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Akerna (KERN) - 2024 Q3 - Quarterly Report
KERNAkerna (KERN)2024-11-13 21:32

Mining Performance - For the three months ended September 30, 2024, Gryphon mined approximately 61 bitcoins, a decrease of 65% compared to 176 bitcoins mined in the same period of 2023[171]. - Gryphon's mining revenues for Q3 2024 were 3,689,000,down293,689,000, down 29% from 5,189,000 in Q3 2023[172]. - The cost to mine one bitcoin in Q3 2024 was 59,213,significantlyhigherthan59,213, significantly higher than 22,625 in Q3 2023, reflecting increased operational costs[172]. - Gryphon's total bitcoin equivalent coins generated in Q3 2024 were 61, compared to 185 in Q3 2023, indicating a decline in mining efficiency[172]. - The global hashrate of the Bitcoin network has shown a consistent upward trend, impacting Gryphon's mining output negatively[176]. - Mining revenues decreased to 3,689,000forthethreemonthsendedSeptember30,2024,downfrom3,689,000 for the three months ended September 30, 2024, down from 5,189,000 for the same period in 2023, a decline of 28.9%[211]. Financial Performance - Total revenues for the three months ended September 30, 2024, were 3,689,000,adecreaseof3,689,000, a decrease of 1,788,000 or 32.6% from 5,477,000in2023[210].−Miningrevenuesincreasedto5,477,000 in 2023[210]. - Mining revenues increased to 16,694,000 for the nine months ended September 30, 2024, up from 14,992,000inthesameperiodof2023,representinganincreaseof14,992,000 in the same period of 2023, representing an increase of 1,702,000 or 11.4%[188]. - The average value of Bitcoin rose to 60,000fortheninemonthsendedSeptember30,2024,comparedto60,000 for the nine months ended September 30, 2024, compared to 26,000 for the same period in 2023, an increase of 34,000or13134,000 or 131%[188]. - Total revenues for the nine months ended September 30, 2024, were 16,694,000, compared to 15,836,000in2023,reflectingagrowthof15,836,000 in 2023, reflecting a growth of 858,000 or 5.4%[187]. - Cost of revenues increased to 12,252,000fortheninemonthsendedSeptember30,2024,from12,252,000 for the nine months ended September 30, 2024, from 9,542,000 in 2023, an increase of 2,710,000or28.42,710,000 or 28.4%[190]. - General and administrative expenses surged to 8,728,000 for the nine months ended September 30, 2024, from 3,250,000in2023,markinganincreaseof3,250,000 in 2023, marking an increase of 5,478,000 or 168.6%[190]. - The Company reported a loss from operations of 5,445,000forthethreemonthsendedSeptember30,2024,comparedtoalossof5,445,000 for the three months ended September 30, 2024, compared to a loss of 9,198,000 in 2023, a reduction of 40.8%[210]. - For the nine months ended September 30, 2024, the company reported a net loss of 21.7millionandanadjustedEBITDAof21.7 million and an adjusted EBITDA of (3.53) million[262]. - For the three months ended September 30, 2024, the company reported a net loss of 5.95million,animprovementfromanetlossof5.95 million, an improvement from a net loss of 8.09 million in the same period of 2023, with an adjusted EBITDA of (2.45)million[263].DebtandFinancing−GryphonhasenteredintoanewloanagreementwithAnchorage,withaninterestrateof4.25(2.45) million[263]. Debt and Financing - Gryphon has entered into a new loan agreement with Anchorage, with an interest rate of 4.25% and a principal amount of 5 million[181]. - As of October 24, 2024, Gryphon owed 304 bitcoins, valued at approximately 18millionbasedonanaveragebitcoinpriceof18 million based on an average bitcoin price of 60,286[179]. - The restructuring of the Anchorage Loan included converting approximately 9.1millionintosharesofcommonstock,resultingintheissuanceof8,287,984shares[180].−TheRestructuredLoanhasaninterestrateof4.259.1 million into shares of common stock, resulting in the issuance of 8,287,984 shares[180]. - The Restructured Loan has an interest rate of 4.25% payable monthly, with Anchorage given a first priority lien on all of Gryphon's assets[251]. - The BTC Note was amended to extend the maturity date to March 2026 and increase the interest rate to 6% per annum[239]. - The company recognized interest expense of 608,000 for the nine months ended September 30, 2024, with 93,000stillaccrued[253].CashFlowandCapitalResources−Cashandcashequivalentsdecreasedto93,000 still accrued[253]. Cash Flow and Capital Resources - Cash and cash equivalents decreased to 368,000 as of September 30, 2024, from 915,000asofDecember31,2023[226].−Theaccumulateddeficitincreasedtoapproximately915,000 as of December 31, 2023[226]. - The accumulated deficit increased to approximately 68,137,000 as of September 30, 2024, compared to 47,175,000asofDecember31,2023[226].−TheCompanyanticipatesneedingadditionalcapitalresourcestofundoperationsandmayconsidersellingadditionalequityordebtsecurities[227].−FortheninemonthsendedSeptember30,2024,netcashusedinoperatingactivitieswasapproximately47,175,000 as of December 31, 2023[226]. - The Company anticipates needing additional capital resources to fund operations and may consider selling additional equity or debt securities[227]. - For the nine months ended September 30, 2024, net cash used in operating activities was approximately 2,368,000, with cash proceeds from the sale of digital assets at approximately 16,649,000andcashexpendituresofapproximately16,649,000 and cash expenditures of approximately 19,017,000[230]. - Net cash used in investing activities for the same period was approximately 1,504,000,primarilyforthepurchaseofminingequipmentcostingapproximately1,504,000, primarily for the purchase of mining equipment costing approximately 1,075,000[231]. - Net cash provided by financing activities was approximately 3,325,000,mainlyfromcashproceedsof3,325,000, mainly from cash proceeds of 3,059,000 from the issuance of common stock[232]. Legal and Regulatory Matters - The Company obtained a PPP Loan of 2.2million,whichwasinitiallyforgivenonSeptember3,2021,buttheSBAisnowreviewingthisforgivenessforpotentialreversal[289].−TheCompanyreceivedacivilinvestigativedemandfromtheDOJregardingthePPPLoan,buttherehasbeennoformaldemandforreturnoftheloanproceeds[290].−DutchiefiledacomplaintagainsttheCompanyallegingunfaircompetitionandtortiousinterference,butthecourtdismissedthecaseinOctober2023,allowingforanappeal[291].−TreComfiledalawsuitseekingrecoveryofapproximately2.2 million, which was initially forgiven on September 3, 2021, but the SBA is now reviewing this forgiveness for potential reversal[289]. - The Company received a civil investigative demand from the DOJ regarding the PPP Loan, but there has been no formal demand for return of the loan proceeds[290]. - Dutchie filed a complaint against the Company alleging unfair competition and tortious interference, but the court dismissed the case in October 2023, allowing for an appeal[291]. - TreCom filed a lawsuit seeking recovery of approximately 4.2 million for breach of contract, with a trial set to commence on December 2, 2024[293]. - The Company established a loss contingency of 0.2millionrelatedtotheTreCommatter,whichremainsoutstandingasofSeptember30,2024[293].−TheCoreComplaintallegedabreachofminerhostingagreements,seeking0.2 million related to the TreCom matter, which remains outstanding as of September 30, 2024[293]. - The Core Complaint alleged a breach of miner hosting agreements, seeking 100 million in damages, but was settled with all claims against the company being released[286]. Management and Internal Controls - The company identified a material weakness in internal control over financial reporting due to insufficient staffing in the accounting department, which could lead to material misstatements[269]. - The company plans to enhance its internal controls by hiring additional personnel and utilizing external audit firms to address identified weaknesses[272]. - Robby Chang was terminated as CEO on September 17, 2024, and subsequently filed a wrongful termination claim against the Company[294][295]. - A special committee was created by the Board to oversee the handling of the wrongful termination claim made by Mr. Chang[296]. - The Company intends to vigorously defend against all ongoing litigation and claims[291][293][295]. Other Developments - The Coinmint Agreement, which provided hosting services for mining operations, was terminated on October 31, 2024[235]. - The adoption of ASU 2023-08 on January 1, 2024, resulted in a 739,000increaseinthecompany′sdigitalassets[264].−Gryphonhassoldapproximately3.4millionsharesunderitsAtTheMarketofferingprogramfortotalnetproceedsof739,000 increase in the company's digital assets[264]. - Gryphon has sold approximately 3.4 million shares under its At The Market offering program for total net proceeds of 2.8 million as of November 13, 2024[178].