Good morning and welcome to Stronghold Digital Mining's Conference Call for the Third Quarter Ended September 30, 2024. My name is Tanya, and I will be your operator this morning.

Before this call, Stronghold issued its results for the third quarter 2024 in a press release, which is available in the Investors section of the company's website at www.strongholddigitalmining.com. You can find the link to the Investors section at the top of the home page.

Joining us today on the call are Stronghold's Chairman and CEO, Greg Beard, and CFO, Matt Smith. Before we begin, I would like to provide Stronghold's Safe Harbor statements that includes cautions regarding forward-looking statements made during this call.

During this presentation, management may discuss financial projections, information or expectations about the company's products and services or markets or otherwise make statements about the future including, but not limited to, the company's previously announced merger with Bitfarms, which are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made.

The company does not undertake any obligation to update them as required by law. Some statements made today may be considered forward-looking statements under securities law and involve a number of risks and uncertainties.

As a result, it is important to note that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in forward-looking statements.

For more detailed risks, uncertainties, and assumptions related to these forward-looking statements, please see the disclosures in the company's earnings release and public filings made with the Securities and Exchange Commission.

There is no obligation or undertaking to update forward-looking statements to reflect circumstances or events that could occur after the date the forward-looking statements are made, except as required by law.

The company will also discuss non-GAAP financial metrics and encourage you to read the company's disclosures and the reconciliation tables to the applicable GAAP measures in the earnings release carefully as you consider these metrics.

Stronghold expects to file its quarterly report on Form 10-Q on or prior to November 14, 2024, with the Securities and Exchange Commission, which sets forth detailed disclosures and descriptions of our businesses, as well as uncertainties and other viable circumstances, including, but not limited to, risks and uncertainties identified under the caption, risk factors.

You may access Stronghold Securities and Exchange Commission filings for free by visiting the SEC website at www.sec.gov or Stronghold's Investor Relations website at irstrongholddigitalmining.com. In addition, we may make statements on this call concerning our pending merger with Bitfarms.

These statements are not an offer to sell or the solicitation of an offer to buy, sell, or solicit any securities or any proxy.

or approval by or on behalf of the company or Bitfarms or the respective directors and executive officers, and are not a substitute for the registration statement on Form F-4, File Number 333-282657 filed by Bitfarms with the SEC, the proxy statement prospectus included in the registration statement on Form F-4.

or any other relevant documents that Bitfarms or Stronghold has filed or will file with the SEC. Investors should carefully read these documents, which contain important information concerning the merger and can be obtained for free by visiting the SEC website or by contacting Stronghold's investor relations at sdig@gateway-grp.com.

I would like to remind everyone that this call is being recorded and will be available for replay via a link on Stronghold's website Investor Relations section. Now I would like to turn the call over to Stronghold's Chairman and CEO, Greg Beard. Mr. Beard, you may proceed..

Good morning, everyone, and thank you for joining our third quarter of 2024 call. Given our pending merger with Bitfarms, which we announced on August 21st, today's update will be relatively brief.

To recap, we're thrilled about this transformative next step for Stronghold, a definitive merger agreement with Bitfarms, a global leader in Bitcoin mining.

After a thorough strategic alternatives review process, we are confident that partnering with Bitfarms offers the optimal platform to realize the full potential of our assets, accelerate growth, and build value for the company and its shareholders.

The transaction could result in a pro forma company with an energy portfolio exceeding 950 megawatts by year-end 2025. And there are multiple studies underway related to the Stronghold assets that have the potential to add significant capacity incrementally.

We believe this growth pipeline, combined with the opportunity to leverage Bitfarms' proven expertise to successfully enhance operational efficiency and merge HPC/AI with Bitcoin mining operations is a recipe for success.

The transaction is structured as a stock for stock merger, whereby Stronghold shareholders will receive 2.52 Bitfarms shares for each Stronghold share, which at the time of the announcement valued Stronghold equity at approximately $125 million plus $50 million in debt to be paid at close.

Upon closing, Stronghold shareholders will hold around 10% of the combined company, positioning them to benefit directly from the growth potential of this expanded platform.

Together, we'll leverage the unique capabilities of the Scrubgrass and Panther Creek facilities in Pennsylvania to deliver low-cost power, support the local grid, and improve the environment through the conversion of mining waste into energy, advancing our commitment to sustainability.

Additionally, we believe that the platform will better position the facilities to integrate high-performance computing, diversifying the business beyond Bitcoin mining. In addition to the merger, we recently strengthened our Bitcoin mining operations through two hosting agreements with Bitfarms, which will high grade the fleet at our facilities.

On September 12th, we entered into an agreement to host 10,000 Bitmain T21 Bitcoin miners at Panther Creek. We received some of these miners, with the remainder expected in November and December of this year.

Bitfarms will pay us a monthly fee of 50% of profit generated by the miners, subject to certain adjustments to account for upfront payments made by Bitfarms, taxes, and the net cost of power associated with the operation of the miners.

Building on this, on October 29th, we entered a second hosting agreement to host an additional 10,000 miners at Scrubgrass at the same economic terms. Miner deliveries are expected to begin in late December or early January. Before I hand over the call, I want to address a recent leadership transition.

Our CFO, Matt Smith, will be stepping down effective November 15th, following the filing of our third quarter report. Matt was instrumental in navigating through a difficult time for the business and ultimately to an attractive merger with Bitfarms.

His efforts and success in raising capital, establishing operational procedures and enhancing how the company tracks and uses data have been critical. We're grateful for Matt's contributions to Stronghold over the past three years, and we look forward to working with him in a consulting role to ensure a smooth transition.

With that, I'll turn it over to Matt..

Thank you, Greg. It's truly been a pleasure working with you and the rest of the Stronghold team. For our Bitcoin mining operations during the third quarter of 2024, we generated 188 Bitcoin and an additional $0.5 million in energy revenue, equivalent to approximately 8 Bitcoin at the average price.

This brought our total production to the equivalent of 196 Bitcoin for the quarter, representing a decrease of about 35% when compared to the second quarter of 2024. This decline was primarily driven by the Bitcoin halving on April 19th, which reduced the block reward from 6.25 to 3.125 Bitcoin.

While this halving impacted production, we continue adapting our strategy to optimize mining and energy revenue in this evolving environment. Revenue for the third quarter of 2024 totaled $11.2 million, down 42% sequentially and 37% year-over-year. This revenue included $10.6 million of cryptocurrency operations and $0.5 million from energy sales.

On the profitability side, our GAAP net loss for the third quarter was $22.7 million with a non-GAAP adjusted EBITDA loss of $5.5 million. You'll find a detailed reconciliation of these figures in our earnings release.

Turning to our balance sheet, as of September 30th of 2024 and November 8th of 2024, we held approximately $5.1 million and $6.7 million respectively in cash and cash equivalents, including 10 Bitcoin as of September 30th and 4 Bitcoin as of November 8th.

Stronghold also has $2.6 million in contracted receivables expected within the next 30 days from the sale of our 2023 waste coal tax credits. Our principal outstanding indebtedness was approximately $53.7 million as of the end of the third quarter.

And we also have approximately $3.4 million remaining under our ATM as of November 8th, 2024 with no shares sold under the ATM during this year. That concludes my remarks. Thank you again, Greg and team. I've greatly appreciated it. Back to you, Greg..

All right. Thank you, Matt. And thank you all for joining us today. As we look ahead, we are excited about the opportunities our merger with Bitfarms will bring and the strategic initiatives we have underway to expand our capacity, enhance operational efficiency, and strengthen our commitment to sustainability.

We remain focused on creating long-term value for our shareholders. and positioning Stronghold as a leader in the evolving digital infrastructure space. We appreciate your continued support and look forward to updating you on our progress. Thank you again for joining. Have a great day.

Operator? Thank you for joining us today for Stronghold's conference call. You may now disconnect..

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