SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2024

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 21 – SUBSEQUENT EVENTS

Matthew Smith Resignation

On October 25, 2024, the Company announced that Matthew Smith, the Company’s Chief Financial Officer, will resign from such position effective November 15, 2024. Mr. Smith will also resign from the Company's Board at such time. Mr. Smith’s resignation was not because of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices, including accounting principles and practices. At this time, the Company does not intend

to fill the vacancy on the Board that will be created following the effective date of Mr. Smith’s resignation.

Simultaneous with his departure, the Company and Mr. Smith entered into a Consulting Agreement (the "Consulting Agreement") pursuant to which Mr. Smith will provide assistance with the Company’s finance function, and a transition from Mr. Smith's prior employment with the Company, as requested by the Company. Pursuant to the Consulting Agreement, Mr. Smith will be paid $400 per hour, and a minimum of $8,000 per month representative of twenty (20) hours per month. The Consulting Agreement has a three (3) month term and may be terminated at any time by either party upon five (5) days' notice.

Second Bitfarms Hosting Agreement

On October 29, 2024, Stronghold Digital Mining Hosting, LLC (“Stronghold Hosting”), a Delaware limited liability company and indirect subsidiary of the Company entered into a Hosting Agreement (the “Second Hosting Agreement”) with Backbone Mining Solutions LLC (“BMS”), a Delaware limited liability company and a subsidiary of Bitfarms Ltd., a corporation organized under the Business Corporations Act (Ontario) (“Bitfarms”), pursuant to which BMS will deliver approximately 10,000 Bitmain T21 or similar miners owned by BMS (the “BMS Miners”) to the Company’s mining facilities, and the Company will provide power to, maintain, host and operate the BMS Miners.

The initial term of the Second Hosting Agreement will commence on November 1, 2024 and remain effective until December 31, 2025, after which it will automatically renew for additional one year periods unless either party provides written notice of non-renewal to the other party at least sixty days prior to the expiration of the then-current initial term or renewal term, as applicable. Upon the occurrence of an event of default that is not cured within fifteen days, the non-breaching party may terminate the Second Hosting Agreement.

Pursuant to the Second Hosting Agreement, BMS will pay Stronghold Hosting a monthly fee equal to fifty percent (50%) of the profit generated by the BMS Miners, subject to certain monthly adjustments between the parties to account for the upfront monthly payment due from BMS to Stronghold Hosting in an amount of $600,000, and for taxes and the net cost of power associated with the operation of the BMS Miners.

In connection with the execution of the Second Hosting Agreement, BMS deposited with Stronghold Hosting $7,800,000 (the “Second Deposit”), equal to the estimated cost of power for three months of operations of the BMS Miners, which will be refundable in full to BMS within one business day of the end of the initial term expiring on December 31, 2025. The Second Deposit will bear interest at a floating rate equal to the forward-looking term secured overnight financing rate as administered by CME Group Benchmark Administration Limited for the applicable interest period plus 1.0%, payable in kind on the last day of each calendar quarter by capitalizing and adding such interest to the then-outstanding amount of the Second Deposit. Upon the occurrence and during the continuance of an event of default under the Second Hosting Agreement, the principal of, and all accrued and unpaid interest on, the Second Deposit shall bear interest from the date of such event of default, until cured or waived, at a rate equal to 24.0%.

Given the Company's efforts to high-grade its fleet, including through the First Hosting Agreement and Second Hosting Agreement with Bitfarms, we are exploring alternatives for a portion of our current fleet of Bitcoin miners.

Fourth Amendment to the Cantaloupe Hosting Agreement

On November 4, 2024, Stronghold Digital Mining Hashco, LLC and Cantaloupe Digital, LLC ("Cantaloupe") entered into a fourth amendment (the "Fourth Amendment") to the Hosting Agreement dated April 27, 2023. Pursuant to the Fourth Amendment, Cantaloupe is to deliver 4,000 Model A1446 Bitcoin miners, to replace the previously delivered 4,000 Model A1346 Bitcoin miners, to the Company's Panther Creek facility by December 31, 2024.

Sunnyside Sale Agreement

On November 13, 2024, as part of the Company’s efforts to high-grade its Bitcoin mining fleet following entry into the First Hosting Agreement and Second Hosting Agreement, Stronghold LLC entered into a Sale and Purchase Agreement (the “Sunnyside Purchase Agreement”) with Sunnyside Digital, Inc. (“Sunnyside”). Pursuant to the Sunnyside Purchase Agreement, Stronghold LLC sold 6,000 M50 Bitcoin miners to Sunnyside for $4.60 per terahash, for a total purchase price of $3,256,800. Pursuant to the Sunnyside Purchase Agreement, the Company shall make the M50 Bitcoin miners available to Sunnyside within ten (10) days of the transaction at the Company’s Panther Creek Plant. The Company expects the proceeds from the Sunnyside Purchase Agreement to be immediately applied towards indebtedness under the Company's Credit Agreement.