Executive Summary / Key Takeaways

• Gryphon Digital Mining is undergoing a significant strategic transformation, pivoting from a pure-play Bitcoin miner towards becoming a provider of high-performance computing (HPC) and AI infrastructure, leveraging its expertise in securing low-cost power.
• The proposed acquisition of Captus Energy, with its potential for up to 4 gigawatts of power development at a site suitable for AI/HPC data centers, is the cornerstone of this strategy, aiming to generate high-margin recurring revenues.
• Recent operational performance in Bitcoin mining has been impacted by the halving and rising energy costs, leading to a substantial increase in the breakeven cost per Bitcoin, highlighting the challenges of the current mining environment.
• A transformative debt restructuring with Anchorage Digital has significantly strengthened the balance sheet, converting debt to equity and reducing cash outflows, providing crucial financial flexibility for the strategic pivot.
• Key risks include the uncertainty of completing the Captus and American Bitcoin mergers, maintaining Nasdaq listing compliance, and the inherent volatility of both cryptocurrency markets and energy prices.

The Evolution of Gryphon: From Bitcoin Mining to Powering AI

Gryphon Digital Mining, which began its journey as Ivy Crypto in 2020, has undergone a notable transformation. Initially focused on Bitcoin mining, the company became publicly traded in February 2024 through a reverse merger with Akerna Corp. This transaction effectively transitioned Gryphon into a dedicated Bitcoin mining entity, shedding Akerna's previous cannabis software business. While Bitcoin mining remains its current operational core, generating revenue by contributing computing power to the network, Gryphon's strategic focus has decisively shifted.

The company now views Bitcoin mining as a "revenue bridge" to a much larger opportunity: becoming a significant provider of energy infrastructure for the burgeoning High-Performance Computing (HPC) and Artificial Intelligence (AI) sectors. This pivot is driven by the recognition that power is rapidly becoming a critical and scarce resource, with industry estimates projecting massive increases in demand from AI data centers in North America alone. Gryphon believes its experience in identifying and securing low-cost energy sources for mining is directly transferable to meeting this demand.

Technological Edge and Operational Realities

Gryphon has emphasized operational efficiency and carbon neutrality in its Bitcoin mining activities. The company has invested in miner upgrades, deploying newer generation machines like the Bitmain S21 to improve fleet efficiency. By the first quarter of 2024, the operational fleet reached approximately 0.94 exahashes per second with an efficiency of 28.5 joules per terahash.

A key aspect of Gryphon's operational model has been its profit-share contracts with hosting providers. This structure allows production costs to flex downwards in correlation with Bitcoin prices, offering a degree of downside protection compared to miners with fixed energy costs. Management has highlighted this as a competitive advantage, noting that their breakeven cost per Bitcoin, while increasing, has often remained below reported industry averages.

However, the realities of the Bitcoin mining market, particularly the April 2024 halving event which cut block rewards by 50%, combined with a continually rising global hashrate and increasing energy costs, have significantly impacted recent performance. In the first quarter of 2025, mining revenues decreased sharply to $1.56 million from $7.49 million in the prior year period. This revenue decline, coupled with higher average electricity costs ($0.11 per kWh in Q1 2025 vs. $0.08 in Q1 2024), resulted in a substantial increase in the breakeven cost per Bitcoin mined, reaching $120,117 in Q1 2025 compared to $34,070 in Q1 2024. This illustrates the intense pressure on profitability in the post-halving environment and underscores the strategic rationale for seeking more stable, high-margin revenue streams.

The Captus Cornerstone: Powering the AI Ambition

The strategic pivot towards AI/HPC infrastructure is centered around the proposed acquisition of Captus Energy. This definitive agreement, signed in January 2025, is considered the "capstone" of Gryphon's new direction. The Captus asset in Pincher Creek, Alberta, is described as an ideal site for an AI/HPC data center campus due to its favorable characteristics, including access to redundant natural gas lines, grid connectivity for redundancy, a depleted reservoir for carbon sequestration, access to non-potable water, and proximity to telecom connectivity.

The potential scale of the Captus site is immense, offering up to 4 gigawatts of power development capacity over time. Gryphon plans a staged development approach, aiming to bring the first 130 megawatts online in phases, with initial megawatts targeted by late 2024 or early 2025, and a larger portion (100 MW) by late 2026. Management anticipates that developing this asset will create significant value, citing industry valuations for comparable computing infrastructure based on megawatts. Following the acquisition and development, the company expects to generate rapidly growing, high-margin recurring revenues by hosting co-located customers focused on power-intensive computing applications like AI and machine learning. The integration of the experienced Captus management team is also a key part of this strategy.

Competitive Positioning and Differentiation

Gryphon operates in a competitive landscape dominated by larger Bitcoin miners like Marathon Digital (MARA), Riot Platforms (RIOT), Hut 8 Mining (HUT), and Core Scientific (CORZ). While these competitors also pursue scale and efficiency, Gryphon aims to differentiate itself through its explicit focus on carbon-neutral operations and its strategic pivot towards AI/HPC energy infrastructure.

Gryphon's emphasis on renewable energy sources provides a quantifiable edge in environmental positioning, potentially appealing to a segment of the market focused on ESG compliance. Its profit-share hosting contracts offer a cost advantage in declining Bitcoin price environments compared to peers with fixed energy costs. However, in terms of sheer scale and historical revenue growth, Gryphon currently trails larger rivals. For instance, MARA and RIOT have significantly larger hashrates and have demonstrated explosive revenue growth, albeit with volatile profitability. Gryphon's recent financial performance, particularly the increased breakeven cost post-halving, highlights the challenge of competing on cost in the core mining business against larger, potentially more efficient operations or those with lower fixed power costs like RIOT. The strategic pivot to AI/HPC is a direct response to this, seeking to establish a new competitive moat based on large-scale, strategically located power assets tailored for a high-demand, potentially higher-margin market segment, distinct from pure-play Bitcoin mining.

Financial Health and Capital Strategy

Gryphon's financial position as of March 31, 2025, shows cash and cash equivalents (excluding restricted cash) of $318,000 and a significant accumulated deficit of approximately $73.65 million. Management has stated that current cash levels are not sufficient to cover anticipated operational needs for the next 12 months, necessitating additional capital.

A critical step in strengthening the balance sheet was the transformative debt restructuring with Anchorage Digital in October 2024. This involved converting $13 million of a Bitcoin-denominated note into equity at a premium to the stock price and restructuring the remaining $5 million into a dollar-denominated note with favorable terms (4.25% interest, due 2027). This significantly reduced monthly cash outflows related to debt service and positioned Anchorage as a major shareholder and strategic partner.

The company has also utilized capital markets to raise funds, including a Registered Direct Offering in January 2025 ($2.82 million gross proceeds) and its At The Market (ATM) offering program, which had approximately $63.60 million remaining capacity as of March 31, 2025, and generated $2.34 million net proceeds in Q1 2025. An authorized share buyback program signals management's intent to manage capital structure opportunistically. The strategic Bitcoin reserve initiative is another facet of their capital strategy.

Risks and Outlook

The path forward for Gryphon is not without significant risks. The successful execution of the strategic pivot hinges heavily on the completion of the proposed acquisition of Captus Energy and the recently announced merger with American Bitcoin Corp. Both transactions are subject to various conditions, and failure to close either could materially impact Gryphon's strategy and financial position, potentially including a $5 million termination fee related to the American Bitcoin merger. The integration of American Bitcoin's operations and management, and the development of the Captus site, present substantial execution challenges.

Maintaining Nasdaq listing compliance is another immediate concern. The company received delisting notices in March 2025 for failing to meet minimum bid price and market value requirements but was granted an extension until September 2025, contingent on meeting specific milestones. Failure to regain compliance could result in delisting. Other risks include the ongoing SBA review and DOJ inquiry regarding the PPP Loan obtained by the former Akerna business, the unresolved litigation with the former CEO, and the inherent volatility of Bitcoin prices and energy markets which directly impact the profitability of the existing mining operations.

Despite these challenges, the outlook is firmly focused on the potential of the AI/HPC strategy. Management expects to announce details regarding the financing for the Captus acquisition imminently and is actively pursuing strategic partnerships and customers for the site. The staged development plan provides a roadmap for bringing significant power capacity online over the next few years, which is anticipated to drive substantial revenue growth and diversification beyond Bitcoin mining. The company continues to seek accretive M&A opportunities, particularly those involving low-cost power assets, to accelerate its growth trajectory in both mining and AI hosting.

Conclusion

Gryphon Digital Mining stands at a critical juncture, strategically repositioning itself to capitalize on the explosive demand for power in the AI and HPC sectors. While its historical roots and current operations lie in Bitcoin mining, the company's future narrative is increasingly tied to the successful development of large-scale energy infrastructure, exemplified by the proposed Captus acquisition and its potential for 4 gigawatts of power. The recent debt restructuring has provided a necessary financial foundation, but significant capital will be required to realize the full potential of the AI/HPC strategy.

The investment thesis for Gryphon is centered on its ability to execute this ambitious pivot, leveraging its energy expertise and differentiated approach to secure high-margin recurring revenues from a rapidly growing market. Success will depend on navigating the complexities of large-scale development, securing necessary financing and partnerships, and managing the inherent risks of both the cryptocurrency market and its own corporate transitions, including regaining Nasdaq compliance and successfully integrating potential mergers. Investors will be closely watching for progress on the Captus development timeline and further details on strategic partnerships as key indicators of the company's ability to transform its vision into tangible value.