As filed with the Securities and Exchange Commission on August 27, 2019February 28, 2024
Registration No. 333-232694333-277060
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FormFORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AKERNA CORP.GRYPHON DIGITAL MINING, INC.
(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)charter)
| Delaware | 83-2242651 | |||
(State or other jurisdiction of | (I.R.S. Employer | |||
| incorporation or organization) |
|
|
1601 Arapahoe St.1180 North Town Center Drive, Suite 100, Las Vegas, NV 89144
Denver, Colorado 80202(877) 646-3374
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Vcorp Services, LLCRobby Chang
1013 Centre Road,Chief Executive Officer, President and Director
Gryphon Digital Mining, Inc.
1180 North Town Center Drive, Suite 403-B100, Las Vegas, NV 89144
Wilmington, Delaware 19805(877) 646-3374
(Address, (Name, address, including zip code, and telephone number,
1including including area code, of agent for service)
CopiesPlease send a copy of all communications to:
Barry I. Grossman, Esq.
Douglas S. Ellenoff, Esq.
Stuart Neuhauser Esq.
Tamar Donikyan, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas 11thFloor
New York, New York 1010510105-0302
Telephone: (212) 370-1300
Fax Number: (212) 370-7889
Approximate date of commencement proposed sale to the public: As soon as practicable on orFrom time to time after the effective date of this registration statement.Registration Statement.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box:box. ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer ☒ | Smaller reporting company | ☒ | |
| Emerging | growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to Be Registered | Amount to Be Registered (1) | Proposed Maximum Offering Price per Share(3) | Proposed Maximum Aggregate Offering Price | Amount of Registration Fee(4) | ||||||||||||
| Common Stock | 5,554,942 | $ | 8.82 | $ | 48,994,588.44 | $ | 5,938.14 | |||||||||
| Common Stock underlying warrants(2) | 243,750 | $ | 8.82 | $ | 2,149,875.00 | $ | 260.56 | |||||||||
| Total(2) (3) | 5,798,692 | $ | 8.82 | $ | 51,144,463.44 | $ | 6,198.71 | |||||||||
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until thisthe Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This registration statement contains a base prospectus which covers the offering, issuance and sale by us of up to $100,000,000 of our common stock, preferred stock, warrants, subscriptions rights, debt securities and/or units. The base prospectus immediately follows this explanatory note.
The information in this prospectus is not complete and may be changed. The selling shareholdersWe may not sell the securities until the Registration Statement filed with the Securities and Exchange Commission, of which this prospectus is a part, is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, dated August 27, 2019SUBJECT TO COMPLETION, DATED FEBRUARY 28, 2024
Prospectus
AKERNA CORP.GRYPHON DIGITAL MINING, INC.
5,798,692 Shares of Common Stock
$100,000,000
This prospectus relates to the resale by certain selling stockholders of up to 5,798,692 shares of common Stock, par value $0.0001 per share (the “Common Stock”), of Akerna Corp. (“we,” “us,” “our,” the “Company,” or “Akerna”) as follows: (i) an aggregate of 901,074 shares (the “Private Placement Shares”) of Common Stock issued to certain accredited investors (the “Investors”) in a private placement (the “Private Placement”), consummated in connection with the Company’s Business Combination (as defined below); (ii) 100,120 shares of Common Stock transferred to the Investors in connection with the Private Placement; (iii) 4,553,748 shares (the “Affiliate Shares”) issued to “affiliates” of the Company (as that term is defined in Rule 144 under the Securities Act) in the Business Combination (as defined below); and (iv) an aggregate of 243,750 shares of Common Stock underlying warrants issued to an affiliate of the Company in the Business Combination.COMMON STOCK
PREFERRED STOCK
WARRANTS
SUBSCRIPTION RIGHTS
DEBT SECURITIES
UNITS
We will not receivemay offer and sell from time to time, in one or more series, any proceeds from the resale of anyone of the sharesfollowing securities of Common Stock being registered hereby. However,our company, for total gross proceeds of up to $100,000,000:
| ● | common stock; | |
| ● | preferred stock; | |
| ● | warrants to purchase our securities; | |
| ● | subscription rights to purchase any of the foregoing securities; | |
| ● | secured or unsecured debt securities consisting of notes, debentures or other evidences of indebtedness which may be senior debt securities, senior subordinated debt securities or subordinated debt securities, each of which may be convertible into equity securities; or | |
| ● | units comprised of, or other combinations of, the foregoing securities. |
We may offer and sell these securities separately or together, in one or more series or classes and in amounts, at prices and on terms described in one or more offerings. We may offer securities through underwriting syndicates managed or co-managed by one or more underwriters or dealers, through agents or directly to purchasers. The prospectus supplement for each offering of securities will describe in detail the plan of distribution for that offering. For general information about the distribution of securities offered, please see “Plan of Distribution” in this prospectus.
Each time our securities are offered, we will provide a prospectus supplement containing more specific information about the particular offering and attach it to this prospectus. The prospectus supplements may receive proceeds fromalso add, update or change information contained in this prospectus.
This prospectus may not be used to offer or sell securities without a prospectus supplement which includes a description of the exercisemethod and terms of warrants held by the selling stockholders exercised other than pursuant to any applicable cashless exercise provisions.this offering.
Our Common Stock and warrants are listedcommon stock is quoted on the Nasdaq Capital Market under the symbols “KERN” and “KERNW”, respectively. On August 26, 2019, thesymbol “GRYP.” The last reported sale price of our Common Stock and warrantscommon stock on the NasdaqNASDAQ Capital Market on February 27, 2024 was $8.80$2.60 per share. The aggregate market value of our outstanding common stock held by non-affiliates is $88,592,834 based on 38,733,554 shares of outstanding common stock, of which 34,074,167 shares are held by non-affiliates, and a per share and $1.18 per warrant, respectively.price of $2.60 which was the closing sale price of our common stock as quoted on the NASDAQ Capital Market on February 27, 2024.
The selling stockholders may offer allIf we decide to seek a listing of any preferred stock, warrants, subscriptions rights, debt securities or part of the shares registered hereby for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. Our registration of the shares of Common Stock coveredunits offered by this prospectus, does not mean that the selling stockholdersrelated prospectus supplement will offerdisclose the exchange or sellmarket on which the securities will be listed, if any, of the shares. With regard only to the shares the selling stockholders sellor where we have made an application for their own behalf, such selling stockholder may be deemed an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). The Company has paid all of the registration expenses incurred in connection with the registration of the shares. We will not pay any of the selling commissions, brokerage fees and related expenses. listing, if any.
Investing in our Common Stocksecurities involves a high degree of risk.certain risks. See “Risk Factors” beginning on page 18to read about14 and the risk factors you should consider before investing in shares of our Common Stock.most recent Annual Report on Form 10-K, which is incorporated by reference herein, as well as in any other recently filed quarterly or current reports and, if any, in the relevant prospectus supplement. We urge you to carefully read this prospectus and the accompanying prospectus supplement, together with the documents we incorporate by reference, describing the terms of these securities before investing.
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectusProspectus is , 2019._____________, 2024.
TABLE OF CONTENTS
i
This prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission, or SEC, utilizing a “shelf” registration process. Under this shelf registration process, we may offer and sell, either individually or in combination, in one or more offerings, any of the securities described in this prospectus, for total gross proceeds of up to $100,000,000. This prospectus provides you with a general description of the securities we may offer. Each time we offer securities under this prospectus, we will provide a prospectus supplement to this prospectus that will contain more specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to these offerings. The prospectus supplement and any related free writing prospectus that we may authorize to be provided to you may also add, update or change any of the information contained in this prospectus or in the documents that we have incorporated by reference into this prospectus.
We urge you to read carefully this prospectus, any applicable prospectus supplement and any free writing prospectuses we have authorized for use in connection with a specific offering, together with the information incorporated herein by reference as described under the heading “Incorporation of Documents by Reference,” before investing in any of the securities being offered. You should rely only on the information contained in, or incorporated by reference into, this prospectus. Neitherprospectus and any applicable prospectus supplement, along with the information contained in any free writing prospectuses we nor the selling stockholders have authorized any other personfor use in connection with a specific offering. We have not authorized anyone to provide you with information different from or in addition to that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. The selling stockholders are not makingadditional information. This prospectus is an offer to sell theseonly the securities offered hereby, but only under circumstances and in any jurisdictionjurisdictions where an offer or saleit is not permitted. You should assume that thelawful to do so.
The information appearing in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate only as of the date on the front coverof the document and any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus. Our business, financial condition, resultsprospectus, any applicable prospectus supplement or any related free writing prospectus, or any sale of operations and prospects may have changed since that date.a security.
We further note thatThis prospectus contains summaries of certain provisions contained in some of the representations, warranties and covenantsdocuments described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by us in any document that isthe actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as an exhibitexhibits to the registration statement of which this prospectus is a part, and in any document that is incorporatedyou may obtain copies of those documents as described below under the section entitled “Where You Can Find Additional Information.”
This prospectus contains, or incorporates by reference, herein were made solely for the benefittrademarks, tradenames, service marks and service names of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements,Gryphon Digital Mining, Inc. and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.its subsidiaries.
iii
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus and any accompanying prospectus supplement and the documents incorporated by reference herein may contain forward looking statements that involve risks and uncertainties. All statements other than statements of historical fact contained in this prospectus and any accompanying prospectus supplement and the documents incorporated by reference herein, including statements regarding future events, our future financial performance, business strategy, and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this prospectus and the documents incorporated by reference herein, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a highly regulatedvery competitive, and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long term business operations, and financial needs. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward lookingforward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this prospectus, and in particular, the risks discussed below and under the heading “Risk Factors” and those discussed in other documents we file with the SecuritiesSEC. The following discussion should be read in conjunction with the consolidated financial statements for the fiscal years ended December 31, 2022 and Exchange Commission, or SEC.
Some factors that could cause actual results to differ include, among others:
ii
2021 and notes incorporated by reference herein. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statement.
You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this prospectus to conform our statements to actual results or changed expectations.
Any forward-looking statement you read in this prospectus, any prospectus supplement or any document incorporated by reference reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, except as otherwise required by applicable law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K filed with the SEC, if any.SEC. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
iii
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in our Company. You should carefully read the entire prospectus, including all documents incorporated by reference herein. In particular, attention should be directed to our “Risk Factors” andFactors,” “Information With Respect to the Company,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes thereto contained herein or otherwise incorporated by reference hereto, before making an investment decision.
All references toAs used herein, and any amendment or supplement hereto, unless otherwise indicated, “we,” “us,” “our,” or the “Company,” means Gryphon Digital Mining, Inc. and the “Company”its subsidiaries. Unless otherwise indicated, all references in this prospectus to “dollars” or “$” refer to Akerna Corp., unless we specifically state otherwise or the context indicates otherwise.US dollars.
CompanyBusiness Overview
The Business Combination
On October 10, 2018 (asFebruary 9, 2024, we completed the previously announced merger in connection the Agreement and Plan of Merger, dated January 27, 2023, as amended, on April 17, 2019),by and between the Company, (f/k/a MTech Acquisition Holdings Inc.) entered into a definitive merger agreement (the “Merger Agreement”) with MTech Acquisition Corp. (“MTech”), MJ Freeway, LLC (“MJF”), MTech PurchaserAkerna Merger Sub Inc.Co., a Delaware corporation and a wholly-ownedwholly owned direct subsidiary of Akernathe Company (“Purchaser Merger Sub”), MTech Companyand Ivy Crypto, Inc. (f/ka/a Gryphon Digital Mining, Inc.), a Delaware corporation (“Gryphon”), pursuant to which Merger Sub LLC,merged with and into Gryphon, with Gryphon surviving as a Colorado limited liability company and a wholly-ownedwholly owned subsidiary of Akerna (“Company Merger Sub”), MTech Sponsor LLC (“MTech Sponsor”), a Florida limited liability company, in the capacity as the representative for the equity holders of the Company (other than(the “Merger”). Upon the Sellers) thereunder,completion of the Merger, our business ceased to be software solutions within the cannabis industry and MJF and Jessica Billingsley (as successor to Harold Handelsman), inbecame the capacity as the representative for the Sellers thereunder. The Merger Agreement provided for two mergers: (i) the mergerbusiness of Purchaser Merger Sub with and into MTech, with MTech continuing as the surviving entity (the “Purchaser Merger”); and (ii) the merger of -Company Merger Sub with and into MJF, with MJF continuing as the surviving entity (the “Company Merger” and together with the Purchaser Merger, the “Business Combination”).Gryphon.
The merger consideration was paidFounded in sharesOctober 2020, Gryphon is a bitcoin mining company based in Las Vegas, Nevada. Gryphon commenced its digital assets mining operations in September 2021. 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.
Gryphon’s operations encompass the following:
| ● | Self-Mining: Gryphon operates approximately 9,000 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. |
| ● | ESG-Led Mining: Gryphon is an ESG-committed bitcoin miner with the mission to create the world’s largest bitcoin miner with a neutral carbon footprint. Gryphon currently uses net carbon neutral energy in its power mix. |
Gryphon launched its mining operations in September 2021 upon the receipt of Common Stock (the “Consideration Shares”) atthe first of 12 batches of 600 Bitmain S19j Pro Antminers. Gryphon has deployed a price per share equal to $10.16 per share. In total 6,520,099 Consideration Shares were issuedof approximately 9,000 S19j Pro Antminers from Bitmain pursuant to the Merger Agreement. All of the Consideration Shares are subject to the terms of the Lock-UpBitmain Agreement (as defined below). In addition, 652,010 and subsequent market purchases, including purchases of S19j Pro Antminers, S19 Pro Antminers, S19j Pro+ Antminers, and S19K Pro Antminers have increased Gryphon’s deployment to approximately 9,000 miners.
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 Consideration Shares (the “Escrow Shares”) are held in an escrow account (the “Escrow Account”) to cover any adjustments to the Merger Consideration (as defined in the Merger Agreement) or claims for indemnification pursuant to the Merger Agreement until ninety (90) days after the Company files with the Securities and Exchange Commission (the “SEC”) its Annual Report on Form 10-K for the fiscal year ending June 30, 2019, with the exception of Escrow Shares held to satisfy then pending claims which shall remain in the Escrow Account until the claims are resolved. In addition, 215,063 of the Consideration Shares are subject to restricted stock agreements with varying vesting terms that reflect the vesting conditions application to equity interests of the applicable MJF equity holders at the time of the Business Combination.
In connection with the Merger Agreement, all recipients of the Consideration Shares executed a lock-up agreement (the “Lock-up Agreement”). Pursuant to the Lock-up Agreement, each holder agreed not to engage in any transfer or other transaction with respect to the Consideration Shares for a period of time. With respect to 50% of the Consideration Shares, each holder agreed not to engage in a transfer or other transaction until the earlier of (1) one year from the closing of the Business Combination and (2) the date on which the Company closes a subsequent corporate transaction with an unaffiliated third party that results in all of the Company’s shareholders having the right to exchange their shares for cash, securities or other property. With respect to the remaining 50% of the Consideration Shares, each holder agreed not to engage in a transfer or other transaction until the earlier of (1) one year from the closing the Business Combination, (2) the date on which the Company closes a subsequent corporate transaction with an unaffiliated third party that results in all of the Company’s shareholders having the right to exchange their shares for cash, securities or other property and (3) the date on which the closing share price of the Common Stock equals or exceeds $12.50 per share for any twenty trading days with any thirty trading day period. The third condition in the immediately preceding sentence was met and as such, there is no longer a lock-up with respect to 50% of the Consideration Shares.
On June 17, 2019, MTech held a Special Meeting at which the MTech stockholders considered and approved, among other matters, the Merger Agreement. On June 17, 2019, the parties consummated the Business Combination.
At the Special Meeting, holders of 4,452,042 shares of MTech’s common stock sold in its initial public offering (the “Public Shares”), or 99 stockholders of MTech, exercised their right to redeem those shares for cash at a price of $10.23841733 per share, for an aggregate of $45,581,864 (which represented 77.98% of the funds held in the trust account of MTechpower’s production on the dateclimate. 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 28 megawatts of the Special Meeting). Upon closing of the Business Combination, MTech’s units ceased trading, and the Common Stock and warrants began tradingspace at its hosting facility in New York, which relies on The Nasdaq Stock Market under the symbols “KERN” and “KERNW,” respectively, MTech Acquisition Holdings Inc. changed its namerenewable hydro energy. As it deploys additional miners, Gryphon will work with hosting partners that have committed to “Akerna Corp.”, and MJF became the Company’s wholly-owned subsidiary. Immediately after giving effect to the Business Combination (including as a result of the redemptions described above and the transfer of the 100,120 Transferred Sponsor Shares (as defined below) pursuant to the Sponsor Stock Transfer Agreement (as defined below)) and the issuance of an additional 901,074 shares of common stock for an aggregate purchase price of $9.2 million in the Private Placement (as defined below) consummated in connection with the Business Combination, there were 10,400,381 shares of Common Stock and warrants to purchase 5,993,750 shares of Common Stock of the Company issued and outstanding. As of the closing date of the Business Combination, the former securityholders of MJF beneficially owned approximately 62.7% of the Company’s outstanding shares of Common Stock, the former securityholders of MTech beneficially owned approximately 27.7% of the Company’s outstanding shares of Common Stock, and the Investors (as defined below) beneficially owned approximately 9.6% of the Company’s outstanding shares of Common Stock. Upon the closing of the Business Combination, our management and principal stockholders beneficially owned approximately 59.70% of the Company’s outstanding shares of Common Stock.providing carbon neutral power.
1
As noted above,Bitcoin Mining Overview
Bitcoin miners use ASIC computers to validate Bitcoin transactions and add “blocks” of validated transactions to Bitcoin’s peer-to-peer blockchain network. Miners earn bitcoin rewards for every block they add to the network as well as the corresponding transaction fees associated with the transactions in the “mined” block. Only one miner or group of miners operating together can receive the block rewards and may also receive the corresponding transaction fees per share redemption priceblock added to the Bitcoin blockchain. The amount of $10.23841733 for holdersbitcoin rewards per block (not including transaction fees) is fixed, and the number of Public Shares electing redemption was paid outblocks that can be added over time is able to be projected with reliable accuracy; therefore, the expected amount of MTech’s trust account, which, had a balance immediately prior to closingbitcoin rewarded per miner is based on the number of miners actively participating in the Bitcoin network. Miners will typically only participate if the value of the Business Combinationexpected bitcoin rewards is higher than their cost of $45,581,864. In addition, MTech obtained $9.2 millionproduction.
Miners consume electricity in proceeds fromorder to compete for rewards. This means that the Private Placement (as defined below), immediately prioreconomics of bitcoin mining largely depend on:
| ● | the cost of electricity to competing miners; |
| ● | the efficiency of mining equipment operated by competing miners; and |
| ● | fluctuations in the price of Bitcoin, Bitcoin difficulty (the relative measure of the amount of resources required to confirm a block of bitcoin transactions and receive bitcoin rewards), and global hash rates (the overall amount of computing power consumed by the network). |
To achieve scale, mining requires access to large amounts of low-cost electricity.
Introduction to Bitcoin, the Bitcoin Network and Bitcoin Mining
Bitcoin is a digital asset that is created and transmitted through the operations of a peer-to-peer decentralized network of computers, known as the Bitcoin network, which operates on cryptographic protocols. No single entity owns or operates the Bitcoin network, the infrastructure of which is collectively maintained by a decentralized user base. The Bitcoin network allows people to exchange digital tokens of value, called bitcoins, which are recorded on a publicly distributed transaction ledger known as a blockchain. The Bitcoin blockchain is a digital, publicly distributed bookkeeping ledger that holds the record of every Bitcoin transaction.
The Bitcoin network is decentralized and does not require governmental authorities or financial institution intermediaries to create, transmit or determine the value of Bitcoin. Rather, bitcoin is created and allocated by the Bitcoin network protocol through a process referred to as “mining” and the persons or machines that provide transaction verification services to the closingBitcoin network and are rewarded with new bitcoin are called “miners.”
The Bitcoin blockchain is a digital chain of blocks with each block containing information relating to a group of Bitcoin transactions. Miners validate Bitcoin transactions, securing the blocks and adding the blocks of transactions to the blockchain record by using computer processing power to solve complex mathematical problems. Solving the problems will result in the block being successfully added to the chain. This means that the Bitcoin transaction information in the block is verified and locked into the blockchain where it remains as a permanent record on the blockchain network. The record set maintained by the Bitcoin network is publicly viewable and accessible to all. As an incentive to those who incur the computational cost of securing the Bitcoin network by validating transactions, the miner who correctly solves the problem resulting in a block being added to the Bitcoin blockchain is awarded bitcoin. To begin bitcoin mining, a user can download and run Bitcoin network mining software, which turns the user’s computer into a “node” on the Bitcoin network that validates blocks. Each block contains the details of some or all of the Business Combination. At the closingmost recent transactions of Bitcoin submitted by users of the Business Combination,Bitcoin network that are not already included in prior blocks, and a transaction awarding an amount of bitcoin to the Company received net proceedsminer who will add the new block. Each unique block can be solved and added to the blockchain by only one miner. Therefore, individual miners and mining pools (i.e., groups of approximately $18 million uponminers acting together) on the consummationBitcoin network are engaged in a competitive process of increasing their computing power to improve their likelihood of solving for new blocks and receiving bitcoin rewards. As more miners join the Bitcoin network and its collective processing power increases, the Bitcoin network adjusts the complexity of the Business Combinationblock-solving equation to maintain a predetermined pace of adding a new block to the blockchain approximately every ten minutes. A miner’s proposed block is added to the blockchain once a majority of the nodes on the Bitcoin network confirms the miner’s work. Miners that are successful in adding a block to the blockchain are awarded bitcoin for their effort and may also receive transaction fees paid by transferors whose transactions are recorded in the Private Placement.block. This reward system is the method by which new bitcoin enter into circulation.
Pursuant
2
The Bitcoin network is designed in such a way that the reward for adding new blocks to the Merger Agreement, uponblockchain decreases over time. The number of bitcoin awarded for solving a new block is automatically halved after every 210,000 blocks are added to the closingblockchain record. Each block takes approximately 10 minutes to be solved and as a result, rewards are halved approximately every four years. Currently, the fixed reward for solving a new block is 6.25 bitcoin per block and this number is expected to decrease by half to become 3.125 bitcoin sometime in April 2024. While Bitcoin prices have historically increased around these halving events, which increases in price have correspondingly mitigated the decrease in mining reward, there is no guarantee that the price change would be favorable or would compensate for the reduction in mining reward. Gryphon aims to mitigate the impacts of halving by maintaining a breakeven profitability floor far below the network average. To do so, Gryphon has developed and implemented a curtailment agreement with its hosting partners to maximize the marginal profitability of its machines. Under this arrangement, on a daily basis, Gryphon’s hosting partner calculates the expected profitability of Gryphon’s machines based on announced day-ahead electricity rates provided by the local utility and using current bitcoin prices. On days when it is forecast that the cost of electricity exceeds Gryphon’s revenue, whether for the entire day or part of the Business Combination,day, the membership unitsmachines are curtailed for the corresponding time period. This program was developed by Gryphon’s hosting partner in collaboration with Gryphon and is in use for several of MJF (includingGryphon’s hosting partner’s clients. This program improves Gryphon’s profitability as it avoids operating the profits interest units) issued and outstanding immediately prior tomachines in periods when electricity costs exceed the Business Combination automatically converted into the right to receive sharesexpected revenue generated without impacting efficiency. The impact of the Companyprogram on Gryphon’s hashpower is relatively minor as Gryphon’s machines are hosted in upstate New York with a strong power grid that does not often require curtailments. The program has implemented occasional curtailments that often coincide with high temperature periods or extreme cold weather in the region that would cause the demand for local electricity to spike. Gryphon’s partners have also implemented standard operating procedures to maximize the operational efficiency of its sites, such as preventative maintenance and cleaning of equipment. Gryphon believes that these steps can enable it to maintain survivability above its competitors and mitigate the securitiesdownside risk of MTech issueddecreased rewards.
Performance Metrics - Network Hash Rate and outstanding immediately prior to the Business Combination automatically converted into the right to receive securities of the Company.
The Private PlacementDifficulty
In connectionbitcoin mining, “hash rate” or “hashes per second” are the measuring units of the processing speed of a mining computer mining bitcoin. “Hash rate” is defined as the speed at which a computer can take any set of information and use an algorithm to reduce that information into a string of letters and numbers of a certain length, known as a “hash.” A “hash” is the computation run by mining hardware in support of the blockchain; therefore, a miner’s “hash rate” refers to the rate at which it is capable of solving such computations.
An individual miner has a hash rate measured as the total hash rate of all of the miners it deploys in its bitcoin mining operations, and network-wide there is a total hash rate of all miners seeking to mine bitcoin. The higher total hash rate of a specific miner, as a percentage of the network wide total hash rate, generally results over time in a corresponding higher success rate in bitcoin rewards as compared to miners with lower hash rates. Today, hash rates are measured in petahashes per second, or one quadrillion (1,000,000,000,000,000) hashes per second, and exahashes per second, or one quintillion (1,000,000,000,000,000,000) hashes per second.
“Difficulty” is a relative measure of how complex the process is made to successfully solve the algorithm and obtain a bitcoin award. The difficulty is adjusted by the Bitcoin network mining software periodically generally as a function of how much hashing power is deployed by the network of miners and designed to maintain certain mining results so that, on average, 10 minutes is required to produce a Bitcoin block. If the time to produce a block is generally exceeding the 10-minute expectation, which suggests that the target difficulty is set too high, the network reduces the degree of difficulty and vice versa, with this protocol called difficulty retargeting. At each interval of 2,016 blocks being mined (which takes roughly two weeks), the network re-analyzes the interval and revises the difficulty index, if needed.
Bitcoin Mining Power Requirements
At the beginning stages of the Bitcoin network in the early 2010s, individuals interested in bitcoin mining were able to do so using the CPUs of their personal computers. As popularity increased, so did the “difficulty” of mining, as adjusted automatically by the Bitcoin network. To accommodate the growing level of difficulty, more computer processing power was required. Soon, miners used GPUs generally used to power graphic intensive gaming computers to mine bitcoin. The process repeated, and the mining difficulty and amount of computing power required increased.
Eventually, computers and chips were created for the sole purpose of mining bitcoin. Today, bitcoin mining requires efficient hardware, i.e., ASIC-based mining computers, with strong computing abilities and energy efficiency. These ASIC-based mining computers require a significant amount of electricity to run their mining operations. Keeping electricity costs low is key to making bitcoin mining profitable and sustainable.
3
The amount of megawatts (“MW”) required to mine bitcoin depends on the number and types of miners and the energy demand for each type of miner. Each type of miner has a specific electricity demand and hash rate output. According to the Digiconomist.net, as of February 8, 2024, an estimated 138terawatts of power per year is being consumed by bitcoin mining globally.
Mining Pools
As more and more miners entered the market competing for the limited number of blocks that are regularly added to the Bitcoin blockchain, and as the related increase in the amount of available hashing power resulted in increasing levels of difficulty being implemented by the Bitcoin network, individual miners found that they were in some cases working for months without finding a block and receiving any reward. To address this problem, bitcoin mining operators began to combine their mining resources into mining pools to better compete and generate mining revenue. A “mining pool” is the pooling of resources by miners to earn bitcoin together. The mining pool shares their processing power over a network and splits rewards according to the amount of hashing capacity they contribute.
The mining pool operator provides a service that coordinates the computing power of the independent mining enterprises. Fees are paid to the mining pool operator by the participating miners to cover the costs of maintaining the pool. The pool uses software that coordinates the pool members’ hashing power, identifies new block rewards, records how much work all of the pool participants are contributing, and assigns block rewards earned by the mining pool in proportion to the individual hash rate contributed by a given participant. As discussed below, Gryphon participates in mining pools as an integral part of its business.
Bitcoin Mining Economics
The current 6.25 bitcoin reward for each block, and one Bitcoin block expected to be validated and attached to the Bitcoin blockchain approximately every 10 minutes, equates to approximately 37.50 bitcoin rewards generated by the Bitcoin network every hour, approximately 900 bitcoin generated every day and approximately 328,500 bitcoins generated each year, at least for the next one to two years at which time the bitcoin reward for solving a block will again be halved. Because mining computers generate hashes randomly, the ability to solve a particular Bitcoin block is a probability, with the Business Combination,odds of success typically measured by a ratio equal to the speed at which a particular mining operation is able to calculate hashes (i.e., that miner’s hash rate) compared against the total aggregate hash rate of the Bitcoin network. Profitability is then measured by that ratio multiplied by the number of bitcoins mined in a year multiplied by the then current market price of Bitcoin, then subtracting the costs of purchasing mining equipment, the cost of electricity, and various corporate and administrative costs. For a mining operation that participates in a mining pool, revenues, which are measured as the percentage of a pool’s revenues equal the participating miner’s hash rate compared to the pool’s aggregate hash rate, and typically result in a fraction of a given block reward being paid to a miner, are further reduced by the costs paid to the pool operator.
As of February 9, 2024, Bitcoin was priced at approximately $47,190. After reaching an all-time high price to date of $68,789.63 on November 10, 2021, the price of Bitcoin has decreased to current levels. Gryphon believes that the price of Bitcoin is likely to continue to fluctuate based on market conditions. Well-known companies have already invested in Bitcoin. Increasing regulatory barriers in Bitcoin epicenters such as China, as well ongoing fiat monetary inflation, have been suggested to support market valuations of Bitcoin. In addition, the block reward for Bitcoin is expected to halve in April 2024, resulting in even greater Bitcoin scarcity. However, in 2022, FTX Trading LTD. and several other major cryptocurrency exchanges collapsed due to financial issues caused by the falling prices of Bitcoin and other cryptocurrencies, which began in the fourth quarter of 2021. The collapses of these exchanges spurred a loss of confidence in participants in the digital asset ecosystem, negative publicity surrounding digital assets more broadly and market-wide declines in digital asset trading prices and liquidity. The prices of Bitcoin and other cryptocurrencies have rebounded from June 5, 2019, through June 10, 2019, MTechtheir lows around the time of the FTX collapse, but volatility due to these market conditions may continue in the near future.
4
The Effects of COVID-19 on the Bitcoin Mining Industry
The global COVID-19 pandemic, and the global measures taken to combat it, have caused and may cause disruption to the activities of Gryphon’s suppliers and, potentially, Gryphon’s bitcoin mining activities and have an adverse effect on Gryphon’s business. COVID-19 or other disease outbreak may continue to adversely affect the economies and financial markets of many countries, resulting in an economic downturn that may adversely affect demand for Bitcoin and impact Gryphon’s operating results. Although the magnitude of the impact of COVID-19 on Gryphon’s business and operations remains uncertain, the continued spread of COVID-19 or the occurrence of other epidemics and the imposition of related public health measures and travel and business restrictions will adversely impact Gryphon’s business, financial condition, operating results and cash flows. If Gryphon is unable to effectively service its miners, Gryphon’s ability to mine bitcoin will be adversely affected as miners go offline, which would have an adverse effect on Gryphon’s business and the results of Gryphon’s operations.
China has previously limited the shipment of products in and out of its borders, which could negatively impact Gryphon’s ability to receive bitcoin mining equipment from Gryphon’s suppliers. Depending on the magnitude of such effects on Gryphon’s supply chain, shipments of parts for Gryphon’s existing miners, as well as any new miners Gryphon purchases, may be delayed. As Gryphon’s miners require repair or become obsolete and require replacement, Gryphon’s ability to obtain adequate replacements or repair parts from their manufacturer may therefore be hampered. Supply chain disruptions could therefore negatively impact Gryphon’s operations. If not resolved quickly, the impact of COVID-19 could have a material adverse effect on Gryphon’s business.
Governments could take additional restrictive measures to combat the pandemic that could further impact Gryphon’s business or the economy in the geographies in which Gryphon operates. It is also possible that the impact of the pandemic and response on Gryphon’s suppliers, customers and markets will persist for some time after governments ease their restrictions. These measures may impact Gryphon’s business and financial condition as the responses to control COVID-19 continue.
The extent to which the pandemic may impact Gryphon’s results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus/proxy statement, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to Gryphon’s performance, financial condition, results of operations and cash flows. See also “Risk Factors” above.
Material Agreements
Bitmain Sales and Purchase Agreement
On April 14, 2021, Gryphon entered into subscription agreements (each, a “SubscriptionNon-Fixed Price Sales and Purchase Agreement with Bitmain (the “Bitmain Agreement”) with certain investors, whereby. Pursuant to the investors named therein (the “Investors”) committedBitmain Agreement, Gryphon agreed to purchase an aggregate of 901,074 shares of common stock of MTech forfrom Bitmain 7,200 S19j Pro Antminer machines at an aggregate purchase price of approximately $9.2 million (the “Private Placement”). Upon$46 million. The product was delivered in 12 separate monthly shipments with the closing offirst shipment having occurred in August 2021 and the Business Combination, such shares issued by MTechlast shipment having arrived in the Private Placement (“Private Placement Shares”) were automatically converted into shares of Common Stock of the Company on a one-for-one basis.July 2022.
BitGo Custodial Services Agreement
Pursuant to the Subscription Agreements, each Investor was granted an option (the “Private Placement Option”) for a period of sixty (60) days starting after the closing of the Business CombinationBitGo Custodial Services Agreement between BitGo Trust and Gryphon, dated October 1, 2021, BitGo Trust, through its custodial services enables Gryphon to purchase, subjectcreate one or more custody accounts, controlled and secured by BitGo Trust to store certain conditions, additional shares of Common Stock (“Option Shares”) at a price of $10.21 per share, up to a number of Option Shares equal to the number of Private Placement Shares purchasedsupported digital currencies and held and not redeemed bydigital tokens or certain fiat currencies such Investor under the Subscription Agreement. As of the date of this prospectus, the Private Placement Option has expired and no Investor exercised such option.
In connectionas dollars or euros. BitGo Trust also provides Gryphon with the execution of the Subscription Agreements, MTech Sponsoroption to create non-custodial wallets that support certain digital assets via an API and MTech entered into an Agreementweb interface. Gryphon may also elect to Transfer Sponsor Shares (each, a “Sponsor Stock Transfer Agreement”)store fiat currency with each Investor, pursuant to which MTech Sponsor agreed to transfer to each Investor at the closing of the Private Placement one share of Class B common stock of MTech for each nine Private Placement Shares purchased by such Investor for an aggregate of 100,120 shares of common stock (such shares, the “Transferred Sponsor Shares”). Each Investor agreed to accept its portion of the Transferred Sponsor Shares subject escrow and other restrictions under the Letter Agreement, dated as of January 29, 2018, by and among MTech and EarlyBirdCapital, Inc.
Business OverviewBitGo Trust.
The Company is a regulatory compliance and inventory management technology company. The Company’s proprietary software platform is adaptableBitGo Custodial Services Agreement has an initial term of one year. After the initial term, it will automatically renew for industries in which interfacing with government regulatory agencies for compliance purposes is required, or wheresuccessive one-year periods, unless either party notifies the trackingother of organic materials from seed or plantits intention not to end products is desired. Nine years ago, the Company identified a need for organic material tracking and regulatory compliance SaaS solutions in the growing cannabis and hemp industry. The Company developed products intended to assist states in monitoring licensed businesses’ compliance with state regulations, and to help state-licensed businesses operate in compliance with such law. The Company provides its regulatory software platform, Leaf Data Systems®, to state government regulatory agencies, and its business software platform, MJ Platform®, to state-licensed businesses. Although the Company has helped monitor legal compliance for more than $13 billion in cannabis sales to date, it does not handle any cannabis related material, does not process sales transactions within the United States, and its revenue generation is not relatedrenew at least 60 days prior to the type or amountexpiration of sales made by its clients, as revenues are generated by the Company onthen-current term. After the initial term, Gryphon may terminate the BitGo Custodial Services Agreement at any time for any reason upon 30 days’ prior written notice. Gryphon may terminate the BitGo Custodial Services Agreement during the initial term if BitGo Trust breaches a fixed-fee based subscription model. The Company’s annual revenues have grown each year since inception,material term of the agreement and fails to cure such breach within 30 days following written notice thereof from $0.8 million in its first full year of operations in the fiscal year ended December 31, 2010 to $10.5 million in the fiscal year ended June 30, 2018.Gryphon.
The Company believes its service offerings are built to scale nationally and internationally while providing technology compliance, monitoring and auditing products across the entire supply chain and all industry verticals of the cannabis, CBD and hemp markets. Importantly, the Company has already started serving businesses and governments globally. Since establishment in 2010, the Company has tracked more than $13 billion in legal cannabis sales with clients across 14 countries, including Australia, Canada, Chile, Colombia, Denmark, New Zealand, South Africa, Spain, Switzerland, Uruguay, Italy, Jamaica, and Macedonia, and 29 states across the U.S as well as the District of Columbia and Puerto Rico. We believe these factors establish the Company as a mature, vetted solution for the coming global expansion in the industry. The Company also serves clients in Australia, Canada, Chile, Colombia, Denmark, New Zealand, South Africa, Spain, Switzerland, Uruguay, Italy, and Macedonia. The Company expects to leverage its first-mover advantage and reputation among industry participants throughout the global supply chain to increase market share, including in growth markets, such as the emerging Asian markets.
The Company’s core products, Leaf Data Systems and MJ Platform, are highly-versatile platforms that provide the Company’s clients with a central data management system for tracking regulated products – from seed to initial plant growth to product – throughout the complete supply chain, using a global unique identifier method. The Company’s platforms also provide clients with integrated security, transparency and scalability capabilities. These capabilities allow the Company’s state-licensed clients to control inventory, operate efficiently in a fast-changing industry and comply with state, local, and federal (in countries such as Canada and Colombia) regulation at all times, and allows its government regulatory clients to effectively and cost-efficiently monitor licensees and ensure that commercial businesses are complying with their states’ regulations.
2
The Company generates revenue in three principal areas:
The Company also resells a limited number of printers for printing compliance product labels and scales that are NTEP certified legal for trade. Revenue from these resale activities was approximately 1% of total revenue in the fiscal year ended June 30, 2018, and 3% of total revenue in the nine months ended March 31, 2019, and is not expected to become a significant generator of revenue.
Cannabis Industry
General
The Company believes the growing cannabis industry in numerous U.S. states and other countries outside of the U.S. represents an ideal market for its technology, as states need to ensure legal compliance and the maintenance of the seed-to-sale life cycle within their states, and state-licensed operating companies need to ensure they operate within applicable state law and carefully track inventory.
Although in its early stages, the cannabis and hemp industries (medicinal and adult-use) are experiencing rapid growth. The Company believes it is witnessing a global paradigm shift in which the cannabis industry is moving from a state of prohibition to a state of legalization and general public acceptance. Furthermore, total legal cannabis spending in the U.S. (excluding pharmaceutical and retail CBD) grew to $9.8 billion in 2018 from $8.5 billion in 2017. According to Arcview Market Research and BDS Analytics’ latest “State of Legal Cannabis Markets” report, the legal cannabinoid market in regulated dispensaries, pharmacies and retail outlets is projected to grow to $44.8 billion by 2024, as the number of states, territories, and nations liberalizing their cannabis legalization rules and policies grows. The forecast is based on expectations that by 2024, every U.S. state, Washington, D.C., and four U.S. territories will have active medical cannabis programs, and 20 states, Washington, D.C., and two territories will have active adult-use markets. The report notes the expected expansion in legalization actions should drive U.S. legal cannabis spending to nearly $30 billion in 2024, growing at a compounded annual growth rate in excess of 20%.
Further to the Company’s current addressable market, the regulatory changes in the 2018 Farm Bill in the U.S. have created an opportunity for hemp-based CBD in general retail and pharmaceutical channels. Hemp-derived CBD is available broadly across retailers (not solely licensed cannabis dispensaries), including online, drug and convenience stores, natural product, beauty, grocery and pet stores.
The cannabis industry is a competitive, increasingly complex, and rapidly changing landscape. Arcview Market Research and BDS Analytics note that the range of regulatory schemes is wide and fines for non-compliance are steep. Proper, safe and profitable operation of a cannabis business requires a full understanding of applicable laws, the ability to track plants and products to ensure compliance with these laws, and the ability to operate at scale in a competitive environment.
The Company uses its years of experience, proprietary databases, and resources to identify trends and predict changes in the cannabis industry in order to evolve its products and better assist its clients in operating in compliance with the applicable laws of their jurisdictions and capitalizing on commercial opportunities within the applicable regulatory framework, with accuracy, efficiency, and geographic specificity.
Seed to Sale
Accurate tracking of any organic products requires the ability to identify an item that changes over time. A seed grows into a plant, and a plant is refined into multiple different products, some of which are sold to consumers, and others of which are destroyed or allowed to expire. The following is a general description of the seed-to-sale process:
Cultivation.The process of growing begins at the cultivation facility, where all living plants are tracked throughout their growth phases. The plants progress from propagation material (seeds or tissue cultures), to the vegetative stage (immature plants), then to the flowering stage (mature plants).
3
Harvest.Upon harvest, weights are gathered which represent the weight of the flower and other material (e.g. stems and roots). Weights decrease as product is processed through drying, trimming and elimination of waste.
Quality Assurance (QA) Laboratory Testing. Certain jurisdictions require cannabis or hemp CBD material to be tested. Samples of flower and other material are sent to a testing laboratory where the required testing can be performed. While product samples are undergoing lab testing, the remaining packages of the associated inventory remain quarantined until passing test results have been entered by the testing laboratory.
Packaging. Once harvested material has had the appropriate QA testing performed, harvest packages may be transferred to extraction and infusion (“E&I”) facilities to undergo extraction and infusion processes. E&I facilities process the usable plant material for sale, or extract the organic compounds from the plant, which can then be packaged for sale directly as concentrated extract, such as cannabis concentrate, or processed into infused products (such as topical products, edible products, and tinctures). In some jurisdictions, it is required that samples be sent to a testing laboratory again at this point for final testing prior to being transported to retail facilities to be distributed to consumers.
The Company’s Platform Capabilities
The Company’s platforms and related technology offer wide ranging capabilities. The Company integrates these capabilities into its software offerings to provide platforms that allow government regulators to engage in accurate and real-time compliance monitoring, and which provide licensed businesses with a true enterprise solution for managing their inventory and compliance. Key capabilities of the Leaf Data Systems and MJ Platform include:
Leaf Data Systems
General
Leaf Data Systems provides regulatory authorities with visibility into the operations of licensed medical and recreational cannabis businesses. Licensed cannabis facilities within a state can enter data regarding the basic workflows performed at their facility, which is processed into reporting tailored to the government agencies that regulate and enforce the rules of the industry. This enhances the ability of regulators to ensure public and product safety as well as to monitor sales and inventory within the industry. Leaf Data Systems is customized to the regulations of the state in which it is contracted and tailored to capture the relevant data points desired by regulatory officials.
Government regulators desire visibility into many of the metrics involved in the seed-to-sale process in order to ensure public safety, monitor sales data for the purposes of taxation, and perform physical inspections of cannabis industry facilities. Leaf Data Systems allows for specific data points captured during these workflows to be compiled into the state and regional view retrievable by regulatory officials. These data points include:
4
Leaf Data Systems leverages the use of unique identifiers that are assigned to each batch, plant and inventory item to connect the life cycle phases together and provide the foundation for the chain of custody. State officials are able to review all seed-to-sale information captured for all licensees through reporting of real-time data. The system allows regulators the ability to set alerts based on specific data points and their relative expected values.
Leaf Data Systems provides regulators with three methods for data capture from licensees:
Leaf Data Systems allows government regulatory clients to track product of licensees from seed to plant, view manifest data on demand in order to verify the transport details for a licensee transporting cannabis products or materials, and ensure proper taxation and payment of fees by licensees.
Government Contract Bidding Process
When seeking cannabis compliance monitoring and regulatory governance systems, states publish requests for proposal (“RFP”) to which companies, such as the Company, can respond. The Company monitors government contract opportunities by reviewing all available state registries for notifications of RFP and similar proposal invitations. The Company has relationships with industry lobbyists, industry coalitions, regulatory agencies and industry businesses, enabling it to learn of all government contract opportunities. The Company believes its industry expertise, adaptable platform technology and ability to timely provide a quality commercial off-the-shelf (COTS) solution at a competitive price provides the Company with the ability to win the bidding process and secure state regulatory customers.
5
BasedBitGo Trust’s cold wallets are supported by a $250 million policy issued by Lloyd’s of London. Specifically, the policy covers: copying and theft of private keys; insider theft or dishonest acts by BitGo employees or executives; and loss of keys. Any theft of assets directly related to BitGo Trust’s custody of key would be covered by the policy. The policy does not cover cases where the client or a third party holds some of the keys themselves (e.g. hot wallets), since BitGo Trust would not be solely responsible for protecting the keys.
BitGo Trust has established a comprehensive set of controls governing the business processes and technology systems using industry standards and frameworks such as NIST, CCSS,CIS, and FFIEC. In addition, these controls have been independently tested as part of our SOC 1 & SOC 2 (Type 2) reports. Customers will decide upon which specific wallets are required based on an RFP,their use case and they determine the Company conducts internal road-mappingportion of assets held in hot or cold wallets. BitGo Trust holds keys to determine ifcold wallets in undisclosed locations. BitGo’s cold storage solution is housed at undisclosed secure facilities. Any facilities that are co-located are secured by human guards and video surveillance, with 24x7 coverage. All BitGo vaults and manned facilities are located within the United States.
BitGo vaults are restricted from public access. BitGo follows role-based access controls and the principle of least privilege. Only individuals who have a specific business need to complete their job function are granted access to client information. Insurance providers rely on our BitGo’s external auditors to ensure that there is valuesufficient controls in responding toplace for accessing the proposal. Ifvault and key material. BitGo maintains $250mm of insurance coverage against loss, theft, and misuse in situations where BitGo holds all keys. As part of this coverage, BitGo’s insurance underwriters have inspection rights associated with the Company decides to proceed, it will formulate a detailed response, including granular responses to solicitation requirements; identifying and detailing the benefitscrypto assets held in storage. All of the Leaf Data System for the state’s needs and formulating a pricing regime that the state will find attractive. Typically, the Company will propose multiple pricing models, all of which consider the extent of customization required and the number of expected licensees operating across the platform:
State procurements for compliance platformsGryphon’s digital assets (100%) are held in the cannabis industry have occurred relatively infrequently, with only 24 states currently using some form of compliance tracking. The Company believes that states’ demand for these platforms will increase as further state-level cannabis legislation is introduced, and the existing legalized states further expand their compliance initiatives.cold wallets. Gryphon does not utilize any hot wallets from BitGo.
Since 2015, the CompanyBitGo has been awarded contracts in the States of Nevada, Washington, and Pennsylvania. The Company was recently awarded a contract with the State of Utah following the submission of a response to an RFP for an interoperable medical cannabis inventory control and electronic verification system.
The Company has supplied Washington State with Leaf Data Systems since 2017. The platform has been integrated with the Washington State Liquor and Cannabis Board and is used to monitor, control, and report on activities of authorized producers, processors and dispensaries. This project involved the conversion of three years of cannabis tracking data from the state’s prior tracking system, as well as coordinating the cutover of all licensed businesses in the state to the Leaf Data Systems,private key procedures as well as the integrationsecurity and procedures in place for securing assets and in withdrawing and transferring assets. The BitGo ecosystem and architecture for private key management includes the BitGo Platform, HSMs and modular services. The BitGo cold custody solution is built on BitGo’s world class security to manage keys on behalf of APIs from numerous third parties.our clients. BitGo only signs transactions that have been authorized by its clients and follow the policies set by the account administrators. BitGo engages an external third-party auditor to verify the digital assets it holds on a periodic basis. In addition, in the course of performing its annual audit of Gryphon’s financial statements, Gryphon’s independent registered public accounting firm sends annual confirmation requests to BitGo to confirm Gryphon’s digital assets held by BitGo. While neither Gryphon nor its insurance providers have any independent inspection rights associated with the digital assets held by BitGo, BitGo’s insurer, Lloyd’s of London, does have inspection rights with respect to the digital assets that BitGo holds.
The Company has supplied Pennsylvania with Leaf Data Systems since 2017. The platform has been integrated with the Pennsylvania Department of Health and is used to monitor, control, and report on activities of authorized growers/processors, dispensaries, laboratories, clinical registrants, and academic clinical research centers. The Leaf Data System, as configured for Pennsylvania, permits growers and processors to begin cultivating, growing, and processing activities as soon as possible. This platform also integrates a third-party SaaS registry from Oracle for patients, caregivers, practitioners and medical providers with our seed to sale system to track patient dispensary activity in the state.
Coinmint Agreement with State of Pennsylvania
On January 30, 2017,July 1, 2021, Gryphon entered into a Coinmint Colocation Mining Services Agreement (the “Coinmint Agreement”), with Coinmint, LLC (“Coinmint”), an established operator of renewable-energy data centers, pursuant to which Coinmint provides hosting services to Gryphon at Coinmint’s hydro powered facility in Massena, New York (the “Coinmint Facility”) for a 15-month period, which upon its conclusion renews automatically for successive three-month terms unless either party delivers to the Pennsylvania Departmentother party 90 days’ written notice of Health (PADOH)intent not to renew. Pursuant to the terms of the Coinmint Agreement, 7,200 S19j Pro Antminer machines were delivered to and installed at the Coinmint Facility. Under the terms of the Coinmint Agreement, Coinmint directly passes through the cost of electricity and maintenance costs to Gryphon, collects an initial reservation fee and collects a percentage of Gryphon’s bitcoin mining profits.
Agreement and Plan of Merger with Sphere 3D
On June 3, 2021, Gryphon and Sphere 3D Corp. (“Sphere 3D”) entered into an Agreement and Plan of Merger (the “Sphere 3D Merger Agreement”), togetherpursuant to which a merger subsidiary of Sphere 3D was to merge with Pennsylvania’s Office of Information Technology Bureau of IT Procurement accepted the Company’s bid to provide a hosted SaaS medical marijuana seed to sale tracking system and awarded the Company a service contract. The Company,into Gryphon, with Gryphon continuing as the prime contractor for this contract, provides all servicessurviving corporation and meetswholly owned subsidiary of Sphere 3D (the “Sphere 3D Merger”). The Sphere 3D Merger Agreement was amended December 29, 2021. On April 4, 2022, Gryphon and Sphere 3D mutually agreed to terminate the requirements requested by PADOH, exceptSphere 3D Merger Agreement due to changing market conditions, the productionpassage of time, and the relative financial positions of the Medical Marijuana Patient and Caregiver identification cards, which is provided by the Pennsylvania Department of Transportation. These specific services are provided through the Company’s Leaf Data System, which monitors, controls and reports on activities of authorized growers/processors, dispensaries, laboratories, clinical registrants and academic clinical research centers. Additionally, the services provided to the Commonwealth by the Company includes implementation of a hosted, SaaS registry for patients, caregivers, practitioners and medical providers, which is integrated with the Leaf Data System as necessary to track patient dispensary activity. The term of the purchase order which was issued under the contract commenced on April 18, 2017, with an initial term of five years and the option for three (3) consecutive one-year renewals at the Commonwealth of Pennsylvania’s (the “Commonwealth”) discretion. The Commonwealth may exercise the renewal(s) in single or multiple year increments, at any time during the purchase order. the Company’s payments from PADOH are made quarterly through invoicing to the Commonwealth’s procurement office with purchase orders added to the main purchase order from time to time and invoiced after completion of delivery date agreed upon in any change request. Termination of the contract will occur at contract closeout and all data collected and stored in the Company’s systems will be transferred to PADOH without cost within 30 calendar days in a format agreed upon by the Commonwealth. Termination by the Commonwealth can occur in whole or any part at any time for certain prescribed reasons, including the Company’s failure to provide services as and when required, the Company’s failure to dedicate sufficient resources, including personnel, equipment and material, to the completion of prescribed services and unsatisfactory performance in the judgment of the Commonwealth. In addition, the Commonwealth can terminate the contract without cause for convenience upon 30 days’ notice if it determines that termination is in the best interest of the Commonwealth.companies, among other factors.
6
Carbon Credit Agreements
On June 8, 2021 and August 19, 2021, Gryphon entered into two agreements to purchase up to 250,000 Certified Emission Reductions (“Credits”) from Polaris Infrastructure Inc. The agreements were amended and consolidated into a single agreement on June 2, 2022, pursuant to which Gryphon ultimately purchased 74,075 Credits for $100,000.
Sphere 3D Promissory Note and Security Agreement
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. 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.
Master Services Agreement with State of WashingtonSphere 3D
In July 2017,On August 19, 2021, in connection with the Company and the Washington State Liquor and Cannabis Board (“WSLCB”)pending Sphere 3D Merger, Gryphon entered into negotiationsa 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 acceptance ofcryptocurrency-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 a services contract for the Company’s provisionpercentage of the Leaf Data System. The contract provides fornet operating profit of all of Sphere 3D’s blockchain and cryptocurrency-related operations. To provide greater certainty as to the Companyterm of the Sphere 3D MSA, Sphere 3D and Gryphon agreed to undertakeextend the work necessary to implement and integrate the Leaf Data system with WSLCB, with a subscription for maintenance and other services by the Company thereafter. The initial term of the contract for performance of such implementation and integration commenced on July 10, 2017 and was for a one-year term. The Company expects WashingtonSphere 3D MSA from three to complete the initial license and implementation phase in September 2019. At that time, Washington is expected to move into subscription services. Upon final acceptance and approval by WSLCB of the implementation of the Leaf Data System, the term of the state’s subscription for software maintenance and support shall initially be for one year, with upfour years, or to five consecutive one-year renewals, atyears in the sole optionevent Sphere 3D did not receive delivery of Washington State. Asa specified minimum number of the date hereof, the Company is completing the implementation of the Leaf Data system with WSLCB, including providing deliverables such as project management plans, testing, data conversion, interfaces, training, production cutover, and initial licensing. The subscription fee payable by WSLCB includes all costs associated with hosting, licensing, and support for each year of subscription services. WSLCB shall paybitcoin mining machines during 2022. Sphere did not meet delivery targets in advance2022, which extended the respective annual cost. Suspension or termination of this contract by WSLCB can occur in whole or any part at any time for certain prescribed reasons, including the Company’s breach of the contract, for the convenience of Washington State or the failure of Washington State to allocate funds in its budget for the Contract.
Agreement with the State of Utah
In August 2019, MJF entered into a State of Utah Contract (the “Utah Contract”) with the Department of Technology Services (“DTS”), for MJF’s provision of the Leaf Data System.
The Utah provides for provision of the Company’s Leaf Data System and Trace Seed to Sale Solution, specifically customized for the State of Utah to include an electronic verification system and inventory control system that includes customer relationship management technology. The Utah Contract also provides for MJF to undertake the work necessary to implement and integrate the Leaf Data system with DTS, with a subscription for maintenance and other services by MJF thereafter. The purpose of such implementation and integration is for a “Seed to Sale” inventory control system and electronic verification system to facilitate the electronic monitoring of the state’s medical cannabis industry; and supporting functionality to register, approve, provide system credentials and administer patients, caregivers, practitioners and medical providers. The initial term of the Utah ContractSphere 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 generally recognized 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 such implementationa breach by Sphere 3D, subject to written notice and integration is effective asan opportunity to cure for a period of August 12, 2019, and terminates on August 1, 2024, with an initial term of five (5) years and the option for three (3) consecutive one-year renewals at the State of Utah’s discretion.up to 180 days.
Pursuant to the Sphere 3D MSA, Gryphon holds the crypto assets of Sphere in a Bitgo Trust digital wallet. Sphere’s assets are safeguarded by Bitgo Trust in the same manner that Gryphon’s assets are safeguarded by Bitgo Trust, as described elsewhere in this section. Gryphon and Sphere’s assets are not co-mingled, as Sphere’s assets are stored in a separate wallet with its own address. The Utah Contract provides for timelines for production, roll out,terms of the Sphere 3D MSA govern the management of Sphere’s assets. The terms prevent self-dealing and operational implementation.conflicts of interest. Additionally, all dealings between Sphere 3D and Gryphon involve one or both of (i) independent, arms-length third parties and (ii) transactions publicly available on the blockchain, which provide a clear, unambiguous trail of documentation to audit the relationship as needed.
The Company expectsGryphon and Sphere 3D are engaged in litigation regarding the inventory control systemSphere 3D MSA, and on October 6, 2023, Sphere 3D delivered a termination notice to be fully rolled out and operational byGryphon with respect to the endSphere 3D MSA. For additional information regarding these matters, see “- Legal Proceedings” on page 13 of calendar year 2019 and the electronic verification system to be to be fully rolled out and operational between March and June 2020. Once the initial phases provided in the Utah Contract are complete, the DTS is expected to move into subscription services. Suspension or termination of the Utah Contract by DTS can occur in whole or any part at any time for certain prescribed reasons, including MJF’s breach of the contract, for the convenience by either party State or the failure of State of Utah to allocate funds in its budget for the Utah Contract.this proxy statement/prospectus.
MJ Platform
The Company provides state-licensed dispensaries, cultivators, and manufacturers with a data-driven seed-to-sale tracking platform, MJ Platform, which provides clients with an enterprise solution for managing their inventory and regulatory compliance, whether they are a small boutique shop, a large multi-state company or a multi-country business, and is available in English, Spanish and French. MJ Platform is used by customers to make their operations more efficient, profitable, and compliant through all phases of the seed-to-sale cycle – from cultivation to extraction and infusion to distribution and retail sales.
Every stage of the product lifecycle has costs attached to it, including building, labor, nutrients, lighting, water, and other, sometimes hidden, expenses. As margins tighten in any products-based industry with the emergence of more competition, managing costs becomes an increasingly important part of sustainability. MJ Platform allows users to track costs with specificity – by the day, by the hour, by the method, by the employee, by the product line, and by the square foot of facility space.
The Company services licensed cannabis operators in all verticals of the industry, including cultivation, manufacturing and retail dispensaries. The Company believes its ability to service clients in the cultivation and manufacturing markets differentiates it from other industry software providers that typically do not provide solutions for these types of businesses. The Company has significant client presence for its commercial software solutions in mature cannabis markets such as Arizona, California, Michigan, Pennsylvania, Colorado, Montana, Nevada, Puerto Rico, and Spain. The Company has exclusivity in the Pennsylvania market due to its government contract, which requires operators in the state to use not only the Company’s track and trace system Leaf Data Systems but also the Company’s seed to sale tracking ERP product MJ Platform.
7
CultivationSub-License and Delegation Agreement with Sphere 3D
On October 8, 2021, in connection with the pending Sphere 3D Merger, Gryphon and Sphere 3D entered into a sub-license and delegation agreement (the “Sublease”), pursuant to which Gryphon sublicensed to Sphere 3D Gryphon’s rights to use Core’s facility pursuant to Order 2 and the Core MSA, and delegated to Sphere 3D all of Gryphon’s obligations to make payments to Core under Order 2. The Sublease will terminate automatically upon the termination of the Core MSA and/or Order 2. As part of the agreements to amend the Sphere 3D Merger Agreement, the Sphere 3D Note and the Sphere 3D MSA, Sphere 3D and Gryphon agreed to amend the Sublease to provide Gryphon the right to recapture the usage of up to 50% of the hosting capacity to be managed by Core if the Sphere 3D Merger Agreement was terminated. Gryphon did not exercise the recapture right, which expired 90 days after the termination of the Sphere 3D Merger Agreement.
Anchorage Loan Agreement
On May 25, 2022, Anchorage entered into the Anchorage Loan Agreement with Gryphon Opco, pursuant to which Anchorage loaned Gryphon Opco the principal amount of 933.333333 bitcoin. Gryphon Opco’s obligations under the Anchorage Loan Agreement are secured by certain equipment and software rights of Gryphon Opco and are guaranteed by Gryphon. The loan was payable in installments of 42.424242 bitcoin with interest of 5.0% per annum, payable monthly in bitcoin. Gryphon Opco is further required thereunder to maintain a collateral coverage ratio of 110%. The maturity date of the loan was initially May 27, 2024.
On March 27, 2023, Gryphon and Anchorage entered into an amendment to the Anchorage Loan Agreement (the “Anchorage Loan Amendment”). Pursuant to the Anchorage Loan Amendment, the maturity date was extended to March 2026, and the interest rate was increased to 6% per annum. The monthly principal and interest payments have been adjusted to be 100% of net monthly mining revenue, defined as, for each calendar month, the sum of (a) all of Gryphon’s revenue generated from all bitcoin generated by Gryphon with the collateral less (b) the sum of Gryphon Selling, General and Administrative Expenses (“SG&A”) in connection with bitcoin mining operations, but not to exceed the greater of (x) $100,000 and (y) the amount that is previously preapproved by Anchorage in writing for such calendar month; provided, however that, to the extent that SG&A is capped by clause (b) above, any unapplied SG&A may be rolled forward to subsequent months until fully deducted. Notwithstanding the foregoing, unless otherwise approved by Anchorage, the aggregate amount of SG&A during any rolling twelve-month period shall not exceed $750,000. Provided that if at the end of a fiscal quarter, commencing with the fiscal quarter ending June 30, 2023, if (x) the aggregate principal amount payment received by the Anchorage for such fiscal quarter exceeds 38.6363638 bitcoin and (y) the average principal amount payment received by Anchorage for each fiscal quarter (commencing fiscal quarter ending June 30, 2023 and through and including the fiscal quarter for which such determination is to be made) exceeds 38.6363638 bitcoin per fiscal quarter, then, the Gryphon shall pay to Anchorage 75% of net monthly mining revenue for the immediately succeeding fiscal quarter (and thereafter, in the following fiscal quarter would shift to 100%). As consideration for the Anchorage Loan Agreement Amendment, Gryphon agreed to make a one-time payment of 173.17 bitcoins, reducing the principal balance of bitcoins from 636.81 to 463.64, and a closing fee of $45,000.
The cultivation module in MJ Platform allows licensed cultivatorsAnchorage Loan Agreement Amendment also added a conversion provision whereby Anchorage has a limited right to quickly get ground-level details about plant strain creation and plant growth location, together with enterprise-level costing and yield projection modeling.convert all or any portion of the outstanding principal on the loan into a number of shares of Gryphon or any public company that is Gryphon’s parent, if Gryphon is not the public company (the “Conversion Right”). The Conversion Right is available at any time during the one month period (the “Conversion Period”) after which the market capitalization of Gryphon, or its public company parent if Gryphon is not the public company, for the first time exceeds $125,000,000 for five consecutive days. The conversion price is equal to $150,000,000 divided by the number of shares of Gryphon, or its public company parent if Gryphon is not the public company, common stock outstanding immediately prior to Anchorage’s exercise of the Conversion Right during the Conversion Period.
The following summarizes MJ Platform’s functionality, utility, and monitoring capabilities through the cultivation stages:
Extraction and Infusion (E&I)
The following summarizes MJ Platform’s functionality, utility,Gryphon’s primary competitors are Marathon Digital Holdings Inc., Riot Blockchain Inc., Hive Blockchain Technologies Ltd., Hut 8 Mining Corp., and monitoring capabilities through the extraction and infusion stages:Bitfarms Ltd.
8
Competitive Advantages
Low operating costs are a key part of Gryphon’s competitive advantage. The low-cost hosting rates from its two host providers combined with its current generation, more efficient bitcoin miners provide Gryphon with a competitive advantage over competitors.
Gryphon believes it has strong relationships with equipment manufacturers and third-party mining data centers. It is challenging to acquire the latest equipment and host capacity due to significant market demand and limited supply. Gryphon has relationships with both types of suppliers, which it believes will allow it to access current-generation equipment and sign contracts with providers of hosting solutions.
Operational Strategy
Gryphon uses a hosting strategy that allows the company to concentrate the deployment of its capital towards bitcoin mining activities as opposed to building its own datacenters. Gryphon has partnered with a host provider that provides net carbon neutral power for its bitcoin mining.
Gryphon’s primary host facility is the Coinmint Facility located in upstate New York and is hydro powered. In September 2021, Gryphon began deploying the first batch of its 7,200 S19j Pro Antminers from Bitmain at this facility. While electricity costs at the Coinmint facility have been as low as $0.032/kWh in 2021 and as of September 30, 2023, were $0.071/kWh with a 39-week rolling average of $0.064/kWh, electricity costs at the facility have fluctuated and will continue to fluctuate. The Coinmint Agreement provides for direct cost pass through of electricity costs and other operating costs at this facility plus a profit share. Gryphon uses approximately 28MW of electricity at this site.
Gryphon’s miner fleet is composed nearly entirely of S19j Pro Antminers from Bitmain, with the exception of 25 S19 Pro Antminers, 876 S19j Pro + Antminers, and 552 S19k Pro Antminers. The S19j Pro Antminers have a hashrate capacity of approximately 100 TH/s per miner and power consumption of approximately 3,050 watts per miner. The S19 Pro Antminers have a hashrate capacity of 110 TH/s and power consumption of 3,250 watts per miner. The S19j Pro + Antminers have a hashrate capacity of 120 TH/s and power consumption of 3,355 watts per miner. The S19k Pro Antminers have a hashrate capacity of 120 TH/s and power consumption of 2,760 watts per miner. Gryphon’s operations will continue to expand as it acquires additional miners to the extent that opportunities for such acquisitions arise.
The Company has entered into contracts with digital asset mining pool operators to provide the service of performing hash computations for the mining pool operator. The contracts are terminable at any time for any reason by either party without cause and without penalty and Gryphon’s enforceable right to compensation only begins when Gryphon provides the service of performing hash computations for the mining pool operator. The contract is for a continuous 24-hour period each day. Gryphon’s access and usage rights to the pool and service automatically renew for a successive 24-hour period (00:00:00 UTC and 23:59:59 UTC) unless terminated in accordance with the terms set forth by the terms of service. In exchange for performing hash computations for the mining pool, Gryphon is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which netted as a reduction of the transaction price). Gryphon’s fractional share is based on the proportion of hash computations Gryphon performed for the mining pool operator to the total hash computations contributed by all mining pool participants in solving the current algorithm during the 24-hour period. Hashrate is the measure of the computational power per second used when mining. It is measured in units of hash per second, meaning how many calculations per second that can be performed. The consideration Gryphon will receive, comprised of block rewards, transaction fees less mining pool operator fees are aggregated in a sub-balance account held by the mining pool operator. That balance, due to Gryphon, is calculated by the mining pool operator based on the hashrate provided and hash computations completed by Gryphon for the mining pool from midnight-to-midnight (00:00:00 UTC and 23:59:59 UTC) UTC time, and a sub-account balance is credited one hour later at 1AM UTC time. The balance is then withdrawn to Gryphon’s whitelisted wallet address, once a day, between the hours of 9am to 5pm UTC time. The rate of payment occurs once per day, as long as the minimum payout threshold of 0.01 bitcoin has accumulated in the sub-account balance, in accordance with the mining pool operator’s terms of service. Pursuant to ASC 606-10-55-42, Gryphon assessed if the customer’s option to renew represented a material right that represents a separate performance obligation and noted the renewal is not a material right. The definition of a material right is a promise in a contract to provide goods or services to a customer at a price that is significantly lower than the stand-alone selling price of the good or service. The mining pool operator does not provide any discounts and as such there is no economic benefit to the customer and as such a separate performance obligation does not exist under 606-10-55-42. In addition, there are no options for renewal that are separately identifiable from other promises in the contract such as an ability to extend the contract at a reduced price.
9
RetailThe performance obligation of the Bitcoin miner under the mining contracts with Foundry Pool USA involves the service of performing hash computations to facilitate the verification of digital asset transactions. Gryphon’s miners contribute computing power (ie. hashrate) that perform hash calculations to the mining pool operator, engaging in the process of validating and securing transactions through the generation of cryptographic hashes. The mining pool then utilizes a specific mining algorithm (e.g. SHA-256) to submit shares (proofs of work) to the mining pool’s server as they contribute to solving the cryptographic puzzles required to mine a block. Gryphon reviews and analyzes its individual pool performance using a dashboard provided by Foundry Pool USA that includes real-time statistics on hashrate, shares submitted and earnings. The service of performing hash computations in digital asset transaction verification services is an output of Gryphon’s ordinary activities. The provision of providing these services is the only performance obligation in Gryphon’s contracts with mining pool operators. Gryphon performs hash computations for one mining pool operator, Foundry USA. Foundry USA operates its pool on the Full Pay Per Share (FPPS) payout method. FPPS is a variant of the Pay Per Share (PPS) method, where miners receive a fixed payout for each valid share submitted, regardless of whether the pool finds a block.
Regardless of the pool’s success, Gryphon will receive consistent rewards based on the number of valid shares it contributes. The following summarizes MJ Platform’s functionality, utility,transaction consideration Gryphon receives is non-cash consideration, in the form of bitcoin. Gryphon measures the bitcoin at fair value on the date earned using the average price (calculated by averaging the daily open price and monitoring capabilities through the retail stages:daily close price) quoted by its Principal Market at the date Gryphon completed the service of performing hash computations for the mining pool operator. There are no deferred revenues or other liability obligations recorded by Gryphon since there are no payments in advance of the performance. At the end of each 24 hour period (00:00:00 UTC and 23:59:59 UTC), there are no remaining performance obligations. By utilizing the average daily price of bitcoin on the date earned, Gryphon eliminates any differences that may arise due to the volatility in trading price between bitcoin and fiat currency during the period where Gryphon establishes and completes the contract. The consideration is all variable. There is no significant financing component in these transactions.
Prior to April 19, 2023, in consideration of Gryphon being an early strategic customer of Foundry USA Pool and in view of competition, Foundry USA Pool has not charged Gryphon with a fee for its services. However, as of April 19, 2023, Gryphon is now charged a fee of 0.43%, based on its deployed hashrate.
Gryphon contributes 100% of its Bitcoin hashing power to Foundry USA Pool. The total hashing power of Foundry USA Pool is approximately 135 EH/S (per https://hashrateindex.com/hashrate/pools), as of November 30, 2023, of which Gryphon provides approximately 0.6%. Because cryptocurrency is considered non-cash consideration, fair value of the cryptocurrency award received is determined using the average daily quoted price of the related cryptocurrency in Gryphon’s principal market at the time of contract inception, which is deemed daily. Revenue is recognized when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. After every 24-hour term, the mining pool transfers the cryptocurrency consideration to our designated cryptocurrency wallet. Gryphon has no knowledge of whether Foundry USA Pool maintains insurance for theft or loss and the risks associated with transferring crypto assets. See “Risk Factors - Incorrect or fraudulent cryptocurrency transactions may be irreversible” for details related to the risks associated with transferring crypto assets.
Gryphon does not have visibility into how Foundry USA Pool holds Gryphon’s proportion of mining rewards prior to transfer as they are a private company. Gryphon obtains comfort on the bitcoin received from Foundry USA Pool as management completes an estimated revenue analysis whereas it calculates its percentage of hashrate contributed on a daily basis as a percentage of the global hashrate to identify expected rewards. Gryphon then compares that amount to the actual bitcoin received from Foundry USA Pool for variances. Foundry USA operates its pool on the Full Pay Per Share (FPPS) payout method. FPPS is a variant of the Pay Per Share (PPS) method, where miners receive a fixed payout for each valid share submitted, regardless of whether the pool finds a block. Daily Earnings are calculated from midnight-to-midnight UTC time, and the sub-account balance is credited one hour later at 1 AM UTC time. Earnings accrued in the balance would be withdrawn to the selected whitelisted wallet address, once a day, during 9 AM to 5 PM UTC time. According to the Foundry USA Pool’s FAQ page, the minimum payout threshold for Bitcoin (BTC) is 0.001 bitcoin. Under the FPPS method, Foundry USA provides Gryphon with a stable and predictable payout for their mining efforts. Regardless of the pool’s success, Gryphon will receive consistent rewards based on the number of valid shares (hash rate) they contribute.
10
Business IntelligenceWhile Gryphon may expand its operations beyond the mining of bitcoin in the future, Gryphon has no plans to pursue the acquisition or mining of digital assets other than bitcoin. However, Gryphon has acquired in the past digital assets other than bitcoin as in-kind investments or payments.
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. For the nine month period ended September 30, 2023, the average holding period was 61 days. Prior to December 31, 2022, Gryphon’s average holding period was under 7 days. The MJ Platform Business Intelligencebitcoin that is sold to pay operating expenses and to reinvest in operational expansion is sold within a 24 hour time frame of receipt. Gryphon converts mined bitcoin into fiat currency through BitGo Prime LLC (“BI”BitGo Prime”) leverages, under the extensive data captured interms of the Electronic Trading Agreement entered into between BitGo Prime and Gryphon as of October 5, 2021. Under such agreement, BitGo Prime and Gryphon may purchase from and sell digital assets to each other, each for its own benefit and account. To facilitate such trading services, BitGo Prime may provide Gryphon online access to its proprietary electronic trading system, with access to and use of MJ Platform’s cultivation, E&I,the trading system being subject to the terms and retail modules, allowingconditions of the Agreement. BitGo Prime charges Gryphon no fees for informed actionable insights. MJ Platform allows userssuch conversion other than a nominal wire transfer fee associated with the wire of fiat currency to align their operational data from three vantage points: in real-time, past trends,Gryphon’s account. Gryphon shall also not pay any commissions and predictive future. The Company believes it has cultivated the cannabis industry’s largest database providing users with valuable market comparison data available only through MJ Platformtransaction, processing and helps clients keep track of emerging legalother fees, including federal, state, and commercial trends. This proprietary database assists user in making important decisions in real-time with respect to product planning and pricing.local taxes.
DuringAn affiliate of BitGo Prime, BitGo Trust Company Inc., (“BitGo Trust”) serves as the cultivation phase,custodian for Gryphon’s digital currency holdings in consideration of nominal fees paid for custodial, transaction, and settlement services provided pursuant to the platform allows for yieldagreement between Gryphon and cycle management forecasting. The platform leverages plant growth cycleBitGo Trust. Gryphon’s CEOand CFO each hold Gryphon side private keys that are protected with two-factor authentication. Custodial side keys are held by BitGo Trust who verifies requests with two factor authentication and expected harvest yield data fromvideo reviews. Additionally, as custodian of Gryphon’s digital assets, BitGo Trust has implemented certain security measures with regard to Gryphon’s digital asset holdings. Any liquidation, conversion, or transfer of the propagation, vegetationdigital assets held in custody by BitGo Trust requires authorizations by two Gryphon executives and flowering stagesrequires 24 hours prior to forecast when therethe effectiveness of any such transaction. In addition, the digital assets held in custody by BitGo Trust are insured up to $100 million. There can be no assurances that these procedures will be on-hand inventory for various products, allowing for ramp upeffective, and Gryphon could suffer a loss of its bitcoin due to an adverse software or cybersecurity event. While Gryphon is confident in cultivation staffing and marketing/pre-sellingthe security of the inventory. It also allows the cultivatorits digital assets, Gryphon continues to evaluate the harvest yieldsadditional protective measures. See “Risk Factors - Gryphon’s bitcoin may be subject to loss, theft or restriction on access” for Gryphon’s risks and quality ratings achieved by various mother plantschallenges related to determine which mother plants to clone for future harvests.custody.
During the E&I phase, the platform allows the licensed facility to monitor product efficiency and product quality. It provides the facility manager with insight into the efficiency and quality of extraction, processing, and assembly jobs by employee, and enables the manager to determine with employees are achieving the highest yielded product output, and which are achieving product output with the highest quality ratings.Intellectual Property
DuringGryphon holds no patents, copyrights, trademarks, or licensing agreements.
Employees and Advisors
Gryphon currently has four full-time employees, its Chief Executive Officer, Chief Financial Officer, Legal Advisor, and its Executive Chair. Gryphon also uses the retail phase, the platform allows licensed retail locations to run patient analytics by tracking sales data relative to patient information, suchservices of Chris Ensey as age, gender, zip codeChief Technical Advisor.
Government Regulation
Government regulation of blockchain technology and date of product sale. The platform helps compliantly monitor and track retail locations retention efforts with existing patients or customers by tracking and reporting on the client’s targeted marketing and advertising efforts. The platform also allows retail location managers to view details about product sales by type and strain, allowing for reorder of products that sell and allowing for discontinuation of laggard product. Retail locations can also use the BI providedBitcoin specifically is being actively considered by the MJ Platform to evaluate gross profit based on the product’s production cost less the product’s sale price or based on the wholesale price. The platform also provides high-level sales data about daily, weekly and monthly sales, sales by payment type, sales by retail employee, sales by product and strain type and other metrics. MJ Platform also allows for inventory management and monitoring.
Partner Integrations
MJ Platform is built on a microservices architecture. This structure hasUnited States federal government via a number of benefits, includingagencies and regulatory bodies, as well as similar entities in other countries. State government regulations also may apply to Gryphon’s bitcoin mining activities and other related activities in which Gryphon participates or may participate in the ability to segregate certain pieces offuture. Certain regulatory bodies have shown an interest in regulating or investigating companies engaged in the service in order to allow for those pieces to be easily accessed by third-party services. For example, if a dispensary wishes to partner with an online menu company, that dispensary’s “menu service” can easily be shared with this third-party partner so that the partner only sees the information the dispensary wishes the partner to see, keeping other pieces of information hidden (e.g., patient data and sales data).blockchain technology or Bitcoin business.
The “cultivation” microservice allows for the querying of all of the plants in a cultivation facility, and all of the details that go along with those plants. This allows for third-party integrations, such as with messaging platforms used by cultivation staff. Cultivation staff can be notified in their messaging platform when a plant or group of plants is ready to be switched over from the vegetation stage to flowering stage.
The “customers” microservice allows for integrators to view details about all customers within an organization and to create new customers within that organization. For example, if a dispensary allows for patients to create an account on its website (even if they have never shopped at the brick and mortar store), that information is sent to MJ Platform and the new customers are automatically added to the dispensary’s MJ Platform account database. This ensure up-to-date and readily available customer identification and monitoring.
The “inventory” microservice provides visibility into which products are available at a particular facility and thequantity of those products. This information can be integrated with third-party online menu providers, allowing for the real-time display all of a dispensary’s available products (including photos, descriptions and prices).
The “orders” microservice monitors all orders that come into a client retail facility and helps ensure that same of fulfilled in compliance with law and that all such sales are monitored – from inventory identification to the facility employee handling the product to the end customer purchasing the product.
11
ConsultingIn addition, because transactions in bitcoin provide a reasonable degree of pseudo anonymity, they are susceptible to misuse for criminal activities, such as money laundering. This misuse, or the perception of such misuse (even if untrue), could lead to greater regulatory oversight of Bitcoin platforms, and there is the possibility that law enforcement agencies could close Bitcoin platforms or other Bitcoin-related infrastructure with little or no notice and prevent users from accessing or retrieving bitcoin held via such platforms or infrastructure. For example, the Secretary of the U.S. Department of the Treasury Janet Yellen noted during her nomination hearing before the Senate Finance Committee in January 2021 that cryptocurrencies have the potential to improve the efficiency of the financial system but that they can be used to finance terrorism, facilitate money laundering and support malign activities that threaten U.S. national security interests and the integrity of the U.S. and international financial systems. Accordingly, Secretary Yellen expressed her view that federal regulators needed to look closely at how to encourage the use of cryptocurrencies for legitimate activities while curtailing their use for malign and illegal activities. Furthermore, in December 2020, the Financial Crimes Enforcement Network (“FinCEN”), a unit of the U.S. Department of the Treasury, focused on money laundering and proposed a new set of rules for cryptocurrency-based exchanges aimed at reducing the use of cryptocurrencies for money laundering. These proposed rules would require filing reports with FinCEN regarding cryptocurrency transactions in excess of $10,000 and impose record-keeping requirements for cryptocurrency transactions in excess of $3,000 involving users who manage their own private keys. In January 2021, the Biden Administration issued a memorandum freezing federal rulemaking, including the proposed FinCEN rules, to provide additional time for the Biden Administration to review the rulemaking that had been proposed by the Trump Administration. As a result, it remains unclear whether the proposed FinCEN rules will take effect.
The Company’s experienced services team assistsMultiple United States federal agencies and regulators have been active in rulemaking, issuing guidance and regulating various actors in the blockchain technology industry, including the CFTC, SEC, FINRA, OCC, CFPB, FinCEN, OFAC, IRS, FDIC, and Federal Reserve. In March 2022, the United States announced plans to establish a unified federal regulatory regime for cryptocurrency, and in January 2023, the House of Representatives announced its governmentfirst ever Financial Services Subcommittee on Digital Assets and its intention to develop a regulatory framework for the digital asset industry. In February 2023, Bipartisan leadership of the Senate Banking Committee announced a similar goal. Regulations may substantially change in the future and it is presently not possible to know how regulations will apply to Gryphon’s businesses, or when they will be effective. As the regulatory and legal environment evolves, Gryphon may become subject to new laws, further regulation by the SEC, and other federal or state agencies, which may affect Gryphon’s bitcoin mining and other related activities. Certain state and local authorities have introduced and passed legislation that may affect Gryphon’s business clients in integrating its platforms into their operations and systems. the business of bitcoin mining. New York recently enacted a 2-year ban on new cryptocurrency mining conducted at fossil fuel-burning plants. It is possible that other states may likewise create laws that specifically impact Gryphon’s business.
EnteringIn 2022, FTX Trading Ltd. and several other major cryptocurrency exchanges declared bankruptcy. The U.S. Department of Justice brought criminal charges, including charges of fraud, violations of federal securities laws, money laundering, and campaign finance offenses against FTX’s former CEO and others. FTX is also under investigation by the cannabisSEC, the Justice Department, and the Commodity Futures Trading Commission, as well as by various regulatory authorities in the Bahamas, Europe and other jurisdictions. In response to these events, the digital asset markets have experienced extreme price volatility and declines in liquidity, and regulatory and enforcement scrutiny has increased, including from the DOJ, the SEC, the CFTC, the White House and Congress. These events continue to develop rapidly, and it is not possible to predict at this time all of the risks that they may pose to Gryphon or on the digital asset industry as a whole.
For additional discussion regarding Gryphon’s belief about the potential risks existing and future regulation pose to Gryphon’s business, see “Risk Factors” herein.
Environmental Considerations
Environmental considerations are top priority for Gryphon. Gryphon was founded as an ESG-led company. This means that Gryphon has limited the provision of electricity to its bitcoin mining activities to facilities using carbon-free energy, or required the purchase of carbon credits by such facility to provide for carbon neutrality. Gryphon currently has no plans to change this practice. Gryphon’s policy, which it currently has no plans to change, is to avoid conducting bitcoin mining at any facility using a carbon-based electricity source. Gryphon recognizes that a byproduct of the acquisition of bitcoin mining equipment from the existing supply chain is a significant undertaking. The Company works with clientscarbon footprint. To offset this footprint, Gryphon has entered into agreements to efficiently comply with state requirements in connection with the launch and operations of their cannabis businesses. The Company’s management and key personnel bring deep cannabis industry experience to the company. The Company’s management team and key personnel have broad experience gained form working with numerous cannabis operations. The Company’s consulting team has experience in every aspect of cannabis operations in every vertical (purchase 74,075 carbon credits. See “e.g.- Material Agreements - Carbon Credit Agreements, cultivation, processing and retail). The Company’s team has managed projects, including growth facilities exceeding 100,000 square feet, retail operations with locations in multiple states and online businesses serving an entire country.” for more information.
The Company provides project-focused consulting services to clients that are initiating or expanding their cannabis businesses or are interested in data consulting engagements regarding the legal cannabis industry. The Company typically provides its consulting services to clients in emerging markets that are seeking consultation on newly introduced licensing regimes and assistance with the regulatory compliant build-out of operations in newly opened states.
The Company consults with clients on a wide range of areas to help them successfully operate in the cannabis industry in compliance with state law, including:
12
StrategyLegal Proceedings
Gryphon is engaged, and may become engaged, in litigation in the ordinary course of business. On April 7, 2023, Sphere 3D filed suit against Gryphon in the Southern District of New York. The Company intendslawsuit concerns the Sphere MSA between the parties where Gryphon agreed to pursue additional growth through organic initiatives, including increased marketing personnelact as Sphere 3D’s “exclusive provider of any and resources, acquisitions,all management services for all blockchain and strategic relationships. Key elementscryptocurrency-related operations.” Sphere 3D alleges that Gryphon has fallen short in its obligations under the Sphere MSA, and is suing for alleged breach of contract, breach of the Company’s strategy include:
Government Regulationimplied covenant of good faith and fair dealing, and breach of fiduciary duty (such matter, the “Sphere 3D Litigation”).
The Company does not grow, handle, process or sell cannabis or cannabis-derived products, nor does it ever possess any such material or process any transactions relatedOn June 15, 2023, Sphere 3D filed an amended complaint in connection with the Sphere 3D Litigation, which clarified certain of Sphere 3D’s prior allegations. On June 28, 2023, Gryphon requested leave to file a motion to dismiss Sphere 3D’s claims for breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing, which the Court granted on August 11, 2023. On August 18, 2023, Gryphon filed: (i) its motion to dismiss Sphere 3D’s claims for breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing; and (ii) its answer and counterclaims against Sphere 3D, asserting, among other things, that Sphere had breached the Sphere MSA, breached the implied covenant of good faith and fair dealing in connection with that contract, acted negligently in connection with a separate incident, and defamed Gryphon. Gryphon’s answer and counterclaims further asserted the defamation counterclaim against Sphere 3D’s Chief Executive Officer, Patricia Trompeter, personally.
On September 20, 2023, Sphere 3D filed a second amended complaint in connection with the Sphere 3D Litigation, which added a claim against Gryphon alleging that Gryphon’s counterclaim for defamation against Sphere 3D violated New York’s anti-SLAPP law.
On October 6, 2023, Sphere 3D delivered a termination notice to Gryphon with respect to the sale of same. The Company only provides a technology platform for its clients to ensure their compliance with state law, and to monitor and control their inventory in compliance with state regulatory environments. The Company does not receive any commissions from sale by its clients and the Company’s revenue generation is not basedSphere MSA, largely on the sales of cannabis product by its clients, but rather the Company generates revenues through a set-fee based subscription revenue model. The Company is not directly subject to state or federal government drug regulation and its products are only intended to be used to ensure compliance with applicable state law under which clients operate. The Company’s clients are subject to state and federal law as it relates to cannabis growth, processing and sale. Asbasis of the dateallegations made by Sphere 3D in the Sphere 3D Litigation (the “Sphere 3D MSA Termination”). On October 11, 2023, Gryphon filed an answer to Sphere 3D’s second amended complaint, in which, among other things, Gryphon alleged that Sphere 3D’s attempted termination of this proxy statement/prospectus, 33 U.S. states have legalized cannabisthe Sphere MSA was wrongful and ineffective, because it violated the terms of the Sphere MSA, and thus that Sphere 3D continues to owe Gryphon all amounts to which Gryphon would otherwise be entitled under the Sphere MSA through that contract’s term ending in some form. Cannabis, however, is still deemed illegal under federal law. The federal government regulates drugs through the Controlled Substances Act (CSA) (21 U.S.C. § 811), which does not recognize the difference between medical and recreational use of cannabis.August 2026.
The Company believes the existing and emerging state and federal regulatory landscape creates opportunities for the Company’s platforms. The Company is awarded contracts with its government regulatory clients for its products and services through the process of competitive bidding. This process begins when the Company firsts learns, formally or otherwise, of a potential contract from a prospective government customer and concludes after all negotiations are completed upon award. When preparing its response to a prospective customer for a potential contract, the Company evaluates the contract requirements and determines and outlines the services and products it can provide to fulfill the contract at a competitive price.
The Company’s government contracts and sub-contracts are subject to the procurement rules and regulations of the individual states. Many of the contract terms are dictated by these rules and regulations. During and after the fulfillment of a government contract, the Company may be audited in respect of the direct and allocated indirect costs attributed thereto. These audits may result in adjustments to the Company’s contract costs. Additionally, the Company may be subject to government inquiries and investigations because of its participation in government procurement. Any inquiry or investigation can result in fines or limitations on the Company’s abilityGryphon intends to continue to bid for government contracts and fulfill existing contracts.
The applicable state government generally hasvigorously defend against the ability to terminate the Company’s contract, in whole or in part, without prior notice, for convenience or for default based on performance. If a government contract were to be terminated for convenience, the Company generally would be protected by provisions covering reimbursement for costs incurred on the contract and profit on those costs, but not the anticipated profit that would have been earned had the contract been completed. The state government also has the ability to stop work under a contract for a limited period of time for its convenience. In the event of a stop work order, the Company generally would be protected by provisions covering reimbursement for costs incurred on the contract to date and for costs associated with the temporary stoppage of work on the contract.
13
In order to obtain a government contract for the Leaf Data Systems, the Company is required to follow a competitive bidding process in each state where it seeks a contract. Any government contract awarded to the Company could require the Company:
Competition
The Company competes with numerous companies in the cannabis industry that offer services that are similar to some of our services,Sphere 3D Litigation, including but not limited to Acumatica, BDS Analytics, BioTrackTHC, Canna Advisors, Cannabis 365, Cova Cannabis, Denver Relief, Flowhub, Greenbits, Guardian, Headset Medicine Man, Metrc, New Frontier, Nextec, 3C, Treez, Trelis,the Sphere 3D MSA Termination, which it believes are without merit, and TILT Holdings. The Companyto aggressively pursue its counterclaims against Sphere 3D. However, Gryphon cannot predict the outcome of these proceedings or provide an estimate of potential damages or recovery, if any. Failure by Gryphon to obtain a favorable resolution of the Sphere 3D Litigation could require it to pay damage awards or otherwise enter into settlement arrangements for which its insurance coverage may be insufficient. Any such damage awards or settlement arrangements in current or future litigation could have a material adverse effect on Gryphon’s business, operating results or financial condition. Even if Sphere 3D’s claims are not successful, or if Gryphon is successful in pursuing its counterclaims or negotiating a favorable settlement, defending against this or future litigation is expensive and could divert management’s attention and resources, all of which could have an adverse and material impact on Gryphon’s business, operating results and financial condition and negatively affect Gryphon’s value. Further, any valid termination of the Sphere MSA in accordance with its terms could also directly competes with Kind Financial,have a company offering substantively similar servicesnegative impact on Gryphon’s business and operating results. In addition, such lawsuits may make it more difficult for Gryphon to the Company and which has partnered with Microsoft (Nasdaq: MSFT) to deliver such servicesfinance its operations in the United States.future.
The Company faces competition in each of the revenue segments in which it operates. The Company believes, however, that it possesses relative strengths in each segment that provide the Company with competitive advantages, including:
Range of Services
The Company believes it possesses a unique viewpoint into the industry because it offers solutions to, and works with, both commercial businesses and government regulatory agencies towards the common goal of ensuring regulatory compliance and real-time monitoring of inventory and sales. The Company offers a complete range of both software and services to meet these needs for both state governments and commercial businesses. While the Company does face competition from firms focusing on specific subsets of the company’s markets, there are a very limited number of competitors providing products or services that compete with the Company’s complete range of products and services. The Company competes with software companies offering a product to businesses only in a certain geographic region or of a certain business type. The Company also competes with consulting firms serving a specific phase of the cannabis plant lifecycle.
Industry Knowledge and Experience
The Company’s management personnel have extensive technical and business operations knowledge and experience within the cannabis industry, which has been developed through numerous years of service in key roles with a broad range of cannabis companies, both in terms of product and service type and size. The Company’s leverages this knowledge and experience to guide its product and service development and delivery. The Company’s management team possesses significant compliance expertise, allowing the Company to continually monitor changes in legislation and regulation within the markets the Company and its customers operate. the Company faces competition from companies who have teams with technical expertise or cannabis industry experience, but there are a limited number of competitors who have both and which understand the interplay between software and technical development and the application of same to the evolving cannabis compliance landscape.
14
Proprietary Databases
The Company’s nine years of operations has provided it with a statistically significant dataset of cannabis transaction information that the Company’s believes cannot be readily duplicated by new entrants into the marketplace. This growing database includes proprietary sales, market trends, customer preferences, pricing and regulatory data. The Company uses this dataset to more accurately predict trends in the marketplace and makes this dataset available to users of its platforms, providing greater utility to customers in this regard than can be provided by competing platforms.
Size Compared to Direct Competitors
Based on numerous private and public sources, including state tax rolls and comparative industry websites, such ashttps://www.owler.com/company/mjfreeway, the Company contends that it is the largest competitor in the software-based compliance and inventory monitoring industry with respect to the cannabis industry. The comparative data available indicates that the Company is at the top of the industry in terms of annual revenues and number of employees. Additionally, the Company has one of the longest operating histories in the industry amongst these competitors, and holds the largest global footprint amongst these competitors, having served cannabis operators in 29 U.S. states and 14 countries globally dating back to 2010.
Company Information
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act since we went public in the U.S. in January 2018. We will remain an emerging growth company for up to the last day of the fiscal year following the fifth anniversary of our initial public offering, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenue exceeds $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. Pursuant to Section 107 of the JOBS Act, we have elected to utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
Recent Developments
In August 2019, MJF entered into the Utah Contract with DTS, for MJF’s provision of the Leaf Data System.
15
Selling Stockholders
Private Placement Investors
In connection with the Business Combination, the Investors purchased an aggregate of 901,074 shares of Class A common stock of MTech for an aggregate of approximately $9.2 million in gross proceeds in the Private Placement. In addition, in connection with the Private Placement, the Investors received from MTech Sponsor the Transferred Sponsor Shares. Upon consummation of the Business Combination, the Class A Common Stock issued by MTech in the Private Placement and the Transferred Sponsor Shares automatically converted into Common Stock of the Company.
Matthew Kane, a director of the Company, is a manager of Seam Capital, LLC who is one of the Investors.
Affiliates of the Company
MTech Sponsor LLC
Pursuant to the terms of the Merger Agreement, MTech Sponsor received Common Stock and warrants to purchase Common Stock of the Company in exchange for its MTech securities upon the consummation of the Business Combination.
Jessica Billingsley Living Trust
The Jessica Billingsley Living Trust received 1,335,802 shares of Common Stock in exchange for 5,000,000 units of MJF upon consummation of the Business Combination. The shares of Common Stock held by the Jessica Billingsley Living Trust are beneficially owned by Jessica Billingsley, the Company’s Chairman and Chief Executive Officer.
16
Ruth Ann Kraemer
Ruth Ann Kraemer received 26,716 shares of Common Stock in exchange for 100,000 profits interest units of MJF upon consummation of the Business Combination. Ms. Kraemer is the Company’s Chief Financial Officer.
Mark Iwanowski
Mark Iwanowski purchased 2,000 shares of MTech in an open market transaction prior to the Business Combination. Pursuant to the Merger Agreement, Mr. Iwanowski received 2,000 shares of Common Stock in exchange for the 2,000 shares of MTech’s common stock upon consummation of the Business Combination. Mr. Iwanowski is a director of the Company.
Amy A. Poinsett Revocable Living Trust
The Amy A. Poinsett Revocable Living Trust received 1,335,802 shares of Common Stock in exchange for 5,000,000 units of MJF upon consummation of the Business Combination. The shares of Common Stock held by the Amy A. Poinsett Revocable Living Trust are beneficially owned by Amy A. Poinsett, a co-founder of MJF.
Jud Wiebe Fund LLC
Jud Wiebe Fund LLC received 189,391 shares of Common Stock in exchange for 708,906 units of MJF upon consummation of the Business Combination. The shares of Common Stock held by Jud Wiebe Fund LLC are beneficially owned by Matthew Kane, a director of the Company
Seam Capital, LLC
Seam Capital, LLC received 82,907 shares of Common Stock in exchange for 310,329 units of MJF upon consummation of the Business Combination. The shares of Common Stock held by Seam Capital, LLC are beneficially owned by Matthew Kane, a director of the Company.
Where You Can Find Us
Our principal executive offices are located at 1601 Arapahoe St., Denver, Colorado 80202,1180 N. Town Center Drive, Las Vegas, NV 89114, our telephone number is (888) 932-6537(877) 646-3374, and our Internet website address ishttps://www.akerna.com/gryphondigitalmining.com/. The information on our website is not a part of, or incorporated in, this prospectus.
17
1813
An investmentInvesting in our Common Stocksecurities involves a high degree of risk. YouBefore deciding whether to invest in our securities, you should carefully consider the risks described below, together with allrisk factors we describe in any prospectus supplement and in any related free writing prospectus for a specific offering of thesecurities, as well as those incorporated by reference into this prospectus or such prospectus supplement. You should also carefully consider other information includedcontained and incorporated by reference in this prospectus before making an investment decision with regard toand any applicable prospectus supplement, including our securities. Thefinancial statements containedand the related notes thereto incorporated by reference in this prospectus that are not historic facts are forward-looking statements that are subject toprospectus. The risks and uncertainties described in the applicable prospectus supplement and our other filings with the SEC incorporated by reference herein are not the only ones we face. Additional risks and uncertainties not presently known to us or that could cause actual results to differ materially from those set forth in or implied by forward-looking statements.we currently consider immaterial may also adversely affect us. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our Common Stock could decline, and you may lose all or part of your investment.
You should carefully consider the following risk factors in evaluating our business and us. The factors listed below and in the prospectus, represent certain important factors that we believe could cause our business results to differ. These factors are not intended to represent a complete list of the general or specific risks that may affect us. It should be recognized that other risks may be significant, presently or in the future, and the risks set forth below may affect us to a greater extent than indicated. If any of the followingdescribed risks occur, our business, financial condition or results of operations could be materially and adversely affected. You should also considerharmed. In such case, the other information included in our registration statement report onForm S-4/A, declared with the SEC on May 14, 2019, and subsequent annual reports and quarterly reports filed with the SEC.
Risks Relating to the Company
The Company has a history of losses, expects to continue to incur losses in the near term and may not achieve or sustain profitability in the future.
Our wholly-owned subsidiary MJF has incurred significant losses in each fiscal year since its inception in 2010. MJF experienced net losses of approximately $2.5 million and $7.0 million for the years ended June 30, 2018 and 2017, respectively and $6.5 million and $2.5 million for the nine months ended March 31, 2019 and 2018, respectively. These losses have been due to the substantial investments made by MJF to develop its monitoring and compliance platforms and related software, market these products to government regulatory agencies and commercial businesses, and grow its infrastructure to support increased business. The Company expects to continue to invest in further development of its platforms, software and related product offerings and to grow both its government regulatory and commercial business client base. As a result, the Company expects its operating expenses to increase in the future due to expected increased sales and marketing expenses, operational costs, product development costs, and general and administrative costs and, therefore, its operating losses will continue or even increase at least through the near term. In addition, since the Company is now a public company, it will incur significant legal, accounting and other expenses that MJF did not incur as a private company. Furthermore, to the extent that the Company is successful in increasing its customer base, it will also incur increased expenses because costs associated with generating and supporting customer agreements are generally incurred up front, while revenue is generally recognized ratably over the term of the agreement. You should not rely upon the Company’s recent revenue growth as indicative of future performance. The Company may not reach profitability in the near future or at any specific time in the future. If and when its operations do become profitable, the Company may not sustain profitability.
The Company has a relatively short operating history, which makes it difficult to evaluate its business and future prospects.
The Company has a relatively short operating history, which makes it difficult to evaluate its business and future prospects. Our wholly-owned subsidiary MJF has been in existence since 2010, and much of its revenue growth has occurred during the past three years. The Company has encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including those related to:
If the Company does not manage these risks successfully, its business and financial performance will be adversely affected.
The Company’s long-term results of operations are difficult to predict and depend on the commercial success of its clients, the continued growth of the cannabis industry generally and the regulatory environment within which the cannabis industry operates.
The Company offers its products and services globally to help government regulatory agencies and commercial businesses monitor regulatory compliance and operate efficiently and successfully in compliance with applicable state laws. The Company’s long-term results will directly depend on the continued growth of the legalized cannabis industry (and public acceptance of cannabis-related products) and the ability of its current and future clients to successfully market their own products and services. If the legalized cannabis marketplace does not continue to grow because the public does not increasingly accept cannabis-related products or government regulators adopt laws, rules or regulations that terminate or diminish the ability for commercial businesses to develop, market and sell cannabis-related products, the Company’s business and financial performance would be materially adversely affected. Additionally, even if the cannabis marketplace continues to grow rapidly, and government regulation allows for the free-market development of this industry, products and services competitive with those offered by the Company may enjoy better market acceptance.
The legalized cannabis industry may not continue to grow and the regulatory environment may not remain favorable to participants in the industry. More generally, the Company’s products and services may not experience growing market acceptance, which would adversely impact the Company’s ability to grow revenue.
As a company whose clients operate in the cannabis industry, the Company faces many unique and evolving risks.
The Company currently serves government and private clients with respect to their tracking, monitoring and compliance needs as they operate in a growing cannabis industry. Any risks related to the cannabis industry that may adversely affect the Company’s clients and potential clients may, in turn, adversely affect demand for the Company’s products. Specific risks faced by companies operating in the cannabis industry include, but are not limited to, the following:
Marijuana remains illegal under United States federal law
Marijuana is a Schedule-I controlled substance under the Controlled Substances Act and is illegal under federal law. It remains illegal under United States federal law to grow, cultivate, sell or possess marijuana for any purpose or to assist or conspire with those who do so. Additionally, 21 U.S.C. 856 makes it illegal to “knowingly open, lease, rent, use, or maintain any place, whether permanently or temporarily, for the purpose of manufacturing, distributing, or using any controlled substance.” Even in those states in which the use of marijuana has been authorized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana is not preempted by state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in the Company’s clients’ inability to proceed with their operations, which would adversely affect demands for the Company’s products.
Uncertainty of federal enforcement and the need to renew temporary safeguards
On January 4, 2018, Attorney General Sessions rescinded the previously issued memoranda (known as the Cole Memorandum) from the U.S. Department of Justice (“DOJ”) that had de-prioritized the enforcement of federal law against marijuana users and businesses that comply with state marijuana laws, adding uncertainty to the question of how the federal government will choose to enforce federal laws regarding marijuana. Attorney General Sessions issued a memorandum to all United States Attorneys in which the DOJ affirmatively rescinded the previous guidance as to marijuana enforcement, calling such guidance “unnecessary.” This one-page memorandum was vague in nature, stating that federal prosecutors should use established principles in setting their law enforcement priorities. Under previous administrations, the DOJ indicated that those users and suppliers of medical marijuana who complied with state laws, which required compliance with certain criteria, would not be prosecuted. As a result, it is now unclear if the DOJ will seek to enforce the Controlled Substances Act against those users and suppliers who comply with state marijuana laws.
Despite Attorney General Sessions’ rescission of the Cole Memorandum, the Department of the Treasury, Financial Crimes Enforcement Network, has not rescinded the “FinCEN Memo” dated February 14, 2014, which de-prioritizes enforcement of the Bank Secrecy Act against financial institutions and marijuana-related businesses which utilize them. This memo appears to be a standalone document and is presumptively still in effect. At any time, however, the Department of the Treasury, Financial Crimes Enforcement Network, could elect to rescind the FinCEN Memo. This would make it more difficult for the Company’s clients and potential clients to access the U.S. banking systems and conduct financial transactions, which would adversely affect the Company’s operations.
In 2014, Congress passed a spending bill (“2015 Appropriations Bill”) containing a provision (“Appropriations Rider”) blocking federal funds and resources allocated under the 2015 Appropriations Bill from being used to “prevent such States from implementing their own State medical marijuana law.” The Appropriations Rider seemed to have prohibited the federal government from interfering with the ability of states to administer their medical marijuana laws, although it did not codify federal protections for medical marijuana patients and producers. Moreover, despite the Appropriations Rider, the Justice Department maintains that it can still prosecute violations of the federal marijuana ban and continue cases already in the courts. Additionally, the Appropriations Rider must be re-enacted every year. While it was continued in 2016, 2017 and 2018, and remains in effect, continued re-authorization of the Appropriations Rider cannot be guaranteed. If Congress should pass a 2019 budget rather than an extension of the 2018 budget, it would need to renew the Appropriations Rider at such time, and there can be no assurance that the Appropriations Rider would be renewed at such time. Additionally, in the event of Congress failing either to pass a 2019 budget or an extension of the 2018 budget in the form of a “continuing resolution,” a government shutdown would result, and the Appropriations Rider would no longer be in force. If the Appropriation Rider is no longer in effect, the risk of federal enforcement and override of state marijuana laws would increase.
Further legislative development beneficial to the operations of the Company is not guaranteed
Among other things, the Company‘s business involves the provision of an online platform that provides monitoring and tracking of those involved in the cultivation, distribution, manufacture, storage, transportation and/or sale of medical and adult use cannabis products in compliance with applicable state law. The success of the Company’s business depends on the continued development of the cannabis industry and the activity of commercial business and government regulatory agencies within the industry. The continued development of the cannabis industry is dependent upon continued legislative and regulatory authorization of cannabis at the state level and a continued laissez-faire approach by federal enforcement agencies. Any number of factors could slow or halt progress in this area. Further regulatory progress beneficial to the industry cannot be assured. While there may be ample public support for legislative action, numerous factors impact the legislative and regulatory process, including election results, scientific findings or general public events. Any one of these factors could slow or halt progressive legislation relating to cannabis and the current tolerance for the use of cannabis by consumers, which could adversely affect demand for the Company’s product and its operations.
The cannabis industry could face strong opposition from other industries
The Company believes that established businesses in other industries may have a strong economic interest in opposing the development of the cannabis industry. Cannabis may be seen by companies in other industries as an attractive alternative to their products, including recreational marijuana as an alternative to alcohol, and medical marijuana as an alternative to various commercial pharmaceuticals. Many industries that could view the emerging cannabis industry as an economic threat are well established, with vast economic and federal and state lobbying resources. It is possible that companies within these industries could use their resources to attempt to slow or reverse legislation legalizing cannabis. Any inroads these companies make in halting or impeding legislative initiatives that would be beneficial to the cannabis industry could have a detrimental impact on the Company’s clients and, in turn on the Company’s operations.
The legality of marijuana could be reversed in one or more states
The voters or legislatures of states in which marijuana has already been legalized could potentially repeal applicable laws which permit the operation of both medical and retail marijuana businesses. These actions might force businesses, including those that are the Company’s clients, to cease operations in one or more states entirely.
Changing legislation and evolving interpretations of law
Laws and regulations affecting the medical and adult-use marijuana industry are constantly changing, which could detrimentally affect the Company’s clients and, in turn, the Company’s operations. Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require the Company’s clients and thus the Company itself to incur substantial costs associated with modification of operations to ensure such clients’ compliance. In addition, violations of these laws, or allegations of such violations, could disrupt the Company’s clients’ business and result in a material adverse effect on the Company’s operations. In addition, it is possible that regulations may be enacted in the future that will limit the amount of cannabis growth or related products that the Company’s commercial clients are authorized to produce. The Company cannot predict the nature of any future laws, regulations, interpretations or applications, nor can it determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its operations.
Dependence on client licensing
The Company’s business is dependent on its customers obtaining various licenses from various municipalities and state licensing agencies. There can be no assurance that any or all licenses necessary for the Company’s clients to operate their businesses will be obtained, retained or renewed. If a licensing body were to determine that a client of the Company had violated applicable rules and regulations, there is a risk the license granted to that client could be revoked, which could adversely affect the Company’s operations. There can be no assurance that the Company’s existing clients will be able to retain their licenses going forward, or that new licenses will be granted to existing and new market entrants.
Banking regulations could limit access to banking services
Since the use of marijuana is illegal under federal law, there is a compelling argument that banks cannot lawfully accept for deposit funds from businesses involved with marijuana. Consequently, businesses involved in the cannabis industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for the Company’s clients to operate and their reliance on cash can result in a heightened risk of theft, which could harm their businesses and, in turn, harm the Company’s business. Additionally, some courts have denied marijuana-related businesses bankruptcy protection, thus, making it very difficult for lenders to recoup their investments, which may limit the willingness of banks to lend to the Company’s clients and to the Company itself.
Insurance risks
In the United States, many marijuana-related businesses are subject to a lack of adequate insurance coverage. In addition, many insurance companies may deny claims for any loss relating to marijuana or marijuana-related operations based on their illegality under federal law, noting that a contract for an illegal transaction is unenforceable.
The cannabis industry is an evolving industry and we must anticipate and respond to changes.
The cannabis industry is not yet well-developed, and many aspects of this industry’s development and evolution cannot be accurately predicted. While the Company has attempted to identify many risks specific to the cannabis industry, you should carefully consider that there are other risks that cannot be foreseen or are not described in this prospectus, which could materially and adversely affect the Company’s business and financial performance. The Company expects that the cannabis market and the business of the Company will evolve in ways that are difficult to predict. For example, it is anticipated that over time, the Company will reach a point in most markets where it has achieved a market penetration level in which new client acquisitions are less productive, and the continued growth of the Company’s revenue will require more focus on increasing the rate at which existing clients purchase products and services across the Company’s platforms. The Company’s long-term success will depend on its ability to successfully adjust its strategy to meet the changing market dynamics. If the Company is unable to successfully adapt to changes in the cannabis industry, the Company’s operations could be adversely affected.
A significant portion of the Company’s business is, and is expected to be, from government contracts, which present certain unique risks.
Contracts for the Leaf Data Systems with government agencies in Pennsylvania and Washington represented 46% of the Company’s revenue for the fiscal year ended June 30, 2018 and 43% of the Company’s revenue for the nine months ended March 31, 2019.
In order to obtain a government contract for the Leaf Data Systems, the Company is required to follow a competitive bidding process in each state where it seeks a contract. Government contracts have very specific compliance requirements that often require contractors to invest material time and money to prepare a bid to ensure that its technology, processes and staff meet these specific requirements. After expenditures of such time and money, there is no assurance that the bid will result in an award of a contract. Further, even if a contract is awarded, there are strict procedures that government agencies follow when it comes to reimbursement of the costs incurred in the course of fulfilling contracts. Accordingly, it is possible that some or all costs might not be reimbursed under a government contract as contemplated by the Company.
Government agencies also typically audit and investigate government contractors. These agencies review a contractor's performance under its contracts, its cost structure, its business systems and compliance with applicable laws, regulations and standards. If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines and suspension, or prohibition from doing business with the government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us. Any such imposition of penalties, or the loss of such government contracts, could materially adversely affect our business, financial condition, results of operations and growth prospects.
There also is typically a longer window of liability under government contracts than private contracts, and the government can seek claims after the contract has ended and payments under the contract have been made. The terms of government contract may also require the sharing of proprietary information, processes, software and research and development efforts with the government. Additionally, government employees are required to follow certain protocols to ensure there is no appearance of impropriety in the bidding process. As a result, bidders on government contracts must ensure that there is no appearance of favoritism, gift giving, bribery or the exertion of other influences in the bidding process. Any finding of same can result in fines to the bidder and cancellation of contracts. The applicable state government generally has the ability to terminate the Company’s contract, in whole or in part, without prior notice, for convenience or for default based on performance. If a government contract were to be terminated for convenience, the Company generally would be protected by provisions covering reimbursement for costs incurred on the contract and profit on those costs, but not the anticipated profit that would have been earned had the contract been completed. The state government also has the ability to stop work under a contract for a limited period of time for its convenience.
We cannot assure you that the Company will be successful in navigating the government contract bidding process or that it will be able to maintain its existing government contracts or obtain additional government contracts in the future.
Privacy regulation is an evolving area and compliance with applicable privacy regulations may increase the Company’s operating costs or adversely impact its ability to service its clients and market its products and services.
Because the Company stores, processes, and uses data, some of which contains personal information, the Company is subject to complex and evolving federal, state, and foreign laws and regulations (including Canadian’s Cannabis Act and related regulations and the European Union’s general data protection regulation (“GDPR”)) regarding privacy, data protection, and other matters. While the Company believes it is currently in compliance with applicable laws and regulations, many of these laws and regulations are subject to change and uncertain interpretation, and could result in investigations, claims, changes to the Company’s business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriously harm the Company’s business.
The Company relies on third parties for certain services made available to users of its platforms, which could limit the Company’s control over the quality of the user experience and its cost of providing services.
Some of the applications and services available through the Leaf Data System and MJ Platform are provided through relationships with third-party service providers. The Company does not typically have any direct control over these third-party service providers. These third-party service providers could experience service outages, data loss, privacy breaches, including cyber-attacks, and other events relating to the applications and services they provide that could diminish the utility of these services and which could harm users thereof. The MJ Platform itself does not depend on any third-party software or applications and is based entirely on open source technologies and custom programming. The MJ Platform, however, is hosted by Amazon Web Services, a third party service provider. There are readily available alternative hosting services available should the Company desire or need to move to a different web host. Certain ancillary services provided by the Company also uses the services of third party providers, for which, the Company believes, there are readily available alternatives on comparable economic terms. Offering integrated platforms, such as the Leaf Data System and MJ Platform which rely, in part, on the services of other providers lessens the control that the Company has over the total client experience. Should the third-party service providers the Company relies upon not deliver at standards the Company expects and desires, acceptance of the Company platforms could suffer, which would have an adverse effect on the Company’s business and financial performance. Further, the Company cannot be assured of entering into agreements with such third-party service providers on economically favorable terms.
To grow and be successful, the Company needs to attract and retain qualified personnel.
The Company’s growth and success will depend to a significant extent on its ability to identify, attract, hire, train and retain qualified professional, creative, technical and managerial personnel. Competition for experience and qualified talent in the cannabis industry can be intense. The Company may not be successful in identifying, attracting, hiring, training and retaining such personnel in the future. If the Company is unable to hire, assimilate and retain qualified personnel in the future, such inability could adversely affect the Company’s operations.
The Company is smaller and less diversified than many of its potential competitors.
While the Company believes it is a leading provider in the software solutions segment of the cannabis industry, there exists many general software design and integrated business platform companies seeking to provide online and software based business solutions and operations integration to customers in numerous industries. The continued growth of the cannabis industry will likely attract some of these existing companies and incentivize them to produce solutions that are competitive with those offered by us. Many of these potential competitors are a part of large diversified corporate groups with a variety of other operations and expansive resources. The Company may not be able to successfully compete with larger enterprises devoting significant resources to compete in its target marketspace.
Protecting and defending against intellectual property claims may have a material adverse effect on the Company’s business.
The Company’s ability to compete depends, in part, upon successful protection of its intellectual property relating to the Company’s Leaf Data Systems and MJ Platform. the Company seeks to protect its proprietary and intellectual property rights through patent applications, available copyright and trademark laws, nondisclosure agreements, and licensing and distribution arrangements with reputable companies in the target markets of the Company. While patent protection for inventions related to marijuana and marijuana-related products is available, there are substantial difficulties faced in the patent process by marijuana-related businesses. Further, patent applications may be rejected for numerous other reasons beyond those related to the cannabis industry, including that the subject matter of the application is found to be non-patentable. The Company’s previous patent applications were denied and while the Company is continuing to pursue such applications and believes they are with merit, there can be no assurance that patents will be issued on these applications. The failure to be awarded patents on its technology could weaken the Company’s ability to enforce its intellectual property rights. Any such enforcement, whether the Company’s has been granted patent protection or not, would be costly, and there can be no assurance that the Company will have the resources to undertake all necessary action to protect its intellectual property rights or that the Company will be successful. Any infringement of the Company’s material intellectual property rights could require the Company to redirect resources to actions necessary to protect same, and could distract management from its underlying business operations. An infringement of the Company’s material intellectual property rights and resulting actions could adversely affect the Company’s operations.
Others may assert intellectual property infringement claims against the Company.
Companies in the software and technology industries own large numbers of patents, copyrights, trademarks, and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. In addition, various “non-practicing entities” that own patents and other intellectual property rights often attempt to aggressively assert their rights in order to extract value from technology companies. It is possible that others may claim from time to time that the Company’s products misappropriate or infringe the intellectual property rights of third parties. Irrespective of the validity or the successful assertion of any such claims, the Company could incur significant costs and diversion of resources in defending against these claims, which could adversely affect the Company’s operations. The Company may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained in all cases. The Company may decide to settle such lawsuits and disputes on terms that are unfavorable to the Company. As a result, the Company may also be required to develop alternative non-infringing technology or practices or discontinue the practices. The development of alternative non-infringing technology or practices could require significant effort and expense or may not be feasible.
In any future acquisitions, the Company may not be able to successfully integrate acquired personnel, operations, and technologies, or effectively manage the combined business following the acquisition. the Company also may not achieve the anticipated benefits from future acquisitions due to a number of factors, including: (a) an inability to integrate or benefit from acquisitions in a profitable manner; (b) unanticipated costs or liabilities associated with the acquisition; (c) the incurrence of acquisition-related costs; (d) the diversion of management’s attention from other business concerns; (e) the loss of the Company’s or the acquired business’ key employees; or (f) the issuance of dilutive equity securities, the incurrence of debt, or the use of cash to fund such acquisitions.
The Company’s business and stock price may suffer as a result of its lack of public company operating experience and if securities or industry analysts do not publish or cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding the Common Stock in an adverse manner, the price and trading volume of the Common Stock could decline.
If the Company is unable to execute its business strategy, either as a result of its inability to manage effectively its business in a public company environment or for any other reason, the Company’s business, prospects, financial condition and operating results may be harmed.
The trading market for the Common Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on the Company. If no securities or industry analysts commence coverage of the Company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Company changes its recommendation regarding the Company’ stock in an adverse manner, or provides more favorable relative recommendations about its competitors, the price of the Company’ Common Stock would likely decline. If any analyst who may cover the Company were to cease coverage of the Company or fail to regularly publish reports on it, the Company could lose visibility in the financial markets, which could cause the Company’ stock price or trading volume to decline.
We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002.
The Company is required to provide management’s attestation on internal controls commencing with its annual report for year ending June 30, 2019. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act of 2002 are significantly more stringent than those required of MJF as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the regulatory compliance and reporting requirements that are applicable to us. If we are not able to implement the additional requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to assess whether its internal controls over financial reporting are effective, which may subject it to adverse regulatory consequences and could harm investor confidence and the market price of our Common Stock.
Warrants will become exercisable for Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to the Company’s stockholders.
Currently there are warrants of the Company to purchase 5,570,456 shares of Common Stock and warrants of the Company held by a selling stockholder to purchase 243,750 shares of Common Stock. Each one share of the Company’s warrants is exercisable for one share of Common Stock at $11.50 per share. To the extent such warrants are exercised, additional shares of Common Stock will be issued, which will result in dilution to the then existing holders of Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of the Common Stock.
The requirements of being a public company may strain our resources and divert management’s attention.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of NASDAQ and other applicable securities rules and regulations. Compliance with these rules and regulations increase the legal and financial compliance costs of the Company, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after it is no longer an “emerging growth company.” The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may need to hire more employees in the future or engage outside consultants to comply with these requirements, which will increase its costs and expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. The Company intends to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and its business may be adversely affected.
We are an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make its shares of Common Stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates. It cannot be predicted if investors will find the Common Stock less attractive because we may rely on these exemptions. If some investors find the Common Stock less attractive as a result, there may be a less active trading market for the Common Stock and its share price may be more volatile.
A market for our securities may not continue, which would adversely affect the liquidity and price of the Company’s securities.
Our securities may fluctuate significantly due to general market and economic conditions. An active trading market for our securities may never develop or, if developed, may not be sustained. In addition, the price of our securities could vary due to general economic conditions and forecasts, its general business condition and the release of its financial reports. You may be unable to sell your securities unless a market can be established or sustained.
Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt and limit the price investors might be willing to pay in the future for the Common Stock and could entrench management.
The Amended and Restated Certificate of Incorporation of the Company contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. The Company is also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
These provisions include a staggered Board of Directors and the ability of the Board of Directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
The Company is also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for the Company’ securities.
Our corporate opportunity provisions in our Amended and Restated Certificate of Incorporation could enable management to benefit from corporate opportunities that might otherwise be available to us.
Our Amended and Restated Certificate of Incorporation provides that the doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Company, or any of its directors or officers in circumstances where the application of such doctrine would conflict with any fiduciary duties or contractual obligations they may otherwise have.
Our management may become aware, from time to time, of certain business opportunities (such as acquisition opportunities) and may direct such opportunities to other businesses in which they have invested, in which case the Company may not become aware of or otherwise have the ability to pursue such opportunity. Further, such businesses may choose to compete with the Company for these opportunities, possibly causing these opportunities to not be available to the Company or causing them to be more expensive for the Company to pursue. These potential conflicts of interest could adversely impact the Company’ business or prospects if attractive business opportunities are procured by such parties for their own benefit rather than for the Company.
Our amended and restated certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty, actions under the Delaware general corporation law or under our certificate of incorporation, or actions asserting a claim governed by the internal affairs doctrine may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.
This choice of forum provision does not exclude stockholders from suing in federal court for claims under the federal securities laws but may limit a stockholder’s ability to bring such claims in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Risks Relating to our Common Stock and this Offering
We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing securities that would dilute your ownership. Depending on the terms available to us, if these activities result in significant dilution, it may negatively impact the trading price of our shares of Common Stock.
Any additional financing that we secure, may require the granting of rights, preferences or privileges senior to, orpari passu with, those of our Common Stock. Any issuances by us of equity securities may be at or below the prevailing market price of our Common Stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our Common Stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our shares of Common Stock. We cannot be certain how the repayment of those promissory notes will be funded and we may issue further equity or debt in order to raise funds to repay the promissory notes, including funding that may be highly dilutive. The holders of any securities or instruments we may issue may have rights superior to the rights of our Common Stockholders. If we experience dilution from the issuance of additional securities and we grant superior rights to new securities over Common Stockholders, it may negatively impact the trading price of our shares of Common Stockdecline and you may lose all or part of your investment.
The market price of our shares of Common Stock is particularly volatile given our status as a relatively unknown company with a generally small and thinly traded public float and lack of profits, which could lead to wide fluctuations in our share price. You may be unable to sell your shares of Common Stock at or above your purchase price, which may result in substantial losses to you.
The market for our shares of Common Stock is characterized by significant price volatility when compared to the shares of larger, more established companies that trade on a national securities exchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of such larger, more established companies for the indefinite future. The volatility in our share price is attributable to a number of factors, including the fact that our shares are thinly traded relative to larger, more established companies. The price for our shares of Common Stock could, for example, decline precipitously in the event that a large number of our shares of Common Stock are sold on the market without commensurate demand. Currently, there are public warrants of the Company to purchase 5,570,456 shares of Common Stock, which such warrants became exercisable on July 17, 2019. In addition, because we may be considered a speculative or “risky” investment due to our lack of profits to date, certain investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares of Common Stock on the market more quickly and at greater discounts, thus resulting in a rapid downward decline in the price of our Common Stock. Many of these factors are beyond our control and may decrease the market price of our shares of Common Stock, regardless of our operating performance.
The market price of our Common Stock is still likely to be highly volatile and subject to wide fluctuations, and you may be unable to resell your shares of Common Stock at or above the price at which you acquired them.
The market price of our Common Stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including, but not limited to:
The trading price of our shares of Common Stock might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating results and financial condition.
We have not paid dividends in the past and do not expect to pay dividends for the foreseeable future, and any return on investment may be limited to potential future appreciation in the value of our Common Stock.
We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends on our shares of Common Stock in the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including without limitation, our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. To the extent we do not pay dividends, our shares of Common Stock may be less valuable because a return on investment will only occur if and to the extent our stock price appreciates, which may never occur. In addition, investors must rely on sales of their Common Stock after price appreciation as the only way to realize their investment, and if the price of our Common Stock does not appreciate, then there will be no return on investment. Investors seeking cash dividends should not purchase our Common Stock.
29
We will not receive anyUnless otherwise indicated in a prospectus supplement, we intend to use the net proceeds from the sale of shares by the selling stockholders. However, we may receive proceeds from the sale of securities upon the exercise of the warrants held by MTech Sponsor (to the extent the registration statement of which this prospectus is a part is then effective and, if applicable, the “cashless exercise” provision is not utilized by the holder). Any net proceeds we receive will be usedthese sales for general corporate purposes, which includes, without limitation, capital expenditures, funding potential acquisitions of additional new mining equipment, other potential acquisitions, and general working capital or other purposes that the Board of Directors deems to be in the best interest of the Company. As of the date of this prospectus, we cannot specify with certainty the particular uses for the net proceeds we may receive. Accordingly, we will retain broad discretion over the usecapital. The amounts and timing of these proceeds, if any.
DETERMINATION OF OFFERING PRICE
The selling stockholdersexpenditures will offer Common Stock at the prevailing market prices or privately negotiated price as they may determine from time to time.
The offering price of our Common Stock to be sold by the selling stockholders does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market.
In addition, there is no assurance that our Common Stock will trade at market prices in excess of the offering price as prices for Common Stock in any public market will be determined in the marketplace and may be influenced by manydepend on numerous factors, including the depth and liquidity.
The following table sets forth certain information as of August 26, 2019, regarding the selling stockholders and the shares offered by them in this prospectus. In computing the number of shares owned by a person and the percentage ownership of that person in the table below, securities that are currently exercisable into sharesdevelopment of our Common Stock that are being offered incurrent business initiatives. We have no specific acquisition contemplated at this prospectus are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to the following table, each selling stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder’s name. The percentage of ownership of each selling stockholder in the following table is based upon 10,958,655 shares of Common Stock outstanding as of August 26, 2019.
Except as set forth below, no selling stockholder has held a position as an officer or director of the Company, nor has any material relationship of any kind with us or any of our affiliates. All information with respect to share ownership has been furnished by the selling stockholders. The Common Stock being offered is being registered to permit secondary trading of the shares and the selling stockholders may offer all or part of the Common Stock owned for resale from time to time. Except as set forth below, none of the selling stockholders have any family relationships with our officers, directors or controlling stockholders. Furthermore, none of the selling stockholders are a registered broker-dealer or an affiliate of a registered broker-dealer.
The term “selling stockholder” also includes any transferees, assignees, pledges, donees, or other successors in interest (including equity holders of entities listed below) to the selling stockholder named in the table below. To our knowledge, subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the Common Stock set forth opposite such person’s name. We will file a supplement to this prospectus (or a post-effective amendment hereto, if necessary) to name successors to any named selling stockholder who is able to use this prospectus to resell the securities registered hereby.
| Name of Selling Stockholder | Number of Shares of Common Stock Owned Prior to Offering | Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus | Number of Shares of Common Stock Owned After Offering Assuming All Shares are Sold (1) | Percentage of Common Stock Owned After Offering Assuming All Shares are Sold (1) | ||||||||||||
| MTech Sponsor LLC (2) | 1,824,880 | 1,824,880 | - | - | ||||||||||||
| Jessica Billingsley Living Trust (3) | 1,335,802 | 1,335,802 | - | - | ||||||||||||
| Ruth Ann Kraemer (4) | 26,716 | 26,716 | - | - | ||||||||||||
| Mark Iwanowski (5) | 2,000 | 2,000 | - | - | ||||||||||||
| Amy A. Poinsett Revocable Living Trust (6) | 1,335,802 | 1,335,802 | - | - | ||||||||||||
| Jud Wiebe Fund LLC (7) | 189,391 | 189,391 | - | - | ||||||||||||
| Khitan LLC (8) | 380,890 | 380,890 | - | - | ||||||||||||
| Seam Capital, LLC (7) | 180,849 | 180,849 | - | - | ||||||||||||
| Alan Docter (9) | 76,178 | 76,178 | - | - | ||||||||||||
| Daniel Marx (10) | 32,647 | 32,647 | - | - | ||||||||||||
| LJM Group Investment III LLC (11) | 163,238 | 163,238 | - | - | ||||||||||||
| ACS Pedersen LLC (12) | 10,882 | 10,882 | - | - | ||||||||||||
| Cresco Capital Partners II LLC (13) | 246,024 | 130,590 | 115,434 | 1.03 | % | |||||||||||
| Monashee Capital Master Fund LP (14) | 108,827 | 108,827 | - | - | ||||||||||||
| TOTAL | 5,914,126 | 5,798,692 | 115,434 | 1.03 | % | |||||||||||
* Less than 1%
Selling Stockholders
The Common Stock held byWe may sell the selling stockholders may be sold or distributedsecurities from time to time by the selling stockholdersto or through underwriters or dealers, through agents, or directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed on any stock exchange, market or trading facility on which the shares are traded or in private transactions. The salepurchasers. A distribution of the selling stockholders’ Common Stocksecurities offered by this prospectus may also be effected through the issuance of derivative securities, including without limitation, warrants, rights to purchase and subscriptions. In addition, the manner in onewhich we may sell some or moreall of the following methods:securities covered by this prospectus includes, without limitation, through:
| ● |
| ● | purchases by a broker-dealer, as principal, and resale by the broker-dealer for its account; or | |
| ● | ordinary brokerage transactions and transactions in which a broker solicits purchasers. |
A prospectus supplement or supplements with respect to each series of securities will describe the terms of the offering, including, to the extent applicable:
| ● | ||
| ● | the name or names of the underwriters or agents and the amounts of securities underwritten or purchased by each of them, if any; | |
| ● | the public offering price or purchase price of the securities or other consideration therefor, and the proceeds to be received by us from the sale; | |
| ● | any delayed delivery requirements; | |
| ● | any over-allotment options under which underwriters may purchase additional securities from us; | |
| ● | any underwriting discounts or agency fees and other items constituting underwriters’ or agents’ compensation | |
| ● | any discounts or concessions allowed or re-allowed or paid to dealers; and | |
| ● | any securities exchange or market on which the securities may be listed. |
The offer and sale of the securities described in this prospectus by us, the underwriters or the third parties described above may be effected from time to time in one or more transactions, including privately negotiated transactions, either:
| ● | at a fixed price or prices, which may be changed; | |
| ● | in |
| ● |
| ● |
In order to comply withOnly underwriters named in the prospectus supplement will be underwriters of the securities laws of certain states, if applicable,offered by the shares of each of the selling stockholders may be sold only through registered or licensed brokers or dealers. In addition, in certain states, such shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the registration or qualification requirement is available and complied with.prospectus supplement.
The selling stockholders may also sell shares of Common Stock under Rule 144 or Rule 145, as applicable, promulgated under the Securities Act, if available, rather than under this prospectus. In addition, the selling stockholders may transfer the shares of Common Stock by other means not described in this prospectus.Underwriters and Agents; Direct Sales
The selling stockholders may also sellIf underwriters are used in a sale, they will acquire the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do sooffered securities for their own account and at their own risk. It is possible that a selling stockholder will attemptmay resell the offered securities from time to sell shares of Common Stocktime in blockone or more transactions, to market makers or other purchasersincluding negotiated transactions, at a fixed public offering price per share whichor at varying prices determined at the time of sale. We may be belowoffer the then market price. The selling stockholders cannot assure that allsecurities to the public through underwriting syndicates represented by managing underwriters or anyby underwriters without a syndicate.
Unless the prospectus supplement states otherwise, the obligations of the shares offered in this prospectus will be issuedunderwriters to or sold by, such selling stockholder.
Brokers, dealers, underwriters, or agents participating inpurchase the distribution of the shares held by the selling stockholders as agents may receive compensation in the form of commissions, discounts, or concessions from the selling stockholders and/or purchasers of the Common Stock for whom the broker-dealers may act as agent. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.
Each of the selling stockholders has advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of Common Stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of Common Stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of Common Stock, if required, we will file a supplement to this prospectus.
With regard only to the shares it sells for its own behalf, the selling stockholders may be deemed an “underwriter” within the meaning of the Securities Act. This offering as it relates to the selling stockholder will terminate on the date that all shares issued to and issuable to the selling stockholders that are offered by this prospectus have been sold by the selling stockholders.
We may suspend the sale of shares by the selling stockholders pursuant to this prospectus for certain periods of time for certain reasons, including if the prospectus is required to be supplemented or amended to include additional material information.
If any of the selling stockholders use this prospectus for any sale of the shares of Common Stock, such selling stockholdersecurities will be subject to the prospectus delivery requirementsconditions set forth in the applicable underwriting agreement. Subject to certain conditions, the underwriters will be obligated to purchase all of the Securities Act.securities offered by the prospectus supplement, other than securities covered by any over-allotment option. Any public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may change from time to time. We may use underwriters with whom we have a material relationship. We will describe in the prospectus supplement, naming the underwriter, the nature of any such relationship.
Lock-Up AgreementsWe may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities, and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
In connection withWe may authorize agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the Merger Agreement, all orpublic offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a portionspecified date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts in the shares of Common Stock held by various selling stockholders are subjectprospectus supplement.
Dealers
We may sell the offered securities to a Lock-Up Agreement (the “Locked-Up Selling Stockholders”). Pursuantdealers as principals. The dealer may then resell such securities to the Lock-up Agreement, each Locked-Up Selling Stockholderpublic either at varying prices to be determined by the dealer or at a fixed offering price agreed not to engage in any transferwith us at the time of resale.
Institutional Purchasers
We may authorize agents, dealers or underwriters to solicit certain institutional investors to purchase offered securities on a delayed delivery basis pursuant to delayed delivery contracts providing for payment and delivery on a specified future date. The applicable prospectus supplement or other transactionoffering materials, as the case may be, will provide the details of any such arrangement, including the offering price and commissions payable on the solicitations.
We will enter into such delayed contracts only with institutional purchasers that we approve. These institutions may include commercial and savings banks, insurance companies, pension funds, investment companies and educational and charitable institutions.
Indemnification; Other Relationships
We may provide agents, underwriters, dealers and remarketing firms with indemnification against certain civil liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the Consideration Shares for a period of time. Withagents or underwriters may make with respect to 50%these liabilities. Agents, underwriters, dealers and remarketing firms, and their affiliates, may engage in transactions with, or perform services for, us in the ordinary course of business. This includes commercial banking and investment banking transactions.
Market-Making; Stabilization and Other Transactions
There is currently no market for any of the Consideration Shares, each Locked-Up Selling Stockholder agreedoffered securities, other than our common stock, which is quoted on the Nasdaq Capital Market. If the offered securities are traded after their initial issuance, they may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar securities and other factors. While it is possible that an underwriter could inform us that it intends to make a market in the offered securities, such underwriter would not be obligated to do so, and any such market-making could be discontinued at any time without notice. Therefore, no assurance can be given as to whether an active trading market will develop for the offered securities. We have no current plans for listing of the debt securities, preferred stock, warrants or subscription rights on any securities exchange or quotation system; any such listing with respect to any particular debt securities, preferred stock, warrants or subscription rights will be described in the applicable prospectus supplement or other offering materials, as the case may be.
Any underwriter may engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Over-allotment involves sales in excess of the offering size, which create a transfershort position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum price. Syndicate-covering or other transaction until the earlier of (1) one year from the closingshort-covering transactions involve purchases of the Business Combination and (2) the date on which the Company closes a subsequent corporate transaction with an unaffiliated third party that results in allsecurities, either through exercise of the Company’s shareholders havingover-allotment option or in the rightopen market after the distribution is completed, to exchange their shares for cash,cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a stabilizing or other property. As such, despitecovering transaction to cover short positions. Those activities may cause the registration of shares of Common Stock pursuant to this prospectus, the Locked-Up Selling Stockholders cannot sell or distribute 50% of their respective Consideration Shares without oneprice of the foregoing conditions being met.securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.
Regulation M
The anti-manipulation rules ofAny underwriters or agents that are qualified market makers on the Nasdaq Capital Market may engage in passive market making transactions in our common stock on the Nasdaq Capital Market in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing of 1934, as amended (the “Exchange Act”) may apply tothe offering, before the commencement of offers or sales of our Common Stockcommon stock. Passive market makers must comply with applicable volume and activitiesprice limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the selling stockholder.highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded. Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.
We have advised the selling stockholders that while it is engaged in a distributionFees and Commissions
If 5% or more of the shares included innet proceeds of any offering of securities made under this prospectus it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the selling stockholder, any affiliated purchasers, and any broker-dealer or other person who participateswill be received by a FINRA member participating in the distribution from bidding foroffering or purchasing,affiliates or attempting to induce any person to bid for or purchase any security which isassociated persons of such FINRA member, the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases madeoffering will be conducted in order to stabilize the price of a security in connectionaccordance with the distribution of that security. All of the foregoing may affect the marketability of the shares offered hereby this prospectus.FINRA Rule 5121.
18
DESCRIPTION OF SECURITIES TO BE REGISTEREDWE MAY OFFER
General
Our authorized shareThis prospectus describes the general terms of our capital consistsstock. The following description is not complete and may not contain all the information you should consider before investing in our capital stock. For a more detailed description of 75,000,000these securities, you should read the applicable provisions of Delaware law and our certificate of incorporation, as amended, referred to herein as our certificate of incorporation, and our amended and restated bylaws, referred to herein as our bylaws. When we offer to sell a particular series of these securities, we will describe the specific terms of the series in a supplement to this prospectus. Accordingly, for a description of the terms of any series of securities, you must refer to both the prospectus supplement relating to that series and the description of the securities described in this prospectus. To the extent the information contained in the prospectus supplement differs from this summary description, you should rely on the information in the prospectus supplement.
The total number of shares of Common Stock, $0.0001 par value per share,capital stock we are authorized to issue is 155,000,000 shares, of which 10,958,655(a) 150,000,000 shares are common stock and (b) 5,000,000 shares are preferred stock.
We, directly or through agents, dealers or underwriters designated from time to time, may offer, issue and sell, together or separately, up to $100,000,000 in the aggregate of:
| ● | common stock; | |
| ● | preferred stock; | |
| ● | warrants to purchase our securities; | |
| ● | subscription rights to purchase our securities; | |
| ● | secured or unsecured debt securities consisting of notes, debentures or other evidences of indebtedness which may be senior debt securities, senior subordinated debt securities or subordinated debt securities, each of which may be convertible into equity securities; or | |
| ● | units comprised of, or other combinations of, the foregoing securities. |
We may issue the debt securities exchangeable for or convertible into shares of common stock, preferred stock or other securities that may be sold by us pursuant to this prospectus or any combination of the foregoing. The preferred stock may also be exchangeable for and/or convertible into shares of common stock, another series of preferred stock or other securities that may be sold by us pursuant to this prospectus or any combination of the foregoing. When a particular series of securities is offered, a supplement to this prospectus will be delivered with this prospectus, which will set forth the terms of the offering and sale of the offered securities.
Common Stock are
As of February 27, 2024, there were 38,733,554 shares of common stock issued and outstanding, asheld of August 26, 2019 and 5,000,000 shares of preferred stock, $0.0001 par value per share, of which none are issued and outstanding. We are a Delaware corporation and our affairs are governedrecord by our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws. The following are summaries of material provisions of our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws insofar as they relate to the material terms of our common shares. Complete copies of our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws are filed as exhibits to our public filings.
Common Stock
Our Common Stock is listed on the Nasdaq Capital Market under the symbol “KERN”.
approximately 443 stockholders. All outstanding shares of Common Stockcommon stock are of the same class and have equal rights and attributes. The holders of Common Stockcommon stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company.our stockholders. Subject to the prior rights of all classes or series of stock at the time outstanding having prior rights as to dividends or other distributions, all stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. Subject to the prior rights of creditors of the CorporationCompany and the holders of all classes or series of stock at the time outstanding having prior rights as to distributions upon liquidation, dissolution or winding up of the Corporation,Company, in the event of liquidation, the holders of Common Stockcommon stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative, preemptive rights, or subscription rights.
Election of DirectorsOur common stock is listed for trading on the Nasdaq Capital Market under the symbol “GRYP”. The transfer agent and registrar for our common stock is Continental Stock Transfer and Trust.
Preferred Stock
Directors hold office untilOur board of directors is authorized, subject to any limitations prescribed by law, without further vote or action by the next annual meetingstockholders, to issue from time to time shares of stockholdersPreferred Stock in one or more series. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications, and are eligible for reelection atspecial or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights. Issuance of preferred stock by our board of directors may result in such meeting. Directors are elected by a pluralityshares having dividend and/or liquidation preferences senior to the rights of the shares presentholders of our common stock and could dilute the voting rights of the holders of our common stock.
We will fix the rights, preferences, privileges and restrictions of the preferred stock of each series in personthe certificate of designation relating to that series. We will file as an exhibit to the registration statement of which this prospectus is a part, or representedwill incorporate by proxy atreference from a current report on Form 8-K that we file with the meeting and entitled to vote onSEC, the electionform of directors. There is no cumulative voting for directors.any certificate of designation that describes the terms of the series of preferred stock we are offering before the issuance of the related series of preferred stock. This description will include any or all of the following, as required:
| ● | the title and stated value; |
| ● | the number of shares we are offering; |
| ● | the liquidation preference per share; |
| ● | the purchase price; |
| ● | the dividend rate, period and payment date and method of calculation for dividends; |
| ● | whether dividends will be cumulative or non-cumulative and, if cumulative, the date from which dividends will accumulate; |
| ● | any contractual limitations on our ability to declare, set aside or pay any dividends; |
| ● | the procedures for any auction and remarketing, if any; |
| ● | the provisions for a sinking fund, if any; |
| ● | the provisions for redemption or repurchase, if applicable, and any restrictions on our ability to exercise those redemption and repurchase rights; |
| ● | any listing of the preferred stock on any securities exchange or market; |
| ● | whether the preferred stock will be convertible into our common stock, and, if applicable, the conversion price, or how it will be calculated, and the conversion period; |
| ● | whether the preferred stock will be exchangeable into debt securities, and, if applicable, the exchange price, or how it will be calculated, and the exchange period; |
| ● | voting rights, if any, of the preferred stock; |
| ● | preemptive rights, if any; |
| ● | restrictions on transfer, sale or other assignment, if any; |
| ● | a discussion of any material or special United States federal income tax considerations applicable to the preferred stock; |
| ● | the relative ranking and preferences of the preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs; |
| ● | any limitations on issuance of any class or series of preferred stock ranking senior to or on a parity with the series of preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs; and |
| ● | any other specific terms, preferences, rights or limitations of, or restrictions on, the preferred stock. |
EXPERTSIf we issue shares of preferred stock under this prospectus, after receipt of payment therefor, the shares will be fully paid and non-assessable.
The financial statementsDelaware General Corporation Law provides that the holders of MJFpreferred stock will have the right to vote separately as a class on any proposal involving fundamental changes in the rights of June 30, 2018 and 2017 andholders of that preferred stock. This right is in addition to any voting rights provided for eachin the applicable certificate of designation.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the two yearsholders of our common stock. Preferred stock could be issued quickly with terms designed to delay or prevent a change in control of our Company or make removal of management more difficult. Additionally, the issuance of preferred stock could have the effect of decreasing the market price of our common stock.
Warrants
We may issue warrants to purchase our securities or other rights, including rights to receive payment in cash or securities based on the value, rate or price of one or more specified commodities, currencies, securities or indices, or any combination of the foregoing. Warrants may be issued independently or together with any other securities that may be sold by us pursuant to this prospectus or any combination of the foregoing and may be attached to, or separate from, such securities. To the extent warrants that we issue are to be publicly-traded, each series of such warrants will be issued under a separate warrant agreement to be entered into between us and a warrant agent.
We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from a current report on Form 8-K that we file with the SEC, forms of the warrant and warrant agreement, if any. The prospectus supplement relating to any warrants that we may offer will contain the specific terms of the warrants and a description of the material provisions of the applicable warrant agreement, if any. These terms may include the following:
| ● | the title of the warrants; |
| ● | the price or prices at which the warrants will be issued; |
| ● | the designation, amount and terms of the securities or other rights for which the warrants are exercisable; |
| ● | the designation and terms of the other securities, if any, with which the warrants are to be issued and the number of warrants issued with each other security; |
| ● | the aggregate number of warrants; |
| ● | any provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price of the warrants; |
| ● | the price or prices at which the securities or other rights purchasable upon exercise of the warrants may be purchased; |
| ● | if applicable, the date on and after which the warrants and the securities or other rights purchasable upon exercise of the warrants will be separately transferable; |
| ● | a discussion of any material U.S. federal income tax considerations applicable to the exercise of the warrants; |
| ● | the date on which the right to exercise the warrants will commence, and the date on which the right will expire; |
| ● | the maximum or minimum number of warrants that may be exercised at any time; |
| ● | information with respect to book-entry procedures, if any; and |
| ● | any other terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants. |
Exercise of Warrants. Each warrant will entitle the holder of warrants to purchase the amount of securities or other rights, at the exercise price stated or determinable in the period ended June 30, 2018 incorporatedprospectus supplement for the warrants. Warrants may be exercised at any time up to the close of business on the expiration date shown in the applicable prospectus supplement, unless otherwise specified in such prospectus supplement. After the close of business on the expiration date, if applicable, unexercised warrants will become void. Warrants may be exercised in the manner described in the applicable prospectus supplement. When the warrant holder makes the payment and properly completes and signs the warrant certificate at the corporate trust office of the warrant agent, if any, or any other office indicated in the prospectus supplement, we will, as soon as possible, forward the securities or other rights that the warrant holder has purchased. If the warrant holder exercises less than all of the warrants represented by the warrant certificate, we will issue a new warrant certificate for the remaining warrants.
Subscription Rights
We may issue rights to purchase our securities. The rights may or may not be transferable by the persons purchasing or receiving the rights. In connection with any rights offering, we may enter into a standby underwriting or other arrangement with one or more underwriters or other persons pursuant to which such underwriters or other persons would purchase any offered securities remaining unsubscribed for after such rights offering. In connection with a rights offering to holders of our capital stock a prospectus supplement will be distributed to such holders on the record date for receiving rights in the rights offering set by us.
We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from a current report on Form 8-K that we file with the SEC, forms of the subscription rights, standby underwriting agreement or other agreements, if any. The prospectus supplement relating to any rights that we offer will include specific terms relating to the offering, including, among other matters:
| ● | the date of determining the security holders entitled to the rights distribution; |
| ● | the aggregate number of rights issued and the aggregate amount of securities purchasable upon exercise of the rights; |
| ● | the exercise price; |
| ● | the conditions to completion of the rights offering; |
| ● | the date on which the right to exercise the rights will commence and the date on which the rights will expire; and |
| ● | any applicable federal income tax considerations. |
Each right would entitle the holder of the rights to purchase the principal amount of securities at the exercise price set forth in the applicable prospectus supplement. Rights may be exercised at any time up to the close of business on the expiration date for the rights provided in the applicable prospectus supplement. After the close of business on the expiration date, all unexercised rights will become void.
Holders may exercise rights as described in the applicable prospectus supplement. Upon receipt of payment and the rights certificate properly completed and duly executed at the corporate trust office of the rights agent, if any, or any other office indicated in the prospectus supplement, we will, as soon as practicable, forward the securities purchasable upon exercise of the rights. If less than all of the rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, including pursuant to standby underwriting arrangements, as described in the applicable prospectus supplement.
Debt Securities
As used in this prospectus, the term “debt securities” means the debentures, notes, bonds and other evidences of indebtedness that we may issue from time to time. The debt securities will either be senior debt securities, senior subordinated debt or subordinated debt securities. We may also issue convertible debt securities. Debt securities may be issued under an indenture (which we refer to herein as an Indenture), which are contracts entered into between us and a trustee to be named therein. The Indenture has been filed as an exhibit to the registration statement of which this prospectus forms a part. We may issue debt securities and incur additional indebtedness other than through the offering of debt securities pursuant to this prospectus. It is likely that convertible debt securities will not be issued under an Indenture.
The debt securities may be fully and unconditionally guaranteed on a secured or unsecured senior or subordinated basis by one or more guarantors, if any. The obligations of any guarantor under its guarantee will be limited as necessary to prevent that guarantee from constituting a fraudulent conveyance under applicable law. In the event that any series of debt securities will be subordinated to other indebtedness that we have been audited by Marcum LLP, independent registered public accounting firm, asoutstanding or may incur, the terms of the subordination will be set forth in their report,the prospectus supplement relating to the subordinated debt securities.
We may issue debt securities from time to time in one or more series, in each case with the same or various maturities, at par or at a discount. Unless indicated in a prospectus supplement, we may issue additional debt securities of a particular series without the consent of the holders of the debt securities of such series outstanding at the time of the issuance. Any such additional debt securities, together with all other outstanding debt securities of that series, will constitute a single series of debt securities under the applicable Indenture and are includedwill be equal in reliance uponranking.
Should an Indenture relate to unsecured indebtedness, in the event of a bankruptcy or other liquidation event involving a distribution of assets to satisfy our outstanding indebtedness or an event of default under a loan agreement relating to secured indebtedness of our company or its subsidiaries, the holders of such report givensecured indebtedness, if any, would be entitled to receive payment of principal and interest prior to payments on the authorityunsecured indebtedness issued under an Indenture.
Each prospectus supplement will describe the terms relating to the specific series of debt securities. These terms will include some or all of the following:
| ● | the title of debt securities and whether the debt securities are senior or subordinated; |
| ● | any limit on the aggregate principal amount of debt securities of such series; |
| ● | the percentage of the principal amount at which the debt securities of any series will be issued; |
| ● | the ability to issue additional debt securities of the same series; |
| ● | the purchase price for the debt securities and the denominations of the debt securities; |
| ● | the specific designation of the series of debt securities being offered; |
| ● | the maturity date or dates of the debt securities and the date or dates upon which the debt securities are payable and the rate or rates at which the debt securities of the series shall bear interest, if any, which may be fixed or variable, or the method by which such rate shall be determined; |
| ● | the basis for calculating interest; |
| ● | the date or dates from which any interest will accrue or the method by which such date or dates will be determined; |
| ● | the duration of any deferral period, including the period during which interest payment periods may be extended; |
| ● | whether the amount of payments of principal of (and premium, if any) or interest on the debt securities may be determined with reference to any index, formula or other method, such as one or more currencies, commodities, equity indices or other indices, and the manner of determining the amount of such payments; |
| ● | the dates on which we will pay interest on the debt securities and the regular record date for determining who is entitled to the interest payable on any interest payment date; |
| ● | the place or places where the principal of (and premium, if any) and interest on the debt securities will be payable, where any securities may be surrendered for registration of transfer, exchange or conversion, as applicable, and notices and demands may be delivered to or upon us pursuant to the applicable Indenture; |
| ● | the rate or rates of amortization of the debt securities; |
| ● | any terms for the attachment to the debt securities of warrants, options or other rights to purchase or sell our securities; |
| ● | if the debt securities will be secured by any collateral and, if so, a general description of the collateral and the terms and provisions of such collateral security, pledge or other agreements; |
| ● | if we possess the option to do so, the periods within which and the prices at which we may redeem the debt securities, in whole or in part, pursuant to optional redemption provisions, and the other terms and conditions of any such provisions; |
| ● | our obligation or discretion, if any, to redeem, repay or purchase debt securities by making periodic payments to a sinking fund or through an analogous provision or at the option of holders of the debt securities, and the period or periods within which and the price or prices at which we will redeem, repay or purchase the debt securities, in whole or in part, pursuant to such obligation, and the other terms and conditions of such obligation; |
| ● | the terms and conditions, if any, regarding the option or mandatory conversion or exchange of debt securities; |
| ● | the period or periods within which, the price or prices at which and the terms and conditions upon which any debt securities of the series may be redeemed, in whole or in part at our option and, if other than by a board resolution, the manner in which any election by us to redeem the debt securities shall be evidenced; |
| ● | any restriction or condition on the transferability of the debt securities of a particular series; |
| ● | the portion, or methods of determining the portion, of the principal amount of the debt securities which we must pay upon the acceleration of the maturity of the debt securities in connection with any event of default; |
| ● | the currency or currencies in which the debt securities will be denominated and in which principal, any premium and any interest will or may be payable or a description of any units based on or relating to a currency or currencies in which the debt securities will be denominated; |
| ● | provisions, if any, granting special rights to holders of the debt securities upon the occurrence of specified events; |
| ● | any deletions from, modifications of or additions to the events of default or our covenants with respect to the applicable series of debt securities, and whether or not such events of default or covenants are consistent with those contained in the applicable Indenture; |
| ● | any limitation on our ability to incur debt, redeem stock, sell our assets or other restrictions; |
| ● | the application, if any, of the terms of the applicable Indenture relating to defeasance and covenant defeasance (which terms are described below) to the debt securities; |
| ● | what subordination provisions will apply to the debt securities; |
| ● | the terms, if any, upon which the holders may convert or exchange the debt securities into or for our securities or property; |
| ● | whether we are issuing the debt securities in whole or in part in global form; |
| ● | any change in the right of the trustee or the requisite holders of debt securities to declare the principal amount thereof due and payable because of an event of default; |
| ● | the depositary for global or certificated debt securities, if any; |
| ● | any material federal income tax consequences applicable to the debt securities, including any debt securities denominated and made payable, as described in the prospectus supplements, in foreign currencies, or units based on or related to foreign currencies; |
| ● | any right we may have to satisfy, discharge and defease our obligations under the debt securities, or terminate or eliminate restrictive covenants or events of default in the Indentures, by depositing money or U.S. government obligations with the trustee of the Indentures; |
| ● | the names of any trustees, depositories, authenticating or paying agents, transfer agents or registrars or other agents with respect to the debt securities; |
| ● | to whom any interest on any debt security shall be payable, if other than the person in whose name the security is registered, on the record date for such interest, the extent to which, or the manner in which, any interest payable on a temporary global debt security will be paid; |
| ● | if the principal of or any premium or interest on any debt securities is to be payable in one or more currencies or currency units other than as stated, the currency, currencies or currency units in which it shall be paid and the periods within and terms and conditions upon which such election is to be made and the amounts payable (or the manner in which such amount shall be determined); |
| ● | the portion of the principal amount of any debt securities which shall be payable upon declaration of acceleration of the maturity of the debt securities pursuant to the applicable Indenture; |
| ● | if the principal amount payable at the stated maturity of any debt security of the series will not be determinable as of any one or more dates prior to the stated maturity, the amount which shall be deemed to be the principal amount of such debt securities as of any such date for any purpose, including the principal amount thereof which shall be due and payable upon any maturity other than the stated maturity or which shall be deemed to be outstanding as of any date prior to the stated maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined); and |
| ● | any other specific terms of the debt securities, including any modifications to the events of default under the debt securities and any other terms which may be required by or advisable under applicable laws or regulations. |
Unless otherwise specified in the applicable prospectus supplement, we do not anticipate the debt securities will be listed on any securities exchange. Holders of the debt securities may present registered debt securities for exchange or transfer in the manner described in the applicable prospectus supplement. Except as limited by the applicable Indenture, we will provide these services without charge, other than any tax or other governmental charge payable in connection with the exchange or transfer.
Debt securities may bear interest at a fixed rate or a variable rate as specified in the prospectus supplement. In addition, if specified in the prospectus supplement, we may sell debt securities bearing no interest or interest at a rate that at the time of issuance is below the prevailing market rate, or at a discount below their stated principal amount. We will describe in the applicable prospectus supplement any special federal income tax considerations applicable to these discounted debt securities.
We may issue debt securities with the principal amount payable on any principal payment date, or the amount of interest payable on any interest payment date, to be determined by referring to one or more currency exchange rates, commodity prices, equity indices or other factors. Holders of such firmdebt securities may receive a principal amount on any principal payment date, or interest payments on any interest payment date, that are greater or less than the amount of principal or interest otherwise payable on such dates, depending upon the value on such dates of applicable currency, commodity, equity index or other factors. The applicable prospectus supplement will contain information as experts in accountingto how we will determine the amount of principal or interest payable on any date, as well as the currencies, commodities, equity indices or other factors to which the amount payable on that date relates and auditing.certain additional tax considerations.
Units
We may issue units consisting of any combination of the other types of securities offered under this prospectus in one or more series. We may evidence each series of units by unit certificates that we may issue under a separate agreement. We may enter into unit agreements with a unit agent. Each unit agent, if any, may be a bank or trust company that we select. We will indicate the name and address of the unit agent, if any, in the applicable prospectus supplement relating to a particular series of units. Specific unit agreements, if any, will contain additional important terms and provisions. We will file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference from a current report that we file with the SEC, the form of unit and the form of each unit agreement, if any, relating to units offered under this prospectus.
If we offer any units, certain terms of that series of units will be described in the applicable prospectus supplement, including, without limitation, the following, as applicable
| ● | the title of the series of units; |
| ● | identification and description of the separate constituent securities comprising the units; |
| ● | the price or prices at which the units will be issued; |
| ● | the date, if any, on and after which the constituent securities comprising the units will be separately transferable; |
| ● | a discussion of certain United States federal income tax considerations applicable to the units; and |
| ● | any other material terms of the units and their constituent securities. |
Each security may be represented either by a certificate issued in definitive form to a particular investor or by one or more global securities representing the entire issuance of securities. Certificated securities in definitive form and global securities will be issued in registered form. Definitive securities name you or your nominee as the owner of the security, and in order to transfer or exchange these securities or to receive payments other than interest or other interim payments, you or your nominee must physically deliver the securities to the trustee, registrar, paying agent or other agent, as applicable. Global securities name a depositary or its nominee as the owner of the debt securities, warrants or units represented by these global securities. The depositary maintains a computerized system that will reflect each investor’s beneficial ownership of the securities through an account maintained by the investor with its broker/dealer, bank, trust company or other representative, as we explain more fully below.
Registered Global Securities
We may issue the securities in the form of one or more fully registered global securities that will be deposited with a depositary or its nominee identified in the applicable prospectus supplement and registered in the name of that depositary or nominee. In those cases, one or more registered global securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal or face amount of the securities to be represented by registered global securities. Unless and until it is exchanged in whole for securities in definitive registered form, a registered global security may not be transferred except as a whole by and among the depositary for the registered global security, the nominees of the depositary or any successors of the depositary or those nominees.
The specific terms of the depositary arrangement with respect to any securities to be represented by a registered global security will be described in the prospectus supplement relating to those securities. We anticipate that the following provisions will apply to all depositary arrangements.
Ownership of beneficial interests in a registered global security will be limited to persons, called participants, that have accounts with the depositary or persons that may hold interests through participants. Upon the issuance of a registered global security, the depositary will credit, on its book-entry registration and transfer system, the participants’ accounts with the respective principal or face amounts of the securities beneficially owned by the participants. Any dealers, underwriters or agents participating in the distribution of the securities will designate the accounts to be credited. Ownership of beneficial interests in a registered global security will be shown on, and the transfer of ownership interests will be effected only through, records maintained by the depositary, with respect to interests of participants, and on the records of participants, with respect to interests of persons holding through participants. The laws of some states may require that some purchasers of securities take physical delivery of these securities in definitive form. These laws may impair your ability to own, transfer or pledge beneficial interests in registered global securities.
So long as the depositary, or its nominee, is the registered owner of a registered global security, that depositary or its nominee, as the case may be, will be considered the sole owner or holder of the securities represented by the registered global security for all purposes under the applicable indenture, warrant agreement or unit agreement.
Except as described below, owners of beneficial interests in a registered global security will not be entitled to have the securities represented by the registered global security registered in their names, will not receive or be entitled to receive physical delivery of the securities in definitive form and will not be considered the owners or holders of the securities under the applicable indenture, warrant agreement or unit agreement. Accordingly, each person owning a beneficial interest in a registered global security must rely on the procedures of the depositary for that registered global security and, if that person is not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights of a holder under the applicable indenture, warrant agreement or unit agreement. We understand that under existing industry practices, if we request any action of holders or if an owner of a beneficial interest in a registered global security desires to give or take any action that a holder is entitled to give or take under the applicable indenture, warrant agreement or unit agreement, the depositary for the registered global security would authorize the participants holding the relevant beneficial interests to give or take that action, and the participants would authorize beneficial owners owning through them to give or take that action or would otherwise act upon the instructions of beneficial owners holding through them.
Payments to holders with respect to securities represented by a registered global security registered in the name of a depositary or its nominee will be made to the depositary or its nominee, as the case may be, as the registered owner of the registered global security. None of the Company, the trustees, the warrant agents, the unit agents or any other agent of the Company, agent of the trustees, the warrant agents or unit agents will have any responsibility or liability for any aspect of the records relating to payments made on account of beneficial ownership interests in the registered global security or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests.
We expect that the depositary for any of the securities represented by a registered global security, upon receipt of any payment of principal, premium, interest or other payment or distribution to holders of that registered global security, will immediately credit participants’ accounts in amounts proportionate to their respective beneficial interests in that registered global security as shown on the records of the depositary. We also expect that payments by participants to owners of beneficial interests in a registered global security held through participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers or registered in “street name,” and will be the responsibility of those participants.
If the depositary for any of these securities represented by a registered global security is at any time unwilling or unable to continue as depositary or ceases to be a clearing agency registered under the Exchange Act and a successor depositary registered as a clearing agency under the Exchange Act is not appointed by us within 90 days, we will issue securities in definitive form in exchange for the registered global security that had been held by the depositary. Any securities issued in definitive form in exchange for a registered global security will be registered in the name or names that the depositary gives to the relevant trustee, warrant agent, unit agent or other relevant agent of ours or theirs. It is expected that the depositary’s instructions will be based upon directions received by the depositary from participants with respect to ownership of beneficial interests in the registered global security that had been held by the depositary.
TheUnless otherwise indicated in the applicable prospectus supplement, the validity of the Common Stock being issued pursuant tosecurities offered by this registration statement have beenprospectus will be passed upon for us by Ellenoff Grossman & Schole LLP, located at 1345 Avenue of the Americas, New York, NY 10105. New York. If legal matters in connection with offerings made by this prospectus are passed on by counsel for the underwriters, dealers or agents, if any, that counsel will be named in the applicable prospectus supplement.
The consolidated financial statements of Gryphon Digital Mining, Inc. and subsidiaries as of and for the years ended December 31, 2022 and 2021 have been incorporated by reference in the registration statement in reliance upon the reports of RBSM LLP and Marcum LLP, each an independent registered public accounting firm, and upon the authority of said firms as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have and will file annual, quarter and periodic reports, proxy statements and other information with the Securities and Exchange Commission using the Commission’s EDGAR system. You may inspect these documents and copy information from them at the Commission’s offices at public reference room at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The Commission maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site ishttp//www.sec.gov.www.sec.gov.
We have filed a registration statement with the Commission relating to the offering of the shares. The registration statement contains information which is not included in this prospectus. You may inspect or copy the registration statement at the Commission’s public reference facilities or its website.
You should rely only on the information contained in this prospectus. We have not authorized any person to provide you with any information that is different.
INCORPORATION OF DOCUMENTS BY REFERENCE
We are “incorporating by reference” in this prospectus certain documents we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information in the documents incorporated by reference is considered to be part of this prospectus supplement.prospectus. Statements contained in documents that we file with the SEC and that are incorporated by reference in this prospectus supplement will automatically update and supersede information contained in this prospectus, supplement, including information in previously filed documents or reports that have been incorporated by reference in this prospectus, supplement, to the extent the new information differs from or is inconsistent with the old information. We have filed or may file the following documents with the SEC and they are incorporated herein by reference as of their respective dates of filing:filing.
| ● | Our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, filed with the SEC on November 14, 2023. |
| ● | Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 14, 2023. |
| ● | Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 15, 2023. |
| ● | Our Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on May 1, 2023. |
| ● | Our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 21, 2023. |
| ● | Our Definitive Proxy Statement on filed pursuant to 424(b)(3) with the SEC on January 9, 2024. |
| ● | Our Current Reports on Form 8-K filed with the SEC onJanuary 18, 2023, January, 27, 2023, February 3, 2023, March 28, 2023, May 1, 2023, June, |
All reports and other documents that we filed with the SECsubsequently file pursuant to SectionsSection 13(a), 13(c), 14 andor 15(d) of the Exchange Act subsequentprior to the termination of this offering, including all such documents we may file with the SEC after the date of thisthe initial registration statement and prior to the filingeffectiveness of a post-effective amendment to thisthe registration statement, that indicates that all securities offeredbut excluding any information “furnished to,” rather than “filed with,” the SEC under the Exchange Act, will also be incorporated by reference into this prospectus supplement have been sold, or that deregisters all securities then remaining unsold, will beand deemed to be incorporated inpart of this registration statement by reference and to be a part hereofprospectus from the date of the filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus supplement shall be deemed modified, superseded or replaced for purposes of this prospectus supplement to the extent that a statement contained in this prospectus, supplement, or in any subsequently filed document that also is deemed to be incorporated by reference in this prospectus, supplement, modifies, supersedes or replaces such statement. Any statement so modified, superseded or replaced shall not be deemed, except as so modified, superseded or replaced, to constitute a part of this prospectus supplement.prospectus. None of the information that we disclose under Items 2.02 or 7.01 of any Current Report on Form 8-K or any corresponding information, either furnished under Item 9.01 or included as an exhibit therein, that we may from time to time furnish to the SEC will be incorporated by reference into, or otherwise included in, this prospectus, supplement, except as otherwise expressly set forth in the relevant document. Subject to the foregoing, all information appearing in this prospectus supplement is qualified in its entirety by the information appearing in the documents incorporated by reference.
We will promptly provide, without charge to each person (including any beneficial owners) who receives a copy of this prospectus, upon written or oral request, a copy of any or all of the documents incorporated by reference in this prospectus supplement. You may request, orally or in writing, a copy of these documents, which will be provided to you at no cost (other than exhibits, unless such exhibits are specifically incorporate by reference), by contacting Jessica Billingsley, Chairman of the Board of Directors of the Company and Chief Executive Officer of Akerna Corp,Robby Chang, c/o Gryphon Digital Mining, Inc., at 1601 Arapahoe St. Denver, Colorado 80202.1180 North Town Center Drive, Suite 100, Las Vegas, NV 89144. Our telephone number is (888) 932-6537.(877) 646-3374. Information about us is also available at our website athttp: https://www.Akerna.comgryphondigitalmining.com/. However, the information onin our website is not a part of this prospectus supplement or the accompanying prospectus and is not incorporated by reference.
DISCLOSURE OF COMMISSION POSITION ONPART II
INDEMNIFICATION FOR SECURITIES LAW VIOLATIONS
Our directors and officers are indemnified to the fullest extent permitted under Delaware law. We may also purchase and maintain insurance which protects our officers and directors against any liabilities incurred in connection with their service in such a capacity, and such a policy may be obtained by us in the future.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of ours in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
You should rely only on the information contained in this document. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.
Additional risks and uncertainties not presently known or that are currently deemed immaterial may also impair our business operations. The risks and uncertainties described in this document and other risks and uncertainties which we may face in the future will have a greater impact on those who purchase our Common Stock. These purchasers will purchase our Common Stock at the market price or at a privately negotiated price and will run the risk of losing their entire investment.
AKERNA CORP.
5,798,692 Shares of
Common Stock
PROSPECTUS
, 2019
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEMItem 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONOther Expenses of Issuance and Distribution.
The Company is paying all expenses of the offering. No portion of theseThe following table sets forth all expenses willto be bornepaid by the selling security holder. The selling security holder, however, will pay any other expenses incurred in selling its Common Stock, including any brokerage commissions or costs of sale. Following is an itemized statement of all expenses in connection with the issuance and distribution of the securities to be registered.registrant. All of the amounts shown are estimates except for the SEC Registration Fees.registration fee.
| SEC registration fee | $ | 14,760 | ||
| FINRA filing fee | $ | 15,500 | ||
| Printing | * | |||
| Legal fees and expenses | * | |||
| Accounting fees and expenses | * | |||
| Trustees’ Fees and Expenses | * | |||
| Warrant Agent Fees and Expenses | * | |||
| Miscellaneous | * | |||
| Total | * |
| * | These fees are calculated based on the securities offered and the number of issuances and accordingly cannot be estimated at this time. The applicable prospectus supplement will set forth the estimated amount of expenses of any offering of securities. |
Item 15. Indemnification of Directors and Officers.
| SEC Registration Fee | $ | 6,198.71 | ||
| Accounting Fees and Expenses | $ | 20,000.00 | ||
| Legal Fees and Expenses | $ | 35,000.00 | ||
| Total | $ | 61,198.71 |
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the DGCL inter alia, empowers a Delaware corporation mayto indemnify its directors, officers, employees and agents and its former directors, officers, employees and agents and thoseany person who serve, at the corporation's request, in such capacities with another enterprise, against expenses (including attorney's fees), as well as judgments, fines and settlements, actually and reasonably incurred in connection with the defense ofwas or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) in which they or any of them were or are made parties or are threatened to be made parties by reason of their serving or having served in such capacity. The DGCL provides, however,the fact that such person must haveis or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he or she reasonably believed to be in (oror not opposed to)to the best interests of the corporation, and, in the case of awith respect to any criminal action such person must haveor proceeding, had no reasonable cause to believe his or her conduct was unlawful. In addition,Similar indemnity is authorized for such persons against expenses (including attorneys’ fees) actually and reasonably incurred in connection with the DGCL does not permit indemnification in andefense or settlement of any such threatened, pending or completed action or suit byif such person acted in good faith and in a manner he reasonably believed to be in or innot opposed to the rightbest interests of the corporation, whereand provided further that (unless a court of competent jurisdiction otherwise provides) such person hasshall not have been adjudged liable to the corporation. Any such indemnification may be made only as authorized in each specific case upon a determination by the stockholders or disinterested directors or by independent legal counsel in a written opinion that indemnification is proper because the indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation for negligenceto purchase and maintain insurance on behalf of any person who is or misconduct in the performancewas a director, officer, employee or agent of his/her duty to the corporation, unless,or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and onlyincurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145. We maintain policies insuring our officers and directors against certain liabilities for actions taken in such capacities, including liabilities under the extent that, a court determines that such person fairly and reasonably is entitled to indemnity for costs the court deems proper in light of liability adjudication. Indemnity is mandatory to the extent a claim, issue or matter has been successfully defended.Securities Act.
Section 102(b)(7) of the DGCL permits a corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL (relating to unlawful payment of dividends and unlawful stock purchase or redemption) or (iv) for any transaction from which the director derived an improper personal benefit.
II-1
Article VI of the Amended and Restated By-Laws of the Company contains provisions which are designed to provide mandatory indemnification of directors and officers of the Company to the full extent permitted by law, as now in effect or later amended. The Amended and Restated By-Laws further provide for reimbursement and advances of payment of expenses actually and reasonably incurred by a current or former director or officer of the Company under the circumstances contained therein.
II-1
ITEMItem 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESExhibits.
The following exhibits are filed with this Registration Statement.
The agreements included or incorporated by reference as exhibits to this registration statement.statement contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.
The undersigned registrant acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this registration statement not misleading.
| * | Filed herewith. |
| ** | If applicable, to be filed by an amendment or as an exhibit to a report pursuant to section 13(a) or section 15(d) of the | |
| *** | Previously Filed. |
II-2
II-3
ITEM 17. UNDERTAKINGSUndertakings.
(a) The undersigned registrantRegistrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided , however , that paragraphs (1)(i), (1)(ii) and (1)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(2)(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(3)(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(A)(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B)(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by sectionSection 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date;date.
(4)
II-3
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(5)(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability of the registrant under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to sectionSection 13(a) of sectionor Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be in the initial bona fide offering thereof; and
thereof.
(c) The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.
(6)
(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statementRegistration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver,Las Vegas, State of ColoradoNevada, on this 2728th day of August, 2019.February, 2024.
| By: | /s/ | ||
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jessica Billingsley his or her true and lawful attorney-in-fact, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments including post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, hereby ratifying and confirming all that said attorney-in-fact or his or her substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
| * By: | /s/ Robby Chang | ||||
| Robby Chang | |||||
| Attorney-in-Fact |
II-5