Akerna (KERN)2024-04-01 20:06Bitcoin Mining Operations - Gryphon operates approximately 7,400 bitcoin ASIC mining computers, generating revenue measured on a dollar per megawatt-hour (MWh) basis, which is variable based on Bitcoin price, difficulty, transaction volume, and global hash rates[38]. - Gryphon has deployed a total of approximately 9,000 S19 series Antminers from Bitmain, with operations launched in September 2021[35]. - Gryphon's hosted capacity at Core Scientific represented approximately 1% of its overall fleet, which has been relocated without material impact on operations[69]. - Gryphon contributes 100% of its Bitcoin hashing power to Foundry USA Pool, which has a total hashing power of approximately 172 EH/S, with Gryphon providing about 0.5% of that[86]. - Gryphon's miner fleet consists of 7,128 S19j Pro Antminers, 229 S19k Pro Antminers, 309 S19 Pro Antminers, and 876 S19j Pro + Antminers, with a total hashrate capacity of approximately 100 TH/s to 120 TH/s per miner[81]. - Gryphon's operations include preventative maintenance and efficiency measures to enhance profitability and competitiveness[122]. - Gryphon's mining operations are heavily dependent on electricity costs, which are expected to account for a significant portion of overall costs[154]. - Gryphon's ability to compete is tied to its hash rate growth, which must keep pace with the increasing global network hash rate[138]. - Gryphon's mining operations depend on third-party mining pools, exposing it to risks if the pool operator experiences downtime or other issues[176]. - Gryphon's reliance on a small number of digital asset mining equipment suppliers poses risks, as demand for mining machines may outpace supply, impacting growth expectations and financial condition[170]. Financial Performance and Revenue Model - Gryphon's revenue model involves mining and holding Bitcoin, selling only the necessary amount to cover operating expenses and reinvest in operational expansion[89]. - Gryphon's revenues from bitcoin mining are dependent on the number of bitcoin rewards mined and the value of Bitcoin, which has historically been volatile, with a price range in fiscal 2023 between approximately 44,000[103]. - Gryphon's operational strategy focuses on low-cost hosting and partnerships with providers for net carbon neutral power[79]. - Gryphon's bitcoin mining reward will halve from 6.25 to 3.125 in 2024, impacting revenue if Bitcoin prices do not adjust accordingly[119]. - Gryphon aims to maintain a breakeven profitability floor significantly below the network average to mitigate halving impacts[121]. - Gryphon's ability to achieve profitability is contingent on the bitcoin reward for solving blocks being sufficiently high[151]. - Gryphon's average holding period for Bitcoin was 25 days, an increase from under 7 days prior to December 31, 2022[89]. - Gryphon's operations will continue to expand as it acquires additional miners when opportunities arise[81]. Regulatory Environment and Compliance - The regulatory environment for cryptocurrency is evolving, with potential impacts on Gryphon's business from new laws and regulations[95]. - Gryphon recognizes the risks posed by the evolving regulatory environment and potential disruptions in the crypto asset markets, which could impact its operations[104]. - Regulatory changes in jurisdictions where Gryphon operates could impact its ability to conduct business, necessitating potential costly relocations[183]. - The U.S. regulatory environment for cryptocurrencies is evolving, with potential new laws and regulations expected to impact Gryphon's operations[206]. - Regulatory scrutiny has increased significantly, particularly following the collapse of FTX, with investigations from multiple U.S. agencies[206]. - Future regulatory changes could impose additional compliance burdens on Gryphon, potentially leading to increased operational costs[208]. - Gryphon's activities may necessitate compliance with anti-money laundering regulations, leading to extraordinary expenses and operational challenges[198]. - Gryphon's ability to continue as a going concern may be adversely affected by regulatory actions in countries that restrict cryptocurrency use[215]. Risks and Challenges - Gryphon faces significant competition from larger companies with greater resources and experience, which may hinder its ability to expand and improve its network[184]. - Gryphon may struggle to access sufficient capital for operations and growth initiatives, which could hinder competitiveness and financial condition[140]. - Gryphon's independent accounting firm's report expresses substantial doubt about its ability to continue as a going concern[144]. - Gryphon may incur additional losses and negative cash flows, necessitating potential future debt or equity financing[146]. - Gryphon's business may be negatively impacted by the development of competing blockchain technologies, making it difficult to adapt and realize anticipated profits[187]. - Gryphon's reliance on a single model of miner increases operational risks, as any design flaws could adversely affect Gryphon's entire mining system[173]. - Gryphon's stock price may be volatile and subject to fluctuations based on various external factors, including market performance and regulatory developments[218]. - Gryphon's future growth depends on attracting and retaining qualified personnel in a competitive market[149]. Environmental and Sustainability Commitments - Gryphon's primary hosting facility in New York utilizes 28 megawatts of space powered by renewable hydro energy, aligning with its mission for carbon neutrality[36]. - Gryphon has entered into agreements to purchase 74,075 carbon credits to offset its carbon footprint from bitcoin mining activities, maintaining its commitment to carbon-free energy sources[99]. - Gryphon's commitment to ESG principles includes avoiding bitcoin mining at facilities using carbon-based electricity sources, reinforcing its focus on sustainability[99]. - Climate change may impose additional costs and risks on Gryphon's operations, potentially impacting its financial condition[192]. Legal and Litigation Matters - Gryphon is currently engaged in litigation, including the Sphere 3D Litigation, which may result in significant liabilities or damages affecting its financial condition[225]. - The Company has a PPP Loan of $2.2 million obtained under the CARES Act, which was initially forgiven by the SBA, but is now under review for potential reversal[228]. - The SBA is considering a full denial of the previously forgiven amount based on the Company's eligibility for the PPP Loan, which could negatively impact its financial position[229]. - There exists a risk that the SBA or DOJ could determine the Company does not qualify for forgiveness of the PPP Loan, leading to potential repayment obligations and penalties[231].