Gryphon Digital Mining(GRYP) - 2024 Q2 - Quarterly Report

Mining Performance - For the three months ended June 30, 2024, Gryphon mined approximately 84 bitcoins, a decrease of 55% compared to 187 bitcoins mined in the same period of 2023[124] - Gryphon's mining revenues for Q2 2024 were $5,515,000, representing a 10.9$4,963,000 in Q2 2023[126] - Mining revenues increased to $13,005,000 for the six months ended June 30, 2024, from$9,803,000 for the same period in 2023, representing a growth of $3,202,000 or 32.7$45,452 in Q2 2024, up from $15,096 in Q2 2023, reflecting a significant rise in operational costs[126] - Gryphon's breakeven cost of total BTC equivalent was$45,452 in Q2 2024, compared to $14,115 in Q2 2023, highlighting increased operational challenges[126] - The average value of one mined bitcoin in Q2 2024 was$65,655, compared to $26,540 in Q2 2023, indicating a substantial increase in bitcoin prices[126] - The average value of Bitcoin rose to$59,000 for the six months ended June 30, 2024, compared to $26,000 for the same period in 2023, an increase of$34,000 or 131%[138] - Total revenues for the six months ended June 30, 2024, were $13,005,000, up from$10,359,000 in 2023, reflecting a growth of $2,646,000 or 25.5$20,431,000 for the six months ended June 30, 2024, from $14,590,000 in 2023, an increase of$5,841,000 or 40.0%[136] - General and administrative expenses surged to $6,289,000 for the six months ended June 30, 2024, from$2,446,000 in 2023, marking an increase of $3,843,000 or 157.1$3,828,000 for the three months ended June 30, 2024, compared to $1,092,000 in 2023, marking a 250.6$(7,426,000) for the six months ended June 30, 2024, compared to $(4,231,000) in 2023, a rise of$3,195,000 or 75.5%[136] - The Company reported a loss from operations of $5,866,000 for the three months ended June 30, 2024, compared to a loss of$2,684,000 in 2023, reflecting an increase of $3,182,000 or 118.6$(15,753,000) for the six months ended June 30, 2024, compared to $(9,533,000) in 2023[195] Cash Flow and Financing - Cash and cash equivalents as of June 30, 2024, were$1,219,000, up from $915,000 as of December 31, 2023[171] - The Company anticipates that its current cash levels will not be sufficient to meet its operational needs for at least the next 12 months, indicating a need for additional capital resources[172] - Net cash used in operating activities for the six months ended June 30, 2024, was approximately$(782,000), compared to $2,676,000 in 2023, reflecting a decrease in cash proceeds from digital currency sales[176] - Net cash provided by financing activities was approximately$2,040,000 for the six months ended June 30, 2024, compared to $(63,000) in 2023, driven by cash proceeds from the issuance of common stock[177] Interest and Unrealized Gains - Interest expense increased to$620,000 for the six months ended June 30, 2024, from $368,000 in 2023, an increase of$252,000 or 68.5%[151] - The Company recognized a $1,385,000 unrealized gain on digital assets as of June 30, 2024, following the implementation of ASU No. 2023-08[147] - The Company recognized a$318,000 unrealized gain on digital assets as of June 30, 2024, following the implementation of ASU No. 2023-08[166] Corporate Strategy and ESG - Gryphon operates approximately 8,800 bitcoin ASIC mining computers, utilizing 28 megawatts of power at its primary hosting facility in New York, which relies on renewable hydro energy[123] - Gryphon's strategy focuses on ESG-led mining, aiming to create a net carbon neutral bitcoin miner by partnering with power hosting providers committed to climate science[123] Legal and Compliance Issues - The company was involved in litigation with Sphere 3D, alleging breach of contract and fiduciary duty, with Gryphon filing counterclaims against Sphere 3D[205][206] - The Core Complaint against the company sought damages of $100 million, but a settlement was reached, dismissing all claims against the company[213] - The company received a PPP Loan of$2.2 million, which was previously forgiven, but the SBA is reviewing this determination for potential reversal[215][216] - The company is cooperating with a DOJ inquiry regarding the PPP Loan, with no formal demands for repayment made yet[217] Internal Controls and Governance - As of June 30, 2024, the company's disclosure controls and procedures were deemed ineffective due to insufficient staffing in the accounting and financial reporting department[200] - The identified material weakness could lead to a reasonable possibility of material misstatements in financial statements not being prevented or detected timely[201] - The company plans to enhance internal resources for technical accounting and financial reporting, potentially hiring a full-time person dedicated to internal controls[201] - The company is utilizing external third-party audit firms to improve controls related to its material weaknesses[202] - The company is committed to ongoing evaluation and improvement of its internal control over financial reporting[203] Debt and Financial Obligations - The BTC Note was amended to extend the maturity date to March 2026 and increase the interest rate to 6% per annum[182] - The Company has a collateral coverage ratio requirement of 110% under the BTC Note, and as of June 30, 2024, it was not in breach of this ratio[185] - The merger and acquisition cost was $394,000 related to the disposal of its subsidiary MJ Freeway, which occurred on February 8, 2024[154]