Stronghold Digital Mining, Inc.
Q4 2021 Earnings Call Transcript

Published: 29 Mar 2022

[Operator:]

Good evening and welcome to the Stronghold Digital Mining's Conference Call for the Fourth Quarter and Full Year ended December 31st, 2021. My name is Jonathan and I will be your operator this afternoon. Before this call, Stronghold issued its results for the fourth-quarter and full-year 2021 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 it in the Investors section at the top of the homepage. Joining us on today's call are Stronghold's Co-chairman and CEO Gregory Beard, CFO Ricardo Larroudé, and the company's outside Investor Relations Advisor, Jeff Grampp, with Gateway Investor Relations. Following the remarks, we will open the call for your questions. Now, I'd like to turn the call over to Mr. Grampp for some introductory comments.

[Jeff Grampp:]

Thank you. Good evening, everyone and welcome. Today's slide presentation, along with our earnings release and financial disclosures were posted to our website earlier today and can be accessed on our website at strongholddigitalmining.com. Some statements we are making today, may be considered forward-looking statements under securities laws and involve a number of risks and uncertainties. As a result, we caution you, that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially, from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation, the undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. We will also discuss non - GAAP financial metrics, and encourage you to read our disclosures in the reconciliation tables to applicable GAAP measures in our earnings release carefully, as you consider these metrics. We filed today, our annual report on Form 10-K with the Securities and Exchange Commission, which sets forth detailed disclosures and descriptions of our business, as well as uncertainties and other variable circumstances, including but not limited to risks and uncertainties identified under the caption Risk Factors in our 10-K. You may get Stronghold's Securities and Exchange Commission filings for free by visiting the SEC website at sec.gov or Stronghold's Investor Relations website at ir.strongholddigitalmining.com. I would like to remind everyone that this call is being recorded and will be made available for a replay, via a link available in the Investor Relations section of Stronghold's website. Now, I would like to turn the call over to stronghold's Co-Chairman and CEO, Gregory Beard. Sir, please proceed.

[Gregory Beard:]

Thanks Jeff. Good evening, everyone. And thank you for joining us on our fourth quarter and FY2021 Earnings Call. For today's call, we're going to reference an associated slide presentation that is available through the webcast and on the IR portion of our corporate website. We will review the presentation before taking your questions. We'll start first on slide three for a quick overview of who we are at Stronghold. We are the only environmentally beneficial, vertically integrated, public Bitcoin miner, with among the lowest power cost in the industry. We believe our unique power assets, not only provide us with a low cost of power, but also provide positive environmental benefits for the areas in which we operate through the reclamation of toxic waste coal piles throughout the Commonwealth of Pennsylvania. In fact, during the fourth quarter alone, we are reclaimed approximately 265,000 tons of coal refuse, which we believe makes us highly differentiated relative to our peers. Our current hash rate capacity is approximately 2.3 exahash per second. And we have contracted miners that bring us to a hash rate capacity of approximately 5.5 exahash per second, including all of the MinerVa miners. Assuming we do not receive any additional MinerVa miners, our hash rate capacity is expected to be 4.3 exahash per second. To-date, we have received approximately 3,300 MinerVa miners, and are in near constant contact on the projected delivery date regarding the remaining miners from MinerVa. MinerVa has been unreliable in hitting their projected dates thus far, and we are not confident in their ability to deliver the remaining miners on any time frame or in early 2022, as we previously assumed. Excluding MinerVa, we expect to receive a majority of miners from our other partners over the next six months. Now, briefly on slide 41, I want to highlight our mission statement

[Ricardo Larroudé:]

Thank you, Gregory and good evening everyone. I will start my comments on Slide 9 and similar to our last call, we'll cover the numbers relatively briefly. As the results do not reflect the recent in future miner deliveries that we believe will allow us to better scale organization and demonstrate results that we think are more meaningful for investors. Revenue for the fourth quarter of 2021 was $17 million with adjusted EBITDA of $0.3 million. Our average cash rate during that period was 0.3 exahash per second and we ended the year with 182 bitcoin on our balance sheet. Flight 10 demonstrates the ramp in miners and hatchery capacity since we began scaling up, bitcoin mining capacity last year. To date, we have received about 25, 000 miners with total hash rate capacity of 2.3 exahash per second. For the fourth quarter of 2022, we expect will have averaged hash rate up 0.9 exahash per second with growth somewhat constrained due to the issues previously discussed by Gregory. The previously discussed issues, combined with a drop in Bitcoin price since our IPO have negatively impacted our cash position therefore, we have revisited our growth plans for 2022. We're no longer targeting organic growth to eight exahash per second by the end of the year 2022, if we receive and install the remaining miners, we have contract on, that would fly a maximum hatchery capacity of 5.5 exahash. If all the remaining MinerVa are delivered or 4.3 exahash when excluding any further MinerVa deliveries. We are guiding to 4.1 exahash installed by the end of year based on the capacity of our current power assets, where we are actively engaged with sellers of new multiple power assets. Slide 11 details all liquidity and capital resources. We ended 2021 with total liquidity of about 75 million, including 31.8 million in cash, 7.7 million in unrestricted digital currencies, and approximately 35 million in availability and our existing equipment financing agreements. We currently have approximately $30 million of cash in our balance sheet, and 344 BTC in our wallets with approximately $18 million in undrawn equipment financing. We expect this liquidity and cash flow from operations to fund our capital needs and also have unencumbered assets that we can finance if necessary. I will now turn the call back over to Gregory

[Gregory Beard:]

Thank you, Ricardo. Slide 12 lays out the remainder of our goals for 2022, including receiving and then installing the remaining miners we have on-order pursuant to definitive agreements, actively working to a satisfactory and beneficial resolution with MinerVa, completing the necessary capital investments at Scrubgrass to make the plant fully operational per our expectations, and strategically exploring potentially accretive M&A opportunities, where we have begun to see increased opportunities. We also continued to pursue the acquisition of additional power assets and still have a non-binding letter of intent in place for a third coal refuse reclamation facility with 112 megawatts of power generation capacity. We are also revisiting our minor procurement strategy to put a greater emphasis on spot purchases over for deliveries. We believe for deliveries have an elevated risk profile given potential delays to delivery timing and uncertainty related to Bitcoin fundamentals at time of receipt. We believe our spot purchases today have been successful with most miners hashing in our facilities within weeks of entering into the purchase agreements. We think this provides a much more attractive, risk adjusted return profile. I will wrap up on Slide 13 and want to be clear to everyone, our recent results are not up to the expectations we have at Stronghold and are not representative of the potential we aim to deliver on. We understand the importance of timely execution. I firmly believe Stronghold has the foundational pieces to be a successful and differentiated company. We are focused on improving the environment. Our vertically integrated business model offers low costs. We have significant scale, and our management team is highly aligned with over 50% ownership in the company. We are working tirelessly to deliver on the high expectations we have for ourselves. Thank you everyone, for taking the time to dial in. We're now ready to take your questions, Operator?

[Operator:]

Certainly. Our first question comes from the line of Lucas Pipes from B. Riley Securities, Inc. Your question, please.

[Lucas Pipes:]

Good afternoon, everyone. Thanks very much for hosting the call and for taking my question. I wanted to dig a little bit deeper on the MinerVa situation. Specifically, when did deliveries fall short of your expectations over the course of this first quarter, I assume? And when was the last delivery of a MinerVa miner made? Thank you.

[Gregory Beard:]

And Lucas, thank you. MinerVa deeply disappointed us. We've gotten communication for them in writing as to when the revised delivery schedule has a minor all in our hands. Earlier in the year, we were notified that we'd have them all by the end of March. That hasn't happened given there's only received 3,300. We have been told that we have another -- there is another batch that is -- that has cleared customs in the U.S. and is on its way to us now. That would represent probably hundreds of miners, but not the thousands that we're expecting. The last time we received a batch of -- a larger batch of miners was in, let's see on February 1st, of this year. That being said, I think with regard to MinerVa, hey they're not -- we're communicating well. So we probably talked to our River founder, Mark Ma on an either daily basis by phone or by text. He's been with us on site in Pennsylvania, for probably ten days in the past of the past 30. So he's not hiding and I think he is doing is best to try to get his side of the deal. I'm working well enough to fulfill the order details to see has the chips in the parts to do it and in fact, we have received 3300 as we said on the call. But they're not -- they haven't proven reliable. They are in violation of the original delivery schedule that should have the all the miners in our hands by October, November, December of last year and they've consistently missed on promises made. And so I'm no longer my reputation depends on MinerVa keeping their promises and their word. They haven't been -- I do not think it is a -- I do personally believe we're going to get these miners. I would not steak my reputation to the timing of exactly when they're going to arrive. And so I think just for the avoidance of doubt, for analysts like you Lucas, why don't you anymore. And your model. And that way we can begin to beat the estimates and the numbers hopefully next quarter and the quarter after and eliminate the issue but I think the -- that would make me more comfortable. So we'll just -- we'll take our lumps on this quarter and tell you that we're doing everything we can to get the miners out of MinerVa. But I think it's -- I'm not willing to -- and buying they're showing up for conversations in-person. But in spite of that, I'm still not comfortable with making representations as to when the rest of them are going to arrive.

[Lucas Pipes:]

Very much appreciate that detailed answer, Gregory. That is very helpful. One quick follow-up before I want to change topics, the performance considerations that you mentioned in the release just now. You have a sense for what is causing that, kind of technically, what's causing the lower than expected performance?

[Gregory Beard:]

I'd say, hey, that's -- I really don't want to -- I think -- Given I just saw that one, hey, just presumably I'll get anymore, and I want to make it on the other call. We have heard every excuse you could hear as to why they are delayed. So if you name one, I can probably tell yeah, they said that. And so I think -- I'm not -- I don't -- I think -- I don't want to really get into why they're saying they're late because then you say what makes us believe in this time? And the answer is I don't -- while I'm happy they were continuing dialogue with them, and I do think they're doing their best given that they've been so late, I don't want to really contemplate why they are like different this time and why am I personally expecting them to deliver even though I'm giving guidance and say, hey, just don't presume it.

[Lucas Pipes:]

Very helpful. Thank you, Gregory. I really appreciate your candor on this. Switching topics, you've pointed to a plan that is now fully funded, if I understood -- stood it correctly. I just thought I'd double check on that and I think that's an incredibly encouraging outlook. So really appreciate your comments on that. Thank you.

[Gregory Beard:]

Yeah, you bet. So in terms of right now, and we own obviously two plants and have two data center -- data center of each plant. And for us to say, "Hey, we're fully funded on those two plants. " And the exahash limit of the two plants is what? 4. -- 4.1 exahash. So I think just for your models, presume that we're fully funded to 4.1 exahash. We have exahash capacity of what 5.3? 5.5 that we need the third plant in order to get past the 4.1 exahash. So I think that's on Slide 10 of the deck that we have posted on our website. Just for clarity, for one with the two plants, fully funded, 5.5 plus, but we will need additional equity and/or debt financing to get to that, if we wanted to accelerate and do that this year, which obviously we are not. I think what you've heard in this call, is that we were -- By the way, just for clarity, 5.5 if I'm wrong, and all these MinerVa miners show up, 5.5 is the exahash per second is the run rate, but that we need a third plant and additional financing to close. Obviously, the reason why you do that is to accelerate the growth plan. If you slow the growth rate down ultimately we're going to end up -- right now a lot of our cash flow is going to debt service for equipment financing for the miners that we bought. So yes, we will ultimately generate the cash to continue a growth profile. But for us to do that this year, we need external financing. And we probably would seek equity and debt to do it, which obviously we want to do if it makes economic sense to do that.

[Lucas Pipes:]

Gregory, really appreciate it. Thank you very much and best of luck.

[Gregory Beard:]

Thanks, Lucas.

[Operator:]

Our next question comes from the line of Stephen Glagola from Cowen Inc. Your question, please.

[Stephen Glagola:]

Hi, thanks for the question Gregory and Ricardo. I just want to ask you, hash ray capacity for most of Q1 has been north of or 1.3 exahash or North and your guidance and average operating hash rate of I believe 0.9 exahash for the quarter, implying sub optimal utilization rate. So I just want to impact what's driving that and just want to impact some of the operational challenges you're experiencing at Scrubgrass delays and sort of these third-party datacenter deliveries is providing some more color there and what steps are you undertaking to rectify in both utilization across your minor fleets and plants? Thanks.

[Gregory Beard:]

Yes, That's a great question. Our immediate goal was keep in mind, sort of in our defense a little bit. We built our two datacenters in the past probably six months between Scrubgrass and Panther. And they're a big and complicated build out. We had -- we were expecting our JV partner to show up with pods to make the implementation of that data center de -risked. That was our -- our goal was to de -risk the business model by having a data center operator show up with their containers and that way we sort of say, hey guys on data center number 1, we're going to be really trusting in someone else's expertise. Unfortunately, the pods weren't ready and so on an emergency basis, we built -- I think we build maybe more than 100 of our own proprietary StrongBoxes to house the container, and house the miners and our goal is just to sort of fight for our own electricity capacity and plugged these miners in, tether boxes in, to close our miners in as quickly as you possibly could recognizing that this is, far from optima like, expected case was we've had 14,080 miners arrive and they would quickly and seamlessly get installed in these fancy mobile datacenter boxes that our JV partner had begun to drop off. And instead we found ourselves scrambling to rework our electrical situation, build our own boxes, and innovator hood fashion tug them in. So make our hay while we apologize that we don't have a mid-90s uptime, which is where we think we're going to end up. We have -- our goal is just to hash as much as we can as quickly as we can, given that we had a much slower deployment from our suppliers and JV partners. So I think judge us -- give us a quarter or two before you judge on the up time. But I think right now, it's not where we expected to end up, but it is inching up every day, I think today we are -- our uptime is averaging just over 80% and I will tell you will end up getting to mid 90s as we optimize the fleet that would just plugged in and configured on an emergency basis.

[Stephen Glagola:]

Okay.

[Gregory Beard:]

Is that helping to answer?

[Stephen Glagola:]

That helps very much. And I just had a quick follow-up too. I noticed in the 10-K that the Tier two racks are now valued at $11 a megawatt hour down from $15 last July. And my channel checks earlier with third-party wreck brokers earlier in the quarter suggested somewhat North, but then I think recently they've come down. l just wanted to see can you comment on what is sort of driven the lower wreck valuation and what you're seeing there.

[Gregory Beard:]

Yes, I think you've got to look at it an aggregate. So if you looked at -- just speaking to as a power business, if you looked at where we were expecting power pricing, where you saw power in the grid at this point and if you asked me a year ago, I would've said we're probably averaging mid thirties for megawatt, we saw on the grid, and then add another 20 bucks for wrecks and mid-fifties. And so what's happened is power prices have come up materially from that, probably now we're averaging mid fifties and racks are getting us to mid-60. So on a net basis, we're still 20% better off than we would've been otherwise. But -- this is in open market so the more expensive wrecks are, the more people want to be in that business. And so I think it's probably going to be a -- in itself is commoditized. And so I think you have to think about it that way, but on an aggregate basis between power and Rex, I am relieved and happy that we have a source of power that is related to reclamation of waste coal and not related to oil and gas. It's going to improve our margins as a power business. But I think the like the intricacies of direct market expect the market to bounce around but still trend upward.

[Stephen Glagola:]

Okay, thank you very much.

[Gregory Beard:]

Sure.

[Operator:]

Thank you. Our next question comes from the line of Michael Grondahl from Northland Securities, Inc. Your question, please.

[Michael Grondahl:]

Yes. Thanks, guys. Two questions. One, how do you guys feel on your confidence level on the Bitmain deliveries the rest of the year? And then secondly you sound fully funded on the 4.1 exahash. If you're able to get those MinerVa miners or other miners up to 5.5 and you need that third plant. Roughly what is the capital you need? It doesn't matter if it's equity or debt, but what is that bridge of capital that you would need to get there roughly?

[Gregory Beard:]

Yes. So between the -- that's a great question. I guess first off, only the members of for the other minor generous show up within as they want to too much when they're supposed to. And we're actually -- our JV partner as a part of the negotiating of that JV grant. They've agreed to send about 6,700 miners by the end of April, which I think it was mentioned on the power part of this call. And I would expect, given that that's in the next 30 days we're expecting the as a show up. If everything you shows up as -- if those miners show up, yeah, then we're fully funded on the 4.1 exahash to get it through the -- that build-out. If we want to beyond that, and we do, we need to acquire the next plant which we have identified and we're sort of in the final stages of the LOY to get that done. We already have all the transformers on order to build it out, because that's all known. I think in aggregate, we would say it's probably around $150 million of investment that is required to get the remaining miners because right now we have more than exahash, like if you don't get this sort of plant, we have an exahash of miners that will be presuming them all the MinerVa 's delivered, that will be on the shelf. And we're of course, we're not going to live that way. We're either going to find a way to finance a third plan, or we're going to divest of that exahash and living in cash flow and grow again when we can. But obviously, we want to be aggressive and still be financially prudent and like the answer there, which we can give you a piece by piece breakdowns of how's that capital was spent, but it's around $150 million given that we already have the one exahash that MinerVa will represent presuming they are delivered this year.

[Michael Grondahl:]

Got it. Thank you.

[Gregory Beard:]

You are welcome. Thank you.

[Operator:]

Our next question comes from the line of Christopher Brendler from D. A. Davidson & Co. Your question, please.

[Christopher Brendler:]

Just wanted to understand a little better on the operational issues at Scrubgrass. I thought the Scrubgrass was the first plant. So what's different about Scrubgrass versus Panther Creek and do you expect to have some of these higher maintenance costs if and when the third facility closes as as well? I'd say a little more detail on exactly what the problem is would be great.

[Gregory Beard:]

Yeah. So on Panther, before we close it we did all of our diligence. We had identified probably about $3 million to $5 million of upgrades to do to that plant while we were installing the datacenter and Panther really had the advantage of being sort of a fresh refurb that gives it that base load uptime that's in above 90%. Scrubgrass did not have the benefit of that. We kept her running while we're installing the datacenter and so we didn't put that capital in. I think we're publishing say Scrubgrass may need $5 million l don't think, it's going to be that much. We tend to review every week we schedule and CapEx items to that it needs. But it just is spent years as a base load plant and then spent years essentially as a peaking plant. And now we're asking it to run at the base load Plant again. And so just has a laundry list of very solvable issues that we're really -- that we're very confident that will be done in a month not quarters, that we'll get Scrubgrass back to the 90% uptime baseload performance that we see at Panther. So that's really what's happened. They are all sorts of safety measures at the plant. And essentially, probably about a half a dozen different recurring issues are causing the plant to trip off. It then takes a couple of days, if not a week, to address that issue and restart one of the boilers again. So I wish that we had done the Scrubgrass upgrades at the same time we did the datacenter, we didn't have the luxury. We're doing it now while we're running. I think we debated whether or not we wanted to take that plant offline altogether. And we don't think we need to do that to get it back to its nameplate capacity and up time capacity it's designed for. Just because the plants are -- they're not brand new obviously, they were designed to run around the clock as baseload facilities. In fact, they perform better when they do. Because this is a massive amount of steel. And if it's off and on all the time, you're expanding and contracting that, actually it's part of what can wear it out. And so by keeping it hot all the time, we expect to see a compounding improvement in uptime. So, I mean, I think if you -- if you're going to be on the call late in the evening here we can give you the -- sort of the struck by stroke as to what those items are. We went through it today and it was actually under a million dollars worth of estimated updates and upgrades that are needed. And I think just -- in your models, they presume of thought. But I think we're trying to give ourselves one road here where we actually get to hit your rough estimates.

[Christopher Brendler:]

Okay. That's helpful. This is probably not a good answer, but is there any recourse to MinerVa at this point, like can you get any of your money back and still get equity? Is there any sort of -- where you can recoup any of those losses if they don't deliver?

[Gregory Beard:]

I'll just say we would evaluate all our options. They had delivered on 3300, so they weren't down thinking that was the full amount. And I'll just say it does it -- from my view, if we thought there were no chance, if they quit answering the phone, if they quit showing up, if they quit being constructive? Yes, we would obviously litigate to recoup where we can, but at this point, it's not really reconstructive for us to put them into such dire straits that they can't deliver. We're trying to be as co-operative as we can be, while being as for slow as it can be an still left them stay in business.

[Christopher Brendler:]

Just one final quick one. Is there a time that the LOI on the third site expires or do you have time to wait?

[Gregory Beard:]

It's -- we have time.

[Christopher Brendler:]

Okay. Great. Well, best of luck this quarter, hope things go better.

[Gregory Beard:]

Hey, we bet. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Chase White from Compass Point Research & Trading, LLC. Your question please.

[Chase White:]

Thanks. Good evening guys. So, just on the prior question about the resolution for MinerVa situation. If we -- assuming that we don't get to the point where they're going to actually deliver the miners. Obviously, you said that you're kind of not making that decision at this point and what point does that become the endgame? I mean when do we kind of look for that to be the resolution?

[Gregory Beard:]

Are you asking when will we -- on which quarterly call we say we're no longer expecting -- we're no longer even talk to them. It's now all between lawyers and the court system, is that what your asking?

[Chase White:]

Yes.

[Gregory Beard:]

I don't know. I can't -- right now we're not -- we have not hired litigators to build the case against them. We're still talking with them and cooperate with them. At some point, if they end up not returning phone calls, not showing in person, not trying to communicate and collaborate with us, we will absolutely -- probably have to put an 8-K to that effect and tell the world, but we're not -- it's not what's happening right now.

[Chase White:]

Got you. Thanks. And then on the decision to purchase the third plant, the one you have the LOI on, what do you need to see to make that decision? What is your thought process around making that decision?

[Gregory Beard:]

It's a mathematical decision. And it will depend on if we issued additional equity, or do it preferred or do some type of financing to buy it. If it's too dear and it's not accretive to do so, then expect us not to do it. But it's purely financial math, they will dictate it. But I'd say, "Hey, the tie is going to go to try to do it. " We still want to grow. We're still believers that we can enter into bioplants and continue to grow our exahash run rate, that if we can do it, that's what we're working to do. But I'm not going to do it if it's massively diluted to shareholders. Growth that is uneconomic, isn't helpful. So I think it's probably part of what I criticize my peers and competitors, growth for growth's sake doesn't really make sense. If it economically makes sense, we'll do it. If doesn't, if it increases risk, and decreases earnings potential, expect us not to. So I think we can probably share with you our financing thoughts, equity value thoughts, as you build your model out, but that's how we're wired.

[Chase White:]

Got you. Thank you.

[Gregory Beard:]

Sure.

[Operator:]

Thank you. Our next question comes from the line of Jacob Roberts from Tudor, Pickering, Holt & Co. Your question, please.

[Jacob Roberts:]

Good afternoon, guys.

[Gregory Beard:]

Hi Jacob.

[Jacob Roberts:]

I was curious if you could comment on what you guys are seeing in the spot market for miners at the moment and how that evolves maybe over the course of this year and really what I'm trying to pinpoint is if you guys are willing to wait because you see a better opportunity, maybe in Q3 or Q4 for that market to maybe open up a little bit.

[Gregory Beard:]

I guess a couple of things. One is maybe the financing markets for Bitcoin mining for crypto generally have cooled, which I think in a way, those that have and that have financing in place and capital available are -- well it feels worse because that exact values are less than half of what they used to be. Those that have access to capital that can connected on their plan, are going to be better off because global hash rate well, continue up at a hockey stick leveling. In fact, we've seen global hash rate begin to level off the crest selling less beneficial. In terms of the cost acquire new machines, the spot market is -- it depending on the machine, probably as little as $50 terahash where if you get the latest in grades, it's closer to $75 and that's probably down 30% to 40% from the peak numbers you saw late last year. And just to defend the decision that we made when we agreed to buy them Northern miners, our purchase price per terahash for those miners was what? 50,000 terahash at a time when the market for those miners in the spot rate was probably 90 plus maybe even over 100. And so the -- a, it is damaging and we are absolutely upset that they're not delivering the miners on the pace that was promised. We also, but by buying them in that way, we didn't spend an additional $75 million that we would have spend had we bought on the spot market. So that in terms of like looking backward, what we've done differently, it's tough to say that I would have -- obviously would've maybe ask for more protections or had maybe a different payment plan to pay more along the way. But I think the decision to pay for 2,000 terahash when the market was at a 100 .

[Jacob Roberts:]

Thank you. As a second question I was wondering if you guys could comment on just the general inflationary environment and how that might impact the upgrades to Scrubgrass. And then if we do assume a third plant gets across the finish line through the back half of this year a kind of how are you seeing that impact there? And then maybe also how it's just impacting the labor market in your term.

[Gregory Beard:]

Yes, and the labor market has always been -- it's always been tough. Our plants are operating in mostly rural areas, we're typically like the highest paying Best Employer in the neighborhood. So we have not had -- while we are constantly hiring, we have not had labor shortages that impact our operations in a mentionable way. l think inflation can hit every aspect of everyone's business. I think the way we're seeing it now is through higher -- our biggest expense on the operations side is trucking, and I think we're getting a fuel surcharge right now for trucking. And that's -- I'm not sure that's going to be a really -- a big determinant in our overall margins. Like actually we're benefiting more from a higher power prices and are being hurt by trucking surcharges. But that's inflationary, obviously. On the biggest component of upgrades, the upgrade for Plant number 3 is the transformers and they're already bought. And so that won't -- it won't be a factor. And I think we'll have a lot of copper to buy. So I don't know. I think it's going to be fair to presume a a slightly more money to build out the third plant, but I'm not expecting it to be a expense that is dramatically different from what we've already -- where we already have modeled for just given that we've already bought the most important pieces.

[Jacob Roberts:]

Thank you. Appreciate your time guys.

[Gregory Beard:]

Sure.

[Operator:]

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Gregory Beard for any further remarks.

[Gregory Beard:]

Now, hey, Shareholders, thank you for your support. I know it's been a disappointing quarter. I think we are doing our best to turn the story around and deliver what was promised in the IPO. I think we -- while it is a challenging environment, we certainly have our fair share of headwinds that seem to be happening. And seem to have happened all at once with MinerVa delays, partner delays, Bitcoin price reductions. We firmly believe that the fundamentals of the business are still very much intact, and that what we have here is a delay of performance, not an ultimate reduction of what we can do. So, I guess we're back on the phone here in about a month and hopefully with a bit better news in the first quarter. Thank you, Operator.

[Operator:]

Thank you and thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.