Stronghold Reports Second Quarter 2024 Operating and Financial Results

Continues Formal Review of Strategic Alternatives

Pursuing Significant Site Expansion and Evaluating GPU Computing Potential

NEW YORK, August 14, 2024 – Stronghold Digital Mining, Inc. (NASDAQ: SDIG) (“Stronghold”, the “Company”, or “we”) today announced financial and operational results for the second quarter ended June 30, 2024, and provided additional strategic updates:

Second Quarter 2024 Financial Highlights

Strategic Alternatives

The formal strategic review process being conducted by Stronghold and its Board of Directors (the “Board”) continues with the assistance of outside financial and legal advisors. To date, the Company has received numerous bids for all or parts of the Company. The Company and its Board continue to consider a wide range of alternatives to maximize shareholder value, including, but not limited to, the sale of all or parts of the Company, another strategic transaction involving some or all of the assets of the Company, and strategic financing. There is no deadline or definitive timetable set for the completion of the strategic alternatives process, and there can be no assurance any proposal will be made or accepted, any agreement will be executed, or any transaction will be consummated in connection with this review.

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1 See Non-GAAP reconciliation table below.

As one part of its strategic review process, Stronghold has assessed opportunities to expand and enhance its current sites. In May and June 2024, Stronghold submitted preliminary load studies to local utilities to import an additional 400 megawatts (“MW”) at Panther Creek. One of the preliminary load studies was for an additional 250 MW and found that such power may be able to be delivered in stages over the next one to five years. The Company has submitted a project feasibility report, which is the next step toward securing this 250 MW. The preliminary load studies associated with the remaining capacity are still in progress. In August 2024, Stronghold secured a one-year option with certain extension rights to purchase up to approximately 1,140 acres of land adjacent to the Company’s existing Panther Creek site. The Company believes that this option, along with the ability to expand the electricity and fiber available at the existing site and proximity to other data centers, provides Panther Creek with a significant opportunity for data center expansion. Stronghold’s Scrubgrass site is 636 acres, and the Company is pursuing various expansion opportunities including preliminary load studies submitted to import an additional 390 MW from the grid.

In July, Stronghold engaged Appleby Strategy Group LLC (“ASG”), an end-to-end data center solutions expert, to advise the Company in evaluating additional potential uses for the Scrubgrass and Panther Creek sites. Initial assessments from ASG support the view that expansive access to land, electricity, fiber, and water are key differentiating traits of the Stronghold sites that may make them attractive for large-scale data center development.

PJM Base Residual Auction

On July 31, 2024, PJM Interconnection LLC (“PJM”) held its annual Base Residual Auction2 for capacity reserve scheduling for the 12-month period from June 2025 through May 2026 delivery year. Stronghold’s Panther Creek and Scrubgrass Plants offered capacity into the auction, as required, and each cleared the auction at $269.92/MW/day, up approximately 833% from $28.92/MW/day in last year’s Base Residual Auction. The Panther Creek Plant cleared 69.2 MW of capacity in the auction, which the Company estimates will yield approximately $7 million of incremental revenue at an estimated 100% net margin during the 12-month period from June 2025 through May 2026. The Scrubgrass Plant cleared 75.6 MW in the auction and has since exited 17 MW of that commitment through bi-lateral transactions, retaining 58.6 MW of clearing capacity. The Company is currently evaluating options with its remaining capacity commitment at Scrubgrass, including exiting the additional clearing capacity through bi-lateral transactions, with a focus on maximizing the flexibility and long-term potential of its data center operations.

Increased Coal Refuse Reclamation and Energy Tax Credit

On July 11, 2024, the Pennsylvania General Assembly completed its annual commonwealth budget process and passed PA Senate Bill 6543, which Governor Josh Shapiro subsequently signed into law. The law increases the Coal Refuse Reclamation and Energy Tax Credit from $4 per ton to $8 per ton, the annual program cap from $20 million to $55 million, and the individual facility cap from 22.2% to 26.5%. The law did not change the duration of the program, which remains effective through 2036. Stronghold estimates this increase in the waste coal tax credit will result in approximately $2 to $4 million per annum of incremental net income.

PJM Guidance Regarding Co-Located Load

On April 14, 2024, PJM updated its “Guidance on Co-Located Load.” Based on this update, Stronghold believes that its data center loads qualify as PJM “In Network” load, which has the potential to enable ancillary revenue streams such as demand response. Stronghold is currently in the process of registering its Scrubgrass data center in the demand response program. Based on PJM guidance, for the Scrubgrass or Panther Creek data centers to participate fully in the demand response programs, the Company notes that the respective plant would need to exit most or all of its future capacity commitment. Stronghold is working with advisors to better understand its options while contributing positively to grid reliability and building long-term value for its shareholders.

Bitcoin Mining Update

Stronghold mined approximately 299 Bitcoin during the second quarter of 2024 and generated $0.2 million of energy revenue, equivalent to 3 Bitcoin at the average price of Bitcoin during the period, for a total of 302 Bitcoin-equivalent during the quarter, which was down approximately 46% from the 561 Bitcoin-equivalent production during the first quarter of 2024. The Bitcoin halving event took place on April 19, 2024, reducing the block subsidy to 3.125 from 6.25. Bitcoin hash price, which is Stronghold’s preferred measure for Bitcoin mining economics and represents revenue per unit of hash rate, thus capturing Bitcoin price, transaction fees, and network hash rate, averaged $68/PH/s per day during the second quarter of 2024, a 26% decline from the first quarter 2024 average of $92/PH/s per day. In July, Stronghold generated 63 Bitcoin through its mining operations and approximately $0.2 million of energy revenue, or 3 Bitcoin-equivalent based on the average Bitcoin price during the month. The total Bitcoin-equivalent production in July was 66, up approximately 5% versus the 63 generated in June. July total revenue is estimated to be approximately $4.1 million, nearly flat with the prior month.

Liquidity and Capital Resources

As of June 30, 2024, and August 9, 2024, the Company had approximately $5.1 million and $3.6 million, respectively, of cash, cash equivalents, and Bitcoin on its balance sheet, which included approximately 4 Bitcoin and 2 Bitcoin, respectively. As of June 30, 2024, the Company had principal amount of outstanding indebtedness of approximately $55.1 million. Stronghold currently has no material capital commitments. As of August 9, 2024, Stronghold had approximately $3.4 million of capacity remaining under its at-the-market offering agreement (“ATM”) with H.C. Wainwright & Co., LLC. The Company has not sold any of its shares under the ATM during 2024. During 2023, Stronghold issued approximately $11.6 million of Class A common stock at an average price of $6.47 per share under its ATM for approximately $11.2 million of net proceeds, with approximately $0.4 million paid in commissions.

Stronghold Carbon Capture Update

As previously announced, test results from the Scrubgrass Plant have demonstrated carbonation of up to 14% by starting weight of ash, an increase from prior estimates of up to 12%. The Company is continuing in the audit process with Puro, with the goal of accreditation at the Scrubgrass Plant. Please see the Carbon Capture Forum Presentation and the disclosures made in the Company’s Securities and Exchange Commission (“SEC”) filings for additional details and assumptions relating to the carbon capture initiative.

Conference Call

Stronghold will host a conference call today, August 14, 2024, at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) with an accompanying presentation 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 Second 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 Plant and Panther Creek Plant, 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; 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 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; and 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 timely complete a strategic review process and our ability to consummate a transaction in connection with such process, in part or at all, 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 and our ability to expand the power capacity at our sites. More information on these risks and other potential factors that could affect our financial results are included in our filings with the SEC, 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 March 8, 2024, and in our subsequently filed Quarterly Reports on Form 10-Q. The Company expects to file its Quarterly Report on Form 10-Q for the second quarter of 2024 on August 14, 2024. 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.

		June 30, 2024				December 31, 2023
ASSETS:
Cash and cash equivalents		$	4,876,152			$	4,214,613
Digital currencies			253,710				3,175,595
Accounts receivable			570,197				507,029
Inventory			4,470,089				4,196,812
Prepaid insurance			2,736,501				3,787,048
Due from related parties			97,288				97,288
Other current assets			2,109,205				1,675,084
Total current assets			15,113,142				17,653,469
Equipment deposits			-				8,000,643
Property, plant and equipment, net			134,083,470				144,642,771
Operating lease right-of-use assets			1,107,044				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			199,480				170,488
TOTAL ASSETS		$	152,900,202			$	174,337,184
LIABILITIES:
Accounts payable		$	13,074,814			$	11,857,052
Accrued liabilities			11,558,654				10,787,895
Financed insurance premiums			1,425,592				2,927,508
Current portion of long-term debt, net of discounts and issuance fees			16,347,388				7,936,147
Current portion of operating lease liabilities			668,604				788,706
Due to related parties			1,106,704				718,838
Total current liabilities			44,181,756				35,016,146
Asset retirement obligation			1,103,215				1,075,728
Warrant liabilities			13,914,884				25,210,429
Long-term debt, net of discounts and issuance fees			38,470,192				48,203,762
Long-term operating lease liabilities			499,886				776,079
Other noncurrent liabilities			2,569,356				241,420
Total liabilities			100,739,289				110,523,564
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK:
Common Stock – Class V; $0.0001 par value; 34,560,000 shares authorized; 2,405,760 shares issued and outstanding as of June 30, 2024, and December 31, 2023.			10,416,454				20,416,116
Total redeemable common stock			10,416,454				20,416,116
STOCKHOLDERS’ EQUITY:
Common Stock – Class A; $0.0001 par value; 685,440,000 shares authorized; 12,980,864 and 11,115,561 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively.			1,298				1,112
Series C convertible preferred stock; $0.0001 par value; 23,102 shares authorized; 5,990 shares issued and outstanding as of June 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 June 30, 2024, and December 31, 2023, respectively.			-				1
Accumulated deficits			(336,973,510	)			(331,647,755	)
Additional paid-in capital			378,716,670				375,044,145
Total stockholders’ equity			41,744,459				43,397,504
Total redeemable common stock and stockholders’ equity			52,160,913				63,813,620
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY		$	152,900,202			$	174,337,184

		Three Months Ended								Six Months Ended
		June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
OPERATING REVENUES:
Cryptocurrency mining		$	14,988,526			$	13,782,798			$	36,279,584			$	25,080,096
Cryptocurrency hosting			3,824,299				3,079,701				9,281,828				5,405,697
Energy			221,370				740,793				921,437				3,471,779
Capacity			-				582,557				-				1,442,067
Other			69,944				47,892				143,475				100,317
Total operating revenues			19,104,139				18,233,741				46,626,324				35,499,956
OPERATING EXPENSES:
Fuel			5,798,304				6,291,501				13,209,132				13,705,515
Operations and maintenance			9,081,647				8,804,097				17,323,372				17,245,020
General and administrative			11,746,585				10,077,738				18,344,931				18,546,493
Depreciation and amortization			9,290,563				8,634,967				18,805,217				16,357,808
Loss on disposal of fixed assets			1,731,105				17,281				1,731,105				108,367
Realized loss (gain) on sale of digital currencies			243,688				(266,665	)			(380,419	)			(593,433	)
Unrealized gain on digital currencies			(145,994	)			-				(147,221	)			-
Realized gain on sale of miner assets			-				-				(36,012	)			-
Impairments on digital currencies			-				254,353				-				325,830
Total operating expenses			37,745,898				33,813,272				68,850,105				65,695,600
NET OPERATING LOSS			(18,641,759	)			(15,579,531	)			(22,223,781	)			(30,195,644	)
OTHER INCOME (EXPENSE):
Interest expense			(2,248,063	)			(2,603,478	)			(4,511,472	)			(4,987,391	)
Loss on debt extinguishment			-				-				-				(28,960,947	)
Changes in fair value of warrant liabilities			(382,175	)			6,475,880				11,295,545				5,761,291
Other			5,000				15,000				15,000				30,000
Total other (expense) income			(2,625,238	)			3,887,402				6,799,073				(28,157,047	)
NET LOSS			(21,266,997	)			(11,692,129	)			(15,424,708	)			(58,352,691	)
NET LOSS attributable to noncontrolling interest			(3,325,180	)			(3,355,873	)			(2,406,893	)			(21,475,004	)
NET LOSS attributable to Stronghold Digital Mining, Inc.		$	(17,941,817	)		$	(8,336,256	)		$	(13,017,815	)		$	(36,877,687	)
NET LOSS attributable to Class A common shareholders:
Basic		$	(1.25	)		$	(1.35	)		$	(0.92	)		$	(6.99	)
Diluted		$	(1.25	)		$	(1.35	)		$	(0.92	)		$	(6.99	)
Weighted average number of Class A common shares outstanding
Basic			14,369,800				6,163,450				14,179,810				5,274,471
Diluted			14,369,800				6,163,450				14,179,810				5,274,471

		Six Months Ended
		June 30, 2024				June 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(15,424,708	)		$	(58,352,691	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization			18,805,217				16,357,808
Accretion of asset retirement obligation			27,484				26,102
Loss on disposal of fixed assets			1,731,105				108,367
Realized gain on sale of miner assets			(36,012	)			-
Change in value of accounts receivable			399,192				1,142,750
Amortization of debt issuance costs			102,946				109,620
Stock-based compensation			3,606,907				6,816,048
Loss on debt extinguishment			-				28,960,947
Changes in fair value of warrant liabilities			(11,295,545	)			(5,761,291	)
Non-cash adjustments for loss contingencies			5,218,167				-
Other			408,303				(532,880	)
(Increase) decrease in digital currencies:
Mining revenue			(42,427,846	)			(28,709,950	)
Net proceeds from sale of digital currencies			45,596,244				27,064,294
Unrealized gain on digital currencies			(147,221	)			-
Impairments on digital currencies			-				325,830
(Increase) decrease in assets:
Accounts receivable			(462,359	)			7,140,368
Prepaid insurance			2,727,056				3,093,404
Due from related parties			-				(64,276	)
Inventory			(273,277	)			303,468
Other assets			(1,231,144	)			306,998
Increase (decrease) in liabilities:
Accounts payable			1,032,860				(145,649	)
Due to related parties			387,866				219,778
Accrued liabilities			(2,413,906	)			27,326
Other liabilities, including contract liabilities			(291,811	)			(78,849	)
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES			6,039,518				(1,642,478	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(573,002	)			(10,581,332	)
Proceeds from sale of property, plant and equipment, including CIP			180,000				-
NET CASH FLOWS USED IN INVESTING ACTIVITIES			(393,002	)			(10,581,332	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt			(1,806,551	)			(2,446,953	)
Repayments of financed insurance premiums			(3,178,426	)			(3,202,071	)
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			-				2,825
Proceeds from exercise of warrants			-				316
NET CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES			(4,984,977	)			4,031,299
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			661,539				(8,192,511	)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD			4,214,613				13,296,703
CASH AND CASH EQUIVALENTS - END OF PERIOD		$	4,876,152			$	5,104,192

		Three Months Ended								Six Months Ended
(in thousands)		June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
Net Income (Loss)—GAAP		$	(21,267	)		$	(11,692	)		$	(15,425	)		$	(58,353	)
Plus:
Interest expense			2,248				2,603				4,511				4,987
Depreciation and amortization			9,291				8,635				18,805				16,358
Loss on debt extinguishment			-				-				-				28,961
Non-recurring expenses 1			5,619				(46	)			6,456				636
Stock-based compensation			1,668				4,367				3,607				6,816
Loss on disposal of fixed assets			1,731				17				1,731				108
Realized gain on sale of miner assets			-				-				(36	)			-
Changes in fair value of warrant liabilities			382				(6,476	)			(11,296	)			(5,761	)
Accretion of asset retirement obligation			14				13				27				26
Adjusted EBITDA—Non-GAAP 2		$	(314	)		$	(2,579	)		$	8,380			$	(6,222	)