What changed in this filing

/stocks — the workspaceLOADING

Item 1. Legal Proceedings

2023-11-01 compared with 2023-08-01 · 127 added, 98 removed, 804 unchanged (22% of the section changed)

30 unchanged sentences

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

On August 22, 2023, MicroStrategy and Mr.

Saylor filed a motion asking the court to reconsider its July 31 decision or, in the alternative, to certify for interlocutory review two case-dispositive issues relating to the validity of tax-related amendments to the District’s False Claims Act and authority of the Office of the Attorney General to sue for allegedly unpaid taxes.

On October 31, 2023, the court denied Mr.

Saylor’s and MicroStrategy’s motion for reconsideration or, in the alternative, certification for interlocutory review.

The final outcome of this matter is not presently determinable.

38 unchanged sentences

In that event, the market price of our class A common stock may fall.

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.

We may not be able to achieve profitability in future periods

We generated net income for the nine months ended September 30, 2023, due in part to a $403.9 million tax benefit generated primarily from the release of a portion of the 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 September 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 achieve 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 June 30, 2023, we had $719.0 million of deferred tax assets, which reflects a $2.6 million valuation allowance.

As of September 30, 2023, we had $614.1 million of deferred tax assets, which reflects a $118.4 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 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.

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.

Additionally, if we do not achieve profitability in the future, we may also be required to increase the valuation allowance against the remaining deferred tax assets.

A significant increase in the valuation allowance could result in a charge that would materially adversely affect net income in the period in which the charge is incurred.

4 unchanged sentences

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.

20 unchanged sentences

Bitcoin does not pay interest or dividends.

Bitcoin does not pay interest or other returns and so our ability to generate cash from our bitcoin holdings depends on sales or implementing strategies that we may consider to create income streams or otherwise generate cash by using our bitcoin holdings.

Bitcoin does not pay interest or other returns and we can only generate cash from our bitcoin holdings if we sell our bitcoin or implement strategies to create income streams or otherwise generate cash by using our bitcoin holdings.

Even if we pursue any such strategies, we may be unable to create income streams or otherwise generate cash from our bitcoin holdings, and any such strategies may subject us to additional risks.

Our bitcoin holdings significantly impact our financial results.

Our bitcoin holdings significantly impact 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.

8 unchanged sentences

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.

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.

creditors, applicable insolvency law is not fully developed 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 custodians’

estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of such custodians, 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 a 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.

1 unchanged sentence

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.

and Binance Holdings Ltd., the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company, 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 adversely 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.

3 unchanged sentences

Changes in the accounting treatment of our bitcoin holdings could have significant accounting impacts, including increasing the volatility of our results.

A change in the accounting treatment of our bitcoin holdings could have a material impact on our results of operations in future periods and could increase the volatility of our reported results of operations as well as affect the carrying value of our bitcoin on our balance sheet, which in turn could have a material adverse effect on our financial results and the market price of our class A common stock.

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.

On March 23, 2023, the Financial Accounting Standards Board (the “FASB”) issued an exposure draft for comment of a proposed ASU 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.

On September 6, 2023, the FASB held a meeting to review the comment letter feedback received and other issues identified for redeliberation.

At the conclusion of the meeting, the FASB determined that the expected benefits of the ASU would justify the expected costs and directed the staff of the FASB to draft the final ASU for vote by written ballot.

As currently proposed, the ASU will be effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years.

The FASB also affirmed the proposed ASU will permit early adoption.

The FASB has indicated that they expect to hold a vote to approve the final ASU in the fourth quarter of 2023.

A change in the accounting treatment of our bitcoin holdings, such as the adoption of the final ASU in a form substantially similar to the exposure draft, could have a material impact on our results of operations in future periods, could increase the volatility of our reported results of operations as well as affect the carrying value of our bitcoin on our balance sheet, and could have adverse tax consequences, which in turn could have a material adverse effect on our financial results and the market price of our class A common stock.

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.

3 unchanged sentences

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, 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;

investment and trading activities, such as (i) trading activities of highly active retail and institutional users, speculators, miners and investors, (ii) actual or expected significant dispositions of bitcoin by large holders, including the expected liquidation of digital assets associated with entities that have filed for bankruptcy protection, such as FTX, which recently received approval to sell up to $3 billion worth of digital assets, including bitcoin, and the transfer and sale of bitcoins associated with the hacked cryptocurrency exchange Mt.

Gox, and (iii) actual or perceived manipulation of the spot or derivative markets for bitcoin;

(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.

1 unchanged sentence

(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;

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;

4 unchanged sentences

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;

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 placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by the Nevada Department of Business and Industry 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;

4 unchanged sentences

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.

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

7 unchanged sentences

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 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;

6 unchanged sentences

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.

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

Of note, (i) digital assets firms, including exchanges and custodians, operating in or providing services to the United Kingdom would need a license to operate and would be required to comply with minimum capital and liquidity requirements, and (ii) the proposed rules would impose issuer liability on exchanges that permit the trading of decentralized digital assets, including bitcoin.

The current proposed rules are subject to a comment and review period that is open until April 30, 2023, after which the government will consider the feedback and prepare its response.

In the United Kingdom, on June 29, 2023, the Financial Services and Markets Act 2023 (“FSMA”) became law.

The FSMA (i) clarifies that “cryptoassets”

are subject to the regulated activities and financial promotion orders and (ii) establishes that digital assets firms, including exchanges and custodians, operating in or providing services to the United Kingdom carrying out certain activities involving “cryptoassets”

are performing a regulated activity that needs to be authorized by the Financial Conduct Authority and may also be subject to oversight from the Bank of England.

Several additional pieces of proposed legislation in the United Kingdom, including The Public Offers and Admissions to Trading Regulations 2023, may subject “cryptoassets”

to further regulation.

On March 1, 2023, the U.S.

3 unchanged sentences

CBDC in the coming months.

In April 2023, the European Parliament approved the Markets in Crypto Assets Regulation (“MiCA”), a comprehensive digital asset regulatory framework for the issuance and use of digital assets, like bitcoin, with the requirements phasing into effect throughout 2023 and 2024.

In May 2023, the European Council approved the Markets in Crypto Assets Regulation (“MiCA”), a comprehensive digital asset regulatory framework for the issuance and use of digital assets, like bitcoin, with the requirements phasing into effect throughout 2023 and 2024.

MiCA also requires the European Commission (i) to provide a report on the environmental impact of crypto-assets and (ii) based upon such report, introduce mandatory minimum sustainability standards for consensus mechanisms, including the proof-of-work consensus mechanisms on which the Bitcoin blockchain is based.

26 unchanged sentences

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.

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.

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.

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.

7 unchanged sentences

The price of bitcoin has historically been subject to dramatic price fluctuations and is highly volatile.

As explained more fully in Note 2(g) to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2022, we determine the fair value of our bitcoin based on quoted (unadjusted) prices on the Coinbase exchange (our principal market for bitcoin).

As explained more fully in Note 2(g) to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, we determine the fair value of our bitcoin based on quoted (unadjusted) prices on the Coinbase exchange (our principal market for bitcoin).

We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices on the active exchange, indicate that it is more likely than not that any of our bitcoin assets are impaired.

5 unchanged sentences

Conversely, any sale of bitcoins at prices above our carrying value for such assets creates a gain for financial reporting purposes even if we would otherwise incur an economic or tax loss with respect to such transaction, which also may result in significant volatility in our reported earnings.

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 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.

In addition, on March 23, 2023, the FASB issued an exposure draft for comment of a proposed ASU 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.

On September 6, 2023, the FASB held a meeting to review the comment letter feedback received and other issues identified for redeliberation.

At the conclusion of the meeting, the FASB determined

that the expected benefits of the ASU would justify the expected costs and directed the staff of the FASB to draft the final ASU for vote by written ballot.

As currently proposed, the ASU will be effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years.

The FASB also affirmed the proposed ASU will permit early adoption.

The FASB has indicated that they expect to hold a vote to approve the final ASU in the fourth quarter of 2023.

If the final ASU adopted by FASB is substantially similar to the exposure draft as updated by the deliberations of the FASB on September 6, 2023, 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.

As of September 30, 2023, we carried $2.451 billion of digital assets on our balance sheet, consisting of approximately 158,245 bitcoins and reflecting $2.230 billion in cumulative impairment losses attributable to bitcoin trading price fluctuations, and held $45.0 million in cash and cash equivalents, compared to a carrying value of $1.993 billion of digital assets, consisting of approximately 130,000 bitcoins, and $60.4 million in cash and cash equivalents at September 30, 2022.

Digital asset impairment losses of $76.6 million incurred during the nine months ended September 30, 2023 represented 21.1% of our operating expenses and were included in our net income of $340.0 million for the nine months ended September 30, 2023, compared to $1.089 billion in digital asset impairment losses incurred during the nine months ended September 30, 2022 which represented 79.3% of our operating expenses and contributed to our net loss of $1.220 billion for the nine months ended September 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.

16 unchanged sentences

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.

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.

For example, in June 2022 the SEC issued an order denying proposals from NYSE Arca, Inc.

to convert Grayscale Bitcoin Trust into a spot bitcoin exchange-traded product (“ETP”).

Following the denial, the Grayscale Bitcoin Trust initiated litigation against the SEC alleging that the SEC’s order denying its conversion was arbitrary and capricious.

On August 29, 2023, the U.S.

Court of Appeals for the District of Columbia Circuit ruled in favor of the Grayscale Bitcoin Trust and vacated the SEC order.

The SEC has not indicated what further actions it intends to take regarding the ETP application of the Grayscale Bitcoin Trust following the decision and has deferred taking action with respect to several recent ETP applications filed by others.

It is possible that the SEC will 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 any NAV premiums that might exist currently with respect to 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 ETPs on U.S.

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 have or 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.

In addition, the introduction of these or other 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, 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.

As a result of the foregoing factors, as the price of our class A common stock is affected by 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.

2 unchanged sentences

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.

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.

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.

In addition, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine.

While we have implemented and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws and regulations and take care to only acquire our bitcoin through entities subject to anti-money laundering regulation and related compliance rules in the United States, if we are found to have purchased any of our bitcoin from bad actors that have used bitcoin to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in bitcoin by us may be restricted or prohibited.

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.

As of October 31, 2023, approximately 15,886 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.

12 unchanged sentences

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

7 unchanged sentences

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.

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.

1 unchanged sentence

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.

As the price of our class A common stock is affected by 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 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.

As of October 31, 2023, we held approximately 158,400 bitcoins that were acquired at an aggregate purchase price of $4.686 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.

3 unchanged sentences

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

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

As of September 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.

8 unchanged sentences

treasury securities) equal to the total value of stablecoins in circulation.

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

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 September 30, 2023, two of the six largest digital assets by market capitalization are U.S.

dollar-backed stablecoins.

9 unchanged sentences

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, 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.

Further, bitcoin we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation.

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.

14 unchanged sentences

The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target.

These attacks may occur on our systems or those of our third-party service providers or partners.

These attacks may occur on our systems or those of

our third-party service providers or partners.

We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities.

5 unchanged sentences

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

The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing conflict between Russia and Ukraine or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts.

The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts.

Any future breach of our operations or those of others in the bitcoin industry, including third-party services on which we rely, could materially and adversely affect our business.

2 unchanged sentences

Although as of the date of this Quarterly Report we hold a substantial portion of our bitcoin with a single custodian, our custodial agreements do not restrict us from reallocating our bitcoin holdings among our custodians.

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.

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.

In light of the significant amount of bitcoin we hold, we continually seek to engage additional custodians to achieve a greater degree of diversification in the custody of our bitcoin 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 September 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.

25 unchanged sentences

Risk of non-performance includes inability or refusal of a counterparty to perform because of a deterioration in the counterparty’s financial condition and liquidity or for any other reason.

For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreement with them, which could result in a loss of bitcoin, a loss of the opportunity to generate funds, or other losses.

For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreements with them, which could result in a loss of bitcoin, a loss of the opportunity to generate funds, or other losses.

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 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.

On January 23, 2023, the NYDFS released “Guidance on Custodial Structures for Customer Protection in the Event of Insolvency”

with the stated purpose of helping to protect customers in the event that a custodian enters bankruptcy, receivership or similar insolvency proceedings.

While all of our custodians are NYDFS-regulated custodians, no assurance can be provided that the stated guidance from the NYDFS will be followed or will not be changed or that custodially-held bitcoin will not become part of the custodian’s insolvency estate in the event one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings.

and Binance Holdings Ltd., the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading.

Although these bankruptcies, closures and liquidations have not resulted in any loss or misappropriation of our bitcoin, nor have such events adversely impacted our access to our bitcoin, legal precedent created in these bankruptcy and other 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.

While all of our custodians are subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held bitcoin will not become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings.

Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our bitcoin holdings, we would become subject to additional counterparty risks.

7 unchanged sentences

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 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.

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.

15 unchanged sentences

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 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.

For the nine months ended September 30, 2023, transactions by channel partners for which we recognized revenue accounted for 28.8% 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.

6 unchanged sentences

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 $207.1 million as of June 30, 2023.

Our deferred revenue and advance payments totaled $186.8 million as of September 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 $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.

In addition, we had $95.5 million of other remaining performance obligations as of September 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.

8 unchanged sentences

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 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.

For the nine months ended September 30, 2023, our top three product licenses transactions with recognized revenue totaled $8.7 million, or 15.3% of total product licenses revenues, compared to $12.1 million, or 20.5% of total product licenses revenues, for the nine months ended September 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

28 unchanged sentences

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.

On October 30, 2023, the Biden administration issued an Executive Order to, among other things, establish extensive new standards for AI safety and security.

Other jurisdictions may decide to adopt similar or more restrictive legislation that may render the use of such technologies challenging.

These restrictions may make it harder for us to conduct our business using AI, lead to regulatory fines or penalties, require us to change our product offerings or business practices, or prevent or limit our use of AI.

Risks Related to Our Technology and Intellectual Property

19 unchanged sentences

IT infrastructure and cloud environments.

If new or modified operating systems are introduced or new web standards and technologies or new standards in the field of database access technology emerge that are incompatible with our software, development efforts to maintain the interoperability of our software with our customers’

new or modified operating systems are introduced or new web standards and technologies or new standards in the field of database access technology emerge that are incompatible with our software, development efforts to maintain the interoperability of our software with our customers’

IT infrastructure and cloud environments could require substantial capital investment and employee resources.

18 unchanged sentences

If we cannot protect our intellectual property against unauthorized copying or use, we may not remain competitive.

We may be obligated to disclose our proprietary source code to our customers, which may limit our ability to protect our intellectual property and could reduce the renewals of our support services

Certain of our customer agreements contain provisions permitting the customer to become a party to, or a beneficiary of, a source code escrow agreement under which we place the proprietary source code for our applicable services and products in escrow with a third party.

Under these escrow agreements, the source code to the applicable product may be released to the customer, typically for its use to maintain, modify, and enhance the product, upon the occurrence of specified events, such as our filing for bankruptcy, discontinuance of our support services, and/or ceasing our business operations generally.

Disclosing the content of our source code may limit the intellectual property protection we can obtain or maintain for that source code or the services and products containing that source code.

It also could permit a customer to which a product’s source code is disclosed to support and maintain that software product without being required to purchase our support services.

Each of these could harm our business, results of operations, and financial condition.

Third parties may claim we infringe their intellectual property rights

16 unchanged sentences

In addition, we serve our customers and manage certain critical internal processes using a third-party data center hosting facility located in the United States and other third-party services, including AWS, Azure, and other cloud services.

Any disruptions or failures of our systems or the third-party hosting facility or other services that we use, including as a result of a natural disaster, fire, cyberattack (including the potential increase in risk for such attacks due to cyberwarfare in connection with the ongoing conflict between Russia and Ukraine), act of terrorism, geopolitical conflict (including due to the ongoing conflict between Russia and Ukraine and any potential conflict involving China and Taiwan), pandemic (including the COVID-19 pandemic), the effects of climate change, or other catastrophic event, as well as power outages, telecommunications infrastructure outages, a decision by one of our third-party service providers to close facilities that we use without adequate notice or to materially change the pricing or terms of their services, host country restrictions on the conduct of our business operations or the availability of our offerings, or other unanticipated problems with our systems or the third-party services that we use, such as a failure to meet service standards, could severely impact our ability to conduct our business operations or to attract new customers or maintain existing customers, or result in a material weakness in our internal control over financial reporting, any of which could materially adversely affect our future operating results.

Any disruptions or failures of our systems or the third-party hosting facility or other services that we use, including as a result of a natural disaster, fire, cyberattack (including the potential increase in risk for such attacks due to cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts), act of terrorism, geopolitical conflict (including due to the ongoing Russia-Ukraine and Israel-Hamas conflicts and any potential conflict involving China and Taiwan), pandemic (including the COVID-19 pandemic), the effects of climate change, or other catastrophic event, as well as power outages, telecommunications infrastructure outages, a decision by one of our third-party service providers to close facilities that we use without adequate notice or to materially change the pricing or terms of their services, host country restrictions on the conduct of our business operations or the availability of our offerings, or other unanticipated problems with our systems or the third-party services that we use, such as a failure to meet service standards, could severely impact our ability to conduct our business operations or to attract new customers or maintain existing customers, or result in a material weakness in our internal control over financial reporting, any of which could materially adversely affect our future operating results.

Our international operations are complex and expose us to risks that could have a material adverse effect on our business, operating results, and financial condition

We receive a significant portion of our total revenues from international sales and conduct our business activities in various foreign countries, including some emerging markets where we have limited experience, where the challenges of conducting our business can be significantly different from those we have faced in more developed markets, and where business practices may create internal control risks.

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.

International revenues accounted for 44.5% and 38.8% of our total revenues for the three months ended September 30, 2023 and 2022, respectively, and 42.7% and 40.5% of our total revenues for the nine months ended September 30, 2023 and 2022, respectively.

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

10 unchanged sentences

our ability to adapt to sales practices and customer requirements in different cultures;

natural disasters, acts of war (including risks relating to the ongoing conflict between Russia and Ukraine and any potential conflict involving China and Taiwan), terrorism, or pandemics (including the COVID-19 pandemic);

political instability and security risks in the countries where we are doing business, including, without limitation, political and economic instability caused by the current conflict between Russia and Ukraine and economic sanctions adopted in response to the conflict.

natural disasters, acts of war (including risks relating to the ongoing conflict between Russia and Ukraine, a potential broadening of the Israel-Hamas conflict to other countries in the Middle East, and any potential conflict involving China and Taiwan), terrorism, or pandemics (including the COVID-19 pandemic);

Disruptions to trade, weakening of economic conditions, economic and legal uncertainties, or changes in currency rates may adversely affect our business, financial condition, operating results, and cash flows.

57 unchanged sentences

For example, in the United States, protected health information is subject to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which can provide for civil and criminal penalties for noncompliance.

Entities (such as us) that engage in creating, receiving, maintaining, or transmitting protected health information provided by covered entities

and other business associates are subject to enforcement under HIPAA.

Entities (such as us) that engage in creating, receiving, maintaining, or transmitting protected health information provided by covered entities and other business associates are subject to enforcement under HIPAA.

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

44 unchanged sentences

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 UK and the U.S.

also agreed to a U.S.-UK “data bridge,”

which went into effect on October 12, 2023.

This functions similarly to the EU-U.S.

Data Privacy Framework and provides an additional legal mechanism for companies to transfer data from the UK to the U.S.

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.

2 unchanged sentences

Brazil enacted the Lei Geral de Proteção de Dados (the “Brazilian General Data Protection Law”), which became effective in August 2020 and imposes requirements largely similar to GDPR on products and services offered to users in Brazil.

In China, we may also be subject to the Cybersecurity Law that went into effect in June 2017 and the revision of the Personal Information Security Specification that went into effect in October 2020, which have broad but uncertain application and impose a number of new privacy and data security obligations.

In China, we may also be subject to the Cybersecurity Law that went into effect in June 2017 and

the revision of the Personal Information Security Specification that went into effect in October 2020, which have broad but uncertain application and impose a number of new privacy and data security obligations.

China also adopted new legislation on the protection of privacy and personal data in November 2021, including the Personal Information Protection Law (“PIPL”) and Data Security Law that impose new data processing obligations on us.

17 unchanged sentences

The implementing regulations are not expected for another two-to-three years.

The Securities and Exchange Commission also has issued new regulations related to cyber attacks that may require additional reporting and other compliance obligations, as well as creating additional risks related to public notifications concerning cyber incidents.

Furthermore, the U.S.

12 unchanged sentences

Third parties may also conduct attacks designed to prevent access to critical data or systems through ransomware or temporarily deny customers access to our cloud environments.

We, and our service providers, may experience and have experienced attempts by third parties to identify and exploit software and service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our or our customers’

We, and our service providers, have experienced and may in the future experience attempts by third parties to identify and exploit software and service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our or our customers’

or service providers’

cloud environments, networks, and other systems.

Security measures that we or our third-party service providers have implemented may not be effective against all current or future security threats, including any potential threats from the exploitation of the log4j or SpringShell vulnerabilities.

Security measures that we or our third-party service providers have implemented may not be effective against all current or future security threats.

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.

19 unchanged sentences

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.

potential trade wars and other events beyond our control, including the conflicts in Ukraine and the Middle East, 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;

8 unchanged sentences

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 $437.88 as of July 31, 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.

23 unchanged sentences

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 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.

As of October 24, 2023, there are 1,964,025 shares of class B common stock outstanding, which accounts for approximately 61.0% of the total voting power of our outstanding common stock.

As of October 24, 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 60.9% of the total voting power.

26 unchanged sentences

We may issue and sell additional shares of class A common stock, convertible notes, or other securities in subsequent offerings to raise capital or issue shares for other purposes, including in connection with the acquisition of additional bitcoin.

For example, through the date of this report we have sold $335.0 million of shares of class A common stock, and we may sell class A common stock having an aggregate offering price of up to an additional $290.0 million from time to time through the 2023 Sales Agents under the 2023 Sales Agreement.

For example, since January 1, 2023, we have sold $823.9 million of shares of class A common stock through at-the-market equity offering programs, and we may sell class A common stock having an aggregate offering price of up to an additional $602.1 million from time to time through the August 2023 Sales Agents under the August 2023 Sales Agreement.

We cannot predict:

13 unchanged sentences

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 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.

As of September 30, 2023, we had $2.210 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 $10.5 million of other long-term indebtedness.

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

61 unchanged sentences

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.

MacroStrategy holds approximately 142,514 bitcoins that, as of September 30, 2023, had a carrying value of $2.200 billion on our Consolidated Balance Sheet, representing 65.2% 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

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings