What changed in this filing

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Item 1. Legal Proceedings

2023-08-01 compared with 2023-05-01 · 213 added, 134 removed, 689 unchanged (33% of the section changed)

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On August 31, 2022, the District, through its Office of the Attorney General, filed a civil complaint in the Superior Court of the District of Columbia naming as defendants (i) Michael J.

Saylor, the Chairman of our Board of Directors and our Executive Chairman, in his personal capacity, and (ii) the Company.

Saylor, the Chairman of our Board of Directors and our Executive Chairman, in his personal capacity, and (ii) MicroStrategy.

The District sought, among other relief, monetary damages under the District’s False Claims Act for the alleged failure of Mr.

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On April 13, 2023, the District, through its Office of the Attorney General, filed a motion to amend its complaint to attempt to restore claims under the False Claims Act against both Mr.

Saylor and MicroStrategy, attaching a proposed amended complaint to its motion.

The proposed amended complaint alleges that MicroStrategy violated the District’s False Claims Act by making and using false records and statements in the form of false withholding filings with the District Office of Tax and Revenue.

The proposed amended complaint also alleges that Mr.

Saylor and MicroStrategy.

On May 10, 2023, the court granted the District’s motion to amend its complaint, reinstating MicroStrategy as a defendant in the case.

The amended complaint alleges that MicroStrategy violated the District’s False Claims Act by making and using false records and statements in the form of false withholding filings with the District Office of Tax and Revenue.

The amended complaint also alleges that Mr.

Saylor violated the District’s False Claims Act by making and using false records and statements and by causing MicroStrategy to make and use false records and statements.

On June 7, 2023, Mr.

Saylor and MicroStrategy filed a motion to dismiss the District’s amended complaint with prejudice.

On July 5, 2023, the District filed an opposition to the motion to dismiss made by Mr.

Saylor and MicroStrategy.

On July 19, 2023, Mr.

Saylor and MicroStrategy filed a reply in support of their motion to dismiss.

On July 31, 2023, the court denied Mr.

Saylor’s and MicroStrategy’s motion to dismiss the amended complaint.

The final outcome of this matter is not presently determinable.

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We may not be able to maintain or increase profitability in future periods

We generated net income for the three months ended March 31, 2023, due in part to a $453.2 million tax benefit generated primarily from the release of a valuation allowance on our deferred tax asset related to the impairment on our bitcoin holdings (attributable to the increase in market value of bitcoin as of March 31, 2023 compared to December 31, 2022) and a $44.7 million gain on debt extinguishment resulting from the repayment of the 2025 Secured Term Loan, however, we may not be able to maintain or increase profitability in future periods.

We generated net income for the six months ended June 30, 2023, due in part to a $513.5 million tax benefit generated primarily from the release of the remaining valuation allowance on our deferred tax asset related to the impairment on our bitcoin holdings (attributable to the increase in market value of bitcoin as of June 30, 2023 compared to December 31, 2022) and a $44.7 million gain on debt extinguishment resulting from the repayment of the 2025 Secured Term Loan, however, we may not be able to maintain or increase profitability in future periods.

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 additional 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.

As of March 31, 2023, we had $651.5 million of deferred tax assets, which reflects a $55.1 million valuation allowance.

As of June 30, 2023, we had $719.0 million of deferred tax assets, which reflects a $2.6 million valuation allowance.

The largest deferred tax asset relates to the impairment on our bitcoin holdings.

Changes to the valuation allowance against the deferred tax asset are largely dependent on the change in the market value of bitcoin from the previous reporting date.

If the market value of bitcoin at a future reporting date is less than the market value of bitcoin at the previous reporting date, we may be required to increase further the valuation allowance against the deferred tax asset.

If the market value of bitcoin at a future reporting date is less than the market value of bitcoin at the previous reporting date, we may be required to record a valuation allowance against the deferred tax asset.

Additionally, if we are unable to maintain or increase profitability in the future, we may also be required to increase the valuation allowance against the remaining deferred tax assets.

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Changes in the tax laws of foreign jurisdictions could arise, including as a result of the project undertaken by the Organisation for Economic Co-operation and Development (“OECD”) to combat base erosion and profit shifting (“BEPS”).

The OECD, which represents a coalition of member countries, has issued recommendations that, in some cases, make substantial changes to numerous long-standing tax positions and principles.

The OECD, which represents a coalition of member countries, has issued recommendations that, in some cases, make substantial changes to numerous long-standing

tax positions and principles.

These changes, many of which have been adopted or are under active consideration by OECD members and/or other countries, could increase tax uncertainty and may adversely affect our provision for income taxes.

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Our bitcoin holdings significantly impact our financial results.

If we continue to increase our overall holdings of bitcoin in the future, our bitcoin holdings will have a greater impact on our financial results and the market price of our class A common stock.

Our bitcoin holdings have significantly affected our financial results and if we continue to increase our overall holdings of bitcoin in the future, they will have an even greater impact on our financial results and the market price of our class A common stock.

See “Risks Related to Our Bitcoin Acquisition Strategy and Holdings –

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Some investors and other market participants may disagree with our bitcoin acquisition strategy or actions we undertake to implement it.

If bitcoin prices were to fall further or our bitcoin acquisition strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our class A common stock would be materially adversely impacted.

If bitcoin prices were to decrease or our bitcoin acquisition strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our class A common stock would be materially adversely impacted.

We are subject to counterparty risks, including in particular risks relating to our custodians.

Although we have implemented various measures that are designed to mitigate our counterparty risks, including by storing substantially all of the bitcoin we own in custody accounts at U.S.-based, institutional-grade custodians and negotiating contractual arrangements intended to establish that our property interest in custodially-held bitcoin is not subject to claims of the custodian’s creditors, applicable insolvency law is not fully developed with respect to the holding of digital assets in custodial accounts.

with respect to the holding of digital assets in custodial accounts.

If our custodially-held bitcoin were nevertheless considered to be the property of our custodian’s estate in the event that the custodian enters bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such bitcoin and this may ultimately result in the loss of the value related to some or all of such bitcoin.

Even if we are able to prevent our

bitcoin from being considered the property of the custodian’s bankruptcy estate as part of an insolvency proceeding, it is possible that we would still be delayed or may otherwise experience difficulty in accessing our bitcoin held by the affected custodian during the pendency of the insolvency proceedings.

Even if we are able to prevent our bitcoin from being considered the property of the custodian’s bankruptcy estate as part of an insolvency proceeding, it is possible that we would still be delayed or may otherwise experience difficulty in accessing our bitcoin held by the affected custodian during the pendency of the insolvency proceedings.

Any such outcome could have a material adverse effect on our financial condition and the market price of our class A common stock.

The broader digital assets industry is subject to counterparty risks, which could adversely impact the adoption rate and use of bitcoin.

A series of recent high-profile bankruptcies, closures and liquidations relating to companies operating in the digital asset industry and certain of their affiliates, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital and the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, have highlighted the counterparty risks applicable to digital asset ownership and trading.

Such developments have, in the short-term, likely negatively impacted the adoption rate and use of bitcoin.

Additional bankruptcies, closures, liquidations, or regulatory enforcement or other regulatory actions involving participants in the digital assets industry in the future may further negatively impact the adoption rate and use of bitcoin.

The broader digital assets industry is subject to counterparty risks, which could adversely impact the adoption rate, price, and use of bitcoin.

A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Inc.

and Binance Holdings Ltd., and the cease-and-desist order issued by Nevada’s Department of Business and Industry to Prime Trust, have highlighted the counterparty risks applicable to owning and transacting in digital assets.

Although these bankruptcies, closures, liquidations and other events have not resulted in any loss or misappropriation of our bitcoin, nor have such events materially impacted our access to our bitcoin, they have, in the short-term, likely negatively impacted the adoption rate and use of bitcoin.

Additional bankruptcies, closures, liquidations, regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further negatively impact the adoption rate, price, and use of bitcoin.

Changes in our ownership of bitcoin could have accounting, regulatory and other impacts.

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For example, on March 23, 2023, the Financial Accounting Standards Board (“FASB”) issued an exposure draft for comment that would cause in-scope crypto assets (such as bitcoin) to be measured at fair value, with fair value changes recorded in current period earnings.

The comment letter period for the exposure draft ended on June 6, 2023.

If the FASB issues a final ASU substantially similar to the exposure draft, the change in presentation could increase the volatility of our reported results of operations as well as affect the carrying value of our bitcoin on our balance sheet.

The broader digital assets industry, including the technology associated with digital assets, the rate of adoption and development of, and use cases for, digital assets, market perception of digital assets, and the legal, regulatory, and accounting treatment of digital assets are constantly developing and changing, and there may be additional risks in the future that are not possible to predict.

The price of bitcoin may be influenced by legal, commercial, technical and industry factors that are highly uncertain, and fluctuations in the price of bitcoin are likely to influence our financial results and the market price of our class A common stock

Fluctuations in the price of bitcoin have in the past and are likely to continue to influence our financial results and the market price of our class A common stock.

The price of bitcoin can fluctuate for a variety of reasons, and fluctuations in the price of bitcoin have in the past influenced and are likely to continue to influence our financial results and the market price of our class A common stock

Fluctuations in the price of bitcoin have in the past influenced and are likely to continue to influence our financial results and the market price of our class A common stock.

Our financial results and the market price of our class A common stock would be adversely affected, and our business and financial condition would be negatively impacted, if the price of bitcoin decreased substantially (as it has in the past), including as a result of:

decreased user and investor confidence in bitcoin;

decreased user and investor confidence in bitcoin, including due to the various factors described herein;

investment and trading activities of highly active retail and institutional users, speculators, miners and investors, including actual or perceived manipulation of the market for bitcoin;

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 of bitcoin or the digital asset industry, including in connection with expected or pending criminal or regulatory enforcement actions against, or bankruptcy proceedings of, industry participants;

negative public sentiment related to the actual or perceived environmental impact of bitcoin and related activities, including environmental concerns raised by private individuals, governmental and non-governmental organizations, and other actors related to the energy resources consumed in the bitcoin mining process;

negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, bitcoin or the broader digital assets industry, for example, (i) public perception that bitcoin can be used as a vehicle to circumvent sanctions, including sanctions imposed on Russia or certain regions related to the ongoing conflict between Russia and Ukraine;

(ii) expected or pending civil, criminal, regulatory enforcement or other high profile actions against major participants in the bitcoin ecosystem, including the SEC’s enforcement actions against Coinbase, Inc.

and Binance Holdings Ltd.;

(iii) additional filings for bankruptcy protection or bankruptcy proceedings of major digital asset industry participants, such as the bankruptcy proceeding of FTX Trading and its affiliates;

and (iv) the actual or perceived environmental impact of bitcoin and related

activities, including environmental concerns raised by private individuals, governmental and 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 or prospects of bitcoin;

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government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets;

the extent the decrease in the price of such other digital assets or the unavailability of such stablecoins may cause a decrease in the price of bitcoin or adversely affect investor confidence in digital assets generally;

a decrease in the price of other digital assets, including stablecoins, or the crash or unavailability of stablecoins that are used as a medium of exchange for bitcoin purchase and sale transactions, such as the crash of the stablecoin Terra USD in 2022, to the extent the decrease in the price of such other digital assets or the unavailability of such stablecoins may cause a decrease in the price of bitcoin or adversely affect investor confidence in digital assets generally;

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.

the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custodians, trading venues, lending platforms, investment funds, or other digital asset industry participants, such as the filing for bankruptcy protection by digital asset trading venues FTX Trading and BlockFi and digital asset lending platforms Celsius Network and Voyager Digital Holdings in 2022, the ordered liquidation of the digital asset investment fund Three Arrows Capital in 2022, the announced liquidation of Silvergate Bank in 2023 and the government-mandated closure and sale of Signature Bank in 2023;

disruptions, failures, unavailability, or interruptions in service of trading venues for bitcoin, such as, for example, the announcement by the digital asset exchange FTX Trading that it would freeze withdrawals and transfers from its accounts and subsequent filing for bankruptcy protection and the recent SEC enforcement action brought against Binance Holdings Ltd., which initially sought to freeze all of its assets during the pendency of the enforcement action;

the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custodians, trading venues, lending platforms, investment funds, or other digital asset industry participants, such as the filing for bankruptcy protection by digital asset trading venues FTX Trading and BlockFi and digital asset lending platforms Celsius Network and Voyager Digital Holdings in 2022, the ordered liquidation of the digital asset investment fund Three Arrows Capital in 2022, the announced liquidation of Silvergate Bank in 2023, the government-mandated closure and sale of Signature Bank in 2023, and the cease-and-desist order issued by the Nevada Department of Business and Industry to Prime Trust, LLC in 2023;

regulatory, legislative, enforcement and judicial actions that adversely affect the price, ownership, transferability, trading volumes, legality or public perception of bitcoin, or that adversely affect the operations of or otherwise prevent digital asset custodians, trading venues, lending platforms or other digital assets industry participants from operating in a manner that allows them to continue to deliver services to the digital assets industry;

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;

who validate bitcoin transactions, or increases in the costs associated with bitcoin mining, including increases in electricity costs and hardware and software used in mining, that may cause a decline in support for the bitcoin network;

transaction congestion and fees associated with processing transactions on the bitcoin network;

macroeconomic changes, such as changes in the level of interest rates and inflation, fiscal and monetary policies of governments, trade restrictions, and fiat currency devaluations;

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;

developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography used by the Bitcoin blockchain becoming insecure or ineffective;

changes in 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 Russia 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 laws and regulations to such assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of bitcoin.

federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations that could materially impact the price of bitcoin or the ability of individuals or institutions such as us to own or transfer bitcoin.

Bitcoin and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty

Bitcoin and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price.

The application of securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of bitcoin.

federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of bitcoin or the ability of individuals or institutions such as us to own or transfer bitcoin.

On March 9, 2022, President Biden signed an executive order relating to cryptocurrencies.

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Department of Treasury, the Department of Justice, and the Department of Commerce.

Among other things, the framework encourages regulators to pursue enforcement actions, issue guidance and rules to address current and emergent risks, support the development and use of innovative technologies by payment providers to increase access to instant payments, consider creating a federal framework to regulate nonbank payment providers, and evaluate whether to call upon Congress to amend the Bank Secrecy Act and laws against unlicensed money transmission to apply explicitly to digital asset service providers.

On September 8, 2022, the White House Office of Science and Technology Policy issued a report in coordination with other federal agencies relating to the climate and energy implications of digital assets, including bitcoin, in the United States.

Among its finding are that digital assets are energy intensive and drive significant environmental impacts, and the report recommends further study of the environmental impact of digital assets and the development of environmental performance regulations for digital asset miners, which may include limiting or eliminating digital assets that use high energy intensity consensus mechanisms, including the proof-of-work consensus mechanisms on which the Bitcoin blockchain is based.

amend the Bank Secrecy Act and laws against unlicensed money transmission to apply explicitly to digital asset service providers.

On April 4, 2022, SEC Chair Gary Gensler announced that he has asked SEC staff to work (i) to register and regulate digital asset platforms like securities exchanges;

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Similarly, foreign government authorities have recently expanded their efforts to restrict certain activities related to bitcoin and other digital assets.

In the United Kingdom, in February 2023, His Majesty’s Treasury issued its first comprehensive set of rules designed to regulate digital assets.

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trading systems.

The comment period will remain open until the later of June 13, 2023, or 30 days after the publication of the proposed rule in the Federal Register , after which the SEC will determine whether to adopt the revised definition.

The comment period is now closed.

The SEC may determine whether to adopt the revised definition after an evaluation of comments provided during the comment period.

If adopted in its proposed form, the new definition would have a sweeping impact on digital asset trading venues and other digital asset industry participants.

On June 5, 2023, the SEC filed a complaint against Binance Holdings Ltd.

and other affiliated entities in federal district court for the District of Columbia, alleging, among other claims related to the operation of the affiliates and their platforms, that:

(i) the Binance entities commingled and diverted customer assets;

(ii) various affiliates of Binance Holdings Ltd.

operated as exchanges, brokers, dealers and clearing agencies without registration under the Exchange Act;

(iii) Binance Holdings Ltd.

engaged in the unregistered offer and sale of securities;

(iv) affiliates of Binance Holdings Ltd.

operated in a manner to evade U.S.

federal securities laws, and (v) affiliates of Binance Holdings Ltd.

misled customers and investors concerning the existence and adequacy of market surveillance and controls to detect and prevent manipulative trading.

On June 6, 2023, the SEC filed a complaint against Coinbase, Inc.

and other affiliated entities in federal district court in the Southern District of New York, alleging, among other claims:

(i) that Coinbase, Inc.

violated the Exchange Act by failing to register with the SEC as a national securities exchange, broker-dealer, and clearing agency, in connection with activities involving certain identified digital assets that the SEC’s complaint alleges are securities, (ii) that Coinbase, Inc.

violated the Securities Act by failing to register with the SEC the offer and sale of securities in connection with its staking program, and (iii) that Coinbase Global Inc.

is jointly and severally liable as a control person under the Exchange Act for Coinbase Inc.’s violations of the Exchange Act to the same extent as Coinbase Inc.

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.

Moreover, the risks of engaging in a bitcoin acquisition 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 strategy, such as the unavailability on acceptable terms, or increased cost, of director and officer liability insurance.

Moreover, the risks of engaging in a bitcoin acquisition strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.

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.

The pace of worldwide growth in the adoption and use of bitcoin may depend, for instance, on public familiarity with digital assets, ease of buying and accessing bitcoin, institutional demand for bitcoin as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for bitcoin as a means of payment, and the availability and popularity of alternatives to bitcoin.

asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for bitcoin as a means of payment, and the availability and popularity of alternatives to bitcoin.

Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term.

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The liquidity of bitcoin may also be reduced and damage to the public perception of bitcoin may occur, if financial institutions were to deny or limit banking services to businesses that hold bitcoin, provide bitcoin-related services or accept bitcoin as payment, which could also decrease the price of bitcoin.

Liquidity of bitcoin may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for bitcoin and other digital assets.

Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our bitcoin holdings

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If the carrying value of a bitcoin exceeds that lowest price at any time during the quarter, an impairment loss is deemed to have occurred with respect to that bitcoin in the amount equal to the difference between its carrying value and such lowest price, and subsequent increases in the price of bitcoin will not affect the carrying value of our bitcoin.

Gains (if any) are not recorded

until realized upon sale, at which point they would be presented net of any impairment losses.

Gains (if any) are not recorded until realized upon sale, at which point they would be presented net of any impairment losses.

In determining the gain to be recognized upon sale, we calculate the difference between the sale price and carrying value of the specific bitcoin sold immediately prior to sale.

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In addition, on March 23, 2023, the FASB issued an exposure draft for comment that would cause in-scope crypto assets (such as bitcoin) to be measured at fair value, with fair value changes recorded in current period earnings.

The comment letter period for the exposure draft ended on June 6, 2023.

At March 31, 2023, we carried $2.000 billion of digital assets on our balance sheet, consisting of approximately 140,000 bitcoins and reflecting $2.172 billion in cumulative impairment losses attributable to bitcoin trading price fluctuations, and held $94.3 million in cash and cash equivalents, compared to a carrying value of $2.896 billion of digital assets, consisting of approximately 129,218 bitcoins, and $92.7 million in cash and cash equivalents at March 31, 2022.

Digital asset impairment losses of $18.9 million incurred during the three months ended March 31, 2023 represented 16.5% of our operating expenses and were included in our net income of $461.2 million for the three months ended March 31, 2023, compared to $170.1 million in digital asset impairment losses incurred during the three months ended March 31, 2022 which represented 64.5% of our operating expenses and contributed to our net loss of $130.8 million for the three months ended March 31, 2022.

At June 30, 2023, we carried $2.323 billion of digital assets on our balance sheet, consisting of approximately 152,333 bitcoins and reflecting $2.196 billion in cumulative impairment losses attributable to bitcoin trading price fluctuations, and held $66.0 million in cash and cash equivalents, compared to a carrying value of $1.988 billion of digital assets, consisting of approximately 129,699 bitcoins, and $69.4 million in cash and cash equivalents at June 30, 2022.

Digital asset impairment losses of $43.1 million incurred during the six months ended June 30, 2023 represented 18.4% of our operating expenses and were included in our net income of $483.4 million for the six months ended June 30, 2023, compared to $1.088 billion in digital asset impairment losses incurred during the six months ended June 30, 2022 which represented 85.1% of our operating expenses and contributed to our net loss of $1.193 billion for the six months ended June 30, 2022.

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.

As a result, volatility in our earnings in future periods may be significantly more than what we experienced in prior periods.

Changes in securities regulations, or the adoption of new laws or regulations, relating to bitcoin could adversely affect the price of bitcoin or our ability to transact in or own bitcoin, which may adversely impact the market price of our class A common stock

Changes in securities regulations, or the adoption of new laws or regulations, relating to digital assets generally or bitcoin specifically could adversely affect the price of bitcoin or our ability to transact in or own bitcoin, which may adversely impact the market price of our class A common stock

Although bitcoin and other digital assets have experienced a surge of investor attention since bitcoin was invented in 2008, investors in the United States currently have limited means to gain direct exposure to bitcoin through traditional investment channels, and instead generally must hold bitcoin through “hosted”

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These premiums have at times been substantial, although such vehicles have recently traded at a discount to NAV.

One reason that such vehicles have in the past traded at substantial premium to NAV may be because of the relative scarcity of traditional investment vehicles providing investment exposure to bitcoin.

To the extent investors view the value of our class A common stock as providing such exposure, it is possible that the value of our class A common stock may also include a premium over the value of our bitcoin.

Any such premium may increase or decrease in different market conditions and the value of our class A common stock could also trade at a discount relative to the value of our bitcoin.

One reason that such vehicles have in the past traded at a substantial premium to NAV may be because of the relative scarcity of traditional investment vehicles providing investment exposure to bitcoin.

To the extent investors view our class A common stock as providing such exposure, it is possible that the value of our class A common stock may also include a premium over the value of our bitcoin.

Any such premium may increase or decrease in different market conditions and our class A common stock could also trade at a discount relative to the value of our bitcoin, including if one or more alternative investment vehicles that provide spot market exposure to bitcoin are approved to list their shares on a U.S.

national securities exchange.

Another reason for the substantial premium to NAV exhibited in the past by the trading prices of shares of some bitcoin investment vehicles is that such vehicles operate in a manner similar to closed-end investment funds as opposed to exchange-traded funds (“ETFs”) and therefore do not continuously offer to create and redeem their shares at NAV in exchange for bitcoin.

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national securities exchange to permit them to function in the manner of an ETF with continuous share creation and redemption at NAV, the SEC has generally declined to approve any such listing, citing concerns over the surveillance of trading in markets for the underlying bitcoin as well as concerns about fraud and manipulation in bitcoin trading markets.

Most recently, in June 2022 the SEC denied proposals from NYSE Arca, Inc.

to convert Grayscale Bitcoin Trust into a spot bitcoin ETF and to list and trade shares of the Bitwise Bitcoin ETF.

However, in October 2021, the SEC permitted the listing of ETFs that invest primarily in bitcoin futures contracts.

It is unclear as to whether or to what extent the existence of ETFs that

invest in bitcoin futures contracts 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.

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.

In addition to greatly simplifying the task of gaining investment exposure to bitcoin, the listing of a bitcoin ETF with continuous share creation and redemption at NAV would be expected to eliminate the NAV premiums currently exhibited by shares of investment vehicles that trade in the over-the-counter market.

For example, in June 2022 the SEC denied proposals from NYSE Arca, Inc.

to convert Grayscale Bitcoin Trust into a spot bitcoin exchange-traded product (“ETP”) and to list and trade shares of the Bitwise Bitcoin ETP.

However, in October 2021, the SEC permitted the listing of ETFs that invest primarily in bitcoin futures contracts, and on June 23, 2023, the SEC approved the first leveraged bitcoin futures ETF, 2x Bitcoin Strategy (BITX).

It is unclear as to whether or to what extent the existence of ETFs that invest in bitcoin futures contracts 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.

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 ETPs specializing in the direct acquisition and holding of bitcoin, allowing these funds to offer their shares directly to the public.

In addition to greatly simplifying the task of gaining investment exposure to bitcoin, the listing of a bitcoin ETP with continuous share creation and redemption at NAV would be expected to eliminate the NAV premiums currently exhibited by shares of investment vehicles that trade in the over-the-counter market.

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.

In addition, the introduction of the bitcoin futures focused ETFs and any future bitcoin focused ETFs on U.S.

In addition, the introduction of the bitcoin-futures-focused ETFs and any future bitcoin-focused ETPs 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.

As a result of the foregoing factors, to the extent investors view our class A common stock as linked to the value of our bitcoin holdings, the introduction of bitcoin ETFs on U.S.

exposure to bitcoin that would generally not be subject to federal income tax at the entity level as we are, or the other risk factors applicable to an operating business, such as ours.

As a result of the foregoing factors, to the extent investors view our class A common stock as linked to the value of our bitcoin holdings, the expansion of avenues for investing in bitcoin, including the listing of bitcoin ETFs and ETPs on U.S.

national securities exchanges, could have a material adverse effect on the market price of our class A common stock.

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national securities exchange to permit them to function in the manner of an ETF with continuous share creation and redemption at NAV.

To date the SEC has declined to approve any such listing, citing concerns over the surveillance of trading in markets for the underlying bitcoin as well as concerns about fraud and manipulation in bitcoin trading markets.

To date the SEC has declined to approve any such listing, citing concerns over the surveillance of trading in markets for the underlying bitcoin as well as concerns about

fraud and manipulation in bitcoin trading markets.

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 due to our bitcoin holdings.

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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.

Approximately 14,890 bitcoins serve as part of the collateral securing our 2028 Secured Notes and we may consider issuing additional debt or other financial instruments that may be collateralized by our bitcoin holdings.

As of July 31, 2023, approximately 15,731 bitcoins serve as part of the collateral securing our 2028 Secured Notes and we may consider issuing additional debt or other financial instruments that may be collateralized by our bitcoin holdings.

We may also consider pursuing strategies to create income streams or otherwise generate funds using our bitcoin holdings.

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If adopted in its proposed form, the proposed rule would have a sweeping impact on digital asset trading venues and other digital asset industry participants.

and foreign regulators have also increased, and are highly likely to continue to increase, enforcement activity, and are likely to adopt new regulatory requirements in response to the collapse.

Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting bitcoin, as well as enforcement actions involving or impacting our counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in bitcoin.

and foreign regulators have also increased, and are highly likely to continue to increase, enforcement activity, and are likely to adopt new regulatory requirements in response to FTX’s collapse.

Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting bitcoin, as well as enforcement actions involving or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in bitcoin.

In addition, private actors that are wary of bitcoin or the regulatory concerns associated with bitcoin have in the past taken and may in the future take further actions that may have an adverse effect on our business or the market price of our class A common stock.

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.

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.

Due to the unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, bitcoin trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in bitcoin trading venues and adversely affect the value of our bitcoin

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Furthermore, there are many bitcoin trading venues which do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance.

As a result, the marketplace may lose confidence in bitcoin trading venues, including prominent exchanges that handle a significant volume of bitcoin trading and/or are subject to regulatory oversight, in the event one or more bitcoin trading venues cease or pause for a prolonged period the trading of bitcoin or other digital assets, or experience fraud, security failures or operational problems.

In 2019 there were reports claiming that 80-95% of bitcoin trading volume on trading venues was false or non-economic in nature, with specific focus on unregulated exchanges located outside of the United States.

Such reports may indicate that the bitcoin market is significantly smaller than expected and that the United States makes up a significantly larger percentage of the bitcoin market than is commonly understood.

Any actual or perceived false trading in the bitcoin market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of our bitcoin.

Negative perception, a lack of stability in the broader bitcoin markets and the closure, temporary shutdown or operational disruption of bitcoin trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the bitcoin ecosystem, due to fraud, business failure, hackers or malware, government-mandated regulation, bankruptcy, or for any other reason, may reduce confidence in bitcoin and the broader bitcoin ecosystem and may result in greater volatility in the price of bitcoin.

The SEC also alleged as part of its June 5, 2023, complaint that Binance Holdings Ltd.

committed strategic and targeted “wash trading”

through its affiliates to artificially inflate the volume of certain digital assets traded on its exchange.

Such reports and allegations may indicate that the bitcoin market is significantly smaller than expected and that the United States makes up a significantly larger percentage of the bitcoin market than is commonly understood.

Any actual or perceived false trading in the bitcoin market, and any other fraudulent or manipulative acts and practices, could adversely

affect the value of our bitcoin.

Negative perception, a lack of stability in the broader bitcoin markets and the closure, temporary shutdown or operational disruption of bitcoin trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the bitcoin ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in bitcoin and the broader bitcoin ecosystem and greater volatility in the price of bitcoin.

For example, in 2022, each of Celsius Networks, Voyager Digital Holdings, Three Arrows Capital, FTX, and BlockFi filed for bankruptcy, following which the market prices of bitcoin and other digital assets significantly declined.

In addition, in June 2023, the SEC announced enforcement actions against Coinbase, Inc., and Binance Holdings Ltd., two providers of large trading venues for digital assets, which similarly was followed by a decrease in the market price of bitcoin and other digital assets.

To the extent investors view our class A common stock as linked to the value of our bitcoin holdings, the failure of a major participant in the bitcoin ecosystem could have a material adverse effect on the market price of our class A common stock.

The concentration of our bitcoin holdings enhances the risks inherent in our bitcoin acquisition strategy

As of April 28, 2023, we held approximately 140,000 bitcoins that were acquired at an aggregate purchase price of $4.172 billion and we intend to purchase additional bitcoin and increase our overall holdings of bitcoin in the future.

As of July 31, 2023, we held approximately 152,800 bitcoins that were acquired at an aggregate purchase price of $4.534 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.

The price of bitcoin experienced a significant decline in 2022, and this has had, and any further significant declines in the price of bitcoin would have, a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.

The price of bitcoin experienced a significant decline in 2022, and this has had, and any future significant declines in the price of bitcoin would have, a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.

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

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Accordingly, the emergence or growth of digital assets other than bitcoin may have a material adverse effect on our financial condition.

As of March 31, 2023, bitcoin was the largest digital asset by market capitalization.

As of June 30, 2023, bitcoin was the largest digital asset by market capitalization.

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.

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Other alternative digital assets that compete with bitcoin in certain ways include “stablecoins,”

which are designed to maintain a constant price because of their issuers’

which are designed to maintain a constant price because of, for instance, their issuers’

promise to hold high-quality liquid assets (such as U.S.

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Stablecoins have grown rapidly as an alternative to bitcoin and other digital assets as a medium of exchange and store of value, particularly on cryptocurrency trading platforms.

As of March 31, 2023, two of the five largest digital assets by market capitalization are U.S.

As of June 30, 2023, two of the five largest digital assets by market capitalization are U.S.

dollar-backed stablecoins.

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For example, China’s CBDC project was made available to consumers in January 2022, and governments including the United States, the European Union, and Israel have been discussing the potential creation of new CBDCs.

Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace,

bitcoin and other digital assets as a medium of exchange or store of value.

Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, bitcoin and other digital assets as a medium of exchange or store of value.

As a result, the emergence or growth of these or other digital assets could cause the market price of bitcoin to decrease, which could have a material adverse effect on our business, prospects, financial condition, and operating results.

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During times of market instability, we may not be able to sell our bitcoin at reasonable prices or at all.

For example, although the Coinbase exchange (our principal market for bitcoin) has, to date, not been impacted, a number of bitcoin trading venues recently have temporarily halted deposits and withdrawals.

For example, a number of bitcoin trading venues recently have temporarily halted deposits and withdrawals, although the Coinbase exchange (our principal market for bitcoin) has, to date, not done so.

As a result, our bitcoin holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Further, our custodians (including Coinbase) are not banking institutions or otherwise members of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, digital asset deposits held with those custodians are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.

Further, our custodians, trade execution partners and trading venues (including Coinbase) are not banking institutions or otherwise members of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, digital asset deposits held with such entities are not subject to the protections enjoyed by depositors with FDIC or SIPC

member institutions.

Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered bitcoin or otherwise generate funds using our bitcoin holdings, including in particular during times of market instability or when the price of bitcoin has declined significantly.

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significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure.

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.

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, regardless of whether 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.

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.

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In addition, certain types of attacks could harm us even if our systems are left undisturbed.

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.

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.

Further, there has been an increase in such activities since the beginning of the COVID-19 pandemic.

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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.

If there is a decrease in the availability of digital asset custodians that we believe can safely custody our bitcoin, for example, due to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, we may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our bitcoin, and our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected.

As of March 31, 2023, 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.

States, we may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our bitcoin, and our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected.

As of June 30, 2023, 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.

Moreover, the use of custodians to hold our bitcoin exposes us to the risk that the bitcoin custodially-held on our behalf could be subject to insolvency proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such bitcoin.

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While senior SEC officials have stated their view that bitcoin is not a “security”

for purposes of the federal securities laws, the SEC has so far refused to permit the listing of any bitcoin-based ETFs, citing, among other things, concerns regarding bitcoin market integrity and custodial protections.

for purposes of the federal securities laws, the SEC has so far refused to permit the listing of any bitcoin spot-market-based ETPs, citing, among other things, concerns regarding bitcoin market integrity and custodial protections.

It is possible that the SEC could take a contrary position to the one taken by its senior officials or a federal court could conclude that bitcoin is a security.

Such a determination could lead to our classification as an “investment company”

under the Investment Company Act of 1940, which would subject us to significant additional regulatory controls that could have a material adverse effect on our business and operations and also may require us to substantially change the manner in which we conduct our business.

under the Investment Company Act of 1940, which would subject us to significant additional regulatory controls that could have a material adverse effect on our business and operations and may also require us to substantially change the manner in which we conduct our business.

In addition, if bitcoin is determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of bitcoin and in turn adversely affect the market price of our class A common stock.

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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.

To the extent that the cash generated by our enterprise analytics software business is insufficient to satisfy our debt service obligations, and to the extent that the liquidation of our

bitcoin holdings would be insufficient to satisfy our debt service obligations, we may be unable to make scheduled payments on our current or future indebtedness, which could cause us to default on our debt obligations.

To the extent that the cash generated by our enterprise analytics software business is insufficient to satisfy our debt service obligations, and to the extent that the liquidation of our bitcoin holdings would be insufficient to satisfy our debt service obligations, we may be unable to make scheduled payments on our current or future indebtedness, which could cause us to default on our debt obligations.

Any default on our current or future indebtedness may have a material adverse effect on our financial condition.

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Our primary counterparty risk with respect to our bitcoin is custodian performance obligations under the various custody arrangements we have entered into.

A series of recent high-profile bankruptcies relating to companies operating in the digital asset industry and certain of their affiliates, including Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital, has highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading.

A series of recent high-profile filings for bankruptcy protection by companies operating in the digital asset industry

and certain of their affiliates, including Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital, has highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading.

Legal precedent created in these bankruptcy proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.

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Because we depend on revenue from a single software platform and related services, our business could be harmed by a decline in demand for, or in the adoption or prices of, our platform and related services as a result of, among other factors, any change in our pricing or packaging model, increased competition, maturation in the markets for our platform, or other risks described in this Quarterly Report.

In addition, the adoption of our bitcoin acquisition strategy and the recent increase in our indebtedness has caused and may in the future cause certain of our existing or prospective customers to form negative perceptions regarding our corporate risk profile or our financial viability as a commercial counterparty, and such negative perceptions could negatively impact sales of our analytics software platform and related services to current or prospective customers.

Such risks can also be exacerbated if the price of bitcoin declines or by adverse developments in the digital assets industry including, for example, the high-profile bankruptcy filings by companies operating in that industry, such as the recent bankruptcy filings by Three Arrows Capital, Voyager Digital, BlockFi and FTX Trading.

In addition, the adoption of our bitcoin acquisition strategy and the increase in our indebtedness has caused and may in the future cause certain of our existing or prospective customers to form negative perceptions regarding our corporate risk profile or our financial viability as a commercial counterparty, and such negative perceptions could negatively impact sales of our analytics software platform and related services to current or prospective customers.

Such risks can also be exacerbated if the price of bitcoin declines or due to adverse developments in the digital assets industry including, for example, the high-profile filings for bankruptcy protection by companies operating in that industry, such as the recent bankruptcy filings by Three Arrows Capital, Voyager Digital, BlockFi and FTX Trading, and the SEC enforcement actions against Coinbase, Inc.

and Binance Holdings Ltd.

We also depend on our installed customer base for a substantial portion of our revenue.

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Given that it is relatively easy for customers to migrate on and off our cloud subscription platform, as we continue to shift our customers toward our cloud platform, we could face higher future rates of attrition among our customers.

In addition, the payment streams and revenue recognition timing for our product

licenses are different from those for our cloud subscriptions.

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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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.

For the three months ended March 31, 2023, transactions by channel partners for which we recognized revenue accounted for 40.1% 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.

For the six months ended June 30, 2023, transactions by channel partners for which we recognized revenue accounted for 33.9% 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

Our deferred revenue and advance payments totaled $223.4 million as of March 31, 2023.

Our deferred revenue and advance payments totaled $207.1 million as of June 30, 2023.

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.

In addition, we had $93.4 million of other remaining performance obligations as of March 31, 2023, consisting of the portions of multi-year contracts that will be invoiced in the future that are not reflected on our balance sheet.

In addition, we had $87.2 million of other remaining performance obligations as of June 30, 2023, 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 advance 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.

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.

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.

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.

For the three months ended March 31, 2023, our top three product licenses transactions with recognized revenue totaled $4.0 million, or 22.9% of total product licenses revenues, compared to $2.6 million, or 15.6% of total product licenses revenues, for the three months ended March 31, 2022.

For the six months ended June 30, 2023, our top three product licenses transactions with recognized revenue totaled $4.4 million, or 13.3% of total product licenses revenues, compared to $8.6 million, or 23.4% of total product licenses revenues, for the six months ended June 30, 2022.

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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Some of these factors include software deployment options;

analytical, mobility, data discovery, visualization, artificial intelligence, and machine learning capabilities;

analytical, mobility, data discovery, visualization, artificial intelligence (“AI”), and machine learning capabilities;

performance and scalability;

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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.

Integration of artificial intelligence into our enterprise analytics product offerings and our use of artificial intelligence in our operations could result in reputational or competitive harm, legal liability, and other adverse effects on our business

We have integrated, and plan to further integrate, AI capabilities into certain components of our enterprise analytics product offerings and we expect to use AI in our operations.

Such integration and use of AI may become more important in our product offerings and operations over time.

These AI-related initiatives, whether successful or not, could cause us to incur substantial costs and could result in delays in our software release cadence.

Our competitors or other third parties may incorporate AI into their products or operations more quickly or more successfully than we do, which could impair our ability to compete effectively.

Additionally, AI algorithms may be flawed and datasets underlying AI algorithms may be insufficient or contain biased information.

If the AI tools integrated into our products or that we use in our operations produce analyses or recommendations that are or are alleged to be deficient, inaccurate, or biased, our reputation, business, financial condition, and results of operations may be adversely affected.

Other companies have experienced cybersecurity incidents that implicate confidential and proprietary company data and/or the personal data of end users of AI applications integrated into their software offerings or used in their operations.

If we were to experience a cybersecurity incident, whether related to the integration of AI capabilities into our product offerings or our use of AI applications in our operations, our business and results of operations could be adversely affected.

AI also presents various emerging legal, regulatory and ethical issues, and the incorporation of AI into our product offerings and our use of AI applications in our operations could require us to expend significant resources in developing, testing and maintaining our product offerings and may cause us to experience brand, reputational, or competitive harm, or incur legal liability.

Risks Related to Our Technology and Intellectual Property

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In addition, customers may delay their purchasing decisions because they anticipate that new or enhanced versions of our offerings will soon become available or because of concerns regarding the complexity of migration or performance issues related to new offerings.

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.

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.

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.

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We periodically receive notices from third parties claiming we are infringing their intellectual property rights.

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.

The frequency 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.

Responding to any infringement claim, regardless of its validity, could:

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Additionally, while we monitor our use of third-party software, including open-source software, our processes for controlling such use in our offerings may not be effective.

If we fail to comply with the terms or conditions associated with third-party software that we use, if we inadvertently embed certain types of third-party software into one or more of our offerings, or if third-party software that we license is found to infringe the intellectual property rights of others, we could subject ourselves to infringement liability and be required to re-engineer our offerings, discontinue the sale of our offerings, or make available to certain third parties or generally available, in source code form, our proprietary code, any of which could materially adversely affect our business, operating results, and financial condition.

If we fail to comply with the terms or conditions associated with third-party software that we use, if we inadvertently embed certain types of third-party software into one or more of our offerings, or if third-party software that we license is found to infringe the intellectual property rights of others, we could become subject to infringement liability and be required to re-engineer our offerings, discontinue the sale of our offerings, or make available to certain third parties or generally available, in source code form, our proprietary code, any of which could materially adversely affect our business, operating results, and financial condition.

If a successful infringement claim is made against us and we fail to develop or license a substitute technology or brand name, as applicable, our business, results of operations, financial condition, or cash flows could be materially adversely affected.

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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.

International revenues accounted for 42.8% and 43.4% of our total revenues for the three months ended March 31, 2023 and 2022, respectively.

International revenues accounted for 40.7% and 39.2% of our total revenues for the three months ended June 30, 2023 and 2022, respectively, and 41.8% and 41.3% of our total revenues for the six months ended June 30, 2023 and 2022, respectively.

Our international operations require significant management attention and financial resources and expose us to additional risks, including:

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Our future success depends on our continuing ability to attract, train, assimilate, and retain highly skilled personnel.

Competition for qualified employees in the technology industry has historically been high, and may be further amplified by evolving restrictions on immigration, travel, or availability of visas for skilled technology workers, including restrictions imposed in response to the COVID-19 pandemic.

There has historically been significant competition for qualified employees in the technology industry, and such competition may be further amplified by evolving restrictions on immigration, travel, or availability of visas for skilled technology workers.

We may not be able to retain our current key employees or attract, train, assimilate, and retain other highly skilled personnel in the future.

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Our access to protected health information triggers obligations to comply with certain privacy rules and data security requirements under HIPAA.

In addition to potential enforcement by the United States Department of Health and Human Services for potential HIPAA violations, we are also potentially subject to privacy enforcement from the Federal Trade Commission (“FTC”).

The FTC has been particularly focused on certain activities related to the processing of sensitive data, including the unpermitted processing of health and genetic data through its recent enforcement actions and is expanding the types of privacy violations that it interprets to be “unfair”

under Section 5 of the FTC Act, as well as the types of activities it views to trigger the Health Breach Notification Rule (which the FTC also has the authority to enforce).

The agency is also in the process of developing rules related to commercial surveillance and data security that may impact our business.

We will need to account for the FTC’s evolving rules and guidance for proper privacy and data security practices in order to mitigate our risk for a potential enforcement action, which may be costly.

If we are subject to a potential FTC enforcement action, we may be subject to a settlement order that requires us to adhere to very specific privacy and data security practices, which may impact our business.

We may also be required to pay fines as part of a settlement (depending on the nature of the alleged violations).

If we violate any consent order that we reach with the FTC, we may be subject to additional fines and compliance requirements.

We face risks of similar enforcement from State Attorneys General and, potentially, other regulatory agencies.

Any systems failure or security breach that results in the release of, or unauthorized access to, personal data, or any failure or perceived failure by us or our third-party service providers to comply with applicable privacy policies, contractual obligations, or any applicable laws or regulations relating to privacy or data protection, could result in proceedings against us by domestic or foreign government entities or others, including private plaintiffs in litigation.

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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.

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.

In the wake of the invalidation of the U.S.-EU Privacy Shield, we have transitioned to reliance on the EU Standard Contractual Clauses (“SCCs”) to lawfully transfer certain personal data from the European Union to the United States.

The rules involving this alternative data transfer option are also 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.

In July 2020, the Court of Justice of the European Union (“CJEU”) invalidated the U.S.-EU Privacy Shield, which provided a mechanism to lawfully transfer personal data from the European Union to the United States and certain other countries.

In the wake of the invalidation of the U.S.-EU Privacy Shield, we transitioned to reliance on the EU Standard Contractual Clauses (“SCCs”) to lawfully transfer certain personal data from the European Union to the United States.

The CJEU decision also drew into question the long-term viability of the SCCs for transfers of personal data from the EU and European Economic Area to the U.S.

As a result, in October 2022, President Biden signed an executive order to implement the EU-U.S.

Data Privacy Framework, which would serve as a replacement to the EU-U.S.

Privacy Shield.

The European Union initiated the process to adopt an adequacy decision for the EU-U.S.

Data Privacy Framework in December 2022 and the European Commission adopted the adequacy decision on July 10, 2023.

The adequacy decision will permit U.S.

companies who self-certify to the EU-U.S.

Data Privacy Framework to rely on it as a valid data transfer mechanism for data transfers from the EU to the U.S.

and will also provide support for the use of standard contractual clauses.

However, some privacy advocacy groups have already suggested that they will be challenging the EU-U.S.

Data Privacy Framework.

If these challenges are successful, they may not only impact the EU-U.S.

Data Privacy Framework, but they may also further limit the viability of the standard contractual clauses and other data transfer mechanisms.

The uncertainty around this issue has the potential to impact our business internationally.

Because the rules involving this data transfer mechanism are also undergoing revision and this transfer mechanism may also be declared invalid (or require us to change our business practices) in the future, these developments may require us to provide an alternative means of data transfer.

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.

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The UK SCCs Addendum and IDTA, after having been put before UK parliament, have been in force as of March 2022 and UK-based organizations were required to start using the UK IDTA or Addendum for new data transfer arrangements starting in September 2022.

The UK and the US are also in discussions to develop a US-UK “data bridge,”

which would function similarly to the EU-US Data Privacy Framework and provide an additional legal mechanism for companies to transfer data from the UK to the US.

The rules involving these alternative SCC data transfer options are continually undergoing revision and these transfer mechanisms 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.

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State privacy laws in the United States also may impact our business operations.

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.

The state of California has adopted a comprehensive privacy law, the California Consumer Privacy Act (“CCPA”), which took effect in January 2020 and became enforceable in July 2020.

We have been 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.

Moreover, in November 2020, California voters approved a privacy law, the California Privacy Rights Act (“CPRA”), which amends the CCPA to create additional privacy rights and obligations in California, and went into effect on January 1, 2023.

Virginia, Colorado, Utah, and Connecticut have passed laws similar to the CCPA, all of which go into effect in 2023, 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.

In March 2022, the U.S.

Numerous other states have passed laws similar to the CCPA, which will go into effect in 2023 and beyond.

More states may follow.

These laws may impose additional costs and obligations on us.

Similarly, in March 2022, the U.S.

federal government also passed the Cyber Incident Reporting for Critical Infrastructure Act of 2022, which will require companies deemed to be part of U.S.

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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.

Any security breach, ransomware attack, or successful denial of service attack could result in a loss of customer confidence in the security of our offerings and damage to our brand, reduce the demand for our offerings, disrupt our normal business operations, require us to spend material resources to investigate or correct the breach, require us to notify affected customers or individuals and/or applicable regulators and others, provide identity theft protection services to individuals, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations, and materially adversely affect our revenues and operating results.

Any security breach, ransomware attack, or successful denial of service attack could result in a loss of customer confidence in the security of our offerings and damage to our brand, reduce the demand for our offerings, disrupt our normal business operations, require us to spend material resources to investigate or correct the breach, require us to notify affected customers or individuals and/or applicable regulators and others, provide identity theft protection services to individuals, expose us to legal liabilities, including litigation, regulatory enforcement actions, and indemnity obligations, and materially adversely affect our revenues and operating results.

Our software operates in conjunction with and is dependent on third-party products and components across a broad ecosystem.

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These risks will increase as we continue to grow the number and scale of our cloud subscriptions and process, store, and transmit increasingly large amounts of our customers’, prospects’, vendors’, channel partners’, and our own data.

In particular, in connection with the COVID-19 pandemic and recent geopolitical conflicts, there has been an increase in cyberattacks and other malicious activities as remote working conditions have led businesses to increasingly rely on virtual environments and communication systems.

Our having entered into indemnification agreements with Michael J.

Saylor, our Chairman of the Board of Directors and Executive Chairman, that supplement our conventional director and officer liability insurance provided by third-party insurance carriers could negatively affect our business and the market price of our class A common stock

Due to market trends toward higher premiums and the novelty of our bitcoin acquisition strategy, we were unable to obtain our desired coverage level for director and officer liability insurance from commercial carriers on acceptable terms, and in lieu of such insurance from June 2021 through June 2022, and as a supplement to commercial carrier coverage we were able to obtain beginning in June 2022, we have entered into indemnification agreements with Michael J.

In particular, as remote working conditions have led businesses to increasingly rely on virtual environments and communication systems, there has been an increase in cyberattacks and other malicious activities.

Our having entered into an indemnification agreement with Michael J.

Saylor, our Chairman of the Board of Directors and Executive Chairman, that supplements our conventional director and officer liability insurance provided by third-party insurance carriers could negatively affect our business and the market price of our class A common stock

We have entered into an indemnification agreement with Michael J.

Saylor, our Chairman of the Board of Directors and Executive Chairman, pursuant to which Mr.

Saylor has agreed to personally indemnify our directors and officers with respect to claims and expenses substantially similar to those typically covered under conventional director and officer insurance policies to the extent such claims and expenses are not covered by insurance provided by commercial carriers, for which we agreed to pay Mr.

Saylor applicable fees.

Our having entered into such indemnification agreements with Mr.

Saylor has agreed to personally indemnify our directors and officers with respect to certain claims and expenses excluded from the insurance coverage provided by our commercial director and officer insurance carriers, for which we agreed to pay Mr.

Saylor an applicable annual fee.

Our having entered into this indemnification agreement with Mr.

Saylor could have adverse effects on our business, including making it more difficult to attract and retain qualified directors and officers due to the unconventional nature of the arrangement and potential concerns that the indemnification arrangement might not provide the same level of protection that might otherwise be provided by coverage obtained entirely through conventional director and officer insurance.

In addition, our indemnity arrangements with Mr.

In addition, our indemnification arrangement with Mr.

Saylor may result in some investors perceiving that our independent directors are not sufficiently independent from Mr.

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The United States and other key international economies have experienced significant economic and market downturns recently characterized by restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, inflation, bank failures, bankruptcies and overall uncertainty with respect to the economy.

In addition, geopolitical and domestic political developments, such as existing and potential trade wars and other events beyond our control, such as conflict in the Ukraine, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.

In addition, geopolitical and domestic political developments, such as existing and

potential trade wars and other events beyond our control, such as conflict in the Ukraine, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.

Moreover, these conditions have affected and may continue to affect the rate of IT spending;

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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.

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 $328.38 as of April 28, 2023.

The market price of our class A common stock may fluctuate widely in response to various factors, some of which are beyond our control.

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the volume of shares of our class A common stock available for public sale;

sales or purchases of stock by us or by our stockholders and issuances of awards under our stock incentive plan;

sales or purchases of stock by us or by our stockholders and issuances of awards under our equity incentive plan;

general economic conditions and slow or negative growth of related markets, including as a result of war, terrorism, infectious diseases (such as COVID-19 and its variants), natural disasters and other global events, and government responses to such events.

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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.

As of April 24, 2023, there are 1,964,025 shares of class B common stock outstanding, which accounts for approximately 64.1% of the total voting power of our outstanding common stock.

As of April 24, 2023, Mr.

As of July 25, 2023, there are 1,964,025 shares of class B common stock outstanding, which accounts for approximately 61.8% of the total voting power of our outstanding common stock.

As of July 25, 2023, Mr.

Saylor, our Chairman of the Board of Directors and Executive Chairman, beneficially owned 1,961,668 shares of class B common stock, or 61.8% of the total voting power.

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A majority of our Board of Directors is currently comprised of independent directors, and our Board of Directors has established a Compensation Committee comprised entirely of independent directors.

The Compensation Committee determines the compensation of our Chief Executive Officer and will also determine the compensation of our Executive Chairman.

The Compensation Committee determines the compensation of our Chief Executive Officer and Executive Chairman.

However, our Board of Directors has authorized our Chief Executive Officer to determine the compensation of executive officers other than himself and the Executive Chairman, except that equity-based compensation is determined by the Compensation Committee.

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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

As of March 31, 2023, we had $2.211 billion aggregate indebtedness, consisting of $650.0 million aggregate principal amount of 2025 Convertible Notes, $1.05 billion aggregate principal amount of 2027 Convertible Notes, $500.0 million aggregate principal amount of 2028 Secured Notes and $10.7 million of other long-term indebtedness.

As of June 30, 2023, we had $2.211 billion aggregate indebtedness, consisting of $650.0 million aggregate principal amount of 2025 Convertible Notes, $1.05 billion aggregate principal amount of 2027 Convertible Notes, $500.0 million aggregate principal amount of 2028 Secured Notes and $10.6 million of other long-term indebtedness.

Our substantial indebtedness and interest expense could have important consequences to us, including:

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If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital, or restructure or refinance our indebtedness.

We cannot assure you that future borrowings will be available to us in an amount sufficient to enable us to service our indebtedness, to refinance our indebtedness, or to fund our other liquidity needs.

We cannot assure you that future borrowings will be available to us in an amount sufficient to enable us to service our indebtedness, to refinance our indebtedness, or to fund our other

liquidity needs.

Even if refinancing indebtedness is available, any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.

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Any financing that we may undertake under such circumstances could result in substantial dilution of our existing stockholders, and in the absence of being able to obtain such financing, we could be forced into bankruptcy or liquidation.

The indenture governing our 2028 Secured Notes imposes significant operating and financial restrictions on us and certain restricted subsidiaries of ours, which may prevent us from capitalizing on business opportunities

The indenture governing our 2028 Secured Notes imposes significant operating and financial restrictions on us and certain designated restricted subsidiaries of ours.

The indenture governing our 2028 Secured Notes imposes significant operating and financial restrictions on us and certain subsidiaries of ours, which may prevent us from capitalizing on business opportunities

The indenture governing our 2028 Secured Notes imposes significant operating and financial restrictions on us and certain designated Restricted Subsidiaries (as defined in the indenture for the 2028 Secured Notes).

These restrictions limit our ability, and the ability of such restricted subsidiaries, to, among other things:

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We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders or amend the covenants.

Our failure to comply with the restrictive covenants described above, as well as other terms of our indebtedness or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date and/or face insolvency proceedings.

If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected.

If we are forced to refinance these borrowings on less favorable terms or if we cannot refinance these borrowings, our results of operations and financial condition could be adversely affected.

We may be required to repay the 2028 Secured Notes prior to their stated maturity date, if the springing maturity feature is triggered

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The operating results of our subsidiaries at any given time may not be sufficient to make dividends, distributions, or other payments to us in order to allow us to make payments on the 2028 Secured Notes, the Convertible Notes, and our other long-term indebtedness.

Our wholly-owned subsidiary, MacroStrategy, which holds the bitcoin that we owned prior to the issuance of the 2028 Secured Notes, the bitcoin that MacroStrategy acquired using the proceeds from the 2025 Secured Term Loan, and the bitcoin that MacroStrategy acquired from the proceeds of the sale of our class A shares pursuant to the Open Market Sale Agreement with Jefferies, LLC, as agent and the 2022 Sales Agreement, 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 under such indebtedness.

MacroStrategy holds approximately 125,110 bitcoins that, as of March 31, 2023, had a carrying value of $1.770 billion on our Consolidated Balance Sheet, representing 58.5% 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.

Our wholly-owned subsidiary, MacroStrategy, which holds the bitcoin that we owned prior to the issuance of the 2028 Secured Notes, the bitcoin that MacroStrategy acquired using the proceeds from the 2025 Secured Term Loan, and the bitcoin that MacroStrategy acquired from the proceeds of the sale of our class A shares pursuant to the sales agreements with various sales agents, 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 under such indebtedness.

MacroStrategy holds approximately 137,069 bitcoins that, as of June 30, 2023, had a carrying value of $2.084 billion on our Consolidated Balance Sheet, representing 62.0% 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.

Despite our current level of indebtedness, we may be able to incur substantially more indebtedness and enter into other transactions in the future which could further exacerbate the risks related to our indebtedness

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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.

What changed 10-Q

Item 1. Legal Proceedings