Akerna (KERN)2025-03-31 21:12Strategy and Operations - Gryphon's new strategy focuses on acquiring and developing energy assets for AI and high-performance computing (HPC) data center infrastructure since September 2024[28]. - Gryphon operates approximately 9,660 bitcoin ASIC mining computers, generating revenue based on a dollar per megawatt-hour (MWh) basis, which is variable depending on Bitcoin price and global hash rates[30]. - Gryphon entered into a Co-Location Mining Services Agreement with Blockfusion for hosting 3,780 bitcoin miners, entitled to 12 MW of power at a cost of 23.50 per MW/hour, with a minimum fee of about 24 million, with a focus on developing AI HPC infrastructure on 850 acres in Alberta[50]. - The Captus Site is considered highly suitable for development due to its redundant natural gas lines, grid connectivity, and access to non-potable water[51]. - Gryphon has delivered 3,996 bitcoin miners to Blockfusion and 6,719 miners to Mawson after the respective agreements[31][32]. - The Company has entered into an Asset Purchase Agreement to acquire four natural gas generators with a combined standby rating of 1,900 kW and 566 bitcoin ASIC mining computers with a combined hashrate capacity of approximately 57,120 TH/s[55]. - The total purchase price for the Giga Acquisition remains 250,000 made to the Seller[56]. - As of December 31, 2024, the Company operates a miner fleet composed of 7,128 S19j Pro Antminers, 552 S19k Pro Antminers, 276 S21 Antminers, and 878 S19j Pro + Antminers, with a total hashrate capacity of approximately 1,000 TH/s[63]. - Gryphon's operations will continue to expand as it acquires additional miners as opportunities arise[63]. - The Company has entered into a cohosting location agreement with Blockfusion, utilizing approximately 12MW of electricity to host approximately 3,780 bitcoin mining machines[61]. Financial Performance and Revenue Model - Gryphon's average holding period for mined bitcoin was 30 days for the year ended December 31, 2024, compared to 25 days for the year ended December 31, 2023[72]. - Gryphon contributes 100% of its Bitcoin hashing power to Foundry USA Pool, which represents approximately 0.3% of the total hashing power of the pool[69]. - Gryphon's revenue model involves mining and holding bitcoin, selling only the bitcoin necessary to cover operating expenses and reinvest in operational expansion[72]. - The market price of bitcoin was extremely volatile in fiscal 2024, ranging between approximately 106,000, directly impacting Gryphon's revenue and profitability[87]. - Gryphon's revenues are solely derived from bitcoin mining, which is influenced by the number of bitcoin rewards mined and the value of bitcoin, making the company vulnerable to price fluctuations[88]. Risks and Challenges - The company faces risks from regulatory changes, as multiple U.S. federal agencies are actively considering regulations that could impact bitcoin mining and related activities[81]. - Gryphon's ability to expand operations is contingent on bitcoin's future price, and failure to meet capital expenditure assumptions could adversely affect its business[87]. - The insolvency of major exchanges like FTX has led to increased market volatility and decreased confidence in the crypto ecosystem, which could adversely impact Gryphon's investment[97]. - The long-term growth and viability of digital assets, including Bitcoin, depend on multiple factors such as adoption rates and market confidence[100]. - A decline in Bitcoin adoption could weaken demand, negatively affecting Gryphon's business and stock value[100]. - Geopolitical and economic crises may lead to significant price volatility in Bitcoin, impacting Gryphon's financial condition[102]. - Gryphon may face liquidity constraints and require additional capital, which may not be available on favorable terms[115]. - The lack of regulation in digital asset exchanges exposes Gryphon to negative publicity and potential loss of confidence in the cryptocurrency market[116]. - Strategic acquisitions may dilute stockholders and strain financial resources, with integration posing additional challenges[123]. - Gryphon's digital assets are not insured against theft, loss, or destruction, increasing the risk of significant financial losses for the company and its stockholders[129]. - The Bitcoin mining reward was recently halved to 3.125 BTC on April 19, 2024, and this halving process will continue until the total amount of Bitcoin rewards reaches 21 million, expected around 2140[136]. - Gryphon aims to maintain a breakeven profitability floor significantly below the network average to mitigate the impacts of halving[138]. - The price of Bitcoin may be negatively affected by large redemptions from other investment vehicles tracking Bitcoin markets, impacting Gryphon's Bitcoin holdings[143]. - The development of central bank digital currencies could compete with Bitcoin, potentially decreasing its value and adversely affecting Gryphon's financial condition[145]. - Internet disruptions could significantly impact Bitcoin's network operations and Gryphon's ability to mine Bitcoin, adversely affecting its business[154]. - Gryphon's independent accounting firm's report expresses substantial doubt about its ability to continue as a "going concern"[160]. - Gryphon's operations are subject to risks associated with cybersecurity, including potential theft or loss of bitcoin assets[165]. - Gryphon's reliance on a single model of miner (Bitmain Antminer) increases operational risks related to design flaws and system failures[182]. - Gryphon's hosting arrangements are uncertain and competitive, with potential regulatory changes affecting availability[185]. - Gryphon faces significant competition from larger companies with greater resources, which may hinder its ability to expand and remain competitive[192]. - Rapid technological changes in the blockchain industry require Gryphon to adapt quickly, or it risks falling behind competitors[195]. Regulatory Environment - Gryphon's business is impacted by evolving regulatory landscapes, which may result in significant fines and reputational harm if compliance is not met[213]. - The company is monitoring potential new regulations in the digital asset industry, particularly in response to recent market collapses and bankruptcies[214]. - Regulatory scrutiny has increased significantly, with investigations and inquiries from U.S. federal and state regulators expected to continue[216]. - The U.S. government is working towards establishing a unified federal regulatory regime for cryptocurrencies, which may impact Gryphon's operations[217]. - Regulatory actions in countries like China and Russia could severely restrict the use of Bitcoin, adversely impacting Gryphon's business[226]. - Gryphon's compliance with the Office of Financial Assets Control's sanctions program is complicated by the pseudonymous nature of blockchain transactions[227]. - Increased scrutiny regarding environmental, social, and governance (ESG) practices may lead to additional costs or risks for Gryphon[228].