Stronghold Digital Mining, Inc. (Nasdaq:
SDIG) (“Stronghold,” or the “Company”) today reported
financial results for its fourth quarter and full year ended
December 31, 2021, and provided an operational update.
Fourth Quarter and Year-End 2021 and
Recent Operational and Financial Highlights
- Removed
approximately 264,561 tons of coal refuse and returned
approximately 141,876 tons of beneficial use ash to waste coal
sites during the fourth quarter, facilitating the remediation of
these sites.
- As of December
31, 2021, we had received a total of 14,700 miners with total hash
rate capacity of approximately 1.3 exahash per second (“EH/s”). As
of March 24, 2022, we had received approximately 25,200 miners with
total hash rate capacity of approximately 2.3 EH/s.
- As of March 24,
2022, we have entered into purchase agreements for an additional
29,400 miners to be delivered with total hash rate capacity of
approximately 3.0 EH/s, including 11,700 miners with total hash
rate capacity of approximately 1.2 EH/s associated with the delayed
and uncertain order from MinerVa Semiconductor Corp.
(“MinerVa”).
- On March 28, 2022,
we restructured our existing data center hosting agreement on
favorable terms to obtain an additional 2,675 miners at a cost of
$37.50 per terahash per second and temporarily reduced the profit
share to be received by the partner while incorporating performance
thresholds until the data center build-out is complete.
- Secured
approximately $54 million in equipment financing on December 15,
2021 with NYDIG ABL, LLC (“NYDIG”).
- Initially
amended the existing equipment financing agreement with WhiteHawk
Finance LLC (the “WhiteHawk Agreement”) to extend the final MinerVa
delivery date from December 31, 2021 to April 30, 2022 and
subsequently amended the WhiteHawk Agreement to remove all MinerVa
miners from the collateral package in exchange for other miners and
a $25 million increase in the total advance.
- Provided
thorough and transparent response to congressional inquiry
addressed to U.S. Bitcoin miners regarding their environmental
footprints.
- Total liquidity
at March 28, 2022 is approximately $50 million, comprising
approximately $27 million in cash, including the approximately $24
million funded by WhiteHawk Finance LLC on March 28, 2022 under the
amended WhiteHawk Agreement, approximately $5 million in
unrestricted digital currencies and approximately $18 million in
availability under existing financing agreements.
Management Commentary
“We built Stronghold and consummated our IPO
with the goal of becoming a leading Bitcoin miner, with core
principles of being vertically integrated, delivering low costs,
and having positive impacts on the environment and the communities
in which we operate; these principles remain intact,” said Greg
Beard, co-chairman and chief executive officer of Stronghold. “Over
the past few months, we have faced significant headwinds in our
operations which have materially impacted recent financial
performance and have led us to re-assess our near-term growth
plans. We no longer believe targeting 8.0 EH/s by the end of 2022
is achievable, given the current circumstances, and we will focus
on installing and optimizing the performance of the miners that we
have already ordered while maximizing our financial
flexibility.”
“Specific to our contract with MinerVa,
deliveries have been well short of the timelines in the contract
and subsequently communicated to us by MinerVa. We are continuously
evaluating all means of extracting value because of this
shortfall.”
“We remain steadfast in our focus on creating
shareholder value and leveraging our low-cost power assets and our
highly experienced management team to continue building a great and
enduring company.”
Cryptocurrency Mining
Update
As of December 31, 2021, Stronghold had received
approximately 14,700 miners with total hash rate capacity of 1.3
EH/s, of which more than 8,000 miners were hashing over 0.8 EH/s.
For the fourth quarter of 2021, Stronghold averaged a hash rate of
approximately 0.3 EH/s, and, for the first quarter of 2022, the
Company estimates it will average a hash rate of approximately 0.9
EH/s. As of March 24, 2022, the Company had received approximately
25,200 miners with total hash rate capacity of approximately 2.3
EH/s, of which approximately 20,500 miners were hashing
approximately 1.9 EH/s.
The Company’s hash rate has been negatively
impacted by delays in miner deliveries, delays in datacenter
buildout, and operational challenges at its Scrubgrass power plant
(the “Scrubgrass Plant”). To date, Stronghold has only received
approximately 3,300 of the total 15,000 miners ordered from
MinerVa, despite an initial delivery deadline of December 31, 2021.
This delivery deadline was later revised to April 30, 2022 based on
communications with MinerVa. Stronghold continues to have active
dialogue with MinerVa regarding its delivery schedule and
operational capabilities, but the Company does not have sufficient
information from MinerVa to provide an update or a timeline on
future deliveries, or if the Company can expect any future
deliveries. Additionally, the performance of MinerVa’s miners has
been below expectations, with hash rates ranging from 50% to 70% of
the expected capacity, compared to 90%+ for a standard performing
machine. The Company is actively working to improve MinerVa miner
performance and evaluating all appropriate avenues to extract value
from the MinerVa miners and contract. The most recent batch of
MinerVa machines are showing improved performance; however, the
Company is evaluating all available remedies at its disposal.
Going forward, Stronghold plans to put a greater
emphasis on spot-market miner purchases for future miner
acquisitions. This approach is intended to mitigate risks
associated with delivery delays, manufacturers and fundamentals of
the Bitcoin market, including future Bitcoin pricing and network
hash rate. To date, the Company has experienced success with this
component of its miner procurement strategy, as miners from several
open-market purchases have been installed within weeks from
entering into purchase agreements.
Excluding MinerVa, Stronghold has approximately
21,900 miners delivered, of which approximately 18,500 miners are
hashing, and approximately 17,700 additional miners ordered with
hash rate capacity of approximately 1.8 EH/s. This includes 12,000
Bitmain S19j Pro miners, which are contracted to be delivered in
six equal monthly installments beginning in April 2022, and 1,800
Bitmain S19 XP miners, which are contracted to be delivered in six
equal monthly installments beginning in July 2022. Total hash rate
capacity associated with these deliveries from Bitmain Technologies
Limited is over 1.4 EH/s. Additionally, the Company expects to
receive approximately 2,300 miners from Northern Data PA, LLC
(“Northern Data”) and approximately 1,600 miners from Cryptech
Solutions, Inc. associated with the purchases announced on December
20, 2021. On March 28, 2022, we restructured our existing data
center hosting agreement on favorable terms to obtain an additional
2,675 miners at cost of $37.50 per terahash per second and an
increased share of the profitability of the miners operating under
this agreement until key operational performance thresholds are met
and the data center build-out is complete.
Stronghold continues to expand its datacenter
capacity as part of its vertically integrated business model. The
Company has manufactured 101 one-megawatt (“MW”) StrongBoxes, its
modular datacenter containers, as of March 24, 2022. While
manufacturing of StrongBoxes has progressed as planned, there have
been delays in third-party datacenter deliveries associated with a
joint venture, which contributed to lower hash rates in the fourth
quarter of 2021 and the beginning of 2022. To date, only four of 24
datacenter containers have been commissioned under the joint
venture. Stronghold has mitigated these impacts by installing the
joint venture miners in StrongBoxes, where Stronghold does not pay
a profit share, and expects this approach to offset any future
delays.
As of December 31, 2021 and March 28, 2022
Stronghold held on its balance sheet approximately 182 Bitcoin and
approximately 340 Bitcoin, respectively.
Power Assets Update
Stronghold owns and operates approximately 165
MW of power generation capacity through its Scrubgrass Plant (83.5
MW) and its Panther Creek power plant (the “Panther Creek Plant”)
(80 MW), both coal refuse reclamation-to-energy facilities located
in Pennsylvania. These plants generate power from coal refuse,
which is a waste byproduct of legacy coal mining operations. The
Commonwealth of Pennsylvania has designated coal refuse as a Tier
II Alternative Energy Source, making the facilities eligible to
earn renewable energy credits.
During the fourth quarter of 2021 and continuing
into 2022, the Scrubgrass Plant had downtime that was greater than
anticipated and operated at a lower utilization than expected,
driven largely by mechanical issues. The upgrades that are
necessary to improve utilization of the Scrubgrass Plant have taken
longer than expected and are more extensive than originally
anticipated; although Stronghold expects these investments to be
completed in the second half of 2022. Once finished, the Scrubgrass
Plant is expected to be operational at nameplate capacity with high
uptime and low operating costs, in line with original expectations,
however, we expect to incur additional maintenance expenses of
approximately $5 million over the next several months.
The Panther Creek Plant’s operational results,
including power generation, uptime and operating costs have been in
line with expectations and the Company has prioritized installing
miners at the Panther Creek Plant due to its currently better
performance over the Scrubgrass Plant. The Company expects hash
rate, capital efficiency and cash flow to be further optimized for
the Panther Creek Plant over the course of 2022.
Stronghold estimates the capacity of its current
power assets is sufficient to power over 4 EH/s of mining capacity.
The Company continues to evaluate opportunities to acquire
additional power generation assets, including a third coal refuse
reclamation facility with 112 MW of power generation capacity that
has been under a non-binding letter of intent to purchase since
2021.
Fourth Quarter 2021 Financial
Results
Revenues in the fourth quarter increased 1,721%
to $17.0 million compared to $0.9 million in the same quarter a
year ago. The increase is primarily attributable to higher energy
generation and crypto asset mining revenues.
Operating expenses in the fourth quarter
increased 1,641% to $31.3 million compared to $1.8 million in the
same quarter a year ago. The increase is primarily attributable to
higher operating costs at the Company’s power assets to facilitate
higher and more consistent power generation capacity for energy
operations and cryptocurrency operations, in addition to higher
general and administrative costs as Stronghold scales its
organizational structure.
Net loss for the fourth quarter of 2021 was
($17.5) million compared to net income of $0.2 million for the same
quarter a year ago.
Adjusted EBITDA for the fourth quarter was $0.3
million, compared to ($0.7) million for the same quarter a year ago
(see reconciliation of Non-GAAP financial measures).
Net cash used by operating activities in the
fourth quarter was ($17.5) million compared to $0.9 million of net
cash provided by operating activities in the same quarter a year
ago.
Stronghold ended the quarter with approximately
$31.8 million in cash and approximately $68.5 million in debt.
Full Year 2021 Financial
Results
Revenues for the full year 2021 increased 651%
to $30.9 million compared to $4.1 million in the prior year period.
The increase is primarily attributable to higher energy generation
and crypto asset mining revenues.
Operating expenses for the full year 2021
increased 714% to $53.1 million compared to $6.5 million in the
prior year period. The increase is primarily attributable to higher
operating costs at the Company’s power assets to facilitate higher
and more consistent power generation capacity for energy and
cryptocurrency operations, in addition to higher general and
administrative costs as Stronghold scales its organizational
structure.
Net loss for the full year 2021 of ($27.3)
million compared to a net loss of ($0.1) million in the prior year
period.
Adjusted EBITDA for the full year 2021 was
($1.6) million, which is essentially unchanged compared to ($1.8)
million for the prior year period (see reconciliation of Non-GAAP
financial measures).
Net cash used by operating activities for the
full year 2021 was ($5.7) million compared to $0.6 million of net
cash provided by operating activities in the prior year period.
Liquidity and Capital
Resources
Stronghold ended 2021 with total liquidity of
approximately $75 million, comprising approximately $32 million in
cash, approximately $8 million in unrestricted digital currencies
and approximately $35 million in availability under its existing
equipment financing agreements. Since the end of 2021, the Company
has entered into a new equipment financing agreement with NYDIG for
approximately $13 million. The Company also amended the WhiteHawk
Agreement, increasing the total advance amount by $25 million,
which amount was drawn immediately in full. Stronghold’s total
liquidity as of March 28, 2022 is approximately $50 million,
comprising approximately $27 million in cash, including the
approximately $24 million funded by WhiteHawk Finance LLC on March
28, 2022 under the amended WhiteHawk Agreement, approximately $5
million in unrestricted digital currencies and approximately $18
million in availability under existing equipment financing
agreements. Stronghold believes its liquidity position, combined
with expected operating cash flow and the proceeds of additional
financings, will be sufficient to meet all existing commitments and
fund operations. The Company also believes that incremental
liquidity can be created through proceeds related to Bitcoin miner
fleet management and optimization, including potential miner sales
and through additional equipment financing agreements, if
necessary.
Operational challenges and delays in receiving
miners impacted the Company’s cash on hand and growth plans. In
aggregate, the Company estimates these factors have negatively
impacted its cash on hand by approximately $40 million to $45
million as of March 24, 2022 compared to its previous internal
estimates.
Financial and Operational
Guidance
Delays in miner deliveries and datacenter
buildout, along with operational challenges at the Scrubgrass
Plant, have negatively impacted the Company’s 2022 cash flow and
capital expenditure expectations. Accordingly, Stronghold believes
a change to its near-term growth forecast is warranted and is
therefore no longer targeting an 8.0 EH/s hash rate exiting 2022.
To maximize flexibility and preserve capital, Stronghold plans to
receive and install its existing miner deliveries at its two
company-owned power assets. Based on current orders and assuming
operations of received miners that perform in line with
expectations, Stronghold estimates achieving a hash rate capacity
of up to 5.5 EH/s at year end, if the remaining MinerVa miners are
delivered, and 4.3 EH/s if no additional MinerVa miners are
delivered. The Company is providing guidance of installing 4.1 EH/s
of hash rate capacity by the end of the year, which is based on the
capacity of the data centers at its Scrubgrass Plant and Panther
Creek Plant; however, this may be adversely impacted by factors
discussed herein and in the risk factors to our Annual Report on
Form 10-K filed on March 29, 2022. The Company also estimates that
upgrades at the Scrubgrass Plant will be completed in the second
half of 2022, which should allow the Scrubgrass Plant to operate at
expected utilization.
Conference Call
Stronghold will host a conference call today,
March 29, 2022, at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time
with an accompanying presentation) to discuss these results. A
question-and-answer session will follow management's
presentation.
To participate, please dial the appropriate
number at least ten minutes prior to the start time and ask for the
Stronghold Digital Mining conference call.
U.S. dial-in number: 1-844-705-8583
International number: 1-270-215-9880Conference ID: 2964549
The conference call will broadcast live and be
available for replay here.
A replay of the call will be available after
8:00 p.m. Eastern time on the same day through April 12, 2022 at
8:00 p.m. Eastern time.
Toll-free replay number: 1-855-859-2056
International replay number: 1-404-537-3406Conference ID:
2964549
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 Plant and Panther Creek Plant, both of which are
low-cost, environmentally beneficial coal refuse power generation
facilities in Pennsylvania.
Cautionary Statement Concerning
Forward-Looking StatementsCertain statements contained in
this press release 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.
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; our ability to
raise capital to fund business growth; our ability to enter into
purchase agreements and acquisitions; 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 avail ourselves of tax credits for the clean-up of
coal refuse piles; and legislative or regulatory changes, and
liability under, or any future inability to comply with, existing
or future energy regulations or requirements. 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 March 29, 2022. Any forward-looking statement 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, whether because of new
information, future events, or otherwise.
STRONGHOLD
DIGITAL MINING, INC. |
CONSOLIDATED
BALANCE SHEETS |
|
|
|
|
December 31, 2021 |
|
December 31, 2020 |
|
|
|
CURRENT ASSETS |
|
|
Cash |
$ |
31,790,115 |
|
|
$ |
303,187 |
|
Digital currencies |
|
7,718,221 |
|
|
|
228,087 |
|
Digital currencies restricted |
|
2,699,644 |
|
|
|
- |
|
Accounts receivable |
|
2,111,855 |
|
|
|
65,900 |
|
Due from related party |
|
- |
|
|
|
302,973 |
|
Prepaid insurance |
|
6,301,701 |
|
|
Inventory |
|
3,372,254 |
|
|
|
396,892 |
|
Other current assets |
|
661,640 |
|
|
|
65,831 |
|
Total Current Assets |
|
54,655,430 |
|
|
|
1,362,870 |
|
EQUIPMENT DEPOSITS |
|
130,999,398 |
|
|
|
- |
|
PROPERTY, PLANT AND EQUIPMENT, NET |
|
166,657,155 |
|
|
|
7,814,199 |
|
LAND |
|
1,748,440 |
|
|
|
- |
|
BONDS |
|
211,958 |
|
|
|
185,245 |
|
SECURITY DEPOSITS |
|
348,888 |
|
|
|
- |
|
TOTAL ASSETS |
$ |
354,621,269 |
|
|
$ |
9,362,314 |
|
CURRENT LIABILITIES |
|
|
Current portion of long-term debt-net of discounts/issuance
fees |
|
50,099,372 |
|
|
|
449,447 |
|
Forward sale contract |
|
7,116,488 |
|
|
|
- |
|
Related-party notes |
|
- |
|
|
|
2,024,250 |
|
Accounts payable |
|
28,650,659 |
|
|
|
8,479,187 |
|
Due to related parties |
|
1,430,660 |
|
|
|
698,338 |
|
Accrued liabilities |
|
5,053,957 |
|
|
|
828 |
|
Total Current Liabilities |
|
92,351,136 |
|
|
|
11,652,050 |
|
LONG-TERM LIABILITIES |
|
|
Asset retirement obligation |
|
973,948 |
|
|
|
446,128 |
|
Contract liabilities |
|
187,835 |
|
|
|
40,000 |
|
Economic Injury Disaster Loan |
|
- |
|
|
|
150,000 |
|
Paycheck Protection Program Loan |
|
841,670 |
|
|
|
638,800 |
|
Long-term debt-net of discounts/issuance fees |
|
18,378,841 |
|
|
|
482,443 |
|
Total Long-Term Liabilities |
|
20,382,294 |
|
|
|
1,757,371 |
|
Total Liabilities |
|
112,733,430 |
|
|
|
13,409,421 |
|
Commitments and contingencies |
|
|
Common Stock - Class V, $0.0001 par value; 34,560,000 shares
authorized and 27,057,600 shares issued and outstanding |
|
301,052,617 |
|
|
|
- |
|
Total redeemable common stock |
|
301,052,617 |
|
|
|
- |
|
STOCKHOLDERS' DEFICIT & PARTNERS' DEFICIT |
|
|
General partners |
|
- |
|
|
|
(2,710,323 |
) |
Limited partners |
|
- |
|
|
|
(1,336,784 |
) |
Non-controlling - Series A convertible preferred units with shares
of Class V common stock. 1,152,000 issued and outstanding as of
December 31, 2021 |
|
37,670,161 |
|
|
|
- |
|
Common Stock - Class A, $0.0001 par value; 685,440,000 shares
authorized and 20,016,067 shares issued and outstanding |
|
2,002 |
|
|
|
- |
|
Accumulated deficit |
|
(338,709,688 |
) |
|
|
- |
|
Additional paid-in capital |
|
241,872,747 |
|
|
|
- |
|
Stockholders' deficit or partners' deficit |
|
(59,164,778 |
) |
|
|
(4,047,107 |
) |
Total |
|
241,887,839 |
|
|
|
(4,047,107 |
) |
TOTAL LIABILITIES, REDEEMABLE COMMON AND
DEFICIT |
$ |
354,621,269 |
|
|
$ |
9,362,314 |
|
|
|
|
STRONGHOLD
DIGITAL MINING, INC. |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended, |
|
Twelve
months ended, |
|
|
Dec 31, 2021 |
|
Dec 31, 2020 |
|
Dec 31, 2021 |
|
Dec 31, 2020 |
|
|
|
|
|
|
|
|
|
OPERATING REVENUES |
|
|
|
|
|
|
|
|
Energy |
|
$ |
5,995,244 |
|
|
$ |
5,454 |
|
|
$ |
11,870,817 |
|
|
$ |
518,397 |
|
Capacity |
|
|
1,886,645 |
|
|
|
614,203 |
|
|
|
4,238,921 |
|
|
|
2,816,457 |
|
Cryptocurrency hosting |
|
|
555,247 |
|
|
|
252,413 |
|
|
|
2,297,489 |
|
|
|
252,413 |
|
Cryptocurrency mining |
|
|
8,593,155 |
|
|
|
118,001 |
|
|
|
12,494,581 |
|
|
|
339,456 |
|
Other |
|
|
(21,468 |
) |
|
|
(56,210 |
) |
|
|
13,329 |
|
|
|
191,661 |
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
17,008,822 |
|
|
|
933,860 |
|
|
|
30,915,137 |
|
|
|
4,118,384 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Fuel |
|
|
6,679,122 |
|
|
|
433,218 |
|
|
|
13,190,828 |
|
|
|
389,633 |
|
Operations and maintenance |
|
|
9,452,590 |
|
|
|
709,603 |
|
|
|
15,492,763 |
|
|
|
3,305,833 |
|
General and administrative |
|
|
8,577,949 |
|
|
|
493,800 |
|
|
|
14,955,626 |
|
|
|
2,269,525 |
|
Impairments on digital currencies |
|
1,403,988 |
|
|
|
- |
|
|
|
1,870,274 |
|
|
|
- |
|
Depreciation and amortization |
|
|
5,144,172 |
|
|
|
158,421 |
|
|
|
7,607,721 |
|
|
|
558,630 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
31,257,821 |
|
|
|
1,795,041 |
|
|
|
53,117,213 |
|
|
|
6,523,621 |
|
|
|
|
|
|
|
|
|
|
NET
OPERATING LOSS |
|
|
(14,248,999 |
) |
|
|
(861,181 |
) |
|
|
(22,202,076 |
) |
|
|
(2,405,237 |
) |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
Interest expense |
|
|
(2,027,904 |
) |
|
|
(177,633 |
) |
|
|
(4,622,655 |
) |
|
|
(205,480 |
) |
Gain on extinguishment of EIDL advance |
|
- |
|
|
|
|
|
- |
|
|
|
- |
|
Gain on extinguishment of PPP loan |
|
- |
|
|
|
10,000 |
|
|
|
638,800 |
|
|
|
10,000 |
|
Realized gain (loss) on sale of digital currencies |
|
- |
|
|
|
26,869 |
|
|
|
149,858 |
|
|
|
31,810 |
|
Changes in fair value of warrant liabilities |
|
(1,045,311 |
) |
|
|
- |
|
|
|
(1,143,809 |
) |
|
|
- |
|
Changes in fair value of forward sale derivative |
|
(116,488 |
) |
|
|
|
|
(116,488 |
) |
|
|
Derivative contracts, net |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,207,131 |
|
Waste coal credit |
|
|
600 |
|
|
|
1,180,710 |
|
|
|
47,752 |
|
|
|
1,188,210 |
|
Other |
|
|
(55,233 |
) |
|
|
- |
|
|
|
(6,712 |
) |
|
|
28,572 |
|
|
|
|
|
|
|
|
|
|
Total other income |
|
|
(3,244,336 |
) |
|
|
1,039,946 |
|
|
|
(5,053,253 |
) |
|
|
2,260,243 |
|
NET
LOSS |
|
$ |
(17,493,335 |
) |
|
$ |
178,765 |
|
|
$ |
(27,255,329 |
) |
|
$ |
(144,994 |
) |
|
|
|
|
|
|
|
|
|
NET LOSS - attributable to predecessor |
$ |
(238,948 |
) |
|
|
|
$ |
(238,948 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET LOSS - attributable to non-controlling
interest |
$ |
(9,072,294 |
) |
|
|
|
$ |
(15,803,234 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET LOSS - Stronghold Digital Mining, Inc |
$ |
(8,182,092 |
) |
|
|
|
$ |
(11,213,147 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET LOSS attributable to Class A Common
Shares |
|
|
|
|
|
|
|
Basic |
|
$ |
(0.52 |
) |
|
|
|
$ |
(2.03 |
) |
|
|
Diluted |
|
$ |
(0.52 |
) |
|
|
|
$ |
(2.03 |
) |
|
|
Class A Common Shares Outstanding |
|
|
|
|
|
|
|
Basic |
|
|
16,093,014 |
|
|
|
|
|
5,518,752 |
|
|
|
Diluted |
|
|
16,093,014 |
|
|
|
|
|
5,518,752 |
|
|
|
|
|
|
|
|
|
|
|
|
STRONGHOLD
DIGITAL MINING, INC. |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
|
|
|
|
December 31, 2021 |
|
December 31, 2020 |
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
Net loss |
$ |
(27,255,329 |
) |
|
$ |
(144,994 |
) |
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: |
|
|
Depreciation and Amortization |
|
7,607,721 |
|
|
|
558,630 |
|
Accretion of asset retirement obligation |
|
- |
|
|
|
21,821 |
|
Forgiveness of PPP loan |
|
(638,800 |
) |
|
|
(10,000 |
) |
Realized loss on sale of derivatives |
|
- |
|
|
|
505,747 |
|
Realized gain on sale of digital currency |
|
(149,858 |
) |
|
|
(31,810 |
) |
Write-off of bad debts |
|
244,924 |
|
|
Amortization of debt issuance costs |
|
1,404,732 |
|
|
|
- |
|
Stock Compensation |
|
4,015,324 |
|
|
|
- |
|
Impairments on digital currencies |
|
1,870,274 |
|
|
|
- |
|
Changes in fair value of warrant liabilities |
|
1,143,809 |
|
|
|
- |
|
Changes in fair value of forward sale derivative |
|
116,488 |
|
|
|
- |
|
(Increase) decrease in assets: |
|
|
Digital currencies |
|
(12,494,581 |
) |
|
|
(339,456 |
) |
Accounts receivable |
|
(1,176,239 |
) |
|
|
70,618 |
|
Prepaid Insurance |
|
588,808 |
|
|
|
- |
|
Due from related party |
|
302,973 |
|
|
|
(302,975 |
) |
Inventory |
|
(1,417,689 |
) |
|
|
132,591 |
|
Other current assets |
|
(2,619,911 |
) |
|
|
(7,871 |
) |
Increase (decrease) in liabilities: |
|
|
Accounts payable |
|
17,395,556 |
|
|
|
546,719 |
|
Due to related parties |
|
268,182 |
|
|
|
(448,868 |
) |
Accrued liabilities |
|
4,981,013 |
|
|
|
(2,929 |
) |
Contract liabilities |
|
147,835 |
|
|
|
40,000 |
|
NET
CASH PROVIDED BY (USED) OPERATING ACTIVITIES |
|
(5,664,768 |
) |
|
|
587,223 |
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
Proceeds from sale of digital currencies |
|
584,387 |
|
|
|
158,615 |
|
Acquisition of Panther Creek, net of cash acquired |
|
(3,914,362 |
) |
|
|
- |
|
Purchase of land |
|
(21,439 |
) |
|
|
- |
|
Purchase of reclamation bond |
|
(26,712 |
) |
|
|
- |
|
Purchase of property, plant and equipment; including construction
in progress |
|
(122,640,861 |
) |
|
|
(1,986,401 |
) |
Equipment purchase deposits |
|
(130,999,398 |
) |
|
|
- |
|
NET
CASH USED IN INVESTING ACTIVITIES |
|
(257,018,385 |
) |
|
|
(1,827,786 |
) |
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
Payments on long-term debt |
|
(16,283,900 |
) |
|
|
(292,292 |
) |
Payments on financed insurance premiums |
|
(2,590,788 |
) |
|
|
- |
|
Proceeds from promissory note |
|
39,100,000 |
|
|
|
- |
|
Proceeds from master equipment financing agreements |
|
41,435,466 |
|
|
|
- |
|
Proceeds from equipment financed |
|
517,465 |
|
|
|
- |
|
Proceeds from PPP loan |
|
841,670 |
|
|
|
638,800 |
|
Proceeds from private placements net of fees |
|
96,786,629 |
|
|
|
- |
|
Initial Public Offering proceeds, net of fees |
|
131,537,789 |
|
|
|
- |
|
(Payments) proceeds on EIDL Loan |
|
(150,000 |
) |
|
|
160,000 |
|
(Repayments) proceeds on related-party notes |
|
(2,024,250 |
) |
|
|
2,024,250 |
|
Buyout of Aspen Interest |
|
(2,000,000 |
) |
|
|
- |
|
Forward sale contract prepayment |
|
7,000,000 |
|
|
|
- |
|
Distributions paid |
|
- |
|
|
|
(1,121,151 |
) |
NET
CASH PROVIDED BY FINANCING ACTIVITIES |
|
294,170,081 |
|
|
|
1,409,607 |
|
NET
INCREASE IN CASH |
|
31,486,928 |
|
|
|
169,044 |
|
CASH
- BEGINNING OF YEAR |
|
303,187 |
|
|
|
134,143 |
|
CASH
- END OF YEAR |
$ |
31,790,115 |
|
|
|
303,187 |
|
|
|
|
|
|
|
Use and Reconciliation of Non-GAAP
Financial MeasuresThis 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, impairment of 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, gain on extinguishment of debt, realized gain or loss on
sale of digital currencies, waste coal credits, commission on sale
of ash, 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,
impairment, and realized gains and losses on sale of long-term
assets) and other items (such as one-time transaction costs,
expenses related to stock-based compensation, and unrealized 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-K for the year ended December 31, 2021.
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 December 31, |
|
Twelve
months ended December 31, |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
(in thousands) |
|
(in thousands) |
Net
Income (loss)� |
$ |
(17,493.3 |
) |
|
$ |
178.8 |
|
|
$ |
(27,255.3 |
) |
|
$ |
(145.0 |
) |
Interest,
net |
|
2,027.9 |
|
|
|
177.6 |
|
|
|
4,622.7 |
|
|
|
202.5 |
|
Income
Taxes |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Depreciation
and amortization. |
|
5,144.2 |
|
|
|
158.4 |
|
|
|
7,607.7 |
|
|
|
558.6 |
|
Impairment
of digital currencies |
|
1,404.0 |
|
|
|
- |
|
|
|
1,870.3 |
|
|
|
- |
|
Realized
gains and losses on the sale of long-term assets |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
One time
non-recurring expenses |
|
5,282.7 |
|
|
|
- |
|
|
|
7,070.4 |
|
|
|
- |
|
Expenses
related to stock-based compensation |
|
2,768.8 |
|
|
|
- |
|
|
|
4,015.3 |
|
|
|
- |
|
(Gains)/Losses on derivative contracts |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,207.1 |
) |
Waste coal
credits |
|
(0.6 |
) |
|
|
(1,180.7 |
) |
|
|
(47.8 |
) |
|
|
(1,188.2 |
) |
Gain on
extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
(638.8 |
) |
|
|
- |
|
Realized
(gain)/loss on sale of digital currencies |
|
- |
|
|
|
(26.9 |
) |
|
|
(149.9 |
) |
|
|
(31.8 |
) |
Changes in
fair value of forward sale derivative |
|
116.5 |
|
|
|
- |
|
|
|
116.5 |
|
|
|
- |
|
Changes in
fair value of warrant liabilities |
|
1,045.3 |
|
|
|
- |
|
|
|
1,143.8 |
|
|
|
- |
|
Adjusted EBITDA |
$ |
295.3 |
|
|
$ |
(692.8 |
) |
|
$ |
(1,645.1 |
) |
|
$ |
(1,811.0 |
) |
|
|
|
|
|
|
Investor Contact:
Matt Glover or Jeff Grampp, CFAGateway Group,
Inc. SDIG@GatewayIR.com1-949-574-3860
Media Contact:
contact@strongholddigitalmining.com
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