings;- requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;- limiting our flexibility to plan for, or react to, changes in our business;- diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the Convertible Notes; and - placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the Convertible Notes, and our cash needs may increase in the future. In addition, future indebtedness that we may incur may contain financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.

Our ability to pay principal and interest on the senior secured notes incurred to finance the construction of the leased facilities will depend primarily upon revenue from our HPC leases. Until we complete construction of the data centers for our HPC tenants, we will not realize the full amount of projected revenue under our HPC leases. As a result, we cannot assure you that our business will generate cash flow from operation of those HPC facilities on a timeline basis, or at all. In the event we are unable to complete construction of the data center for our HPC leases in a timely manner and, consequently, do not receive some or all of the contracted rent under our HPC leases, we may not have sufficient funds to service our obligations under the senior secured notes incurred to finance the construction of the leased facilities or our other debt obligations. If we cannot make scheduled payments on our indebtedness, we will be in default and holders of the notes and other debt obligations could declare all outstanding principal and interest to be due and payable, our secured creditors (including the holders of the notes) could foreclose against the assets securing their loans and the notes and we could be forced into bankruptcy or liquidation. We cannot assure you we will be able to access other sources of financing, in an amount sufficient to fund our liquidity needs, including the payment of principal and interest on the notes or our other indebtedness. If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness, including the notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time, and there can be no guarantee that we will be able to access the capital markets on terms that are attractive or at all. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We cannot assure you that we will be able to restructure or refinance any of our debt on commercially reasonable terms or at all. In addition, the terms of existing or future debt agreements may restrict us from adopting some of these alternatives. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could result in a material adverse effect on our business, results of operations and financial condition and could negatively impact our ability to satisfy our obligations under the notes. If any of our indebtedness is accelerated, we may need to repay or refinance all or a portion of our other indebtedness before maturity. There can be no assurance that we will be able to obtain sufficient funds to enable us to repay or refinance our debt obligations on commercially reasonable terms, or at all.

The indentures governing the senior secured notes contain, and any other existing or future indebtedness of ours would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our and our subsidiaries' ability to, among other things: - incur additional debt or guarantee indebtedness;- pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock or make other restricted payments;- prepay, redeem or repurchase certain debt;- make loans or certain investments;- sell certain assets;- create liens on certain assets;- consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;- enter into certain transactions with our affiliates; and - engage in business activities other than the operation of the Barber Lake Facility or certain additional projects. As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.

Holders of the Convertible Notes may, subject to limited exceptions, require us to repurchase their Convertible Notes on May 15, 2028 (for the 2030 Convertible Notes) and on October 1, 2029 (for the 2031 Convertible Notes), and following a fundamental change, at a cash repurchase price generally equal to the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid special interest and additional interest, if any. Upon maturity of the Convertible Notes, we must pay their principal amount and accrued and unpaid special interest and additional interest, if any, in cash, unless they have been previously repurchased, redeemed or converted. In addition, prior to the "reserved share effective date", upon conversion, we will satisfy all of our conversion obligation in cash, subject to the "share settlement election exception", and on or after the "reserved share effective date", upon conversion, we will satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our common stock. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the Convertible Notes or pay any cash amounts due upon their maturity or conversion. In addition, applicable law, regulatory authorities and the agreements that we may have in the future governing our other indebtedness may restrict our ability to repurchase the Convertible Notes or to pay any cash amounts due upon their maturity or conversion. Our failure to repurchase Convertible Notes or to pay any cash amounts due upon their maturity or conversion when required will constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness and the Convertible Notes.

Certain provisions in the Convertible Notes and related indentures could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change, then noteholders will have the right to require us to repurchase their Convertible Notes for cash. In addition, if a takeover constitutes a make-whole fundamental change, then we may be required to temporarily increase the conversion rate. In either case, and in other cases, our obligations under the Convertible Notes and the indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.

In the event the conditional conversion feature of the Convertible Notes is triggered, holders of such notes will be entitled to convert the Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, (i) if the conversion date for such conversion is before the "reserved share effective date", we will settle all of our conversion obligation through the payment of cash, subject to the "share settlement election exception", and (ii) if the conversion date for such conversion is on or after the "reserved share effective date," we may elect to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Constructing data center facilities for HPC hosting requires significant capital expenditures, and we anticipate that future strategic growth initiatives will likewise continue to be capital-intensive. We expect to fund these through our capital raising efforts and raise additional capital to fund other future strategic growth initiatives; however, we may not be able to secure sufficient capital or financing on favorable terms, or meet the obligations of the financing we have secured. If we are unable to fund our construction efforts with respect to HPC hosting facilities, the completion of such projects may be delayed, our ability to collect any potential revenue or to otherwise monetize such facilities may be compromised and we may be less competitive in our industry, which could have a material adverse impact on our business, results of operations and financial condition, including our expansion strategy, our ability to generate significant or any revenue from an HPC hosting business and on the market price for our securities. See also "- Risks Related to Our Indebtedness - We may need to raise additional capital, which may not be available on terms acceptable to us, or at all."

From time to time, we may require additional capital to expand our operations or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances. Accordingly, we may determine to engage in equity or debt financings or enter into credit facilities for the above-mentioned or other reasons. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Our ability to obtain additional funds may also be affected by economic uncertainty and any disruptions in credit or capital markets as a result of geopolitical instability. See "-Any unfavorable global economic, business or political conditions, such as geopolitical tensions, military conflicts, acts of terrorism, natural disasters, pandemics, trade restrictions, tariffs, or similar events could have material adverse effect on our business, financial condition and results of operations." Furthermore, if we raise additional funds through equity financing, our existing stockholders could experience significant dilution. Any debt financing obtained by us in the future could also involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. See "Risks Related to Our Indebtedness-Our debt agreements contain restrictions that will limit flexibility in operating our business." If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited and it could have a material adverse effect on our business, prospects, financial condition, and operating results.

Our ability to comply with applicable complex and evolving laws, regulations, and rules is largely dependent on the maintenance of our compliance, audit, and reporting systems, as well as our ability to attract and retain qualified compliance and other risk management personnel. We cannot assure you that our policies and procedures will always be effective against all types of risks, including unidentified or unanticipated risks, or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed in all market environments.

Our business has grown rapidly since our inception. Our business model has also significantly evolved, and we expect it may continue to do so in the future. To stay current with technology and an industry that is rapidly evolving, we expect the services and products associated with them to evolve and, thus, require that our business model evolve, as well. From time to time, we may modify aspects of our business model or engage in various strategic initiatives, which may be complementary to our existing operations. For further information on our strategy, see "Business-Our Strategy." Our growth strategy includes expanding and diversifying our revenue sources into new markets. We are actively working to develop our pipeline for HPC data centers. Expansion plans may take longer or be more expensive than we currently anticipate as a result of evolving market conditions, technological developments, customer requirements, our evolving business model or otherwise, and any such expansion may also have an impact on our existing bitcoin mining operations. Factors including inflation, tariffs, and interest rates may all impact the amount of capital required and the terms upon which we can obtain such capital. We will continue to review our expansion plans in light of such factors, and our expansion plans may be delayed or may change as a result. We cannot offer any assurance that our expansion into HPC services or any other modifications to our business model or our strategy will be successful or will not result in harm to our business, reputation and our growth potential. Such modifications may increase the complexity of our business and place significant strain on our management, personnel, operations, systems, technical performance, financial resources and internal financial control and reporting functions. Further, we cannot provide any assurance that we will successfully manage growth and identify all emerging trends and future growth opportunities within the HPC market or other markets we seek to expand into, and we may lose out on such opportunities. Additionally, any such changes to our business model or strategy could cause us to become subject to additional regulatory scrutiny and a number of additional requirements, including licensing and permit requirements. Any of the foregoing could have a material adverse effect on our business, prospects, financial condition, and results of operations.

As we continue to enter into the HPC data center market, competitive, operational, legal and regulatory risks may be exacerbated as there is substantial uncertainty about the extent to which AI will result in changes that come with risks that we may not be able to anticipate, prevent, mitigate or remediate. We will face new sources of competition, new business models and new customer relationships, and our competitors may be larger, have longer operating histories and significantly greater resources than we do. In order to be successful, we will need to cultivate new industry relationships and strengthen existing relationships to bring any new solutions and offerings to market, and the success of any services we develop will depend on many factors, including demand for those solutions, our ability to win and maintain customers, and the cost, performance and perceived value of any such services. As a result, there can be no assurance that any HPC data centers we develop will be adopted by the market, or be profitable or viable. Our limited experience with respect to the provision of data center services could limit our ability to successfully execute on this growth strategy or adapt to market changes. If we are unsuccessful in continuing to develop HPC data centers, our business, results of operations and financial condition could be adversely affected. Further, an increased focus on HPC data centers could displace or reduce our existing operations, which may adversely affect our business, results of operations and financial condition. Our investments in developing HPC data centers may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns or other complications that could adversely affect our business, reputation, results of operations or financial condition. The increasing focus on the risks and strategic importance of certain AI services, such as AI cloud services, and AI or machine learning technologies, has already resulted in regulatory restrictions that target products and services capable of enabling or facilitating AI and machine learning, and may in the future result in additional restrictions or complex regulatory requirements impacting any offerings we may develop, including AI cloud services and other solutions. Complying with multiple evolving laws, rules and regulations from different jurisdictions related to new solutions are developed could increase the cost of doing business or may change the way HPC data centers operate in certain jurisdictions. We may not be able to adequately anticipate or respond to these evolving laws and regulations, and we may need to expend additional resources to adjust our offerings in certain jurisdictions if applicable legal frameworks are inconsistent across jurisdictions. For example, the European Union ("EU") Artificial Intelligence Act ("EU AI Act"), which entered into force on August 1, 2024 and will become enforceable in a gradual manner between 2025 and 2027, establishes, among other things, a risk-based governance framework for regulating AI systems operating in the EU. There is a risk that the EU AI Act could have a negative impact on our current or future use of AI. For example, the EU AI Act prohibits certain uses of AI systems and places numerous obligations on providers and developers of permitted AI systems, with heightened requirements based on AI systems that are considered high risk. This regulatory framework is expected to have a material impact on the way AI is regulated in the EU and beyond. Similarly, other jurisdictions, such as Canada with its Artificial Intelligence and Data Act and several U.S. states have also implemented or are considering similar regulatory frameworks or laws governing the development and deployment of AI generally or in specific contexts, as well as critical infrastructure cybersecurity legislation or regulations relating to data flows. Specific to AI law, in April 2023, the U.S. Federal Trade Commission, Department of Justice, Consumer Financial Protection Bureau and Equal Employment Opportunity Commission issued a joint statement on AI enforcement, demonstrating their interest in monitoring the development and use of automated systems and enforcement of their respective laws and regulations. The Federal Trade Commission and certain state Attorneys General have pursued enforcement actions against companies offering AI products and services under consumer protection laws. Such regulatory frameworks, as well as developing or potentially conflicting regulatory guidance and judicial decisions in this area, as well as conflict between potentially competing legal regimes (including with respect to state laws that may conflict with federal AI policy), may introduce uncertainty, affect our use of AI and our ability to provide and to improve our products and solutions, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us and could have a material adverse effect on our business, financial condition and results of operations. Furthermore, concerns regarding third-party use of AI for purposes contrary to governmental, national security and societal interests, including concerns relating to the misuse of AI applications, models, and solutions, could result in restrictions on AI products. Any such restrictions could reduce the demand for our intended AI data center services, and negatively impact our business, financial condition and operating results, and damage our reputation. It is also unclear how our status as an infrastructure provider for customers developing and deploying AI applications, as opposed to developing such applications ourselves, could affect the applicability of these existing or proposed regulatory frameworks and other restrictions with respect to any services we may offer from time to time. However, it is possible that such regimes will impose obligations on infrastructure providers, such as us, to oversee, monitor or restrict the use of AI systems that are trained or deployed on their systems, and/or to ensure compliance with such regulatory frameworks and other restrictions. If our customers violate existing or proposed regulatory regimes or other restrictions, or if they use our services for unlawful, harmful or non-compliant purposes, we could be subject to regulatory investigations, regulatory fines, reputational damage or contractual liability for any such actions, even if we do not control the customer applications. Further, potential HPC tenants may look to pass through their regulatory obligations and other liabilities to their outsourced data center providers, and we may not be able to limit our liability or damages in an event of loss suffered by such customers whether as a result of our breach of an agreement or otherwise. These competitive, operational, legal and regulatory risks are evolving and uncertain and could impact our business in ways we cannot predict. Any of the foregoing could limit our ability to expand our offering of HPC data centers and continue to grow our business, which could have a material adverse effect on prospects, results of operations and financial condition.