Stronghold Digital Mining, Inc. (Nasdaq:
SDIG) (“Stronghold,” or the “Company”) today reported
financial results for its second quarter ended June 30, 2022,
provided an operational update and announced significant debt
restructuring events.
Recent Developments to Greatly Enhance
Stronghold’s Financial Position
- NYDIG
Debt Extinguishment: On August 16, 2022, Stronghold
entered into an agreement with NYDIG ABL LLC (“NYDIG”) and another
participating lender to eliminate all $67.4 million outstanding
under the equipment financing agreements with these lenders and
consensually return approximately 26,200 Bitcoin miners
(approximately 18,700 of which are currently operating) with hash
rate capacity of approximately 2.5 exahash per second (“EH/s”),
freeing up the related fully developed data center slots. The
closing under the agreement is subject to the satisfaction of
certain conditions relating to, among other things, the transport,
delivery, and condition of the miners.
-
WhiteHawk Restructuring: On August 16, 2022,
Stronghold received a binding commitment letter from WhiteHawk
Finance LLC (“WhiteHawk”) to restructure and expand its current
equipment financing agreements into a secured, 36-month note, more
than doubling the weighted-average tenor from 14 to 36 months,
reducing near-term principal payments, and adding up to $20 million
of additional borrowing capacity in a flexible, drawdown facility
available upon closing of the new facility. The Company expects to
prudently deploy this capital to purchase additional miners
opportunistically.
-
Convertible Notes Restructuring: On August 16,
2022, Stronghold amended its May 16, 2022 Convertible Notes and
Warrants to reduce the principal amount outstanding under the Notes
by $11.3 million in exchange for reducing the strike price on
outstanding warrants from $2.50 to $0.01. The amended terms also
allow the Company, at its option, to fully extinguish the Notes
with equity over the next few quarters.
- Collectively,
the NYDIG, WhiteHawk, and Convertible Notes and Warrants
restructurings (i) reduce principal amount outstanding by
approximately $79 million (approximately 55% of total principal
amount outstanding as of June 30, 2022), (ii) reduce cash interest
and principal payments through year-end 2023 by approximately $113
million, and (iii) improve Stronghold’s forecasted cash flow by
approximately $40 million through year-end 2023 through a reduction
in interest and principal payments and monetization of the power
capacity formerly dedicated to miners.
- As of August 12,
2022, and pro forma for the agreements with NYDIG, WhiteHawk, and
the Convertible Note holders, Stronghold has approximately $47
million of liquidity and $64 million of principal amount of debt
outstanding.
- Historically
high power prices help to mitigate the cash flow impact from
returning miners given our vertically integrated business model.
With lower Bitcoin margins and higher power costs, Stronghold has
been consistently toggling between selling power to the grid and
mining Bitcoin.
- Through August
12, 2022, the Company has received over half of the value pursuant
to the MinerVa Semiconductor Corp (“MinerVa”) purchase agreement
(the “MinerVa Purchase Agreement”) via a combination of cash
refunds, new industry-leading third-party miners, and MinerVa
miners.
Management Commentary
“Today we are announcing a series of
transactions that we believe transform Stronghold into a materially
less-levered, vertically integrated Bitcoin miner with
significantly improved liquidity and flexibility to deploy capital
opportunistically in a way that creates equity value through cycles
in the Bitcoin and power markets,” said Greg Beard, co-chairman and
chief executive officer of Stronghold. “By returning miners to
NYDIG that served as the collateral for the non-recourse financing
agreements and restructuring the WhiteHawk financing agreements and
the Convertible Notes, we will be able to eliminate over half of
our total principal amount of debt outstanding and the significant
associated interest and principal payments. Additionally,
WhiteHawk’s continued support of Stronghold allows us to extend a
significant portion of our remaining debt and provides additional
availability for us to patiently and opportunistically acquire
Bitcoin miners at currently depressed prices. Combined with our May
2022 Convertible Note holders’ commitment to swap debt for equity
over time, at our option, Stronghold is back on offense.
“Our power generation capacity remains
unchanged, so, while our Bitcoin mining fleet has been reduced in
the short run, we have significantly more open exposure to strong
power markets, which remain tight. We believe this is especially
true over the next six months, through the winter, when forward
prices suggest that selling power is an attractive alternative to
Bitcoin mining, irrespective of the size of our mining fleet.
“Vertical integration has always been paramount
to our strategy, and we believe the benefits are visible now more
than ever, providing us a highly differentiated strategic position
relative to other Bitcoin miners. Looking ahead, we aim to
capitalize on our dramatically improved liquidity position to
prudently invest in our Bitcoin mining fleet when dislocations
between price and value might arise. We continue to push forward
with investments in our power assets where we expect meaningful
operational improvements following planned maintenance at both
plants during the third quarter.”
Liquidity and Capital
Resources
Stronghold ended the quarter with approximately
$33.0 million in cash, $0.4 million in unrestricted digital
currencies, and $127.9 million in debt.
On August 16, 2022, Stronghold entered into an
agreement with NYDIG and another participating lender to eliminate
all $67.4 million outstanding under its equipment financing
agreements with NYDIG and such other lender and consensually return
approximately 26,200 Bitcoin miners (approximately 18,700 of which
are currently operating) with hash rate capacity of approximately
2.5 EH/s, freeing up these fully developed data center slots. The
closing under the agreement is subject to the satisfaction of
certain conditions relating to, among other things, the transport,
delivery, and condition of the miners.
On August 16, 2022, Stronghold received a
binding commitment letter from WhiteHawk to restructure and expand
its current equipment financing agreements into a secured, 36-month
note, more than doubling the weighted-average tenor from 14 to 36
months, reducing near-term principal payments, and adding up to $20
million of additional borrowing capacity in a flexible, drawdown
facility available upon closing of the new facility. The Company
has the ability to prudently deploy this capital to purchase miners
opportunistically.
On August 16, 2022, Stronghold amended its May
16, 2022 Convertible Notes and Warrants to reduce the principal
amount outstanding under such Notes by $11.3 million in exchange
for reducing the strike price on outstanding warrants from $2.50 to
$0.01. The amended terms also allow the Company, at its option, to
fully extinguish the Notes with equity over the next few
quarters.
Collectively, the NYDIG, WhiteHawk, and Convertible
Notes and Warrants restructurings (i) reduce principal amount
outstanding by approximately $79 million (approximately 55% of
total principal amount outstanding as of June 30, 2022), (ii)
reduce cash interest and principal payments through year-end 2023
by approximately $113 million, and (iii) improve Stronghold’s
forecasted cash flow by approximately $40 million through year-end
2023 through a reduction in interest and principal payments and
monetization of the power capacity formerly dedicated to
miners.
Bitcoin Mining Update
On August 16, 2022, the Company entered into an
agreement with NYDIG and another participating lender whereby
Stronghold will return approximately 26,200 Bitcoin miners with
associated hash rate capacity of approximately 2.5 EH/s to NYDIG in
exchange for the cancellation of $67.4 million in outstanding
principal amount under the equipment financing. The Company expects
this agreement to significantly improve the financial condition of
Stronghold and position it for increased financial flexibility
going forward, including the option to acquire Bitcoin miners at
attractive prices given the current oversupplied Bitcoin miner
market.
During the second quarter of 2022, Stronghold
mined approximately 637 gross Bitcoin, a 45% increase from the 438
gross Bitcoin mined in the first quarter of 2022. After giving
effect to the miners being returned to NYDIG, Stronghold’s current
mining fleet is expected to be approximately 16,000 Bitcoin miners
with hash rate capacity of over 1.4 EH/s and total power draw of
50-55 megawatts (“MW”).
On July 18, 2022, Stronghold provided written
notice of dispute to MinerVa pursuant to the MinerVa Purchase
Agreement, obligating the two companies to work together in good
faith towards a resolution for a period of 60 days. If no
settlement has been reached after 60 days, Stronghold may declare
an impasse and adhere to the dispute resolution provisions of the
MinerVa Purchase Agreement. As of August 12, 2022, Stronghold had
received approximately 8,500 miners or equivalent value, including
refunded cash or swapped deliveries, from MinerVa out of the total
15,000 miner order.
On August 10, 2022, Stronghold and its joint
venture partner terminated the provision of its restructured
hosting services agreement related to the purchase of an additional
2,675 miners; as a result, no payment will be due under this
agreement.
As of June 30, 2022, Stronghold held on its
balance sheet approximately 268 Bitcoin, 250 of which were pledged
as collateral and held in restricted digital currencies on the
balance sheet. On July 27, 2022, the Company closed out the forward
sale derivative agreement with NYDIG Derivatives Trading LLC and
transferred the 250 Bitcoin associated with the agreement.
Stronghold had previously received approximately $8 million related
to this forward sale and received approximately $0.2 million upon
transfer.
Power Assets Update
Stronghold owns and operates approximately 165
MW of power generation capacity through its Scrubgrass power plant
(the “Scrubgrass Plant”) and its Panther Creek power plant (the
“Panther Creek Plant”), 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.
We believe Stronghold’s vertically integrated
business model, which includes ownership of power assets, provides
differentiated opportunities to create value, including during
periods of higher power prices or inferior returns of Bitcoin
mining. To better position itself to capture upside opportunities
in both markets, the Company strategically reduced its exposure to
the capacity markets, effective June 1, 2022 through May 31, 2024.
Higher than anticipated requirements from PJM Interconnection LLC
(“PJM”) and cost capping associated with its role as a capacity
resource, significantly impacted the Company’s operations in the
first half of 2022. These previously made commitments required the
Company to divert power away from Bitcoin mining operations at
lower-than-market power prices and reduced Stronghold’s ability to
provide power to the real time market that was often associated
with higher prices. This increased flexibility and exposure to
market prices is expected to provide the Company with an improved
ability to maximize profitability of operations and support grid
stability.
Given Stronghold’s reduced Bitcoin miner fleet,
the Company expects to shift the majority of its power generation
to grid sales in the near-term. The current forward power curve in
the Company’s power markets is elevated into 2024, and particularly
robust through winter 2023, providing attractive economics for its
power generation compared to current Bitcoin mining economics.
During the second quarter of 2022, Stronghold
removed approximately 241,000 tons of coal refuse and returned
approximately 168,000 tons of beneficial use ash to waste coal
sites during the second quarter of 2022, facilitating the
remediation of these sites.
Stronghold is continuing to implement upgrades
at the Scrubgrass Plant to improve utilization and reliability. As
of June 30, 2022, the Company has spent approximately $2.3 million
on upgrades and expects to spend an additional approximately $2.7
million the remainder of the year to complete the required upgrades
to yield operational results in-line with management expectations
for the plant. Average output increased by 8% in the second quarter
of 2022 compared to the first quarter of 2022 and the upgrades
remain on track to be completed by late September or early October
of 2022, at which point uptime and utilization are expected to
return to normalized levels.
Second Quarter 2022 Financial
Results
Revenues in the second quarter of 2022 increased
597% to $29.2 million compared to $4.2 million in the same quarter
a year ago. The increase is primarily attributable to an $18.9
million increase in Bitcoin mining revenue from deploying
additional miners and a $5.6 million increase in energy revenue
driven by higher power prices and higher power generation.
Operating expenses in the second quarter of 2022
increased 717% to $59.0 million compared to $7.2 million in the
same quarter a year ago due to several factors. Operations and
maintenance expense increased by $14.8 million as a result of the
Panther Creek Plant acquisition in November 2021, higher labor and
maintenance costs at the Scrubgrass Plant associated with increased
plant uptime, and the ramp up of cryptocurrency mining operations
including higher lease expenses for the hosting services agreement.
Depreciation and amortization increased by $11.9 million primarily
from deploying additional miners and transformers. General and
administrative costs increased by $8.9 million due to legal and
professional fees, insurance costs, and compensation as the Company
continues to organize and scale operations. Fuel expenses increased
by $6.5 million due to higher power generation from the Panther
Creek Plant acquisition in November 2021, and increased fuel
delivery costs from higher diesel prices. Stronghold also recorded
non-cash impairments of $5.0 million on miner assets and $5.2
million on digital currencies due to the decline in the price of
Bitcoin.
Net loss for the second quarter of 2022 was
($40.2) million compared to a net loss of ($3.2) million for the
same quarter a year ago.
Adjusted EBITDA for the second quarter of 2022
was a loss of ($1.0) million, compared to a loss of ($1.6) million
for the same quarter a year ago (see reconciliation of Non-GAAP
financial measures).
Conference Call
Stronghold will host a conference call today,
August 16, 2022 at 4:30 p.m. Eastern Time (1:30 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: 1-646-307-1963International
number: 1-800-715-9871Conference ID: 4275661
The conference call will broadcast live and be
available for replay here.
A replay of the call will be available after
9:00 p.m. Eastern time on the same day through August 30, 2022.
U.S. replay number: 1-609-800-9909International
replay number: 1-800-770-2030Conference ID: 4275661
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 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; our ability to perform our
obligations and satisfy all conditions to closing under the
agreements related to our NYDIG Debt Extinguishment transaction;
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 and our Quarterly Reports on Form 10-Q filed on May
16, 2022 and August 16, 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. |
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
|
|
|
|
June 30, 2022 |
|
December 31, 2021 |
|
(unaudited) |
|
|
CURRENT ASSETS |
|
|
|
Cash |
$ |
32,987,181 |
|
|
$ |
31,790,115 |
|
Digital currencies |
|
352,092 |
|
|
|
7,718,221 |
|
Digital currencies restricted |
|
4,779,895 |
|
|
|
2,699,644 |
|
Accounts receivable |
|
1,851,719 |
|
|
|
2,111,855 |
|
Due from related party |
|
848,150 |
|
|
|
- |
|
Prepaid insurance |
|
2,356,411 |
|
|
|
6,301,701 |
|
Inventory |
|
3,605,533 |
|
|
|
3,372,254 |
|
Other current assets |
|
1,733,907 |
|
|
|
661,640 |
|
Total Current Assets |
|
48,514,888 |
|
|
|
54,655,430 |
|
EQUIPMENT DEPOSITS |
|
66,472,016 |
|
|
|
130,999,398 |
|
PROPERTY, PLANT AND EQUIPMENT, NET |
|
237,973,955 |
|
|
|
166,657,155 |
|
LAND |
|
1,748,439 |
|
|
|
1,748,440 |
|
ROAD BOND |
|
211,958 |
|
|
|
211,958 |
|
SECURITY DEPOSITS |
|
348,888 |
|
|
|
348,888 |
|
TOTAL ASSETS |
$ |
355,270,144 |
|
|
$ |
354,621,269 |
|
CURRENT LIABILITIES |
|
|
|
Current portion of long-term debt-net of discounts/issuance
fees |
$ |
100,593,168 |
|
|
$ |
45,799,651 |
|
Financed insurance premiums |
|
393,260 |
|
|
|
4,299,721 |
|
Forward sale contract |
|
4,650,848 |
|
|
|
7,116,488 |
|
Accounts payable |
|
23,887,308 |
|
|
|
28,650,659 |
|
Due to related parties |
|
1,974,299 |
|
|
|
1,430,660 |
|
Accrued liabilities |
|
12,920,128 |
|
|
|
5,053,957 |
|
Total Current Liabilities |
|
144,419,011 |
|
|
|
92,351,136 |
|
LONG-TERM LIABILITIES |
|
|
|
Asset retirement obligation |
|
986,115 |
|
|
|
973,948 |
|
Contract liabilities |
|
132,093 |
|
|
|
187,835 |
|
Paycheck Protection Program Loan |
|
- |
|
|
|
841,670 |
|
Long-term debt-net of discounts/issuance fees |
|
26,889,570 |
|
|
|
18,378,841 |
|
Total Long-Term Liabilities |
|
28,007,778 |
|
|
|
20,382,294 |
|
Total Liabilities |
|
172,426,789 |
|
|
|
112,733,430 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
REDEEMABLE COMMON STOCK |
|
|
|
Common Stock - Class V, $0.0001 par value; 34,560,000 shares
authorized, and 27,057,600 and 27,057,600 shares issued and
outstanding, respectively |
|
47,239,903 |
|
|
|
301,052,617 |
|
Total redeemable common stock |
|
47,239,903 |
|
|
|
301,052,617 |
|
STOCKHOLDERS' EQUITY / (DEFICIT) |
|
|
|
Non-controlling Series A redeemable and convertible preferred
stock, $0.0001 par value, aggregate liquidation value $5,000,000.
1,152,000 and 1,152,000 issued and outstanding, respectively |
|
35,937,061 |
|
|
|
37,670,161 |
|
Common Stock - Class A, $0.0001 par value; 685,440,000 shares
authorized, and 20,034,875 and 20,016,067 shares issued and
outstanding, respectively |
|
2,002 |
|
|
|
2,002 |
|
Accumulated deficits |
|
(155,708,865 |
) |
|
|
(338,709,688 |
) |
Additional paid-in capital |
|
255,373,254 |
|
|
|
241,872,747 |
|
Stockholders' equity / (deficit) |
|
135,603,452 |
|
|
|
(59,164,778 |
) |
Total |
|
182,843,355 |
|
|
|
241,887,839 |
|
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY /
(DEFICIT) |
$ |
355,270,144 |
|
|
$ |
354,621,269 |
|
|
|
|
|
STRONGHOLD DIGITAL MINING, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
Three months ended, |
|
Six months ended, |
|
|
Consolidated |
|
Consolidated |
|
Consolidated |
|
Consolidated |
|
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
OPERATING REVENUES |
|
|
|
|
|
|
|
|
Cryptocurrency mining |
$ |
20,227,536 |
|
|
$ |
1,324,645 |
|
|
$ |
38,431,729 |
|
|
$ |
1,840,903 |
|
|
Energy |
|
7,129,732 |
|
|
|
1,570,966 |
|
|
|
15,492,533 |
|
|
|
3,486,822 |
|
|
Capacity |
|
1,668,001 |
|
|
|
595,545 |
|
|
|
3,712,428 |
|
|
|
1,283,236 |
|
|
Cryptocurrency hosting |
|
121,172 |
|
|
|
686,771 |
|
|
|
189,048 |
|
|
|
1,242,518 |
|
|
Other |
|
32,008 |
|
|
|
6,597 |
|
|
|
52,770 |
|
|
|
33,123 |
|
|
Total operating revenues |
|
29,178,449 |
|
|
|
4,184,524 |
|
|
|
57,878,508 |
|
|
|
7,886,602 |
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Fuel |
|
8,680,114 |
|
|
|
2,228,167 |
|
|
|
18,018,508 |
|
|
|
4,100,521 |
|
|
Operations and maintenance |
|
16,586,756 |
|
|
|
1,834,170 |
|
|
|
27,921,089 |
|
|
|
3,204,858 |
|
|
General and administrative |
|
10,903,876 |
|
|
|
1,996,971 |
|
|
|
21,514,079 |
|
|
|
2,907,847 |
|
|
Impairments on digital currencies |
|
5,205,045 |
|
|
|
375,246 |
|
|
|
7,711,217 |
|
|
|
375,246 |
|
|
Impairments on equipment deposits |
|
- |
|
|
|
- |
|
|
|
12,228,742 |
|
|
|
- |
|
|
Impairments on miner assets |
|
4,990,000 |
|
|
|
- |
|
|
|
4,990,000 |
|
|
|
- |
|
|
Depreciation and amortization |
|
12,667,300 |
|
|
|
787,731 |
|
|
|
24,986,881 |
|
|
|
1,305,174 |
|
|
Total operating expenses |
|
59,033,091 |
|
|
|
7,222,285 |
|
|
|
117,370,516 |
|
|
|
11,893,646 |
|
|
NET OPERATING LOSS |
|
(29,854,642 |
) |
|
|
(3,037,761 |
) |
|
|
(59,492,008 |
) |
|
|
(4,007,044 |
) |
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Interest expense |
|
(4,508,783 |
) |
|
|
(55,443 |
) |
|
|
(7,420,235 |
) |
|
|
(134,083 |
) |
|
Gain on extinguishment of PPP loan |
|
841,670 |
|
|
|
- |
|
|
|
841,670 |
|
|
|
638,800 |
|
|
Realized gain (loss) on sale of digital currencies |
|
- |
|
|
|
5,977 |
|
|
|
751,110 |
|
|
|
149,858 |
|
|
Changes in fair value of warrant liabilities |
|
- |
|
|
|
(191,477 |
) |
|
|
- |
|
|
|
(191,477 |
) |
|
Realized gain (loss) on disposal of fixed asset |
|
(1,724,642 |
) |
|
|
- |
|
|
|
(1,769,600 |
) |
|
|
- |
|
|
Realized gain (loss) on sale of miner assets |
|
(8,012,248 |
) |
|
|
- |
|
|
|
(8,012,248 |
) |
|
|
- |
|
|
Changes in fair value of forward sale derivative |
|
3,919,388 |
|
|
|
- |
|
|
|
3,435,639 |
|
|
|
- |
|
|
Changes in fair value of convertible note |
|
(962,761 |
) |
|
|
- |
|
|
|
(962,761 |
) |
|
|
- |
|
|
Waste coal credits |
|
53,443 |
|
|
|
15,406 |
|
|
|
53,443 |
|
|
|
23,796 |
|
|
Other |
|
10,000 |
|
|
|
20,290 |
|
|
|
30,000 |
|
|
|
38,185 |
|
|
Total other income / (expense) |
|
(10,383,933 |
) |
|
|
(205,248 |
) |
|
|
(13,052,982 |
) |
|
|
525,079 |
|
|
NET LOSS |
$ |
(40,238,575 |
) |
|
$ |
(3,243,009 |
) |
|
$ |
(72,544,990 |
) |
|
$ |
(3,481,965 |
) |
|
NET LOSS - attributable to non-controlling
interest |
$ |
(23,537,555 |
) |
|
$ |
(2,235,218 |
) |
|
$ |
(42,435,192 |
) |
|
$ |
(2,402,488 |
) |
|
NET LOSS - Stronghold Digital Mining, Inc |
$ |
(16,701,021 |
) |
|
$ |
(1,007,791 |
) |
|
$ |
(30,109,798 |
) |
|
$ |
(1,079,477 |
) |
|
NET LOSS attributable to Class A Common
Shares(1) |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.82 |
) |
|
$ |
(123.86 |
) |
|
$ |
(1.49 |
) |
|
$ |
(123.86 |
) |
|
Diluted |
$ |
(0.82 |
) |
|
$ |
(123.86 |
) |
|
$ |
(1.49 |
) |
|
$ |
(123.86 |
) |
|
Class A Common Shares Outstanding(1) |
|
|
|
|
|
|
|
|
Basic |
|
20,341,061 |
|
|
|
8,137 |
|
|
|
20,274,672 |
|
|
|
8,137 |
|
|
Diluted |
|
20,341,061 |
|
|
|
8,137 |
|
|
|
20,274,672 |
|
|
|
8,137 |
|
|
|
|
|
|
|
|
|
|
|
STRONGHOLD DIGITAL MINING, INC. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
|
|
Six months ended, |
|
June 30, 2022 |
|
June 30, 2021 |
|
(unaudited) |
|
(unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
Net Loss |
$ |
(72,544,990 |
) |
|
$ |
(3,481,965 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation and Amortization - PP&E |
|
24,986,881 |
|
|
|
1,305,174 |
|
Forgiveness of PPP loan |
|
(841,670 |
) |
|
|
(638,800 |
) |
Realized (gain) loss on disposal of fixed assets |
|
1,769,600 |
|
|
|
- |
|
Realized (gain) loss on sale of equipment deposits |
|
8,012,248 |
|
|
|
- |
|
Amortization of debt issuance costs |
|
2,060,806 |
|
|
|
- |
|
Stock Compensation |
|
5,745,625 |
|
|
|
269,932 |
|
Impairments on equipment deposits |
|
12,228,742 |
|
|
|
- |
|
Impairments on miner assets |
|
4,990,000 |
|
|
|
- |
|
Changes in fair value of warrant liabilities |
|
- |
|
|
|
191,477 |
|
Changes in fair value of forward sale derivative |
|
(3,435,639 |
) |
|
|
- |
|
Forward sale contract prepayment |
|
970,000 |
|
|
|
- |
|
Changes in fair value of convertible note |
|
962,761 |
|
|
|
- |
|
Accretion of asset retirement obligation |
|
12,169 |
|
|
|
- |
|
(Increase) decrease in Digital Currencies: |
|
|
|
Mining Revenue |
|
(38,431,729 |
) |
|
|
(1,840,903 |
) |
Proceeds from sales of digital currencies, net of gain |
|
36,006,390 |
|
|
|
434,529 |
|
Impairments on digital currencies |
|
7,711,217 |
|
|
|
375,246 |
|
(Increase) decrease in assets: |
|
|
|
Accounts receivable |
|
260,136 |
|
|
|
(710,720 |
) |
Prepaid Insurance |
|
3,945,290 |
|
|
|
- |
|
Due from related party |
|
(848,150 |
) |
|
|
302,973 |
|
Inventory |
|
(233,279 |
) |
|
|
77,071 |
|
Other current assets |
|
(1,072,267 |
) |
|
|
(134,790 |
) |
Increase (decrease) in liabilities: |
|
|
|
Accounts payable |
|
(4,763,351 |
) |
|
|
5,550,196 |
|
Due to related parties |
|
543,639 |
|
|
|
319,071 |
|
Accrued liabilities excluding sales tax liabilities |
|
4,393,075 |
|
|
|
58,866 |
|
Contract liabilities |
|
(55,742 |
) |
|
|
147,841 |
|
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES |
|
(7,628,238 |
) |
|
|
2,225,198 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
Purchase of land |
|
- |
|
|
|
(29,919 |
) |
Purchase of property, plant and equipment |
|
(57,074,647 |
) |
|
|
(12,738,793 |
) |
Proceeds from the sale of equipment deposits |
|
13,844,780 |
|
|
|
- |
|
Equipment purchase deposits- net of future commitments |
|
(12,073,928 |
) |
|
|
(78,688,465 |
) |
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES |
|
(55,303,795 |
) |
|
|
(91,457,176 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
Payments on long-term debt |
|
(24,022,738 |
) |
|
|
(188,168 |
) |
Payments on financed insurance premiums |
|
(3,906,462 |
) |
|
|
- |
|
Proceeds from debt, net of debt issuance costs paid in cash |
|
92,058,299 |
|
|
|
- |
|
Proceeds from promissory note |
|
- |
|
|
|
39,100,000 |
|
Proceeds from PPP loan |
|
- |
|
|
|
841,670 |
|
Proceeds from private placements-mezzanine equity (net of
fees) |
|
- |
|
|
|
97,064,318 |
|
Proceeds/(Payoff) of EIDL loan |
|
- |
|
|
|
(150,000 |
) |
Payoff of related-party notes |
|
- |
|
|
|
(2,024,250 |
) |
Buyout of Aspen Interest |
|
- |
|
|
|
(2,000,000 |
) |
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES |
|
64,129,099 |
|
|
|
132,643,570 |
|
NET INCREASE (DECREASE) IN CASH |
|
1,197,066 |
|
|
|
43,411,592 |
|
CASH - BEGINNING OF PERIOD |
|
31,790,115 |
|
|
|
303,187 |
|
CASH - END OF PERIOD |
$ |
32,987,181 |
|
|
$ |
43,714,779 |
|
|
|
|
|
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-Q for the quarter ended June 30, 2022.
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, |
|
Six months ended, |
|
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
|
|
(in thousands) |
|
(in thousands) |
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
Net Income (loss) |
$ |
(40,239 |
) |
|
$ |
(3,243 |
) |
|
$ |
(72,545 |
) |
|
$ |
(3,482 |
) |
|
Interest expense |
|
4,509 |
|
|
|
55 |
|
|
|
7,420 |
|
|
|
134 |
|
|
Depreciation and amortization |
|
12,667 |
|
|
|
788 |
|
|
|
24,987 |
|
|
|
1,305 |
|
|
Impairments on digital currencies |
|
5,205 |
|
|
|
375 |
|
|
|
7,711 |
|
|
|
375 |
|
|
Impairments on equipment deposits |
|
- |
|
|
|
- |
|
|
|
12,229 |
|
|
|
- |
|
|
Impairments on miner assets |
|
4,990 |
|
|
|
- |
|
|
|
4,990 |
|
|
|
- |
|
|
One time non-recurring expenses 1 |
|
2,799 |
|
|
|
- |
|
|
|
6,563 |
|
|
|
- |
|
|
Expenses related to stock-based compensation |
|
3,153 |
|
|
|
270 |
|
|
|
5,746 |
|
|
|
270 |
|
|
(Gains)/Losses on disposal of fixed assets |
|
1,725 |
|
|
|
- |
|
|
|
1,770 |
|
|
|
- |
|
|
Realized gain/(loss) on sale of miner assets |
|
8,012 |
|
|
|
- |
|
|
|
8,012 |
|
|
|
- |
|
|
Changes in fair value of forward sale derivative |
|
(3,919 |
) |
|
|
- |
|
|
|
(3,436 |
) |
|
|
- |
|
|
Waste coal credits |
|
(53 |
) |
|
|
(15 |
) |
|
|
(53 |
) |
|
|
(24 |
) |
|
Gain on extinguishment of PPP loan |
|
(842 |
) |
|
|
- |
|
|
|
(842 |
) |
|
|
(639 |
) |
|
Realized (gain)/loss on sale of digital currencies |
|
- |
|
|
|
(6 |
) |
|
|
(751 |
) |
|
|
(150 |
) |
|
Changes in fair value of convertible note |
|
963 |
|
|
|
- |
|
|
|
963 |
|
|
|
- |
|
|
Changes in fair value of warrant liabilities |
|
- |
|
|
|
191 |
|
|
|
- |
|
|
|
191 |
|
|
Adjusted EBITDA |
$ |
(1,031 |
) |
|
$ |
(1,585 |
) |
|
$ |
2,764 |
|
|
$ |
(2,019 |
) |
|
|
|
|
|
|
|
|
|
|
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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