SDIG Stronghold Digital Mining Inc

 

 

Pursuant to the Purchase Agreements, the Institutional Investor will invest $9.0 million in exchange for an aggregate of 9,000,000 shares of Common Stock and pre-funded warrants (the “Pre-funded Warrants”), and Mr. Beard will invest $1.0 million in exchange for an aggregate of 1,000,000 shares of Common Stock, in each case at a price of $1.00 per share equivalent. Further, the Institutional Investor and Mr. Beard will receive Warrants exercisable for 9,000,000 shares and 1,000,000 shares, respectively, of Common Stock. Subject to certain ownership limitations, the Warrants are exercisable six months after issuance.  The Warrants will be exercisable for five and a half years commencing upon the date of issuance. The Pre-funded Warrants have an exercise price of $0.0001 per warrant share and are immediately exercisable.

The gross proceeds, before deducting offering expenses, from the Private Placement was $10.0 million.  The Company will use the proceeds from this offering for acquisitions of Bitcoin miners.  The Private Placement closed on April 21, 2023.

In connection with the Private Placement, the Company entered into a Registration Rights Agreement with the Institutional Purchaser (the “Registration Rights Agreement”) whereby it agreed to, among other things, file within 30 days of closing of the Private Placement a resale registration statement (the “Resale Registration Statement”) with the Securities and Exchange Commission (the “Commission”) covering all shares of Common Stock sold to the Institutional Purchaser and the shares of Common Stock issuable upon exercise of the Warrants and the Pre-funded Warrants purchased by the Institutional Purchaser, and to cause the Resale Registration Statement to become effective within the timeframes specified in the Registration Rights Agreement; failure to do so will result in certain penalties as set forth in the Registration Rights Agreement.

Subject to certain exceptions, from the closing of the Private Placement until 30 days after the effective date of the Resale Registration Statement (the “Effective Date”), the Company will be prohibited from issuing any shares of Common Stock or securities convertible or exercisable into Common Stock, or filing, amending or supplementing any registration statements, other than (i) any registration statement on Form S-8 or a shelf registration statement on Form S-3, (ii) any registration statement required to be filed pursuant to any currently existing registration rights agreement or (iii) as contemplated pursuant to the Registration Rights Agreement.  Until 6 months after the Effective Date, the Company will also be prohibited from effecting a variable rate transaction, except that a registered at-the-market offering will only be subject to the 30-day restriction.

Certain of the Company’s directors and officers executed lock-up agreements in connection with the Private Placement whereby such persons agreed not to sell, pledge or otherwise dispose of shares of Common Stock or securities convertible into Common Stock, subject to certain exceptions, from the closing of the Private Placement until 30 days after the Effective Date.

The Shares, the Warrants and the Pre-funded Warrants are being sold and issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 506 of Regulation D promulgated under the Securities Act as sales to accredited investors, and in reliance on similar exemptions under applicable state laws.

The representations, warranties and covenants contained in the Purchase Agreements were made solely for the benefit of the parties to the Purchase Agreements. In addition, such representations, warranties and covenants: (i) are intended as a way of allocating the risk between the parties to the Purchase Agreements and not as statements of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, the Company.  Accordingly, the Purchase Agreements are filed with this report only to provide investors with information regarding the terms of transaction, and not to provide investors with any other factual information regarding the Company.  Information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreements, which subsequent information may or may not be fully reflected in public disclosures.

The foregoing description of the Purchase Agreements, Registration Rights Agreement, Warrants and Pre-funded Warrants does not purport to be complete and is qualified in its entirety by reference to the complete text thereof, which are filed as exhibits to this report and are incorporated by reference herein.

As previously disclosed, on September 13, 2022, the Company entered into Securities Purchase Agreements (the “2022 SPAs”) with the Purchasers for the purchase of Common Stock, Pre-funded Warrants and warrants to purchase an aggregate of 5,602,409 shares of Common Stock (the “2022 Warrants”), at an initial exercise price of $1.75 per share. On April 20, 2023, the Company and the Purchasers entered into amendments of the 2022 SPA and the 2022 Warrants to, among other things, (i) replace Section 4.11(b) in the 2022 SPA with Section 4.11(b) in the Securities Purchase Agreements, (ii) with respect to the Institutional Purchaser, remove Section 4.2(b) in the 2022 SPA, and (iii) adjust the strike price of the 2022 Warrants to $1.01 per share.