Stronghold Digital enters exchange agreement to extinguish convertible notes

Stronghold Digital Mining announced that it has entered into an exchange agreement with the holders of the Company’s Amended and Restated 10% Notes, whereby all of the approximately $17.9 million of outstanding principal amount of debt and interest, which would accrue through maturity under the Notes, will be extinguished in exchange for shares of a new series of convertible preferred stock with face value of approximately $23.1 million. The Series C Preferred Stock will be convertible into shares of the Company’s Class A common stock, or pre-funded warrants that may be exercised for shares of Class A common stock, at a conversion price of $0.40 per share. Assuming the conversion of all Series C Preferred Stock anticipated to be issued, approximately 57.8 million shares of Class A common stock would be issued, which would represent approximately 46% of the fully diluted shares outstanding pro forma for such conversion. The Series C Preferred Stock will not bear a preferred dividend and will not require cash payments related to amortization, coupon payments, or other payments. Pursuant to the Exchange Agreement, the closing of the exchange transaction is to be held as soon as practicable following the satisfaction or waiver, as applicable, of the conditions in the Exchange Agreement, but in no event later than February 20, 2023. The Closing is subject to various customary conditions, including stockholder approval and Nasdaq approval. As of December 31, 2022, Stronghold had approximately $12.4 million of unrestricted cash on hand and approximately 6 Bitcoin.