2 unchanged sentences
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
−Removed: If any of the following risks occurs, our business, financial condition, or results of operations could be materially adversely affected.
+Added: If any of the following risks occur, our business, financial condition, or results of operations could be materially adversely affected.
In such case, the market price of our class A common stock could decline, and you may lose all or part of your investment.
5 unchanged sentences
Our quarterly operating results may fluctuate, in part, as a result of:
−Removed: fluctuations in the price of bitcoin, of which we have significant holdings and with respect to which we expect to continue to make significant purchases in future periods, and potential material impairment charges that may be associated therewith;
+Added: fluctuations in the price of bitcoin, of which we have significant holdings and with respect to which we expect to continue to make significant future purchases, and potential material impairment charges that may be associated therewith;
+Added: any sales by us of our bitcoin at prices above their then current carrying costs, which would result in our recording gains upon sale of our digital assets;
regulatory, commercial, and technical developments related to bitcoin or the bitcoin blockchain;
19 unchanged sentences
We may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall or impairment losses related to our digital assets.
−Removed: Accordingly, any shortfall in revenue or impairment losses related to our digital assets may cause significant variation in operating results in any quarter.
+Added: Accordingly, any shortfall in revenue from our enterprise analytics software business or impairment losses related to our digital assets may cause significant variation in operating results in any quarter.
Based on the above factors, we believe quarter-to-quarter comparisons of our operating results are not a good indication of our future performance.
2 unchanged sentences
We may not be able to regain or increase profitability in the future
−Removed: We generated a net loss for the nine months ended September 30, 2021, primarily due to digital asset impairment losses, and we may not be able to regain or increase profitability on a quarterly or annual basis in the future.
+Added: We generated a net loss for the three months ended March 31, 2022, primarily due to digital asset impairment losses, and we may not be able to regain or increase profitability on a quarterly or annual basis in the future.
If our revenues are not sufficient to offset our operating expenses, we are unable to adjust our operating expenses in a timely manner in response to any shortfall in anticipated revenue, or we incur significant impairment losses related to our digital assets, we may incur operating losses in future periods, our profitability may decrease, or we may cease to be profitable.
As a result, our business, results of operations, and financial condition may be materially adversely affected.
−Removed: As of September 30, 2021, we had $261.1 million of deferred tax assets, net of a $1.3 million valuation allowance.
−Removed: If we are unable to regain or increase profitability in the future, we may be required to increase the valuation allowance against these deferred tax assets, which could result in a charge that would materially adversely affect net income in the period in which the charge is incurred.
+Added: As of March 31, 2022, we had $377.3 million of deferred tax assets, which reflects a $1.0 million valuation allowance.
+Added: The largest deferred tax asset relates to the impairment on our bitcoin holdings.
+Added: If the market value of bitcoin declines, we may be required to increase the valuation allowance against the deferred tax asset.
+Added: Additionally, if we are unable to regain or increase profitability in the future, we may also be required to increase the valuation allowance against the remaining deferred tax assets.
+Added: A significant increase in the valuation allowance could result in a charge that would materially adversely affect net income in the period in which the charge is incurred.
We may have exposure to greater than anticipated tax liabilities
24 unchanged sentences
In September 2020, our Board of Directors adopted our Treasury Reserve Policy, under which our treasury reserve assets will consist of (i) Cash Assets held by us that exceed working capital requirements and (ii) bitcoin held by us, with bitcoin serving as the primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets.
−Removed: In the first quarter of 2021, we determined to adopt, in addition to and in conjunction with our Treasury Reserve Policy, a corporate strategy of acquiring and holding bitcoin, and from time to time, subject to market conditions, issuing debt or equity securities in capital raising transactions with the objective of using the proceeds to purchase additional bitcoin.
−Removed: We have only recently adopted this bitcoin acquisition strategy and are continually examining the risks and rewards of such a strategy.
+Added: In the first quarter of 2021, we adopted, in addition to and in conjunction with our Treasury Reserve Policy, a corporate strategy of acquiring and holding bitcoin.
+Added: Pursuant to this strategy, and from time to time, subject to market conditions, we may issue debt or equity securities or engage in other capital raising transactions with the objective of using the proceeds to purchase additional bitcoin.
+Added: We are continually examining the risks and rewards of our bitcoin acquisition strategy.
This strategy has not been tested over time or under various market conditions.
1 unchanged sentence
If bitcoin prices fall or our bitcoin acquisition strategy otherwise proves unsuccessful, it would adversely impact our financial condition, results of operations, and the market price of our class A common stock.
−Removed: As of October 27, 2021, we held approximately 114,042 bitcoins that were acquired at an aggregate purchase price of $3.160 billion and an average purchase price of approximately $27,713 per bitcoin, inclusive of fees and expenses.
−Removed: These purchases included purchases of bitcoin using the net proceeds from our issuance of $650.0 million aggregate principal amount of our 2025 Convertible Notes in the fourth quarter of 2020, our issuance of $1.050 billion aggregate principal amount of our 2027 Convertible Notes in the first quarter of 2021, our issuance of $500.0 million aggregate principal amount of our 2028 Secured Notes in the second quarter of 2021, and our issuance and sale of 555,179 shares of our class A common stock pursuant to the Sale Agreement in the third quarter of 2021.
+Added: As of May 2, 2022, we held approximately 129,218 bitcoins that were acquired at an aggregate purchase price of $3.967 billion and an average purchase price of approximately $30,700 per bitcoin, inclusive of fees and expenses.
+Added: These purchases included purchases of bitcoin using the net proceeds from our issuance of $650.0 million aggregate principal amount of our 2025 Convertible Notes in the fourth quarter of 2020, our issuance of $1.050 billion aggregate principal amount of our 2027 Convertible Notes in the first quarter of 2021, our issuance of $500.0 million aggregate principal amount of our 2028 Secured Notes in the second quarter of 2021, our issuance and sale of 1,413,767 shares of our class A common stock pursuant to the Open Market Sale Agreement in the third and fourth quarters of 2021, and our borrowing of $205.0 million pursuant to our 2025 Secured Term Loan.
As part of our overall corporate strategy, we expect to purchase additional bitcoin in future periods, though we may also sell bitcoin in future periods as needed to generate Cash Assets for treasury management purposes.
−Removed: While our bitcoin is currently owned directly by us or our wholly owned subsidiaries, we are investigating other potential approaches to holding our bitcoin assets.
−Removed: If we change the means by which we hold our bitcoin assets, the accounting treatment for our bitcoin may correspondingly change.
+Added: While our bitcoin is currently owned directly by us or our wholly owned subsidiaries, we may investigate other potential approaches to holding our bitcoin assets.
+Added: If we change the means by which we hold our bitcoin assets, the accounting treatment for our bitcoin, as well as our ability to use our bitcoin as collateral for additional borrowings, may correspondingly change.
A change in the accounting treatment of our bitcoin holdings could have a material impact on our results of operations in future periods and could increase the volatility of our reported results of operations as well as affect the carrying value of our bitcoin on our balance sheet, which in turn could have a material adverse effect on our financial results and the market price of our class A common stock.
−Removed: Bitcoin is a highly volatile asset that has traded below $15,000 per bitcoin and above $65,000 per bitcoin on the Coinbase exchange (our principal market) in the 12 months preceding the date of this Quarterly Report.
−Removed: Bitcoin does not pay interest or other returns and so our ability to generate cash from our bitcoin holdings depends on sales.
+Added: Bitcoin is a highly volatile asset that has traded below $30,000 per bitcoin and above $65,000 per bitcoin on the Coinbase exchange (our principal market for bitcoin) in the 12 months preceding the date of this Quarterly Report.
+Added: Bitcoin does not pay interest or other returns and so our ability to generate cash from our bitcoin holdings depends on sales or implementing strategies that we may consider to create income streams or otherwise generate funds using our bitcoin holdings, including lending bitcoin to counterparties.
The impact of our bitcoin holdings on our financial results and the market price of our class A common stock will increase as we increase our overall holdings of bitcoin in the future.
4 unchanged sentences
decreased user and investor confidence in bitcoin;
−Removed: negative publicity or events relating to bitcoin;
+Added: investment and trading activities of highly active retail and institutional users, speculators, miners and investors;
+Added: negative publicity or events relating to bitcoin, including potential public backlash against bitcoin to the extent the public views bitcoin as a vehicle that may be used to circumvent sanctions, including the recent sanctions imposed on Russia related to the ongoing conflict between Russia and Ukraine;
negative or unpredictable media or social media coverage on bitcoin;
−Removed: public sentiment related to the actual or perceived environmental impact of bitcoin and related activities, including environmental concerns raised by private individuals and governmental actors related to the energy resources consumed in the bitcoin mining process;
+Added: public sentiment related to the actual or perceived environmental impact of bitcoin and related activities, including environmental concerns raised by private individuals, governmental, non-governmental organizations, and other actors related to the energy resources consumed in the bitcoin mining process;
changes in consumer preferences and the perceived value of bitcoin;
competition from other crypto assets that exhibit better speed, security, scalability, or other characteristics, or that are backed by governments, including the U.S.
−Removed: the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed bitcoin, or the transfer of Satoshi’s bitcoin;
+Added: the correlation between the prices of digital assets, including the potential that a crash in one digital asset or widespread defaults on one digital asset exchange or trading venue may cause a crash in the price of bitcoin, or a series of defaults by counterparties on bitcoin asset exchanges or trading venues;
+Added: the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed bitcoin, or the transfer of substantial amounts of bitcoin from bitcoin wallets attributed to Mr.
interruptions in service or failures of the principal markets for bitcoin;
further reductions in mining rewards of bitcoin, including block reward halving events, which are events that occur after a specific period of time that reduce the block reward earned by “miners” who validate bitcoin transactions;
−Removed: transaction congestion and fees associated with processing transactions on the b itcoin network;
+Added: transaction congestion and fees associated with processing transactions on the bitcoin network;
changes in the level of interest rates and inflation, monetary policies of governments, trade restrictions, and fiat currency devaluations;
−Removed: national and international economic and political conditions.
+Added: developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography being used by bitcoin becoming insecure or ineffective;
+Added: national and international economic and political conditions, including, without limitation, the adverse impact attributable to the economic and political instability caused by the current conflict between Russian and Ukraine and the economic sanctions adopted in response to the conflict.
In addition, bitcoin and other digital assets are relatively novel and are subject to various risks and uncertainties that may adversely impact their price.
The application of securities laws and other regulations to such assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may create new regulations or interpret laws in a manner that adversely affects the price of bitcoin.
−Removed: For example, foreign government authorities have recently expanded their efforts to restrict certain activities related to bitcoin and other digital assets.
+Added: For example, on March 9, 2022, President Biden signed an executive order relating to cryptocurrencies.
+Added: While the executive order did not mandate the adoption of any specific regulations, it instructs various federal agencies to consider potential regulatory measures, including the evaluation of the creation of a U.S.
+Added: Central Bank digital currency.
+Added: Similarly, foreign government authorities have recently expanded their efforts to restrict certain activities related to bitcoin and other digital assets.
+Added: In the European Union, in March of 2022, the EU parliament’s Economic and Monetary Affairs Committee voted to advance a new draft of the Markets in Crypto Assts framework, which contains provisions which may limit the use of digital assets that use “proof-of-work” validation, like bitcoin.
In China, the People’s Bank of China and the National Development and Reform Commission have outlawed cryptocurrency mining and declared all cryptocurrency transactions illegal within the country.
In India, it has been reported that the Ministry of Corporate Affairs has circulated draft legislation that would prohibit mining, holding, selling, trading, or using cryptocurrencies in the country.
−Removed: In Iran, President Hassan Rouhani ordered a ban on all licensed and unlicensed mining of cryptocurrencies throughout the summer of 2021 in response to an increasing number of electricity blackouts.
−Removed: Moreover, the risks of engaging in a bitcoin-focused business strategy also are relatively novel and have created, and may create further, complications due to the lack of experience that third parties have with companies engaging in such a business, such as the unavailability of director and officer liability insurance on acceptable terms.
+Added: Similarly, the Central Bank of the Russian Federation issued a report in January 2022 advocating for a wide-ranging ban on crypto-related activities including the issuance, exchange, and mining of cryptocurrencies in Russian territory, citing threats to financial stability, citizens’ wellbeing and its monetary policy sovereignty.
+Added: Moreover, the risks of engaging in a bitcoin-focused business strategy are relatively novel and have created, and may create further, complications due to the lack of experience that third parties have with companies engaging in such a business, such as the unavailability of director and officer liability insurance on acceptable terms.
The growth of the digital assets industry in general, and the use and acceptance of bitcoin in particular, may also impact the price of bitcoin and is subject to a high degree of uncertainty.
2 unchanged sentences
Because bitcoin has no physical existence beyond the record of transactions on the bitcoin blockchain, a variety of technical factors related to the bitcoin blockchain could also impact the price of bitcoin.
−Removed: For example, malicious attacks by miners, inadequate mining fees to incentivize validating of bitcoin transactions, hard “forks” of the bitcoin blockchain into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the bitcoin blockchain and negatively affect the price of bitcoin.
+Added: For example, malicious attacks by miners, inadequate mining fees to incentivize validating of bitcoin transactions, hard “forks” of the bitcoin blockchain into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the bitcoin blockchain and negatively
+Added: affect the price of bitcoin.
The liquidity of bitcoin may also be reduced and damage to the public perception of bitcoin may occur, if financial institutions were to deny banking services to businesses that hold bitcoin, provide bitcoin-related services or accept bitcoin as payment, which could also decrease the price of bitcoin.
Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our bitcoin holdings
−Removed: Our historical financial statements, including those for the nine months ended September 30, 2021, do not fully reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of bitcoin.
+Added: Our historical financial statements do not fully reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of bitcoin.
The price of bitcoin has historically been subject to dramatic price fluctuations and is highly volatile.
−Removed: We determine the fair value of our bitcoin based on quoted (unadjusted) prices on the active exchange that we have determined is our principal market for bitcoin.
+Added: We determine the fair value of our bitcoin based on quoted (unadjusted) prices on the Coinbase exchange (our principal market for bitcoin).
We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices on the active exchange, indicate that it is more likely than not that any of our bitcoin assets are impaired.
4 unchanged sentences
As a result, any decrease in the fair value of bitcoin below our carrying value for such assets at any time since their acquisition requires us to incur an impairment charge, and such charge could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings and decrease the carrying value of our digital assets, which in turn could have a material adverse effect on the market price of our class A common stock.
−Removed: At September 30, 2021 , we carried $ 2.406 billion of digital assets on our balance sheet, consisting of approximately 114,042 bitcoin s and reflecting $ 754.7 million in cumulative impairment losses attributable to bitcoin trading price fluctuations, and held $ 57.0 million in cash and cash equivalents, compared to a carrying value of $380.8 million of digital assets and $ 52.7 million in cash and cash equivalents at September 30, 2020 , reflecting the beginning of the shift in our liquid asset holdings following the adoption s of our Treasury Reserve Policy and our corporate strategy to acquire and hold bitcoin .
−Removed: Digital asset impairment losses of $ 684.0 million incurred during the nine months ended September 30, 2021 represented 71.6 % of our operating expenses, compared to $ 44.2 million in digital asset impairment losses representing 15.1 % of our operating expenses in the nine months ended September 30, 2020 , contributing to our net loss of $ 445.5 million for the nine months ended September 30, 2021 compared to net loss of $ 10.2 million for the nine months ended September 30, 2020 .
+Added: At March 31, 2022, we carried $2.896 billion of digital assets on our balance sheet, consisting of approximately 129,218 bitcoins and reflecting $1.071 billion in cumulative impairment losses attributable to bitcoin trading price fluctuations, and held $92.7 million in cash and cash equivalents, compared to a carrying value of $1.947 billion of digital assets, consisting of approximately 91,326 bitcoins, and $82.5 million in cash and cash equivalents at March 31, 2021.
+Added: Digital asset impairment losses of $170.1 million incurred during the three months ended March 31, 2022 represented 64.5% of our operating expenses, compared to $194.1 million in digital asset impairment losses representing 68.5% of our operating expenses in the three months ended March 31, 2021, contributing to our net loss of $130.8 million for the three months ended March 31, 2022 compared to net loss of $110.0 million for the three months ended March 31, 2021.
Because we intend to purchase additional bitcoin in future periods and increase our overall holdings of bitcoin, we expect that the proportion of our total assets represented by our bitcoin holdings will increase in the future.
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As a result, it is unclear as to whether or to what extent the existence of this ETF or other ETFs that invest in bitcoin futures contracts that may be listed in the future will have on any premium over the value of our bitcoin holdings that may be included in the value of our class A common stock.
−Removed: Shortly after the listing of the ProShares ETF, the SEC permitted the listing of the Valkyrie Bitcoin Strategy ETF (the “Valkyrie ETF”) , another ETF that invests primarily in bitcoin futures contracts.
+Added: Shortly after the listing of the ProShares ETF, the SEC permitted the listing of the Valkyrie Bitcoin Strategy ETF (the “Valkyrie ETF”) and VanEck Bitcoin Strategy ETF (“VanEck ETF”), additional ETFs that invest primarily in bitcoin futures contracts.
+Added: Other ETFs containing an asset mix consisting of bitcoin futures contracts and equities of publicly traded companies that have exposure to bitcoin or blockchain technology have also been introduced.
If the SEC were to further resolve its concerns regarding surveillance of and the existence of fraud and manipulation in the bitcoin trading markets, it is possible that the SEC would permit the listing of ETFs specializing in the direct acquisition and holding of bitcoin, allowing these funds to offer their shares directly to the public.
1 unchanged sentence
To the extent that our class A common stock is viewed as an alternative-to-bitcoin investment vehicle and trades at a premium to the value of our bitcoin holdings, that premium may also be eliminated, causing the price of our class A common stock to decline.
−Removed: In addition, the introduction of the ProShares ETF, the Valkyrie ETF, and any additional bitcoin ETFs on U.S.
+Added: In addition, the introduction of the bitcoin futures focused ETFs and any future bitcoin focused ETFs on U.S.
national securities exchanges may be viewed by investors as offering “pure play” exposure to bitcoin that would generally not be subject to federal income tax at the entity level as we are.
6 unchanged sentences
Even though we do not function in the manner of an ETF and do not offer continuous share creation and redemption at NAV, it is possible that we nevertheless could face regulatory scrutiny from the SEC, as a company with a class of securities registered under the Exchange Act and traded on The Nasdaq Global Select Market.
−Removed: In addition, as digital assets, including bitcoin, have grown in popularity and market size, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities or fund criminal or terrorist activities, or entities subject to sanctions regimes.
+Added: In addition, as digital assets, including bitcoin, have grown in popularity and market size, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions recently imposed in response to the ongoing conflict between Russia and Ukraine.
While we have implemented and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws and regulations and take care to only acquire our bitcoin through entities subject to anti-money laundering regulation and related compliance rules in the United States, if we are found to have purchased any of our bitcoin from bad actors that have used bitcoin to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in bitcoin by us may be restricted or prohibited.
+Added: We may consider issuing debt or other financial instruments that may be collateralized by our bitcoin holdings and may consider strategies to create income streams or otherwise generate funds using our bitcoin holdings, including lending bitcoin to counterparties.
+Added: To the extent that we enter into bitcoin-related transactions beyond simply acquiring and holding bitcoin, such transactions may subject us to additional regulatory compliance requirements, including federal and state money services regulations, money transmitter licensing requirements and various commodity laws and regulations.
In addition, private actors that are wary of bitcoin or the regulatory concerns associated with bitcoin may take actions that may have an adverse effect on the market price of our class A common stock.
−Removed: For example, an affiliate of HSBC Holdings has prohibited customers of its HSBC InvestDirect retail investment platform from buying shares of our class A common stock after determining that the value of our stock is related to the performance of bitcoin, indicating that it did not want to facilitate exposure to virtual currencies.
+Added: For example, an affiliate of HSBC Holdings has prohibited customers
+Added: of its HSBC InvestDirect retail investment platform from buying shares of our class A common stock after determining that the value of our stock is related to the performance of bitcoin, indicating that it did not want to facilitate exposure to virtual currencies.
Due to the unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our bitcoin
8 unchanged sentences
The concentration of our bitcoin holdings enhances the risks inherent in our bitcoin acquisition strategy
−Removed: As of October 27, 2021, we held approximately 114,042 bitcoins that were acquired at an aggregate purchase price of $3.160 billion and we intend to purchase additional bitcoin and increase our overall holdings of bitcoin in the future.
+Added: As of May 2, 2022, we held approximately 129,218 bitcoins that were acquired at an aggregate purchase price of $3.967 billion and we intend to purchase additional bitcoin and increase our overall holdings of bitcoin in the future.
The concentration of our bitcoin holdings limits the risk mitigation that we could take advantage of by purchasing a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our bitcoin acquisition strategy.
If there is a significant decrease in the price of bitcoin, we will experience a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.
+Added: The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of Bitcoin and adversely affect our business
+Added: As a result of our bitcoin acquisition strategy, the majority of our assets are concentrated in our bitcoin holdings.
+Added: Accordingly, a significant decrease in the market price of bitcoin may have a material adverse effect on our financial condition.
+Added: As of the date of this Quarterly Report on Form 10-Q, bitcoin was the largest digital asset by market capitalization.
+Added: However, there are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets that do not use proof-of-work mining like the bitcoin network.
+Added: Additionally, central banks in some countries have started to introduce digital forms of legal tender.
+Added: For example, China’s cryptocurrencies backed by central banks (“CBDC”) project was made available to consumers in January 2022, and governments including the United States and the European Union have been discussing potential creation of new digital currencies.
+Added: Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could have an advantage in competing with, or replacing, bitcoin and other cryptocurrencies as a medium of exchange or store of value.
+Added: As a result, the value of bitcoin could decrease, which could have a material adverse effect on our business, prospects, financial condition, and operating results.
Our bitcoin holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents
7 unchanged sentences
Bitcoin and other blockchain-based cryptocurrencies have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.
−Removed: For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange (our principal market), although the flaw was subsequently fixed and Coinbase reimbursed affected customers.
−Removed: Nonetheless, a successful security breach or cyberattack could result in a partial or total loss of our bitcoin in a manner that may not be covered by insurance or indemnity provisions of the custody agreement with a custodian who holds our bitcoin.
−Removed: Such a loss could have a material adverse effect on our financial condition and results of operations.
+Added: For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange (our principal market for bitcoin), although the flaw was subsequently fixed and Coinbase reimbursed affected customers.
+Added: Similarly, in January 2022, hackers exploited weaknesses in the security architecture of the cryptocurrency exchange Crypto.com and stole over $30 million in cryptocurrencies, including bitcoin, from the accounts of 483 customers, although the flaw was subsequently fixed and Crypto.com reimbursed affected customers.
+Added: Nonetheless, a successful security breach or cyberattack could result in:
+Added: a partial or total loss of our bitcoin in a manner that may not be covered by insurance or indemnity provisions of the custody agreement with a custodian who holds our bitcoin;
+Added: harm to our reputation and brand;
+Added: improper disclosure of data and violations of applicable data privacy and other laws;
+Added: significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure.
+Added: Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, whether or not we are directly impacted, could lead to a general loss of confidence in the broader bitcoin blockchain ecosystem or in the use of bitcoin networks to conduct financial transactions, which could negatively impact us.
+Added: Attacks upon systems across a variety of industries, including industries related to bitcoin, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors.
+Added: The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target.
+Added: These attacks may occur on our systems or those of our third-party service providers or partners.
+Added: We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities.
+Added: In particular, unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud.
+Added: In the past, hackers have successfully employed a social engineering attack against one of our service providers and misappropriated our digital assets, although, to date, such events have not been material to our financial condition or operating results.
+Added: Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders.
+Added: In addition, certain types of attacks could harm us even if our systems are left undisturbed.
+Added: For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures.
+Added: Further, there has been an increase in such activities as a result of the COVID-19 pandemic.
+Added: The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing conflict between Russia and Ukraine, including potential proliferation of malware from the conflict into systems unrelated to the conflict.
+Added: Any future breach of our operations or those of others in the bitcoin industry, including third-party services on which we rely, could materially and adversely affect our business.
The loss or destruction of a private key required to access our bitcoin may be irreversible.
3 unchanged sentences
To the extent our private key is lost, destroyed, or otherwise compromised and no backup of the private key is accessible, we will be unable to access the bitcoin held in the related digital wallet.
−Removed: Furthermore, we cannot provide assurance that our digital wallets will not be compromised as a result of a cyberattack.
+Added: Furthermore, we cannot provide assurance that our digital
+Added: wallets will not be compromised as a result of a cyberattack.
The bitcoin and blockchain ledger, as well as other cryptocurrencies and blockchain technologies, have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.
In light of the significant amount of bitcoin we hold, we are continuing to seek a greater degree of diversification in the use of custodial services as the extent of potential risk of loss is dependent, in part, on the degree of diversification.
−Removed: As of September 30, 2021, the insurance that covers losses of our bitcoin holdings covers only a small fraction of the value of the entirety of our bitcoin holdings, and there can be no guarantee that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect to our bitcoin.
+Added: As of March 31, 2022, the insurance that covers losses of our bitcoin holdings covers only a small fraction of the value of the entirety of our bitcoin holdings, and there can be no guarantee that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect to our bitcoin.
Regulatory change reclassifying bitcoin as a security could lead to our classification as an “investment company” under the Investment Company Act of 1940 and could adversely affect the market price of bitcoin and the market price of our class A common stock
4 unchanged sentences
A significant decrease in the market value of our bitcoin holdings could adversely affect our ability to service our indebtedness
−Removed: As a result of our bitcoin acquisition strategy, the majority of our assets are concentrated in our bitcoin holdings, which limits our ability to mitigate risk by purchasing a more diversified portfolio of treasury assets.
−Removed: Accordingly, if there is a significant decrease in the market
−Removed: price of bitcoin, the market value of our bitcoin holdings will experience a significant decline, which may have a material adverse effect on our financial condition.
+Added: As a result of our bitcoin acquisition strategy and our Treasury Reserve Policy, the majority of our assets are concentrated in our bitcoin holdings.
+Added: The concentration of our assets in bitcoin limits our ability to mitigate risk that could otherwise be achieved by purchasing a more diversified portfolio of treasury assets.
+Added: Accordingly, if there is a significant decrease in the market price of bitcoin, the market value of our bitcoin holdings will experience a significant decline, which may have a material adverse effect on our financial condition.
Any material adverse effect on our financial condition caused by a significant decline in the market value of our bitcoin holdings may create liquidity and credit risks for our business operations, as we would have limited means to obtain cash beyond the revenues generated by our enterprise analytics software business.
11 unchanged sentences
If our existing customers cancel or fail to renew their service contracts or fail to make additional purchases from us, our revenue could decrease and our operating results could be materially adversely affected.
−Removed: A substantial customer shift in the deployment of the MicroStrategy platform from a product license model to a cloud subscription model could affect the timing of revenue recognition, reduce product licenses and product support revenues, and materially adversely affect our operating results
+Added: A substantial customer shift in the deployment of the MicroStrategy platform from a product license model to a cloud subscription model could result in higher future rates of attrition of customers from the MicroStrategy platform and could affect the timing of revenue recognition, reduce product licenses and product support revenues, and materially adversely affect our operating results,
+Added: and our ability to accelerate our cloud strategy could be negatively impacted by any inability to provide necessary sales and engineering support
We offer our analytics platform in the form of a product license or a cloud subscription.
−Removed: The payment streams and revenue recognition timing for our product licenses are different from those for our cloud subscriptions.
+Added: Given that it is relatively easy for customers to migrate on and off our cloud subscription platform, a substantial shift among our customers toward our cloud platform could result in higher future rates of attrition among our customers.
+Added: In addition, the payment streams and revenue recognition timing for our product licenses are different from those for our cloud subscriptions.
For product licenses, customers typically pay us a lump sum soon after entering into a license agreement, and we typically recognize product licenses revenue when control of the license is transferred to the customer.
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Accordingly, in any particular reporting period, cloud subscription sales could negatively impact product license sales to our existing and prospective customers, which could reduce product licenses and product support revenues.
+Added: Finally, our ability to accelerate our cloud strategy could be negatively impacted by any inability to provide necessary sales and sales engineering support, including the support of channel partners, our internal sales team, and digital marketing.
We use channel partners and if we are unable to maintain successful relationships with them, our business, operating results, and financial condition could be materially adversely affected
In addition to our direct sales force, we use channel partners, such as system integrators, consulting firms, resellers, solution providers, managed service providers, OEMs, and technology companies, to license and support our offerings.
−Removed: For the nine months ended September 30, 2021, transactions by channel partners for which we recognized revenue accounted for 34.6% of our total product licenses revenues, and our ability to achieve revenue growth in the future will depend in part on our ability to maintain these relationships.
+Added: For the three months ended March 31, 2022, transactions by channel partners for which we recognized revenue accounted for 28.3% of our total product licenses revenues, and our ability to achieve revenue growth in the future will depend in part on our ability to maintain these relationships.
Our channel partners may offer customers the products and services of several different companies, including competing offerings, and we cannot be certain that they will prioritize or devote adequate resources to selling our offerings.
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Our recognition of deferred revenue and advance payments is subject to future performance obligations and may not be representative of revenues for succeeding periods
−Removed: Our deferred revenue and advance payments totaled $169.0 million as of September 30, 2021.
+Added: Our deferred revenue and advance payments totaled $214.5 million as of March 31, 2022.
The timing and ultimate recognition of our deferred revenue and advance payments depend on various factors, including our performance of various service obligations.
Because of the possibility of customer changes or delays in customer development or implementation schedules or budgets, and the need for us to satisfactorily perform product support and other services, deferred revenue and advance payments at any particular date may not be representative of actual revenue for any succeeding period.
−Removed: In addition, we had $29.9 million of other remaining performance obligations as of September 30, 2021, consisting of the portions of multi-year contracts that will be invoiced in the future that are not reflected on our balance sheet.
+Added: In addition, we had $66.1 million of other remaining performance obligations as of March 31, 2022, consisting of the portions of multi-year contracts that will be invoiced in the future that are not reflected on our balance sheet.
As with deferred revenue and advanced payments, these other remaining performance obligations at any particular date may not be representative of actual revenue for any succeeding period.
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These long sales cycles increase the risk that intervening events, such as the introduction of new offerings and changes in customer budgets and purchasing priorities, will affect the size, timing, and completion of an order.
−Removed: Even if an order is completed, the time and resources required to implement and integrate our offerings vary widely depending on customer needs and the complexity of deployment.
+Added: Even if an order is completed, the time and resources required to implement and integrate our offerings vary
+Added: widely depending on customer needs and the complexity of deployment.
If we lose sales or sales are delayed due to these long sales and implementation cycles, our revenues and operating results for that period may be materially adversely affected.
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The presence or absence of one or more large transactions in a particular period may have a material effect on our revenues and operating results for that period and may result in lower estimated revenues and earnings in future periods.
−Removed: For the nine months ended September 30, 2021, our top three product licenses transactions with recognized revenue totaled $10.1 million, or 14.6% of total product licenses revenues, compared to $14.7 million, or 25.8% of total product licenses revenues, for the nine months ended September 30, 2020.
+Added: For the three months ended March 31, 2022, our top three product licenses transactions with recognized revenue totaled $2.6 million, or 15.6% of total product licenses revenues, compared to $7.0 million, or 32.8% of total product licenses revenues, for the three months ended March 31, 2021.
Our offerings face intense competition, which may lead to lower prices for our offerings, reduced gross margins, loss of market share, and reduced revenue
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Failure to compete successfully in any one of these or other areas may reduce the demand for our offerings and materially adversely affect our revenue from both existing and prospective customers.
−Removed: Some of our competitors have longer operating histories and significantly greater financial, technical, and marketing resources than we do.
+Added: Some of our competitors have longer operating histories, more focused business strategies and significantly greater financial, technical, and marketing resources than we do.
As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements or devote greater resources to the development, promotion, sale, and marketing of their offerings than we can, such as offering certain analytics products free of charge when bundled with other products.
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Current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others.
−Removed: By doing so, these competitors may increase their ability to meet the needs of our potential customers by their expanded offerings
−Removed: and rapidly gain significant market share, which could limit our ability to obtain revenues from new customers and to sustain software maintenance revenues from our installed customer base.
+Added: By doing so, these competitors may increase their ability to meet the needs of our potential customers by their expanded offerings and rapidly gain significant market share, which could limit our ability to obtain revenues from new customers and to sustain software maintenance revenues from our installed customer base.
In addition, basic office productivity software suites, such as Microsoft Office, could evolve to offer advanced analysis and reporting capabilities that may reduce the demand for our analytics offerings.
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We cannot be sure that we will succeed in developing, marketing, and delivering, on a timely and cost-effective basis, new or enhanced offerings that will achieve market acceptance.
−Removed: Moreover, even if our new offerings achieve market acceptance, we may experience a decline in revenues of our existing offerings that is not fully matched by the new offering’s revenue.
+Added: Moreover, even if our new offerings achieve market acceptance, we may experience a decline in revenues
+Added: of our existing offerings that is not fully matched by the new offering’s revenue.
This could result in a temporary or permanent revenue shortfall and materially adversely affect our business, operating results, and financial condition.
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The nature of our software makes it particularly susceptible to undetected errors, bugs, or security vulnerabilities, which could cause problems with how the software performs and, in turn, reduce demand for our software, reduce our revenue, and lead to litigation claims against us
−Removed: Despite extensive testing by us and our current and potential customers, we have in the past discovered software errors, bugs, or security vulnerabilities in our offerings after commercial shipments began and they may be found in future offerings or releases.
+Added: Despite extensive testing by us and our current and potential customers, we have in the past discovered software errors, bugs, or security vulnerabilities (including the log4j and SpringShell vulnerabilities which surfaced in December 2021 and March 2022, respectively, and affected companies worldwide) in our offerings after commercial shipments began and they may be found in future offerings or releases.
This could result in lost revenue, damage to our reputation, or delays in market acceptance, which could have a material adverse effect on our business, operating results, and financial condition.
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We periodically receive notices from third parties claiming we are infringing their intellectual property rights.
−Removed: The number of such claims may increase as we expand our offerings and branding, the number of offerings and level of competition in our industry grow, the functionality of offerings overlaps, and the volume of issued patents, patent applications, and copyright and trademark registrations continues to increase.
+Added: The number of such claims may increase as we expand our offerings and branding, the number of offerings and level of competition in our industry grow,
+Added: the functionality of offerings overlaps, and the volume of issued patents, patent applications, and copyright and trademark registrations continues to increase.
Responding to any infringement claim, regardless of its validity, could:
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Many governmental authorities have instituted quarantines, work-from-home directives, social distancing mandates, travel restrictions, border closures, limitations on public gatherings, and closures of or operational limitations on non-essential businesses, which are adversely impacting a number of industries such as travel, leisure, hospitality, and retail.
−Removed: Government recommendations and requirements are continuing to change, and we may not be able to immediately respond to, meet or enforce all required health and safety measures in all of our locations.
+Added: Government recommendations and requirements are continuing to change, and we may not be able to immediately respond to, meet or enforce all required health and safety measures or other government requirements in all of our locations.
There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the global economy and consumer confidence.
The COVID-19 pandemic could have a sustained adverse impact on economic and market conditions and trigger a period of prolonged global economic slowdown, which could decrease technology spending, adversely affect demand for our offerings, and harm our business and operating results.
−Removed: Although our total revenues for the nine months ended September 30, 2021 were not materially impacted by COVID-19, we believe our revenues may be negatively impacted in future periods until the effects of the pandemic have fully subsided and the current macroeconomic environment has substantially recovered.
+Added: Although our total revenues for the three months ended March 31, 2022 were not materially impacted by COVID-19, our revenues may be negatively impacted in future periods until the effects of the pandemic and the efforts to address it have fully subsided and the current macroeconomic environment has substantially recovered.
The uncertainty related to COVID-19 may also result in increased volatility in the financial projections we use as the basis for estimates and assumptions used in our financial statements.
In light of the uncertain and rapidly evolving situation relating to COVID-19, we have taken precautionary measures intended to reduce the risk of the virus to our employees, customers, and communities in which we operate.
−Removed: We have established remote working arrangements for our employees, limited non-essential business travel, and cancelled or shifted our customer, employee, and industry events to a virtual-only format for the foreseeable future.
+Added: We established flexible working arrangements for our employees, reduced business travel, and shifted certain of our customer, employee, and industry events to virtual formats.
As a result of these precautionary measures, there could be a negative impact on our sales, marketing, and customer success efforts, continued delays in our sales cycles, delays in the release or delivery of new or enhanced offerings or unexpected changes to such offerings, or operational or other challenges, any of which could significantly disrupt our business and operating results.
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Considerable uncertainty still surrounds COVID-19, the evolution of its variants, its potential long-term economic effects, as well as the effectiveness of any responses taken by government authorities and businesses and of various efforts to inoculate the global population.
−Removed: Although we continue to actively monitor the situation and may take further actions as may be required by government authorities or as more information and public health guidance become available, we may not be able to immediately respond to, meet or enforce all required health and safety measures in all of our locations, and the full extent to which COVID-19 impacts our business and operating results will depend on future developments, including the duration, spread, severity, and potential recurrence of the COVID-19 pandemic, impact on our customers and our sales cycles, our ability to generate new business leads, impact on our customer, employee, and industry events, and effect on our vendors, all of which are highly uncertain and cannot be predicted.
+Added: Although we continue to actively monitor the situation and may take further actions as may be required by government authorities or as
+Added: more information and public health guidance become available, we may not be able to immediately respond to, meet or enforce all required health and safety measures or other government requirements in all of our locations, and the full extent to which COVID-19 impacts our business and operating results will depend on future developments, including the duration, spread, severity, and potential recurrence of the COVID-19 pandemic, impact on our customers and our sales cycles, our ability to generate new business leads, impact on our customer, employee, and industry events, and effect on our vendors, all of which are highly uncertain and cannot be predicted.
In addition, the effects of the COVID-19 pandemic may heighten many of the other risks described in this “Risk Factors” section.
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In addition, we serve our customers and manage certain critical internal processes using a third-party data center hosting facility located in the United States and other third-party services, including AWS, Azure, and other cloud services.
−Removed: Any disruptions or failures of our systems or the third-party hosting facility or other services that we use, including as a result of a natural disaster, fire, cyberattack, act of terrorism, geopolitical conflict, pandemic (including the ongoing COVID-19 pandemic), the effects of climate change, or other catastrophic event, as well as power outages, telecommunications infrastructure outages, a decision by one of our third-party service providers to close facilities that we use without adequate notice or to materially change the pricing or terms of their services, host country restrictions on the conduct of our business operations or the availability of our offerings, or other unanticipated problems with the third-party services that we use, such as a failure to meet service standards, could severely impact our ability to conduct our business operations or to attract new customers or maintain existing customers, or result in a material weakness in our internal control over financial reporting, any of which could materially adversely affect our future operating results.
+Added: Any disruptions or failures of our systems or the third-party hosting facility or other services that we use, including as a result of a natural disaster, fire, cyberattack (including the potential increase in risk for such attacks due to cyberwarfare in connection with the ongoing conflict between Russia and Ukraine), act of terrorism, geopolitical conflict, pandemic (including the ongoing COVID-19 pandemic), the effects of climate change, or other catastrophic event, as well as power outages, telecommunications infrastructure outages, a decision by one of our third-party service providers to close facilities that we use without adequate notice or to materially change the pricing or terms of their services, host country restrictions on the conduct of our business operations or the availability of our offerings, or other unanticipated problems with the third-party services that we use, such as a failure to meet service standards, could severely impact our ability to conduct our business operations or to attract new customers or maintain existing customers, or result in a material weakness in our internal control over financial reporting, any of which could materially adversely affect our future operating results.
Our international operations are complex and expose us to risks that could have a material adverse effect on our business, operating results, and financial condition
We receive a significant portion of our total revenues from international sales and conduct our business activities in various foreign countries, including some emerging markets where we have limited experience, where the challenges of conducting our business can be significantly different from those we have faced in more developed markets, and where business practices may create internal control risks.
−Removed: International revenues accounted for 41.8% and 38.2% of our total revenues for the three months ended September 30, 2021 and 2020, respectively, and 43.3% and 41.0% of our total revenues for the nine months ended September 30, 2021 and 2020, respectively.
+Added: International revenues accounted for 42.6% and 42.9% of our total revenues for the three months ended March 31, 2022 and 2021, respectively.
Our international operations require significant management attention and financial resources and expose us to additional risks, including:
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natural disasters, acts of war, terrorism, or pandemics (including the ongoing COVID-19 pandemic);
−Removed: political instability and security risks in the countries where we are doing business.
+Added: political instability and security risks in the countries where we are doing business, including, without limitation, political and economic instability caused by the current conflict between Russia and Ukraine and economic sanctions adopted in response to the conflict.
Disruptions to trade, weakening of economic conditions, economic and legal uncertainties, or changes in currency rates may adversely affect our business, financial condition, operating results, and cash flows.
−Removed: For example, we may face heightened risks in connection with our international operations as a result of the withdrawal of the United Kingdom from the European Union, commonly referred to as “Brexit.” The future effects of Brexit are uncertain and will depend on the implementation of the Trade and Cooperation Agreement between the United Kingdom and the European Union and any other agreements the United Kingdom may make in the future to retain access to European Union markets post their separation.
+Added: For example, we may face heightened risks in connection with our international operations as a result of the withdrawal of the United Kingdom from the European Union, commonly referred to as “Brexit.” The future effects of Brexit are uncertain and will depend on the implementation of the Trade and Cooperation Agreement
+Added: between the United Kingdom and the European Union and any other future agreements the United Kingdom may make to retain access to European Union markets.
Brexit could, among other outcomes, disrupt the free movement of goods, services, and people between the United Kingdom and the European Union.
Brexit could also lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which EU laws to replace or replicate.
−Removed: In addition, the Trump administration imposed greater restrictions on international trade and significant increases in tariffs on certain goods imported into the United States from a number of foreign markets, following which retaliatory tariffs were imposed on exports of certain U.S.
−Removed: goods to those markets.
−Removed: These tariffs and any further escalation of protectionist trade measures could adversely affect the markets in which we sell our offerings and, in turn, our business, financial condition, operating results, and cash flows and it is unclear to what extent the Biden administration will maintain the increased tariffs imposed by the prior administration or make additional changes to U.S.
+Added: Recently, the United States has put in place higher tariffs and other trade restrictions and signaled that it may additionally alter trade agreements and terms between the United States and China, the European Union, Canada, and Mexico, among others, including limiting trade and/or imposing tariffs on imports from such countries.
+Added: In addition, China, the European Union, Canada, and Mexico, among others, have either threatened or put into place retaliatory tariffs of their own.
+Added: These tariffs and any further escalation of protectionist trade measures could adversely affect the markets in which we sell our offerings and, in turn, our business, financial condition, operating results, and cash flows and it is unclear to what extent the Biden administration will work to reverse such measures in the future or pursue similar policy initiatives imposed by the prior administration or make additional changes to U.S.
trade policy that may result in further impacts on our business .
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These laws and regulations include anti-bribery laws, such as the U.S.
−Removed: Foreign Corrupt Practices Act, the U.K.
−Removed: Bribery Act, local laws prohibiting corrupt payments to government officials, and local laws relating to procurement, contracting, and antitrust.
+Added: Foreign Corrupt Practices Act, the UK Bribery Act, local laws prohibiting corrupt payments to government officials, and local laws relating to procurement, contracting, and antitrust.
These laws and regulations also include import and export requirements and economic and trade sanctions administered by the Office of Foreign Assets Control and the U.S.
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Our customers include the U.S.
−Removed: government and a number of state and local governments and government agencies.
+Added: government, state and local governments and government agencies.
There are a variety of risks in doing business with government entities, including:
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If, as a result of an audit or review, it is determined that we have failed to comply with these requirements, we may be subject to civil and criminal penalties or administrative sanctions, including contract termination, forfeiture of profits, fines, and suspensions or debarment from future government business and we may suffer harm to our reputation.
−Removed: Our customers also include a number of foreign governments and government agencies.
+Added: Our customers also include foreign governments and government agencies.
Similar procurement, budgetary, contract, and audit risks also apply to these entities.
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We store a substantial amount of customer and employee data, including personal data, on our networks and other systems and the cloud environments we manage.
−Removed: In addition, the types of data subject to protection as personal data in the European Union, the United States, and elsewhere have been expanding.
+Added: In addition, the types of data subject to protection as personal data in the European Union, China, the United States, and elsewhere have been expanding.
In recent years, the collection and use of personal data by companies have come under increased regulatory and public scrutiny, especially in relation to the collection and processing of sensitive data, such as healthcare, biometric, genetic, financial services, and children’s data, precise location data, and data regarding a person’s race or ethnic origins, political opinions, or religious beliefs.
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Furthermore, a new ePrivacy Regulation, regulating electronic communications, was proposed in 2017 and is under consideration by the European Commission, the European Parliament, and the European Council.
−Removed: More recently, the Court of Justice of
−Removed: the European Union (“CJEU”) invalidated the U.S.-EU Privacy Shield in July 2020.
+Added: More recently, the Court of Justice of the European Union (“CJEU”) invalidated the U.S.-EU Privacy Shield in July 2020.
The U.S.-EU Privacy Shield provided a mechanism to lawfully transfer personal data from the European Union to the United States and certain other countries.
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In addition, the required terms for contracts containing SCCs along with recommended supplemental provisions are changing and may require us to assume additional obligations, otherwise inhibit or restrict our ability to undertake certain activities, or incur additional costs related to data protection.
+Added: In addition, in June 2021, the European Data Protection Board (“EDPB”) issued a new set of SCCs and formal recommendations on measures to ensure compliance with the EU data protection requirements when transferring personal data outside of the European Economic Area (the “EDPB Recommendations”).
+Added: The new SCCs place obligations on us in relation to government authorities’ access requests in respect of personal data transferred under the SCCs.
+Added: The EDPB Recommendations are designed to be read in tandem with the new SCCs and set out new requirements for organizations to assess third countries and identify appropriate supplementary data protection and security measures to be implemented on a case-by-case basis where needed.
+Added: The rules involving this alternative SCC data transfer option are continually undergoing revision and this transfer mechanism may also be declared invalid (or require us to change our business practices) in the future, requiring us to provide an alternative means of data transfer or implement significant changes in our data security and protection practices.
+Added: In addition, the required terms for contracts
+Added: containing SCCs along with recommended supplemental provisions are changing and may require us to assume additional obligations, otherwise inhibit or restrict our ability to undertake certain activities, or incur additional costs related to data protection.
Similar requirements are also coming into force in other countries.
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In China, we may also be subject to the Cybersecurity Law that went into effect in June 2017 and the revision of the Personal Information Security Specification that went into effect in October 2020, which have broad but uncertain application and impose a number of new privacy and data security obligations.
−Removed: China is also implementing new legislation on the protection of privacy and personal data, including a Personal Information Protection Law and a Data Security Law that is scheduled to become effective in September 2021 and may impose new obligations on us.
+Added: China also adopted new legislation on the protection of privacy and personal data in November 2021, including the Personal Information Protection Law and Data Security Law that impose new data processing obligations on us.
+Added: Under these new regulations, if an entity operating in China violates the law, regulators may order it to take corrective actions, issue warnings, confiscate illegal income, suspend services, revoke operating permits or business licenses, or issue a fine.
+Added: The fine can be up to ¥50 million or 5 percent of an organization’s annual revenue for the prior financial year.
Other countries are considering new or expanded laws governing privacy and data security that may impact our business practices.
−Removed: The state of California has also adopted a new comprehensive privacy law, the California Consumer Privacy Act (“CCPA”), which took effect in January 2020 and became enforceable in July 2020.
+Added: These developments, including in China, may impact our activities with our customers, other MicroStrategy entities and vendors, and require us to take appropriate steps in light of data transfers between the U.S.
+Added: and the EU (and the UK), as well as transfers and onward transfers of personal data from the EU to other non-EU countries.
+Added: The state of California has also adopted a comprehensive privacy law, the California Consumer Privacy Act (“CCPA”), which took effect in January 2020 and became enforceable in July 2020.
We may be required to devote substantial resources to implement and maintain compliance with the CCPA, and noncompliance could result in regulatory investigations and fines or private litigation.
−Removed: Moreover, in November 2020, California voters approved a new privacy law, the California Privacy Rights Act (“CPRA”), which amends the CCPA to create new privacy rights and obligations in California.
+Added: Moreover, in November 2020, California voters approved a privacy law, the California Privacy Rights Act (“CPRA”), which amends the CCPA to create privacy rights and obligations in California.
Virginia and Colorado have passed laws similar to the CCPA and several other states are considering bills similar to the CCPA or other generally applicable privacy laws that may impose additional costs and obligations on us.
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Third parties may also conduct attacks designed to prevent access to critical data or systems through ransomware or temporarily deny customers access to our cloud environments.
−Removed: We have experienced attempts by third parties to identify and exploit software and service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our or our customers’ or service providers’ cloud environments, networks, and other systems.
−Removed: Security measures that we or our third-party service providers have implemented may not be effective against all current or future security threats.
+Added: We, and our service providers, may experience and have experienced attempts by third parties to identify and exploit software and service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our or our customers’ or service providers’ cloud environments, networks, and other systems.
+Added: Security measures that we or our third-party service providers have implemented may not be effective against all current or future security threats, including any potential threats from the exploitation of the log4j or SpringShell vulnerabilities.
Because there are many different security breach techniques and such techniques continue to evolve, we may be unable to anticipate, detect, or mitigate attempted security breaches and implement adequate preventative measures.
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The market price of our class A common stock has historically been volatile and this volatility has been significant in recent periods.
−Removed: Since August 11, 2020, the date on which we announced our initial purchase of bitcoin, the closing price of our class A common stock has increased from $123.62 as of August 10, 2020, the last trading day before our announcement, to $715.02 as of October 27, 2021.
+Added: Since August 11, 2020, the date on which we announced our initial purchase of bitcoin, the closing price of our class A common stock has increased from $123.62 as of August 10, 2020, the last trading day before our announcement, to $365.91 as of May 2, 2022.
The market price of our class A common stock may fluctuate widely in response to various factors, some of which are beyond our control.
These factors include, but are not limited to:
−Removed: fluctuations in the price of bitcoin, of which we have significant holdings and expect to continue to make significant purchases of;
−Removed: announcements about our transactions in bitcoin;
+Added: fluctuations in the price of bitcoin, of which we have significant holdings, and in which we expect we will continue to make significant purchases and announcements about our transactions in bitcoin;
+Added: changes to our bitcoin acquisition strategy;
+Added: announcement of additional capital raising transactions;
regulatory, commercial and technical developments related to bitcoin or the bitcoin blockchain;
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Holders of our class A common stock generally have the same rights as holders of our class B common stock, except that holders of class A common stock have one vote per share while holders of class B common stock have ten votes per share.
−Removed: As of October 21, 2021, holders of our class B common stock owned 1,964,025 shares of class B common stock, or 70.1% of the total voting power.
−Removed: As of October 21, 2021, Mr.
+Added: As of April 26, 2022, holders of our class B common stock owned 1,964,025 shares of class B common stock, or 67.8% of the total voting power.
+Added: As of April 26, 2022, Mr.
Saylor, our Chairman of the Board of Directors & Chief Executive Officer, beneficially owned 1,961,668 shares of class B common stock, or 67.7% of the total voting power.
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We may issue and sell additional shares of class A common stock, convertible notes, or other securities in subsequent offerings to raise capital or issue shares for other purposes, including in connection with the acquisition of additional bitcoin.
−Removed: For example, we may sell shares of our class A common stock having an aggregate offering price of up to approximately $596.0 million from time to time through Jefferies, acting as our agent, under the Sale Agreement.
We cannot predict:
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Our level and terms of indebtedness could adversely affect our ability to raise additional capital to further execute on our bitcoin acquisition strategy, fund our enterprise analytics software operations, and take advantage of new business opportunities
−Removed: As of September 30, 2021, we had $1.7 billion aggregate principal amount of indebtedness under the Convertible Notes and $500.0 million aggregate principal amount of indebtedness under the 2028 Secured Notes.
+Added: As of March 31, 2022, we had $1.7 billion aggregate principal amount of indebtedness under the Convertible Notes, $500.0 million aggregate principal amount of indebtedness under the 2028 Secured Notes, and $205.0 million of outstanding borrowings under the 2025 Secured Term Loan.
Our substantial indebtedness and interest expense could have important consequences to us, including:
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In the event of an event of default under any of our indebtedness, the holders of the defaulted indebtedness could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest and, in the case of our 2028 Secured Notes, enforce their security interests on substantially all of our assets and the assets of our subsidiary guarantors, including any bitcoins or other digital assets acquired on or after the closing of our sale of the 2028 Secured Notes, but excluding our bitcoin acquired prior to that date (“Prior Bitcoins”), as well as bitcoins and digital assets acquired with the proceeds from the sale of Prior Bitcoins and bitcoins acquired from proceeds of debt secured by Prior Bitcoins.
+Added: Similarly, in the event of an event of default under the Credit and Security Agreement, the lender thereunder could elect to declare all outstanding loan principal under the 2025 Secured Term Loan to be due and payable, together with accrued and unpaid interest, and enforce its security interest on the $5.0 million cash reserve account and the bitcoin held in the account securing the borrowings under the Credit and Security Agreement.
Any of these events could in turn result in cross-defaults under our other indebtedness.
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The 2028 Secured Notes have a stated maturity date of June 15, 2028, but include a springing maturity feature that will cause the stated maturity date to spring ahead to the date that is 91 days prior to the existing maturity date of the 2025 Convertible Notes (which is September 15, 2025), the 2027 Convertible Notes (which is November 16, 2026), or the maturity date of any future convertible debt that we may issue that is then outstanding, unless on such dates we meet specified liquidity requirements or less than $100,000,000 of aggregate principal amount of the 2025 Convertible Notes, the 2027 Convertible Notes, or such future convertible debt, as applicable, remains outstanding.
−Removed: If such springing maturity feature is triggered, we will be required to pay all amount outstanding under the 2028 Secured Notes sooner than they would otherwise be due, we may not have sufficient funds available to pay such amounts at that time, and we may not be able to raise additional funds to pay such amounts on a timely basis, on terms we find acceptable, or at all.
−Removed: We may not be able to finance required repurchases of the 2028 Secured Notes or the Convertible Notes upon a change of control or a fundamental change
+Added: If such springing maturity feature is triggered, we will be required to pay all amounts outstanding under the 2028 Secured Notes sooner than they would otherwise be due, we may not have sufficient funds available to pay such amounts at that time, and we may not be able to raise additional funds to pay such amounts on a timely basis, on terms we find acceptable, or at all.
+Added: Our MacroStrategy subsidiary has no independent operations other than holding bitcoin and financing activities and will depend on cash contributions from us and/or sales of bitcoin to meet its obligations under the Credit and Security Agreement under which the 2025 Secured Term Loan was issued
+Added: Our MacroStrategy subsidiary primarily holds bitcoin, a $5.0 million cash reserve account held as collateral for the 2025 Secured Term Loan, and certain cash proceeds retained from the 2025 Secured Term Loan.
+Added: As of March 31, 2022, MacroStrategy had no operations other than purchasing and holding bitcoin and those related to the administration and repayment of the loan principal outstanding and interest due under the Credit and Security Agreement.
+Added: MacroStrategy's principal sources of funds to make payments pursuant to the Credit and Security Agreement are capital contributions, loans or other cash payments from us, which may be restricted by the covenants governing the 2028 Secured Note, and sales of bitcoin, which in turn may be restricted due to the requirement in the Credit and Security Agreement requiring MacroStrategy to maintain the LTV Ratio at or below 50%.
+Added: Accordingly, MacroStrategy may not have sufficient funds available to pay amounts due under the Credit and Security Agreement when they become due, and MacroStrategy and we may not be able to raise additional funds to pay such amounts on a timely basis, on terms we find acceptable, or at all.
+Added: MacroStrategy may be required to contribute additional bitcoin to the collateral package securing the Credit and Security Agreement or repay certain amounts outstanding thereunder prior to its stated maturity date, if the value of bitcoin declines
+Added: The Credit and Security Agreement has a stated maturity date of March 23, 2025, but includes a requirement that MacroStrategy maintain a LTV Ratio of 50% or less, which amounts to at least $410.0 million worth of bitcoin being required to be held in the account securing the borrowings under the Credit and Security Agreement based on the loan principal outstanding as of March 31, 2022.
+Added: If the price of bitcoin drops such that the LTV Ratio exceeds 50%, MacroStrategy will be required to either deposit additional bitcoin into such account or prepay a portion of the outstanding borrowings under the Credit and Security Agreement such that the LTV Ratio is reduced to 25% or less (or 35% or less, provided that in such case the interest rate on the outstanding borrowings will be increased by 25 basis points until such time as the LTV Ratio is reduced to 25% or less).
+Added: If the LTV Ratio exceeds 50% at any time prior to the maturity date of the Credit and Security Agreement, MacroStrategy may be required to repay some of the principal outstanding under the Credit and Security Agreement sooner than such amounts would otherwise be due, MacroStrategy may not have sufficient funds available to pay such amounts at that time or the ability to sell bitcoin to generate additional funds, and MacroStrategy and we may not be able to raise additional funds to pay such amounts on a timely basis, on terms we find acceptable, or at all.
+Added: We may not be able to finance required repurchases of the 2028 Secured Notes or the Convertible Notes upon a change of control or a fundamental change or the repayment of amounts due under the 2025 Secured Term Loan upon a change of control
Upon a change of control or a fundamental change as defined in the indentures governing the 2028 Secured Notes and the Convertible Notes, the holders of such notes will have the right to require us to offer to purchase all of the applicable notes then outstanding at a price equal to 101% of the principal amount of the 2028 Secured Notes and 100% of the principal amount of the Convertible Notes, respectively, plus, in each case, accrued and unpaid interest, if any, to, but excluding, the repurchase date.
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If a change of control or a fundamental change occurs, we may not have enough assets to satisfy all obligations under the indentures governing the 2028 Secured Notes and the Convertible Notes.
−Removed: Upon the occurrence of a change of control or a fundamental change we could seek to refinance the indebtedness under the 2028 Secured Notes or the Convertible Notes or obtain a waiver from the applicable note holders.
+Added: Upon the occurrence of a change of control or a fundamental change we could seek to refinance the indebtedness under the 2028 Secured Notes or the Convertible Notes or obtain a waiver from the applicable
+Added: note holders.
However, we may not be able to obtain a waiver or refinance the applicable notes on commercially reasonable terms, if at all.
Moreover, the exercise by holders of the 2028 Secured Notes or the Convertible Notes of their right to require us to repurchase such notes could cause a default under future debt agreements, even if the change of control or fundamental change itself does not, due to the financial effect of such repurchase on us.
+Added: Similarly, the Credit and Security Agreement under which the 2025 Secured Term Loan was issued includes customary change-of-control provisions, providing the lender with a right to declare all outstanding loan principal to be immediately due and payable, together with accrued and unpaid interest, in connection with a change of control (as such term is defined therein), including the sale of all or substantially all of our or MacroStrategy’s assets.
+Added: In order to obtain sufficient funds to repay the amounts due under the Credit and Security Agreement, we expect that we or MacroStrategy would need to refinance the amount due and may not be able do so on reasonable terms, if at all.
We may not have the ability to raise the funds necessary to settle for cash conversions of the Convertible Notes
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If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
−Removed: 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
−Removed: outstanding principal of the applicable Convertible N otes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
+Added: 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 applicable Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
We rely on the receipt of funds from our subsidiaries in order to meet our cash needs and service our indebtedness, including the 2028 Secured Notes and the Convertible Notes, and certain of our subsidiaries holding digital assets may not provide any dividends, distributions, or other payments to us to fund our obligations and meet our cash needs
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Our MacroStrategy LLC subsidiary that holds the bitcoin that we owned prior to the issuance of the 2028 Secured Notes and the bitcoin that we acquired from the proceeds of the Open Market Offering is not obligated to provide and may in the future be prohibited from providing any dividends, distributions, or other payments to us to fund our obligations and meet our cash needs.
−Removed: MacroStrategy LLC holds digital assets that as of September 30, 2021 had a carrying value of $2.014 billion on our Consolidated Balance Sheet, representing 67.4% of our consolidated total assets at such date.
+Added: MacroStrategy LLC holds digital assets that as of March 31, 2022 had a carrying value of $2.484 billion on our Consolidated Balance Sheet, representing 68.3% of our consolidated total assets at such date.
In addition, dividends, distributions, or other payments, as well as other transfers of assets, between our subsidiaries and from our subsidiaries to us may be subject to legal, regulatory, or contractual restrictions, which may materially adversely affect our ability to transfer cash within our consolidated companies and our ability to meet our cash needs and service our indebtedness.
4 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.