Stronghold Digital Mining, Inc. (NASDAQ:
SDIG) (“Stronghold”, the “Company”, or “we”) today
announced the following:
Recent Operational and Financial Highlights
-
Stronghold’s Beneficial Use Ash Can Capture Carbon Dioxide
(CO2). Following four months of extensive testing,
third-party lab results indicate that Stronghold’s beneficial use
ash, a natural byproduct of its mining-waste-to-power process, can
capture CO2 from ambient air at a capacity of up to 12% by weight
of starting ash. The process results in permanent and stable
storage of the CO2.
- Initial
Phase of Carbon Capture Project Underway at the Scrubgrass
Plant. Stronghold and third-party engineering, design, and
construction partners have developed direct air capture (“DAC”)
technology to utilize the beneficial use ash to capture CO2. Field
testing is in progress with initial results expected by December of
2023.
- Reiterating
Q4 2023 Hash Rate Guidance. The Company is committed to
Bitcoin mining and expects at least 20% sequential growth in hash
rate going into the fourth quarter of 2023.
- Procured
3,135 High-Spec Bitcoin Miners (358 PH/s, >114 TH/s per miner,
28.7 J/T) Since the End of Q2 2023. The Company is taking
a disciplined approach to the Bitcoin event in April of 2024, with
no incremental capital currently committed to purchase additional
miners.
- Signed
Managed Services Agreement with Frontier Outpost 8, LLC (“Frontier
Mining”) to optimize Bitcoin mining operations and
profitability of Stronghold’s data centers.
- Fixed Costs
Were Down ~$31 Million for the First Three Quarters of 2023 Versus
the First Three Quarters of 2022, Representing a ~56%
Reduction. Fixed costs include operations &
maintenance expense and general & administrative expense,
excluding stock-based compensation and a one-time accounts
receivable adjustment.
- Generated 620
Bitcoin during the third quarter of 2023, which was nearly flat
versus the second quarter of 2023 and represented approximately 9%
and 41% growth compared to the third and fourth quarters of 2022,
respectively.
- The Company
generated revenues of $17.7 million, net loss of $22.3 million, and
non-GAAP Adjusted EBITDA loss of $2.4 million during the third
quarter of 2023. Excluding the adjustment to accounts receivable,
the non-GAAP Adjusted EBITDA loss would have been $1.6 million.
Revenues comprised $12.7 million from cryptocurrency self-mining,
$3.8 million from cryptocurrency hosting, and $1.2 million from the
sale of energy.1
Stronghold Carbon Capture
Initiative
On November 10, 2023, Stronghold launched the
first phase of its carbon capture project at the Scrubgrass Plant.
The design and process follow four months of third-party laboratory
tests, conducted by Karbonetiq, Inc. (“Karbonetiq”) at their Santa
Barbara, California lab, utilizing a variety of testing
methodologies. Stronghold’s beneficial use ash naturally contains
reactive calcium oxide as a result of including limestone in the
fuel mix to reduce sulfur dioxide emissions given high sulfur
content in mining waste. Calcium oxide can, under the right
conditions, bond with CO2 to form calcium carbonate, effectively
absorbing CO2 out of ambient air and permanently storing it in a
geologically stable solid. Karbonetiq’s lab results demonstrated
that Stronghold’s beneficial use ash can potentially capture CO2 at
a capacity of approximately 12% by weight of starting ash with the
use of their proprietary, patent pending, direct air capture
technology. We believe that the carbonation will occur in no more
than two weeks based on the lab results. As part of the first phase
of development, Stronghold aims to confirm that laboratory results
are replicable and scalable in the field. The Company expects to
use third-party labs with industry-standard thermogravimetric
analysis - mass spectrometry (TGA-MS) measurements to test ash
samples following exposure to Karbonetiq’s proprietary, patent
pending process. Stronghold expects that development will be
iterative, as the Company works to optimize processes around ash
movement, composition, rate of capture, time to capture and cost,
among other variables. The cost of equipment for the first phase is
expected to be less than $100,000, and the Company believes that
the scaled project will cost approximately $50-125 per annual ton
of CO2 capture capacity, assuming the laboratory results are
validated.
Stronghold’s two mining-waste-to-power
facilities produce approximately 800,000 to 900,000 tons of
beneficial use ash per year at baseload capacity utilization.
Extrapolating the potential 12% CO2 capture capacity from
Scrubgrass ash lab tests, this would imply potential to capture
approximately 100,000 tons of CO2 per year. In September of 2023,
Stronghold engaged third-party consultant Carbonomics to advise on
the verification of its carbon removals for private-market
monetization. The Company believes that its process will qualify
for the Carbonated Materials Methodology for CO2 Removal on the
Puro Registry, and the average transaction price for Puro’s Carbon
Removal Certificates has ranged from approximately $130 to 190 per
ton of CO2 removed during 2023. Stronghold expects to submit a
Project Design Document to Puro by the first quarter of 2024.
Additionally, the Company intends for its process to qualify for
the direct air capture standard under the recently enacted Internal
Revenue Service (“IRS”) Section 45Q and the Inflation Reduction
Act, which can provide for up to $180/ton tax credits based on
existing incentives. The Company is currently exploring whether its
carbon capture initiatives would be able to qualify for Section 45Q
tax credits.
“Our focus on improving the environment is a key
component of our business,” said Greg Beard, chairman and chief
executive officer of Stronghold. “Mining waste piles, if left in
their dormant states, will remain ‘forever emitters’ of greenhouse
gasses, including CO2, methane, and other air pollutants. In the
last year, multiple third-party studies found that greenhouse gas
emissions from unabated mining waste piles greatly exceeds the
corresponding emissions under the controlled and regulated
conditions of mining-waste-to-power CFB and similar facilities.
Specifically, one study estimates that mining-waste-to-power
facilities in Pennsylvania and West Virginia alone ‘reduce the
equivalent net GHG emissions that would otherwise be emitted from
the same amount of coal refuse by over 20 million tons of CO2e in a
single year’. This is an exciting affirmation of our efforts, and,
with the deployment of our carbon capture project, we have the
opportunity to make even more progress in combating greenhouse gas
emissions.
“While it is early, if the lab results are
replicable in the field using direct air capture technology, when
scaled, our carbon capture deployment has the potential to be one
of the ten largest DAC projects currently announced in the U.S.,”
Beard continued. “We are optimistic that this meaningful project
can become operational for a fraction of the cost of the other
announced projects and believe that it could be deployed at scale
on a shorter timeline. We look forward to providing updates as we
receive test results and the project progresses.”
Bitcoin Mining Update
Stronghold generated 620 Bitcoin during the third quarter of
2023, which was nearly flat versus the second quarter 2023 and
represented approximately 9% and 41% growth compared to the third
and fourth quarters of 2022, respectively. The Company achieved
this growth despite the average network hash rate in the third
quarter of 2023 being 83% and 52% higher than the average network
hash rate in the third quarter and fourth quarter of 2022,
respectively. Network hash rate grew ~9% sequentially from the
second quarter of 2023 to the third quarter 2023.
The Panther Creek Plant entered its planned 15-day outage on
October 28, 2023, and the Company intended to import electricity
from the PJM grid to power its Panther Creek data center during
that time. The Panther Creek Plant notified PJM of this outage, as
is customary. Shortly after the outage began, the Panther Creek
Plant was notified by PJM that there was a reliability issue
elsewhere in the region that would constrain Panther Creek’s
electricity imports to 30 megawatts through its outage, less than
half of its need. As a result, the Company took steps to shorten
the outage, and the Panther Creek Plant restarted on November 9,
2023, and the data center resumed unconstrained operations shortly
thereafter.
Liquidity and Capital
Resources
As of September 30, 2023, and
November 10, 2023, we had approximately $5.6 million and
$5.2 million, respectively, of cash and cash equivalents and
Bitcoin on our balance sheet, which included 24 Bitcoin and 12
Bitcoin, respectively. Additionally, Stronghold has $3.8 million of
contracted receivables that it expects to receive in the next 30
days, including approximately $2.7 million related to the sale of
2022 waste coal tax credits and approximately $0.8 million related
to the sale of renewable energy credits. As of September 30,
2023, and November 10, 2023, the Company had principal amount
of outstanding indebtedness of approximately $59.7 million and
$59.6 million, respectively. As of November 10, 2023, Stronghold
had approximately $6.1 million of capacity remaining of its
at-the-market offering agreement (“ATM”) with H.C. Wainwright &
Co., LLC. Stronghold has issued approximately $8.9 million of Class
A common stock at an average price of $6.96 per share under its ATM
for approximately $8.6 million of net proceeds, with approximately
$0.3 million paid in commissions. The Company has not sold any of
its shares under the ATM since the end of the third quarter of
2023.
Analyst & Investor Day
On December 12, 2023, Stronghold will host an
analyst and investor day in New York, NY to discuss the carbon
capture initiative and other items. In-person attendance is by
invitation only to institutional investors and analysts.
Presentations are expected to begin at 1:00 p.m. ET, and the event
is expected to conclude at 3:00 p.m. ET. For those who would like
to attend the event in-person, please contact Stronghold’s investor
relations team SDIG@gateway-grp.com for additional details and
instructions. A webcast will also be available on Stronghold’s
investor relations website.
Conference Call
Stronghold will host a conference call today,
November 14, 2023, at 11:00 a.m. Eastern Time (7:00 a.m.
Pacific Time) with an accompanying presentation to discuss these
results. A question-and-answer session will follow management's
presentation.
To participate, a live webcast of the call will
be available on the Investor Relations page of the Company’s
website at ir.strongholddigitalmining.com. To access the call by
phone, please use the following link Stronghold Digital Mining
Third Quarter 2023 Earnings Call. After registering, an email will
be sent, including dial-in details and a unique conference call
access code required to join the live call. To ensure you are
connected prior to the beginning of the call, please register a
minimum of 15 minutes before the start of the call.
A replay will be available on the Company's
Investor Relations website shortly after the event at
ir.strongholddigitalmining.com.
About Stronghold Digital Mining,
Inc.
Stronghold is a vertically integrated Bitcoin
mining company with an emphasis on environmentally beneficial
operations. Stronghold houses its miners at its wholly owned and
operated Scrubgrass and Panther Creek plants, both of which are
low-cost, environmentally beneficial coal refuse power generation
facilities in Pennsylvania.
Cautionary Statement Concerning
Forward-Looking Statements and Disclaimer
Certain statements contained in this press
release, including guidance, constitute “forward-looking
statements.” within the meaning of the Private Securities
Litigation Reform Act of 1995. You can identify forward-looking
statements because they contain words such as “believes,”
“expects,” “may,” “will,” “should,” “seeks,” “approximately,”
“intends,” “plans,” “estimates” or “anticipates” or the negative of
these words and phrases or similar words or phrases which are
predictions of or indicate future events or trends and which do not
relate solely to historical matters. Forward-looking statements and
the business prospects of Stronghold are subject to a number of
risks and uncertainties that may cause Stronghold’s actual results
in future periods to differ materially from the forward-looking
statements, including with respect to its potential carbon capture
initiative. These risks and uncertainties include, among other
things: the hybrid nature of our business model, which is highly
dependent on the price of Bitcoin; our dependence on the level of
demand and financial performance of the crypto asset industry; our
ability to manage growth, business, financial results and results
of operations; uncertainty regarding our evolving business model;
our ability to retain management and key personnel and the
integration of new management; our ability to raise capital to fund
business growth; our ability to maintain sufficient liquidity to
fund operations, growth and acquisitions; our substantial
indebtedness and its effect on our results of operations and our
financial condition; uncertainty regarding the outcomes of any
investigations or proceedings; our ability to enter into purchase
agreements, acquisitions and financing transactions; public health
crises, epidemics, and pandemics such as the coronavirus pandemic;
our ability to procure crypto asset mining equipment from
foreign-based suppliers; our ability to maintain our relationships
with our third party brokers and our dependence on their
performance; our ability to procure crypto asset mining equipment;
developments and changes in laws and regulations, including
increased regulation of the crypto asset industry through
legislative action and revised rules and standards applied by The
Financial Crimes Enforcement Network under the authority of the
U.S. Bank Secrecy Act and the Investment Company Act; the future
acceptance and/or widespread use of, and demand for, Bitcoin and
other crypto assets; our ability to respond to price fluctuations
and rapidly changing technology; our ability to operate our coal
refuse power generation facilities as planned; our ability to
remain listed on a stock exchange and maintain an active trading
market; our ability to avail ourselves of tax credits for the
clean-up of coal refuse piles; legislative or regulatory changes,
and liability under, or any future inability to comply with,
existing or future energy regulations or requirements; our ability
to replicate and scale the carbon capture project; our ability to
manage costs related to the carbon capture project; and our ability
to monetize our carbon capture project, including through the
private market and our ability to qualify for, obtain, monetize or
otherwise benefit from Section 45Q tax credits. More information on
these risks and other potential factors that could affect our
financial results is included in our filings with the Securities
and Exchange Commission, including in the “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” sections of our Annual Report on Form 10-K
filed on April 3, 2023, and in our subsequently filed Quarterly
Reports on Form 10-Q. Any forward-looking statement or guidance
speaks only as of the date as of which such statement is made, and,
except as required by law, we undertake no obligation to update or
revise publicly any forward-looking statements or guidance, whether
because of new information, future events, or otherwise.
In January 2021, the IRS issued final
regulations under Section 45Q of the Internal Revenue Code, which
provides a tax credit disposed of in secure geological storage (in
the event of direct air capture that results in secure geological
storage, credits are valued at $180 per ton of CO2 captured) or
utilized in a manner that satisfies a series of regulatory
requirements (in the event of direct air capture that results in
utilization, credits are valued at $130 per ton of CO2 captured).
We may benefit from Section 45Q tax credits only if we satisfy the
applicable statutory and regulatory requirements, and we cannot
make any assurances that we will be successful in satisfying such
requirements or otherwise qualifying for or obtaining the Section
45Q tax credits currently available or that we will be able to
effectively benefit from such tax credits. Additionally, the amount
of Section 45Q tax credits from which we may benefit is dependent
upon our ability to satisfy certain wage and apprenticeship
requirements, which we cannot assure you that we will satisfy. We
are currently exploring whether our carbon capture initiatives
discussed herein would be able to qualify for any Section 45Q tax
credit. It is not entirely clear whether we will be able to meet
any required statutory and regulatory requirements, and
qualification for any amount of Section 45Q credit may not be
feasible with our currently planned direct air capture initiative.
Additionally, the availability of Section 45Q tax credits may be
reduced, modified or eliminated as a matter of legislative or
regulatory policy. Any such reduction, modification or elimination
of Section 45Q tax credits, or our inability to otherwise benefit
from Section 45Q tax credits, could materially reduce our ability
to develop and monetize our carbon capture program. These and any
other changes to government incentives that could impose additional
restrictions or favor certain projects over our projects could
increase costs, limit our ability to utilize tax benefits, reduce
our competitiveness, and/or adversely impact our growth. Any of
these factors may adversely impact our business, results of
operations and financial condition.
STRONGHOLD DIGITAL MINING, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(UNAUDITED) |
|
|
September 30, 2023 |
|
December 31, 2022 |
ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
4,979,299 |
|
|
$ |
13,296,703 |
|
Digital currencies |
|
641,999 |
|
|
|
109,827 |
|
Accounts receivable |
|
486,706 |
|
|
|
10,837,126 |
|
Inventory |
|
3,143,284 |
|
|
|
4,471,657 |
|
Prepaid insurance |
|
1,842,250 |
|
|
|
5,471,498 |
|
Due from related parties |
|
97,288 |
|
|
|
73,122 |
|
Other current assets |
|
1,137,834 |
|
|
|
1,381,737 |
|
Total current assets |
|
12,328,660 |
|
|
|
35,641,670 |
|
Equipment deposits |
|
— |
|
|
|
10,081,307 |
|
Property, plant and equipment, net |
|
156,481,678 |
|
|
|
167,204,681 |
|
Operating lease right-of-use assets |
|
1,552,735 |
|
|
|
1,719,037 |
|
Land |
|
1,748,440 |
|
|
|
1,748,440 |
|
Road bond |
|
211,958 |
|
|
|
211,958 |
|
Security deposits |
|
348,888 |
|
|
|
348,888 |
|
Other noncurrent assets |
|
155,992 |
|
|
|
— |
|
TOTAL
ASSETS |
$ |
172,828,351 |
|
|
$ |
216,955,981 |
|
LIABILITIES: |
|
|
|
Accounts payable |
$ |
14,666,753 |
|
|
$ |
27,540,317 |
|
Accrued liabilities |
|
9,638,819 |
|
|
|
8,893,248 |
|
Financed insurance premiums |
|
1,112,558 |
|
|
|
4,587,935 |
|
Current portion of long-term debt, net of discounts and issuance
fees |
|
1,654,634 |
|
|
|
17,422,546 |
|
Current portion of operating lease liabilities |
|
748,369 |
|
|
|
593,063 |
|
Due to related parties |
|
451,367 |
|
|
|
1,375,049 |
|
Total current liabilities |
|
28,272,500 |
|
|
|
60,412,158 |
|
Asset retirement obligation |
|
1,062,677 |
|
|
|
1,023,524 |
|
Warrant liabilities |
|
5,434,420 |
|
|
|
2,131,959 |
|
Long-term debt, net of discounts and issuance fees |
|
57,653,823 |
|
|
|
57,027,118 |
|
Long-term operating lease liabilities |
|
899,576 |
|
|
|
1,230,001 |
|
Contract liabilities |
|
560,510 |
|
|
|
351,490 |
|
Total liabilities |
|
93,883,506 |
|
|
|
122,176,250 |
|
COMMITMENTS AND
CONTINGENCIES (NOTE 10) |
|
|
|
REDEEMABLE COMMON
STOCK: |
|
|
|
Common Stock – Class V; $0.0001 par value; 34,560,000 shares
authorized; 2,405,760 and 2,605,760 shares issued and outstanding
as of September 30, 2023, and December 31, 2022,
respectively. |
|
10,563,277 |
|
|
|
11,754,587 |
|
Total redeemable common stock |
|
10,563,277 |
|
|
|
11,754,587 |
|
STOCKHOLDERS’ EQUITY
(DEFICIT): |
|
|
|
Common Stock – Class A; $0.0001 par value; 685,440,000 shares
authorized; 7,876,688 and 3,171,022 shares issued and outstanding
as of September 30, 2023, and December 31, 2022,
respectively. |
|
788 |
|
|
|
317 |
|
Series C convertible preferred stock; $0.0001 par value; 23,102
shares authorized; 21,572 and 0 shares issued and outstanding as of
September 30, 2023, and December 31, 2022,
respectively. |
|
2 |
|
|
|
— |
|
Accumulated deficits |
|
(321,126,596 |
) |
|
|
(240,443,302 |
) |
Additional paid-in capital |
|
389,507,374 |
|
|
|
323,468,129 |
|
Total stockholders' equity |
|
68,381,568 |
|
|
|
83,025,144 |
|
Total redeemable common stock and stockholders' equity |
|
78,944,845 |
|
|
|
94,779,731 |
|
TOTAL LIABILITIES,
REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY |
$ |
172,828,351 |
|
|
$ |
216,955,981 |
|
STRONGHOLD DIGITAL MINING, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(UNAUDITED) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
OPERATING
REVENUES: |
|
|
|
|
|
|
|
Cryptocurrency mining |
$ |
12,684,894 |
|
|
$ |
12,283,695 |
|
|
$ |
37,764,990 |
|
|
$ |
50,715,424 |
|
Energy |
|
1,210,811 |
|
|
|
13,071,894 |
|
|
|
4,682,590 |
|
|
|
29,807,512 |
|
Cryptocurrency hosting |
|
3,789,375 |
|
|
|
93,279 |
|
|
|
9,195,072 |
|
|
|
282,327 |
|
Capacity |
|
— |
|
|
|
878,610 |
|
|
|
1,442,067 |
|
|
|
4,591,038 |
|
Other |
|
41,877 |
|
|
|
39,171 |
|
|
|
142,194 |
|
|
|
91,941 |
|
Total operating revenues |
|
17,726,957 |
|
|
|
26,366,649 |
|
|
|
53,226,913 |
|
|
|
85,488,242 |
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
Fuel |
|
8,556,626 |
|
|
|
10,084,466 |
|
|
|
22,262,141 |
|
|
|
29,292,616 |
|
Operations and maintenance |
|
6,961,060 |
|
|
|
19,528,088 |
|
|
|
24,206,080 |
|
|
|
47,449,177 |
|
General and administrative |
|
6,598,951 |
|
|
|
11,334,212 |
|
|
|
25,145,444 |
|
|
|
32,848,291 |
|
Depreciation and amortization |
|
9,667,213 |
|
|
|
12,247,245 |
|
|
|
26,025,021 |
|
|
|
37,234,126 |
|
Loss on disposal of fixed assets |
|
— |
|
|
|
461,940 |
|
|
|
108,367 |
|
|
|
2,231,540 |
|
Realized gain on sale of digital currencies |
|
(131,706 |
) |
|
|
(185,396 |
) |
|
|
(725,139 |
) |
|
|
(936,506 |
) |
Realized loss on sale of miner assets |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,012,248 |
|
Impairments on miner assets |
|
— |
|
|
|
11,610,000 |
|
|
|
— |
|
|
|
16,600,000 |
|
Impairments on digital currencies |
|
357,411 |
|
|
|
465,651 |
|
|
|
683,241 |
|
|
|
8,176,868 |
|
Impairments on equipment deposits |
|
5,422,338 |
|
|
|
— |
|
|
|
5,422,338 |
|
|
|
12,228,742 |
|
Total operating expenses |
|
37,431,893 |
|
|
|
65,546,206 |
|
|
|
103,127,493 |
|
|
|
193,137,102 |
|
NET OPERATING
LOSS |
|
(19,704,936 |
) |
|
|
(39,179,557 |
) |
|
|
(49,900,580 |
) |
|
|
(107,648,860 |
) |
OTHER INCOME
(EXPENSE): |
|
|
|
|
|
|
|
Interest expense |
|
(2,441,139 |
) |
|
|
(3,393,067 |
) |
|
|
(7,428,530 |
) |
|
|
(10,813,302 |
) |
Loss on debt extinguishment |
|
— |
|
|
|
(28,697,021 |
) |
|
|
(28,960,947 |
) |
|
|
(28,697,021 |
) |
Impairment on assets held for sale |
|
— |
|
|
|
(4,159,004 |
) |
|
|
— |
|
|
|
(4,159,004 |
) |
Gain on extinguishment of PPP loan |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
841,670 |
|
Changes in fair value of warrant liabilities |
|
(180,838 |
) |
|
|
1,302,065 |
|
|
|
5,580,453 |
|
|
|
1,302,065 |
|
Realized gain on sale of derivative contract |
|
— |
|
|
|
90,953 |
|
|
|
— |
|
|
|
90,953 |
|
Changes in fair value of forward sale derivative |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,435,639 |
|
Changes in fair value of convertible note |
|
— |
|
|
|
(1,204,739 |
) |
|
|
— |
|
|
|
(2,167,500 |
) |
Other |
|
15,000 |
|
|
|
20,000 |
|
|
|
45,000 |
|
|
|
50,000 |
|
Total other income (expense) |
|
(2,606,977 |
) |
|
|
(36,040,813 |
) |
|
|
(30,764,024 |
) |
|
|
(40,116,500 |
) |
NET LOSS |
$ |
(22,311,913 |
) |
|
$ |
(75,220,370 |
) |
|
$ |
(80,664,604 |
) |
|
$ |
(147,765,360 |
) |
NET LOSS attributable
to noncontrolling interest |
|
(5,188,727 |
) |
|
|
(44,000,155 |
) |
|
|
(26,663,731 |
) |
|
|
(86,435,347 |
) |
NET LOSS attributable
to Stronghold Digital Mining, Inc. |
$ |
(17,123,186 |
) |
|
$ |
(31,220,215 |
) |
|
$ |
(54,000,873 |
) |
|
$ |
(61,330,013 |
) |
NET LOSS attributable
to Class A common shareholders: |
|
|
|
|
|
|
|
Basic |
$ |
(2.26 |
) |
|
$ |
(12.67 |
) |
|
$ |
(8.93 |
) |
|
$ |
(28.17 |
) |
Diluted |
$ |
(2.26 |
) |
|
$ |
(12.67 |
) |
|
$ |
(8.93 |
) |
|
$ |
(28.17 |
) |
Weighted average
number of Class A common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
7,569,511 |
|
|
|
2,463,163 |
|
|
|
6,047,891 |
|
|
|
2,177,206 |
|
Diluted |
|
7,569,511 |
|
|
|
2,463,163 |
|
|
|
6,047,891 |
|
|
|
2,177,206 |
|
STRONGHOLD DIGITAL MINING, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(UNAUDITED) |
|
|
Nine Months Ended |
|
September 30, 2023 |
|
September 30, 2022 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
Net loss |
$ |
(80,664,604 |
) |
|
$ |
(147,765,360 |
) |
Adjustments to reconcile net loss to cash flows from operating
activities: |
|
|
|
Depreciation and amortization |
|
26,025,021 |
|
|
|
37,234,126 |
|
Accretion of asset retirement obligation |
|
39,153 |
|
|
|
18,253 |
|
Gain on extinguishment of PPP loan |
|
— |
|
|
|
(841,670 |
) |
Loss on disposal of fixed assets |
|
108,367 |
|
|
|
2,231,540 |
|
Realized loss on sale of miner assets |
|
— |
|
|
|
8,012,248 |
|
Change in value of accounts receivable |
|
1,867,506 |
|
|
|
— |
|
Amortization of debt issuance costs |
|
161,093 |
|
|
|
2,681,039 |
|
Stock-based compensation |
|
7,603,859 |
|
|
|
9,123,124 |
|
Loss on debt extinguishment |
|
28,960,947 |
|
|
|
28,697,021 |
|
Impairment on assets held for sale |
|
— |
|
|
|
4,159,004 |
|
Impairments on equipment deposits |
|
5,422,338 |
|
|
|
12,228,742 |
|
Impairments on miner assets |
|
— |
|
|
|
16,600,000 |
|
Changes in fair value of warrant liabilities |
|
(5,580,453 |
) |
|
|
(1,302,065 |
) |
Changes in fair value of forward sale derivative |
|
— |
|
|
|
(3,435,639 |
) |
Realized gain on sale of derivative contract |
|
— |
|
|
|
(90,953 |
) |
Forward sale contract prepayment |
|
— |
|
|
|
970,000 |
|
Changes in fair value of convertible note |
|
— |
|
|
|
2,167,500 |
|
Other |
|
(229,485 |
) |
|
|
— |
|
(Increase) decrease in digital currencies: |
|
|
|
Mining revenue |
|
(43,778,958 |
) |
|
|
(50,715,424 |
) |
Net proceeds from sale of digital currencies |
|
42,563,545 |
|
|
|
46,209,822 |
|
Impairments on digital currencies |
|
683,241 |
|
|
|
8,176,868 |
|
(Increase) decrease in assets: |
|
|
|
Accounts receivable |
|
8,129,033 |
|
|
|
1,336,817 |
|
Prepaid insurance |
|
1,399,254 |
|
|
|
5,321,521 |
|
Due from related parties |
|
(91,617 |
) |
|
|
(58,735 |
) |
Inventory |
|
1,328,373 |
|
|
|
55,538 |
|
Other assets |
|
9,666 |
|
|
|
(866,298 |
) |
Increase (decrease) in liabilities: |
|
|
|
Accounts payable |
|
(1,445,109 |
) |
|
|
4,878,600 |
|
Due to related parties |
|
(239,230 |
) |
|
|
781,485 |
|
Accrued liabilities |
|
875,203 |
|
|
|
(407,909 |
) |
Other liabilities, including contract liabilities |
|
(211,225 |
) |
|
|
(55,742 |
) |
NET CASH FLOWS USED IN
OPERATING ACTIVITIES |
|
(7,064,082 |
) |
|
|
(14,656,547 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
Purchases of property, plant and equipment |
|
(14,743,269 |
) |
|
|
(68,052,422 |
) |
Proceeds from sale of equipment deposits |
|
— |
|
|
|
13,844,780 |
|
Equipment purchase deposits - net of future commitments |
|
— |
|
|
|
(13,656,428 |
) |
NET CASH FLOWS USED IN
INVESTING ACTIVITIES |
|
(14,743,269 |
) |
|
|
(67,864,070 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
Repayments of debt |
|
(3,196,644 |
) |
|
|
(34,490,545 |
) |
Repayments of financed insurance premiums |
|
(1,474,889 |
) |
|
|
(3,992,336 |
) |
Proceeds from debt, net of issuance costs paid in cash |
|
(147,385 |
) |
|
|
97,337,454 |
|
Proceeds from private placements, net of issuance costs paid in
cash |
|
9,824,567 |
|
|
|
8,599,440 |
|
Proceeds from ATM, net of issuance costs paid in cash |
|
8,483,982 |
|
|
|
— |
|
Proceeds from exercise of warrants |
|
316 |
|
|
|
— |
|
NET CASH FLOWS
PROVIDED BY FINANCING ACTIVITIES |
|
13,489,947 |
|
|
|
67,454,013 |
|
NET DECREASE IN CASH
AND CASH EQUIVALENTS |
|
(8,317,404 |
) |
|
|
(15,066,604 |
) |
CASH AND CASH
EQUIVALENTS - BEGINNING OF PERIOD |
|
13,296,703 |
|
|
|
31,790,115 |
|
CASH AND CASH
EQUIVALENTS - END OF PERIOD |
$ |
4,979,299 |
|
|
$ |
16,723,511 |
|
|
Use and Reconciliation of Non-GAAP
Financial Measures
This press release and our related earnings call
contain certain non-GAAP financial measures, including Adjusted
EBITDA, as a measure of our operating performance. Adjusted EBITDA
is a non-GAAP financial measure. We define Adjusted EBITDA as net
income (loss) before interest, taxes, depreciation and
amortization, further adjusted by the removal of one-time
transaction costs, impairments on digital currencies, realized
gains and losses on the sale of long-term assets, expenses related
to stock-based compensation, gains or losses on derivative
contracts, gains or losses on extinguishment of debt, realized
gains or losses on sale of digital currencies, or changes in fair
value of warrant liabilities in the period presented. See
reconciliation below.
Our board of directors and management team use
Adjusted EBITDA to assess our financial performance because they
believe it allows them to compare our operating performance on a
consistent basis across periods by removing the effects of our
capital structure (such as varying levels of interest expense and
income), asset base (such as depreciation, amortization,
impairments, and realized gains and losses on the sale of long-term
assets) and other items (such as one-time transaction costs,
expenses related to stock-based compensation, and gains and losses
on derivative contracts) that impact the comparability of financial
results from period to period. We present Adjusted EBITDA because
we believe it provides useful information regarding the factors and
trends affecting our business in addition to measures calculated
under GAAP. Adjusted EBITDA is not a financial measure presented in
accordance with GAAP. We believe that the presentation of this
non-GAAP financial measure will provide useful information to
investors and analysts in assessing our financial performance and
results of operations across reporting periods by excluding items
we do not believe are indicative of our core operating performance.
Net income (loss) is the GAAP measure most directly comparable to
Adjusted EBITDA. Our non-GAAP financial measure should not be
considered as an alternative to the most directly comparable GAAP
financial measure. You are encouraged to evaluate each of these
adjustments and the reasons we consider them appropriate for
supplemental analysis. In evaluating Adjusted EBITDA, you should be
aware that in the future we may incur expenses that are the same as
or similar to some of the adjustments in such presentation. Our
presentation of Adjusted EBITDA should not be construed as an
inference that our future results will be unaffected by unusual or
non-recurring items. There can be no assurance that we will not
modify the presentation of Adjusted EBITDA in the future, and any
such modification may be material. Adjusted EBITDA has important
limitations as an analytical tool, and you should not consider
Adjusted EBITDA in isolation or as a substitute for analysis of our
results as reported under GAAP and should be read in conjunction
with the financial statements furnished in our Form 10-Q for the
quarter ended September 30, 2023, expected to be filed on or
prior to November 14, 2023. Because Adjusted EBITDA may be
defined differently by other companies in our industry, our
definition of this non-GAAP financial measure may not be comparable
to similarly titled measures of other companies, thereby
diminishing its utility.
STRONGHOLD DIGITAL MINING, INC. |
RECONCILIATION OF ADJUSTED EBITDA |
|
|
Three Months Ended |
|
Nine Months Ended |
(in thousands) |
September 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
Net Loss (GAAP) |
$ |
(22,312 |
) |
|
$ |
(75,220 |
) |
|
$ |
(80,665 |
) |
|
$ |
(147,765 |
) |
Plus: |
|
|
|
|
|
|
|
Interest expense |
|
2,441 |
|
|
|
3,393 |
|
|
|
7,429 |
|
|
|
10,813 |
|
Depreciation and amortization |
|
9,667 |
|
|
|
12,247 |
|
|
|
26,025 |
|
|
|
37,234 |
|
Loss on debt extinguishment |
|
— |
|
|
|
28,697 |
|
|
|
28,961 |
|
|
|
28,697 |
|
Impairment on assets held for sale |
|
— |
|
|
|
4,159 |
|
|
|
— |
|
|
|
4,159 |
|
Impairments on equipment deposits |
|
5,422 |
|
|
|
— |
|
|
|
5,422 |
|
|
|
12,229 |
|
Impairments on miner assets |
|
— |
|
|
|
11,610 |
|
|
|
— |
|
|
|
16,600 |
|
Impairments on digital currencies |
|
357 |
|
|
|
466 |
|
|
|
683 |
|
|
|
8,177 |
|
Non-recurring expenses1 |
|
1,216 |
|
|
|
8,218 |
|
|
|
1,853 |
|
|
|
14,781 |
|
Stock-based compensation |
|
788 |
|
|
|
3,377 |
|
|
|
7,604 |
|
|
|
9,123 |
|
Loss on disposal of fixed assets |
|
— |
|
|
|
462 |
|
|
|
108 |
|
|
|
2,232 |
|
Realized loss on sale of miner assets |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,012 |
|
Realized gain on sale of digital currencies |
|
(132 |
) |
|
|
(185 |
) |
|
|
(725 |
) |
|
|
(937 |
) |
Changes in fair value of forward sale derivative |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,436 |
) |
Gain on extinguishment of PPP loan |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(842 |
) |
Changes in fair value of convertible note |
|
— |
|
|
|
1,205 |
|
|
|
— |
|
|
|
2,168 |
|
Changes in fair value of warrant liabilities |
|
181 |
|
|
|
(1,302 |
) |
|
|
(5,580 |
) |
|
|
(1,302 |
) |
Realized gain (loss) on sale of derivative contract |
|
— |
|
|
|
(91 |
) |
|
|
— |
|
|
|
(91 |
) |
Accretion of asset retirement obligation |
|
13 |
|
|
|
— |
|
|
|
39 |
|
|
|
— |
|
Adjusted EBITDA (Non-GAAP) |
$ |
(2,357 |
) |
|
$ |
(2,965 |
) |
|
$ |
(8,846 |
) |
|
$ |
(148 |
) |
1 Includes the following non-recurring expenses:
out-of-the-ordinary major repairs and upgrades to the power plant
and other one-time items.
Investor Contact:
Matt Glover or Alex KovtunGateway Group, Inc.
SDIG@gateway-grp.com1-949-574-3860
Media Contact:
contact@strongholddigitalmining.com
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