Gryphon Digital Mining Inc
For the period ended Sep 30, 2024. Filed Nov 13, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 13, 2024
ABTC$5.35+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001213900-24-068996
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001213900-24-097500
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 146 previous paragraphs and 151 current paragraphs.
72 unchanged; 62 reworded; 16 added; 11 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 14 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
Gryphon operates approximately 8,800 bitcoin ASIC mining computers, referred to as “miners,” that Gryphon has installed at third-party hosted mining data centers located in New York. Revenue generated by the mining of bitcoin is measured on a dollar per megawatt-hour (“MWh”) basis and is variable based on the price of bitcoin, the measure of difficulty, transaction volume and global hash rates.
Current report
As previously disclosed, on May 25, 2022, Anchorage entered into the Anchorage Loan Agreement with Gryphon Opco, an indirect wholly owned subsidiary of Gryphon, pursuant to which Anchorage loaned Gryphon Opco the principal amount of 933.333333 bitcoin. Gryphon Opco’s obligations under the Anchorage Loan Agreement were secured by certain equipment and software rights of Gryphon Opco and were guaranteed by Gryphon. As of October 24, 2024, Gryphon owed 304 bitcoins, valued at approximately $18 million based on an average bitcoin price for the month of September 2024 of $60,286.
Current report
On October 25, 2024, Gryphon, its direct and indirect subsidiaries, as applicable, and Anchorage entered into the Agreements to restructure the Anchorage Loan and terminate the existing the Anchorage Loan Agreement. Pursuant to the Agreements, (i) approximately $9.1 million of the Anchorage Loan was converted into shares of Common Stock, at an ascribed value of $1.10 per share, resulting in the issuance of 8,287,984 shares of Common Stock to Anchorage in a private placement pursuant to Section 4(a)(2) of the Securities Act, (ii) approximately $3.9 million of the Anchorage Loan was converted into warrants to purchase 3,530,198 shares of Common Stock, which warrants are exercisable immediately, have a ten year term and an exercise price of $0.01 per share, in a private placement pursuant to Section 4(a)(2) of the Securities Act and (iii) the remaining $5 million of the Anchorage Loan was exchanged for a new $5 million loan pursuant to the New Loan Agreement.
Current report
The New Loan Agreement contains customary representations, warranties and agreements by Gryphon, customary conditions to closing, indemnification obligations of the Company and the purchasers, including for liabilities arising under the Securities Act (as defined below), other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Loan Agreement were made only for the purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements, and may be subject to limitations agreed upon by the contracting parties.
Current report
Pursuant to the Agreements, Gryphon also issued Anchorage warrants to purchase 2,000,000 shares of Common Stock, which warrants are exercisable immediately, will expire five years from the date of issuance and have an exercise price of $1.50 per share. The $1.50 Warrants were issued in a private placement pursuant to Section 4(a)(2) of the Securities Act.
Current report
The Restructured Loan and the Warrants cannot be converted or exercised, respectively, if Anchorage (together with its affiliates) would beneficially own in excess of 19.99% of the number of shares of Common Stock outstanding as of the date of the Agreements after giving effect to such conversion or exercise without the approval of Gryphon’s stockholders. Gryphon has agreed to seek such approval at its next annual meeting of stockholders.
Current report
The Coinmint Agreement was terminated on October 31, 2024, with effect on January 1, 2025.
Current report
Nine months ended September 30, 2024 compared to nine months ended September 30, 2023
Current report
Other expenses were as follows for the nine months ended September 30,
Current report
Other expenses increased to $225,000 for the three months ended September 30, 2024 from $76,000 for the three months ended September 30, 2023.
Current report
Stock-based compensation expense decreased to $97,000 for the three months ended September 30, 2024 from $392,000 for the three months ended September 30, 2023.
Current report
Unrealized loss on marketable securities
Current report
The Coinmint Agreement was terminated on October 31, 2024, with effect on January 1, 2025.
Current report
Subsequent to September 30, 2024, on October 25, 2024, the Company and Anchorage entered into the Debt Repayment and Exchange Agreement (the (“DPE Agreement”), Loan, Guaranty and Security Agreement (the “New Loan Agreement”), the Pre-Funded Warrants (as defined below) and the $1.50 Warrants (as defined below) (together, the “Agreements”) to restructure the Anchorage Loan (the “Restructuring”) and terminate the existing the Anchorage Loan Agreement. Pursuant to the Agreements, (i) approximately $9.1 million of the Anchorage Loan was converted into shares of Common Stock, at an ascribed value of $1.10 per share, resulting in the issuance of 8,287,984 shares of Common Stock to Anchorage in a private placement pursuant to Section 4(a)(2) of the Securities Act, (ii) approximately $3.9 million of the Anchorage Loan was converted into warrants to purchase 3,530,198 shares of Common Stock, which warrants are exercisable immediately, have a ten year term and an exercise price of $0.01 per share (the “Pre-Funded Warrants”), in a private placement pursuant to Section 4(a)(2) of the Securities Act and (iii) the remaining $5 million of the Anchorage Loan was exchanged for a new $5 million loan (the “Restructured Loan”) pursuant to the New Loan Agreement.
Current report
Restructured Loan
Current report
The Restructured Loan and the Warrants cannot be converted or exercised, respectively, if Anchorage (together with its affiliates) would beneficially own in excess of 19.99% of the number of shares of Common Stock outstanding as of the date of the Agreements after giving effect to such conversion or exercise without the approval of Gryphon’s stockholders. Gryphon agreed to seek such approval at its next annual meeting of stockholders.
Removed paragraphs (11)
Previous report
Gryphon’s operations encompass the following:
Previous report
Termination of Sphere 3D Merger Agreement
Previous report
On June 3, 2021, Gryphon and Sphere 3D Corp. (“Sphere 3D”) entered into the “Sphere 3D Merger Agreement, pursuant to which a merger subsidiary of Sphere 3D was to merge with and into Gryphon, with Gryphon continuing as the surviving corporation and wholly-owned subsidiary of Sphere 3D (the “Sphere 3D Merger”).
Previous report
On July 6, 2021, in connection with the pending Sphere 3D Merger, Sphere 3D entered into a Secured Promissory Note with Gryphon (the “Sphere 3D Note”), pursuant to which Sphere 3D loaned Gryphon the principal amount of $2.7 million. The Sphere 3D Note was secured by certain assets of Gryphon and bore interest at the rate of 9.5% per annum. On August 30, 2021, Sphere 3D and Gryphon entered into Amendment No. 1 to the Sphere 3D Note pursuant to which Sphere 3D loaned Gryphon an additional $3.65 million. On September 29, 2021, Sphere 3D and Gryphon entered into Amendment No. 2 to the Sphere 3D Note, pursuant to which Sphere 3D loaned Gryphon an additional $3.65 million and amended the repayment schedule. On January 3, 2022, Sphere 3D and Gryphon entered into Amendment No. 3 to the Sphere 3D Note, pursuant to which Sphere 3D loaned an additional $2.5 million to Gryphon, which increased the principal amount of the Sphere 3D Note to $12.5 million and extended the initial date for the repayment.
Previous report
On August 19, 2021, in connection with the pending Sphere 3D Merger, Gryphon entered into a Master Services Agreement (the “Sphere 3D MSA”) with Sphere 3D. Under the Sphere 3D MSA, Gryphon is Sphere 3D’s exclusive provider of management services for all blockchain and cryptocurrency-related operations, including but not limited to services relating to all mining equipment owned, purchased, leased, operated, or otherwise controlled by Sphere 3D and/or its subsidiaries and/or its affiliates at any location. Gryphon, in return receives 22.5% of the net operating profit of all of Sphere 3D’s blockchain and cryptocurrency-related operations. To provide greater certainty as to the term of the Sphere 3D MSA, Sphere 3D and Gryphon agreed to extend the initial term of the Sphere 3D MSA from three to four years or to five years in the event Sphere 3D did not receive delivery of a specified minimum number of bitcoin mining machines during 2022. Sphere did not meet delivery targets in 2022, which extended the initial term of the Sphere 3D MSA to five years through August 2026. Subject to written notice from Sphere 3D and an opportunity by Gryphon to cure for a period of up to 180 days, Sphere 3D shall be entitled to terminate the Sphere 3D MSA in the event of: (i) Gryphon’s failure to perform the services under the Sphere 3D MSA in a professional and workmanlike manner in accordance with crypto-mining industry standards for similar services, or (ii) Gryphon’s gross negligence, fraud or willful misconduct in connection with performing the services. Gryphon shall be entitled to specific performance or termination for cause in the event of a breach by Sphere 3D, subject to written notice and an opportunity to cure for a period of up to 180 days.
Previous report
On April 4, 2022, Gryphon and Sphere 3D mutually agreed to terminate the Sphere 3D Merger Agreement due to changing market conditions, the passage of time, and the relative financial positions of the companies, among other factors. In connection with the termination of the Sphere 3D Merger Agreement, all amounts payable by Gryphon under the Sphere 3D Note were forgiven, and Sphere 3D released all of the collateral pledged by Gryphon to secure the Sphere 3D Note. In addition, Gryphon received 850,000 shares of Sphere 3D’s restricted common stock that were held in a third-party escrow account. The parties will continue to operate under the Sphere 3D MSA in accordance with its terms.
Previous report
Gryphon and Sphere 3D are engaged in litigation regarding the Sphere 3D MSA, and on October 6, 2023, Sphere 3D delivered a termination notice to Gryphon with respect to the Sphere 3D MSA. For additional information regarding these matters, see Note 8 - Commitments and Contingencies.
Previous report
Six months ended June 30, 2024 compared to six months ended June 30, 2023
Previous report
Unrealized (loss) gain on marketable securities
Previous report
Other expenses decreased to $64,000 for the three months ended June 30, 2024 from $89,000 for the three months ended June 30, 2023.
Previous report
Stock-based compensation expense increased to $140,000 for the three months ended June 30, 2024 from $131,000 for the three months ended June 30, 2023.
Reworded paragraphs (62)
Previous wording
Founded in October 2020, Gryphon is a bitcoin mining company based in Las Vegas, Nevada. Gryphon launched its mining operations in September 2021 upon the receipt of the first of 12 batches of 600 Bitmain S19j Pro Antminers. Gryphon has deployed a combined total of approximately 8,800 S19j Pro and S21 Antminers from Bitmain Technologies Limited. Gryphon’s mission is to create a net carbon neutral bitcoin miner. Gryphon’s revenue model is to mine and hold bitcoin, and then sell only the bitcoin that is necessary to pay its operating expenses and to reinvest in operational expansion. The bitcoin that is sold to pay operating expenses and to reinvest in operational expansion is sold within a 24-hour time frame of receipt.
Current wording
Founded in October 2020, Gryphon is a bitcoin mining company based in Las Vegas, Nevada. Gryphon launched its mining operations in September 2021 upon the receipt of the first of 12 batches of 600 Bitmain S19j Pro Antminers. Gryphon’s revenue model is to mine and hold bitcoin, and then sell only the bitcoin that is necessary to pay its operating expenses and to reinvest in operational expansion. The bitcoin that is sold to pay operating expenses and to reinvest in operational expansion is typically sold within 24-hours of receipt.
Previous wording
Given the significant amount of power that ASIC miners require to operate, Gryphon believes most mining companies focus completely on low-cost electricity without considering the impact of the power’s production on the climate. Gryphon’s strategy is to focus on working with power hosting partners that are committed to climate science and also can produce reliable, low-cost power. Gryphon uses approximately 28 megawatts of space at its primary hosting facility in New York, which relies on renewable hydro energy. As it deploys additional miners, Gryphon will work with hosting partners that have committed to providing power that is net carbon neutral.
Current wording
Gryphon uses approximately 28 megawatts of space at its primary hosting facility in New York, which relies on renewable hydro energy.
Previous wording
For the three months ended June 30, 2024 and 2023, Gryphon mined approximately 84 and 187 bitcoins, respectively. For the six months ended June 30, 2024 and 2023, Gryphon mined approximately 227 and 399 bitcoins, respectively. While Gryphon does not have any plans to acquire digital assets other than bitcoin, it may do so in the future.
Current wording
For the three months ended September 30, 2024 and 2023, Gryphon mined approximately 61 and 176 bitcoins, respectively. For the nine months ended September 30, 2024 and 2023, Gryphon mined approximately 287 and 575, respectively. While Gryphon does not have any plans to acquire digital assets other than bitcoin, it may do so in the future.
Previous wording
The breakeven analysis is computed by taking the cost of revenues for the given period and dividing that sum by the number of Bitcoin Equivalent Coins Generated during the same period. For instance, in (Q2/23 the $4,963,000 cost of revenues is divided by the 200 Bitcoin Equivalent Coins Generated, resulting in an average of $14,115 per coin). The BTC Equivalent calculation labeled as “Total BTC Equiv” in the table, is determined by combining Gryphon’s bitcoin-mined during the period with the bitcoin equivalent amount of revenue earned from the Sphere MSA. To calculate the latter, the revenue earned from the Sphere MSA during the period is divided by the average bitcoin price as quoted by the Principal Market for that same period (labeled as “MSA BTC Equiv” in the table). The breakeven analysis is an operational metric that does not take capital expenditures or financing mechanics into consideration. The calculation only considers direct operational costs, such as electricity and hosting. The mining equipment was originally financed primarily through equity capital raises and cash flows resulting from the sale of bitcoin generating by mining operations. As of June 30, 2024, there are no financing agreements outstanding related to financing of mining equipment.
Current wording
The breakeven analysis is computed by taking the cost of revenues for the given period and dividing that sum by the number of Bitcoin Equivalent Coins Generated during the same period. For instance, in (Q3/24 the $3,612,000 cost of revenues is divided by the 61 Bitcoin Equivalent Coins Generated, resulting in an average of $59,213 per coin). The BTC Equivalent calculation labeled as “Total BTC Equiv” in the table, is determined by combining Gryphon’s bitcoin-mined during the period with the bitcoin equivalent amount of revenue earned from the Sphere MSA. To calculate the latter, the revenue earned from the Sphere MSA during the period is divided by the average bitcoin price as quoted by the Principal Market for that same period (labeled as “MSA BTC Equiv” in the table). The breakeven analysis is an operational metric that does not take capital expenditures or financing mechanics into consideration. The calculation only considers direct operational costs, such as electricity and hosting. The mining equipment was originally financed primarily through equity capital raises and cash flows resulting from the sale of bitcoin generating by mining operations. As of September 30, 2024, there were no financing agreements outstanding related to financing of mining equipment.
Previous wording
The breakeven cost of mining bitcoin is influenced primarily by two factors. First, the cost of electricity sourced from Gryphon’s hosting providers, which encompasses a combination of pass-through market electricity prices and profit-sharing arrangements. Second, it is affected by the global hashrate of the Bitcoin network. Over the twelve-month period through the second quarter of 2024, the cost of electricity plus the profit-sharing arrangement in place with the hosting provider have continued to increase from $0.0569 per kilowatt hour in the second quarter of 2023 to $0.0654 per kilowatt hour in the second quarter of 2024. This increase is attributed to an increase in pass through energy prices over the twelve-month period of 14.9%, resulting in a less cost-effective electricity supply. In addition, the global hashrate of the Bitcoin network has shown a consistent upward trend, with sequential increases of 9.1%, 21.6%, 19.0% and 6.7% over the last four quarters ending June 30, 2024. This increase in the global hashrate has led to fewer bitcoins being mined for the same amount of energy consumption. The combined effect of these changes in the two key cost drivers has resulted in an increase in the overall breakeven level as of June 30, 2024 compared to June 30, 2023.
Current wording
The breakeven cost of mining bitcoin is influenced primarily by two factors. First, the cost of electricity sourced from Gryphon’s hosting providers, which encompasses a combination of pass-through market electricity prices and profit-sharing arrangements. Second, it is affected by the global hashrate of the Bitcoin network. Over the twelve-month period through the third quarter of 2024, the cost of electricity plus the profit-sharing arrangement in place with the hosting provider has fluctuated due to seasonality from $0.0709 per kilowatt hour in the third quarter of 2023 to $0.0624 per kilowatt hour in the third quarter of 2024, reaching a high of $0.0817 per kilowatt hour during Q1 of 2024. In addition, the global hashrate of the Bitcoin network has shown a consistent upward trend, with sequential increases of 21.6%, 19.0%, 6.8% and 4.3% over the last four quarters ending September 30, 2024. This increase in the global hashrate has led to fewer bitcoins being mined for the same amount of energy consumption. The combined effect of these changes in the two key cost drivers has resulted in an increase in the overall breakeven level as of September 30, 2024 compared to September 30, 2023.
Previous wording
On April 19, 2024, the Company commenced a new At The Market offering program with B. Riley Inc., Ladenburg Thalmann & Co. Inc., Kingswood Investments, a division of Kingswood Capital Partners, LLC, PI Financial (US ) Corp. and ATB Capital Markets USA Inc., each respectively acting as sales agents, under which the Company may offer and sell shares of its Common Stock from time to time through the sales agents having an aggregate offering price of up to $70,000,000. As of August 14, 2024, the Company had sold 1,075,021 shares under this program for total net proceeds of $1.24 million.
Current wording
On April 19, 2024, the Company commenced an At The Market offering program with B. Riley Inc., Ladenburg Thalmann & Co. Inc., Kingswood Investments, a division of Kingswood Capital Partners, LLC, PI Financial (US ) Corp. and ATB Capital Markets USA Inc., each respectively acting as sales agents, under which the Company may offer and sell shares of its Common Stock from time to time through the sales agents having an aggregate offering price of up to $70,000,000. As of May 30, 2024, B. Riley Securities is no longer participating as a sales agent. As of November 13, 2024, the Company had sold approximately 3.4 million shares under this program for total net proceeds of $2.8 million.
Previous wording
The following table shows the Company’s results of operations for the six months ended June 30:
Current wording
The following table shows the Company’s results of operations for the nine months ended September 30:
Previous wording
Mining revenues increased to $13,005,000 for the six months ended June 30, 2024 from $9,803,000 for the six months ended June 30, 2023. The increase in mining revenues of $3,202,000 is due to both an increase in the number of miners in operation and the average value of a Bitcoin. As of June 30, 2024, the Company had approximately 8,800 miners compared to approximately 8,300 as of June 30, 2023. The average value of Bitcoin for the six months ended June 30, 2024 was $59,000 compared to $26,000 for the six months ended June 30, 2023, an increase of $34,000, or 131%.
Current wording
Mining revenues increased to $16,694,000 for the nine months ended September 30, 2024 from $14,992,000 for the nine months ended September 30, 2023. The increase in mining revenues of $1,702,000 is due to both an increase in the number of miners in operation and the average value of a Bitcoin. As of September 30, 2024, the Company had approximately 8,800 miners compared to approximately 8,300 as of September 30, 2023. The average value of Bitcoin for the nine months ended September 30, 2024 was $60,000 compared to $26,000 for the nine months ended September 30, 2023, an increase of $34,000, or 131%.
Previous wording
Management services revenue decreased to $0 for the six months ended June 30, 2024, compared to $556,000 for the six months ended June 30, 2023. Management services revenue relates to the Sphere MSA, regarding which Sphere 3D delivered a termination notice to the Company on October 6, 2023. See Note 8 - Commitments and Contingencies.
Current wording
Management services revenue decreased to $0 for the nine months ended September 30, 2024, compared to $844,000 for the nine months ended September 30, 2023. Management services revenue relates to the Sphere MSA, regarding which Sphere 3D delivered a termination notice to the Company on October 6, 2023. See Note 8 - Commitments and Contingencies.
Previous wording
Cost of revenues increased to $8,640,000 for the six months ended June 30, 2024 from $5,560,000 for the six months ended June 30, 2023. The increase of $3,080,000 was primarily attributable to (i) an increase in the deployment of miners, (ii) an increase in Bitcoin network hashrate, and (iii) higher energy costs.
Current wording
Cost of revenues increased to $12,252,000 for the nine months ended September 30, 2024 from $9,542,000 for the nine months ended September 30, 2023. The increase of $2,710,000 was primarily attributable to (i) an increase in the deployment of miners, (ii) an increase in Bitcoin network hashrate, and (iii) higher energy costs.
Previous wording
General and administrative expenses are as follows for the six months ended June 30,
Current wording
General and administrative expenses are as follows for the nine months ended September 30,
Previous wording
Professional fees increased to $1,939,000 for the six months ended June 30, 2024 from $1,147,000 for the six months ended June 30, 2023. The increase of $792,000 was due to (i) an increase of $140,000 for accounting-related services, (ii) an increase in legal fees of $264,000, and (iii) $388,000 of professional fees related to the Merger.
Current wording
Professional fees increased to $3,067,000 for the nine months ended September 30, 2024 from $1,626,000 for the nine months ended September 30, 2023. The increase of $1,441,000 was due to (i) an increase of $261,000 for accounting and other related services, (ii) an increase in legal fees of $792,000, and (iii) $388,000 of professional fees related to the Merger.
Previous wording
Investor and public relations expenses increased to $3,354,000 for the six months ended June 30, 2024 from $0 for the six months ended June 30, 2023. The increase is due to the Merger. As a newly public company, management hired consulting firms to increase the Company’s public exposure. Included in the $3.4 million of investor and public relations expense for the six months ended June 30, 2024 is $1.5 million of non-cash expense related to the fair value of common stock issued to consultants.
Current wording
Investor and public relations expenses increased to $3,694,000 for the nine months ended September 30, 2024 from $0 for the nine months ended September 30, 2023. The increase is due to the Merger. As a newly public company, management hired consulting firms to increase the Company’s public exposure. Included in the $3,694,000 of investor and public relations expense for the nine months ended September 30, 2024 is $1,661,000 of non-cash expense related to the fair value of common stock issued to consultants.
Previous wording
Salaries and wages increased to $454,000 for the six months ended June 30, 2024 from $302,000 for the six months ended June 30, 2023. The increase of $152,000 is due to compensation for three new directors and hiring one additional employee.
Current wording
Salaries and wages increased to $808,000 for the nine months ended September 30, 2024 from $507,000 for the nine months ended September 30, 2023. The increase of $301,000 is due to compensation for three new directors and hiring one additional employee and estimated bonus accrual for the Company’s officers.
Previous wording
Insurance expense increased to $327,000 for the six months ended June 30, 2024 from $84,000 for the six months ended June 30, 2023. The increase of $243,000 was attributable to an increase in our insurance premiums as a result of becoming a public company.
Current wording
Insurance expense increased to $494,000 for the nine months ended September 30, 2024 from $125,000 for the nine months ended September 30, 2023. The increase of $369,000 was attributable to an increase in insurance premiums as a result of becoming a public company.
Previous wording
Franchise tax and license decreased to $0 for the six months ended June 30, 2024 from $194,000 for the six months ended June 30, 2023.
Current wording
Franchise tax and license increased to $225,000 for the nine months ended September 30, 2024 from $197,000 for the nine months ended September 30, 2023.
Previous wording
Other expenses increased to $215,000 for the six months ended June 30, 2024 from $159,000 for the six months ended June 30, 2023. The increase of $56,000 is attributable to an increase in payments of $108,000 to regulatory agencies and a general decrease in other expenses of $52,000.
Current wording
Other expenses increased to $440,000 for the nine months ended September 30, 2024 from $235,000 for the nine months ended September 30, 2023. The increase of $205,000 is attributable to an increase in payments of $108,000 to regulatory agencies and a general increase in other expenses of $97,000.
Previous wording
Stock-based compensation expense increased to $348,000 for the six months ended June 30, 2024 from a benefit of $(1,021,000) for the six months ended June 30, 2023. The increase is due to a one time forfeiture of stock-based compensation of $1,910,000 in connection with termination of an employment agreement in the prior year period.
Current wording
Stock-based compensation expense increased to $445,000 for the nine months ended September 30, 2024 from a benefit of $629,000 for the nine months ended September 30, 2023. The increase is due to a one-time forfeiture of stock-based compensation of $1,910,000 in connection with termination of an employment agreement in the prior year period.
Previous wording
Depreciation decreased to $6,539,000 for the six months ended June 30, 2024 from $7,839,000 for the six months ended June 30, 2023. During the year ended December 31, 2023, the Company assessed the need for an impairment write-down of mining equipment (held as fixed assets). In accordance with ASC 360-10, the Company determined that the fixed asset category had carrying values in excess of fair value. Accordingly, the Company recognized impairment charges, reducing its mining equipment’s depreciable basis. Therefore, the depreciation expense for the six months ended June 30, 2024 was reduced.
Current wording
Depreciation decreased to $9,435,000 for the nine months ended September 30, 2024 from $11,906,000 for the nine months ended September 30, 2023. During the year ended December 31, 2023, the Company assessed the need for an impairment write-down of mining equipment (held as fixed assets). In accordance with ASC 360-10, the Company determined that the fixed asset category had carrying values in excess of fair value. Accordingly, the Company recognized impairment charges, reducing its mining equipment’s depreciable basis. Therefore, the depreciation expense for the nine months ended September 30, 2024 was reduced.
Previous wording
The impairment of digital assets decreased to $0 for the six months ended June 30, 2024 from $233,000 for the six months ended June 30, 2023.
Current wording
The impairment of digital assets decreased to $0 for the nine months ended September 30, 2024 from $250,000 for the nine months ended September 30, 2023.
Previous wording
As of January 1, 2024, the Company implemented ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60) (“ASU 2023-08”): Accounting for and Disclosure of Crypto Assets. ASU 2023-08 requires entities to measure crypto assets that meet specific criteria at fair value with changes recognized in net income each reporting period. ASU 2023-08 requires an entity to present crypto assets measured at fair value separately from other intangible assets in the balance sheets and record changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. As of June 30, 2024, the Company recognized a $1,385,000 increase in the fair market value of its digital asset holdings.
Current wording
As of January 1, 2024, the Company implemented ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60) (“ASU 2023-08”): Accounting for and Disclosure of Crypto Assets. ASU 2023-08 requires entities to measure crypto assets that meet specific criteria at fair value with changes recognized in net income each reporting period. ASU 2023-08 requires an entity to present crypto assets measured at fair value separately from other intangible assets in the balance sheets and record changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. For the nine months ended September 30, 2024, the Company recognized a $1,295,000 unrealized gain in the fair market value of its digital asset holdings.
Previous wording
The realized gain on the sale of digital assets was $0 for the six months ended June 30, 2024, compared to $467,000 for the six months ended June 30, 2023. With the implementation of ASU 2023-08, realized gains on the sale of digital assets will be eliminated since the digital assets will be marked to market prior to sale.
Current wording
The realized gain on the sale of digital assets was $0 for the nine months ended September 30, 2024, compared to $484,000 for the nine months ended September 30, 2023. With the implementation of ASU 2023-08, realized gains on the sale of digital assets will be eliminated since the digital assets will be marked to market prior to sale.
Previous wording
For the six months ended June 30, 2024, unrealized loss on marketable securities was $272,000, as compared to a gain of $1,000 for the six months ended June 30, 2023. The loss for the six months ended June 30, 2024 related to a decrease in the fair market value of the underlying securities held.
Current wording
For the nine months ended September 30, 2024, unrealized loss on marketable securities was $293,000, as compared to a loss of $74,000 for the nine months ended September 30, 2023. The loss for the nine months ended September 30, 2024 related to a decrease in the fair market value of the underlying securities held.
Previous wording
For the six months ended June 30, 2024, the realized gain from the use of digital assets was $0, compared to $3,800,000 for the six months ended June 30, 2023. With the implementation of ASU 2023-08, realized gains on the use of digital assets will be eliminated since the digital assets will be marked to market prior to sale.
Current wording
For the nine months ended September 30, 2024, the realized gain from the use of digital assets was $0, compared to $3,809,000 for the nine months ended September 30, 2023. With the implementation of ASU 2023-08, realized gains on the use of digital assets will be eliminated since the digital assets will be marked to market prior to sale.
Previous wording
The Company has a note payable denominated in Bitcoin, which is accounted for under the fair value method of accounting. For the six months ended June 30, 2024, the Company recognized a $6,895,000 increase in the fair value of notes payable, compared to an $8,949,000 increase for the six months ended June 30, 2023.
Current wording
The Company has a note payable denominated in Bitcoin, which is accounted for under the fair value method of accounting. For the nine months ended September 30, 2024, the Company recognized a $7,089,000 decrease in the fair value of notes payable, compared to an $7,607,000 decrease for the nine months ended September 30, 2023.
Previous wording
Interest expense increased to $620,000 for the six months ended June 30, 2024 from $368,000 for the six months ended June 30, 2023. The increase of $252,000 is primarily due to the Amendment of the BTC Note on March 29, 2023.
Current wording
Interest expense increased to $908,000 for the nine months ended September 30, 2024 from $530,000 for the nine months ended September 30, 2023. The increase of $378,000 is primarily due to the Amendment of the BTC Note on March 29, 2023.
Previous wording
Loss on disposal of asset was $146,000 for the six months ended June 30, 2024, as compared to $53,000 for the six months ended June 30, 2023.
Current wording
Loss on disposal of asset was $146,000 for the nine months ended September 30, 2024, as compared to $55,000 for the nine months ended September 30, 2023.
Previous wording
During the six months ended June 30, 2023, the Company held third-party discount coupons for the purchase of mining machines. The Company sold these discount coupons for $267,000.
Current wording
During the nine months ended September 30, 2023, the Company held third-party discount coupons for the purchase of mining machines. The Company sold these discount coupons for $267,000.
Previous wording
Mining revenues increased to $5,515,000 for the three months ended June 30, 2024 from $4,963,000 for the three months ended June 30, 2023. The increase in mining revenues of $552,000 is due to both an increase in the number of miners in operation and the average value of a Bitcoin. As of June 30, 2024, the Company had approximately 8,800 miners compared to approximately 8,300 as of June 30, 2023. The average value of Bitcoin for the three months ended June 30, 2024 was $65,000 compared to $28,000 for the three months ended June 30, 2023, an increase of $38,000, or 134%.
Current wording
Mining revenues decreased to $3,689,000 for the three months ended September 30, 2024 from $5,189,000 for the three months ended September 30, 2023. The decrease in mining revenues of $1,500,000 is due to both an increase in the number of miners in operation and the average value of a Bitcoin. As of September 30, 2024, the Company had approximately 8,800 miners compared to approximately 8,300 as of September 30, 2023. The average value of Bitcoin for the three months ended September 30, 2024 was $61,000 compared to $28,000 for the three months ended September 30, 2023, an increase of $33,000, or 118%.
Previous wording
Management services revenue decreased to $0 for the three months ended June 30, 2024, compared to $320,000 for the three months ended June 30, 2023. Management services revenue relates to the Sphere MSA, regarding which Sphere 3D delivered a termination notice to the Company on October 6, 2023. See Note 8 - Commitments and Contingencies.
Current wording
Management services revenue decreased to $0 for the three months ended September 30, 2024, compared to $288,000 for the three months ended September 30, 2023. Management services revenue relates to the Sphere MSA, regarding which Sphere 3D delivered a termination notice to the Company on October 6, 2023. See Note 8 - Commitments and Contingencies.
Previous wording
Cost of revenues increased to $3,803,000 for the three months ended June 30, 2024 from $2,823,000 for the three months ended June 30, 2023. The increase of $980,000 was primarily attributable to (i) an increase in the deployment of miners, (ii) an increase in Bitcoin network hashrate, and (iii) higher energy costs.
Current wording
Cost of revenues decreased to $3,612,000 for the three months ended September 30, 2024 from $3,982,000 for the three months ended September 30, 2023. The decrease of $370,000 was primarily attributable to (i) an increase in the deployment of miners, (ii) an increase in Bitcoin network hashrate, and (iii) higher energy costs.
Previous wording
Professional fees increased to $891,000 for the three months ended June 30, 2024 from $659,000 for the three months ended June 30, 2023. The increase of $232,000 was due to (i) an increase of $200,000 for legal fees and (ii) an increase of $32,000 for accounting services.
Current wording
Professional fees increased to $1,128,000 for the three months ended September 30, 2024 from $479,000 for the three months ended September 30, 2023. The increase of $649,000 was due to (i) an increase of $560,000 for legal fees and (ii) an increase of $89,000 for accounting and other related services.
Previous wording
Investor and public relations expense increased to $2,467,000 for the three months ended June 30, 2024 from $0 for the three months ended June 30, 2023. The increase is due to the Merger. As a newly public company, management hired consulting firms to increase the Company’s public exposure. Included in the $2.5 million of investor and public relations expense for the three months ended June 30, 2024 is $1.5 million of non-cash expense related to the fair value of common stock issued to consultants.
Current wording
Investor and public relations expense increased to $340,000 for the three months ended September 30, 2024 from $0 for the three months ended September 30, 2023. The increase is due to the Merger. As a newly public company, management hired consulting firms to increase the Company’s public exposure. Included in the $340,000 of investor and public relations expense for the three months ended September 30, 2024 is $215,000 of non-cash expense related to the fair value of common stock issued to consultants.
Previous wording
Salaries and wages increased to $221,000 for the three months ended June 30, 2024 from $219,000 for the three months ended June 30, 2023.
Current wording
Salaries and wages increased to $354,000 for the three months ended September 30, 2024 from $205,000 for the three months ended September 30, 2023.
Previous wording
Insurance expense increased to $185,000 for the three months ended June 30, 2024 from $42,000 for the three months ended June 30, 2023. The increase of $143,000 was attributable to an increase in our insurance premiums as a result of becoming a public company.
Current wording
Insurance expense increased to $193,000 for the three months ended September 30, 2024 from $41,000 for the three months ended September 30, 2023. The increase of $152,000 was attributable to an increase in our insurance premiums as a result of becoming a public company.
Previous wording
Franchise tax and license decreased to $0 for the three months ended June 30, 2024 from $83,000 for the three months ended June 30, 2023.
Current wording
Franchise tax and license increased to $199,000 for the three months ended September 30, 2024 from $3,000 for the three months ended September 30, 2023.
Previous wording
Depreciation expense decreased to $3,292,000 for the three months ended June 30, 2024 from $3,858,000 for the three months ended June 30, 2023. During the year ended December 31, 2023, the Company assessed the need for an impairment write-down of mining equipment (held as fixed assets). In accordance with ASC 360-10, the Company determined that the fixed asset category had carrying values in excess of fair value. Accordingly, the Company recognized impairment charges, reducing its mining equipment’s depreciable basis. Therefore, the depreciation expense for the three months ended June 30, 2024 was reduced.
Current wording
Depreciation expense decreased to $2,896,000 for the three months ended September 30, 2024 from $4,067,000 for the three months ended September 30, 2023. During the year ended December 31, 2023, the Company assessed the need for an impairment write-down of mining equipment (held as fixed assets). In accordance with ASC 360-10, the Company determined that the fixed asset category had carrying values in excess of fair value. Accordingly, the Company recognized impairment charges, reducing its mining equipment’s depreciable basis. Therefore, the depreciation expense for the three months ended September 30, 2024 was reduced.
Previous wording
Impairment of digital assets decreased to $0 for the three months ended June 30, 2024 from $232,000 for the three months ended June 30, 2023.
Current wording
Impairment of digital assets decreased to $0 for the three months ended September 30, 2024 from $17,000 for the three months ended September 30, 2023.
Previous wording
As of January 1, 2024, the Company implemented ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60) (“ASU 2023-08”): Accounting for and Disclosure of Crypto Assets. ASU 2023-08 requires entities to measure crypto assets that meet specific criteria at fair value with changes recognized in net income each reporting period. ASU 2023-08 requires an entity to present crypto assets measured at fair value separately from other intangible assets in the balance sheets and record changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. As of June 30, 2024, the Company recognized a $318,000 decrease in the fair market value of its digital asset holdings.
Current wording
As of January 1, 2024, the Company implemented ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60) (“ASU 2023-08”): Accounting for and Disclosure of Crypto Assets. ASU 2023-08 requires entities to measure crypto assets that meet specific criteria at fair value with changes recognized in net income each reporting period. ASU 2023-08 requires an entity to present crypto assets measured at fair value separately from other intangible assets in the balance sheets and record changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. For the three months ended September 30, 2024, the Company recognized a $90,000 unrealized loss in the fair market value of its digital asset holdings.
Previous wording
Realized gain on the sale of digital assets was $0 for the three months ended June 30, 2024, compared to $169,000 for the three months ended June 30, 2023. With the implementation of ASU 2023-08, realized gains on the sale of digital assets will be eliminated since the digital assets will be marked to market prior to sale.
Current wording
Realized gain on the sale of digital assets was $0 for the three months ended September 30, 2024, compared to $17,000 for the three months ended September 30, 2023. With the implementation of ASU 2023-08, realized gains on the sale of digital assets will be eliminated since the digital assets will be marked to market prior to sale.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The following is a reconciliation of our non-GAAP adjusted EBITDA to its most directly comparable GAAP measure (i.e., net income (loss)) for the three months ended September 30:
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Other (expense) income was as follows for the six months ended June 30,