Series D Exchange Transaction

On November 13, 2023, the Company consummated a transaction (the “Series D Exchange Transaction”) pursuant to an exchange agreement, dated November 13, 2023, with Adage Capital Partners, LP (the “Holder”) whereby the Company issued to the Holder an aggregate of 15,582 shares of a newly created series of preferred stock, the Series D Convertible Preferred Stock, par value $0.0001 per share (the “Series D Preferred Stock”), in exchange for 15,582 shares of Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”) held by the Holder, which represented all of the shares of Series C Preferred Stock held by the Holder. The Series D Preferred Stock contains substantially similar terms as the Series C Preferred Stock except with respect to a higher conversion price. The Series D Exchange Agreement contains representations, warranties, covenants, releases, and indemnities customary for transactions of this type, as well as certain trading volume restrictions. On November 13, 2023, in connection with the consummation of the Series D Exchange Transaction, the Company also entered into a Registration Rights Agreement with the Holder.

 

The transaction described above for which disclosure of pro forma financial information was considered material has been consummated.

 

As a result of the Series D Exchange Transaction, the Company prepared the accompanying unaudited pro forma condensed consolidated financial statements. Except as set forth herein, the unaudited pro forma condensed consolidated balance sheet as of September 30, 2023, and statement of operations for the nine months ended September 30, 2023, give pro forma effect to the Series D Exchange Transaction as if it occurred on September 30, 2023 (in the case of the balance sheet), or January 1, 2023 (in the case of the statement of operations).

 

The unaudited pro forma condensed consolidated financial statements include unaudited pro forma adjustments that are factually supportable and directly attributable to the Series D Exchange Transaction. In addition, the unaudited pro forma adjustments are expected to have a continuing impact on the Company’s results. The Company has prepared the unaudited pro forma condensed consolidated financial statements for illustrative purposes only, and it does not purport to represent what the results of operations or financial condition would have been had the Series D Exchange Transaction actually occurred on the dates indicated, nor does the Company purport to project the results of operations or financial condition for any future period or as of any future date. Actual results may differ significantly from those reflected in the unaudited pro forma condensed consolidated financial statements for various reasons, including but not limited to, differences between the assumptions used to prepare the unaudited pro forma condensed consolidated financial statements and actual results.

		Historical				Pro Forma Adjustments					Pro Forma
		September 30, 2023				November 2023 Series D Exchange			Notes		September 30, 2023
ASSETS:
Cash and cash equivalents		$	4,979,299			$	-				$	4,979,299
Digital currencies			641,999				-					641,999
Accounts receivable			486,706				-					486,706
Inventory			3,143,284				-					3,143,284
Prepaid insurance			1,842,250				-					1,842,250
Due from related parties			97,288				-					97,288
Other current assets			1,137,834				-					1,137,834
Total current assets			12,328,660				-					12,328,660
Equipment deposits			-				-					-
Property, plant and equipment, net			156,481,678				-					156,481,678
Operating lease right-of-use assets			1,552,735				-					1,552,735
Land			1,748,440				-					1,748,440
Road bond			211,958				-					211,958
Security deposits			348,888				-					348,888
Other noncurrent assets			155,992				-					155,992
TOTAL ASSETS		$	172,828,351			$	-				$	172,828,351
LIABILITIES:
Accounts payable		$	14,666,753			$	-				$	14,666,753
Accrued liabilities			9,638,819				94,274		(a)			9,733,093
Financed insurance premiums			1,112,558				-					1,112,558
Current portion of long-term debt, net of discounts and issuance fees			1,654,634				-					1,654,634
Current portion of operating lease liabilities			748,369				-					748,369
Due to related parties			451,367				-					451,367
Total current liabilities			28,272,500				94,274					28,366,774
Asset retirement obligation			1,062,677				-					1,062,677
Warrant liabilities			5,434,420				-					5,434,420
Long-term debt, net of discounts and issuance fees			57,653,823				-					57,653,823
Long-term operating lease liabilities			899,576				-					899,576
Contract liabilities			560,510				-					560,510
Total liabilities			93,883,506				94,274					93,977,780
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK:
Common Stock - Class V; $0.0001 par value; 34,560,000 shares authorized and 2,405,760 shares issued and outstanding			10,563,277				-					10,563,277
Total redeemable common stock			10,563,277				-					10,563,277
STOCKHOLDERS’ EQUITY (DEFICIT):
Common Stock – Class A; $0.0001 par value; 685,440,000 shares authorized; 7,876,688 shares issued and outstanding.			788				-					788
Series C convertible preferred stock; $0.0001 par value; 23,102 shares authorized; 5,990 shares issued and outstanding.			2				(2	)	(b)			-
Series D convertible preferred stock; $0.0001 par value; 15,582 shares authorized; 15,582 shares issued and outstanding.			-				2		(b)			2
Accumulated deficits			(321,126,596	)			20,492,568		(b)			(300,634,028	)
Additional paid-in capital			389,507,374				(20,586,842	)	(a) (b)			368,920,532
Total stockholders' equity (deficit)			68,381,568				(94,274	)				68,287,294
Total redeemable common stock and stockholders' equity (deficit)			78,944,845				(94,274	)				78,850,571
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)		$	172,828,351			$	-				$	172,828,351

STRONGHOLD DIGITAL MINING, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The September 30, 2023, unaudited pro forma condensed consolidated balance sheet gives effect to the pro forma adjustments necessary to reflect the Series D Exchange Transaction as if it had occurred on September 30, 2023. The unaudited pro forma condensed consolidated statement of operations gives effect to the pro forma adjustments to reflect the Series D Exchange Transaction as if it had occurred as of January 1, 2023. The unaudited pro forma adjustments related to the Series D Exchange Transaction are based on available information and assumptions that management believes are directly attributable to the Series D Exchange Transaction, factually supportable, and are expected to have a continuing impact on the Company’s results of operations with respect to the unaudited condensed consolidated statement of operations.

Note 2 – Pro Forma Adjustments

Adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet

The following adjustments have been made to the accompanying unaudited pro forma condensed consolidated balance sheet as of September 30, 2023.

 

Adjustments to the Unaudited Pro Forma Condensed Consolidated Statement of Operations

The following adjustment has been made to the accompanying unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2023.