Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Introduction
The following sets forth unaudited pro forma condensed consolidated financial statements of the Company prepared in accordance with Article 11 of Regulation S-X. The following information should be read in conjunction with the following: (i) the accompanying notes to the unaudited pro forma condensed consolidated financial statements; and (ii) the Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2023, and related notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 12, 2023.
The unaudited pro forma condensed consolidated financial statements are based on and have been derived from the Company’s historical consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America and are presented based on assumptions, adjustments, and currently available information described in the accompanying notes.
On May 15, 2023, the Company effected a 1-for-10 reverse stock split (“Reverse Split”) of its Class A common stock, par value $0.0001 per share, and Class V common stock, par value $0.0001 per share. The historical and pro forma share and per share information included herein have been adjusted to reflect the Reverse Split.
Description of the Transaction
The unaudited pro forma condensed consolidated financial statements are presented to illustrate the estimated effects of the following transaction (described on a pre-Reverse Split basis below):
April 2023 Private Placement
On April 20, 2023, the Company entered into Securities Purchase Agreements with an institutional investor and the Company’s chairman and chief executive officer, Greg Beard, for the purchase and sale of shares of Class A common stock, par value $0.0001 per share at a purchase price of $1.00 per share, and warrants to purchase shares of common stock, at an initial exercise price of $1.10 per share (subject to certain adjustments in accordance with the terms thereof) (“April 2023 Private Placement”). Pursuant to the Securities Purchase Agreements, the institutional investor invested $9.0 million in exchange for an aggregate of 9,000,000 shares of common stock and pre-funded warrants, and Mr. Beard invested $1.0 million in exchange for an aggregate of 1,000,000 shares of common stock, in each case at a price of $1.00 per share equivalent. Further, the institutional investor and Mr. Beard received warrants exercisable for 9,000,000 shares and 1,000,000 shares, respectively, of common stock.
Subject to certain ownership limitations, the warrants are exercisable six months after issuance. The warrants are exercisable for five and a half years commencing upon the date of issuance. The pre-funded warrants have an exercise price of $0.0001 per warrant share and are immediately exercisable. The gross proceeds, before deducting offering expenses, from the April 2023 Private Placement was approximately $10.0 million. The April 2023 Private Placement closed on April 21, 2023.
Additionally, as previously disclosed, on September 13, 2022, the Company entered into Securities Purchase Agreements with Armistice Capital Master Fund Ltd. and Greg Beard (the “September PIPE Purchasers”) for warrants to purchase an aggregate of 5,602,409 shares of Class A common stock, at an exercise price of $1.75 per share. On April 20, 2023, the Company and the September PIPE Purchasers entered into amendments to, among other things, adjust the strike price of the warrants to $1.01 per share.
The transaction described above for which disclosure of pro forma financial information was considered material has been consummated.
As a result of this 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 March 31, 2023, and statement of operations for the three months ended March 31, 2023, give pro forma effect to this transaction as if it occurred on March 31, 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 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 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.
STRONGHOLD DIGITAL MINING, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2023
| | | Historical | | | Pro Forma Adjustments | | | | Pro Forma | |
| | | | | | April 2023 | | | | | |
| | | March 31, 2023 | | | Private Placement | | Notes | | March 31, 2023 | |
| ASSETS: | | | | | | | | | | |
| Cash and cash equivalents | | $ | 6,353,973 | | | $ | 9,999,567 | | (a) | | $ | 16,353,540 | |
| Digital currencies | | | 672,852 | | | | - | | | | | 672,852 | |
| Accounts receivable | | | 4,742,092 | | | | - | | | | | 4,742,092 | |
| Inventory | | | 4,700,832 | | | | - | | | | | 4,700,832 | |
| Prepaid insurance | | | 3,541,898 | | | | - | | | | | 3,541,898 | |
| Due from related parties | | | 74,107 | | | | - | | | | | 74,107 | |
| Other current assets | | | 1,354,955 | | | | - | | | | | 1,354,955 | |
| Total current assets | | | 21,440,709 | | | | 9,999,567 | | | | | 31,440,276 | |
| Equipment deposits | | | 5,422,338 | | | | - | | | | | 5,422,338 | |
| Property, plant and equipment, net | | | 158,366,684 | | | | - | | | | | 158,366,684 | |
| Operating lease right-of-use assets | | | 1,581,400 | | | | - | | | | | 1,581,400 | |
| Land | | | 1,748,440 | | | | - | | | | | 1,748,440 | |
| Road bond | | | 211,958 | | | | - | | | | | 211,958 | |
| Security deposits | | | 348,888 | | | | - | | | | | 348,888 | |
| TOTAL ASSETS | | $ | 189,120,417 | | | $ | 9,999,567 | | | | $ | 199,119,984 | |
| LIABILITIES: | | | | | | | | | | | | | |
| Accounts payable | | $ | 14,847,939 | | | $ | - | | | | $ | 14,847,939 | |
| Accrued liabilities | | | 7,112,648 | | | | 175,000 | | (a) | | | 7,287,648 | |
| Financed insurance premiums | | | 2,806,538 | | | | - | | | | | 2,806,538 | |
| Current portion of long-term debt, net of discounts and issuance fees | | | 995,145 | | | | - | | | | | 995,145 | |
| Current portion of operating lease liabilities | | | 613,657 | | | | - | | | | | 613,657 | |
| Due to related parties | | | 1,612,515 | | | | - | | | | | 1,612,515 | |
| Total current liabilities | | | 27,988,442 | | | | 175,000 | | | | | 28,163,442 | |
| Asset retirement obligation | | | 1,036,575 | | | | - | | | | | 1,036,575 | |
| Warrant liabilities | | | 2,846,548 | | | | 9,023,135 | | (a) | | | 11,869,683 | |
| Long-term debt, net of discounts and issuance fees | | | 58,208,207 | | | �� | - | | | | | 58,208,207 | |
| Long-term operating lease liabilities | | | 1,067,654 | | | | - | | | | | 1,067,654 | |
| Contract liabilities | | | 277,397 | | | | - | | | | | 277,397 | |
| Total liabilities | | | 91,424,823 | | | | 9,198,135 | | | | | 100,622,958 | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | | | | | | |
| REDEEMABLE COMMON STOCK: | | | | | | | | | | | | | |
| Common Stock - Class V; $0.0001 par value; 34,560,000 shares authorized and 2,605,760 shares issued and outstanding | | | 15,499,219 | | | | - | | | | | 15,499,219 | |
| Total redeemable common stock | | | 15,499,219 | | | | - | | | | | 15,499,219 | |
| STOCKHOLDERS’ EQUITY (DEFICIT): | | | | | | | | | | | | | |
| Common Stock – Class A; $0.0001 par value; 685,440,000 shares authorized; 4,104,619 shares issued and outstanding. | | | 4,105 | | | | 1,000 | | (a) | | | 5,105 | |
| Series C convertible preferred stock; $0.0001 par value; 23,102 shares authorized; 21,572 shares issued and outstanding. | | | 2 | | | | - | | | | | 2 | |
| Accumulated deficits | | | (290,848,496 | ) | | | (140,221 | ) | (a) | | | (290,988,717 | ) |
| Additional paid-in capital | | | 373,040,764 | | | | 940,653 | | (a) | | | 373,981,417 | |
| Total stockholders’ equity (deficit) | | | 82,196,375 | | | | 801,432 | | | | | 82,997,807 | |
| Total redeemable common stock and stockholders’ equity (deficit) | | | 97,695,594 | | | | 801,432 | | | | | 98,497,026 | |
| TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) | | $ | 189,120,417 | | | $ | 9,999,567 | | | | $ | 199,119,984 | |
STRONGHOLD DIGITAL MINING, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2023
| | | Historical | | | Pro Forma Adjustments | | | | Pro Forma | |
| | | Three Months Ended | | | April 2023 | | | | Three Months Ended | |
| | | March 31, 2023 | | | Private Placement | | Notes | | March 31, 2023 | |
| OPERATING REVENUES: | | | | | | | | | | |
| Cryptocurrency mining | | $ | 11,297,298 | | | $ | - | | | | $ | 11,297,298 | |
| Energy | | | 2,730,986 | | | | - | | | | | 2,730,986 | |
| Cryptocurrency hosting | | | 2,325,996 | | | | - | | | | | 2,325,996 | |
| Capacity | | | 859,510 | | | | - | | | | | 859,510 | |
| Other | | | 52,425 | | | | - | | | | | 52,425 | |
| Total operating revenues | | | 17,266,215 | | | | - | | | | | 17,266,215 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | |
| Fuel | | | 7,414,014 | | | | - | | | | | 7,414,014 | |
| Operations and maintenance | | | 8,440,923 | | | | - | | | | | 8,440,923 | |
| General and administrative | | | 8,468,755 | | | | - | | | | | 8,468,755 | |
| Depreciation and amortization | | | 7,722,841 | | | | - | | | | | 7,722,841 | |
| Loss on disposal of fixed assets | | | 91,086 | | | | - | | | | | 91,086 | |
| Realized gain on sale of digital currencies | | | (326,768 | ) | | | - | | | | | (326,768 | ) |
| Impairments on digital currencies | | | 71,477 | | | | - | | | | | 71,477 | |
| Impairments on equipment deposits | | | - | | | | - | | | | | - | |
| Total operating expenses | | | 31,882,328 | | | | - | | | | | 31,882,328 | |
| NET OPERATING LOSS | | | (14,616,113 | ) | | | - | | | | | (14,616,113 | ) |
| OTHER INCOME (EXPENSE): | | | | | | | | | | | | | |
| Interest expense | | | (2,383,913 | ) | | | - | | | | | (2,383,913 | ) |
| Loss on debt extinguishment | | | (28,960,947 | ) | | | - | | | | | (28,960,947 | ) |
| Changes in fair value of warrant liabilities | | | (714,589 | ) | | | (140,221 | ) | (b) | | | (854,810 | ) |
| Changes in fair value of forward sale derivative | | | - | | | | - | | | | | - | |
| Changes in fair value of convertible note | | | - | | | | - | | | | | - | |
| Other | | | 15,000 | | | | - | | | | | 15,000 | |
| Total other income (expense) | | | (32,044,449 | ) | | | (140,221 | ) | | | | (32,184,670 | ) |
| NET LOSS | | $ | (46,660,562 | ) | | $ | (140,221 | ) | | | $ | (46,800,783 | ) |
| NET LOSS attributable to noncontrolling interest | | | (18,119,131 | ) | | | (54,451 | ) | | | | (18,173,582 | ) |
| NET LOSS attributable to Stronghold Digital Mining, Inc. | | $ | (28,541,431 | ) | | $ | (85,770 | ) | | | $ | (28,627,201 | ) |
| NET LOSS attributable to Class A common shareholders: | | | | | | | | | | | | | |
| Basic | | $ | (6.52 | ) | | | | | | | $ | (5.33 | ) |
| Diluted | | $ | (6.52 | ) | | | | | | | $ | (5.33 | ) |
| Weighted average number of Class A common shares outstanding: | | | | | | | | | | | | | |
| Basic | | | 4,375,614 | | | | 1,000,000 | | | | | 5,375,614 | |
| Diluted | | | 4,375,614 | | | | 1,000,000 | | | | | 5,375,614 | |
STRONGHOLD DIGITAL MINING, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation
The March 31, 2023, unaudited pro forma condensed consolidated balance sheet gives effect to the pro forma adjustments necessary to reflect the transaction as if it had occurred on March 31, 2023. The unaudited pro forma condensed consolidated statement of operations gives effect to the pro forma adjustments to reflect the transaction as if it had occurred as of January 1, 2023. The unaudited pro forma adjustments related to the transaction are based on available information and assumptions that management believes are directly attributable to the 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 March 31, 2023.
| (a) | Reflects increases in cash of approximately $10.0 million, accrued liabilities of $0.2 million for legal transaction fees, and warrant liabilities of approximately $9.0 million, which has been recognized at fair market value using the Black-Scholes model. The pro forma balance sheet as of March 31, 2023, also reflects changes in Class A common stock and additional paid-in capital to adjust for shares issued as part of the Private Placement. The change in accumulated deficit results from the impact of adjusting the exercise price of warrants previously issued in September 2022. |
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 three months ended March 31, 2023.
| (b) | Reflects a non-operating loss of approximately $0.1 million for the three months ended March 31, 2023, which represents a change in the fair value of warrant liabilities caused by an adjustment to the strike price of warrants previously issued in September 2022. |
