Stronghold Digital Mining, Inc. (NASDAQ: SDIG)
(“Stronghold”, the “Company”, or “we”) today announced the
following:
Recent Financial Highlights
- Revenues
of $11.2 million, down 42% sequentially and 37%
year-over-year. Revenues comprised $10.6 million from
cryptocurrency operations and $0.5 million from the sale of
energy.
- GAAP Net
Loss of $22.7 million and non-GAAP Adjusted EBITDA Loss of $5.5
million.
Merger Agreement with
Bitfarms
On August 21, 2024, the Company entered into an
Agreement and Plan of Merger (the “Merger Agreement”) with Bitfarms
Ltd., a corporation incorporated under the Canada Business
Corporations Act and continued under the Business Corporations Act
(Ontario) (“Bitfarms”) and certain affiliates of Bitfarms. Under
the terms of the Merger Agreement, Stronghold shareholders will
receive 2.52 common shares of Bitfarms for each share of Stronghold
common stock that they own. The Merger Agreement has been
unanimously approved by the Boards of Directors of both companies
and is expected to close in the first quarter of 2025, subject to
the receipt of Stronghold shareholder approval, applicable
regulatory approvals, certain third-party consents and other
customary closing conditions.
Bitfarms Hosting Agreements
On September 12, 2024, Stronghold Digital Mining
Hosting, LLC (“Stronghold Hosting”), an indirect subsidiary of the
Company entered into a Hosting Agreement (the “First Hosting
Agreement”) with Bitfarms, pursuant to which Stronghold Hosting
will host 10,000 Bitmain T21 Bitcoin miners owned by Bitfarms (the
“Bitfarms Miners”) at the Company’s Panther Creek site. The Company
has received a portion of the Bitfarms Miners to date and expects
to receive the remaining Bitfarms Miners during November and
December 2024. The First Hosting Agreement has an initial term
expiring on December 31, 2025, after which it will automatically
renew for additional one-year periods unless either party provides
written notice of non-renewal. Pursuant to the First Hosting
Agreement, Bitfarms will pay Stronghold fifty percent of the profit
generated by the Bitfarms miners, subject to certain monthly
adjustments. In connection with the execution of the First Hosting
Agreement, Bitfarms also deposited with Stronghold $7.8 million,
equal to the estimated cost of power for three months of operations
of the Bitfarms Miners, which will be refundable in full to
Bitfarms within one business day of the end of the initial term
expiring on December 31, 2025.
On October 29, 2024, Stronghold Hosting entered
into another Hosting Agreement (the “Second Hosting Agreement”)
with Bitfarms, pursuant to which Stronghold Hosting will host
10,000 Bitmain T21 miners owned by Bitfarms (the “Second Bitfarms
Miners”) at the Company’s Scrubgrass site. The Company expects to
begin receiving the Second Bitfarms Miners in late December 2024,
or early January 2025. The initial term of the Second Hosting
Agreement will expire on December 31, 2025, after which it will
automatically renew for additional one-year periods unless either
party provides written notice of non-renewal. Pursuant to the
Second Hosting Agreement, Bitfarms will pay Stronghold fifty
percent of the profit generated by the Second Bitfarms Miners,
subject to certain monthly adjustments. In connection with the
execution of the Second Hosting Agreement, Bitfarms also deposited
with Stronghold $7.8 million, equal to the estimated cost of power
for three months of operations of the Second Bitfarms Miners, which
will be refundable in full to Bitfarms at the end of the initial
term.
Bitcoin Mining Update
During the third quarter of 2024, Stronghold
generated 188 Bitcoin, and approximately $0.5 million of energy
revenues, which represented the equivalent of 8 Bitcoin at the
average price of Bitcoin during the period, for a total of 196
Bitcoin equivalents. This represents an approximately 35% decrease
versus the Bitcoin-equivalent production during the second quarter
of 2024, which was primarily a result of the Bitcoin halving that
occurred on April 19, 2024, that caused a reduction in the block
subsidy from 6.25 Bitcoin to 3.125 Bitcoin.
Liquidity and Capital
Resources
As of September 30, 2024, and
November 8, 2024, the Company had approximately
$5.1 million and $6.7 million, respectively, of cash and
cash equivalents and Bitcoin on our balance sheet, which included
10 Bitcoin and 4 Bitcoin, respectively. Additionally, Stronghold
has approximately $2.6 million of contracted receivables that it
expects to receive in the next 30 days related to the sale of its
2023 waste coal tax credits. As of September 30, 2024, the
Company had principal amount of outstanding indebtedness of
approximately $53.7 million and approximately $3.4 million of
capacity remaining under its at-the-market offering agreement (the
“ATM”) with H.C. Wainwright & Co., LLC. The Company has not
sold any of its shares under the ATM during 2024.
Conference Call
Stronghold will host a conference call today,
November 13, 2024, at 8:30 a.m. Eastern Time (5:30 a.m.
Pacific Time) to discuss these results. 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 2024 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
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 and with respect to completing a strategic review
process or entering into a transaction. 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 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
including to upgrade our current fleet; 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; our
ability to monetize our carbon capture project, including through
the private market; our ability to qualify for, obtain, monetize or
otherwise benefit from the Puro registry and Section 45Q tax
credits; our ability to qualify for demand response programs; our
ability to qualify as PJM “In Network” load; our ability to prepare
our sites for and execute on GPU computing initiatives; our ability
to expand the power capacity at our sites; the risk that the merger
may not be completed on the anticipated terms in a timely manner or
at all, which may adversely affect our business and the price of
Class A common stock; the failure to satisfy any of the conditions
to the consummation of the merger, including obtaining required
stockholder and regulatory approvals; potential litigation relating
to the merger that could be instituted against us, Bitfarms or
their respective directors or officers, including the effects of
any outcomes related thereto; the occurrence of any event, change
or other circumstance that could give rise to the termination of
the Merger Agreement, including in circumstances requiring us to
pay a termination fee; the effect of the announcement or pendency
of the merger on our business relationships, operating results and
business generally; the risk that the merger disrupts our current
plans and operations; our ability to retain and hire key personnel
and maintain relationships with key business partners and
customers, and others with whom it does business, in light of the
merger; potential adverse reactions or changes to business
relationships resulting from the announcement or completion of the
merger; risks related to diverting management’s attention from our
ongoing business operations; certain restrictions during the
pendency of the merger that may impact our ability to pursue
certain business opportunities or strategic transactions; the
possibility that the merger may be more expensive to complete than
anticipated, including as a result of unexpected factors or events;
those risks described in Section 4.19 of Bitfarms’ Annual
Information Form for the year ended December 31, 2023, filed with
the SEC on March 7, 2024, as Exhibit 99.1 to Bitfarms’ Annual
Report on Form 40-F, Section 19 of Bitfarms’ Management’s
Discussion and Analysis for the year ended December 31, 2023, filed
with the SEC on March 7, 2024, as Exhibit 99.3 to Bitfarms’ Annual
Report on Form 40-F, Section 19 of Bitfarms’ Management’s
Discussion and Analysis for the three and six months ended June 30,
2024, filed with the SEC on August 8, 2024, as Exhibit 99.2 to
Bitfarms’ Current Report on Form 6-K, and subsequent reports on
Form 6-K; those risks described in Item 1A of the Company’s Annual
Report on Form 10-K, filed with the SEC on March 8, 2024, Item 1A
of the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2024, filed with the SEC on May 8, 2024,
Item 1A of the Company’s Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2024, filed with the SEC on August
14, 2024, and subsequent reports on Form 10-Q, including the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2024, which the Company expects to file on or
around November 13, 2024, and Form 8-K; and those risks that are
described in the registration statement on Form F-4 (File No.
333-282657) filed by Bitfarms with the SEC (the “registration
statement”), which includes a proxy statement of Stronghold that
also constitutes a prospectus of Bitfarms (the “proxy
statement/prospectus”).
These risks, as well as other risks associated
with the proposed transaction, are more fully discussed in the
proxy statement/prospectus. While the list of factors presented
here, and the list of factors presented in the registration
statement, are each considered representative, no such list should
be considered to be a complete statement of all potential risks and
uncertainties. Unlisted factors may present significant additional
obstacles to the realization of forward-looking statements. We
caution you not to place undue reliance on any of these
forward-looking statements as they are not guarantees of future
performance or outcomes and that actual performance and outcomes,
including, without limitation, our actual results of operations,
financial condition and liquidity, and the development of new
markets or market segments in which we operate, may differ
materially from those made in or suggested by the forward-looking
statements contained in this communication. Neither Bitfarms nor
the Company assumes any obligation to publicly provide revisions or
updates to any forward-looking statements, whether as a result of
new information, future developments or otherwise, should
circumstances change, except as otherwise required by securities
and other applicable laws. Neither future distribution of this
communication nor the continued availability of this communication
in archive form on Bitfarms’ or the Company’s website should be
deemed to constitute an update or re-affirmation of these
statements as of any future date.
Additional Information about the Merger
and Where to Find It
In connection with the proposed merger, Bitfarms
has filed the registration statement with the SEC. After the
registration statement is declared effective, Stronghold will mail
the proxy statement/prospectus to its shareholders. This
communication is not a substitute for the registration statement,
the proxy statement/prospectus or any other relevant documents
Bitfarms and the Company has filed or will file with the
SEC. Investors are urged to read the proxy
statement/prospectus (including all amendments and supplements
thereto) and other relevant documents filed with the SEC carefully
and in their entirety, if and when they become available, because
they will contain important information about the proposed merger
and related matters.
Investors may obtain free copies of the
registration statement, the proxy statement/prospectus and other
relevant documents filed by Bitfarms and the Company with the SEC,
when they become available, through the website maintained by the
SEC at www.sec.gov. Copies of the documents may also be obtained
for free from Bitfarms by contacting Bitfarms’ Investor Relations
Department at investors@bitfarms.com and from Stronghold by
contacting Stronghold’s Investor Relations Department at
SDIG@gateway-grp.com.
Participants in Solicitation Relating to
the Merger
Bitfarms, the Company, their respective
directors and certain of their respective executive officers may be
deemed to be participants in the solicitation of proxies from the
Company’s shareholders in respect of the proposed merger.
Information regarding Bitfarms’ directors and executive officers
can be found in Bitfarms’ annual information form for the year
ended December 31, 2023, filed on March 7, 2024, as well as its
other filings with the SEC. Information regarding the Company’s
directors and executive officers can be found in the Company’s
proxy statement for its 2024 annual meeting of stockholders, filed
with the SEC on April 29, 2024, and supplemented on June 7, 2024,
and in its Form 10-K for the year ended December 31, 2023, filed
with the SEC on March 8, 2024. This communication may be deemed to
be solicitation material in respect of the proposed merger.
Additional information regarding the interests of such potential
participants, including their respective interests by security
holdings or otherwise, is set forth in the proxy
statement/prospectus and other relevant documents filed with the
SEC in connection with the proposed merger if and when they become
available. These documents are available free of charge on the
SEC’s website and from Bitfarms and the Company using the sources
indicated above.
No Offer or Solicitation
This communication is not intended to and does
not constitute an offer to sell or the solicitation of an offer to
buy, sell or solicit any securities or any proxy, vote or approval,
nor shall there be any sale of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be deemed to be made
except by means of a prospectus meeting the requirements of Section
10 of the Securities Act of 1933, as amended.
STRONGHOLD DIGITAL MINING, INC.CONDENSED
CONSOLIDATED BALANCE
SHEETS(UNAUDITED) |
|
|
September 30, 2024 |
|
December 31, 2023 |
ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
4,491,447 |
|
|
$ |
4,214,613 |
|
Digital currencies |
|
613,949 |
|
|
|
3,175,595 |
|
Accounts receivable |
|
1,240,900 |
|
|
|
507,029 |
|
Inventory |
|
2,815,178 |
|
|
|
4,196,812 |
|
Prepaid insurance |
|
1,668,837 |
|
|
|
3,787,048 |
|
Due from related parties |
|
90,538 |
|
|
|
97,288 |
|
Other current assets |
|
1,898,404 |
|
|
|
1,675,084 |
|
Total current assets |
|
12,819,253 |
|
|
|
17,653,469 |
|
Equipment deposits |
|
— |
|
|
|
8,000,643 |
|
Property, plant and equipment, net |
|
124,971,766 |
|
|
|
144,642,771 |
|
Operating lease right-of-use assets |
|
904,988 |
|
|
|
1,472,747 |
|
Land |
|
1,748,440 |
|
|
|
1,748,440 |
|
Road bond |
|
299,738 |
|
|
|
299,738 |
|
Security deposits |
|
348,888 |
|
|
|
348,888 |
|
Other noncurrent assets |
|
271,960 |
|
|
|
170,488 |
|
TOTAL
ASSETS |
$ |
141,365,033 |
|
|
$ |
174,337,184 |
|
LIABILITIES: |
|
|
|
Accounts payable |
$ |
11,259,291 |
|
|
$ |
11,857,052 |
|
Accrued liabilities |
|
13,846,663 |
|
|
|
10,787,895 |
|
Financed insurance premiums |
|
952,369 |
|
|
|
2,927,508 |
|
Current portion of long-term debt, net of discounts and issuance
fees |
|
19,566,519 |
|
|
|
7,936,147 |
|
Current portion of operating lease liabilities |
|
605,324 |
|
|
|
788,706 |
|
Due to related parties |
|
1,449,195 |
|
|
|
718,838 |
|
Total current liabilities |
|
47,679,361 |
|
|
|
35,016,146 |
|
Asset retirement obligation |
|
1,116,958 |
|
|
|
1,075,728 |
|
Warrant liabilities |
|
16,765,182 |
|
|
|
25,210,429 |
|
Long-term debt, net of discounts and issuance fees |
|
33,879,516 |
|
|
|
48,203,762 |
|
Long-term operating lease liabilities |
|
356,542 |
|
|
|
776,079 |
|
Other noncurrent liabilities |
|
10,500,864 |
|
|
|
241,420 |
|
Total liabilities |
|
110,298,423 |
|
|
|
110,523,564 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
REDEEMABLE COMMON
STOCK: |
|
|
|
Common Stock – Class V; $0.0001 par value; 50,000,000 shares
authorized; 2,405,760 shares issued and outstanding as of
September 30, 2024, and December 31, 2023. |
|
11,536,161 |
|
|
|
20,416,116 |
|
Total redeemable common stock |
|
11,536,161 |
|
|
|
20,416,116 |
|
STOCKHOLDERS’
EQUITY: |
|
|
|
Common Stock – Class A; $0.0001 par value; 238,000,000 shares
authorized; 14,737,601 and 11,115,561 shares issued and outstanding
as of September 30, 2024, and December 31, 2023,
respectively. |
|
1,474 |
|
|
|
1,112 |
|
Series C convertible preferred stock; $0.0001 par value; 23,102
shares authorized; 5,990 shares issued and outstanding as of
September 30, 2024, and December 31, 2023,
respectively. |
|
1 |
|
|
|
1 |
|
Series D convertible preferred stock; $0.0001 par value; 15,582
shares authorized; 0 and 7,610 shares issued and outstanding as of
September 30, 2024, and December 31, 2023,
respectively. |
|
— |
|
|
|
1 |
|
Accumulated deficits |
|
(360,763,808 |
) |
|
|
(331,647,755 |
) |
Additional paid-in capital |
|
380,292,782 |
|
|
|
375,044,145 |
|
Total stockholders' equity |
|
19,530,449 |
|
|
|
43,397,504 |
|
Total redeemable common stock and stockholders' equity |
|
31,066,610 |
|
|
|
63,813,620 |
|
TOTAL LIABILITIES,
REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY |
$ |
141,365,033 |
|
|
$ |
174,337,184 |
|
STRONGHOLD DIGITAL MINING, INC.CONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, 2024 |
|
September 30, 2023 |
|
September 30, 2024 |
|
September 30, 2023 |
OPERATING
REVENUES: |
|
|
|
|
|
|
|
Cryptocurrency mining |
$ |
8,709,777 |
|
|
$ |
12,684,894 |
|
|
$ |
44,989,361 |
|
|
$ |
37,764,990 |
|
Cryptocurrency hosting |
|
1,911,610 |
|
|
|
3,789,375 |
|
|
|
11,193,438 |
|
|
|
9,195,072 |
|
Energy |
|
502,640 |
|
|
|
1,210,811 |
|
|
|
1,424,077 |
|
|
|
4,682,590 |
|
Capacity |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,442,067 |
|
Other |
|
44,046 |
|
|
|
41,877 |
|
|
|
187,521 |
|
|
|
142,194 |
|
Total operating revenues |
|
11,168,073 |
|
|
|
17,726,957 |
|
|
|
57,794,397 |
|
|
|
53,226,913 |
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
Fuel |
|
6,500,292 |
|
|
|
8,556,626 |
|
|
|
19,709,424 |
|
|
|
22,262,141 |
|
Operations and maintenance |
|
4,998,609 |
|
|
|
6,961,060 |
|
|
|
22,321,981 |
|
|
|
24,206,080 |
|
General and administrative |
|
8,326,999 |
|
|
|
6,598,951 |
|
|
|
26,671,930 |
|
|
|
25,145,444 |
|
Depreciation and amortization |
|
8,623,646 |
|
|
|
9,667,213 |
|
|
|
27,428,863 |
|
|
|
26,025,021 |
|
Loss on disposal of fixed assets |
|
458,147 |
|
|
|
— |
|
|
|
2,189,252 |
|
|
|
108,367 |
|
Realized loss (gain) on sale of digital currencies |
|
(719,795 |
) |
|
|
(131,706 |
) |
|
|
(1,100,214 |
) |
|
|
(725,139 |
) |
Unrealized loss (gain) on digital currencies |
|
33,783 |
|
|
|
— |
|
|
|
(113,438 |
) |
|
|
— |
|
Realized loss on sale of miner assets |
|
530,099 |
|
|
|
— |
|
|
|
494,087 |
|
|
|
— |
|
Impairments on digital currencies |
|
— |
|
|
|
357,411 |
|
|
|
— |
|
|
|
683,241 |
|
Impairments on equipment deposits |
|
— |
|
|
|
5,422,338 |
|
|
|
— |
|
|
|
5,422,338 |
|
Total operating expenses |
|
28,751,780 |
|
|
|
37,431,893 |
|
|
|
97,601,885 |
|
|
|
103,127,493 |
|
NET OPERATING
LOSS |
|
(17,583,707 |
) |
|
|
(19,704,936 |
) |
|
|
(39,807,488 |
) |
|
|
(49,900,580 |
) |
OTHER INCOME
(EXPENSE): |
|
|
|
|
|
|
|
Interest expense |
|
(2,236,587 |
) |
|
|
(2,441,139 |
) |
|
|
(6,748,059 |
) |
|
|
(7,428,530 |
) |
Loss on debt extinguishment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(28,960,947 |
) |
Changes in fair value of warrant liabilities |
|
(2,850,298 |
) |
|
|
(180,838 |
) |
|
|
8,445,247 |
|
|
|
5,580,453 |
|
Other |
|
— |
|
|
|
15,000 |
|
|
|
15,000 |
|
|
|
45,000 |
|
Total other (expense) income |
|
(5,086,885 |
) |
|
|
(2,606,977 |
) |
|
|
1,712,188 |
|
|
|
(30,764,024 |
) |
NET LOSS |
$ |
(22,670,592 |
) |
|
$ |
(22,311,913 |
) |
|
$ |
(38,095,300 |
) |
|
$ |
(80,664,604 |
) |
NET LOSS attributable
to noncontrolling interest |
|
(3,181,407 |
) |
|
|
(5,188,727 |
) |
|
|
(5,588,300 |
) |
|
|
(26,663,731 |
) |
NET LOSS attributable
to Stronghold Digital Mining, Inc. |
$ |
(19,489,185 |
) |
|
$ |
(17,123,186 |
) |
|
$ |
(32,507,000 |
) |
|
$ |
(54,000,873 |
) |
NET LOSS attributable
to Class A common shareholders: |
|
|
|
|
|
|
|
Basic |
$ |
(1.34 |
) |
|
$ |
(2.26 |
) |
|
$ |
(2.27 |
) |
|
$ |
(8.93 |
) |
Diluted |
$ |
(1.34 |
) |
|
$ |
(2.26 |
) |
|
$ |
(2.27 |
) |
|
$ |
(8.93 |
) |
Weighted average
number of Class A common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
14,594,955 |
|
|
|
7,569,511 |
|
|
|
14,319,202 |
|
|
|
6,047,891 |
|
Diluted |
|
14,594,955 |
|
|
|
7,569,511 |
|
|
|
14,319,202 |
|
|
|
6,047,891 |
|
STRONGHOLD DIGITAL MINING, INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED) |
|
|
Nine Months Ended |
|
September 30, 2024 |
|
September 30, 2023 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
Net loss |
$ |
(38,095,300 |
) |
|
$ |
(80,664,604 |
) |
Adjustments to reconcile net loss to cash flows from operating
activities: |
|
|
|
Depreciation and amortization |
|
27,428,863 |
|
|
|
26,025,021 |
|
Accretion of asset retirement obligation |
|
41,230 |
|
|
|
39,153 |
|
Loss on disposal of fixed assets |
|
2,189,252 |
|
|
|
108,367 |
|
Realized loss on sale of miner assets |
|
494,087 |
|
|
|
— |
|
Change in value of accounts receivable |
|
399,192 |
|
|
|
1,867,506 |
|
Amortization of debt issuance costs |
|
154,419 |
|
|
|
161,093 |
|
Stock-based compensation |
|
5,093,193 |
|
|
|
7,603,859 |
|
Loss on debt extinguishment |
|
— |
|
|
|
28,960,947 |
|
Impairments on equipment deposits |
|
— |
|
|
|
5,422,338 |
|
Changes in fair value of warrant liabilities |
|
(8,445,247 |
) |
|
|
(5,580,453 |
) |
Non-cash adjustments for loss contingencies |
|
5,253,238 |
|
|
|
— |
|
Other |
|
584,510 |
|
|
|
(229,485 |
) |
(Increase) decrease in digital currencies: |
|
|
|
Mining revenue |
|
(51,963,137 |
) |
|
|
(43,778,958 |
) |
Net proceeds from sale of digital currencies |
|
54,737,513 |
|
|
|
42,563,545 |
|
Unrealized gain on digital currencies |
|
(113,438 |
) |
|
|
— |
|
Impairments on digital currencies |
|
— |
|
|
|
683,241 |
|
(Increase) decrease in assets: |
|
|
|
Accounts receivable |
|
(1,133,062 |
) |
|
|
8,129,033 |
|
Prepaid insurance |
|
4,218,459 |
|
|
|
5,174,903 |
|
Due from related parties |
|
(211,870 |
) |
|
|
(91,617 |
) |
Inventory |
|
1,381,634 |
|
|
|
1,328,373 |
|
Other assets |
|
(896,572 |
) |
|
|
9,666 |
|
Increase (decrease) in liabilities: |
|
|
|
Accounts payable |
|
(643,132 |
) |
|
|
(1,445,109 |
) |
Due to related parties |
|
730,357 |
|
|
|
(239,230 |
) |
Accrued liabilities |
|
(543,442 |
) |
|
|
875,203 |
|
Other liabilities, including contract liabilities |
|
7,888,095 |
|
|
|
(211,225 |
) |
NET CASH FLOWS
PROVIDED BY (USED IN) OPERATING ACTIVITIES |
|
8,548,842 |
|
|
|
(3,288,433 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
Purchases of property, plant and equipment |
|
(749,528 |
) |
|
|
(14,743,269 |
) |
Proceeds from sale of property, plant and equipment, including
CIP |
|
221,212 |
|
|
|
— |
|
NET CASH FLOWS USED IN
INVESTING ACTIVITIES |
|
(528,316 |
) |
|
|
(14,743,269 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
Repayments of debt |
|
(3,668,304 |
) |
|
|
(3,196,644 |
) |
Repayments of financed insurance premiums |
|
(4,075,388 |
) |
|
|
(5,250,538 |
) |
Proceeds from debt, net of issuance costs paid in cash |
|
— |
|
|
|
(147,385 |
) |
Proceeds from private placements, net of issuance costs paid in
cash |
|
— |
|
|
|
9,824,567 |
|
Proceeds from ATM, net of issuance costs paid in cash |
|
— |
|
|
|
8,483,982 |
|
Proceeds from exercise of warrants |
|
— |
|
|
|
316 |
|
NET CASH FLOWS (USED
IN) PROVIDED BY FINANCING ACTIVITIES |
|
(7,743,692 |
) |
|
|
9,714,298 |
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
276,834 |
|
|
|
(8,317,404 |
) |
CASH AND CASH
EQUIVALENTS - BEGINNING OF PERIOD |
|
4,214,613 |
|
|
|
13,296,703 |
|
CASH AND CASH
EQUIVALENTS - END OF PERIOD |
$ |
4,491,447 |
|
|
$ |
4,979,299 |
|
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, non-recurring expenses, realized gains and
losses on the sale of long-term assets, expenses related to
stock-based compensation, gains or losses on extinguishment of
debt, or changes in the 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. Our presentation of Adjusted EBITDA
should be read in conjunction with the financial statements
furnished in our Form 10-Q for the third quarter ended
September 30, 2024, expected to be filed on or around
November 13, 2024. 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 NON-GAAP ADJUSTED
EBITDA |
|
|
Three Months Ended |
|
Nine Months Ended |
(in thousands) |
September 30, 2024 |
|
September 30, 2023 |
|
September 30, 2024 |
|
September 30, 2023 |
Net Loss—GAAP |
$ |
(22,671 |
) |
|
$ |
(22,312 |
) |
|
$ |
(38,095 |
) |
|
$ |
(80,665 |
) |
Plus: |
|
|
|
|
|
|
|
Interest expense |
|
2,237 |
|
|
|
2,441 |
|
|
|
6,748 |
|
|
|
7,429 |
|
Depreciation and amortization |
|
8,624 |
|
|
|
9,667 |
|
|
|
27,429 |
|
|
|
26,025 |
|
Loss on debt extinguishment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28,961 |
|
Impairments on equipment deposits |
|
— |
|
|
|
5,422 |
|
|
|
— |
|
|
|
5,422 |
|
Non-recurring expenses 1 |
|
928 |
|
|
|
1,216 |
|
|
|
7,384 |
|
|
|
1,853 |
|
Stock-based compensation |
|
1,486 |
|
|
|
788 |
|
|
|
5,093 |
|
|
|
7,604 |
|
Loss on disposal of fixed assets |
|
458 |
|
|
|
— |
|
|
|
2,189 |
|
|
|
108 |
|
Realized loss on sale of miner assets |
|
530 |
|
|
|
— |
|
|
|
494 |
|
|
|
— |
|
Changes in fair value of warrant liabilities |
|
2,850 |
|
|
|
181 |
|
|
|
(8,445 |
) |
|
|
(5,580 |
) |
Accretion of asset retirement obligation |
|
14 |
|
|
|
13 |
|
|
|
41 |
|
|
|
39 |
|
Adjusted EBITDA—Non-GAAP 2 |
$ |
(5,544 |
) |
|
$ |
(2,583 |
) |
|
$ |
2,838 |
|
|
$ |
(8,804 |
) |
1 Includes the following non-recurring expenses: estimated
accrual for two loss contingencies, one-time legal fees, and other
one-time items. 2 As previously disclosed, the Company adopted
ASU 2023-08 effective January 1, 2024, using a modified
retrospective transition method, with a cumulative-effect
adjustment of approximately $0.1 million recorded to the opening
balance of retained earnings. In conjunction with this accounting
change and following consultation with the SEC, realized
gains/losses on sale of digital currencies and unrealized
gains/losses on digital currencies will no longer be excluded in
the Company's determination of Adjusted EBITDA. Furthermore, the
Company revised its Adjusted EBITDA for the three and nine months
ended September 30, 2023, to remove adjustments for
impairments on digital currencies and realized gain on sale of
digital currencies.
Investor Contact:
Matt GloverGateway Group, Inc.
SDIG@gateway-grp.com1-949-574-3860
Media Contact:
contact@strongholddigitalmining.com
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