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STOCK-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION
NOTE 14 – STOCK-BASED COMPENSATION
On October 19, 2021, the board of directors of the Company (the "Board") and the stockholders of the Company approved a new long-term incentive plan the Stronghold Digital Mining, Inc. Omnibus Incentive Plan (the “New LTIP”) for employees, consultants and directors. The New LTIP provides for the grant of options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock units ("RSUs"), dividend equivalents, other stock-based awards, and substitute awards intended to align the interests of service providers, including our named executive officers, with those of our stockholders. Pursuant to the New LTIP, the remaining shares of Class A common stock under the prior long-term incentive plan that was effective April 28, 2021, that were reserved and available for delivery, were assumed and reserved for issuance under the New LTIP. In addition, the New LTIP raised the aggregate number of shares of common stock that may be issued or used for reference purposes or with respect to which awards may be granted under the plan to not exceed 4,752,000 shares. As of October 19, 2021, the Company now grants all equity-based awards under the New LTIP. On January 18, 2023, the stockholders of the Company approved an amendment to the New LTIP to increase the amount of shares of Class A common stock available for delivery with respect to awards by 6,000,000 shares. The numbers of shares available under the New LTIP was proportionately reduced to reflect the Reverse Stock Split.
The Board is duly authorized to administer the New LTIP. The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award.
Stock options issued under the Company’s New LTIP are granted with an exercise price no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of the grant. The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the LTIP were granted with an exercise price equal to the fair market value of the Company’s stock, as determined with reference to third-party valuations as of the date of option grants, and expire up to ten years from the date of grant. Options granted under the New LTIP and the LTIP vest over various terms.
RSUs are subject to restrictions on transferability, risk of forfeiture and other restrictions imposed by the Compensation Committee of the Board (the "Committee"). Settlement of vested RSUs will occur upon vesting or upon expiration of the deferral period specified for such RSUs by the Committee (or, if permitted by the Committee, as elected by the participant). RSUs may be settled in cash or a number of shares of stock (or a combination of the two), as determined by the Committee at the date of grant or thereafter.
Stock-Based Compensation
Stock-based compensation expense, including share-based expenses associated with non-employee directors, was $9,238,826 and $13,890,350 for the years ended December 31, 2023, and 2022, respectively, and is included in general and administrative expense in the consolidated statements of operations. There is no tax benefit related to stock compensation expense due to the Company having a full valuation allowance recorded against its deferred income tax assets as of December 31, 2023.
The Company recognized total stock-based compensation expense for the years ended December 31, 2023, and 2022, from the following categories:
For the years ended
December 31, 2023December 31, 2022
Restricted stock awards under the Plan$7,167,680 $3,592,641 
Stock option awards under the Plan2,071,146 10,297,709 
Total stock-based compensation expense$9,238,826 $13,890,350 
Stock Options
There were no stock options granted during 2023. The following are the weighted-average assumptions used in calculating the fair value of the total stock options granted during 2022 using the Black-Scholes method.
December 31, 2022
Weighted-average fair value of options granted$102.10 
Expected volatility125.85 %
Expected life (in years)5.81
Risk-free interest rate1.69 %
Expected dividend yield0 %
Expected Volatility – The Company estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies, as the Company does not currently have sufficient history for the volatility of its own stock.
Expected Term – The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of the contractual term.
Risk-Free Interest Rate – The Company bases the risk-free interest rate on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term.
Expected Dividend Yield – The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero in its valuation models.
The Company elected to account for forfeited awards as they occur, as permitted by ASU 2016-09.
As of December 31, 2023, the total future compensation expense related to unvested options not yet recognized in the consolidated statements of operations was approximately $787,683, and the weighted-average period over which these awards are expected to be recognized is approximately 0.52 years.
The following table summarizes the Company's stock option activity for the years ended December 31, 2023, and 2022.
Number
of Shares
Weighted-
Average
Exercise
Price
Weighted-
Average
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding at January 1, 2022337,908 $89.10 9.61$30,906,003 
Granted20,597 106.10 9.11— 
Exercised— — — — 
Expired— — — — 
Cancelled / Forfeited(3,500)180.60 8.68— 
Outstanding at December 31, 2022355,005 $90.30 9.00$— 
Granted— — — — 
Exercised— — — — 
Expired(25,203)82.02 7.59— 
Cancelled / Forfeited(248,370)93.96 7.63— 
Outstanding at December 31, 202381,432 $82.44 7.59$— 
Shares vested and expected to vest81,432 $82.44 7.59$— 
Exercisable as of December 31, 202368,136 $82.67 7.58$— 
RSUs
The following table summarizes the Company's RSU activity for the years ended December 31, 2023, and 2022.
Number
of Shares
Weighted-Average Grant Date Fair Value
Unvested at January 1, 20226,074 $111.00 
Vested(31,996)53.60 
Granted168,711 37.60 
Cancelled / Forfeited(836)38.80 
Unvested at December 31, 2022141,953 $43.50 
Vested(82,795)22.49 
Granted547,178 8.38 
Cancelled / Forfeited(53,692)36.02 
Unvested at December 31, 2023552,644 $6.93 
The value of RSUs are measured based on their fair value on the date of grant and amortized over their respective vesting periods. As of December 31, 2023, total future compensation expense related to unvested RSUs not yet recognized in the consolidated statements of operations was approximately $2,735,625, and the weighted-average vesting period over which these awards are expected to be recognized is approximately 1.02 years.