STRONGHOLD DIGITAL MINING, INC. : Completion of Acquisition or Disposition of Assets, Regulation FD Disclosure, Other Events, Financial Statements and Exhibits (form 8-K)

Item 2.01 Completion of Acquisition or Disposition of Assets and Extinguishment

of Debt.

As previously disclosed, Stronghold Digital Mining, Inc. (the “Company”), its
subsidiaries Stronghold Digital Mining LLC, a Delaware limited liability company
(“SDM”), and Stronghold Digital Mining BT, LLC, a Delaware limited liability
company (“Digital Mining BT”, and together with SDM, the “Sellers”), and the
Company’s operating partnership subsidiary Stronghold Digital Mining Holdings,
LLC, a Delaware limited liability company (together with the Sellers and the
Company, the “Seller Parties” and each, a “Seller Party”), entered into an Asset
Purchase Agreement, dated August 16, 2022 (the “Asset Purchase Agreement”) with
NYDIG ABL LLC, a Delaware limited liability company formerly known as Arctos
Credit, LLC (“NYDIG”), and The Provident Bank, a Massachusetts savings bank
(“BankProv” and together with NYDIG, “Purchasers” and each, a “Purchaser”).

Pursuant to the master equipment financing agreement entered into between SDM
and NYDIG on June 25, 2021 (the “Arctos/NYDIG Financing Agreement”) and the
master equipment financing agreement entered into between Digital Mining BT and
NYDIG on December 15, 2021 (the “Second NYDIG Financing Agreement” and together
with the Arctos/NYDIG Financing Agreement, the “NYDIG Financing Agreements”),
the Seller Parties pledged as collateral under the NYDIG Financing Agreements
certain Bitcoin miners the Seller Parties purchased with borrowings under the
NYDIG Financing Agreements (together with certain related agreements to purchase
miners, the “APA Collateral”). Under the Asset Purchase Agreement, the Seller
Parties agreed to sell, and the Purchasers (or their respective designee) agreed
to purchase, the APA Collateral in a private disposition in exchange for the
forgiveness, reduction and release of all principal, interest, and fees owing
under each of the NYDIG Financing Agreements (collectively, the “NYDIG Debt”).
Upon the signing of the Asset Purchase Agreement, the amount of principal under
the NYDIG Debt outstanding was approximately $67.4 million.

On September 30, 2022, the Seller Parties completed the sale of the initial
three tranches of the APA Collateral to BankProv pursuant to the Asset Purchase
Agreement in exchange for the extinguishment of $27.4 million of principal under
the NYDIG Debt and related interest (the “BankProv Settlement”). On October 13,
2022, the Seller Parties completed the sale of three tranches of APA Collateral
to NYDIG pursuant to the Asset Purchase Agreement in exchange for the
extinguishment of $37.9 million of principal under the NYDIG Debt and related
interest (the “NYDIG Settlement”). Following the NYDIG Settlement, together with
the BankProv Settlement, the aggregate amount of principal under the NYDIG Debt
extinguished is $65.3 million.

The sale of all Bitcoin miners included in the APA Collateral that were in the
Company’s possession at the Panther Creek Plant and Scrubgrass Plant at the time
the Asset Purchase Agreement was executed and the related forgiveness, reduction
and release of the NYDIG Debt associated with such Bitcoin miners have been
completed. The sale of the remainder of the APA Collateral, and the
extinguishment of the related, remaining portion of the NYDIG Debt, will be
settled in accordance with the terms and conditions set forth under the Asset
Purchase Agreement, including an inspection period. As of October 13, 2022, only
$2.1 million remained outstanding under the NYDIG Financing Agreements, such
amount being related to 504 Bitcoin miners that are in the possession of US
Customs and Border Control. The Company expects the 504 miners that are in the
possession of US Customs and Border Control to be released in the near future
and the remaining extinguishment of the NYDIG Debt to be consummated in
accordance with the terms of the Asset Purchase Agreement thereafter. As a
result of this transaction, the Company expects to recognize a loss of
approximately $21 million in the third quarter of 2022. The loss amount has been
estimated based solely on the value of the deposit paid for the undelivered
miners forming the APA Collateral, the net book value of the delivered miners
forming the APA Collateral, and the principal amount and funding costs of the
NYDIG Debt.

Item 7.01 Regulation FD Disclosure.

A copy of the press release and slide presentation announcing certain business
updates is furnished herewith as Exhibit 99.2 and Exhibit 99.3, respectively,
and is incorporated into this Item 7.01 by reference. Further, on October 13,
2022, the Company filed a Registration Statement on Form S-1 (File No.
333-267869) with the Securities and Exchange Commission (the “SEC”), which
contains updated business, risk factors, and other disclosure. The Company’s
filings with the SEC are available to the public through the Internet at the
SEC’s website at http://www.sec.gov.

In accordance with General Instruction B.2 of Form 8-K, the information
furnished pursuant to this Item 7.01 in this Current Report on Form 8-K,
including Exhibit 99.2 and Exhibit 99.3, shall not be deemed “filed” for the
purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liability of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in such a
filing.

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Item 8.01 Other Items

Northern Data Settlement Agreement and Termination of Hosting Agreement

On September 30, 2022, SDM, Stronghold Digital Mining Operating, LLC
(“Operating”) and Stronghold Digital Mining Hashco, LLC (“Hashco”) entered into
a Settlement Agreement with Northern Data PA LLC (“NDPA”) and 1277963 B.C. Ltd.
(“Bitfield”, and together with NDPA, “Northern Data”) whereby the previously
disclosed Hosting Agreement between NDPA and SDM dated August 17, 2021 (as
amended, the “Hosting Agreement”) was mutually terminated.

Pursuant to the Settlement Agreement, for a term of two years until October 1,
2024, the Company has the right to lease from Northern Data for its exclusive
use, access, and operation (i) 24 Northern Data manufactured pods (the “Northern
Data Pods”) capable of supporting approximately 550 Bitcoin miners each for an
aggregate amount of approximately 13,200 available slots and (ii) four
Strongboxes (“Strongboxes”) that the Company previously sold to Northern Data
capable of supporting approximately 264 Bitcoin miners each for an aggregate of
approximately 1,056 mining slots for $1,000 annually. Following the Settlement
Agreement, no future revenue share will be applicable for miners in the Northern
Data Pods or Strongboxes, and Stronghold will receive 100% of the profits
generated by Bitcoin miners in the Northern Data Pods and Strongboxes. The
Company estimates that the Settlement Agreement will result in the Company
saving approximately $0.5 to $1.1 million per month through 2023, based on (i)
Northern Data Pods being fully utilized for approximately 1.33 EH/s of hash rate
capacity, average miner efficiency 37 joules per terahash, and 95% miner uptime
(ii) a Bitcoin price range of $17,500 to $30,000 and (iii) a network hash rate
of 250 EH/s until the halving in April 2024, and reduced by 35% thereafter,
compared to what would have been payable under the Hosting Agreement based upon
the 35% profit share of mining revenue net of $0.027/kWh. At the end of the
two-year term of the Settlement Agreement, the Company has the option, but not
the obligation, to purchase the Northern Data Pods and Strongboxes for an amount
between $2 million and $6 million based on the prevailing hash price at the
time, net of a maximum of $1.5 million of expenditures that the Company has the
option to use to upgrade the Northern Data Pods throughout the two-year term.
The Company estimates that the Settlement Agreement will improve cash flow by
approximately $7 to $20 million through September 2024 based on a Bitcoin price
range of $17,500 to $30,000 and a network hash rate of 250 EH/s until the
halving in April 2024.

Pursuant to the Settlement Agreement, we will pay Northern Data an aggregate
amount of $4.5 million as follows (i) $2.5 million to Northern Data not later
than October 3, 2022, which amount was paid to Northern Data on October 3, 2022
in full, (ii) $1.0 million to Northern Data not later than October 31, 2022; and
(iii) $1.0 million to Northern Date not later than November 30, 2022.

May PIPE Election

As previously disclosed, on May 15, 2022, the Company entered into a note and
warrant purchase agreement (the “May 2022 Purchase Agreement”) by and among the
Company and the purchasers thereto (collectively, the “PIPE Purchasers”),
whereby the Company agreed to issue and sell to the Purchasers, and the
Purchasers agreed to purchase from the Company, (i) $33,750,000 aggregate
principal amount of 10.00% unsecured convertible promissory notes (the “May 2022
Notes”) and (ii) warrants (the “May 2022 Warrants”). On August 16, 2022, the
Company entered into an agreement with the PIPE Purchasers, whereby the Company
agreed to amend the terms of the May 2022 Notes such that an aggregate of $11.25
million of the outstanding principal under the May 2022 Notes (the “Amended May
2022 Notes”) was exchanged for the amended and restated warrant agreement
pursuant to which the strike price of the aggregate 6,318,000 May 2022 Warrants
was reduced from $2.50 to $0.01. After giving effect to the principal reduction
under the Amended May 2022 Notes, the Company will continue to make subsequent
payments to the Purchasers on the fifteenth (15th) day of each of November 2022,
December 2022, January 2023 and February 2023. The Company may generally elect
to make each such payment (A) in cash or (B) in shares of its Class A common
stock, at a twenty percent (20%) discount to the average of the daily VWAPs for
each of the twenty (20) consecutive trading days preceding the payment date. The
Company intends to elect to make a portion of the November 15, 2022 payment in
shares of its Class A common stock.

           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; our ability to perform our remaining obligations and
satisfy all conditions to each Settlement under the Asset Purchase Agreement;
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 and August 18, 2022, and in its Current Report 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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Item 9.01 Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

The following unaudited pro forma financial information is filed as Exhibit 99.1
to this Current Report on Form 8-K and is incorporated herein by reference:

? Unaudited pro forma condensed consolidated balance sheet as of June 30, 2022,

? Unaudited pro forma condensed consolidated statement of operations for the six

months ended June 30, 2022, and

? Unaudited pro forma condensed consolidated statement of operations for the

year ended December 31, 2021.

(d) Exhibits.

 Exhibit
 Number                                  Description
   99.1     Unaudited Pro Forma Financial Statements of Stronghold Digital Mining,
            Inc.
  99.2*     Press release, dated October 14, 2022
  99.3*     Slide Presentation, dated October 14, 2022
      104   Cover Page Interactive Data File (embedded within the Inline XBRL
            document).

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* Furnished herewith

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