American Bitcoin Corp. quarterly report, Q1 FY2024

Filing identity and business context

The supplied filing is Gryphon Digital Mining, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2024—not a filing by American Bitcoin Corp. Gryphon became publicly traded under ticker GRYP after its February 9, 2024 reverse merger with Akerna Corp.; the merger was accounted for as a reverse recapitalization, with Gryphon’s mining operations as the continuing business. Comparative results primarily reflect Gryphon’s operations.

Financial performance and position

Mining revenue rose 54.8%, while management-services revenue fell to zero from $236,000 following Sphere 3D’s termination notice. Cost of revenue increased 76.7% to $4.84 million. Approximate mining gross margin, using revenue less cost of revenue, was 35.4%, versus 46.1% a year earlier. Operating loss improved modestly, but net loss widened substantially, principally reflecting a $9.64 million noncash fair-value expense on the Bitcoin-denominated note. A $1.70 million unrealized Bitcoin fair-value gain partly offset operating expenses.

Operating cash flow was negative $983,000, compared with positive $1.81 million in Q1 2023. Investing cash flow was zero; financing cash flow was positive $1.81 million, including $1.40 million from a share issuance and $500,000 cash acquired in the merger. Total assets were $17.78 million and stockholders’ deficit was $12.41 million at quarter-end. Current liabilities exceeded current assets by approximately $23.10 million.

Changes, outlook, and material risks

• Gryphon mined approximately 142 BTC, down from 212 BTC in Q1 2023, despite mining revenue increasing as the average Bitcoin value and miner fleet increased. Management reported approximately 8,900 miners at March 31, 2024, versus approximately 7,400 a year earlier.
• Reported cost to mine one Bitcoin increased to $34,063 from $12,910. Management cited higher energy costs and network hashrate; electricity and hosting costs rose from $0.059/kWh to $0.082/kWh. The company’s breakeven analysis is a non-GAAP operational measure and excludes capital expenditures and financing.
• Gryphon early-adopted crypto fair-value accounting on January 1, 2024, recording a $739,000 transition adjustment. Subsequent fair-value changes are recognized in earnings, increasing reported-period volatility.
• Management stated that existing cash would not cover anticipated needs for at least the next 12 months and that additional capital is required. A post-quarter ATM program permits up to $70 million of common-stock sales; $44,958 of net proceeds had been raised by May 9, 2024. Future equity sales could dilute shareholders, and financing availability is not assured.
• The BTC note is secured by mining equipment, the Coinmint agreement and other collateral; it bears 6% interest and is presented entirely as current. Gryphon reported no breach of its 110% collateral-coverage requirement at quarter-end, but a shortfall could require additional collateral or lead to default. The lender also has a conditional conversion right.
• The Sphere 3D litigation remains unresolved, including disputes over the MSA’s termination and competing claims. Gryphon cannot estimate potential damages or recovery; an adverse outcome, defense costs, or loss of the MSA could materially affect results and financing prospects. The company also reported an SBA review of previously forgiven $2.2 million PPP proceeds and a related DOJ information request; no repayment demand or formal claim had been made as of the filing.
• Disclosure controls were deemed ineffective because of insufficient accounting and financial-reporting personnel, inadequate segregation of duties, and insufficient review. Remediation is ongoing and is not yet established as effective.
• The filing identifies risks including Bitcoin-price and mining-difficulty changes, power cost and availability, equipment and cybersecurity issues, regulation, and the need to raise capital. It provides no specific operating or financial guidance.

Investor verification priorities

• Confirm the issuer identity and filing: this is Gryphon Digital Mining, Inc. (GRYP), not American Bitcoin Corp.
• Review the BTC note’s contractual repayment mechanics, fair-value assumptions, collateral coverage, and current classification.
• Track liquidity, cash burn, ATM share sales, dilution, and management’s stated need for additional capital.
• Monitor the Sphere 3D litigation and MSA dispute, as well as the SBA and DOJ PPP-loan inquiry, for developments or quantified exposure.
• Assess whether internal-control remediation is implemented and operating effectively, and reconcile non-GAAP adjusted EBITDA with GAAP net loss.