UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A
   (Amendment No.1)
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): November 9, 2022
  Stronghold Digital Mining, Inc.
(Exact Name of Registrant as Specified in Its Charter)

  Delaware
(State or other Jurisdiction of Incorporation)
 
001-40931
(Commission File No.)
  
86-2759890
(I.R.S. Employer Identification No.)
     
595 Madison Avenue, 28th Floor
New York, NY
(Address of Principal Executive Offices))
  
10022
(Zip Code)

(845)-579-5992
(Registrant’s Telephone Number, Including Area Code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 

 ☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 

 ☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 

 ☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 

 ☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading Symbol(s)
  
Name of exchange on which registered
Class A Common Stock, par value $0.0001 per share
  
SDIG
  
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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 13(a) of the Exchange Act.  ☐
 
Explanatory Note
 
This Current Report on Form 8-K/A amends the Current Report on Form 8-K of Stronghold Digital Mining, Inc. (the “Company”), originally furnished by the Company to the Securities and Exchange Commission on November 9, 2022 (the “Initial 8-K”). The sole purpose for filing this Form 8-K/A is to correct certain information contained in Exhibit 99.1 to the Initial 8-K related to the Company’s financial statements, as described further below. Except as stated in this Form 8-K/A, no other changes have been made to the Initial 8‑K or Exhibit 99.1 thereto. A correct Exhibit 99.1 is attached to this Form 8-K/A as an exhibit.

Item 2.02.
Results of Operations and Financial Condition.

On November 9, 2022, prior to filing of the Initial 8-K, the Company issued an earnings press release announcing its financial results for the quarter ended September 30, 2022. The unaudited condensed consolidated balance sheets, unaudited condensed consolidated statement of operations and unaudited condensed consolidated statement of cash flow included in the earnings press release filed on November 9, 2022 and the Company’s Quarterly Report on Form 10-Q filed on November 10, 2022 were correct, however, the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statement of operations, unaudited condensed consolidated statement of cash flow and written description of the third quarter financial results included on Exhibit 99.1 to the Initial 8-K contained incorrect figures due to a clerical error when submitting the Initial 8-K to the printer. The corrected items for Exhibit 99.1 to the Initial 8-K are presented in the excerpts below (with original reported items struck and the corrected items in bold type and underlined).

***
STRONGHOLD DIGITAL MINING, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

   
September 30, 2022
    
December 31, 2021
  
   
(unaudited)
        
ASSETS:
            
Cash and cash equivalents
  
$
16,723,511
    
$
31,790,115
  
Digital currencies
    
2,186,704
      
7,718,221
  
Digital currencies, restricted
    
-
      
2,699,644
  
Accounts receivable
    
775,038
      
2,111,855
  
Due from related parties
    
58,735 856,156
      
-
  
Prepaid insurance
    
980,180
      
6,301,701
  
Inventory
    
3,316,716
      
3,372,254
  
Assets held for sale
    
39,008,651
      
-
  
Other current assets
    
1,527,938
      
661,640
  
Total current assets
    
64,577,473 65,374,894
      
54,655,430
  
Equipment deposits
    
24,385,876
      
130,999,398
  
Property, plant and equipment, net
    
182,869,685 194,479,685
      
166,657,155
  
Land
    
1,748,439
      
1,748,440
  
Road bond
    
211,958
      
211,958
  
Security deposits
    
348,888
      
348,888
  
TOTAL ASSETS
  
$
274,142,319 286,549,740
    
$
354,621,269
  
LIABILITIES:
                
Current portion of long-term debt, net of discounts and issuance fees
  
$
90,298,367
    
$
45,799,651
  
Financed insurance premiums
    
307,385
      
4,299,721
  
Forward sale contract
    
-
      
7,116,488
  
Accounts payable
    
28,491,137 33,963,438
      
28,650,659
  
Due to related parties
    
2,212,145
      
1,430,660
  
Accrued liabilities
    
7,385,258 7,197,121
      
5,053,957
  
Total current liabilities
    
128,694,292 133,978,456
      
92,351,136
  
Asset retirement obligation
    
992,201
      
973,948
  
Contract liabilities
    
132,093
      
187,835
  
Paycheck Protection Program Loan
    
-
      
841,670
  
Warrant liabilities
    
5,056,065
      
-
  
Long-term debt, net of discounts and issuance fees
    
7,607,240
      
18,378,841
  
Total long-term liabilities
    
13,787,599
      
20,382,294
  
Total liabilities
    
142,481,891 147,766,055
      
112,733,430
  
COMMITMENTS AND CONTINGENCIES REDEEMABLE COMMON STOCK:
                
                 
Common Stock – Class V; $0.0001 par value; 34,560,000 shares authorized; 27,057,600 and 27,057,600 shares issued and outstanding as
     of September 30, 2022, and December 31, 2021, respectively.
    
29,433,528
      
301,052,617
  
Total redeemable common stock
    
29,433,528
      
301,052,617
  
STOCKHOLDERS’ EQUITY (DEFICIT):
                
Noncontrolling Series A redeemable and convertible preferred stock; $0.0001 par value; $5,000,000 aggregate liquidation value;
     1,152,000 and 1,152,000 shares issued and outstanding as of September 30, 2022, and December 31, 2021, respectively.
    
34,140,047 34,751,437
      
37,670,161
  
Common Stock – Class A; $0.0001 par value; 685,440,000 shares authorized; 23,063,813 and 20,016,067 shares issued and outstanding
     as of September 30, 2022, and December 31, 2021, respectively.
    
2,307
      
2,002
  
Accumulated deficits
    
(211,325,844) (186,345,3
)
    
(338,709,688
)
Additional paid-in capital
    
279,410,390 260,941,756
      
241,872,747
  
Total stockholders’ equity (deficit)
    
102,226,900 109,350,157
      
(59,164,778
)
Total redeemable common stock and stockholders' equity (deficit)
    
131,660,428 138,783,685
      
241,887,839
  
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
  
$
274,142,319 286,549,740
    
$
354,621,269
  
 
STRONGHOLD DIGITAL MINING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

   
Three months ended,
    
Nine months ended,
  
   
September 30,
    
September 30,
    
September 30,
    
September 30,
  
   
2022
    
2021
    
2022
    
2021
  
   
(unaudited)
    
(unaudited)
    
(unaudited)
    
(unaudited)
  
OPERATING REVENUES:
                        
Cryptocurrency mining
  
$
12,283,695
    
$
2,060,523
    
$
50,715,424
    
$
3,901,426
  
Energy
    
11,454,016
      
2,388,752
      
26,946,549
      
5,875,574
  
Capacity
    
878,610
      
1,069,040
      
4,591,038
      
2,352,276
  
Cryptocurrency hosting
    
93,279
      
499,724
      
282,327
      
1,742,242
  
Other
    
39,171
      
1,674
      
91,941
      
34,797
  
Total operating revenues
    
24,748,771
      
6,019,713
      
82,627,279
      
13,906,315
  
OPERATING EXPENSES:
                                
Fuel
    
8,466,588
      
2,411,186
      
26,485,096
      
6,511,706
  
Operations and maintenance
    
19,528,08819,410,875
      
2,835,315
      
47,449,17747,331,964
      
6,040,173
  
General and administrative
    
11,334,21211,712,544
      
3,469,830
      
32,848,29133,226,623
      
6,377,677
  
Impairments on digital currencies
    
465,651
      
91,040
      
8,176,868
      
466,286
  
Impairments on equipment deposits
    
-
      
-
      
12,228,742
      
-
  
Impairments on miner assets
    
11,610,0000
      
-
      
16,600,0004,990,000
      
-
  
Realized gain on sale of digital currencies
    
(185,396
)
    
-
      
(936,506
)
    
(149,858
)
Loss on disposal of fixed assets
    
461,9400
      
-
      
2,231,5400
      
-
  
Realized loss on sale of miner assets
    
0
      
-
      
8,012,2480
      
-
  
Depreciation and amortization
    
12,247,245
      
1,158,374
      
37,234,126
      
2,463,549
  
Total operating expenses
    
63,928,32852,117,507
      
9,965,745
      
190,329,582168,736,913
      
21,709,533
  
NET OPERATING LOSS
    
(39,179,557) (27,368,73
)
    
(3,946,032
)
    
(107,702,303)(86,109,63
)
    
(7,803,218
)
OTHER INCOME (EXPENSE):
                                
Interest expense
    
(3,393,067)(2,530,56
)
    
(2,460,668
)
    
(10,813,302)(9,950,80
)
    
(2,594,751
)
Loss on debt extinguishment
    
(28,697,021(15,316,51
)
    
-
      
(28,697,021)(15,316,51
)
    
-
  
Impairment on assets held for sale
    
(4,159,004
)
    
-
      
(4,159,004
)
    
-
  
Gain on extinguishment of PPP loan
    
-
      
-
      
841,670
      
638,800
  
Changes in fair value of warrant liabilities
    
1,302,065
      
92,979
      
1,302,065
      
(98,498
)
Realized gain on sale of derivative contract
    
90,953
      
-
      
90,953
      
-
  
Loss on disposal of fixed assets
    
0(461,940
)
    
-
      
0(2,231,540
)
    
-
  
Realized loss on sale of miner assets
    
0
      
-
      
0(8,012,248
)
    
-
  
Changes in fair value of forward sale derivative
    
-
      
-
      
3,435,639
      
-
  
Changes in fair value of convertible note
    
(1,204,739
)
    
-
      
(2,167,500
)
    
-
  
Waste coal tax credits
    
-
      
23,356
      
53,443
      
47,152
  
Other
    
20,000
      
10,336
      
50,000
      
48,521
  
Total other income (expense)
    
(36,040,813)(22,259,74
)
    
(2,333,997
)
    
(40,063,057)(36,063,83
)
    
(1,958,776
)
NET LOSS
    
(75,220,370) (49,628,47
)
    
(6,280,029
)
    
(147,765,360)(122,173,46
)
    
(9,761,994
)
NET LOSS attributable to noncontrolling interest
    
(44,000,155)(29,030,17
))
    
(4,328,460
)
    
(86,435,347)(71,465,37
)
    
(6,730,940
)
NET LOSS attributable to Stronghold Digital Mining, Inc
  
$
(31,220,215)(20,598,30
))
  
$
(1,951,569
)
  
$
(61,330,013)(50,708,09
)
  
$
(3,031,054
)
NET LOSS per share attributable to Class A common shareholders
                                
Basic
  
$
(1.27)(0.8
)
  
$
(6.05
)
  
$
(2.82)(2.3
)
  
$
(17.05
)
Diluted
  
$
(1.27)(0.8
)
  
$
(6.05
)
  
$
(2.82)(2.3
)
  
$
(17.05
)
Weighted average number of Class A common shares outstanding
                                
Basic
    
24,631,62624,098,289
      
322,342
      
21,772,05721,592,286
      
173,532
  
Diluted
    
24,631,62624,098,289
      
322,342
      
21,772,05721,592,286
      
173,532
  

STRONGHOLD DIGITAL MINING, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   
Nine months ended,
  
   
September 30, 2022
    
September 30, 2021
  
   
(unaudited)
    
(unaudited)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net loss
  
$
 (147,765,360(122,173,469)
 
$
(9,761,994
)
Adjustments to reconcile net loss to net cash flows from operating activities:
                
Depreciation and amortization
    
37,234,126
      
2,463,549
  
Gain on extinguishment of PPP loan
    
(841,670
)
    
(638,800
)
Realized gain on sale of derivative contract
    
(90,953) 0
   
-
  
Loss on disposal of fixed assets
    
2,231,540
      
-
  
Write-off of bad debts
    
-
      
150,1620
  
Realized loss on sale of miner assets
    
8,012,248
      
-
  
Amortization of debt issuance costs
    
2,681,0392,681,038
      
643,0250
  
Stock-based compensation
    
9,123,1249,073,124
      
1,246,460269,932
  
Loss on debt extinguishment
    
28,697,0210
      
-
  
Impairment on assets held for sale
    
4,159,0040
      
-
  
Impairments on equipment deposits
    
12,228,742
      
-
  
Impairments on miner assets
    
16,600,0004,990,000
      
-
  
Changes in fair value of warrant liabilities
    
(1,302,065
)
    
98,498
  
Changes in fair value of forward sale derivative
    
(3,435,639
)
    
-
  
Forward sale contract prepayment
    
970,000
      
-
  
Changes in fair value of convertible note
    
2,167,500
      
-
  
Accretion of asset retirement obligation
    
18,253
      
-
  
(Increase) decrease in digital currencies:
                
Mining revenue
    
(50,715,424
)
    
(3,901,426
)
Net proceeds from sale of digital currencies
    
46,209,82246,209,821
      
434,529
  
Impairments on digital currencies
    
8,176,868
      
466,286375,246
  
(Increase) decrease in assets:
                
Accounts receivable
    
1,336,817
      
(242,489)(710,72
)
Prepaid insurance
    
5,321,5215,321,522
      
(278,538) 0
Due from related parties
    
(58,735)(856,15
))
    
302,973
  
Inventory
    
55,538
      
29,29177,071
  
Other current assets
    
(866,298
)
    
(3,713,832)(134,79
)
Increase (decrease) in liabilities:
                
Accounts payable
    
4,878,6005,312,778
      
21,141,0555,550,196
  
Due to related parties
    
781,485781,486
      
37,280319,071
  
Accrued liabilities, excluding sales tax liabilities
    
(407,909)(596,04
))
    
3,832,36258,866
  
Contract liabilities
    
(55,742
)
    
147,836147,841
  
NET CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES
    
(14,656,547
)
    
12,456,227(5,049,958
)
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchase of land
    
-
      
(29,919
)
Purchases of property, plant and equipment
    
(68,052,422
)
    
(34,735,332)(12,738,79
)
Proceeds from sale of equipment deposits
    
13,844,780
      
-
  
Equipment purchase deposits - net of future commitments
    
(13,656,428
)
    
(85,624,852)(78,688,46
)
NET CASH FLOWS USED IN INVESTING ACTIVITIES
    
(67,864,070
)
    
(120,390,103)(91,457,17
)
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Repayments of debt
    
(34,490,545
)
    
(7,811,150)(188,16
)
Repayments of financed insurance premiums
    
(3,992,336
)
    
-
  
Proceeds from debt, net of debt issuance costs paid in cash
    
97,337,454
      
-
  
Proceeds from promissory note
    
-
      
38,987,33339,100,000
  
Proceeds from equipment financing agreement
    
-
      
24,157,1780
  
Proceeds from PPP loan
    
-
      
841,670
  
Proceeds from private placements, net of issuance costs paid in cash
    
8,599,440
      
97,064,318
  
Repayments of EIDL loan
    
-
      
(150,000
)
Repayments of related-party debt
    
-
      
(2,024,250
)
Buyout of Aspen Interest
    
-
      
(2,000,000
)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
    
67,454,013
      
149,065,099132,643,570
  
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
(15,066,604
)
    
41,131,22336,136,436
  
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
    
31,790,115
      
303,187
  
CASH AND CASH EQUIVALENTS - END OF PERIOD
  
$
16,723,511
    
$
41,434,41036,439,623
  
 
Third Quarter 2022 Financial Results
 
Revenues in the third quarter of 2022 increased 311% to $24.7 million compared to $6.0 million in the same quarter a year ago. This is primarily due to a $10.2 million increase in cryptocurrency mining revenue from deploying additional miners, and a $9.1 million increase in energy revenue driven by higher prevailing power prices per MW and higher MW generation as a result of the November 2021 Panther Creek Plant acquisition.

Operating expenses in the third quarter of 2022 increased 541% 423% to $63.9 million $52.1 million compared to $10.0 million in the same quarter a year ago due to several factors. Operations and maintenance expense increased by $16.7 million $16.6 million as a result of the November 2021 Panther Creek Plant acquisition, higher labor and maintenance costs related to the previously disclosed planned maintenance, and the ramp up of cryptocurrency mining operations. Depreciation and amortization increased by $11.1 million primarily from deploying additional miners and transformers. General and administrative costs increased by $7.9 million $8.2 million due to legal and professional fees, insurance costs, and compensation as the Company continues to organize and scale operations. Fuel expenses increased by $6.1 million driven by higher MW generation, primarily due to the November 2021 Panther Creek Plant acquisition, and increased fuel delivery costs from higher diesel prices.

Net loss for the third quarter of 2022 was ($75.2) million ($49.6) million compared to a net loss of ($6.3) million for the same quarter a year ago.

Adjusted EBITDA for the third quarter of 2022 was a loss of ($3.0) million, compared to $0.0 million for the same quarter a year ago (see reconciliation of Non-GAAP financial measures).

***

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any filing under the Securities Act of 1933 unless specifically identified therein as being incorporated therein by reference.
 
Item 9.01.
Financial Statements and Exhibits.

(d)
Exhibits.

Exhibit No.
  
Description
 
Corrected version of the press release issued by Stronghold Digital Mining, Inc. dated as of November 9, 2022.
104
  
Cover Page Interactive Data File (embedded within the Inline XBRL document).
 
* Furnished herewith.
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Stronghold Digital Mining, Inc.
 
 
 
 
By:
 /s/ Gregory A. Beard
 
 
 Gregory A. Beard
 
 
 Chief Executive Officer and Co-Chairman
 
 
 
 Date: November 10, 2022
 
 


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