Stronghold Digital Mining, Inc. (NASDAQ:
SDIG) (“Stronghold”, or the “Company”) today provided an
update on its previously announced agreement with NYDIG ABL LLC
(“NYDIG”) and the Provident Bank (“BankProv”), to eliminate
approximately $67 million in principal amount of debt outstanding
(the “Debt”) under equipment financing agreements. Separately, the
Company also announced its recent mutual termination and settlement
of its data center hosting agreement. The Company believes that the
settlement is materially beneficial to cash flow generation and
operational flexibility. Stronghold has posted an investor
presentation to its Investor Relations website to supplement this
press release, which can be found in the Events and Presentations
section.
NYDIG Equipment Financing
Update
As previously disclosed on August 16, 2022,
affiliates of Stronghold entered into an Asset Purchase Agreement
(“APA”) with NYDIG and BankProv to return approximately 26,000
Bitcoin mining rigs that served as collateral under equipment
financing agreements (the “APA Collateral”) in exchange for the
extinguishment of approximately $67 million of principal amount of
debt outstanding. On September 30, 2022, Stronghold completed the
sale of the initial three tranches of the APA Collateral to
BankProv in exchange for the extinguishment of approximately $27
million of the Debt. On October 13, 2022, Stronghold completed the
sale of three tranches of APA Collateral to NYDIG in exchange for
the extinguishment of approximately $38 million of the Debt. As of
October 13, 2022, approximately $65 million of the $67 million of
Debt has been extinguished following the delivery of miners to
NYDIG and BankProv between August 16, 2022 and October 12, 2022
pursuant to the APA. As of October 13, 2022, the Company has
transferred to NYDIG and BankProv all of the approximately 26,000
Bitcoin mining rigs that served as collateral under the Debt except
for approximately 500 Bitcoin mining rigs that are currently in the
possession of U.S. Customs and Border Control in California. The
Company expects these remaining miners to be released in the near
future, after which, following an inspection period, the remaining
approximately $2 million of Debt will be extinguished in accordance
with the APA.
Favorable Northern Data Hosting
Agreement Termination
On September 30, 2022, Stronghold entered into a
Settlement Agreement (the “Settlement Agreement”) with Northern
Data PA LLC (“NDPA”) and 1277963 B.C. Ltd. (“Bitfield”, and
together with NDPA, “Northern Data”) to mutually terminate the data
center hosting agreement at the Company’s Scrubgrass plant.
Pursuant to the Settlement Agreement:
1) Stronghold will not pay any future profit
share payments to Northern Data, which was expected to be 35% of
miner revenue, net of a $0.027/kWh power cost. The Company
estimates these payments were to be approximately $0.5 to $1.1
million per month until the halving in April of 2024 and
approximately $10 to $25 million cumulatively through September
2024, which is based on the following assumptions: 1) Bitcoin price
range of $17,500 to $30,000, 2) network hash rate of 250 EH/s
through the halving in April 2024 and reduced by 35% thereafter, 3)
approximately 1.33 EH/s of hash rate capacity, 4) average miner
efficiency of 37 joules per terahash, and 5) miner uptime of 95%.
2) Stronghold to operate the approximately 50 MW of modular miner
pods capable of hosting over 14,200 Bitcoin miners, equating to
approximately 1.25 to 1.5 EH/s. The Company believes operating the
miner pods will allow more flexibility to optimize profitability by
either mining Bitcoin or selling power to the PJM power grid. In
return for operating the pods, the Company will incur a de minimis
$1,000 per year leasing expense.3) Settlement Agreement eliminates
the approximately $2.6 million accrued liability on Stronghold’s
balance sheet as of June 30, 2022.
4) At the end of the two-year
lease term, Stronghold has the option, but not the obligation, to
purchase the Northern Data pods for between $2 million and $6
million, depending on prevailing hash price at time, net of up to
$1.5 million in expenditures that the Company has the option, but
not the obligation, to spend if it deems necessary in order to
upgrade or maintain the pods.5) Stronghold to pay
Northern Data $4.5 million, of which the Company paid $2.5 million
on October 3, 2022 and will pay an additional $1 million prior to
October 31, 2022, and $1 million prior to November 30, 2022.
Management Commentary
“We are pleased to have closed on a significant
portion of our debt restructuring with NYDIG and look forward to
eliminating the small remaining piece of this debt in the near
future. These closings continue our meaningful transition towards a
deleveraged company that can either sell power to the grid or use
its low cost self-generated power to mine for Bitcoin,” said Greg
Beard, co-chairman and chief executive officer of Stronghold. “We
are also satisfied with the settlement of our prior hosting
agreement, which provides us with improved operational control of
our Bitcoin operations and a material uplift to our cash flow
generation over the next two years, as well as significant
optionality. Overall, we believe that we continue to make
significant progress towards improving our balance sheet, liquidity
and cost structure to deliver shareholder value.”
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.
Investor Contact:
Matt Glover or Jeff Grampp, CFAGateway Group,
Inc. SDIG@GatewayIR.com1-949-574-3860
Media Contact:
contact@strongholddigitalmining.com
Forward Looking Statements:
The information, financial projections and other
estimates contained herein contain “forward-looking” statements as
that term is defined in Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended by the Private Securities Litigation Reform Act of 1995,
including, but not limited to the anticipated performance of the
Company as a result of the recent restructuring of the Company’s
debt. Such financial projections and estimates are as to future
events and are not to be viewed as facts, and reflect various
assumptions of management of the Company concerning the future
performance of the Company and are subject to significant business,
financial, economic, operating, competitive and other risks and
uncertainties and contingencies (many of which are difficult to
predict and beyond the control of the Company) that could cause
actual results to differ materially from the statements and
information included herein. Forward-looking statements concern
future circumstances and results and other statements that are not
historical facts and are sometimes identified by the words “may,”
“will,” “should,” “potential,” “intend,” “expect,” “endeavor,”
“seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,”
“believe,” “could,” “project,” “predict,” “continue,” “target” or
other similar words or expressions. Forward-looking statements are
based upon current plans, estimates and expectations that are
subject to risks, uncertainties and assumptions. Forward-looking
statements may include statements about various risks and
uncertainties, including those described under the heading "Risk
Factors" as detailed from time to time in Stronghold’s reports
filed with the SEC, including Stronghold’s annual report on Form
10-K, periodic quarterly reports on Form 10-Q, current reports on
Form 8-K and other documents filed with the SEC. Such risk and
uncertainties are not exclusive. Any forward-looking statements
speak only as of the date of this communication. The Company does
not undertake any obligation to update any forward-looking
statements, whether as a result of new information or development,
future events or otherwise, except as required by law. Readers are
cautioned not to place undue reliance on any of these
forward-looking statements. In addition, such information,
financial projections and estimates were not prepared with a view
to public disclosure or compliance with published guidelines of the
SEC, the guidelines established by the American Institute of
Certified Public Accountants or U.S. generally accepted accounting
principles (“GAAP”). Accordingly, although the Company’s management
believes the financial projections and estimates contained herein
represent a reasonable estimate of the Company’s projected
financial condition and results of operations based on assumptions
that the Company’s management believes to be reasonable at the time
such estimates are made and at the time the related financial
projections and estimates are disclosed, there can be no assurance
as to the reliability or correctness of such information, financial
projections and estimates, nor should any assurances be inferred,
and actual results may vary materially from those projected. This
presentation includes financial measures that are not presented in
accordance with GAAP. While management believes such non-GAAP
measures are useful, it is not a measure of our financial
performance under GAAP and should not be considered in isolation or
as an alternative to any measure of such performance derived in
accordance with GAAP. These non-GAAP measures have limitations as
analytical tools and you should not consider them in isolation or
as substitutes for analysis of our results as reported under GAAP.
Certain information contained herein has been derived from sources
prepared by third parties. While such information is believed to be
reliable for the purposes used herein, none of the Company or any
of its affiliates, directors, officers, employees, members,
partners, shareholders or agents makes any representation or
warranty with respect to the accuracy or completeness of such
information. Although the Company believes the sources are
reliable, it has not independently verified the accuracy or
completeness of data from such sources. Additionally, descriptions
herein of market conditions and opportunities are presented for
informational purposes only; there can be no assurance that such
conditions will actually occur or result in positive returns.
Recipients of this presentation should make their own
investigations and evaluations of any information referenced
herein. Information regarding performance by, or businesses
associated with our management team and their respective affiliates
is presented for informational purposes only. You should not rely
on the historical record of our management team’s performance or
the performance of their respective affiliates as indicative of our
future performance. The recipient should not construe the contents
of this presentation as legal, tax, accounting or investment advice
or a recommendation. The recipient should consult its own counsel,
tax advisors and financial advisors as to legal and related matters
concerning the matters described herein. By reviewing this
presentation, the recipient confirms that it is not relying upon
the information contained herein to make any decision. This
presentation does not purport to be all-inclusive or to contain all
of the information that the recipient may require to make any
decision.
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