STRONGHOLD DIGITAL MINING, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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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, filed with the U.S. Securities and Exchange Commission
(the "SEC") on March 29, 2022 (the "2021 Form 10-K") 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.

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 currently 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 of 2021 and which has the capacity to generate approximately 80
megawatts ("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. Owning our own source of power helps us
to produce Bitcoin at one of the lowest prices among our publicly traded peers.
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.

Bitcoin Mining Growth

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 March 31, 2022, we received
approximately 26 thousand cryptocurrency mining computers (known as "miners")
with hash rate capacity of approximately 2.4 exahash. As of March 31, 2022, we
had entered into definitive agreements with multiple suppliers to deliver
approximately 19 thousand additional miners with capacity of approximately 1.8
exahash through the end of 2022. We intend to house our miners at the Scrubgrass
Plant and the Panther Creek 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 LP") held by Aspen Scrubgrass Participant, LLC (the
"Aspen Interest"), (ii) the Panther Creek Plant, and (iii) 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, comprised primarily of the Panther Creek Plant. The Panther Creek
Plant is a coal refuse reclamation facility with 80 MW of net electricity
generation capacity located near Nesquehoning, Pennsylvania. We completed the
Panther Creek Acquisition on November 2, 2021.
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The consideration for the Panther Creek Plant was approximately $2.2 million ($3
million less $800 thousand 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. Effective November 2,
2021, we closed on this acquisition.

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. The consideration for the
Third Plant is expected to be approximately $3.0 million in cash and 6,250,000
of Stronghold LLC Units, together with a corresponding number of shares of Class
V common stock. If acquired, we plan to store newly acquired miners at or near
the Third Plant and use power generated by the Third Plant to power crypto asset
mining operations in an environmentally conscious manner. We are also
strategically pursuing acquisitions of additional assets.

Initial public offering

We completed the issuance and sale of our Class A common stock, par value $.0001
per share, in an initial public offering (the "IPO") on October 22, 2021, and
our Class A common stock is listed on Nasdaq under the symbol "SDIG."

Stock split

We effected 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

On October 28, 2021, we entered into an agreement with Bitmain Technologies
Limited ("Bitmain") to purchase 12,000 miners, which will 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 will be made in the future in connection with additional deliveries of
miners under the First Bitmain Purchase Agreement.

On November 16, 2021, we entered into a second agreement with Bitmain to
purchase 1,800 miners, which will 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 will 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 will have an aggregate hash rate capacity of approximately 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.

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 and $3,633,500
respectively; for an additional 750 and 500 miners.
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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 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 and MicroBT WhatsMiner M30S+ miners
with a hash rate per unit of 100 TH/s (the "M30S+ Miners"). Pursuant to the
Second Supplier Purchase Agreement, the unit price per M30S Miner is $2,714 and
the unit price per M30S+ Miner is $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 ABL LLC ("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 are 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 includes customary restrictions on additional liens on the Second
NYDIG-Financed Equipment. The NYDIG Second Financing Agreement may not be
terminated by Digital Mining BT or prepaid in whole or in part.

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 will provide certain operations and maintenance services to Stronghold
LLC, as well as employ certain personnel to operate the Panther Creek Plant and
the Scrubgrass Plant. Stronghold LLC will reimburse 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 shall be approved by
Stronghold LLC. Stronghold LLC will also pay 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.

Reorganization

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

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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
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.


grass plant

During the fourth quarter of 2021 and continuing into 2022, the Scrubgrass Plant
had downtime that was greater than anticipated, driven largely by mechanical
failures. The upgrades and maintenance that are necessary have taken longer and
are more extensive than originally anticipated. We expect these investments to
be completed in the second half of 2022. Once finished, the Scrubgrass Plant is
expected to be operational at nameplate capacity with high uptime and low
operating costs.

During the first quarter of 2022 and the beginning of the second quarter, 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 had a material adverse effect on our business, financial
condition and results of operations.

Panther Creek Data Center

During the second quarter of 2022 to date, 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.

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 $30,000 to a
high of approximately $68,000 during 2021, and has ranged from approximately
$26,400 to approximately $48,000 year-to-date as of May 13, 2022. Since the IPO,
the price of Bitcoin has dropped over 50%, 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
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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.

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 May 2022,
MinerVa has delivered approximately 3,350 of the 15,000 miners (based on hash
rate equivalence). 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, 2022.

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 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 Finance 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.

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 "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 offered and sold in reliance
on the exemption afforded by Section 4(a)(2) of the Securities Act, and Rule
506(b) of Regulation D promulgated thereunder for aggregate consideration of
$27.0 million.

In connection with the 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 2022 Private Placement, the terms of a new series of
preferred stock (the "Series C Preferred Stock").

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In connection with the 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.


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 within the fair value hierarchy is based on the
lowest level of any input that is significant 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 two-year period. The rate at which we
generate digital assets and, therefore, consume the economic benefits of our
transaction verification servers, is influenced by a number of factors including
the following:

1. The complexity of the transaction verification process which is driven by the algorithms contained in the Bitcoin open source 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 transaction
verification server 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 hardware models generally have
faster processing capacity combined with lower operating costs and a lower cost
of purchase).

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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 two years best reflects the current expected useful life of
transaction verification servers. 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 such estimate as and when
data becomes available.

To the extent that any of the assumptions underlying management's estimate of
useful life of its transaction verification servers 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: Attribute the transaction price to the performance obligations of the contract

5.Step 5: Recognize revenue when we satisfy 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 ASC 606's definition of a "distinct" good or service (or bundle
of goods or services) 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

• 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 three months ended March 31, 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
condensed consolidated financial position and results from operations.

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, a Regional
Transmission Organization ("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 are therefore accounted for as a distinct performance
obligation. The transaction price is based on pricing published in the day ahead
market which constitute 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 our 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 are therefore 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 our 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 offset the
billings to the customer which prevented them from cryptocurrency mining.
Advanced payments and customer deposits are reflected as contract liabilities.

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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 a component of cost of 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 digital asset transaction verification services is
an output of our ordinary 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 all 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 EUL 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 Facility.

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 should have
systems or processes 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 have assessed 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. Based on
our analysis, no impairment indicators existed as of March 31, 2022 and 2021,
respectively, that would require impairment testing of our long-lived assets.

Derivative contracts

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
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adjusted to fair value through earnings. Derivative contracts are classified as
either assets or liabilities on the accompanying combined 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 its 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 settles
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 changes 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 as 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 recognizes changes in the balances, over the comparative periods of either
the issuance date or the last reporting date, as part of changes in fair value
of warrant liabilities expense. At the issuance date, each series of warrants
were 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 income 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 March 31, 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.
                                       55
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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., resulting in an estimated blended statutory rate of 28.89% of
pre-tax earnings or losses attributable to the Company.

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 ("G&A") 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 anticipate that a large portion of our revenue and expenses will be related to crypto-asset mining.

As previously discussed in the Significant Accounting Policies section, the preparation of financial statements in accordance with generally accepted accounting principles in The United States of America (GAAP) requires management

                                       56
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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. 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.


                                       57
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Operating results


Consolidated Results for the three months ended March 31, 2022 and March 31,
2021

                                                             % of                                      % of
                                       2022                 Total                 2021                Total                $ Change           % Change vs. 2021
                                   (unaudited)                                (unaudited)
OPERATING REVENUES
Energy                           $   8,362,801                 29.1  %       $ 1,915,856                 50.4  %       $   6,446,945                    336.5  %
Capacity                             2,044,427                  7.1  %           687,690                 18.1  %           1,356,737                    197.3  %
Cryptocurrency hosting                  67,876                  0.2  %           555,747                 14.6  %            (487,871)                   (87.8) %
Cryptocurrency mining               18,204,193                 63.4  %           516,259                 13.6  %          17,687,934                   3426.2  %
Other                                   20,762                  0.1  %           122,782                  3.2  %            (102,020)                   (83.1) %
Total operating revenues            28,700,059                100.0  %         3,798,334                100.0  %          24,901,725                    655.6  %
OPERATING EXPENSES
Fuel                                 9,338,394                 16.0  %         2,172,109                 43.7  %           7,166,285                    329.9  %
Operations and maintenance          10,520,305                 18.0  %         1,370,688                 27.6  %           9,149,617                    667.5  %
General and administrative          11,424,231                 19.6  %           910,876                 18.3  %          10,513,355                   1154.2  %
Impairments on digital
currencies                           2,506,172                  4.3  %                 -                    -              2,506,172                        -
Impairments on equipment
deposits                            12,228,742                 21.0  %                 -                    -             12,228,742                        -
Depreciation and amortization       12,319,581                 21.1  %           517,443                 10.4  %          11,802,138                   2280.9  %
Total operating expenses            58,337,426                100.0  %         4,971,116                100.0  %          53,366,310                   1073.5  %
NET OPERATING LOSS                 (29,637,367)                               (1,172,782)                                (28,464,585)                  2427.1  %
OTHER INCOME (EXPENSE)
Interest Expense                    (2,911,452)               109.1  %           (78,640)                (8.4) %          (2,832,812)                  3602.3  %
Gain on extinguishment of PPP
loan                                         -                    -              638,800                 68.4  %            (638,800)                  (100.0) %
Realized gain (loss) on sale of
digital currencies                     751,110                (28.1) %           143,881                 15.4  %             607,229                   

422.0%

Realized gain (loss) on disposal
of fixed assets                        (44,958)                 1.7  %                 -                    -                (44,958)                   

Changes in fair value of forward
sale derivative                       (483,749)                18.1  %                 -                    -               (483,749)                       -

Waste coal credit                            -                    -              211,890                 22.7  %            (211,890)                  (100.0) %
Other                                   20,000                 (0.7) %            17,895                  1.9  %               2,105                     11.8  %
Total other income (expense)        (2,669,050)               100.0  %           933,826                100.0  %          (3,602,876)                  (385.8) %
NET LOSS                         $ (32,306,416)                              $  (238,956)                              $ (32,067,460)                13,419.8  %

Highlights of our consolidated operating results for the three months ended
March 31, 2022 compared to the three months ended March 31, 2021 include:

Operating revenue

Revenue increased $24.9 million for the three-month period ended March 31, 2022,
as compared to the same period in 2021, primarily due to a $17.7 million
increase in cryptocurrency mining revenue from deploying additional miners, and
a $6.4 million increase in energy revenue driven by higher MW generation as a
result of the July 2021 Panther Creek Acquisition. Capacity revenue also
increased $1.4 million due to the Panther Creek Acquisition.

Functionnary costs

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Total operating expenses increased $53.4 million for the three-month period
ended March 31, 2022, as compared to the same period in 2021, driven by (1) a
$12.2 million impairment on equipment deposits for MinerVa miners discussed in
"Note 4 - Equipment Deposits" and "Note 8 - Contingencies and Commitments", (2)
an $11.8 million increase in depreciation and amortization primarily from
deploying additional miners and transformers, (3) a $10.5 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 $9.1 million increase in operations and maintenance expense
primarily driven by the additional Panther Creek plant and one-time plant
upgrades at Scrubgrass, and (5) a $7.2 million increase in fuel expenses driven
by higher MW generation. Impairment costs of $2.5 million were attributed to the
January and February declines 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.

Other income (expenses)

Total other income (expense) decreased $3.6 million for the three-month period
ended March 31, 2022, as compared to the same period in 2021, primarily driven
by (1) a $2.8 million increase in interest expense on additional financing
agreements used to fund the growth of cryptocurrency operations, (2) a
$0.6 million decrease from the one-time gain on extinguishment of PPP loan, and
(3) a $0.5 million decrease from a change in value of the forward sale
derivative. 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.


Sector results

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

                                                                                Three Months Ended
                                                                                                                         % Change
                                            March 31, 2022           March 31, 2021             $ Change                 vs. 2021
Operating Revenues
Energy Operations                          $   10,427,989          $     2,726,328          $   7,701,661                      282.5  %
Cryptocurrency Operations                      18,272,070                1,072,006             17,200,064                    1,604.5  %
Total Operating Revenues                   $   28,700,059          $     3,798,334          $  24,901,725                      655.6  %

Net Operating Loss
Energy Operations                          $  (11,505,165)         $    (1,419,137)         $ (10,086,028)                     710.7  %
Cryptocurrency Operations                  $  (18,132,202)                 246,354            (18,378,556)                   (7460.2) %
Net Operating Loss                         $  (29,637,367)         $    (1,172,783)         $ (28,464,584)                    2427.1  %
Other Income, net (a)                          (2,669,049)                 933,827          $  (3,602,876)                    (385.8) %
Net Loss                                   $  (32,306,416)         $      (238,956)         $ (32,067,460)                  13,419.8  %

Depreciation and Amortization
Energy Operations                          $   (1,256,101)         $      (143,634)         $  (1,112,467)                     774.5  %
Cryptocurrency Operations                     (11,063,480)                (373,809)           (10,689,671)                    2859.7  %

Total amortization $(12,319,581) ($517,443) $(11,802,138)

                    2280.9  %

Interest Expense
Energy Operations                          $      (31,522)         $       (38,266)         $       6,744                      (17.6) %
Cryptocurrency Operations                      (2,879,930)                 (40,374)            (2,839,556)                    7033.1  %
Total Interest Expense                     $   (2,911,452)         $       (78,640)         $  (2,832,812)                    3602.3  %


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(a) We do not attribute other net income for segment reporting purposes. The amount is presented as a reconciling item between net operating income and consolidated income before tax. See our Consolidated Statement of Income for the Three Months Ended March 31, 2022 and 2021 for more details.



Energy Operations Segment

                                                                            

Three months completed March, 31st,

                                                                                                                                                  % Change vs.
                                     2022                % of Total               2021                % of Total              $ Change                2021
                                 (unaudited)                                   (unaudited)
OPERATING REVENUES
Energy                         $   8,362,801                   80.2  %       $  1,915,856                   70.3  %       $   6,446,945                 336.5  %
Capacity                           2,044,427                   19.6  %            687,690                   25.2  %           1,356,737                 197.3  %
Other                                 20,762                    0.2  %            122,782                    4.5  %            (102,020)                (83.1) %
Total operating revenues          10,427,989                  100.0  %          2,726,328                  100.0  %           7,701,661                 282.5  %

OPERATING EXPENSES
Fuel - net of crypto segment
subsidy1                           6,807,579                   31.0  %          2,075,854                   50.1  %           4,731,725                 227.9  %
Operations and maintenance         9,739,164                   44.4  %          1,297,578                   31.3  %           8,441,586                 650.6  %
General and administrative         4,130,310                   18.8  %            628,399                   15.2  %           3,501,911                 557.3  %
Depreciation and amortization      1,256,101                    5.7  %            143,634                    3.5  %           1,112,467                 774.5  %
Total operating expenses       $  21,933,154                  100.0  %       $  4,145,465                  100.0  %       $  17,787,689                 429.1  %

NET OPERATING LOSS             $ (11,505,165)                 100.0  %       $ (1,419,137)                 100.0  %       $ (10,086,028)                710.7  %

INTEREST EXPENSE               $     (31,522)                 100.0  %       $    (38,266)                 100.0  %       $       6,744                 (17.6) %


1 Cryptocurrency operations consumed $2.5 million of electricity generated by
the Energy operations segment. For segment reporting, this intercompany electric
charge is recorded as a contra-expense to offset fuel costs within the Energy
Operations segment.

Operating Revenues

Total operating revenue increased $7.7 million for the three-month period ended
March 31, 2022, as compared to the same period in 2021, primarily due to a
$6.4 million increase in energy revenue and a $1.4 million increase in capacity
revenue 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 Renewable Energy Credits ("RECs"), waste coal tax credits, and
beneficial use ash sales, as well as the increased power bandwidths for the
crypto asset operations.

Functionnary costs

Total operating expenses increased $17.8 million for the three-month period
ended March 31, 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 $8.4 million primarily driven by major
maintenance, upgrade expenditures, and payroll. Fuel expenses increased
$4.7 million primarily due to higher energy generation resulting from the
Panther Creek Acquisition. REC sales of $0.5 million and $0.2 million were
recognized as contra-expense to offset fuel expenses for the three months ended
March 31, 2022, and 2021, respectively. General and administrative expenses
increased $3.5 million primarily due to higher directors' and officers'
liability insurance, legal and professional fees, 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 and amortization
expense increased $1.1 million primarily due to the Panther Creek Acquisition.


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Cryptocurrency trading segment

Three months completed March, 31st,

                                      2022                % of Total               2021                % of Total              $ Change           % Change vs. 2021
                                  (unaudited)                                   (unaudited)
OPERATING REVENUES
Cryptocurrency hosting          $      67,876                    0.4  %       $    555,747                   51.8          $    (487,871)                  (87.8) %
Cryptocurrency mining              18,204,193                   99.6  %            516,259                   48.2  %          17,687,934                 3,426.2  %
Total operating revenues           18,272,070                  100.0  %          1,072,006                  100.0  %          17,200,064                 1,604.5  %

OPERATING EXPENSES
Electricity - purchased from
energy segment                      2,530,815                    7.0  %             96,255                   11.7              2,434,560                 2,529.3  %
Operations and maintenance            781,142                    2.1  %             73,110                    8.9  %             708,032                   968.4  %
General and administrative          7,293,921                   20.0  %            282,477                   34.2  %           7,011,444                 2,482.1  %
Impairments on digital
currencies                          2,506,172                    6.9  %                  -                      -              2,506,172                       -
Impairments on equipment
deposits                           12,228,742                   33.6  %                  -                      -             12,228,742                       -
Depreciation and amortization      11,063,480                   30.4  %            373,809                   45.3             10,689,671                 2,859.7  %
Total operating expenses        $  36,404,271                  100.0  %       $    825,651                  100.0  %       $  35,578,620                 4,309.2  %

NET OPERATING INCOME (LOSS)     $ (18,132,201)                 100.0  %       $    246,355                  100.0  %       $ (18,378,556)                (7460.2) %

INTEREST EXPENSE                $  (2,879,930)                 100.0  %       $          -                    0.0  %       $  (2,879,930)                      -


Operating Revenues

Total operating revenues increased by $17.2 million for the three-month period
ended March 31, 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 three-month period ended March 31,
2022. The increased quantity of miners increased total hash rates and Bitcoin
awards. Cryptocurrency hosting revenue decreased by $0.5 million due to the
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 $35.6 million for the three-month period
ended March 31, 2022, as compared to the same period in 2021, primarily due to a
$12.2 million impairment on equipment deposits for MinerVa miners, a
$10.7 million increase in Depreciation and amortization resulting from the
deployment of miners and infrastructure assets, a $7.0 million increase in
General and Administrative expenses primarily due to higher directors' and
officers' liability insurance, legal and professional fees, and payroll
expenses, a $2.4 million increase of intercompany electric charges related to
the ramp up of cryptocurrency mining operations, and a $0.7 million increase in
Operations and maintenance driven by lease expenses from the Northern Data
Hosting Agreement.

General and administrative expenses include legal and professional fees,
executive and support payroll, property taxes, insurance premiums related to
coverages and rates, and management fees. The majority of general and
administrative costs are allocated between the two segments using a "fair-share"
of revenues approach, where the revenue for the segment is
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divided by the total combined revenue of the segments and is then multiplied by the general and administrative expenses shared for the combined segments.

Depreciation on digital currencies

A $2.5 million impairment on digital currencies was recognized for the
three-month period ended March 31, 2022, as a result of the negative impacts
from the crypto coin spot market declines. As of March 31, 2022, the Company
held approximately 369 Bitcoin on its balance sheet at carrying value, of which
250 are restricted. The spot market price of Bitcoin was $44,947.73 as of
March 31, 2022, per Coinbase Global Inc.

Interest charges

Interest expense of $2.9 million for the three months ended March 31, 2022 from
$40.4 thousand for the three months ended March 31, 2021 and was attributed to
the borrowings from our WhiteHawk promissory notes and draws against the
Arctos/NYDIG Financing Agreement discussed in "Note 14 - Stocks Issued Under
Master Financing Agreements and Warrants" in the notes to our financial
statements.

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 and working capital
to support equipment financing and the purchase of additional miners. 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 buildout costs associated with enabling 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, 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 and net proceeds of $96.8 million from two private placements of
convertible preferred securities. Additionally, on March 28, 2022, we received
an additional $25.0 million from WhiteHawk as a result of the Second WhiteHawk
Amendment. 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 first quarter of 2022.

As of March 31, 2022, we held 369 Bitcoin on hand, of which 250 are pledged as
collateral. As of March 31, 2022 and May 12, 2022, we had approximately
$30.6 million and $10.1 million of cash and cash equivalents on our balance
sheet, which included 119 and 35 unrestricted Bitcoin, respectively. As of
March 31, 2022 and May 12, 2022, we had outstanding indebtedness of
$110.8 million and $108.0 million, respectively, and availability under our
financing agreements of $18.0 million and $14.4 million, respectively.
Subsequent to May 12, 2022, the Company closed multiple agreements to provide
additional liquidity of $36.9 million resulting in pro forma cash and cash
equivalents of $47.0 million, including $27.0 million from the 2022 Private
Placement, and $9.9 million from the Miner Sales Agreements of some of our
unproductive, excess or not-in-use assets. Refer to "Note 32 - Subsequent
Events" for further discussions of our recent measures to increase liquidity.

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 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. 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 $32.3 million for the three
months ended March 31, 2022 and an accumulated deficit of $241.9 million as of
March 31,
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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, and further exacerbated by 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 we estimate that we will spend an aggregate of
approximately $5 million on total repair and maintenance cost in fiscal 2022. In
addition to incurred expenses, we were also unable to mine Bitcoin at the
Scrubgrass Plant during such downtime, which directly and negatively affects our
results of operations. Also, during the second quarter of 2022 to date, 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.

Taking into account the Second WhiteHawk Amendment, 2022 Private Placement and
the Bitmain Sale and other miner sales, we believe our liquidity position,
combined with expected improvements in operating cash flows, and the proceeds of
additional asset sales, 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.

Cash flow

Analysis of variations in cash flows between the three months ended March 31, 2022 and 2021

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

                                                                 Three Months Ended March 31,
                                                         2022                2021              Change
                                                                        (in thousands)
Net cash provided by (used in) operating activities  $ (2,502.2)         $ 2,957.8          $ (5,460.0)
Net cash provided by (used in) investing activities   (29,749.9)          (2,370.5)          (27,379.4)
Net cash provided by (used in) financing activities    25,942.7              732.3            25,210.4
Net change in cash                                   $ (6,309.4)         $ 1,319.6          $ (7,629.0)


Operating Activities. Net cash used in operating activities was $2.5 million for
the three months ended March 31, 2022 compared to $3.0 million provided by
operating activities for the three months ended March 31, 2021. The $5.5 million
net decrease in cash from operating activities was primarily due to increases in
general and administrative expenses from higher legal and professional fees,
insurance costs, and compensation as we continue to organize and scale
operations 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 an increase in
cash received related to higher operating revenue net of fuel and operating and
maintenance expenses.

Investing Activities. Net cash used in investing activities was $29.7 million
for the three months ended March 31, 2022 compared to $2.4 million used in
investing activities for the three months ended March 31, 2021. The
$27.4 million net decrease in cash from investing activities was primarily
attributable to 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. These decreases were partially offset by proceeds from the sale
of digital currencies.

Financing Activities. Net cash provided by financing activities was
$25.9 million for the three months ended March 31, 2022 compared to $0.7 million
provided by financing activities for the three months ended March 31, 2021. The
$25.2 million net increase in cash provided by financing activities was due to
incremental borrowings via a promissory note and equipment financing agreements
discussed in "Note 6 - Long-Term Debt" and "Note 14 - Stock Issued Under Master
Financing Agreements and Warrants". The increases were partially offset by
payments on long-term debt and financed insurance premiums.


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Debt agreements

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

We entered into the WhiteHawk Financing Agreement (as defined below) on June 30,
2021 and amended the agreement on December 31, 2021 and March 28, 2022. As of
March 31, 2022, the amount owed under the debt agreements totaled $65.0 million
with repayment terms extending through March 31, 2024. As of March 31, 2022, the
monthly repayment amounts, including interest, total $50.9 million. For
additional information, see "Note 6 - Long-Term Debt" in the notes to our
financial statements.

Four draws against the Arctos/NYDIG Financing Agreement (as defined below)
totaled $36.3 million (net of debt issuance costs) secured by our equipment
contract commitments for future miner deliveries. As of March 31, 2022, the
amount owed under the debt agreements totaled $26.5 million with repayment terms
extending through October 25, 2023. Of the total amount outstanding of $26.5
million, $20.5 million was classified as current portion of long term debt (less
discounts and debt issuance costs) and will be repaid as of March 25, 2023. The
remaining portion of long-term debt is $6.0 million (less discounts and debt
issuance costs). As of March 31, 2022, the monthly repayment amounts, including
interest, totaled $27.3 million. 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 $34.6 million
(net of debt issuance costs) secured by our equipment contract commitments for
future miner deliveries. As of March 31, 2022, the amount owed under the debt
agreements totaled $34.8 million with repayment terms extending through
January 25, 2024. Of the total amount outstanding of $34.8 million, $24.0
million was classified as current portion of long-term debt (less discounts and
debt issuance costs) and will be repaid as of March 25, 2023. The remaining
portion of long-term debt is $10.8 million (less discounts and debt issuance
costs). As of March 31, 2022, the monthly repayment amounts, including interest,
totaled $36.0 million. For additional information, see "Note 6 - Long-Term Debt"
in the notes to our financial statements.

Total net obligations under all debt agreements as of March 31, 2022including a second round of PPP loan of $841.7 thousandhave been $109.1 million.

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
March 31, 2022, the unpaid balance was $2.5 million.

May 2022 Remarks

On May 15, 2022, we issued $33.75 million aggregate principal amount of May 2022
Notes to the Purchasers, bearing an interest rate of 10.00% per annum (in
arrears) and a maturity date of May 15, 2024. The maturity date for the May 2022
Notes may be accelerated upon certain instances, and the May 2022 Notes may be
prepaid at any time in whole or in part, at our election. The holders of the May
2022 Notes (the "Holders") have certain conversion rights. In the event that we,
by September 30th, 2022, (i) have achieved a total equity market capitalization
of at least $400 million, based on the 20-day VWAP of our common stock and (ii)
have at least 60 million shares of common stock outstanding, the full amount
outstanding and accrued but unpaid interest on the May 2022 Notes shall
automatically convert into a number of shares of Series C Preferred Stock,
provided that the Series C Preferred Certificate of Designation has been filed.
Upon such conversion, dividends will accrue at a rate of 8.0% per annum on the
Series C Preferred Stock. Beginning October 1, 2022, if the May 2022 Notes have
not converted into shares of Series C Preferred Stock, we will begin paying off
the May 2022 Notes in quarterly installments in amounts equal to the greater of
(i) 8% of our consolidated revenue from each trailing quarter or (ii) $5.4
million, payable at our option in either cash or up to 50% of the shares of
common stock at a 20% discount to the 20-day VWAP. Each of our subsidiaries,
subject to the exclusions therein, executed a guaranty agreement with the
Holders to guaranty our obligations under the May 2022 Notes.

Equipment purchase and financing operations

MinerVa Semiconductor Corp Purchase Agreement

On April 2, 2021we entered into the MinerVa Purchase Agreement for the acquisition of 15,000 of their Model MV7 ASIC SHA256 cryptocurrency miner equipment (miners) with a total terahash to be delivered equal to 1.5 million

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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 has 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 11,650 undelivered MinerVa miners. Refer to
"Note 30 - Covenants" that describes covenants referencing the anticipated final
delivery timeframe of April 2022. In exchange for the delivery of the miners
that are operating under the specifications set forth in the purchase agreement,
we will grant the seller 443,848 shares of our Class A common stock at a price
per share of $8.68 (adjusted for the Stock Split). 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.

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 (refer to "Note 32 - Subsequent Events" in the notes to our financial
statements for further discussions). 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 March 31, 2022, there are no miners operating that
will contractually obligate the Company to pay the 35% revenue share (refer to
"Note 32 - Subsequent Events" in the notes to our financial statements for
further discussions).

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 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 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 is $2,714 and the unit price per M30S+ Miner is $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 comprised of 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 March 31, 2022, the Company paid installments totaling
$17.4 million.

On November 16, 2021, we 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, on November 18, 2021, the Company paid the
first installment payment of 35% or $6,835,000. During the three-month period
ending March 31, 2022, the Company paid three installments totaling $3,528,000.

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

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 a $34,481,700 ("Maximum Advance Amount")
master equipment financing agreement with an affiliate of Arctos Credit, LLC
("Arctos," now known as "NYDIG") (the "Arctos/NYDIG Financing Agreement. 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 and the contracts
to acquire such miners. The Arctos/NYDIG Financing Agreement includes customary
restrictions on additional liens on the Arctos/NYDIG Financed Equipment. As of
March 31, 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 MicroBT WhatsMiner M30S+ miners and
(ii) 2,140 MicroBT WhatsMiner 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

On December 15, 2021, we entered into the Second NYDIG Financing Agreement with
NYDIG whereby NYDIG agreed to lend us up to $53,952,000 to finance the purchase
of the Second NYDIG-Financed Equipment. Outstanding borrowings under the Second
NYDIG Financing Agreement are secured by the Second NYDIG-Financed Equipment,
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contracts to acquire Second NYDIG-Financed Equipment, and the Bitcoin mined by
the Second NYDIG-Financed Equipment. The Second NYDIG Financing Agreement
includes customary restrictions on additional liens on the Second NYDIG-Financed
Equipment. The Second NYDIG Financing Agreement may not be terminated by us or
prepaid in whole or in part.

WhiteHawk Financing Agreement

On June 30, 2021, we entered into an equipment financing agreement (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 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 Finance 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.

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" ("EGC"), 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, 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 for all leases, including operating leases,
with a term greater than 12 months on its balance sheet. The update also expands
the required quantitative and qualitative disclosures surrounding leases. Topic
842 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, FASB
deferred the effective date for implementation of Topic 842 by one year and, in
June 2020, FASB deferred the effective date by an additional year. Beginning
after December 15, 2021 and the six months ended June 30, 2021, the guidance
under Topic 842 is effective. We are still in the process of developing our new
accounting policies and determining the potential aggregate impact this guidance
is likely to have on our unaudited consolidated financial statements as of its
adoption date.

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