Stronghold Digital Mining, Inc. (NASDAQ:
SDIG) (“Stronghold”, the “Company”, or “we”) today
announced financial and operational results for the first quarter
of 2023 and provided an operational update:
Recent Operational and Financial Highlights
-
Accelerating hash rate guidance – we now expect to
achieve hash rate capacity of approximately 4 EH/s by the end of
the third quarter of 2023, which would beat our prior guidance of
year-end 2023
-
Completed $10 million private placement and subsequent
purchase of 5,000 MicroBT Whatsminer M50 Bitcoin miners, adding
~600 PH/s of hash rate capacity – $9 million invested by
an institutional investor and $1 million invested by the Company’s
chairman and chief executive officer, Greg Beard
-
Signed “Canaan Bitcoin Mining Agreement”, adding
~400 PH/s of hash rate
capacity – two-year hosting agreement with Cantaloupe
Digital LLC, a subsidiary of Canaan, Inc. (“Canaan”), whereby
Stronghold will operate 4,000 Bitcoin miners supplied by Canaan at
the Company’s wholly owned Panther Creek plant
-
Achieved objective of $45 to $50 per megawatt hour (“MWh”)
net cost of power in March 2023 and expects that the net
cost of power will average between $40 and $50 per MWh over the
course of 2023, which the Company estimates corresponds to a cost
per Bitcoin of approximately $10,000 to $14,000, assuming
latest-generation miners and a network hash rate of 320 EH/s
-
Previously announced substantial deleveraging efforts have resulted
in approximately $59.6 million of principal amount of debt
outstanding and approximately $51.5 million of net debt (calculated
as the principal amount of debt outstanding less cash and Bitcoin)
as of May 8, 2023
-
First quarter 2023 revenue of $17.3 million, net loss of $46.7
million, and non-GAAP Adjusted EBITDA loss of $3.9 million (see
reconciliation of non-GAAP financial measures)
Management Commentary
“We have only a few thousand slots left at our
fully developed, energized data centers to reach our target hash
rate capacity of 4 EH/s, and we are focused on the rapid deployment
of our recent order of 5,000 MicroBT M50 miners and the 4,000
miners associated with the recently announced Canaan Bitcoin Mining
Agreement, 2,000 of which are already on site,” said Greg Beard,
chairman and chief executive officer of Stronghold. “Since
consensually returning approximately 26,000 miners to our previous
lender starting in August 2022, we have grown hash rate capacity by
approximately 2.2 EH/s, with incremental spend of approximately $15
million, and eliminated approximately $67 million of debt. We see
an opportunity-rich environment, both in the secondary, distressed
miner market, as well as in the hosting market, where we are
gaining traction with our differentiated agreement structure. These
opportunities exceed the capacity of our existing infrastructure,
and we continue to evaluate ways to deploy the approximately 25
megawatts (“MW”) of end-to-end data center equipment that we own
and hold in inventory.”
Liquidity and Capital
Resources
As of May 8, 2023, Stronghold’s liquidity was
approximately $8.0 million, comprising $7.4 million in cash plus 22
Bitcoin, and the Company had approximately $59.6 million of
principal amount of debt outstanding. Stronghold continues to
vigilantly manage its exposure to counterparties exposed to the
cryptocurrency and technology sectors.
On April 21, 2023, Stronghold completed the
transaction contemplated under the securities purchase agreements
with an institutional investor and its chairman and chief executive
officer, Greg Beard, to sell an aggregate of 10,000,000 shares of
Class A common stock, par value $0.0001 per share (the “Class A
Common Stock”) and share equivalents (the “Private Placement”). The
Company also issued warrants to purchase an aggregate of 10,000,000
shares of Class A Common Stock, with an initial exercise price of
$1.10 per share (subject to adjustments), and such warrants are not
exercisable until six months after issuance. The Company also
agreed to lower the exercise price of the warrants issued to the
same investors in September 2022 from $1.75 per share to $1.01 per
share.
On March 28, 2023, the Company entered into a
Settlement Agreement with its electrical contractor, Bruce &
Merrilees Electric Co., to eliminate an $11.4 million outstanding
payable — Stronghold’s largest payable as of December 31, 2022 — in
exchange for a $3.5 million subordinated note and three million
penny warrants.
On February 6, 2023, the Company entered into an
amendment to the previously announced secured credit agreement (the
“Credit Agreement”) with WhiteHawk Finance LLC and/or its
affiliates or designees and the other lenders from time to time
party thereto (“WhiteHawk”), to provide Stronghold with enhanced
liquidity and financial flexibility. The Credit Agreement with
WhiteHawk was entered into on October 27, 2022, and nearly tripled
the weighted-average maturity of existing debt from approximately
13 to 36 months, reduced monthly principal payments, and added
approximately $21.6 million of cash to the Company’s balance
sheet.
On January 3, 2023, the Company announced the
exchange of the Company’s Amended and Restated 10% Notes (the
“Notes”) for convertible preferred stock (the “Exchange Agreement”)
to reduce debt and improve liquidity. On February 20, 2023, the
Company closed the Exchange Agreement, whereby the Notes were
exchanged for convertible preferred stock that is convertible,
directly and indirectly, into approximately 58 million shares of
Class A Common Stock. The Exchange Agreement extinguished
approximately $16.9 million of principal amount of debt and
approximately $1.0 million of accrued interest.
Bitcoin Mining Update
During the first quarter of 2023, Stronghold
earned approximately 618 Bitcoin through its mining operations, an
increase of approximately 38% from the 447 Bitcoin mined during the
fourth quarter of 2022. As of May 8, 2023, Stronghold’s current
Bitcoin mining fleet exceeds 31,000 miners with hash rate capacity
of approximately 2.8 EH/s. Following (i) the delivery of 5,000
recently purchased MicroBT Whatsminer M50 miners expected later in
May, (ii) receipt of the remaining 2,000 Canaan A1346 miners
expected by June 15, 2023, under the Canaan Bitcoin Mining
Agreement, and (iii) assuming receipt of the outstanding contracted
2,300 miners from MinerVa Semiconductor Corp. (“MinerVa”), the
Company’s hash rate capacity is expected to rise to over 3.8 EH/s,
of which approximately 80% will be wholly owned by the Company and
not subject to a profit share. Stronghold will receive at least 50%
of the Bitcoin mined by the approximately 20% of hash rate capacity
that is hosted.
The Company is actively evaluating incremental
opportunities, representing over 1 EH/s, to fill its remaining data
center slots. While no assurances can be made that Stronghold will
be able to consummate any of these transactions or that Stronghold
will receive the remaining MinerVa miners, the Company now believes
that it will be able to fill its existing 4 EH/s of data center
capacity by the end of the third quarter of 2023. Beyond the 4 EH/s
of data center capacity at the Company’s wholly owned Scrubgrass
and Panther Creek plants, Stronghold is currently pursuing the
deployment of its additional 25 MW of end-to-end data center
equipment that it owns in inventory. This includes 20 proprietary
StrongBox containers and the transformers, breakers, and switchgear
to support them.
As of May 8, 2023, MinerVa has fulfilled
approximately 85% of the order purchased pursuant to the Equipment
Purchase Agreement dated April 2, 2021, in the form of cash
refunds, MinerVa miners, and other leading third-party-manufactured
miners. The remaining 15% of the order has not yet been scheduled
for delivery and it is unclear when the remaining MinerVa miners
will be delivered, if at all.
Power Update
During the first quarter of 2023, Stronghold
removed approximately 259,000 tons of coal refuse from the
environment and returned approximately 197,000 tons of beneficial
use ash to waste coal piles, facilitating the remediation of these
sites. As previously disclosed, the first quarter of 2023 featured
a significant drop in power prices when compared to the forward
power curve entering 2023, as the result of record warm weather in
January and February, which impacted power demand and led to a
material loosening of power markets. As a result of
lower-than-expected power prices, for most of the first quarter,
Stronghold mined Bitcoin instead of selling that power to the PJM
grid because Bitcoin mining economics were more attractive than
what the Company would have received if it had sold the power to
the grid.
In the first quarter of 2023, Stronghold
continued to realize the benefits of the previous investments and
cost-cutting initiatives at its Scrubgrass and Panther Creek plants
during 2022. For instance, our Scrubgrass plant demonstrated
availability of approximately 80% of capacity during January;
although, the Company opted to not run this plant for a few days in
order to import power at prices lower than the variable cost of
generating power. Consistent with prior expectations, the Company
expects to invest in the Scrubgrass and Panther Creek plants on a
more normalized basis and, at this time, estimates $2 million to $4
million of expenses related to maintenance during planned outages
over the course of 2023. This is significantly lower than the costs
incurred in 2022 related to major maintenance and upgrades at the
Scrubgrass and Panther Creek plants.
Stronghold achieved its $45 to $50 per MWh net
cost of power objective in March 2023, demonstrating that it can
make power at improved, and what the Company believes are highly
competitive, costs. While no assurances can be made, current
beneficial cost trends, if extrapolated forward, including reduced
fuel costs, reduced fixed costs, and increased Pennsylvania Tier II
Renewable Energy Credit prices, cause the Company to believe that
the likely range for the cost of power for the rest of 2023 has
improved to $40 to $50 per MWh, including imported power and
expenses related to the aforementioned planned outages.
Conference Call
Stronghold will host a conference call today,
May 11, 2023, at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)
with an accompanying presentation to discuss these results. A
question-and-answer session will follow management's
presentation.
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
First Quarter 2023 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.
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; 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 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; 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 April 3, 2023. Any forward-looking statement
or guidance 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 or
guidance, whether because of new information, future events, or
otherwise.
STRONGHOLD DIGITAL MINING,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(UNAUDITED)
|
March 31, 2023 |
|
December 31, 2022 |
|
|
|
|
ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
6,353,973 |
|
|
$ |
13,296,703 |
|
Digital currencies |
|
672,852 |
|
|
|
109,827 |
|
Accounts receivable |
|
4,742,092 |
|
|
|
10,837,126 |
|
Inventory |
|
4,700,832 |
|
|
|
4,471,657 |
|
Prepaid insurance |
|
3,541,898 |
|
|
|
4,877,935 |
|
Due from related parties |
|
74,107 |
|
|
|
73,122 |
|
Other current assets |
|
1,354,955 |
|
|
|
1,975,300 |
|
Total current assets |
|
21,440,709 |
|
|
|
35,641,670 |
|
Equipment deposits |
|
5,422,338 |
|
|
|
10,081,307 |
|
Property, plant and equipment, net |
|
158,366,684 |
|
|
|
167,204,681 |
|
Operating lease right-of-use assets |
|
1,581,400 |
|
|
|
1,719,037 |
|
Land |
|
1,748,440 |
|
|
|
1,748,440 |
|
Road bond |
|
211,958 |
|
|
|
211,958 |
|
Security deposits |
|
348,888 |
|
|
|
348,888 |
|
TOTAL
ASSETS |
$ |
189,120,417 |
|
|
$ |
216,955,981 |
|
LIABILITIES: |
|
|
|
Accounts payable |
$ |
14,847,939 |
|
|
$ |
27,540,317 |
|
Accrued liabilities |
|
7,112,648 |
|
|
|
8,893,248 |
|
Financed insurance premiums |
|
2,806,538 |
|
|
|
4,587,935 |
|
Current portion of long-term debt, net of discounts and issuance
fees |
|
995,145 |
|
|
|
17,422,546 |
|
Current portion of operating lease liabilities |
|
613,657 |
|
|
|
593,063 |
|
Due to related parties |
|
1,612,515 |
|
|
|
1,375,049 |
|
Total current liabilities |
|
27,988,442 |
|
|
|
60,412,158 |
|
Asset retirement obligation |
|
1,036,575 |
|
|
|
1,023,524 |
|
Warrant liabilities |
|
2,846,548 |
|
|
|
2,131,959 |
|
Long-term debt, net of discounts and issuance fees |
|
58,208,207 |
|
|
|
57,027,118 |
|
Long-term operating lease liabilities |
|
1,067,654 |
|
|
|
1,230,001 |
|
Contract liabilities |
|
277,397 |
|
|
|
351,490 |
|
Total liabilities |
|
91,424,823 |
|
|
|
122,176,250 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
REDEEMABLE COMMON
STOCK: |
|
|
|
Common Stock – Class V; $0.0001 par value; 34,560,000 shares
authorized; 26,057,600 and 26,057,600 shares issued and outstanding
as of March 31, 2023, and December 31, 2022,
respectively. |
|
15,499,219 |
|
|
|
11,754,587 |
|
Total redeemable common stock |
|
15,499,219 |
|
|
|
11,754,587 |
|
STOCKHOLDERS’ EQUITY
(DEFICIT): |
|
|
|
Common Stock – Class A; $0.0001 par value; 685,440,000 shares
authorized; 41,046,186 and 31,710,217 shares issued and outstanding
as of March 31, 2023, and December 31, 2022,
respectively. |
|
4,105 |
|
|
|
3,171 |
|
Series C convertible preferred stock; $0.0001 par value; 23,102
shares authorized; 21,572 and 0 shares issued and outstanding as of
March 31, 2023, and December 31, 2022, respectively. |
|
2 |
|
|
|
— |
|
Accumulated deficits |
|
(290,848,496 |
) |
|
|
(240,443,302 |
) |
Additional paid-in capital |
|
373,040,764 |
|
|
|
323,465,275 |
|
Total stockholders' equity |
|
82,196,375 |
|
|
|
83,025,144 |
|
Total redeemable common stock and stockholders' equity |
|
97,695,594 |
|
|
|
94,779,731 |
|
TOTAL LIABILITIES,
REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY |
$ |
189,120,417 |
|
|
$ |
216,955,981 |
|
STRONGHOLD DIGITAL MINING,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED)
|
|
Three Months Ended |
|
|
|
March 31, 2023 |
|
March 31, 2022 |
|
|
|
|
|
|
|
OPERATING
REVENUES: |
|
|
|
|
|
Cryptocurrency mining |
|
$ |
11,297,298 |
|
|
$ |
18,204,193 |
|
|
Energy |
|
|
2,730,986 |
|
|
|
9,044,392 |
|
|
Cryptocurrency hosting |
|
|
2,325,996 |
|
|
|
67,876 |
|
|
Capacity |
|
|
859,510 |
|
|
|
2,044,427 |
|
|
Other |
|
|
52,425 |
|
|
|
20,762 |
|
|
Total operating revenues |
|
|
17,266,215 |
|
|
|
29,381,650 |
|
|
OPERATING
EXPENSES: |
|
|
|
|
|
Fuel |
|
|
7,414,014 |
|
|
|
10,019,985 |
|
|
Operations and maintenance |
|
|
8,440,923 |
|
|
|
10,520,305 |
|
|
General and administrative |
|
|
8,468,755 |
|
|
|
11,424,231 |
|
|
Depreciation and amortization |
|
|
7,722,841 |
|
|
|
12,319,581 |
|
|
Loss on disposal of fixed assets |
|
|
91,086 |
|
|
|
44,958 |
|
|
Realized gain on sale of digital currencies |
|
|
(326,768 |
) |
|
|
(751,110 |
) |
|
Impairments on digital currencies |
|
|
71,477 |
|
|
|
2,506,172 |
|
|
Impairments on equipment deposits |
|
|
— |
|
|
|
12,228,742 |
|
|
Total operating expenses |
|
|
31,882,328 |
|
|
|
58,312,864 |
|
|
NET OPERATING
LOSS |
|
|
(14,616,113 |
) |
|
|
(28,931,214 |
) |
|
OTHER INCOME
(EXPENSE): |
|
|
|
|
|
Interest expense |
|
|
(2,383,913 |
) |
|
|
(2,911,453 |
) |
|
Loss on debt extinguishment |
|
|
(28,960,947 |
) |
|
|
— |
|
|
Changes in fair value of warrant liabilities |
|
|
(714,589 |
) |
|
|
— |
|
|
Changes in fair value of forward sale derivative |
|
|
— |
|
|
|
(483,749 |
) |
|
Other |
|
|
15,000 |
|
|
|
20,000 |
|
|
Total other income (expense) |
|
|
(32,044,449 |
) |
|
|
(3,375,202 |
) |
|
NET LOSS |
|
$ |
(46,660,562 |
) |
|
$ |
(32,306,416 |
) |
|
NET LOSS attributable
to noncontrolling interest |
|
|
(18,119,131 |
) |
|
|
(18,897,638 |
) |
|
NET LOSS attributable
to Stronghold Digital Mining, Inc. |
|
$ |
(28,541,431 |
) |
|
$ |
(13,408,778 |
) |
|
NET LOSS attributable
to Class A common shareholders: |
|
|
|
|
|
Basic |
|
$ |
(0.65 |
) |
|
$ |
(0.66 |
) |
|
Diluted |
|
$ |
(0.65 |
) |
|
$ |
(0.66 |
) |
|
Weighted average
number of Class A common shares outstanding |
|
|
|
|
|
Basic |
|
|
43,756,137 |
|
|
|
20,206,103 |
|
|
Diluted |
|
|
43,756,137 |
|
|
|
20,206,103 |
|
|
STRONGHOLD DIGITAL MINING,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)
|
Three Months Ended |
|
March 31, 2023 |
|
March 31, 2022 |
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
Net loss |
$ |
(46,660,562 |
) |
|
$ |
(32,306,416 |
) |
Adjustments to reconcile net loss to cash flows from operating
activities: |
|
|
|
Depreciation and amortization |
|
7,722,841 |
|
|
|
12,319,581 |
|
Accretion of asset retirement obligation |
|
13,051 |
|
|
|
6,084 |
|
Loss on disposal of fixed assets |
|
91,086 |
|
|
|
44,958 |
|
Change in value of accounts receivable |
|
1,002,750 |
|
|
|
— |
|
Amortization of debt issuance costs |
|
34,517 |
|
|
|
881,463 |
|
Stock-based compensation |
|
2,449,324 |
|
|
|
2,592,995 |
|
Loss on debt extinguishment |
|
28,960,947 |
|
|
|
— |
|
Impairments on equipment deposits |
|
— |
|
|
|
12,228,742 |
|
Changes in fair value of warrant liabilities |
|
714,589 |
|
|
|
— |
|
Changes in fair value of forward sale derivative |
|
— |
|
|
|
483,749 |
|
Forward sale contract prepayment |
|
— |
|
|
|
970,000 |
|
Other |
|
(12,139 |
) |
|
|
— |
|
(Increase) decrease in digital currencies: |
|
|
|
Mining revenue |
|
(12,921,075 |
) |
|
|
(18,204,193 |
) |
Net proceeds from sales of digital currencies |
|
12,286,573 |
|
|
|
12,247,300 |
|
Impairments on digital currencies |
|
71,477 |
|
|
|
2,506,172 |
|
(Increase) decrease in assets: |
|
|
|
Accounts receivable |
|
4,959,865 |
|
|
|
410,525 |
|
Prepaid insurance |
|
1,336,037 |
|
|
|
1,852,595 |
|
Due from related parties |
|
(68,436 |
) |
|
|
(864,624 |
) |
Inventory |
|
(229,175 |
) |
|
|
(179,774 |
) |
Other assets |
|
(296,265 |
) |
|
|
(37,242 |
) |
Increase (decrease) in liabilities: |
|
|
|
Accounts payable |
|
(1,390,895 |
) |
|
|
(410,917 |
) |
Due to related parties |
|
237,466 |
|
|
|
68,647 |
|
Accrued liabilities |
|
(1,518,296 |
) |
|
|
1,227,709 |
|
Other liabilities, including contract liabilities |
|
(125,146 |
) |
|
|
(55,742 |
) |
NET CASH FLOWS USED IN
OPERATING ACTIVITIES |
|
(3,341,466 |
) |
|
|
(4,218,388 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
Purchases of property, plant and equipment |
|
(13,738 |
) |
|
|
(38,157,218 |
) |
Equipment purchase deposits - net of future commitments |
|
— |
|
|
|
(6,482,000 |
) |
NET CASH FLOWS USED IN
INVESTING ACTIVITIES |
|
(13,738 |
) |
|
|
(44,639,218 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
Repayments of debt |
|
(1,836,925 |
) |
|
|
(9,290,668 |
) |
Repayments of financed insurance premiums |
|
(1,750,874 |
) |
|
|
(1,832,149 |
) |
Proceeds from debt, net of issuance costs paid in cash |
|
— |
|
|
|
53,671,001 |
|
Proceeds from exercise of warrants |
|
273 |
|
|
|
— |
|
NET CASH FLOWS (USED
IN) PROVIDED BY FINANCING ACTIVITIES |
|
(3,587,526 |
) |
|
|
42,548,184 |
|
NET DECREASE IN CASH
AND CASH EQUIVALENTS |
|
(6,942,730 |
) |
|
|
(6,309,422 |
) |
CASH AND CASH
EQUIVALENTS - BEGINNING OF PERIOD |
|
13,296,703 |
|
|
|
31,790,115 |
|
CASH AND CASH
EQUIVALENTS - END OF PERIOD |
$ |
6,353,973 |
|
|
$ |
25,480,693 |
|
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, 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, 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 March 31, 2023,
expected to be filed on May 12, 2023. 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 |
|
|
(in thousands) |
March 31, 2023 |
|
March 31, 2022 |
|
|
Net Income (Loss) (GAAP) |
$ |
(46,661 |
) |
|
$ |
(32,306 |
) |
|
|
Plus: |
|
|
|
|
|
Interest expense |
|
2,384 |
|
|
|
2,911 |
|
|
|
Depreciation and amortization |
|
7,723 |
|
|
|
12,320 |
|
|
|
Loss on debt extinguishment |
|
28,961 |
|
|
|
— |
|
|
|
Impairments on equipment deposits |
|
— |
|
|
|
12,229 |
|
|
|
Impairments on digital currencies |
|
71 |
|
|
|
2,506 |
|
|
|
One-time non-recurring expenses1 |
|
682 |
|
|
|
3,765 |
|
|
|
Stock-based compensation |
|
2,449 |
|
|
|
2,593 |
|
|
|
Loss on disposal of fixed assets |
|
91 |
|
|
|
45 |
|
|
|
Realized gain on sale of digital currencies |
|
(327 |
) |
|
|
(751 |
) |
|
|
Changes in fair value of forward sale derivative |
|
— |
|
|
|
484 |
|
|
|
Changes in fair value of warrant liabilities |
|
715 |
|
|
|
— |
|
|
|
Accretion of asset retirement obligation |
|
13 |
|
|
|
— |
|
|
|
Adjusted EBITDA
(Non-GAAP) |
$ |
(3,898 |
) |
|
$ |
3,795 |
|
|
1 Includes the following non-recurring expenses:
out-of-the-ordinary major repairs and upgrades to the power plant
and other one-time items.
Investor Contact:
Matt Glover or Alex KovtunGateway Group, Inc.
SDIG@GatewayIR.com1-949-574-3860
Media Contact:
contact@strongholddigitalmining.com
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