STRONGHOLD DIGITAL MINING, INC. : Results of Operations and Financial Condition, Regulation FD Disclosure, Other Events, Financial Statements and Exhibits (form 8-K)

Item 2.02 Results of Operations and Financial Condition.

The preliminary information set forth in Item 7.01 of this Form 8-K regarding
the estimated results of Stronghold Digital Mining, Inc. (the “Company”) for the
fourth quarter of 2022 is hereby incorporated by reference into this Item 2.02.

The information furnished in this Item 2.02 shall not be deemed “filed” for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liabilities of that section, nor shall such information
be deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, regardless of any general incorporation language in such
filing, except as shall be expressly set forth by specific reference in such
filing.

Item 7.01 Regulation FD Disclosure.

Fourth Quarter 2022 Operational and Financial Update

The Company generated an estimated $23 million of revenue, an estimated $48
million of net loss and an estimated $5 million of adjusted EBITDA (see
reconciliation of non-GAAP financial measures) during the fourth quarter of
2022. Revenue comprised an estimated $14 million from the sale of energy, an
estimated $8 million from cryptocurrency mining, and an estimated $1 million
from capacity sales during the quarter. The preliminary results are unaudited.
The period featured two extremes: record high PJM power prices in December and
record low Bitcoin hash price in November. The Company believes that
Stronghold’s vertically integrated business model, combining power generation
and Bitcoin mining, demonstrated its value and flexibility when the Company
fully curtailed its Bitcoin mining operations in order to deliver power to the
PJM Interconnection LLC (“PJM”) grid during the PJM emergency declaration from
December 23, 2022 through December 25, 2022. The Company remains committed to
supporting the PJM grid, which the Company believes is also aligned with
maximizing shareholder value.

On March 22, 2023, the Company issued a press release regarding certain business
and financial updates. A copy of the press release is attached as Exhibit 99.1
hereto.

The estimated results set forth below are based on preliminary information as of
the date of this Form 8-K and are subject to change following completion of the
year-end review process for the year ended December 31, 2022, and the potential
impact of other developments arising between the date of this Form 8-K and the
time such financial results are finalized. These estimates should not be relied
upon as fact or as an accurate representation of future results, and their
presentation is not intended to represent actual results. Actual results
remain subject to the completion of management’s final reviews and our other
financial closing procedures.

The information furnished in this Item 7.01, including Exhibit 99.1, shall not
be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that section, nor
shall such information be deemed incorporated by reference in any filing under
the Securities Act of 1933, as amended, regardless of any general incorporation
language in such filing, except as shall be expressly set forth by specific
reference in such filing.

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Item 8.01 Other Events.



Cost of Power

In the fourth quarter of 2022 and early 2023, the Company began to realize the
benefits of the investments that were made at the Company’s wholly owned power
generation facilities located (i) in Scrubgrass Township, Venango County,
Pennsylvania and (ii) near Nesquehoning, Pennsylvania (the “Panther Creek
Plant”). The Company continues to believe that it will achieve a net cost of
power of $45-50 per megawatt hour in the first quarter of 2023.

Sales of Beneficial Use Ash

In 2022, the Company realized a benefit of approximately $300,000 from selling
its beneficial use ash, a byproduct of the Company’s coal refuse to energy
process, primarily from the Panther Creek Plant. This benefit comprises revenue
and avoided disposal costs. The Company now expects to grow its ash sale
business and realize a benefit of at least $1 million during 2023, which the
Company believes will be incrementally beneficial to the Company’s efforts to
reduce its net cost of power.

MinerVa Update

As of March 21, 2023, MinerVa Semiconductor Corp. (“MinerVa”) has fulfilled
approximately 85% of the order purchased pursuant to the Equipment Purchase
Agreement, dated April 2, 2021. The Company has received cash refunds, MinerVa
miners and other third-party manufactured miners from MinerVa, leaving
approximately 230 petahash per second, or approximately 2,300 miners, remaining
to be delivered to the Company. Additionally, as a result of various operational
and engineering efforts, the Company believes that the miners received from
MinerVa are now performing largely in line with manufacturer specifications.

Recent Events and Exposures

The Company has had no direct exposure to Celsius Network LLC, First Republic
Bank, FTX Trading Ltd., Signature Bank, Silicon Valley Bank, or Silvergate
Capital Corporation and continues to vigilantly manage its exposure to
counterparties exposed to the cryptocurrency and technology sectors.

           Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this current report on Form 8-K 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 the Company are subject to a number of risks and
uncertainties that may cause the Company’s actual results in future periods to
differ materially from the forward-looking statements. These risks and
uncertainties include, among other things: the recent restructuring of the
Company’s debt and the performance and satisfaction of various obligations under
the agreements entered into in order to effect such restructuring of debt; 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 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 the Company’s 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 its Annual Report on Form 10-K
filed on March 29, 2022 and our Quarterly Reports on Form 10-Q filed on May 16,
2022, August 18, 2022 and November 10, 2022, and in its Current Reports on Form
8-K. Any forward-looking statement speaks only as of the date as of which such
statement is made, and, except as required by law, the Company undertakes no
obligation to update or revise publicly any forward-looking statements, whether
because of new information, future events, or otherwise.

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Use and Reconciliation of Non-GAAP Financial Measures

This Form 8-K contains 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 contained in our filings with the
Securities and Exchange Commission. 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.

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Preliminary Non-GAAP Reconciliations:

A reconciliation of the Company’s net earnings (loss), the closest GAAP measure,
to adjusted EBITDA is presented in the following table:

                                               Three months ended
(in millions)                                   December 31, 2022
Net Loss (GAAP)                                $             (48.0 )
Plus:
Interest expense                                               3.1
Depreciation and amortization                                 10.0
Impairment on miner assets                                    24.3
Impairments on equipment deposits                              5.1
Impairments on digital currencies                              0.2
Loss on debt extinguishment                                    7.7
Stock-based compensation                                       4.8
Non-recurring expenses                                         0.5
Loss on disposal of fixed assets                               0.3
Realized gain on sale of digital currencies                   (0.2 )
Changes in fair value of warrant liabilities                  (2.9 )
Adjusted EBITDA (Non-GAAP)                     $               4.8

Item 9.01 Financial Statements and Exhibits.

 (d) Exhibits.



Exhibit Number                                   Description
       99.1*     Press release dated March 22, 2023
           104   Cover Page Interactive Data File (embedded within the Inline XBRL document).

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* Furnished herewith

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