Except as otherwise indicated or required by the context, all references in this
prospectus to the "Company," "we," "us" or "our" relate to Stronghold Digital
Mining, Inc. ("Stronghold Inc.") and its consolidated subsidiaries following the
Reorganization.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes and other financial information appearing in this
Form 10-Q. Some of the information contained in this discussion and analysis or
set forth elsewhere in this Form 10-Q, including information with respect to our
plans, expectations and strategy for our business, and operations, includes
forward-looking statements within the meaning of the federal securities laws.
For a complete discussion of forward-looking statements, see section above
entitled "Cautionary Statement Regarding Forward-Looking Statements." Certain
risks may cause actual results, performance or achievements to differ materially
from those expressed or implied by the following discussion and analysis.
Factors that may cause actual results to differ materially from current
expectations include, among other things, those described under the heading
"Item 1A.Risk Factors" as filed in our Annual Report on Form 10-K for the year
ended December 31, 2021, our Quarterly Reports on Form 10-Q for the quarter
ended March 31, 2022 and the quarter ended June 30, 2022, each as filed with the
U.S. Securities and Exchange Commission (the "SEC"), and this Form 10-Q. Except
as set forth in Item 1A. "Risk Factors" below, there have been no material
changes to the risk factors previously disclosed in the 2021 Form 10-K, first
quarter 2022 Form 10-Q or second quarter 2022 Form 10-Q.

Insight

We are a vertically integrated crypto asset mining company currently focused on
mining Bitcoin. We wholly own and operate two low-cost,
environmentally-beneficial coal refuse power generation facilities that we have
upgraded: (i) our first reclamation facility located on a 650-acre site in
Scrubgrass Township, Venango County, Pennsylvania, which we acquired the
remaining interest of in April 2021 and has the capacity to generate
approximately 83.5 megawatts ("MW") of electricity (the "Scrubgrass Plant") and
(ii) a facility located near Nesquehoning, Pennsylvania, which we acquired in
November 2021 and which has the capacity to generate approximately 80 MW of
electricity (the "Panther Creek Plant"), each of which is as an Alternative
Energy System because coal refuse is classified under Pennsylvania law as a Tier
II Alternative Energy Source (large-scale hydropower is also classified in this
tier). We are committed to generating our energy and managing our assets
sustainably, and we believe that we are one of the first vertically integrated
crypto asset mining companies with a focus on environmentally beneficial
operations. We believe that our integrated model of owning our own power plants
and Bitcoin mining data center operations helps us to produce Bitcoin at a cost
that we believe is attractive versus the price of Bitcoin, and generally below
the prevailing market price of power that many of its peers must pay and may
have to pay in the future during periods of uncertain or elevated power pricing.
Due to the environmental benefit resulting from the remediation of the sites
from which the waste coal utilized by our two power generation facilities is
removed, we also qualify for Tier II renewable energy tax credits ("RECs") in
Pennsylvania. These RECs are currently valued at approximately $14.50 per
megawatt hour and help reduce our net cost of power. We believe that our ability
to utilize RECs in reducing our net cost of power further differentiates us from
our public company peers that purchase power from third party sources or import
power from the grid and that do not have access to RECs or other similar tax
credits. Should power prices weaken to a level that is below the Company's cost
to produce power, we have the ability to purchase power from the PJM grid to
ensure that we are producing Bitcoin at the lowest possible cost. Conversely, if
power prices exceed the price of Bitcoin, we may choose to sell power to the PJM
grid instead of producing Bitcoin, as we has recently done, on an opportunistic
basis. In addition, we operate as a market participant through PJM
Interconnection, a Regional Transmission Organization ("RTO") that coordinates
the movement of wholesale electricity. Our ability to sell energy in the
wholesale generation market in the PJM RTO provides us with an additional source
of revenue. We also believe that owning our own power source makes us a more
attractive partner to crypto asset mining equipment purveyors. We intend to
leverage these competitive advantages to continue to grow our business through
the opportunistic acquisition of additional power generating assets and miners.


In light of the recent downturn in the price of Bitcoin, we have taken steps
that we believe will strengthen our balance sheet and liquidity position by
transferring a portion of our Bitcoin miners back to certain equipment lenders
in exchange for cancellation of indebtedness and have acted, in part, on our
ability to sell power generated at the Company's power plants to the grid on an
opportunistic basis. We are actively monitoring the Bitcoin miner market for
both new and used Bitcoin miners and evaluating options to purchase additional
miners or otherwise enter into arrangements to replenish our current unfilled
mining capacity. With lower Bitcoin margins and higher power costs, we have been
consistently toggling between selling power to the grid and mining.
Nevertheless, we believe that the price of Bitcoin will recover over time, and
our primary strategy remains to expand our Bitcoin mining capacity (including
through opportunistic hosting agreements or joint ventures) over time through
opportunistic Bitcoin miner purchases.
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Bitcoin mining

During 2018 and 2019, we began providing Bitcoin mining services to third
parties and also began operating our own Bitcoin mining equipment to generate
Bitcoin, which we then exchange for U.S. Dollars. We have been expanding our
mining operations since such date. As of September 30, 2022, we operated
approximately 18,200 Bitcoin mining computers (known as "miners") with hash rate
capacity of approximately 1.6 EH/s. As of September 30, 2022, we had entered
into definitive agreements with one supplier to deliver approximately 600
additional miners with capacity of approximately 54 PH/s through the end of
2022. We intend to house our miners at the Scrubgrass Plant and the Panther
Creek Plant data centers. On August 16, 2022, the Company agreed to sell
approximately 26,000 NYDIG-secured Bitcoin miners to NYDIG ABL, LLC, a Delaware
limited liability company formerly known as Arctos Credit LLC ("NYDIG"), fewer
than 19 thousand of which were installed as of August 16, 2022, to NYDIG in
exchange for assignment to us and cancellation of the NYDIG Debt (as defined
below). Through October 26, 2022, we have sold or assigned all of the
approximately 26,000 miners that we agreed to sell or assign and cancelled all
of the NYDIG Debt.

As of November 8, 2022, we operate approximately 21,900 Bitcoin miners with hash
rate capacity of approximately 1.9 EH/s. Of these Bitcoin miners, approximately
19,000 are wholly owned with hash rate capacity of approximately 1.7 EH/s. We
will host the remaining approximately 2,900 Bitcoin miners, for which we will
receive a hosting fee of $60 per MWh and profit share of 50% of the Bitcoin
mining profit. As of November 8, 2022, we have entered into definitive
agreements to receive an additional approximately 8,400 Bitcoin miners with hash
rate capacity of approximately 0.8 EH/s, which includes approximately 0.4 EH/s
related to the MinerVa Purchase Agreement that have not yet been scheduled for
delivery. We do not know when the remaining MinerVa miners will be received, if
at all.

Power Plant Acquisitions

On March 3, 2021, Stronghold Digital Mining LLC ("SDM") entered into a
non-binding letter of intent (the "Olympus LOI") with Olympus Power, LLC
(together with its affiliates, "Olympus") for the purchase of (i) the ownership
interest in Scrubgrass Reclamation Company, L.P. (f/k/a Scrubgrass Generating
Company, L.P.) ("Scrubgrass") held by Aspen Scrubgrass Participant, LLC (the
"Aspen Interest"), (ii) the Panther Creek Plant, and (iii) a third coal refuse
power generation facility (the "Third Plant").

On July 9, 2021, Stronghold Digital Mining Holdings LLC ("Stronghold LLC")
entered into a purchase agreement for the Panther Creek Plant (the "Panther
Creek Acquisition"), as contemplated by the Olympus LOI, from Olympus. The
Panther Creek Acquisition includes all of the assets of Panther Creek Power
Operating LLC, comprising primarily the Panther Creek Plant. We completed the
Panther Creek Acquisition on November 2, 2021. The consideration for the Panther
Creek Plant was approximately $2.2 million ($3 million less $0.8 million in
shared land closing costs) in cash and 1,152,000 Class A common units of
Stronghold LLC ("Stronghold LLC Units"), together with a corresponding number of
shares of Class V common stock.

We continue to evaluate the acquisition of the Third Plant as contemplated by
the Olympus LOI, although we do not consider this acquisition to be probable at
this time. The acquisition of the Third Plant is subject to further due
diligence and the negotiation of a definitive agreement, and there is no
assurance that the acquisition will be completed.

Initial public offering

We have completed the issue and sale of our Class A common shares, par value
$0.0001 per share, in an initial public offering (the “IPO”) on October 22, 2021and our Class A common stock is listed on the Nasdaq Global Market (“Nasdaq”) under the symbol “SDIG”.

Stock split

We effected a 2.88-for-1 stock split on October 22, 2021, pursuant to which each
share of common stock held of record by the holder thereof was reclassified into
approximately 2.88 shares of common stock. No fractional shares were issued.
Pursuant to the Second Amended and Restated Limited Liability Company Agreement
of Stronghold LLC, as amended from time to time, each "Stronghold LLC Unit" was
also split on a corresponding 2.88-for-1 basis, such that there are an
equivalent number of Stronghold LLC Units outstanding as the aggregate number of
shares of Class V common stock and Class A common stock outstanding following
the stock split. We refer to this collectively as the "Stock Split."

bitmain

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On October 28, 2021, we entered into an agreement with Bitmain Technologies
Limited ("Bitmain") to purchase 12,000 miners, which were to be delivered in six
equal batches on a monthly basis beginning in April 2022 (the "First Bitmain
Purchase Agreement"). Per the First Bitmain Purchase Agreement, on October 29,
2021, we made an initial payment of $23,300,000 to Bitmain for the miners. On
November 18, 2021, we made an additional payment of $4,550,000. Subsequent
payments were to be made in the future in connection with additional deliveries
of miners under the First Bitmain Purchase Agreement. The miners associated with
the First Bitmain Purchase Agreement were part of the APA Collateral pursuant
the Asset Purchase Agreement whereby the APA 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 the NYDIG Debt.

On November 16, 2021, we entered into a second agreement with Bitmain to
purchase 1,800 miners, which were to be delivered in six equal batches on a
monthly basis beginning in July 2022 (the "Second Bitmain Purchase Agreement").
Per the Second Bitmain Purchase Agreement, on November 18, 2021, we made an
initial payment of $6,835,000 to Bitmain for the miners. Subsequent payments
were to be made in the future in connection with additional deliveries of miners
under the Second Bitmain Purchase Agreement.

Miners purchased under the two agreements with Bitmain were to have an aggregate hash rate capacity of around 1,450 PH/s.

On May 13, 2022, we entered into a purchase order to transfer the Second Bitmain
Purchase Agreement for 1,800 Bitmain Antminer S19 XP miners (the "Bitmain Sale")
to Cryptech Solutions, Inc. ("Cryptech") for a total value of $12,600,000,
including a $5,638,500 payment to the Company along with a transfer of the
responsibility of the future payments to Cryptech.

Nowlit Solutions Corp.

We paid for two separate purchases of miners from Nowlit Solutions Corp. The
first purchase payment was made on November 23, 2021, in the amount of
$1,605,360 for 190 miners. The second purchase payment was made on November 26,
2021, in the amount of $2,486,730 for an additional 295 miners.

Luxor Technology Company

We paid for three separate purchases of miners from Luxor Technology Corporation
("Luxor"). The first purchase payment was made on November 26, 2021, in the
amount of $4,312,650 for 770 miners. The second and third purchase payments were
made on November 29, 2021, in the amount of $5,357,300 for 750 miners and
$3,633,500 for 500 miners, respectively.

On November 30, 2021, we entered into a fourth purchase agreement with Luxor to
acquire 400 Antminer T19 miners with a hash rate of 84 TH/s and 400 Antminer T19
miners with a hash rate of 88 TH/s for a total purchase price of $6,260,800.

Cryptotech Purchase Agreement

On December 7, 2021, we entered into a Hardware Purchase and Sales Agreement
(the "Cryptech Purchase Agreement") with Cryptech to acquire 1,000 Bitmain S19a
miners with a hash rate of 96 TH/s for a total purchase price of $8,592,000.
Pursuant to the Cryptech Purchase Agreement, all hardware will be paid for in
advance of being shipped to the Company.

Purchase agreements with suppliers

On December 10, 2021, we entered into a Hardware Purchase and Sale Agreement
(the "First Supplier Purchase Agreement") to acquire 3,000 MicroBT WhatsMiner
M30S miners (the "M30S Miners") with a hash rate per unit of 87 TH/s. Pursuant
to the First Supplier Purchase Agreement, the unit price per M30S Miner was
$6,960 for a cumulative purchase price of $20,880,000 that was paid in full
within five business days of the execution of the First Supplier Purchase
Agreement.

On December 16, 2021, we entered into a Second Hardware Purchase and Sale
Agreement (the "Second Supplier Purchase Agreement") to acquire a cumulative
amount of approximately 4,280 M30S Miners and MicroBT WhatsMiner M30S+ miners
with a hash rate per unit of 100 TH/s (the "M30S+ Miners"). Pursuant to the
Second Supplier Purchase
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Agreement, the unit price per M30S Miner was $2,714 and the unit price per M30S+ Miner was $3,520 for a cumulative purchase price of $11,340,373.

NYDIG ABL LLC

On December 15, 2021, we entered into a Master Equipment Finance Agreement (the
"Second NYDIG Financing Agreement") with NYDIG whereby NYDIG agreed to lend
Stronghold Digital Mining BT, LLC ("Digital Mining BT") up to $53,952,000 to
finance the purchase of certain Bitcoin miners and related equipment (the
"Second NYDIG-Financed Equipment"). Outstanding borrowings under the Second
NYDIG Financing Agreement were secured by the Second NYDIG-Financed Equipment,
contracts to acquire Second NYDIG-Financed Equipment, and the Bitcoin mined by
the Second NYDIG-Financed Equipment. The Second NYDIG Financing Agreement
included customary restrictions on additional liens on the Second NYDIG-Financed
Equipment.

See "-Recent Developments" and Note 6 - Long-Term Debt for further discussion of
the transactions we completed
on October 26, 2022, pursuant to the Asset Purchase Agreement, which resulted in
the cancellation of all of the NYDIG
Debt and the termination of the NYDIG Financing Agreements.

Operation and maintenance agreement

On November 2, 2021, we entered into the Operations, Maintenance and Ancillary
Services Agreement (the "Omnibus Services Agreement") with Olympus Stronghold
Services, LLC ("Olympus Stronghold Services"), whereby Olympus Stronghold
Services provides certain operations and maintenance services to Stronghold LLC,
as well as employs certain personnel to operate the Panther Creek Plant and the
Scrubgrass Plant. Stronghold LLC reimburses Olympus Stronghold Services for
those costs incurred by Olympus Stronghold Services and approved by Stronghold
LLC in the course of providing services under the Omnibus Services Agreement,
including payroll and benefits costs and insurance costs. The material costs
incurred by Olympus Stronghold Services are approved by Stronghold LLC.
Stronghold LLC also pays Olympus Stronghold Services a management fee at the
rate of $1,000,000 per year, payable monthly, and an additional one-time
mobilization fee of $150,000 upon the effective date of the Omnibus Services
Agreement. Effective October 1, 2022, Stronghold LLC only pays Olympus
Stronghold Services a management fee in the amount of $500,000 per year, payable
monthly, for services provided at the Panther Creek Plant.

Miner’s sale contract

During the second quarter of 2022, the Company entered into multiple miner sales
agreements with multiple buyers. The Company previously disclosed its effort to
optimize its Bitcoin miner fleet through its sale of 3,425 miners (approximately
411 PH/s) with a historical carrying value of $21.9 million, or $50.70 per TH/s.
The Company recognized a realized loss on sale of miner assets of approximately
$8.0 million on these miners during the second quarter of 2022. The Company
undertook these sales due to its priorities of improving its liquidity position
and improved returns over growth. The loss was recorded in Realized loss on sale
of miner assets on the consolidated statements of operations. The various buyers
paid the Company an aggregate of $13.8 million up front and took over the
remaining installment payment obligations upon transfer of the contract,
relieving the Company of the outstanding purchase obligation.

During the third quarter of 2022, the Company consensually delivered
approximately 26,000 Bitcoin miners (approximately 18,700 of which were plugged
in and operating prior to delivery) to NYDIG and BankProv and the related debt
was cancelled pursuant to the terms of the Asset Purchase Agreement. See Note 6
- Long-Term Debt in the notes to our financial statements for further discussion
of the Asset Purchase Agreement.

Reorganization

On April 1, 2021we proceeded with the corporate reorganization described in Note 1 – Business combinations to our financial statements.

Trends and other factors affecting our performance

COVID-19 and Supply Chain Constraints

The coronavirus ("COVID-19") global pandemic has resulted and is likely to
continue to result in significant national and global economic disruption, which
may adversely affect our business. Among other things, the COVID-19 pandemic has
caused supply chain disruptions that may have lasting impacts. Additionally, the
global supply chain for Bitcoin miners is presently further constrained due to
unprecedented demand coupled with a global shortage of mining equipment and
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mining equipment parts. Based on our current assessments, however, we do not
expect any material impact on long-term development, operations, or liquidity
due to the spread of COVID-19. However, we are actively monitoring this
situation and the possible effects on its financial condition, liquidity,
operations, suppliers, and industry.

China Crackdown on bitcoin mining

In May 2021, the Chinese government called for a crackdown on Bitcoin mining and
trading. Following this, the majority of Bitcoin miners in China were taken
offline. This resulted in (i) a significant reduction in the Bitcoin global
network hash rate, (ii) an increase in the availability of Bitcoin miners for
purchase and (iii) an increase in the demand for power outside of China.
Further, in September 2021, Chinese regulators instituted a blanket ban on all
crypto mining and transactions, including overseas crypto exchange services
taking place in China, effectively making all crypto-related activities illegal
in China. The reduction in network hash rate has improved Bitcoin mining
profitability (not factoring in underlying Bitcoin prices), with plugged-in
Bitcoin miners representing a larger percentage of the global hash rate. We do
not believe that higher demand for power will have a negative impact on our
business because we own and operate our power sources.

Brush Factory and Data Center

During the fourth quarter of 2021 and continuing into the second and third
quarter of 2022, the Scrubgrass Plant had downtime that was greater than
anticipated, driven largely by mechanical failures. The upgrades and maintenance
that were necessary took longer and were more extensive than originally
anticipated. Additionally, during the first half of 2022, higher than
anticipated requirements from PJM Interconnection LLC ("PJM") resulted in
unplanned and extended outages of our mining operations at the Scrubgrass Plant,
diverting capacity away from our mining operations at a time that was not
economical for our business strategy. These diversions of power away from our
mining operations during the first and second quarters had a material adverse
effect on our business, financial condition and results of operations. The
Scrubgrass Plant also experienced higher than expected cost capping, as the
result of its role as a capacity resource, from PJM which obligated the
Scrubgrass Plant to supply power to the PJM grid at pre-set prices in an effort
to stabilize PJM grid pricing. Starting in June, Scrubgrass Plant was no longer
classified as a capacity resource, and is now an energy resource, which allows
the plant to sell power to the grid at market prices.

Starting in the third quarter of 2022, the Scrubgrass Plant conducted its
planned maintenance outage that lasted for approximately two weeks from the end
of September into early October, during which time it did not generate power.
During the outage, management undertook a thorough review of plant-level
profitability and identified opportunities for immediate cost reductions
including improved fuel purchasing, headcount reductions and optimization, and
inventory and maintenance planning enhancements. Given seasonally low power
prices in October, and some additional desired maintenance objectives,
management kept the plant offline while it implemented the cost reduction
program and improved the fuel mix through accelerated deliveries of low-cost
fuel, and then returned Scrubgrass to service in late October. Following the
outage, the Scrubgrass Plant has demonstrated the ability to run at baseload
output levels, as expected. During the outage, the Scrubgrass Data Center
imported power from the grid to support operations.

Panther Creek Factory and Data Center

During the second quarter of 2022, the Panther Creek Plant's mining operations
were offline for ten days due to the failure of a switchgear and the need to
source, deliver and install a new piece of equipment, causing ten days of no
mining revenue generation at the facility and resulting in an estimated loss of
approximately $1.4 million. The operation of our power generation facilities,
information technology systems and other assets and conduct of other activities
subjects us to a variety of risks, including the breakdown or failure of
equipment, accidents, security breaches, viruses or outages affecting
information technology systems, labor disputes, obsolescence,
delivery/transportation problems and disruptions of fuel supply, failure to
receive spare parts in a timely manner, and performance below expected levels.

As previously disclosed on the Company's Current Report on Form 8-K dated July
25, 2022, the Panther Creek Plant experienced approximately 8.5 days of
unplanned downtime in the month of June from damaged transmission lines caused
by a storm, and other plant maintenance issues. The Company estimates the
financial impact of the June outages to be lost revenue of $1.8 million and a
net income impact of $1.4 million.

In the third quarter of 2022, the Panther Creek Plant completed its planned
maintenance outage which lasted for approximately two weeks, during which time
it did not generate power. The outage went as planned, and the plant was
restored to service in October. During the outage, the Panther Creek Data Center
imported power from the grid to support operations.
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Bitcoin Price Volatility

The market price of Bitcoin has historically and recently been volatile. For
example, the price of Bitcoin ranged from a low of approximately $29,000 to a
high of approximately $69,000 during 2021 and has ranged from approximately
$18,000 to approximately $48,000 year-to-date as of November 7, 2022. Since the
IPO, the price of Bitcoin has dropped over 70%, resulting in an adverse effect
on our results of operations, liquidity and strategy, and resulting in increased
credit pressures on the cryptocurrency industry. Our operating results depend on
the value of Bitcoin because it is the only crypto asset we currently mine.

We cannot accurately predict the future market price of Bitcoin and, as such, we
cannot accurately predict potential adverse effects, including whether we will
record impairment of the value of our Bitcoin assets. The future value of
Bitcoin will affect the revenue from our operations, and any future impairment
of the value of the Bitcoin we mine and hold for our account would be reported
in our financial statements and results of operations as charges against net
income, which could have a material adverse effect on the market price for our
securities.

Recent Developments

Northern Data

On August 17, 2021, Stronghold LLC entered into an agreement with Northern Data
PA, LLC ("Northern Data") whereby Northern Data will construct and operate a
colocation data center facility located on the Scrubgrass Plant (the "Hosting
Agreement"), the primary business purpose of which will be to provide hosting
services and support the cryptocurrency miners that we have purchased but not
yet received entirely from Northern Data. On March 28, 2022, we restructured the
Hosting Agreement to obtain an additional 2,675 miners at cost of $37.5 per
terahash (to be paid five months after delivery) and temporarily reduced the
profit share for Northern Data while incorporating performance thresholds until
the data center build-out is complete. On August 10, 2022 the Company and
Northern Data terminated the provision of the restructured Hosting Agreement
related to the additional 2,675 miners and the Company shall neither make
payment for such additional miners nor obtain title to such additional miners.

On September 30, 2022, the Company entered into a settlement agreement with
Northern Data (the "Settlement Agreement") whereby 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 of (i) 24 Northern Data
manufactured pods capable of supporting approximately 550 Bitcoin miners each
for an aggregate amount of approximately 13,200 available slots and (ii) four
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 the Company will receive 100% of the profits
generated by Bitcoin miners in the Northern Data pods and Strongboxes. 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.

Pursuant to the Settlement Agreement, the Company 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 in full
on October, 3, 2022; (ii) $1.0 million to Northern Data not later than October
31, 2022, which amount was paid to Northern Data in full on October 31, 2022;
and (iii) $1.0 million to Northern Data not later than November 30, 2022, and
included in accounts payable on the condensed consolidated balance sheet as of
September 30, 2022. The Company recorded the settlement costs of $4.5 million in
September 2022, partially offset by the elimination of approximately
$2.6 million payable to Northern Data. The net impact of $1.9 million was
recorded as operations and maintenance expense on the condensed consolidated
statements of operations for the three and nine months ended September 30, 2022.

Miner Will

On April 2, 2021, we entered into a purchase agreement with MinerVa (the
"MinerVa Purchase Agreement") for the acquisition of 15,000 of their MV7 ASIC
SHA256 model cryptocurrency miner equipment (miners) with a total terahash to be
delivered equal to 1.5 million terahash. In December 2021, we extended the
deadline for delivery of the MinerVa miners to April 2022. As of September 30,
2022, MinerVa has delivered, refunded cash, or swapped into deliveries of
industry leading miners of equivalent value to approximately 9,100 of the 15,000
miners. We do not know when the remaining MinerVa miners will be received, if at
all. As a result, an impairment totaling $12,228,742 was recognized on March 31,
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2022. On July 18, 2022, Company has provided written notice of dispute to MinerVa pursuant to MinerVa’s purchase agreement obliging Company and MinerVa to work together in good faith toward resolution for a period of sixty (60) days. Pursuant to the MinerVa Purchase Agreement, if no settlement has been reached after sixty (60) days, Stronghold may terminate discussions and declare a stalemate and adhere to the dispute resolution provisions of the MinerVa Purchase Agreement. As the 60 day period has now expired, the Company is evaluating all available remedies under the MinerVa Purchase Agreement.

WhiteHawk Second Amendment

On March 28, 2022, Equipment LLC and WhiteHawk Finance LLC ("WhiteHawk") amended
the WhiteHawk Financing Agreement (as defined below) for a second time (the
"Second WhiteHawk Amendment") to exchange the collateral under the equipment
financing agreement dated June 30, 2021, by and between Stronghold LLC and
WhiteHawk (the "WhiteHawk Financing Agreement"). Pursuant to the Second
WhiteHawk Amendment, (i) the approximately 11,700 remaining miners under the
MinerVa Purchase Agreement were exchanged as collateral for additional miners
received by us from other suppliers and (ii) WhiteHawk agreed to lend to us an
additional amount not to exceed $25.0 million to finance certain previously
purchased Bitcoin miners and related equipment (the "Second Total Advance").
Pursuant to the Second WhiteHawk Amendment, Equipment, LLC paid an amendment fee
in the amount of $275,414.40 and a closing fee with respect to the Second Total
Advance of $500,000. In addition to the purchased Bitcoin miners and related
equipment, Panther Creek and Scrubgrass each agreed to a negative pledge of the
Panther Creek Plant and Scrubgrass Plant, respectively, and guaranteed the
WhiteHawk Financing Agreement. Each of the negative pledge and the guaranty by
Panther Creek and Scrubgrass will be released upon payment in full of the Second
Total Advance, regardless of whether the Total Advance remains outstanding. In
conjunction with the Second WhiteHawk Amendment, we issued a warrant to
WhiteHawk to purchase 125,000 shares of Class A common stock, subject to certain
antidilution and other adjustment provisions as described in the warrant
agreement, at an exercise price of $0.01 per share (the "Second WhiteHawk
Warrant"). The Second WhiteHawk Warrant expires on March 28, 2032.

May 2022 Private placement

On May 15, 2022, we entered into a note and warrant purchase agreement (the
"Purchase Agreement"), by and among the Company and the purchasers thereto
(collectively, the "Purchasers"), whereby we agreed to issue and sell to
Purchasers, and 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") representing the
right to purchase up to 6,318,000 shares of Class A Common Stock, of the Company
with an exercise price per share equal to $2.50, on the terms and subject to the
conditions set forth in the Purchase Agreement (collectively, the "May 2022
Private Placement"). The Purchase Agreement contained representations and
warranties by the Company and the Purchasers that are customary for transactions
of this type. The May 2022 Notes and the May 2022 Warrants were sold for
aggregate consideration of $27.0 million.

In connection with the May 2022 Private Placement, the Company undertook to
negotiate with the Purchasers, and to file a certificate of designation ("Series
C Preferred Certificate of Designation") with the State of Delaware, following
the closing of the May 2022 Private Placement, the terms of a new series of
preferred stock (the "Series C Preferred Stock").

In connection with the May 2022 Private Placement, the May 2022 Warrants were
issued pursuant to a Warrant Agreement, dated as of May 15, 2022 (the "Warrant
Agreement"). The May 2022 Warrants are subject to mandatory cashless exercise
provisions and have certain anti-dilution provisions. The May 2022 Warrants will
be exercisable for a five-year period from the closing.

McClymonds Supply & Transit Company, Inc. and DTA, PL versus Scrubgrass Generating Company, LP

On May 9, 2022, an award in the amount of $5.0 million plus interest computed as
of May 15, 2022, in the amount of $0.8 million was issued in favor of the
McClymonds Supply & Transit Company, Inc. in the previously disclosed dispute
over a trucking contract between the claimant and our subsidiary. The two
managing members of Q Power, LLC, our primary Class V shareholder, have agreed
to and begun to pay the full amount of the award such that there will be no
effect on the financial condition of the Company.

May 2022 Amendment to the private placement

On August 16, 2022, the Company entered into an amendment to the note and
warrant purchase agreement (the "Purchase Agreement"), by and among the Company
and the purchasers thereto (collectively, the "Purchasers"), whereby the Company
agreed to amend the Purchase Agreement such that $11.25 million of the
outstanding principal has been
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exchanged for the Purchaser's execution of an amended and restated warrant
agreement pursuant to which the strike price of the 6,318,000 May 2022 Warrants
was reduced from $2.50 to $0.01. After giving effect to the principal reduction
and amended and restated warrants, the Company will continue to make subsequent
monthly, payments to the Purchasers on the fifteenth (15th) day of each of
November 2022, December 2022, January 2023, and February 2023. The Company may
elect to pay each such payment (A) in cash or (B) in shares of Common Stock, in
each case, 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.

September 2022 Private placement

On September 13, 2022, we entered into Securities Purchase Agreements (the
"Purchase Agreements") with Armistice Capital Master Fund Ltd. ("Armistice") and
Greg Beard, our co-chairman and chief executive officer, for the purchase and
sale of 2,274,350 and 602,409 shares, respectively, of Class A common stock, par
value $0.0001 per share at a purchase price of $1.60 and $1.66, respectively,
and warrants to purchase an aggregate of 5,602,409 shares of Class A common
stock, at an initial exercise price of $1.75 per share (subject to certain
adjustments) (the "September 2022 Private Placement"). Subject to certain
ownership limitations, such warrants are exercisable upon issuance and will be
exercisable for five and a half years commencing upon the date of issuance.
Armistice also purchased pre-funded warrants to purchase 2,725,650 shares of
Class A common stock (the "Pre-Funded Warrants") at a purchase price of $1.60
per Pre-Funded Warrant. The Pre-Funded Warrants have an exercise price of
$0.0001 per warrant share. The transaction closed on September 19, 2022. The
gross proceeds, before deducting offering expenses, from the sale of such
securities was approximately $9.0 million. The Company intends to use the
proceeds from this offering for general corporate purposes, which may include
acquisition of Bitcoin miners.

Pursuant to the Armistice Purchase Agreement, we entered into a registration
rights agreement with Armistice (the "Armistice Registration Rights Agreement"),
filed a registration statement covering the resale of all Registrable Securities
(as defined in the Armistice Registration Rights Agreement), and agreed to use
our commercially reasonable efforts to cause the registration statement to
become effective within the timeframes specified in the Armistice Registration
Rights Agreement; failure to do so will result in certain liquidated damages as
set forth in the Armistice Registration Rights Agreement.

Subject to certain exceptions, until 30 days after the effective date of the
registration statement (the "Effective Date"), we will be prohibited from
issuing, entering into any agreement to issue or announcing the issuance or
proposed issuance of any shares of Class A common stock or securities
convertible or exercisable into Class A common stock, or filing, amending or
supplementing certain other registration statements. Until six months after the
Effective Date, we will also be prohibited from effecting or entering into an
agreement to effect any issuance involving a variable rate transaction.

WhiteHawk Refinance Agreement

On August 16, 2022we have entered into a letter of commitment (the “Letter of Commitment”) with WhiteHawk to provide committed financing to refinance WhiteHawk’s financing agreement and provide up to $20 million additional commitments for a global loan not exceeding $60.0 million.


On October 27, 2022, we entered into a secured credit agreement (the "Credit
Agreement") with WhiteHawk to refinance the WhiteHawk Financing Agreement,
effectively terminating the WhiteHawk Financing Agreement. The Credit Agreement
consists of $35.1 million in term loans and $23.0 million in additional
commitments (such additional commitments, the "Delayed Draw Facility"). Such
loans under the Delayed Draw Facility were drawn on the closing date of the
Credit Agreement. The Credit Agreement and Delayed Draw Facility together reduce
monthly principal payments and added approximately $21 million of cash to the
Company's balance sheet following the Company's draw down on the full amount of
the Delayed Draw Facility. The full amount of the WhiteHawk Financing Agreement
has been drawn as of the date hereof.

The financing pursuant to the Credit Agreement (such financing, the "WhiteHawk
Refinancing Agreement") was entered into by Stronghold LLC as Borrower (the
"Borrower") and is secured by substantially all of the assets of the Company and
its subsidiaries and is guaranteed by the Company and each of its material
subsidiaries. The WhiteHawk Refinancing Agreement requires equal monthly
amortization payments resulting in full amortization at maturity. The WhiteHawk
Refinancing Agreement has customary representations, warranties and covenants
including restrictions on indebtedness, liens, restricted payments and
dividends, investments, asset sales and similar covenants and contains customary
events of default. The WhiteHawk Refinancing Agreement also contains covenants
requiring the Borrower and
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its subsidiaries to maintain a minimum (x) of $7.5 million of liquidity at all
times, (y) a minimum liquidity of $10 million of average daily liquidity for
each calendar month (rising to $20 million beginning July 1, 2023) and (z) a
maximum total leverage ratio covenant of (i) 7.5:1.0 for the quarter ending
December 31, 2022, (ii) 5.0:1.0 for the quarter ending March 31, 2023, (iii)
4.0:1.0 for the quarter ending June 30, 2023 and (iv) 4.0:1.0 for each quarter
ending thereafter.

The borrowings under the WhiteHawk Refinancing Agreement mature on October 26,
2025 and bear interest at a rate of either (i) the Secured Overnight Financing
Rate ("SOFR") plus 10% or (ii) a reference rate equal to the greater of (x) 3%,
(y) the federal funds rate plus 0.50% and (y) the Term SOFR rate plus 1%, plus
9%. The loan under the Delayed Draw Facility was issued with 3% closing fee on
the drawn amount, paid when such amount was drawn. Amounts drawn on the
WhiteHawk Refinancing Agreement are subject to a prepayment premium such that
the lenders thereunder achieve a 20% return on invested capital. The Company
also issued a stock purchase warrant to WhiteHawk in conjunction with the
closing of the WhiteHawk Refinancing Agreement, which provides for the purchase
of an additional 4,000,000 shares of Class A common stock at an exercise price
of $0.01 per share.

NYDIG Asset Purchase Agreement


On August 16, 2022, the Company, Stronghold LLC, Stronghold Digital Mining LLC,
a Delaware limited liability company ("SD Mining") and Stronghold Digital Mining
BT, LLC, a Delaware limited liability company ("SD Mining BT", and together with
SD Mining, the "APA Sellers" and, together with the Company and Stronghold LLC,
the "APA Seller Parties"), entered into an Asset Purchase Agreement (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 June 25, 2021 $34,481,700 master equipment financing agreement
with an affiliate of NYDIG (the "Arctos/NYDIG Financing Agreement" and the
Second NYDIG Financing Agreement (collectively, the "NYDIG Agreements"), certain
miners were pledged as collateral under such agreements (and together with
certain related agreements to purchase miners, the "APA Collateral"). Under the
Asset Purchase Agreement, the APA 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 Agreements
(collectively, the "NYDIG Debt"). Following (i) delivery of the APA Collateral
to the Purchasers or their designees pursuant to a master bill of sale and (ii)
a subsequent inspection period of up to 14 days (which may be extended up to
seven additional days), upon acceptance of the APA Collateral, the related
portion of the NYDIG Debt will be assigned to the APA Sellers and cancelled
pursuant to the terms of the Asset Purchase Agreement (each, a "Settlement").

On September 30, 2022, the APA Seller Parties completed the sale, in two
separate settlements, of six tranches of APA Collateral to BankProv and NYDIG in
exchange for the extinguishment of an aggregate of $65.3 million of principal
under the NYDIG Debt and related interest. On October 26, 2022, the APA Seller
Parties completed the transfer of the seventh and final tranche of the APA
Collateral to NYDIG pursuant to the Asset Purchase Agreement in exchange for the
extinguishment of $2.1 million of principal under the NYDIG Debt and related
interest (the "Final Settlement"). Following the Final Settlement, the aggregate
amount of principal under the NYDIG Debt extinguished is $67.4 million, the
entire amount of the NYDIG Debt, and it will therefore no longer be reflected on
our balance sheet. The NYDIG Agreements were terminated concurrently with the
Final Settlement.

Debt restructuring initiatives

In August and September of 2022, the Company undertook several steps aimed to
improve its liquidity and flexibility to deploy capital opportunistically
through cycles in the Bitcoin and power markets. Largely driven by depressed
Bitcoin mining economics, the Company's ability to sell power to the PJM grid,
and the value of miner collateral per terahash under the Company's non-recourse
financing agreements, on August 16, 2022, the Company (i) entered into the Asset
Purchase Agreement, (ii) May 2022 Private Placement Amendment, and (iii)
WhiteHawk Refinancing Agreement. The Company also entered into the Settlement
Agreement.

Collectively, the Asset Purchase Agreement, May 2022 Private Placement Amendment
and WhiteHawk Refinancing Agreement (i) reduced the Company's principal amount
of debt outstanding by approximately $79 million (approximately 55% of total
principal amount outstanding as of June 30, 2022), (ii) reduce cash interest and
principal payments through year-end 2023 by approximately $113 million, and
(iii) improved the Company's forecasted cash flow through year-end 2023 through
a reduction in interest and principal payments and monetization of the power
capacity formerly dedicated to miners. The Company believes the Asset Purchase
Agreement, May 2022 Private Placement Amendment, WhiteHawk Refinancing Agreement
and Settlement Agreement provide the Company with increased operational control
to
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opportunistically take advantage of the distressed Bitcoin miner market at
attractive prices while preserving liquidity. For context on the Bitcoin miner
market, pursuant to the Asset Purchase Agreement, the Company transferred
approximately 26,000 miners, to NYDIG and The Provident Bank, in exchange for
the extinguishment of approximately $67 million of debt. Based on recent
publicly disclosed Bitcoin miner purchases as well as offerings provided to the
Company by third-party brokers of Bitcoin miners, the Company estimates that the
current market value of these miners is between $30 million and $35 million,
primarily due to the decrease in the market value of Bitcoin miners generally
from the dates we acquired them to now. Since executing the Asset Purchase
Agreement, the Company has received over 6,300 miners for an existing fleet of
21,900 miners, and expects to receive an additional approximately 4,000 miners,
bringing the total number of miners operated by the Company to over 25,900 upon
receipt. Of the current Bitcoin miners, approximately 19,000 are wholly owned
with hash rate capacity of approximately 1.7 EH/s. We host the remaining
approximately 2,900 Bitcoin miners.

Significant Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions about future events that affect the amounts
reported in the financial statements and accompanying notes. Future events and
their effects cannot be determined with absolute certainty. Therefore, the
determination of estimates requires the exercise of judgment. Actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements. The most significant accounting estimates
inherent in the preparation of our financial statements include estimates
associated with revenue recognition, investments, intangible assets, stock-based
compensation, and business combinations. Our financial position, results of
operations and cash flows are impacted by the accounting policies we have
adopted. In order to get a full understanding of our financial statements, one
must have a clear understanding of the accounting policies employed.

Here is a summary of our significant accounting policies:

Fair value measurements

We measure at fair value certain of our financial and non-financial assets and
liabilities by using a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, essentially an
exit price, based on the highest and best use of the asset or liability. The
levels of the fair value hierarchy are:

Level 1: observable data such as quoted prices in active markets for identical assets or liabilities;

Level 2: observable data based on the market or unobservable data corroborated by market data; and

Level 3: Unobservable inputs for which there is little or no market data, which requires the use of the reporting entity’s own assumptions.

A financial instrument’s level in the fair value hierarchy is based on the lowest level of any input material to the fair value measurement.

Cryptocurrency machines

Management has assessed the basis of depreciation of our cryptocurrency machines
used to verify digital currency transactions and generate digital currencies and
believes they should be depreciated over a three-year period. The rate at which
we generate digital assets and, therefore, consume the economic benefits of our
Bitcoin miners is influenced by a number of factors including the following:

1. The complexity of the bitcoin mining process which is driven by the algorithms contained in the open source bitcoin software;

2. The general availability of suitable computer processing capacity on a global scale (commonly referred to in the industry as hashing capacity which is measured in units of petahash); and

3.Technological obsolescence reflecting rapid development in the Bitcoin miner
industry such that more recently developed hardware is more economically
efficient to run in terms of digital assets generated as a function of operating
costs, primarily power costs (i.e., the speed of hardware evolution in the
industry is such that later
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hardware models typically have faster processing capability combined with lower operating costs and purchase cost).

We operate in an emerging industry for which limited data is available to make
estimates of the useful economic lives of specialized equipment. Management has
determined that three years best reflects the current expected useful life of
Bitcoin miners. This assessment takes into consideration the availability of
historical data and management's expectations regarding the direction of the
industry including potential changes in technology. Management will review this
estimate annually and will revise it as and when data becomes available.

To the extent that any of the assumptions underlying management's estimate of
useful life of its Bitcoin miners are subject to revision in a future reporting
period, either as a result of changes in circumstances or through the
availability of greater quantities of data, then the estimated useful life could
change and have a prospective impact on depreciation expense and the carrying
amounts of these assets.

Revenue Recognition

We recognize revenue under ASC 606, Revenue from Contracts with Customers. The
core principle of this revenue standard is that a company should recognize
revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the company expects to be
entitled in exchange for those goods or services. The following five steps are
applied to achieve that core principle:

1.Step 1: Identify the contract with the customer.

2.Step 2: Identify performance obligations in the contract.

3.Step 3: Determine the price of the transaction.

4.Step 4: Allocate the transaction price to the performance obligations of the contract.

5.Step 5: Recognize revenue when we meet a performance obligation.

In order to identify the performance obligations in a contract with a customer,
a company must assess the promised goods or services in the contract and
identify each promised good or service that is distinct. A performance
obligation meets the definition of a "distinct" good or service (or bundle of
goods or services) per ASC 606 if both of the following criteria are met: the
customer can benefit from the good or service either on its own or together with
other resources that are readily available to the customer (i.e., the good or
service is capable of being distinct), and the entity's promise to transfer the
good or service to the customer is separately identifiable from other promises
in the contract (i.e., the promise to transfer the good or service is distinct
within the context of the contract).

If a good or service is not distinct, the good or service is combined with other
promised goods or services until a bundle of goods or services is identified
that is distinct.

The transaction price is the amount of consideration to which an entity expects
to be entitled in exchange for transferring promised goods or services to a
customer. The consideration promised in a contract with a customer may include
fixed amounts, variable amounts, or both.

When determining the transaction price, an entity shall consider the effects of all of the following:

•Variable consideration;

• Binding estimates of the variable consideration;

•The existence of a significant financing component in the contract;

• Non-monetary consideration; and

• Consideration payable to a client.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable

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consideration is subsequently resolved. The transaction price is allocated to
each performance obligation on a relative standalone selling price basis. The
transaction price allocated to each performance obligation is recognized when
that performance obligation is satisfied, at a point in time or over time as
appropriate. There were no revenue streams with variable consideration during
the nine months ended September 30, 2022, and 2021.

There is currently no specific definitive guidance under GAAP or alternative
accounting framework for the accounting for cryptocurrencies recognized as
revenue or held, and management has exercised significant judgment in
determining the appropriate accounting treatment. In the event authoritative
guidance is enacted by the Financial Accounting Standards Board (the "FASB"), we
may be required to change our policies, which could have an effect on our
consolidated financial position and results from operations.

The Company has determined that the Bitcoin awarded through its Bitcoin mining
operations are a current asset and should be accounted for as cash flow from
operating activities due to the fact that it has been selling cryptocurrency on
a regular basis in order to fund its operations. As such, any changes in the
balance of the current asset account, including those resulting from mining
revenue, sales of Bitcoin and any associated gains and losses, and impairments,
should be accounted for as cash flows from operating activities as opposed to
cash flows from investing activities, where sales of Bitcoin had appeared
previously.

The fair value of the digital asset reward received is determined using the quoted price of the associated cryptocurrency at the time of receipt.

Our policies regarding our revenue streams are detailed below.

Energy revenues

We operate as a market participant through PJM Interconnection, an RTO that
coordinates the movement of wholesale electricity. We sell energy in the
wholesale generation market in the PJM RTO. Energy revenues are delivered as a
series of distinct units that are substantially the same and that have the same
pattern of transfer to the customer over time and, therefore, are accounted for
as a distinct performance obligation. The transaction price is based on pricing
published in the day ahead market which constitutes the stand-alone selling
price.

Energy revenue is recognized over time as energy volumes are generated and
delivered to the RTO (which is contemporaneous with generation), using the
output method for measuring progress of satisfaction of the performance
obligation. We apply the invoice practical expedient in recognizing energy
revenue. Under the invoice practical expedient, energy revenue is recognized
based on the invoiced amount which is considered equal to the value provided to
the customer for the performance obligation completed to date.

Reactive energy power is supplied to maintain a continuous voltage level. Reactive power revenues are recognized as we are ready to provide them if requested by the PJM RTO.

Ability Recipes

We provide capacity to a customer through participation in capacity auctions
held by the PJM RTO. Capacity revenues are a series of distinct performance
obligations that are substantially the same and that have the same pattern of
transfer to the customer over time and, therefore, are accounted for as a
distinct performance obligation. The transaction price for capacity is
market-based and constitutes the stand-alone selling price. As capacity
represents our stand-ready obligation, capacity revenue is recognized as the
performance obligation is satisfied ratably over time, on a monthly basis, since
we stand ready equally throughout the period to deliver power to the PJM RTO if
called upon. We apply the invoice practical expedient in recognizing capacity
revenue. Under the invoice practical expedient, capacity revenue is recognized
based on the invoiced amount which is considered equal to the value provided to
the customer for the performance obligation completed to date. Penalties may be
assessed by the PJM RTO against generation facilities if the facility is not
available during the capacity period. The penalties assessed by the PJM RTO, if
any, are recorded as a reduction to capacity revenue when incurred.

Cryptocurrency Hosting

We have entered into customer hosting contracts whereby we provide electrical
power to cryptocurrency mining customers, and the customers pay a stated amount
per MWh ("Contract Capacity"). This amount is paid monthly in advance. Amounts
used in excess of the Contract Capacity are billed based upon calculated
formulas as contained in the contracts. If any shortfalls occur due to outages,
make-whole payment provisions contained in the contracts are used to
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offset billings to the client that prevent him from mining the cryptocurrency. Advance payments and customer deposits are recognized as contract liabilities.

Cryptocurrency mining

We have entered into digital asset mining pools by executing contracts, as
amended from time to time, with the mining pool operators to provide computing
power to the mining pool. The contracts are terminable at any time by either
party, and our enforceable right to compensation only begins when we provide
computing power to the mining pool operator. In exchange for providing computing
power, we are entitled to a fractional share of the fixed cryptocurrency award
the mining pool operator receives (less digital asset transaction fees to the
mining pool operator which are recorded as reduction to cryptocurrency mining
revenues) for successfully adding a block to the blockchain. The terms of the
agreement provide that neither party can dispute settlement terms after
thirty-five days following settlement. Our fractional share is based on the
proportion of computing power we contributed to the mining pool operator to the
total computing power contributed by all mining pool participants in solving the
current algorithm.

Providing computing power in Bitcoin miners is an output of our ordinary
business activities. The provision of providing such computing power is the only
performance obligation in our contracts with mining pool operators. The
transaction consideration we receive, if any, is noncash consideration, which we
measure at fair value on the date received, which is not materially different
than the fair value at contract inception or the time we have earned the award
from the pools. The consideration is not variable. Because it is not probable
that a significant reversal of cumulative revenue will not occur, the
consideration is constrained until the mining pool operator successfully places
a block (by being the first to solve an algorithm) and we receive confirmation
of the consideration we will receive, at which time revenue is recognized. There
is no significant financing component in these transactions.

Fair value of the cryptocurrency award received is determined using the quoted
price of the related cryptocurrency at the time of receipt. There is currently
no specific definitive guidance under GAAP or alternative accounting framework
for the accounting for cryptocurrencies recognized as revenue or held, and
management has exercised significant judgment in determining the appropriate
accounting treatment. In the event authoritative guidance is enacted by the
FASB, we may be required to change our policies, which could have an effect on
our consolidated financial position and results from operations.

Asset retirement obligations

Asset retirement obligations, including those conditioned on future events, are
recorded at fair value in the period in which they are incurred, if a reasonable
estimate of fair value can be made. The associated asset retirement costs are
capitalized as part of the carrying amount of the related long-lived asset in
the same period. In each subsequent period, the liability is accreted to its
present value and the capitalized cost is depreciated over the estimated useful
life of the long-lived asset. If the asset retirement obligation is settled for
other than the carrying amount of the liability, we recognize a gain or loss on
settlement. Our asset retirement obligation represents the cost we would incur
to perform environmental clean-up or dismantle certain portions of the
facilities.

Impairment of long-lived assets

We review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. A long-lived asset (group) that is held and used must be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the long-lived asset (group) might not be recoverable (i.e.,
information indicates that an impairment might exist). We are responsible for
routinely assessing whether impairment indicators are present and ensuring
systems or processes are in place to assist in the identification of potential
impairment indicators.

We are not required to perform an impairment analysis (i.e., test the asset
(group) for recoverability and potentially measure an impairment loss) if
indicators of impairment are not present. We assess the need for an impairment
write-down only if an indicator of impairment (e.g., a significant decrease in
the market value of a long-lived asset (group)) is present. The Company
performed an impairment test on its long-lived assets and $11.6 million and
$16.6 million was recognized as expenses for the three and nine months ended
September 30, 2022, respectively. No impairment indicators existed as of
September 30, 2021, that required impairment testing of our long-lived assets in
the prior year.

Derivative Contracts
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In accordance with guidance on accounting for derivative instruments and hedging
activities all derivatives should be recognized at fair value. Derivatives or
any portion thereof, that are not designated as, and effective as, hedges must
be adjusted to fair value through earnings. Derivative contracts are classified
as either assets or liabilities on the accompanying condensed consolidated
balance sheets. Certain contracts that require physical delivery may qualify
for, and be designated as, normal purchases/normal sales. Such contracts are
accounted for on an accrual basis.

We use derivative instruments to mitigate our exposure to various energy
commodity market risks. We do not enter into any derivative contracts or similar
arrangements for speculative or trading purposes. We will, at times, sell our
forward unhedged electricity capacity to stabilize our future operating margins.

We also use derivative instruments to mitigate the risks of Bitcoin market
pricing volatility. We entered into a variable prepaid forward sale contract
that mitigates Bitcoin market pricing volatility risks between a low and high
collar of Bitcoin market prices during the contract term. This contract settled
in September 2022. The contract meets the definition of a derivative transaction
pursuant to guidance under ASC 815 and is considered a compound derivative
instrument which is required to be presented at fair value subject to
remeasurement each reporting period. The change in fair value is recorded as
changes in fair value of forward sale derivative as part of earnings.

Stock-based compensation

For equity-classified awards, compensation expense is recognized over the
requisite service period based on the computed fair value on the grant date of
the award. Equity-classified awards include the issuance of stock options and
restricted stock units ("RSUs").

Notes payable

We record notes payable net of any discounts or premiums. Discounts and premiums
are amortized as interest expense or income over the life of the note in such a
way to result in a constant rate of interest when applied to the amount
outstanding at the beginning of any given period.

Responsibilities Related to Warrants

We record warrant liabilities at their fair value as of the balance sheet date
and recognize changes in the balances, over the comparative periods of either
the issuance date or the last reporting date, as part of changes in the fair
value of warrant liabilities expense. At the issuance date, each series of
warrants was convertible and redeemable to preferred stock.

Loss per share

Basic net (loss) income per share ("EPS") of common stock is computed by
dividing net loss by the weighted average number of shares of common stock
outstanding or shares subject to exercise for a nominal value during the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the entity.

Income taxes

The amount of income taxes we record requires interpretations of complex rules
and regulations of federal, state and local tax jurisdictions. We use the asset
and liability method of accounting for income taxes, under which deferred tax
assets and liabilities are recognized for the future tax consequences of
temporary differences between the financial statement carrying values and the
tax bases of existing assets and liabilities, and for operating loss and tax
credit carryforwards. Deferred income tax assets and liabilities are based on
enacted tax rates applicable to the future period when those temporary
differences are expected to be recovered or settled. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in earnings in
the period the rate change is enacted. A valuation allowance is provided for
deferred tax assets when it is more likely than not the deferred tax assets will
not be realized after considering all positive and negative evidence available
concerning the realizability of our deferred tax assets.

As of September 30, 2022, and December 31, 2021, we maintained a valuation
allowance on our deferred tax assets. The valuation allowance remains in place
based on the uncertainty of future events, including the Company's ability to
generate future taxable income in light of its recent losses, and management
considered this and other factors in evaluating the realizability of our
deferred tax assets. Any changes in the positive or negative evidence evaluated
when determining if our deferred tax assets will be realized could result in a
material change to our consolidated financial statements.
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The accruals for deferred tax assets and liabilities are often based on
assumptions that are subject to a significant amount of judgment by management.
These assumptions and judgments are reviewed and adjusted as facts and
circumstances change. Material changes to our income tax accruals may occur in
the future based on the potential for income tax audits, changes in legislation
or resolution of pending matters.

Post-IPO Taxation and Public Company Costs

Stronghold LLC is and has been organized as a pass-through entity for U.S.
federal income tax purposes and is therefore not subject to entity-level U.S.
federal income taxes. Stronghold Inc. was incorporated as a Delaware corporation
on March 19, 2021 and therefore is subject to U.S. federal income taxes and
state and local taxes at the prevailing corporate income tax rates, including
with respect to its allocable share of any taxable income of Stronghold LLC. In
addition to tax expenses, Stronghold Inc. also incurs expenses related to its
operations, plus payment obligations under the Tax Receivable Agreement entered
into between the Company, Q Power LLC ("Q Power") and an agent named by Q Power,
dated April 1, 2021 (the "TRA"), which are expected to be significant. To the
extent Stronghold LLC has available cash and subject to the terms of any current
or future debt instruments, the Fourth Amended and Restated Limited Liability
Company Agreement of Stronghold LLC, as amended from time to time (the
"Stronghold LLC Agreement") requires Stronghold LLC to make pro rata cash
distributions to holders of Stronghold LLC Units ("Stronghold Unit Holders"),
including Stronghold Inc., in an amount sufficient to allow Stronghold Inc. to
pay its taxes and to make payments under the TRA. In addition, the Stronghold
LLC Agreement requires Stronghold LLC to make non-pro rata payments to
Stronghold Inc. to reimburse it for its corporate and other overhead expenses,
which payments are not treated as distributions under the Stronghold LLC
Agreement. See "Tax Receivable Agreement" herein for additional information.

In addition, we have incurred, and expect to continue to incur incremental,
non-recurring costs related to our transition to a publicly traded corporation,
including the costs of the IPO and the costs associated with the initial
implementation of our internal control reviews and testing pursuant to Section
404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). We have also
incurred, and expect to continue to incur additional significant and recurring
expenses as a publicly traded corporation, including costs associated with
compliance under the Securities Exchange Act of 1934, as amended, (the "Exchange
Act"), annual and quarterly reports to common stockholders, registrar and
transfer agent fees, national stock exchange fees, audit fees, incremental
director and officer liability insurance costs and director and officer
compensation. Our financial statements following the IPO will continue to
reflect the impact of these expenses.

Factors affecting the comparability of our future operating results with our historical operating results

Our historical financial results described below may not be comparable to our future financial results for the reasons described below.

Stronghold Inc. is subject to U.S. federal, state and local income taxes as a
corporation. Our accounting predecessor was treated as a partnership for U.S.
federal income tax purposes, and as such, was generally not subject to U.S.
federal income tax at the entity level. Rather, the tax liability with respect
to its taxable income was passed through to its members. Accordingly, the
financial data attributable to our predecessor contains no provision for U.S.
federal income taxes or income taxes in any state or locality. Due to cumulative
and current losses as well as an evaluation of other sources of income as
outlined in ASC 740, management has determined that the utilization of our
deferred tax assets is not more likely than not, and therefore we have recorded
a valuation allowance against our net deferred tax assets. Management continues
to evaluate the likelihood of the Company utilizing its deferred taxes, and
while the valuation allowance remains in place, we expect to record no deferred
income tax expense or benefit. Should the valuation allowance no longer be
required, the 21% statutory federal income tax rate as well as state and local
income taxes at their respective rates will apply to income allocated to
Stronghold Inc.

As we further implement controls, processes and infrastructure applicable to
companies with publicly traded equity securities, it is likely that we will
incur additional selling, general and administrative expenses relative to
historical periods. Our future results will depend on our ability to efficiently
manage our consolidated operations and execute our business strategy.

As we continue to acquire miners and use our power generation assets to power those miners, we expect a greater proportion of our revenue and expenses to be related to crypto asset mining.

As previously discussed in the Critical Accounting Policies section, the
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions about future events that affect the amounts
reported in the financial statements and accompanying notes. Future events and
their effects cannot be determined with absolute certainty. Therefore, the
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determination of estimates requires the exercise of judgment. Actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements. The most significant accounting estimates
inherent in the preparation of our financial statements include estimates
associated with revenue recognition, investments, intangible assets, stock-based
compensation, and business combinations. The Company's financial position,
results of operations and cash flows are impacted by the accounting policies the
Company has adopted. In order to get a full understanding of the Company's
financial statements, one must have a clear understanding of the accounting
policies employed.

Operating results

Highlights of our consolidated operating results for the three and nine months ended September 30, 2022 compared to the three and nine month periods ended
September 30, 2021 to understand:

Operating revenue

Revenue increased $18.7 million for the three-month period ended September 30,
2022, as compared to the same period in 2021, primarily due to a $10.2 million
increase in cryptocurrency mining revenue from deploying additional miners, and
a $9.1 million increase in energy revenue driven by higher prevailing power
prices per MW and higher MW generation as a result of the November 2021 Panther
Creek Acquisition. Cryptocurrency hosting revenue decreased by $0.2 million due
to the strategic termination of several agreements of generated power sales to
crypto asset mining customers for which we were providing hosting services.

Revenue increased $68.7 million for the nine-month period ended September 30,
2022, as compared to the same period in 2021, primarily due to a $46.8 million
increase in cryptocurrency mining revenue from deploying additional miners, and
a $21.1 million increase in energy revenue driven by higher prevailing market
rates per MW and higher MW generation as a result of the November 2021 Panther
Creek Acquisition. Capacity revenue also increased $2.2 million due to the
Panther Creek Acquisition.

Functionnary costs

Total operating expenses increased $54.0 million for the three-month period
ended September 30, 2022, as compared to the same period in 2021, primarily
driven by (1) a $16.7 million increase in operations and maintenance expense as
a result of the November 2021 Panther Creek Acquisition, higher labor and
maintenance costs related to the previously disclosed planned fall outage, and
the ramp up of cryptocurrency mining operations, (2) a $11.1 million increase in
depreciation and amortization primarily from deploying additional miners and
transformers, (3) a $7.9 million increase in general and administrative expenses
due to legal and professional fees, insurance costs, and compensation as we
continue to organize and scale operations, and (4) a $6.1 million increase in
fuel expenses driven by higher MW generation, primarily due to the November 2021
Panther Creek Acquisition, and increased fuel delivery costs from higher diesel
prices.

Total operating expenses increased $168.6 million for the nine-month period
ended September 30, 2022, as compared to the same period in 2021, primarily
driven by (1) a $41.4 million increase in operations and maintenance expense
driven by major maintenance costs and labor at the Scrubgrass Plant associated
with increasing plant uptime, higher costs as a result of the November 2021
Panther Creek Acquisition, and the ramp up of cryptocurrency mining operations
including higher lease expenses for our hosting services agreement, (2) a
$34.8 million increase in depreciation and amortization primarily from deploying
additional miners and transformers, (3) a $26.5 million increase in general and
administrative expenses due to legal and professional fees, insurance costs, and
compensation as we continue to organize and scale operations, (4) a
$20.0 million increase in fuel expenses driven by higher MW generation and
increased fuel delivery costs from higher diesel prices, and (5) a $12.2 million
impairment on equipment deposits for MinerVa miners discussed in Note 4 -
Equipment Deposits and Miner Sales and Note 8 - Contingencies and Commitments.
Impairments on digital currencies of $8.2 million were primarily attributed to
the June decline in the price of Bitcoin. In March 2022, the Company evaluated
the MinerVa equipment deposits for impairment and determined an impairment
charge of $12.2 million based on lack of miner delivery per agreement. In June
2022, the Company evaluated miner assets and determined an impairment charge of
$16.6 million for certain miners attributable to the decline in the price of
Bitcoin.

Other Income (Expense)

Total other income (expense) decreased $33.7 million for the three-month period
ended September 30, 2022, as compared to the same period in 2021, primarily
driven by (1) the strategic decision to sell approximately 26 thousand miners
under an Asset Purchase Agreement that resulted in a $15.3 million loss on debt
extinguishment and a $4.2 million impairment on assets held for sale discussed
in Note 6 - Long-Term Debt and Note 33 - Subsequent Events and (2) a
$13.4 million loss on the revaluation of warrant liabilities related to the
September 2022 PIPE.
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Total other income (expense) decreased $38.1 million for the nine-month period
ended September 30, 2022, as compared to the same period in 2021, primarily
driven by (1) the strategic decision to sell approximately 26 thousand miners
under an Asset Purchase Agreement that resulted in a $15.3 million loss on debt
extinguishment and a $4.2 million impairment on assets held for sale discussed
in Note 6 - Long-Term Debt and Note 33 - Subsequent Events, (2) a $13.4 million
loss on the revaluation of warrant liabilities related to the September 2022
PIPE, (3) a $8.2 million increase in interest expense on additional financing
agreements used to fund the growth of cryptocurrency operations, (4) a
$8.0 million realized loss on the sale of miner assets that occurred in the
second quarter of 2022, (5) a $3.4 million increase from a change in value of
the forward sale derivative, and (6) a $2.2 million decrease in the fair value
of the convertible note discussed in Note 32 - Private Placements. See Note 6 -
Long-Term Debt and Note 14 - Stock Issued Under Master Financing Agreements and
Warrants in the notes to our financial statements for further information on
financing agreements.

Segment Results

The table below shows the summarized results of our operations for the two reporting segments: Energy Operations and Cryptocurrency Operations.

                                                    Three Months Ended,                                  Nine Months Ended
                                                                     September 30,                                       September 30,
                                         September 30, 2022               2021               September 30, 2022               2021
                                            (unaudited)               (unaudited)               (unaudited)               (unaudited)
Operating Revenues
Energy Operations                      $        12,371,797          $   

3,459,466 $31,629,528 $8,262,647
Cryptocurrency operations

                       12,376,974              2,560,247                   50,997,751              5,643,668
Total Operating Revenues               $        24,748,771          $   

6,019,713 $82,627,279 $13,906,315
Net operating profit/(loss) from energy operations

                      $       (16,086,915)         $  

(2,121,260) ($39,915,660) $(5,907,066)
Cryptocurrency operations

                      (23,092,642)            (1,824,772)                 (67,786,643)            (1,896,152)
Net Operating Income/(Loss)            $       (39,179,557)         $  (3,946,032)         $      (107,702,303)         $  (7,803,218)
Other Income, net (a)                  $       (36,040,813)         $  (2,333,997)         $       (40,063,057)         $  (1,958,776)
Net Income/(Loss)                      $       (75,220,370)         $ 

(6,280,029) $(147,765,360) ($9,761,994)
Depreciation and amortization Energy operations

                      $        (1,292,241)         $    

(149,426) ($3,874,894) ($430,965)
Cryptocurrency operations

                      (10,955,004)            (1,008,948)                 (33,359,232)            (2,032,584)
Total Depreciation & Amortization      $       (12,247,245)         $  (1,158,374)         $       (37,234,126)         $  (2,463,549)
Interest Expense
Energy Operations                      $           (15,864)         $     (22,264)         $           (71,933)         $     (90,570)
Cryptocurrency Operations                       (3,377,203)            (2,438,404)                 (10,741,369)            (2,504,181)
Total Interest Expense                 $        (3,393,067)         $  (2,460,668)         $       (10,813,302)         $  (2,594,751)


(a)We do not allocate other income, net for segment reporting purposes. Amount
is shown as a reconciling item between net operating income/(losses) and
consolidated income before taxes. Refer to our consolidated statement of
operations for the nine months ended September 30, 2022 and 2021 for further
details.



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Energy Operations Segment

                                                  Three Months Ended September 30,                                     Nine Months Ended September 30,
                                          2022                  2021                 $ Change                 2022                  2021                 $ Change
                                      (unaudited)            (unaudited)                                  (unaudited)            (unaudited)
OPERATING REVENUES
Energy                              $  11,454,016          $  2,388,752          $   9,065,264          $  26,946,549          $  5,875,574          $  21,070,975
Capacity                                  878,610             1,069,040               (190,430)             4,591,038             2,352,276              2,238,762
Other                                      39,171                 1,674                 37,497                 91,941                34,797                 57,144
Total operating revenues               12,371,797             3,459,466              8,912,331             31,629,528             8,262,647             23,366,881

OPERATING EXPENSES
Fuel - net of crypto segment
subsidy1                                5,578,137             1,084,247              4,493,890             17,138,049             4,686,062             12,451,987
Operations and maintenance             15,730,182             2,442,004             13,288,178             37,199,699             5,535,701             31,663,998
General and administrative                339,364               991,405               (652,041)             1,097,054               991,405                105,649
Depreciation and amortization           1,292,241               149,426              1,142,815              3,874,894               430,965              3,443,929
Total operating expenses            $  22,939,924          $  4,667,082          $  18,272,842          $  59,309,696          $ 11,644,133          $  47,665,563
NET OPERATING LOSS EXCLUDING
CORPORATE OVERHEAD                  $ (10,568,127)         $ (1,207,616)         $  (9,360,511)         $ (27,680,168)         $ (3,381,486)         $ (24,298,682)
Corporate overhead                      5,518,788               913,644              4,605,144             12,235,492             2,525,580              9,709,912
NET OPERATING LOSS                  $ (16,086,915)         $ (2,121,260)         $ (13,965,655)         $ (39,915,660)         $ (5,907,066)         $ (34,008,594)

INTEREST EXPENSE                    $     (15,864)         $    (22,264)         $       6,400          $     (71,933)         $    (90,570)         $      18,637


1 Cryptocurrency operations consumed $2.9 million and $9.3 million of
electricity generated by the Energy Operations segment for the three and nine
months ended September 30, 2022 and $1.3 million and $1.8 million for the three
and nine months ended September 30, 2021. For segment reporting, this
intercompany electric charge is recorded as a contra-expense to offset fuel
costs within the Energy Operations segment.

operating income

Total operating revenue increased $8.9 million for the three-month period ended
September 30, 2022, as compared to the same period in 2021, primarily due to a
$9.1 million increase in energy revenue driven by higher prevailing market rates
per MW and higher MW generation. Capacity revenue decreased $0.2 million.
Effective June 1, 2022 through May 31, 2024, both plants strategically reduced
their exposure to the capacity markets, and the resulting cost-capping and
operational requirements in the day ahead market by PJM. The Company chose to be
an energy resource after achieving its RegA certification, which will reduce
monthly capacity revenue and the frequency with which the plants will be
mandated to sell power at non-market rates, in exchange for the opportunity to
sell power to the grid at prevailing market rates, which management expects will
more than make up for lost capacity revenue. This also gives our plants the
ability to provide fast response energy to the grid in the real time market when
needed without having to comply with day ahead power commitments. Over the
course of 2022, the PJM grid has seen stronger around the clock prices, and
stronger daily "peak" prices suggesting tight supply and demand grid conditions.
When high power prices call for more electricity to be supplied by our plants,
and those prices are in excess of Bitcoin-equivalent power prices, the Company
may shut off its data center Bitcoin mining load in order to sell power to the
grid. The Company believes that this integration should allow it to optimize for
both Revenue as well as grid support over time.

Total operating revenue increased $23.4 million for the nine-month period ended
September 30, 2022, as compared to the same period in 2021, primarily due to a
$21.1 million increase in energy revenue driven by higher prevailing market
rates per MW and higher MW generation. Capacity revenue increased $2.2 million
resulting from the November 2021 Panther Creek Acquisition.

Full plant power utilization is optimal for our revenue growth as it also drives
a higher volume of Tier II RECs, waste coal tax credits, and beneficial use ash
sales, as well as the increased electricity supply for the crypto asset
operations.

Functionnary costs

Total operating expenses increased $18.3 million for the three-month period
ended September 30, 2022, as compared to the same period in 2021, primarily due
to the incremental expenses associated with operating the Panther Creek Plant
after its November 2021 acquisition. Operations and maintenance expense
increased $13.3 million primarily driven by higher labor, plant maintenance and
one-time upgrades. Fuel expenses increased $4.5 million primarily due to higher
MW
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generation resulting from the November 2021 Panther Creek Acquisition and
increased fuel delivery costs from higher diesel prices, partially offset by
higher costs being allocated to the Cryptocurrency Segment due to higher
electric consumption for bitcoin mining operations, and greater REC sales. REC
sales of $2.3 million and $1.0 million were recognized as contra-expense to
offset fuel expenses for the three months ended September 30, 2022, and 2021,
respectively. Depreciation and amortization expense increased $1.1 million
primarily due to the Panther Creek Acquisition.

Corporate overhead increased $4.6 million primarily due to higher legal and
professional fees, directors' and officers' liability insurance, and payroll
expenses, which have been allocated to the two segments using a "fair-share" of
revenues approach, where the revenue for the segment is divided by the total
combined revenues of the segments and is then multiplied by the shared general
and administrative costs for the combined segments.

Total operating expenses increased $47.7 million for the nine-month period ended
September 30, 2022, as compared to the same period in 2021, primarily due to the
incremental operations and maintenance and fuel expenses associated with
operating the Panther Creek Plant after its November 2021 acquisition.
Operations and maintenance increased $31.7 million primarily driven by payroll,
major maintenance and upgrade expenditures. Fuel expenses increased
$12.5 million primarily due to higher MW generation resulting from the November
2021 Panther Creek Acquisition and increased fuel delivery costs from higher
diesel prices, partially offset by higher costs being allocated to the
Cryptocurrency Segment due to higher electric consumption for bitcoin mining
operations, and greater REC sales. REC sales of $4.9 million and $1.7 million
were recognized as contra-expense to offset fuel expenses for the nine months
ended September 30, 2022, and 2021, respectively. Depreciation and amortization
expense increased $3.4 million primarily due to the Panther Creek Acquisition.

Corporate overhead increased $9.7 million primarily due to higher legal and
professional fees, directors' and officers' liability insurance, and payroll
expenses, which have been allocated to the two segments using a "fair-share" of
revenues approach, where the revenue for the segment is divided by the total
combined revenues of the segments and is then multiplied by the shared general
and administrative costs for the combined segments.


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Cryptocurrency trading segment

                                                      Three Months Ended September 30,                                  Nine Months Ended September 30,
                                           2022                  2021                 $ Change                 2022                  2021                 $ Change
                                       (unaudited)            (unaudited)                                  (unaudited)            (unaudited)
OPERATING REVENUES
Cryptocurrency mining                $  12,283,695          $  2,060,523          $  10,223,172          $  50,715,424          $  3,901,426          $  46,813,998
Cryptocurrency hosting                      93,279               499,724               (406,445)               282,327             1,742,242             (1,459,915)
Total operating revenues                12,376,974             2,560,247              9,816,727             50,997,751             5,643,668             45,354,083

OPERATING EXPENSES
Electricity - purchased from energy
segment                                  2,888,451             1,326,939              1,561,512              9,347,047             1,825,644              7,521,403
Operations and maintenance               3,797,906               393,311              3,404,595             10,249,478               504,472              9,745,006
General and administrative                  97,501               549,859               (452,358)               667,046               619,977                 47,069
Impairments on digital currencies          465,651                91,040                374,611              8,176,868               466,286            

7,710,582

Impairments on equipment deposits                -                     -                      -             12,228,742                     -             12,228,742
Impairments on miner assets             11,610,000                     -             11,610,000             16,600,000                     -             16,600,000
Realized gain on sale of digital
currencies                                (185,396)                    -               (185,396)              (936,506)             (149,858)           

(786,648)

Loss on disposal of fixed assets           461,940                     -                461,940              2,231,540                     -            

2,231,540

Realized loss on sale of miner
assets                                           -                     -                      -              8,012,248                     -            

8,012,248

Depreciation and amortization           10,955,004             1,008,948              9,946,056             33,359,232             2,032,584             31,326,648
Total operating expenses             $  30,091,057          $  3,370,097          $  26,720,960          $  99,935,695          $  5,299,105          $  94,636,590
NET OPERATING LOSS EXCLUDING
CORPORATE OVERHEAD                   $ (17,714,083)         $   (809,850)         $ (16,904,233)         $ (48,937,944)         $    344,563          $ (49,282,507)
Corporate overhead                       5,378,559             1,014,922              4,363,637             18,848,699             2,240,715             16,607,984
NET OPERATING LOSS                   $ (23,092,642)         $ (1,824,772)         $ (21,267,870)         $ (67,786,643)         $ (1,896,152)         $ (65,890,491)

INTEREST EXPENSE                     $  (3,377,203)         $ (2,438,404)         $    (938,799)         $ (10,741,369)         $ (2,504,181)         $  (8,237,188)


Operating Revenues

Total operating revenues increased by $9.8 million for the three-month period
ended September 30, 2022, as compared to the same period in 2021, primarily due
to increased cryptocurrency mining revenue as a result of purchasing and
deploying additional miners throughout 2021 and the nine-month period ended
September 30, 2022. The increased quantity of miners increased total hash rates
and Bitcoin awards. Cryptocurrency hosting revenue decreased by $0.4 million due
to the strategic termination of several agreements of generated power sales to
crypto asset mining customers for which we were providing hosting services.

Total operating revenues increased by $45.4 million for the nine-month period
ended September 30, 2022, as compared to the same period in 2021, primarily due
to increased cryptocurrency mining revenue as a result of purchasing and
deploying additional miners throughout 2021 and the nine-month period ended
September 30, 2022. The increased quantity of miners increased total hash rates
and Bitcoin awards. Cryptocurrency hosting revenue decreased by $1.5 million due
to the strategic termination of several agreements of generated power sales to
crypto asset mining customers for which we were providing hosting services.

Functionnary costs

Total operating expenses increased by $26.7 million for the three-month period
ended September 30, 2022, as compared to the same period in 2021, primarily due
to (1) an $11.6 million impairment on miner assets attributable to lower
projected cash flows from mining operations due to prolonged declines in Bitcoin
prices and growth of the Bitcoin global network hash rate, (2) a $9.9 million
increase in depreciation and amortization resulting from the deployment of
miners and infrastructure assets, (3) a $3.4 million increase in operations and
maintenance primarily due to the $1.9 million net settlement expense from
terminating the Northern Data hosting agreement discussed in Note 28 - Hosting
Services Agreement and higher labor costs, and (4) a $1.6 million increase of
intercompany electric charges related to the ramp up of cryptocurrency mining
operations.
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Corporate overhead increased by $4.4 million primarily due to higher legal and
professional fees, directors' and officers' liability insurance, and payroll
expenses, which have been allocated to the two segments using a "fair-share" of
revenues approach, where the revenue for the segment is divided by the total
combined revenues of the segments and is then multiplied by the shared general
and administrative costs for the combined segments.

Total operating expenses increased by $94.6 million for the nine-month period
ended September 30, 2022, as compared to the same period in 2021, primarily due
to (1) a $31.3 million increase in depreciation and amortization resulting from
the deployment of miners and infrastructure assets, (2) a $16.6 million
impairment on miner assets, (3) a $12.2 million impairment on equipment deposits
for MinerVa miners, (4) a $9.7 million increase in Operations and maintenance
due to $4.5 million of lease expense and settlement expenses from the Northern
Data Hosting Agreement discussed in Note 28 - Hosting Services Agreement,
increased purchases of power supplies and power cables, and higher labor costs,
(5) a $8.0 million Realized loss on sale of miner assets as discussed in Note 4
- Equipment Deposits and Miner Sales, (6) a $7.7 million increase in Impairments
on digital currencies primarily related to the June 2022 decrease in Bitcoin
pricing, and (7) a $7.5 million increase of intercompany electric charges
related to the ramp up of cryptocurrency mining operations.

Corporate overhead increased by $16.6 million primarily due to higher legal and
professional fees, directors' and officers' liability insurance, and payroll
expenses, which have been allocated to the two segments using a "fair-share" of
revenues approach, where the revenue for the segment is divided by the total
combined revenues of the segments and is then multiplied by the shared general
and administrative costs for the combined segments.

Depreciation on digital currencies

Impairments on digital currencies of $0.5 million and $8.2 million were
recognized for the three and nine-months ended September 30, 2022, respectively,
as a result of the negative impacts from the crypto coin spot market declines.
As of September 30, 2022, the Company held approximately 113 Bitcoin on its
balance sheet at carrying value. The spot market price of Bitcoin was $19,424 as
of September 30, 2022, per Coinbase Global Inc.

Interest charges

Interest expense increased $0.9 million and $8.2 million for the three and nine
months ended September 30, 2022, as compared to the same period in 2021,
primarily due to the borrowings from our WhiteHawk promissory notes, draws
against the Arctos/NYDIG Financing Agreement discussed in Note 14 - Stock Issued
Under Master Financing Agreements and Warrants in the notes to our financial
statements, and accrued interest from the May 2022 Private Placement discussed
in Note 32 - Private Placements.

Cash and capital resources

Insight

Stronghold Inc. is a holding company with no operations and is the sole managing
member of Stronghold LLC. Our principal asset consists of units of Stronghold
LLC. Our earnings and cash flows and ability to meet any debt obligations will
depend on the cash flows resulting from the operations of our operating
subsidiaries, and the payment of distributions to us by such subsidiaries.

Our cash needs are primarily for growth through acquisitions, capital
expenditures, working capital to support equipment financing and the purchase of
additional miners and general operating expenses. We have incurred and may
continue to incur significant expenses in servicing and maintaining our power
generation facilities. If we were to acquire additional facilities in the
future, capital expenditures may include improvements, maintenance, and build
out costs associated with equipping such facilities to house miners to mine
Bitcoin.

We have historically relied on funds from equity issuances, equipment
financings, and revenue from sales of Bitcoin and power generated at our power
plants to provide for our liquidity needs. During 2021 and the first quarter of
2022, we received $63.2 million (net of loan fees and debt issuance costs) in
proceeds from the financing agreements with WhiteHawk and NYDIG, net proceeds of
$131.5 million from the IPO, net proceeds of $96.8 million from two private
placements of convertible preferred securities, and an additional $25.0 million
from WhiteHawk as a result of the Second WhiteHawk Amendment. Additionally, on
May 15, 2022, we received $33.75 million (net of loan fees and debt issuance
costs) pursuant to the May 2022 Private Placement, and on September 13, 2022, we
received approximately $9.0 million
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pursuant to the September PIPE . Please see "-Recent Developments - WhiteHawk
Refinancing Agreement" for more information regarding our Credit Agreement with
WhiteHawk. Please see "-Debt Agreements - Equipment Financing Transactions" for
more information regarding our financing arrangements. These cash sources
provided additional short and long-term liquidity to support our operations in
fiscal year 2021 and through the third quarter of 2022.

As of September 30, 2022 and November 7, 2022, we had approximately
$18.9 million and $27.4 million, respectively, of cash, cash equivalents and
Bitcoin on our balance sheet, which included 113 Bitcoin and 19 Bitcoin. As of
September 30, 2022 and November 7, 2022, we had principal amount outstanding
indebtedness of $102.2 million and $82.2 million, respectively.

If our cash flows from operations continue to fall short of uses of capital, we
may need to seek additional sources of capital to fund our short-term and
long-term capital needs. We may further sell assets or seek potential additional
debt or equity financing to fund our short-term and long-term needs. Further,
the terms of the Credit Agreement, May 2022 Notes
and September 2022 Private Placement contain certain restrictions, including
maintenance of certain financial and liquidity
ratios and minimums, and certain restrictions on future issuances of equity and
debt. If we are unable to raise additional capital, there is a risk that we
could default on our obligations and could be required to discontinue or
significantly reduce the scope of our operations, including through the sale of
our assets, if no other means of financing options are available.

Operations have not yet established a consistent record of covering our
operating expenses and we incurred a net loss of $75.2 million and
$147.8 million for the three and nine months ended September 30, 2022,
respectively, and an accumulated deficit of $211.3 million as of September 30,
2022. We experienced a number of previously disclosed setbacks and unexpected
challenges, including a longer-than-expected and continuing delay of the MinerVa
miners and longer than expected downtime at our Scrubgrass Plant for
maintenance, the Panther Creek Plant's mining operations shutdown in April 2022
and the outages of our mining operations due to higher than anticipated
requirements from PJM. As a result of the delay in delivery of the MinerVa
miners, we were at risk of defaulting on our obligations under the WhiteHawk
debt facility because those miners were to be provided as collateral to
WhiteHawk by April 30, 2022. Pursuant to the Second WhiteHawk Amendment, the
MinerVa miners were exchanged for collateral for additional miners received by
the Company. Due to the delay, we determined an impairment charge totaling $12.2
million that was recognized on March 31, 2022. We spent approximately $5.1
million in fiscal year 2021 on maintenance and repair costs at the Scrubgrass
Plant, and an additional $7 million in 2022 on major repairs and upgrades,
primarily during the planned maintenance outage that occurred beginning in
September 2022.

As previously disclosed, the Panther Creek Plant's mining operations were
offline for ten days in April due to the failure of a switchgear and the need to
source, deliver and install a new piece of equipment, causing ten days of no
mining revenue generation at the facility and resulting in an estimated loss of
approximately $1.4 million.

As previously disclosed in the Company's Current Report on Form 8-K dated July
25, 2022, the Panther Creek Plant experienced approximately 8.5 days of
unplanned downtime in the month of June from damaged transmission lines caused
by a storm, and other plant maintenance issues. The Company estimates the
financial impact of the June outages to be lost revenue of $1.8 million and a
net income impact of $1.4 million.

Taking into account the Second WhiteHawk Amendment, May 2022 Private Placement,
the WhiteHawk Refinancing Agreement, the Bitmain Sale, other miner sales,
equitization of the May 2024 Convertible Notes, September PIPE and transactions
subsequent to the September 30, 2022 quarter end which include the NYDIG Debt
extinguishment, the WhiteHawk Credit Agreement and the Foundry Hosting
Agreement, we believe our liquidity position, combined with expected
improvements in operating cash flows, will be sufficient to meet our existing
commitments and fund our operations for the next twelve months.

We have no significant off-balance sheet arrangements.

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Cash flow

Analysis of variations in cash flows between the nine months ended September 30, 2022
and 2021

The following table summarizes our cash flows for the periods indicated:

                                                                 Nine 

Months ended September 30,

                                                          2022                 2021                Change
($ in thousands)                                                          (in thousands)
Net cash provided by (used in) operating activities  $ (14,656.5)         $ 

12,456.2 $(27,112.8)
Net cash provided by (used in) investing activities (67,864.1) (120,390.1)

            52,526.0
Net cash provided by (used in) financing activities     67,454.0            149,065.1            (81,611.1)
Net change in cash                                   $ (15,066.6)         $ 

41,131.2 $(56,197.8)


Operating Activities. Net cash used in operating activities was $14.7 million
for the nine months ended September 30, 2022 compared to $12.5 million provided
by operating activities for the nine months ended September 30, 2021. The $27.1
million net decrease in cash from operating activities was primarily due to
higher cash outflows for increases in operations and maintenance expenses
related to major repairs and upgrades to the Scrubgrass Plant and increases in
general and administrative expenses from higher legal and professional fees,
insurance costs, and compensation as we continue to organize and scale
operations and year-over-year decreases in accounts payable and accrued
liabilities. Interest expense increased for the same period driven by
incremental borrowings discussed in Note 6 - Long-Term Debt in the notes to our
financial statements. These increases in cash paid were partially offset by
higher proceeds from the sale of digital currencies and higher energy revenue
after the acquisition of the Panther Creek Plant.

Investing Activities. Net cash used in investing activities was $67.9 million
for the nine months ended September 30, 2022 compared to $120.4 million used in
investing activities for the nine months ended September 30, 2021. The
$52.5 million decrease in net cash used in investing activities was primarily
attributable to lower outflows for equipment deposits, partially offset by
higher outflows for the purchase of property, plant and equipment for the
continued ramp up of cryptocurrency mining operations. These investments require
significant deposits to be made with equipment vendors as commitments for future
deliveries of miners and cryptocurrency mining infrastructure. Cash outflows
were partially offset by the sale of some of our unproductive, excess or
not-in-use assets. See Note 4 - Equipment Deposits and Miner Sales.

Financing Activities. Net cash provided by financing activities was
$67.5 million for the nine months ended September 30, 2022 compared to
$149.1 million provided by financing activities for the nine months ended
September 30, 2021. The $81.6 million net decrease in cash provided by financing
activities was due to lower proceeds from private placements, the WhiteHawk
promissory note and equipment financings, and increased cash outflows for
payments on long-term debt and financed insurance premiums. See the promissory
note, equipment financing agreements and convertible note discussed in Note 6 -
Long-Term Debt and Note 14 - Stock Issued Under Master Financing Agreements and
Warrants and Note 32 - Private Placements.

Debt agreements

We have entered into various loan agreements used to purchase equipment to operate our business.

We entered into the WhiteHawk Financing Agreement on June 30, 2021 and amended
the agreement on December 31, 2021 and March 28, 2022 totaling $65.0 million. As
of September 30, 2022, the amount owed under the debt agreements totaled
$34.8 million, with repayment terms extending through March 31, 2024. For
additional information, see Note 6 - Long-Term Debt in the notes to our
financial statements.

Four draws against the Arctos/NYDIG Financing Agreement totaled $37.3 million
secured by our equipment contract commitments for future miner deliveries. As of
September 30, 2022, the amount owed under the debt agreements totaled
$8.2 million (net of debt issuance costs) and was cancelled pursuant to the
terms of the Asset Purchase Agreement in October of 2022. For additional
information, see Note 6 - Long-Term Debt in the notes to our financial
statements.

Three draws against the Second NYDIG Financing Agreement totaled $54.0 million
secured by our equipment contract commitments for future miner deliveries. As of
September 30, 2022, the amount owed under the debt agreements totaled
$30.8 million (net of debt issuance costs) and was cancelled pursuant to the
terms of the Asset Purchase Agreement in October of 2022. For additional
information, see Note 6 - Long-Term Debt in the notes to our financial
statements.

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Total net obligations under all debt agreements as of September 30, 2022 were
$97.9 million (excluding financing insurance premiums).

Effective October 21, 2021, we entered into a director and officer insurance
policy with annual premiums totaling $6.9 million. We have executed a Commercial
Premium Finance Agreement with AFCO Premium Credit LLC over a term of nine
months, with an annual interest rate of 3.454%, that finances the payment of the
total premiums owed. The agreement requires a $1.4 million down payment, with
the remaining $5.5 million plus interest paid over nine months. Monthly payments
of $621.3 thousand started November 21, 2021 and end July 21, 2022. As of
September 30, 2022, the premiums were paid in full.

Effective April 29, 2022, we entered into a commercial property insurance policy
with annual premiums totaling $523,076. The Company has executed a Commercial
Premium Finance Agreement with AFCO Premium Credit LLC, over a term of eleven
months, with an annual interest rate of 5.99%, that finances the payment of the
total premiums owed. The agreement requires a $44,793 down payment, with the
remaining $478,283 plus interest paid over eleven months. Monthly payments of
$44,793 started May 29, 2022 and end March 29, 2023. As of September 30, 2022,
the unpaid balance is $307,385.

Amended May 2022 Remarks

On May 15, 2022, we issued $33.75 million aggregate principal amount of May 2022
Notes to the Purchasers (the "May 2022 Notes"), bearing an interest rate of
10.00% per annum (in arrears) and a maturity date of May 15, 2024. On August 16,
2022, we entered into an agreement with the Purchasers, whereby we 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, we 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. We may generally elect to make each such payment
(A) in cash or (B) in shares of 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.

Equipment purchase and financing operations

MinerVa Semiconductor Corp Purchase Agreement

On April 2, 2021, we entered into the MinerVa Purchase Agreement for the
acquisition of 15,000 of their MV7 ASIC SHA256 model cryptocurrency miner
equipment (miners) with a total terahash to be delivered equal to 1.5 million
terahash. The price per miner is $4,892.50 for an aggregate purchase price of
$73,387,500 to be paid in installments. The first installment of 60% of the
purchase price, or $44,032,500, was paid on April 2, 2021, and an additional
payment of 20% of the purchase price, or $14,677,500, was paid on June 2, 2021.
As of December 31, 2021, there are no remaining deposits owed. In December 2021,
we extended the deadline for delivery of the MinerVa miners to April 2022. In
March 2022, MinerVa was again unable to meet its delivery date and had only
delivered approximately 3,350 of the 15,000 miners. We do not know when the
remaining MinerVa miners will be received, if at all. As a result, we may write
off some or all of the approximately 7,800 undelivered MinerVa miners. Refer to
Note 30 - Covenants that describes covenants referencing the anticipated final
delivery timeframe of April 2022. On July 18, 2022, the Company provided written
notice of dispute to MinerVa pursuant to the MinerVa Purchase Agreement
obligating the Company and MinerVa to work together in good faith towards a
resolution for a period of sixty (60) days. In accordance with the MinerVa
Purchase Agreement, if no settlement has been reached after sixty (60) days,
Stronghold may end discussions and declare an impasse and adhere to the dispute
resolution provisions of the MinerVa Purchase Agreement. As the 60-day period
has now expired, the Company is evaluating all available remedies under the
MinerVa Purchase Agreement. The aggregate purchase price does not include
shipping costs, which are our responsibility and shall be determined at which
time the miners are ready for shipment.

Nowlit Solutions Corp Purchase Agreement

We entered into a hardware purchase and sales agreement with Nowlit Solutions
Corp effective April 1, 2021. Hardware includes, but is not limited to, ASIC
miners, power supply units, power distribution units and replacement fans for
ASIC miners. All hardware must be paid for in advance before it is shipped to
us. We made payments totaling $5,657,432 in April 2021 and costs have been
capitalized and reported as property and equipment.
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We also entered into two additional separate purchases of miners from Nowlit
Solutions Corp. The first purchase payment was made on November 23, 2021, in the
amount of $1,605,360 for 190 miners. The second purchase payment was made on
November 26, 2021, in the amount of $2,486,730 for an additional 295 miners.

Cryptographic Solutions Purchase Agreement

We entered into a hardware purchase and sales agreement with Cryptech effective
April 1, 2021. Hardware includes, but is not limited to, ASIC miners, power
supply units, power distribution units and replacement fans for ASIC miners.
Total purchase price is $12,660,000 for 2,400 BitmainS19j miners to be delivered
monthly in equal quantities (200 per month) from November 2021 through October
2022. All hardware must be paid for in advance before it is shipped to us. We
made a 30% down payment of $3,798,000 on April 1, 2021 with the remaining 70% or
$8,862,000, agreed to be paid in 17 installments.

On December 7, 2021, we entered into the Cryptech Purchase Agreement with
Cryptech to acquire the Cryptech miners with a hash rate of 96 TH/s for a total
purchase price of $8,592,000. Pursuant to the Cryptech Purchase Agreement, all
hardware will be paid for in advance of being shipped to the Company.

Purchase agreements with suppliers

On April 14, 2021, we entered into an agreement with a supplier to provide
approximately 9,900 miners for $21,011,287. We were required to make an initial
payment on the miners that are currently being delivered starting in October
2021. We made a 75% deposit of $15,758,432 in April 2021, and the remaining 25%,
or $5,252,755 plus sales taxes has been invoiced in October 2021. Once
operational, after deducting an amount equal to $0.027 per kWh for the actual
power used, 65% of all cryptocurrency revenue generated by the miners in the
supplier's pods shall be payable to us and 35% of all cryptocurrency revenue
generated by the miners shall be payable to this party or its designee. As of
September 30, 2022, there are no miners operating that will contractually
obligate us to pay the 35% revenue share (refer to Note 28 - Hosting Services
Agreement in the notes to our financial statements for further discussion).

On December 10, 2021, we entered into a Hardware Purchase and Sale Agreement
(the "First Supplier Purchase Agreement") to acquire 3,000 M30S Miners with a
hash rate per unit of 87 TH/s. Pursuant to the First Supplier Purchase
Agreement, the unit price per M30S Miner is $6,960 for a cumulative purchase
price of $20,880,000 that was paid in full within five business days of the
execution of the First Supplier Purchase Agreement.

On December 16, 2021, we entered into a Second Hardware Purchase and Sale
Agreement (the "Second Supplier Purchase Agreement") to acquire a cumulative
amount of approximately 4,280 M30S+ Miners. Pursuant to the Second Supplier
Purchase Agreement, the unit price per M30S Miner was $2,714 and the unit price
per M30S+ Miner was $3,520 for a cumulative purchase price of $11,340,373.

Bitmain Technologies Limited Purchase Agreement

On October 28, 2021, we entered into the first of two Non-Fixed Price Sales and
Purchase Agreements with Bitmain. This first agreement covers six batches of
2,000 miners, or 12,000 in total, arriving on a monthly basis from April through
September 2022. Each batch has an assigned purchase price that totals to
$75,000,000, to be paid in three installments of 25%, 35% and 40% over the
six-month delivery period. Per the agreement, on October 29, 2021, the Company
made a $23,300,000 payment comprising the 25% installment payment plus 35% of
the April 2022 batch of 2,000 miners that have an assigned purchase price of
$13,000,000. On November 18, 2021, the Company made an additional payment of 35%
or $4,550,000 towards the April 2022 batch of miners. During the three-month
period ending September 30, 2022, the Company paid installments totaling
$24,196,500.

On November 16, 2021, the Company entered into the second Non-Fixed Price Sales
and Purchase Agreement with Bitmain. This second agreement covers six batches of
300 miners, or 1,800 in total, arriving on a monthly basis from July 2022
through December 2022. Each batch has an assigned purchase price that totals
$19,350,000, to be paid in three installments of 35%, 35% and 30% of the total
purchase price over the six-month delivery period. Per the second Non-Fixed
Price Sales and Purchase Agreement, the Company paid the first installment
payment of 35% or $6,835,000 on November 18, 2021. During the first five months
of 2022, the Company paid five installments totaling $5,733,000. The second
Non-Fixed Price Sales and Purchase Agreement was sold in May 2022. Refer to Note
4 - Equipment Deposits and Miner Sales in the notes to our financial statements
for more information.

Miners purchased under the two agreements with Bitmain will have an aggregate hash rate capacity of around 1,450 PH/s.

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Luxor Technology Corporation Purchase Agreement

We paid for three separate purchases of miners from Luxor. The first purchase
payment was made on November 26, 2021, in the amount of $4,312,650 for 770
miners. The second and third purchase payments were made on November 29, 2021,
in the amount of $5,357,300 and $3,633,500 respectively; for an additional 750
and 500 miners.

On November 30, 2021, we entered into a fourth purchase agreement with Luxor to
acquire 400 Antminer T19 miners with a hash rate of 84 TH/s and 400 Antminer T19
miners with a hash rate of 88 TH/s for a total purchase price of $6,260,800.

Arctos/NYDIG Funding Agreement

On June 25, 2021, we entered into the $34,481,700 ("Maximum Advance Amount")
Arctos/NYDIG Financing
Agreement with an affiliate of Arctos Credit, LLC ("Arctos," now known as
"NYDIG"). The aggregate principal outstanding bears interest of 10% and will be
repaid in 24 monthly payments, with a 1.25% fee due if the Maximum Advance
Amount is not requested prior to August 15, 2021. Outstanding borrowings under
the Arctos/NYDIG Financing Agreement are secured by certain miners (the
"Arctos/NYDIG Financed Equipment") and the contracts to acquire the Arctos/NYDIG
Financed Equipment. The Arctos/NYDIG Financing Agreement includes customary
restrictions on additional liens on the Arctos/NYDIG Financed Equipment. As of
September 30, 2022, $35.7 million (net of debt issuance costs) has been
borrowed, leaving zero funds available to be drawn under the Arctos/NYDIG
Financing Agreement. The Arctos/NYDIG Financing Agreement may not be terminated
by us or prepaid in whole or in part. In conjunction with the Arctos/NYDIG
Financing Agreement, we issued 126,273 shares of Class A common stock to Arctos
(adjusted for the Stock Split) and may issue additional shares of Class A common
stock to Arctos in consideration of future financings.

On January 31, 2022, we and NYDIG amended the Arctos/NYDIG Financing Agreement
(the "NYDIG Amendment") to include (i) 2,140 M30S+ Miners and (ii) 2,140 M30S
Miners we purchased pursuant to a purchase agreement dated December 16, 2021,
totaling $12,622,816 of additional borrowing capacity. We will pay an aggregate
closing fee of $504,912 to NYDIG. The NYDIG Amendment requires that we maintain
a blocked wallet or other account for deposits of all mined currency.

NYDIG ABL LLC Funding agreement

As part of the asset purchase agreement, debt under the NYDIG agreements was extinguished. Please see “-Recent Developments – NYDIG Asset Purchase Agreement” for more information.

WhiteHawk Refinance Agreement

On June 30, 2021, we entered into the WhiteHawk Financing Agreement with
WhiteHawk whereby WhiteHawk agreed to lend to us an aggregate amount not to
exceed $40.0 million (the "Total Advance") to finance the purchase of certain
Bitcoin miners and related equipment (the "WhiteHawk-Financed Equipment"). At
August 30, 2021, the entirety of the Total Advance was drawn under the WhiteHawk
Financing Agreement. The aggregate principal outstanding bears interest of 10%
and will be repaid in 24 monthly payments. Outstanding borrowings under the
WhiteHawk Financing Agreement are secured by the WhiteHawk Financed Equipment
and the contracts to acquire the WhiteHawk-Financed Equipment. The WhiteHawk
Financing Agreement includes customary restrictions on additional liens on the
WhiteHawk-Financed Equipment and is guaranteed by the Company. The WhiteHawk
Financing Agreement may be terminated early if we, among other things, pay the
Early Termination Fee (as defined therein). In conjunction with the WhiteHawk
Financing Agreement, we issued a stock purchase warrant to WhiteHawk, which
provides for the purchase of a number of shares of Class A common stock at $0.01
per share, equal to approximately $2.0 million, subject to adjustment as
described in the warrant agreement (the "WhiteHawk Warrant"). The WhiteHawk
Warrant expires on June 30, 2031.

On December 31, 2021, we amended the WhiteHawk Financing Agreement (the
"WhiteHawk Amendment") to extend the final MinerVa delivery date from December
31, 2021 to April 30, 2022. Pursuant to the WhiteHawk Amendment, Equipment, LLC
paid an amendment fee in the amount of $250,000 to WhiteHawk. On March 28, 2022,
Equipment LLC and WhiteHawk again amended the WhiteHawk Financing Agreement to
exchange the collateral under the WhiteHawk Financing Agreement. Pursuant to the
Second WhiteHawk Amendment, (i) the approximately 11,700 remaining miners under
the MinerVa Purchase Agreement were exchanged as collateral for additional
miners received by us from other suppliers and (ii) WhiteHawk agreed to lend to
us the Second Total Advance. Pursuant to the Second WhiteHawk Amendment,
Equipment, LLC paid an amendment fee in the amount of $275,414.40 and a closing
fee with respect to the
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Second Total Advance of $500,000. In addition to the purchased Bitcoin miners
and related equipment, Panther Creek and Scrubgrass each agreed to a negative
pledge of the Panther Creek Plant and Scrubgrass Plant, respectively, and
guaranteed the WhiteHawk Financing Agreement. Each of the negative pledge and
the guaranty by Panther Creek and Scrubgrass will be released upon payment in
full of the Second Total Advance, regardless of whether the Total Advance
remains outstanding. In conjunction with the Second WhiteHawk Amendment, we
issued a warrant to WhiteHawk to purchase 125,000 shares of Class A common
stock, subject to certain antidilution and other adjustment provisions as
described in the Second WhiteHawk Warrant, at an exercise price of $0.01 per
share. The Second WhiteHawk Warrant expires on March 28, 2032. While we continue
to engage in discussions with MinerVa on the delivery of the remaining miners,
we do not know when the remaining miners will be delivered, if at all.

On October 27, 2022, we entered into the Credit Agreement with WhiteHawk to
refinance the WhiteHawk Financing Agreement, effectively terminating the
WhiteHawk Financing Agreement. The Credit Agreement consists of $35.1 million in
term loans and a $23.0 Delayed Draw Facility. Such loans under the Delayed Draw
Facility were drawn on the closing date of the Credit Agreement. The Credit
Agreement and Delayed Draw Facility together reduce monthly principal payments
and added approximately $21 million of cash to our balance sheet following the
our draw down on the full amount of the Delayed Draw Facility. The full amount
of the WhiteHawk Financing Agreement has been drawn as of the date hereof.

The WhiteHawk Refinancing Agreement was entered into by Stronghold LLC as
Borrower and is secured by substantially all of the assets of the Company and
its subsidiaries and is guaranteed by the Company and each of its material
subsidiaries. The WhiteHawk Refinancing Agreement requires equal monthly
amortization payments resulting in full amortization at maturity. The WhiteHawk
Refinancing Agreement has customary representations, warranties and covenants
including restrictions on indebtedness, liens, restricted payments and
dividends, investments, asset sales and similar covenants and contains customary
events of default. The WhiteHawk Refinancing Agreement also contains covenants
requiring the Borrower and its subsidiaries to maintain a minimum (x) of $7.5
million of liquidity at all times, (y) a minimum liquidity of $10 million of
average daily liquidity for each calendar month (rising to $20 million beginning
July 1, 2023) and (z) a maximum total leverage ratio covenant of (i) 7.5:1.0 for
the quarter ending December 31, 2022, (ii) 5.0:1.0 for the quarter ending March
31, 2023, (iii) 4.0:1.0 for the quarter ending June 30, 2023 and (iv) 4.0:1.0
for each quarter ending thereafter.

The borrowings under the WhiteHawk Refinancing Agreement mature on October 26,
2025 and bear interest at a rate of either (i) the SOFR plus 10% or (ii) a
reference rate equal to the greater of (x) 3%, (y) the federal funds rate plus
0.50% and (y) the Term SOFR rate plus 1%, plus 9%. The loan under the Delayed
Draw Facility was issued with 3% closing fee on the drawn amount, paid when such
amount was drawn. Amounts drawn on the WhiteHawk Refinancing Agreement are
subject to a prepayment premium such that the lenders thereunder achieve a 20%
return on invested capital. We also issued a stock purchase warrant to WhiteHawk
in conjunction with the closing of the WhiteHawk Refinancing Agreement, which
provides for the purchase of an additional 4,000,000 shares of Class A common
stock at an exercise price of $0.01 per share. Borrowings under the WhiteHawk
Refinancing Agreement may also be accelerated in certain circumstances.

Agreement on tax claims

The TRA generally provides for the payment by Stronghold Inc. to certain of the
Stronghold Unit Holders of 85% of the net cash savings, if any, in U.S. federal,
state and local income tax and franchise tax (computed using the estimated
impact of state and local taxes) that Stronghold Inc. actually realizes (or is
deemed to realize in certain circumstances) as a result of (i) certain increases
in tax basis that occur as a result of Stronghold Inc.'s acquisition (or deemed
acquisition for U.S. federal income tax purposes) of all or a portion of such
holder's Stronghold LLC Units pursuant to an exercise of Redemption Right or the
Call Right and (ii) imputed interest deemed to be paid by Stronghold Inc. as a
result of, and additional tax basis arising from, any payments Stronghold Inc.
makes under the TRA. Stronghold Inc. will retain the remaining net cash savings,
if any. The TRA generally provides for payments to be made as Stronghold Inc.
realizes actual cash tax savings from the tax benefits covered by the TRA.
However, the TRA provides that if Stronghold Inc. elects to terminate the TRA
early (or it is terminated early due to Stronghold Inc.'s failure to honor a
material obligation thereunder or due to certain mergers, asset sales, other
forms of business combinations or other changes of control), Stronghold Inc. is
required to make an immediate payment equal to the present value of the future
payments it would be required to make if it realized deemed tax savings pursuant
to the TRA (determined by applying a discount rate equal to one-year LIBOR (or
an agreed successor rate, if applicable) plus 100 basis points, and using
numerous assumptions to determine deemed tax savings), and such early
termination payment is expected to be substantial and may exceed the future tax
benefits realized by Stronghold Inc.
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The actual timing and amount of any payments that may be made under the TRA are
unknown at this time and will vary based on a number of factors. However,
Stronghold Inc. expects that the payments that it will be required to make to Q
Power (or its permitted assignees) in connection with the TRA will be
substantial. Any payments made by Stronghold Inc. to Q Power (or its permitted
assignees) under the TRA will generally reduce the amount of cash that might
have otherwise been available to Stronghold Inc. or Stronghold LLC. To the
extent Stronghold LLC has available cash and subject to the terms of any current
or future debt or other agreements, the Stronghold LLC Agreement will require
Stronghold LLC to make pro rata cash distributions to holders of Stronghold LLC
Units, including Stronghold Inc., in an amount sufficient to allow Stronghold
Inc. to pay its taxes and to make payments under the TRA. Stronghold Inc.
generally expects Stronghold LLC to fund such distributions out of available
cash. However, except in cases where Stronghold Inc. elects to terminate the TRA
early, the TRA is terminated early due to certain mergers or other changes of
control or Stronghold Inc. has available cash but fails to make payments when
due, generally Stronghold Inc. may defer payments due under the TRA if it does
not have available cash to satisfy its payment obligations under the TRA or if
its contractual obligations limit its ability to make these payments. Any such
deferred payments under the TRA generally will accrue interest at the rate
provided for in the TRA, and such interest may significantly exceed Stronghold
Inc.'s other costs of capital. If Stronghold Inc. experiences a change of
control (as defined under the TRA, which includes certain mergers, asset sales
and other forms of business combinations), and in certain other circumstances,
payments under the TRA may be accelerated and/or significantly exceed the actual
benefits, if any, Stronghold Inc. realizes in respect of the tax attributes
subject to the TRA. In the case of such an acceleration in connection with a
change of control, where applicable, Stronghold Inc. generally expects the
accelerated payments due under the TRA to be funded out of the proceeds of the
change of control transaction giving rise to such acceleration, which could have
a significant impact on our ability to consummate a change of control or reduce
the proceeds received by our stockholders in connection with a change of
control. However, Stronghold Inc. may be required to fund such payment from
other sources, and as a result, any early termination of the TRA could have a
substantial negative impact on our liquidity or financial condition.

Recent accounting pronouncements

As an "emerging growth company", the Jumpstart Our Business Startups Act ("JOBS
Act") allows us to delay adoption of new or revised accounting pronouncements
applicable to public companies until such pronouncements are made applicable to
private companies. We have elected to use this extended transition period under
the JOBS Act. The adoption dates discussed below reflect this election.

In February 2016, the FASB issued ASU 2016-02, Leases ("Topic 842"), which
supersedes ASC Topic 840, Leases. Topic 842 requires lessees to recognize a
lease liability and a lease asset on its balance sheet for all leases, including
operating leases, with a term greater than 12 months. Topic 842 also expands the
required quantitative and qualitative disclosures surrounding leases. The new
guidance will be applied using a modified retrospective transition approach for
leases existing at, or entered into after, the beginning of the earliest
comparative period presented in the financial statements. In November 2020, the
FASB deferred the effective date for implementation of Topic 842 by one year
and, in June 2020, the FASB deferred the effective date by an additional year.
Topic 842 became effective for the Company on January 1, 2022, to be presented
in its annual report on Form 10-K for the year ending December 31, 2022.

The Company is currently in the process of finalizing the effects that the
adoption of Topic 842 will have on its consolidated financial statements. Topic
842 provides a number of optional practical expedients in transition. The
Company expects to elect the package of practical expedients, which permits the
Company not to reassess, under the new guidance, our prior conclusions about
lease identification, lease classification and initial direct costs. The Company
does not expect Topic 842 to have a material impact on its consolidated balance
sheet, results of operations or cash flows.

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