UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____to _____
Commission File Number:
(Exact name of registrant as specified in its charter)
__________________
| State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization | Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
|
Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of May 13, 2025, the Registrant had shares of common stock outstanding.
SOLUNA HOLDINGS, INC. AND SUBSIDIARIES
INDEX
| 1 |
Glossary of Abbreviations and Acronyms for Selected References
The following list defines various abbreviations and acronyms used throughout this Quarterly report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Condensed Consolidated Financial Statements, the Condensed Notes to Consolidated Financial Statements and the Condensed Financial Statement Schedules.
This glossary covers essential terms related to Bitcoin mining, high-performance computing, Artificial Intelligence (“AI”) and related fields, providing valuable context for readers of the Form 10-Q. A number of cross-references to additional information included throughout this Quarterly Report on Form 10-Q are also utilized throughout this report, to assist readers seeking additional information related to a particular subject.
Artificial Intelligence (“AI”): The simulation of human intelligence processes by machines, especially computer systems. These processes include learning (the acquisition of information and rules for using the information), reasoning (using rules to reach approximate or definite conclusions), and self-correction. AI applications include expert systems, natural language processing, speech recognition, and machine vision.
Bitcoin: A decentralized digital currency created in 2009 by an unknown person or group of people using the name Satoshi Nakamoto. It operates on a peer-to-peer network, allowing direct transactions without intermediaries. Transactions are verified by network nodes through cryptography and recorded on a publicly distributed ledger called a blockchain.
Bitcoin Halving: An event occurring approximately every four years where the reward for mining new Bitcoin blocks is halved. This reduces the number of new Bitcoins generated by miners, impacting their profitability and potentially affecting Bitcoin’s value. Bitcoin Halving is part of Bitcoin’s deflationary monetary policy, designed to control supply.
Bitcoin Mining: The process of adding new transactions to the Bitcoin blockchain. It involves solving complex cryptographic puzzles to discover a new block, rewarding miners with transaction fees and newly created Bitcoins. This process secures and verifies transactions on the network.
Curtailment (“Curtailed” or “Curtailments”): In energy management, the reduction in electrical power supply by power plants to balance the grid or avoid excess generation. In Bitcoin mining or other computing activities, curtailment - pausing computing activities and related energy usage - can occur during peak demand periods or insufficient energy supply.
Data Center Colocation: A service where businesses can be provided with services and infrastructure such as electrical power and network connectivity for servers and other computing hardware at a third-party provider’s data center. This arrangement allows for cost savings, better infrastructure, and enhanced security compared to private data centers.
Electric Reliability Council of Texas (“ERCOT”): An independent system operator that manages the flow of electric power to more than 26 million Texas customers, representing about 90 percent of the state’s electric load. ERCOT schedules power on an electric grid that connects more than 46,500 miles of transmission lines and over 680 generation units.
Exahash (“EH/s”): A unit of computational power equal to one quintillion (10^18) hashes per second. EH/s are used to measure the hashrate of the most powerful cryptocurrency mining equipment and the overall computational power of the Bitcoin network.
Fork: A fork refers to a change or divergence in the protocol of a blockchain network. It occurs when the blockchain’s code is modified, resulting in two separate chains: one that follows the old rules and one that follows the new rules.
Generative AI: AI that can generate new content, such as text, images, or music, based on its training data. It learns from vast amounts of data to create outputs that mimic original human-generated content, often used in creative and analytical applications.
Gigawatt (“GW”): A unit of power equal to one billion watts. Often used to measure the capacity of large power plants or the power usage of large operations like data centers and industrial complexes.
| 2 |
Graphics Processing Unit (“GPU”)- as-a Service: The sale of GPU clusters, ranging from bare metal to turnkey solutions, which may be either owned by the Company, or leased from another company and that are housed within data centers which may be owned by the Company or leased from another company, typically on a “per GPU-hour” basis, either on a reserved or on demand basis.
Grid Demand Response Services: Services provided to support the basic services of generating and delivering electricity to the grid. They help maintain power quality, reliability, and efficiency. In the context of Bitcoin mining, the use of mining facilities to provide grid stabilization services is an emerging concept.
Hashrate: The measure of computational power per second used in cryptocurrency mining. It indicates the number of hash function computations per second by a miner’s hardware, with higher hashrates implying greater efficiency and network security.
High Performance Computing (“HPC”): The use of supercomputers and parallel processing techniques for solving complex computational problems. HPC is used in fields such as scientific research, simulation, and large-scale data analysis.
Joules: A unit of energy in the International System of Units (SI). One joule is the energy transferred when one watt of power is exerted for one second. In Bitcoin mining, energy efficiency is often measured in joules per hash.
Large Language Models (“LLMs”): Advanced AI models designed to understand, generate, and respond to human language in a way that mimics human-like understanding. They are trained on vast datasets and can perform a variety of language-based tasks, such as translation, summarization, and question-answering.
Machine Learning: A subset of AI involving the creation of algorithms that can learn and make decisions or predictions based on data. It enables computers to improve their performance on a specific task with experience and data, without being explicitly programmed.
Megawatts (“MW”): A unit of power measurement equivalent to one million watts used to measure the electrical power consumption of large operations like data centers and Bitcoin mining rigs.
Mining Pool: A group of cryptocurrency miners who combine their computational resources over a network to increase their chances of finding a block and receiving rewards. The rewards are then divided among the pool participants, proportional to the amount of hashing power each contributed.
Petahash (“PH/s”): A unit of computational power equal to one quadrillion (10^15) hashes per second. It is used to measure the hashrate of extremely powerful cryptocurrency mining equipment.
Power Usage Effectiveness (“PUE”): A ratio that describes how efficiently a computer data center uses energy; specifically, how much energy is used by the computing equipment (in contrast to cooling and other overhead that supports the equipment).
| 3 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of March 31, 2025 (Unaudited) and December 31, 2024
| (Dollars in thousands, except per share) | March 31, 2025 | December 31, 2024 | ||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net (allowance for expected credit losses of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Equipment held for sale | ||||||||
| Total Current Assets | ||||||||
| Restricted cash, noncurrent | ||||||||
| Other assets | ||||||||
| Deposits and credits on equipment | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accrued interest payable | ||||||||
| Contract liability | ||||||||
| Current portion of debt | ||||||||
| Income tax payable | ||||||||
| Customer deposits | ||||||||
| Operating lease liability | ||||||||
| Total Current Liabilities | ||||||||
| Other liabilities | ||||||||
| Long-term debt | ||||||||
| Operating lease liability | ||||||||
| Deferred tax liability, net | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 10) | ||||||||
| Stockholders’ Equity: | ||||||||
| Series B Preferred Stock, par value $ per share, authorized ; shares issued and outstanding as of March 31, 2025 and December 31, 2024 | ||||||||
| Common stock, par value $ per share, authorized ; shares issued and shares outstanding as of March 31, 2025 and shares issued and shares outstanding as of December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Common stock in treasury, at cost, shares at March 31, 2025 and December 31, 2024 | ( | ) | ( | ) | ||||
| Total Soluna Holdings, Inc. Stockholders’ (Deficit) Equity | ( | ) | ( | ) | ||||
| Non-Controlling Interest | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
For the Three Months Ended March 31, 2025 and 2024
| For the three months ended | ||||||||
| March 31, | ||||||||
| (Dollars in thousands, except per share) | 2025 | 2024 | ||||||
| Cryptocurrency mining revenue | $ | $ | ||||||
| Data hosting revenue | ||||||||
| Demand response service revenue | ||||||||
| High-performance computing service revenue | ||||||||
| Total revenue | ||||||||
| Operating costs: | ||||||||
| Cost of cryptocurrency mining revenue, exclusive of depreciation | ||||||||
| Cost of data hosting revenue, exclusive of depreciation | ||||||||
| Cost of high-performance computing services | ||||||||
| Cost of cryptocurrency mining revenue- depreciation | ||||||||
| Cost of data hosting revenue- depreciation | ||||||||
| Total cost of revenue | ||||||||
| Operating expenses: | ||||||||
| General and administrative expenses, exclusive of depreciation and amortization | ||||||||
| Depreciation and amortization associated with general and administrative expenses | ||||||||
| Total general and administrative expenses | ||||||||
| Impairment on fixed assets | ||||||||
| Operating (loss) income | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain (loss) on debt extinguishment and revaluation, net | ( | ) | ||||||
| Loss on sale of fixed assets | ( | ) | ||||||
| Other (expense) income, net | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax benefit, net | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| (Less) Net income attributable to non-controlling interest, net | ( | ) | ( | ) | ||||
| Net loss attributable to Soluna Holdings, Inc. | $ | ( | ) | $ | ( | ) | ||
| Basic and Diluted loss per common share: | ||||||||
| Basic & Diluted loss per share | $ | ) | $ | ) | ||||
| Weighted average shares outstanding (Basic and Diluted) | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Equity
For the Year Ended December 31, 2024
And the Three Months Ended March 31, 2025 (Unaudited)
(Dollars in thousands, except per share)
| Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Series A Shares | Amount | Series B Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Shares | Amount | Non- Controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Reverse split adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares – warrant exercise | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units vested | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares- Notes conversion | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Warrant revaluation | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Distribution to Non-Controlling interest | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock issuance | — | — | ( | ) | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares – warrant exercise | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units vested | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares-Restricted stock awards | — | — | ( | ) | — | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares- Notes conversion | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Warrants revaluation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to Non-Controlling interest | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares-warrant exercise | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares – Restricted stock awards | — | — | ( | ) | — | |||||||||||||||||||||||||||||||||||||||||||
| SEPA commitment fee payment | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares- notes conversion | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Contribution from Non-Controlling interest | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to Non-Controlling interest | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | ( | ) | —— | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares –warrants exercise | — | — | ( | ) | — | |||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units vested | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares – Restricted stock awards | — | — | ( | ) | — | |||||||||||||||||||||||||||||||||||||||||||
| SEPA consent fee | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares- Placement agent release payment | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares- notes conversion | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Distribution to non-controlling interest | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Contribution from Non-Controlling interest | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||
| 6 |
| Preferred Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||
| Series
A Shares | Amount | Series
B Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Shares | Amount | Non- Controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| January 1, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares – warrant exercise | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units vested | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares- SEPA draws | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Contribution from Non-Controlling interest | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to Non-Controlling interest | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2025 and 2024
| Three Months Ended March 31, | ||||||||
| (Dollars in thousands) | 2025 | 2024 | ||||||
| Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) by operating activities: | ||||||||
| Depreciation expense | ||||||||
| Amortization expense | ||||||||
| Stock-based compensation | ||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||
| Impairment on fixed assets | ||||||||
| Amortization of operating lease asset | ||||||||
| (Gain) loss on debt extinguishment and revaluation, net | ( | ) | ||||||
| Amortization on deferred financing costs and discount on notes | ||||||||
| SEPA fair value revaluation | ||||||||
| Loss on sale of fixed assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other long-term assets | ||||||||
| Accounts payable | ||||||||
| Contract liability | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Other liabilities and customer deposits | ( | ) | ||||||
| Accrued liabilities and interest payable | ||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Investing Activities | ||||||||
| Purchases of property, plant, and equipment | ( | ) | ( | ) | ||||
| Purchases of intangible assets | ( | ) | ( | ) | ||||
| Proceeds from disposal on property, plant, and equipment | ||||||||
| Deposits of equipment, net | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities | ||||||||
| Proceeds from common stock warrant exercises | ||||||||
| Proceeds from SEPA | ||||||||
| Proceeds from notes | ||||||||
| Payments on notes and deferred financing costs | ( | ) | ( | ) | ||||
| Contributions from non-controlling interest | ||||||||
| Distributions to non-controlling interest | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Increase in cash & restricted cash | ||||||||
| Cash & restricted cash – beginning of period | ||||||||
| Cash & restricted cash – end of period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Interest paid on NYDIG loans | ||||||||
| Interest paid on Navitas loan | ||||||||
| Interest paid on June and July SPA notes | ||||||||
| Warrant consideration in relation to convertible notes and revaluation | ||||||||
| Notes converted to common stock | ||||||||
| Noncash deferred financing cost accrual | ||||||||
| Noncash membership distribution accrual | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 8 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Nature of Operations
Description of Business
Unless the context requires otherwise in these notes to the consolidated financial statements, the terms “SHI,” “ the “Company,” “we,” “us,” and “our” refer to Soluna Holdings, Inc. together with its consolidated subsidiaries, “SDI” refers to Soluna Digital, Inc., “SCI” refers to Soluna Computing, Inc., formerly known as EcoChain, Inc., “Soluna Cloud” or “Cloud” refers to Soluna Cloud, Inc., and “SEI” refers to Soluna Energy, Inc.
Soluna Holdings, Inc. (“SHI”) is a digital infrastructure company that specializes in transforming surplus renewable energy into computing resources. The Company’s strategy is to operate modular data centers co-located with wind, solar, and hydroelectric power plants, supporting compute-intensive applications, including Bitcoin mining, generative AI, and soon-high performance computing (“HPC”). This approach aims to create a more sustainable grid while providing cost-effective and environmentally friendly computing solutions.
SHI was originally incorporated in the State of New York in 1961 as Mechanical Technology, Incorporated and reincorporated in the State of Nevada on March 24, 2021. Headquartered in Albany, New York, the Company changed its name from “Mechanical Technology, Incorporated” to Soluna Holdings, Inc. on November 2, 2021. On October 29, 2021, Soluna Callisto Holdings, Inc. (“Soluna Callisto”) merged into Soluna Computing, Inc. (“SCI”), a private green data center development company and a subsidiary of SHI. MTI Instruments, Inc., a subsidiary of SHI, was sold on April 11, 2022. On March 23, 2021, our common stock commenced trading on the Nasdaq Stock Market LLC (“Nasdaq”). We formed a wholly owned subsidiary of SHI on December 27, 2023, Soluna Digital, Inc. (“Soluna Digital,” or “SDI”). Effective December 31, 2023, SCI transferred substantially all of its assets to SHI or its subsidiaries, including SDI.
During fiscal year 2021, the Company commenced mining operations at its Murray, Kentucky location (“Project Sophie”) and Calvert City, Kentucky site (“Project Marie”). Project Marie was decommissioned in February 2023, while Project Sophie transitioned its focus from proprietary Bitcoin mining to hosting customers’ Bitcoin mining operations in the second quarter of 2023. All 25 MW of Project Sophie now perform data hosting services. The Company has since sold all Bitcoin miners at Project Sophie and redeployed the capital.
The Company’s Texas site (“Project Dorothy”),
located at a wind farm, holds the potential for up to 100 MW of power generation. By June 2024, SHI had energized 50 MW of the site across
two phases, Project Dorothy 1A and 1B. As of March 31, 2025, SHI holds a
Going Concern and Liquidity
The Company’s condensed financial
statements as of March 31, 2025 have been prepared using generally accepted accounting principles in the United States of America (“U.S.
GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal
course of business. As shown in the accompanying condensed financial statements, the Company was in a net loss position, has negative
working capital, and has significant outstanding debt as of March 31, 2025. In addition, Soluna MC Borrowings, LLC 2021-1 (“Borrower”),
a subsidiary of Soluna MC, LLC (“Soluna MC”), a subsidiary of Soluna Digital, Inc.
(“Soluna Digital” or “SDI”), a subsidiary of the Company, has a litigation matter with NYDIG ABL LLC (“NYDIG”)
in relation to their Master Equipment Finance Agreement. See further discussion around the NYDIG litigation in Note 10.
| 9 |
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. In the near term, management is evaluating and implementing different strategies to obtain financing to fund the Company’s expenses and growth to achieve a level of revenue adequate to support the Company’s current cost structure. Financing strategies may include, but are not limited to, stock issuances, project level equity, debt borrowings, partnerships and/or collaborations. If the Company is unable to meet its financial obligations, it could be forced to restructure or refinance, seek additional equity capital or sell its assets. The Company might then be unable to obtain such financing or capital or sell its assets on satisfactory terms. There can be no assurance that additional financing will be available to the Company when needed or, if available, that it can be obtained on commercially reasonable terms. If the Company is not able to obtain the additional financing on a timely basis, if and when it is needed, it will be forced to delay or scale down some or all of its development activities or perhaps even cease the operation of its business.
In addition to the Company’s cash on hand for
available use of approximately $
The Company, in fiscal year 2025, will continue to look to evaluate different strategies to obtain financing to fund operations. However, management cannot provide any assurances that the Company will be successful in accomplishing additional financing or any of its other plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Basis of Presentation
In the opinion of management, the Company’s condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the periods presented in accordance with United States of America’s Generally Accepted Accounting Principles (“U.S. GAAP”). The results of operations for the interim periods presented are not necessarily indicative of results for the full year.
Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (“the Annual Report”).
The information presented in the accompanying condensed consolidated balance sheet as of December 31, 2024 has been derived from the Company’s audited consolidated financial statements. All other information has been derived from the Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2025 and March 31, 2024.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company, including the Company’s variable interest entities disclosed in Note 14. All intercompany balances and transactions are eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of less than three months.
Restricted Cash
Restricted cash relates to cash that is legally restricted
as to withdrawal and usage or is being held for a specific purpose and thus not available to the Company for immediate or general business
use. As of March 31, 2025, the Company had restricted cash of approximately $
| 10 |
Deposits and Credits on equipment
As of March 31, 2025 and December 31, 2024, the Company
had approximately $
Debt Issuance Costs
Debt issuance costs consist of costs incurred in obtaining long-term financing. These costs are classified on the condenses consolidated balance sheet as a direct deduction from the carrying amount of the related debt liability and subsequently amortized as interest expense in the condensed consolidated statement of operations using the effective interest rate method.
The Company evaluates amendments to its debt instruments in accordance with ASC 470-50, Debt - Modifications and Extinguishments (“ASC 470”) to determine whether the amendment should be accounted for as a modification or an extinguishment. An amendment may be considered modified when the terms of the new debt and original instrument are not “substantially different” (as defined in the debt modification guidance in ASC 470). Amendments that are considered modifications are accounted for prospectively as yield adjustments, based on the revised terms, and lender fees and costs directly incurred with third parties, to the extent material, are recorded as debt discount and amortized to interest expense using the effective interest rate method.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations or net assets.
3. Accounts Receivable, net
| (Dollars in thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Data hosting | $ | $ | ||||||
| Demand response service receivable | ||||||||
| Proprietary mining Coinbase receivable | ||||||||
| Other | ||||||||
| Less: Allowance for expected credit losses | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The Company’s allowance for expected credit
loss was $
Rollforward of Allowance of Expected Credit Losses:
| (Dollars in thousands) | January 1, 2025- March 31, 2025 | January 1, 2024 – December 31, 2024 | ||||||
| Allowance for expected credit losses, beginning of period | $ | $ | ||||||
| Current period credit provision | ||||||||
| Write offs charged against the allowance | ( | ) | ||||||
| Recoveries collected | ||||||||
| Allowance of expected credit losses, end of period | $ | $ | ||||||
4. Property, Plant and Equipment, net
Property, plant and equipment consist of the following at:
| (Dollars in thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Land and land improvements | $ | $ | ||||||
| Buildings and leasehold improvements | ||||||||
| Computers and related software | ||||||||
| Machinery and equipment | ||||||||
| Office furniture and fixtures | ||||||||
| Construction in progress | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense was approximately $
| 11 |
5. Intangible Assets, net
Intangible assets consist of the following as of March 31, 2025:
| (Dollars in thousands) | Intangible Assets | Accumulated Amortization | Total | |||||||||
| Strategic pipeline contract | $ | $ | $ | |||||||||
| Assembled workforce | ||||||||||||
| Patents | ||||||||||||
| Total | $ | $ | $ | |||||||||
Intangible assets consist of the following as of December 31, 2024:
| (Dollars in thousands) | Intangible Assets | Accumulated Amortization | Total | |||||||||
| Strategic pipeline contract | $ | $ | $ | |||||||||
| Assembled workforce | ||||||||||||
| Patents | ||||||||||||
| Total | $ | $ | $ | |||||||||
Amortization expense for the each of the three months ended March 31, 2025
and 2024 was approximately $
The strategic pipeline contract relates to supply of a critical input to our digital mining and hosting business. The Company has analyzed this strategic pipeline contract similar to a permit for future benefit. The strategic pipeline contract relates to potential renewable energy datacenters that fit in the alignment of the Company structure to expand operations of the Company’s new focus in their business.
The Company expects to record amortization expense of intangible assets over the next five years and thereafter as follows:
| (Dollars in thousands) | ||||
| Year | 2025 | |||
| 2025 (remainder of the year) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
6. Accrued Liabilities
Accrued liabilities consist of the following at:
| (Dollars in thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Salaries, wages and related expenses | $ | $ | ||||||
| Liability to shareholders for previous acquisition | ||||||||
| Legal, audit, tax and professional fees | ||||||||
| Sales tax accrual | ||||||||
| Real estate taxes accrual | ||||||||
| Hosting and utility fees | ||||||||
| SEPA consent fee payable | ||||||||
| Dividend payable | ||||||||
| Construction fees | ||||||||
| Membership distribution accrual | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
| 12 |
Contract liability
|
|
On March 24, 2025, CloudCo
notified HPE of its termination of the HPE Agreement and, on March 26, 2025, HPE sent notice of its termination of the HPE Agreement.
The HPE Agreement provided the Company access to datacenter and cloud services for AI and supercomputing applications utilizing NVIDIA
H100 GPUs. In accordance with the terms of the HPE Agreement, CloudCo is required to pay all of the unpaid fees that were payable over
the entire term of the HPE Agreement. As of December 31, 2024, the Company reduced its prepaid assets and other long-term assets by approximately
$ |
7. Income Taxes
During the three months ended March 31,
2025 and 2024, the Company’s effective income tax rate was
In connection with the strategic contract pipeline
acquired in the Soluna Callisto acquisition as further discussed in Note 5, ASC 740-10-25-51 requires the recognition of a deferred tax
impact of acquiring an asset in a transaction that is not a business combination when the amount paid exceeds the tax basis on the acquisition
date. As such, the Company is required to adjust the value of the strategic contract pipeline by approximately $
The Company provides for recognition of deferred tax assets if the realization of such assets is more likely than not to occur in accordance with accounting standards that address income taxes. Significant management judgment is required in determining the period in which the reversal of a valuation allowance should occur. The Company has considered all available evidence, both positive and negative, such as historical levels of income and future forecasts of taxable income amongst other items, in determining its valuation allowance. In addition, the Company’s assessment requires us to schedule future taxable income in accordance with accounting standards that address incomes taxes to assess the appropriateness of a valuation allowance which further requires the exercise of significant management judgment.
The Company believes that the accounting
estimate for the valuation of deferred tax assets is a critical accounting estimate because judgment is required in assessing the likely
future tax consequences of events that have been recognized in our financial statements or tax returns. The Company based the estimate
of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about
future outcomes. In the event that actual results differ from these estimates, or the Company adjusts these estimates in future periods,
the Company may need to adjust the recorded valuation allowance, which could materially impact our financial position and results of
operations. The valuation allowance was $
8. Debt
The following table represents total debt outstanding by agreement as of March 31, 2025:
| (Dollars in thousands): | Current portion of debt | Long term debt | Total | |||||||||
| NYDIG financing | $ | $ | $ | |||||||||
| Navitas term loan | ||||||||||||
| June 2024 secured note | ||||||||||||
| July 2024 additional secured note | ||||||||||||
| Equipment loan | ||||||||||||
| Galaxy loan | ||||||||||||
| Total Debt | $ | $ | $ | |||||||||
| 13 |
The following table represents total debt outstanding by agreement as of December 31, 2024:
| (Dollars in thousands): | Current portion of debt | Long term debt | Total | |||||||||
| Convertible Notes | $ | $ | $ | |||||||||
| NYDIG financing | ||||||||||||
| Navitas term loan | ||||||||||||
| June 2024 secured note | ||||||||||||
| July 2024 additional secured note | ||||||||||||
| Total Debt | $ | $ | $ | |||||||||
NYDIG Financing
| (Dollars in thousands) | Maturity Dates | Interest Rate | January 1, 2025- March 31, 2025 | January 1, 2024- December 31, 2024 | ||||||||
| NYDIG Loans #1-11 | $ | $ | ||||||||||
| Less: repossession of collateralized assets | ||||||||||||
| Total outstanding debt | $ | $ | ||||||||||
| * |
On December 30, 2021, Borrower, a subsidiary of Soluna
MC, a subsidiary of SDI, a subsidiary of the Company, entered into a Master Equipment Finance Agreement (the “Master Agreement”)
with NYDIG as lender, servicer and collateral agent (the “NYDIG facility”). The Master Agreement outlined the framework for
a financing up to approximately $
On January 14, 2022, the Borrower effected an initial
drawdown under the Master Agreement in the aggregate principal amount of approximately $
On December 20, 2022, as a result of the Borrower’s default on as series of loans made by NYDIG to the Borrower, the Borrower received a Notice of Acceleration and Repossession (the “NYDIG Notice”) from NYDIG with respect to the Master Agreement, by and between Borrower and NYDIG. The obligations of Borrower under the Master Agreement and reflected in the NYDIG Notice are ring-fenced to Borrower and its direct parent company, Soluna MC LLC. The Company is not a party to any guaranty, collateral agreement, or other support agreement with or for the benefit of NYDIG.
| 14 |
On February 23, 2023, NYDIG proceeded to foreclose
on all of the collateral securing the MEFA, and repossessed the collateralized assets that totaled approximately $
June 2024 secured note
| (Dollars in thousands) | Maturity Date | Interest Rate | January 1, 2025- March 31, 2025 | July 20, 2024- December 31, 2024 | ||||||||||
| Term Loan and capitalized interest (excludes debt issuance cost) | % | $ | $ | |||||||||||
| Less: principal and capitalized interest payments | ( | ) | ( | ) | ||||||||||
| Less: debt discount | ( | ) | ( | ) | ||||||||||
| Less: debt issuance costs | ( | ) | ( | ) | ||||||||||
| Total outstanding note | ||||||||||||||
| (Less) Current note outstanding | ||||||||||||||
| Long-term note outstanding | $ | $ | ||||||||||||
On June 20, 2024, pursuant
to the terms and subject to the conditions of a Note Purchase Agreement (the “June SPA”) by and among (i) CloudCo, a Delaware
limited liability company and indirect wholly owned subsidiary of the Company, (ii) Soluna Cloud, a Nevada corporation, indirect wholly
owned subsidiary of the Company, and parent of CloudCo, (iii) the Company and (iv) the accredited investor named therein (the “Investor”,
and collectively the “Note Parties”), CloudCo issued to the Investor a secured promissory note in a principal amount equal
to $
For the three months ended
March 31, 2025, the Company incurred approximately $
| 15 |
June SPA Modification
On March 23, 2025, the Note Parties entered into a Modification Agreement (the “Modification Agreement”) to, among other things:
| (i) | provide for the deposit of shares (the “Escrow Shares”) of the Company’s common stock, into an escrow account maintained by Northland Securities, Inc., pursuant to an escrow agreement (as further described below), | |
| (ii) | provide for the issuance
to the Investor of penny warrants to purchase shares of the Company’s common stock. The number of penny warrants (exercise price at $ | |
| (iii) | amend the payment schedule of the Note to provide (a) for each of the six scheduled payments occurring after the earlier of the effectiveness of a registration statement for the resale of the Escrow Shares and the Conversion Shares (as defined below) or the date that the Escrow Shares and the Conversion Shares may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), without any information requirements, the amount of principal and interest payable on such date shall be reduced by 50% (the aggregate amount of the six months of such reductions, the “Specified Amount”) and (b) if the aggregate amount of payments on the Amended Note applied from the proceeds of the sale of the Escrow Shares on or prior to the last six scheduled payments is less than the Specified Amount (such difference, the “Make Whole Amount”), than the amount of each of the remaining scheduled payments shall be increased by an amount equal to the Make Whole Amount divided by the number of remaining scheduled payments, | |
| (iv) | modify the Note such that the Note is now convertible into up to shares of the Company’s common stock based (“Conversion Shares”) on a conversion price of $, | |
| (v) | amend the Note to provide that the Company will be a direct co-obligor with CloudCo under the Note; and | |
| (vi) | amend the SPA to allow the Company to organize or incorporate any subsidiary, over which the Company shall have voting or beneficial control, which is being formed with the intent to engage in a business or line of business substantially similar to that of Soluna Cloud or the Company, without first paying all of the principal and interest due under the Note and without first obtaining Investor’s prior written consent (collectively, the “June SPA Modification”). |
The joint-and-several liability arrangement is between the Company and CloudCo. While no written agreement has been created to establish the amount that each entity agrees to pay under the obligation, the nature of the relationship is such that the Company has taken a significant role in the economics of the Notes. The Company expects to make any necessary payments on behalf of CloudCo in order to prevent default on the Notes because the Investor has a lien on all property and assets of the Company in connection with the Notes. Based on quantitative analysis performed by the Company, it was determined that the terms of the debt instrument before and after the June SPA Modification were not substantially different. Accordingly, the June SPA Modification is accounted for as a debt modification.
Subsequent to March 31, 2025, the Company and the Investor mutually agreed that the Escrow Shares would instead be issued directly to the Investor, and on, April 29, 2025, the Company issued shares of common stock to the Investor.
July 2024 Additional Secured Note
| (Dollars in thousands) | Maturity Date | Interest Rate | January 1, 2025- March 31, 2025 | July 12, 2024- December 31, 2024 | |||||||||||
| Term Loan and capitalized interest (excludes debt issuance cost) | % | $ | $ | ||||||||||||
| Less: principal and capitalized interest payments | ( | ) | ( | ) | |||||||||||
| Debt discount | ( | ) | |||||||||||||
| Gain on extinguishment | ( | ) | |||||||||||||
| Total outstanding debt | $ | $ | |||||||||||||
| * |
On July 12, 2024, the Company, CloudCo, Soluna Cloud,
and the Investor entered into a First Amendment to the Note Purchase Agreement (the “June SPA Amendment”). This amendment
allows CloudCo to issue additional secured promissory notes totaling $
| 16 |
A “Qualified Issuance”
includes any issuance of common stock by Soluna Cloud from the day after the Cloud Additional Warrant date until the earlier of raising
an additional $
On October 1, 2024, CloudCo, Soluna Cloud and the Company entered into
assignment and assumption agreements (the “Assignment Agreements”) with the Additional Investors with respect to an aggregate
of $
On March 14, 2025, the Company fulfilled
the purchase obligations, and assumed the Additional Notes through payment of $
Galaxy Loan
| (Dollars in thousands) | Maturity Date | Interest Rate | March 12, 2025 – March 31, 2025 | |||||||
| Term Loan | % | $ | ||||||||
| Less: principal payments | ||||||||||
| Less: debt discount and issuance costs | ( | ) | ||||||||
| Total outstanding note | ||||||||||
| (Less) Current note outstanding | ||||||||||
| Long-term note outstanding | $ | |||||||||
On March 12, 2025, Soluna SW LLC (the “SW Borrower”), a Delaware limited liability company and subsidiary of Soluna SW Holdings LLC (“SW Holdings”, and together with the SW Borrower, the “SW Loan Parties”), a subsidiary of SDI, a Nevada corporation and wholly owned subsidiary of Company, entered into a Loan Agreement (the “Galaxy Loan Agreement”) with SW Holdings and Galaxy Digital LLC (the “Lender”).
The Galaxy Loan Agreement
provides for a term loan facility in the principal amount of $
The SW Borrower may voluntarily prepay all or part of the Term Loan Facility at any time together with accrued and unpaid interest on the principal amount to be prepaid up to the date of prepayment. The SW Borrower shall prepay all or part of the Term Loan Facility with 100% of the Net Cash Proceeds (as defined therein) received upon the occurrence of (i) an Asset Sale or Casualty Event (each as defined therein), (ii) an Equity Issuance (as defined therein), (iii) an issuance or incurrence of Indebtedness (as defined therein), or (iv) an Extraordinary Receipt (as defined therein), each subject to certain exceptions. In addition, certain principal payments are subject to the payment of a premium amount equal to 50% of the remaining amount of interest payable on such principal amount through the scheduled maturity date, if paid on or prior to the 30-month anniversary of the closing date, and 25% of the remaining amount of interest payable on such principal amount through the scheduled maturity date, if paid after the 30-month anniversary of the closing date.
The Galaxy Loan Agreement includes certain restrictions (subject to certain exceptions outlined in the Galaxy Loan Agreement) on the ability of the SW Loan Parties and their subsidiaries to undertake certain activities, including to incur indebtedness and liens, enter into sale or lease-back transactions, merge or consolidate with other entities, dispose or transfer their assets, pay dividends or make distributions, make investments, make Restricted Payments (as defined therein), enter into burdensome agreements or transact with affiliates. In addition, the SW Loan Parties are subject to three financial covenants – a minimum debt service coverage ratio, a minimum current ratio, and cash in customer deposit account must equal or be greater than related customer liabilities. The Company also received an extension on its non-financial covenants through May 15, 2025, in which the Company expects to be in compliance.
| 17 |
Proceeds of the Term Loan Facility will be used to issue a distribution to SW Holdings, the proceeds of which may be used to make a distribution to SDI.
In connection with the Galaxy Loan Agreement, on March 12, 2025, the SW Loan Parties and the Lender entered into a security agreement to secure the obligations under the Term Loan Facility by a lien on substantially all the assets and properties of SW Borrower and SW Holdings, subject to certain exceptions. The SW Borrower is the owner and operator of the Company’s Project Sophie data center.
In connection with the Galaxy Loan Agreement, on March 12, 2025, SDI and the Lender entered into a Limited Guarantee Agreement pursuant to which SDI guarantees the Loss Liabilities (as defined therein) and, after the occurrence of a Recourse Trigger Event (as defined therein), the obligations under the Loan Agreement.
Equipment Loan Agreement
On May 16, 2024,
SDI SL Borrowing – 1, LLC, an affiliate of the Company. (the “SDI Borrower”) entered into a loan agreement (the “Equipment
Loan Agreement” or the “Loan”) with Soluna2 SLC Fund II Project Holdco LLC (the “Lender”, and collectively,
the “Parties”). As further amended on February 28, 2025, the Equipment Loan Agreement provides for the Company to borrow,
from time to time, up to $
On May 17, 2024, the SDI
Borrower drew down $
On March 21, 2025, the SDI
Borrower drew down $
Per ASC 835-30-S45-1, debt issuance costs related
to line of credits should be recorded as an asset and amortized over the life of the line of credit agreement. As such, the Company recorded
$
Navitas Term Loan
| (Dollars in thousands) | Maturity Date | Interest Rate | January 1, 2025- March 31, 2025 | January 1, 2024- December 31, 2024 | |||||||||||
| Term Loan and capitalized interest (excludes debt issuance cost) | * | % | $ | $ | |||||||||||
| Less: principal and capitalized interest payments | ( | ) | ( | ) | |||||||||||
| Total outstanding debt | $ | $ | |||||||||||||
| * |
| 18 |
On May 9, 2023, DVCC and Navitas West Texas Investments SPV, LLC entered into a 2-year Loan Agreement (“Term Loan”) for $. The unpaid principal balance of the Term Loan shall bear interest at per annum rate equal to %. Beginning on the last Business Day of the month in which the In-Service Date occurs (date Dorothy 1B is put into full operation following the planned ramp-up period), and continuing on the last Business Day of each month thereafter until the repayment of all Term Loan debt principal and accrued interest occurs, DVCC shall make debt service payments on the Term Loan through a cash sweep with the Site-level Free Cash Flow (total revenue of DVCC minus power costs and site level costs listed in Loan and Security agreement), otherwise to be distributed to Soluna Holdings, Inc., the ultimate parent entity of DVCC (the “SLNH Cash”) being applied as a permanent repayment of the Loan in an amount equal to the greater of: (i) the sum of (A) the amount of accrued and unpaid interest that has not yet been added to the principal balance of the Term Loan, if any, plus (B) an amount equal to 1/24th of the then outstanding principal balance of the Term Loan; provided that the aggregate amount payable pursuant to this clause (i) shall not exceed SLNH Cash times 0.60; or (ii) SLNH Cash times 0.33.
Any and all monthly debt service amounts so paid to Lender shall be applied first to accrued and unpaid interest that has not yet been added to the principal balance of the Term Loan, if any, and then to repayment of the then outstanding principal balance of the Term Loan. On the Term Loan Maturity Date (), all remaining principal and accrued and unpaid interest that has not yet been added to the principal balance of the Term Loan, if any, shall become immediately due and owing in full and shall be paid by wire transfer in immediately available funds. As of March 31, 2025, the Company has paid the remaining outstanding balance of $ thousand, therefore fulfilling its debt obligation with Navitas. Interest expense related to the Navitas Term Loan for the three months ended March 31, 2025 and 2024 was approximately $ thousand and $ thousand.
Convertible Notes
On October 25, 2021, pursuant to a
Securities Purchase Agreement (the “October SPA”), the Company issued to certain accredited investors (the “Noteholders”)
(i) secured convertible notes in an aggregate principal amount of $
On July 19, 2022 and on September 13, 2022, the Company entered into an Addendum and Addendum Amendment which adjusted the terms such as maturity date, conversion prices, and the issuance of new warrants to the Noteholders. Pursuant to the Addendum and Addendum Amendment, the Company evaluated whether the new addendums qualified as debt modification or debt extinguishment. Based on ASC 470, Debt, the Company determined the Addendum and Addendum Amendment to fall under Debt Extinguishment treatment and the Company would be required to record the new debt at fair value, and in turn write off the existing debt on the Company’s books.
Following the debt extinguishment on July 19, 2022 as noted above, the Convertible Notes have been accounted for under the fair value method on a recurring basis upon issuance (e.g., upon execution of the Addendum) per guidance within ASC 480, and at each subsequent reporting period, with changes in fair value reported in earnings. See below for rollforward of the fair value of the convertible debt :
| (in thousands) | ||||
| Balance January 1, 2024 | $ | |||
| Conversions of debt (January 1, 2024- March 31, 2024) | ( | ) | ||
| Total revaluation gains (January 1, 2024- March 31, 2024) | ( | ) | ||
| Balance March 31, 2024 | ||||
| Conversions of debt (April 1, 2024- December 31, 2024) | ( | ) | ||
| Revaluation losses and extinguishment of debt, net (April 1, 2024- December 31, 2024) | ||||
| Extension fee | ||||
| Balance December 31, 2024 | $ | |||
| 19 |
For the three months ended March 31, 2024, the Company
had approximately $
The following table represents the significant and subjective fair value assumptions used for Convertible Notes during the year ended December 31, 2024. As the Convertible Notes were fully converted in fiscal year 2024, no assumptions were noted for the three months ended March 31, 2025.
Year Ended December 31, 2024 | ||||
| Stock price | $ | – | ||
| Conversion price | $ | |||
| Volatility | % | |||
| Risk-free interest rate | % | |||
There were two additional amendments in fiscal year
2023. On February 28, 2024, the Company and the Noteholders entered into a Fourth Amendment Agreement to amend the Notes, SPA and related
agreements to facilitate future financings by the Company. In addition, the Company was permitted to unilaterally extend the maturity
date of the Notes for two 3-Month extensions if prior to the then in effect maturity date the Company gives notice to the Noteholders
and increases the principal amount of the Notes on the date of each such extension by two percent (
In consideration of the foregoing, the Company:
| ● | Reduced the conversion price of the Notes to $ | |
| ● | The Noteholders received an aggregate of | |
| ● | An aggregate of |
| ● | An aggregate of |
In June 2024, pursuant to
the Fourth Amendment Agreement, the Company exercised its right to extend the maturity date of the Notes for an additional six months,
or until January 24, 2025, to enable the Company to continue to pursue its significant project development opportunities for Soluna Cloud,
Dorothy 2, and other projects. The extension of the notes caused an increase in the convertible note balance of approximately $
The effect of the additional penny warrants, $
The following table represents the significant fair value assumptions used for warrants issued or repriced during the year ended December 31, 2024. No warrants were issued or repriced for the three months ended March 31, 2025.
| Year ended December 31, 2024 |
||||
| Stock price | $ | - | ||
| Exercise price | $ | - | ||
| Expected term in years | – | |||
| Expected dividend yield | % | |||
| Volatility | – | % | ||
| Risk-free interest rate | - | % | ||
| 20 |
On May 30, 2024, shareholder approval was obtained
removing the cap containment provision for the warrants, and as such, the liability accounting treatment was no longer required. Since
all other criteria were met to be treated as equity, the Company adjusted the warrant liability as of the date of shareholder approval
and reclassified balance to equity. As such, the Company accounted for the change in the fair value of the warrant liability as of the
date of the shareholder approval (May 30, 2024), in connection with its loss on revaluation of the warrant of approximately $
Pursuant to additional agreements with holders of
another
For the year ended December 31, 2024,
As previously discussed in Footnote 1, the Company entered into the SEPA with YA on August 12, 2024. Access to the SEPA was subject to a number of conditions precedent including, but not limited to, various consents from the Company’s Note Holders. On October 1, 2024, the Noteholders entered into a Consent, Waiver, and Mutual Release Agreement (the “Master Consent”) which provides the following:
| ● | consent to the Company’s entry into the SEPA; | |
| ● | waiver of any rights of first refusal or participation rights in connection with the SEPA; | |
| ● | standstill of the rights to exercise certain $ | |
| ● | the right to prepay the convertible notes with a | |
| ● | termination of the SPA and related agreements upon the full payoff of the convertible notes; and | |
| ● | mutual limited release of claims between the Noteholders and the Company. |
In return for these consents, the Company agreed to
pay a $
For the year ended December 31, 2024, the Company issued shares of common stock for conversion of the debt, which includes the final conversion shares noted below.
On December
12, 2024, the Company entered into an agreement with the remaining three Note Holders who held an outstanding principal balance as of
December 12, 2024, pursuant to which the three remaining Note Holders elected to immediately convert all of the outstanding principal
of certain convertible notes into shares of the Company’s common stock. The agreement satisfied the full outstanding debt owed to
the remaining three Note Holders under the Convertible Notes. Following the conversion, shares of common stock were issued to
the Note Holders in accordance with the terms of the Convertible Notes, as amended. The Company recorded a debt inducement conversion
expense of approximately $
Line of Credit
On September 15, 2021, the Company entered into a
$
9. Stockholders’ Equity
Preferred Stock
The Company has two series of preferred stock outstanding:
the Series A Preferred Stock, with a $
| 21 |
Series A Preferred Stock
The Series A Preferred Stock is not convertible into
or exchangeable into common stock of the Company, except upon the occurrence of a delisting event or change of control. Per the Company’s
Certificate of Designations, Preferences and Rights of 9.0% Series A Cumulative Perpetual Preferred Stock (“Series A Certificate
of Designations”), if there is an occurrence of delisting or change of control, the holders of Series A Preferred Stock will have
the right to convert the number of preferred A shares into a number of common shares by the lesser of (a) the sum of the $
Series B Preferred Stock
On July 19, 2022, the Company entered into a Securities
Purchase Agreement (the “Series B SPA”) with an accredited investor (the “Series B Investor”) pursuant to which
the Company sold to the Series B Investor shares of Series B Preferred Stock, for a purchase price of $
In addition, in 2022, the Company issued to the Series
B Investor
Effective from October 1, 2024, the sale of common
stock as a result of conversion of Series B Preferred Stock and exercise of the new
Common Stock
The Company has one class of common stock, par value $ per share. Each share of the Company’s common stock is entitled to one vote on all matters submitted to stockholders. As of March 31, 2025 and December 31, 2024, there were and shares of common stock outstanding, respectively.
Dividends
Pursuant to the Certificate of Designations,
The Company’s Series B Preferred Stock included
a
Effective October 1, 2024, the dividend payment obligation
has been modified to be annual. The amendment resulted in annual dividend payments going forward. As a result of the amendment, the Company
would be obligated to make annual dividend payments for the period starting from July 2023 as per the Series B Preferred Consent and Waiver,
however, the board of directors has not yet declared any dividends for that period. As such, the Company has accumulated approximately
$
| 22 |
Standby Equity Purchase Agreement
On August 12, 2024, the Company entered into the SEPA
with YA. Pursuant to the terms of the SEPA, the Company agreed to issue and sell to YA, from time to time, and YA agreed to purchase from
the Company, up to $
Reservation of Shares
| Stock options outstanding | ||||
| Restricted stock units outstanding | ||||
| Warrants outstanding | ||||
| Shares to be isssued for June SPA Modification | ||||
| Common stock available for future equity awards or issuance of options | ||||
| Number of common shares reserved |
The Company also notes that as of March 31, 2025, there are Series A preferred stock available for future equity awards under the 2021 Plan.
Loss per Share
The Company computes basic loss per common share by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per share reflects the potential dilution, if any, computed by dividing loss by the combination of dilutive common share equivalents, comprised of shares issuable under outstanding investment rights, warrants and the Company’s share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money stock options, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of a stock option and the amount of compensation cost, if any, for future service that the Company has not yet recognized are assumed to be used to repurchase shares in the current period.
| (Dollars in thousands, except shares) | 2025 | 2024 | ||||||
| Numerator: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| (Less) Net income attributable to non-controlling interest | ( | ) | ( | ) | ||||
| Net loss attributable to Soluna Holdings, Inc. | $ | ( | ) | $ | ( | ) | ||
| Less: Preferred dividends or deemed dividends | ( | ) | ||||||
| Less: Cumulative Preferred Dividends in arrears | ( | ) | ( | ) | ||||
| Balance | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Basic and Diluted EPS: | ||||||||
| Common shares outstanding, beginning of period, including penny warrants | ||||||||
| Weighted average common shares issued during the period including penny warrants issued and outstanding as of quarter-end | ||||||||
| Denominator for basic earnings per common shares — | ||||||||
| Weighted average common shares | ||||||||
| 23 |
The Company notes as continuing operations was in a Net loss for the three months ended March 31, 2025 and 2024, as such basic and diluted EPS is the same balance as continuing operations acts as the control amount in which would cause antidilution. Not included in the computation of earnings per share, assuming dilution, for the three months ended March 31, 2025, were options to purchase shares of the Company’s common stock, nonvested restricted stock units, outstanding warrants not exercised which excludes penny warrants that can be potentially exercised, and shares to be issued in connection with the June SPA modification (in which were effectively issued on April 29, 2025). These potentially dilutive items were excluded because the calculation of incremental shares resulted in an anti-dilutive effect.
Not included in the computation of earnings per share, assuming dilution, for the three months ended March 31, 2024, were options to purchase shares of the Company’s common stock, nonvested restricted stock units, and outstanding warrants not exercised which excludes penny warrants that can be potentially exercised. These potentially dilutive items were excluded because the calculation of incremental shares resulted in an anti-dilutive effect.
10. Commitments and Contingencies
Commitments:
Leases
The Company determines whether an arrangement is a
lease at inception. The Company and its subsidiaries have operating leases for certain manufacturing, laboratory, office facilities and
certain equipment. The leases have remaining lease terms of approximately
Lease expense for these leases is recognized on a straight-line basis over the lease term. For the three months ended March 31, total lease costs are comprised of the following:
| Three Months Ended March 31, | ||||||||
| (Dollars in thousands) | 2025 | 2024 | ||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost | ||||||||
| Total net lease cost | $ | $ | ||||||
Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases. There were no short term leases for the three months ended March 31, 2025 and 2024.
Other information related to leases was as follows:
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Weighted Average Remaining Lease Term (in years): | ||||||||
| Operating leases | ||||||||
| Weighted Average Discount Rate: | ||||||||
| Operating leases | % | % | ||||||
Supplemental cash flows information related to leases for the three months ended March 31 was as follows:
| (Dollars in thousands) | ||||||||
| 2025 | 2024 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| 24 |
Maturities of noncancellable operating lease liabilities are as follows for the quarter ending March 31:
| (Dollars in thousands) | ||||
| 2025 | ||||
| 2025 (remainder of year) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total lease obligations | ||||
| Less: current obligations | ||||
| Long-term lease obligations | $ | |||
As of March 31, 2025, there were no additional operating lease commitments that had not yet commenced. On April 3, 2025, Soluna KK Energy ServiceCo., LLC, a subsidiary of the Company, entered into a lease agreement for 50 acres of property located in Willacy County, Texas for the purpose of constructing, installing, operating, and maintaining modular data centers and related facilities for a leased term of twenty-two years.
Project Dorothy 2 and Project Kati Commitments:
As of March 31, 2025, the Company was contractually
committed for approximately $
Contingencies:
Spring Lane Capital Contingency
The
Company has a potential contingency associated with an agreement with Spring Lane of up to $
Bonus Contingency
During the year ended December 31, 2024, the Company’s
Board of Directors approved a discretionary bonus program with an aggregate payout of approximately $
Legal
We are subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. When applicable, we accrue for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Legal fees are charged to expense as they are incurred.
On December 29, 2022, NYDIG filed a complaint against
Soluna MC Borrowings, LLC 2021- 1, a subsidiary of Soluna MC, LLC, a subsidiary of Soluna Digital, a subsidiary of the Company (“Borrower”)
and Soluna MC, LLC (“Guarantor”, and together with Borrower, “NYDIG Defendants”) in Marshall Circuit Court of
the Commonwealth of Kentucky regarding a series of loans (the “NYDIG Loans”) made by NYDIG to Borrower pursuant to a Master
Equipment Finance Agreement (“MEFA”) that were secured by certain assets of Borrower and guaranteed by Guarantor pursuant
to a written guaranty agreement executed by Guarantor. On February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing
the MEFA, and repossessed the collateralized assets. Subsequently, NYDIG filed its Motion for Summary Judgment seeking entry of a judgment
against the NYDIG Defendants in the approximate amount of $
| 25 |
On March 13, 2024, NYDIG served the NYDIG Defendants with a post-judgment discovery seeking information regarding the NYDIG Defendants’ assets and liabilities. The NYDIG Defendants completed responding to NYDIG’s initial document requests on May 13, 2024. On September 24, 2024, NYDIG sent a letter seeking supplemental discovery from the NYDIG Defendants, and the NYDIG Defendants completed responding to NYDIG’s additional/supplemental document requests by November 20, 2024. A deposition of a representative of the NYDIG Defendants occurred on January 23, 2025. On April 2, 2025, NYDIG sent another letter seeking supplemental discovery from the NYDIG Defendants or alternatively to commence discovery discussions. The NYDIG Defendants sent a response on April 10, 2025 requesting contact information for potential settlement discussions and proposing a rolling discovery schedule; as of May 15, 2025 there has not been a response on the proposed discovery schedule.
Additionally, NYDIG has stated its intention to pursue the parent company of Guarantor (“Parent Entity”) under a piercing of the corporate veil theory relating to NYDIG Defendants’ debts and liabilities under the loan documents. Parent Entity intends to vigorously defend itself from NYDIG’s parent company claims. Parent Entity denies any such liability and filed a complaint for a declaratory judgment against NYDIG in the Eighth Judicial District Court in Clark County, Nevada on March 16, 2023, seeking a declaratory judgment as to such matter. On June 22, 2023, the court issued an order granting NYDIG’s motion to dismiss, without prejudice. Parent Entity intends to continue to vigorously defend any allegations regarding liability on account of NYDIG Defendants’ debts and liabilities to NYDIG under their loan documents.
As of March 31, 2025, the Company still has an outstanding
principal of approximately $
11. Related Party Transactions
MeOH Power, Inc.
On December 18, 2013, MeOH Power, Inc. and the Company
executed a Senior Demand Promissory Note (the Note) in the amount of $
Employee Receivables
Certain employees have a receivable due to the Company
based on their stock-based awards, in which $ and $ was outstanding as of March 31, 2025 and December 31, 2024, respectively. The
balance is currently presented as $
HEL Transactions
As discussed in the Company’s 2023 Annual Report and all agreements included as exhibits and defined within the 2023 Annual Report, on October 29, 2021, the Company completed the Soluna Callisto acquisition pursuant to the merger agreement (the “Merger Agreement”). The purpose of the transaction was for SCI to acquire substantially all of the assets (other than those assets physically located in Morocco) formerly held by Harmattan Energy, Ltd. (“HEL”), which assets consisted of SCI’s existing pipeline of certain cryptocurrency mining projects that HEL previously transferred to SCI, which was formed expressly for this purpose, and to provide SCI with the opportunity to directly employ or retain the services of four individuals whose services it had retained through HEL prior to the merger. As a result of the merger, each share of common stock of Soluna Callisto issued and outstanding immediately prior to the effective time of the merger, other than shares owned by the Company or any of our subsidiaries, was cancelled and converted into the right to receive a proportionate share of the Merger Consideration.
In connection with the Soluna Callisto acquisition,
effective as of October 29, 2021, upon and subject to the terms and conditions of the Termination Agreement, on November 5, 2021: (1)
the existing Operating and Management Agreements between HEL and SCI were terminated in all respects; and (2)(A) SCI paid HEL $
| 26 |
Due to conditions being met within the Merger Agreement in relation to energization and retention of employees, the Company has advised SCI US Holdings LLC, a Delaware limited liability company, who is the sole Effective Time Holder (as defined in the Merger Agreement) of the right to receive the Merger Shares of the Company and that Merger Shares were issued on May 26, 2023 and Merger Shares were issued on October 10, 2023. SCI US Holdings LLC has consented to the issuance of such Merger Shares as required under the Merger Agreement and has directed the Company to issue such Merger Shares to its affiliate, HEL. Following the issuance of the Merger Shares, a total of Merger Shares remains available for possible issuance through October 29, 2026 pursuant to the terms of the Merger Agreement.
Several of HEL’s equity holders are affiliated with Brookstone Partners, the investment firm that previously held an equity interest in the Company through Brookstone Partners Acquisition XXIV, LLC. The Company’s two Brookstone-affiliated directors also serve as directors and, in one case, as an officer, of HEL and also have ownership interest in HEL. In light of these relationships, the various transactions by and between the Company and SCI, on the one hand, and HEL, on the other hand, were negotiated on behalf of the Company and SCI via an independent investment committee of the Board and separate legal representation. The transactions were subsequently unanimously approved by both the independent investment committee and the full Board.
Four of the Company’s directors have various affiliations with HEL.
Michael Toporek, the former Chief Executive Officer,
and current Executive Chairman of the Board, owns
In addition, one of the Company’s directors,
Matthew E. Lipman, serves as a director and is currently acting as President of HEL. Mr. Lipman does not directly own any equity interest
in
John Belizaire, the Company’s Chief Executive
Officer, and John Bottomley, who were elected to the Board upon the effective time of SCI’s acquisition of Soluna Callisto, serve
as directors of HEL.
The Company owned approximately
2023 Plan
The Company’s 2023 Stock Incentive Plan was adopted by the Board on February 10, 2023 and approved by the stockholders on March 10, 2023. The 2023 Plan sets the number of shares of our Common Stock reserved for issuance thereunder, on a quarterly basis, to % of the shares of our Common Stock outstanding on the measurement date. Subject to certain adjustments as provided in the 2023 Plan, the maximum aggregate number of shares of our Common Stock that may be issued under the 2023 Plan (excluding the number of shares of our Common Stock subject to Specified Awards (as defined below)) (i) pursuant to the exercise of stock options, (ii) as unrestricted or restricted Common Stock, and (iii) in settlement of RSUs shall be limited to, beginning with the first quarter of our fiscal year ending December 31, 2023 (or January 1, 2023), % of the number of shares of our Common Stock outstanding as of the first trading day of each quarter . Subject to certain adjustments as provided in the 2023 Plan, (i) shares of our Common Stock subject to the 2023 Plan shall include shares of our Common Stock which revert back to the 2023 Plan in a prior quarter pursuant to the paragraph below, and (ii) the number of shares of our Common Stock that may be issued under the 2023 Plan may never be less than the number of shares of our Common Stock that are then outstanding under (or available to settle existing) 2023 Plan Award grants.
| 27 |
On June 29, 2023, at the Annual Shareholder Meeting, the Amended and Restated 2023 Stock Incentive Plan was approved. The Amended and Restated 2023 Plan will, among other things, increase the number of shares of our Common Stock reserved for issuance thereunder, on a quarterly basis, to % of the shares of our Common Stock outstanding on the measurement date. Subject to certain adjustments as provided herein, the maximum aggregate number of shares of common stock that may be issued hereunder (excluding the number of shares of common stock subject to Specified Awards (as hereinafter defined)) (i) pursuant to the exercise of Options, (ii) as unrestricted shares of common stock or Restricted Stock, and (iii) in settlement of RSUs shall be limited to, beginning with the third quarter of our fiscal year ending December 31, 2023 (or July 1, 2023), % of the number of shares of common stock outstanding as of the first trading day of each quarter. Subject to certain adjustments as provided herein, (A) shares of common stock subject to this Plan shall include shares of common stock which reverted back to this Plan in a prior quarter, and (B) the number of shares of common stock that may be issued under this Plan may never be less than the number of shares of common stock that are then outstanding under (or available to settle existing) Awards. For purposes of determining the number of shares of common stock available under this Plan, shares of common stock withheld by the Company to satisfy applicable tax withholding or exercise price obligations pursuant to Section 10(e) of this Plan shall be deemed issued under this Plan. In the event that, prior to the date this Plan shall terminate, any Award granted under this Plan expires unexercised or unvested or is terminated, surrendered or cancelled without the delivery of shares of common stock, or any shares of Restricted Stock are forfeited back to the Company, then the shares of common stock subject to such Award may be made available for subsequent Awards under the terms of this Plan. As used in this Plan, “Specified Awards” shall mean (i) Awards to Eligible Persons who are not employed or engaged by the Company or any of its subsidiaries as of the last day of any fiscal quarter of the Company, commencing with the fiscal quarter ending March 31, 2023 and (ii) Awards that have a grant date at least three (3) years prior to the last day of any fiscal quarter of the Company, commencing with the fiscal quarter ending March 31, 2023.
2021 Plan
The Company’s 2021 Stock Incentive Plan was adopted by the Board on February 12, 2021 and approved by the stockholders on March 25, 2021. The 2021 Plan was amended and restated effective as of October 29, 2021, and May 27, 2022, respectively. The 2021 Plan authorizes the Company to issue shares of common stock upon the exercise of stock options, the grant of restricted stock awards, and the conversion of restricted stock units (collectively, the “Awards”). The Compensation Committee has full authority, subject to the terms of the 2021 Plan, to interpret the 2021 Plan and establish rules and regulations for the proper administration of the 2021 Plan. Subject to certain adjustments as provided in the 2021 Plan, the maximum aggregate number of shares of the Company’s common stock that may be issued under the 2021 Plan (i) pursuant to the exercise of options, (ii) as shares or restricted stock and (iii) in settlement of RSUs shall be limited to (A) during the Company’s fiscal year ending December 31, 2021 (the “2021 Fiscal Year”), Shares, (B) for the period from January 1, 2022 to June 30, 2022, fifteen percent (%) of the number of Shares outstanding on January 3, 2022, which was the first trading day of 2022, and (C) beginning with the third quarter of the Company’s fiscal year ending December 31, 2022 (the “2022 Fiscal Year”), fifteen percent (%) of the number of Shares outstanding as of the first trading day of each quarter, net of any Shares awarded in the previous quarter(s). Subject to certain adjustments as provided in the 2021 Plan, (i) shares subject to the 2021 Plan shall include shares reverted back to the Company pursuant the 2021 Plan in a prior year or quarter, as applicable, as provided herein and (ii) the number of shares that may be issued under the 2021 Plan may never be less than the number of shares that are then outstanding under (or available to settle existing) Awards. For purposes of determining the number of shares available under the 2021 Plan, shares withheld by the Company to satisfy applicable tax withholding or exercise price obligations pursuant to the 2021 Plan shall be deemed issued under this Plan. In the event that, prior to the date on which the 2021 Plan shall terminate, any Award granted under the 2021 Plan expires unexercised or unvested or is terminated, surrendered, or cancelled without the delivery of shares of common stock, or any Awards are forfeited back to the Company, then the shares of common stock subject to such Award may be made available for subsequent Awards under the terms of the 2021 Plan.
On March 10, 2023, at the Special Shareholder Meeting, the Third Amended and Restated 2021 Stock Incentive Plan was approved. The
| 28 |
The Board approved amendments to both the 2021 and 2023 Plans on April 15, 2024. The amendments were subsequently approved by the stockholders at the 2024 Annual Meeting on May 30, 2024. Under the 2021 and 2023 Plans, the number of shares of common stock available for awards is limited to, % for the 2021 Plan and % for the 2023 Plan of the number of shares of common stock outstanding as of the first trading day of each quarter. The amendments to each Plan would change the calculation of this limitation to reflect the applicable percentage to % and % respectively, after giving effect to the increase in the number of shares subject to Awards after giving effect to the amount to the increase as of the date of the calculation.
The Board approved an additional amendment to the 2021 Plan on October 16, 2024. The amendment was subsequently approved by the stockholders at the Special Meeting on November 15, 2024. Under the 2021 Plan, the number of shares of common stock available for awards is limited to % of the number of Common Shares outstanding as of the first trading day of each quarter. The amendment to the 2021 Plan would change this limitation to % from the first quarter of our fiscal year ending December 31, 2025 through the second quarter of our fiscal year ending December 31, 2027 and, effective at the end of the second quarter of our fiscal year ending December 31, 2027 the percentage will revert to % of the number of shares of common stock outstanding as of the first trading day of each quarter.
There were no awards granted during the three months ended March 31, 2025 and March 31, 2024.
13. Effect of Recent Accounting Updates
Accounting Updates Effective for fiscal year 2025
Changes to U.S. GAAP are established by the Financial Accounting Standards Board (the “FASB”) in the form of accounting standard updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considered the applicability and impact of all ASUs. ASUs not mentioned below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.
Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendment is required to be disclosed on an annual basis, in which the Company will include on its annual report for the year ended December 31, 2025.
Stock Compensation
In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards (“ASU 2024-01”), to clarify the scope application of profits interest and similar awards by adding illustrative guidance in ASC 718, Compensation—Stock Compensation (“ASC 718”). ASU 2024-01 clarifies how to determine whether profits interest and similar awards should be accounted for as a share-based payment arrangement (ASC 718) or as a cash bonus or profit-sharing arrangement (ASC 710, Compensation—General, or other guidance) and applies to all reporting entities that account for profits interest awards as compensation to employees or non-employees. In addition to adding the illustrative guidance, ASU 2024-01 modified the language in paragraph 718-10-15-3 to improve its clarity and operability without changing the guidance. ASU 2024-01 is effective for fiscal years beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is permitted. The amendments should be applied either retrospectively to all prior periods presented in the financial statements, or prospectively to profits interests and similar awards granted or modified on or after the adoption date. The Company notes that this ASU did not have an impact on the condensed financial statements for the three months ended March 31, 2025. If any new awards are issued in the future, the Company will evaluate the scope application of this ASU.
Accounting Updates Not Yet Effective
Improvements to Comprehensive Income- Expense Disaggregation
In December 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). ASU 2024-03 requires, in the notes to the financial statements, disclosures of specified information about certain costs and expenses specified in the updated guidance. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact the updated guidance will have on its disclosures.
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Debt with Conversion and Other Options
In December 2024, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2024-04, Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. ASU 2024-04 clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion to improve relevance and consistency. The new standard is effective for the Company for its annual periods beginning after December 15, 2025 and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.
14. Variable Interest Entities and Voting Interest Entities
On January 26, 2022, DVSL was created in order to
construct, own, operate and maintain data centers in order to support the mining of cryptocurrency assets, batch processing and other
non-crypto related activities (collectively, the “Project”). On May 3, 2022, SCI entered into a Bilateral Master Contribution
Agreement (the “Bilateral Contribution Agreement”) with Spring Lane Capital, pursuant to which Spring Lane agreed, pursuant
to the terms and conditions of such agreement, to make one or more capital contributions to, and in exchange for equity in, SCI or one
of its subsidiaries up to an aggregate amount of $
On August 5, 2022, the Company entered into a Contribution
Agreement (the “Dorothy Contribution Agreement”) with Spring Lane, Soluna DV Devco, LLC (“Devco”), an indirect
wholly owned subsidiary of SCI, and DVSL an entity formed in order to further the Company’s development for Project Dorothy, (each,
a “Party” and, together, the “Parties”).
In exchange for their contributions, the Company and
Spring Lane were issued
The Company evaluated this legal entity under ASC 810, Consolidations and determined that DVSL is a variable interest entity (“VIE”) that should be consolidated into the Company, with a non-controlling interest recorded to account for Spring Lane’s equity ownership of the Company. The Company has a variable interest in DVSL. The entity was designed by the Company to create an entity for outside investors to invest in specific projects. The creation of this entity resulted in the Company, through its equity interest in DVSL, absorbing operational risk that the entity was created to create and distribute, resulting in the Company having a variable interest in DVSL.
On March 10, 2023, the Company along with Devco, and DVSL, a Delaware limited liability company (the “Project Company”) entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Soluna SLC Fund I Projects Holdco, LLC, a Delaware limited liability company (“Spring Lane”) that is wholly owned indirectly by Spring Lane Management LLC. The Project Company was constructing a modular data center with a peak demand of 25 MW (the “Dorothy Phase 1A Facility”).
Under a series of transactions in February 2023 and
March 2023, culminating in the March 10, 2023 Purchase and Sale Agreement, the Company sold to Spring Lane certain Class B Membership
Interests for a purchase price of $
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Concurrently with the Sale, the Company, Spring Lane, Devco and the Project Company entered into (a) the Fourth Amended and Restated Limited Liability Company Agreement of the Project Company, dated as of March 10, 2023 (the “Fourth A&R LLCA”), an amendment and restatement of the Third Amended and Restated Limited Liability Company Agreement of the Project Company dated as of March 3, 2023, and (b) the Amended and Restated Contribution Agreement, dated as of March 10, 2023 (the “A&R Contribution Agreement”), an amendment and restatement of the Contribution Agreement dated as of August 5, 2022. The Fourth A&R LLCA provides for certain updates in respect of Spring Lane’s majority ownership. The A&R Contribution Agreement reflects updated pro rata member funding percentages as a result of the Sale as well as updated contribution caps for each of the Company and Spring Lane.
As of January 1, 2023, there were no changes in the Limited Liability Agreement of DVSL other than those related to incorporating the new investment and the purpose and design of DVSL has not changed. The Company evaluated the concepts under ASC 810 for DVSL after the change in membership interest, concluding that this resulted in the Project Company not being structured with non-substantive voting rights, as the noncontrolling shareholders have disproportionately fewer voting rights but the activities are not conducted on their behalf. This, in conjunction with there being sufficient equity at risk to finance its activities and the equity holders as a group having the characteristics of a controlling financial interest in DVSL, results in DVSL not meeting the definition of a VIE. The Company’s consolidation model is based on the concept of power. Given the Company’s Class A membership interest, the Company has the ability to control the significant decisions made in the ordinary course of the business of DVSL. The non-controlling shareholders do not hold substantive participating rights, voting rights or liquidation rights. This results in the Project Company being a voting interest entity (“VOE”), therefore allowing the Company to continue to consolidate.
The carrying amount of the assets and liabilities was as follows for DVSL:
| (Dollars in thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Current assets: | ||||||||
| Cash and restricted cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other receivable, related party | ||||||||
| Prepaids and other current assets | ||||||||
| Total current assets | ||||||||
| Other assets- long term, related party | ||||||||
| Operating lease right-of-use assets | ||||||||
| Property, plant, and equipment | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities: | ||||||||
| Due to intercompany | $ | $ | ||||||
| Accrued expense | ||||||||
| Customer deposits-current | ||||||||
| Operating lease liability | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability | ||||||||
| Other liabilities, related party | ||||||||
| Total liabilities | $ | $ | ||||||
Effective January 1, 2023, the Company’s ownership
in DVSL was reduced from
On May 9, 2023, the Company’s indirect subsidiary
DVCC completed a strategic partnership and financing with a special purpose vehicle, Navitas West Texas Investments SPV, LLC, (“Navitas”)
organized by Navitas Global, to complete the second phase of the Dorothy Project (“Dorothy 1B”). Under a Contribution Agreement
among the parties, the Company owned a substantially complete 25MW data center under construction, in which
| 31 |
The Company evaluated this legal entity under ASC 810, Consolidations and determined that DVCC is a VIE that should be consolidated into the Company, with a non-controlling interest recorded to account for Navitas’ equity ownership of DVCC. The Company has a variable interest in DVCC. The entity was designed by the Company to create an entity for outside investors to invest in specific projects. The creation of this entity resulted in the Company, through its equity interest in DVCC, absorbing operational risk that the entity was created to create and distribute, resulting in the Company having a variable interest in DVCC.
DVCC is a VIE of the Company due to DVCC being structured with non-substantive voting rights. This is due to the following two factors being met as outlined in ASC 810-10-15-14 that require the VIE model to be followed.
| a. | The voting rights of the Company are not proportional to their obligation to absorb the expected losses of the legal entity. The Company gave Navitas veto rights over significant decisions, which resulted in Soluna having fewer voting rights relative to their obligation to absorb the expected losses of the legal entity. | |
| b. | Substantially all of DVCC’s activities are conducted on behalf of the Company, which has disproportionally fewer voting rights. |
Also, the Company is the primary beneficiary due to having the power to direct the activities of DVCC that most significantly impact the performance of DVCC due to its role as the manager handling the day-to-day activities of DVCC as well as majority ownership and the obligation to absorb losses or gains of DVCC that could be significant to the Company.
Accordingly, the accounts of DVCC are consolidated in the accompanying financial statements.
The carrying amount of the VIE’s assets and liabilities was as follows for DVCC:
| (Dollars in thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Current assets: | ||||||||
| Cash and restricted cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaids and other current assets | ||||||||
| Other receivable, related party | ||||||||
| Total current assets | ||||||||
| Other assets- long term, related party | ||||||||
| Operating lease right-of-use assets | ||||||||
| Property, plant, and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities: | ||||||||
| Due to intercompany | $ | $ | ||||||
| Accrued expense | ||||||||
| Operating lease liability | ||||||||
| Current portion of debt | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability | ||||||||
| Total liabilities | $ | $ | ||||||
On July 22, 2024 (the “Effective Date”), Soluna Holdings, Inc. (the “Company”) closed financing for the Dorothy 2 project. This project involves Soluna Digital, Inc. (the “Developer”) and Soluna DVSL II ComputeCo, LLC (the “ComputeCo”), a special purpose vehicle initially owned solely by the Developer. They are collaborating on the development, design, procurement, and construction of a 48 MW modular data center (the “Project Dorothy 2”) in Silverton, Texas. This facility is owned by ComputeCo and operated by Soluna US Services, LLC, and may engage in cryptocurrency, batch processing, and other non-crypto related activities. It is adjacent to two other company modular data center projects at the same site.
Project Dorothy 2 is financed by Soluna2 SLC Fund
II Project Holdco LLC, an investment vehicle of Spring Lane Capital (“SLC”) with a capital contribution of up to $
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Project Dorothy 2 allows the Developer to invest in
ComputeCo, with the total ownership of the Developer and its affiliates capped at
On May 16, 2024, the Company secured $
As of March 31, 2025 SLC owns
The Company evaluated this legal entity under ASC 810, Consolidations and determined that this is not a VIE. This entity is a VOE primarily due to there being sufficient equity at risk to finance its activities, the equity holders as a group having the characteristics of a controlling financial interest and the entity is not structured with non-substantive voting rights. The Company’s consolidation model is based on the concept of power. Given the Company’s Class A membership interest, the Company has the ability to control the significant decisions made in the ordinary course of the business of ComputeCo. Even though SLC has a majority of the Class B membership, the Company holds all the Class A membership, which gives them the ability to control the significant decisions made in the ordinary course of business. The non-controlling shareholders do not hold substantive participating rights, voting rights or liquidation rights.
The carrying amount of the assets and liabilities was as follows for ComputeCo:
| (Dollars in thousands) | March 31, 2025 | December 31, 2024 | ||||||
| Current assets: | ||||||||
| Cash and restricted cash | $ | $ | ||||||
| Accounts receivable, intercompany | ||||||||
| Prepaids and other current assets | ||||||||
| Other receivable, related party | ||||||||
| Total current assets | ||||||||
| Other assets- long term, related party | ||||||||
| Operating lease right-of-use assets | ||||||||
| Deposits on equipment | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities: | ||||||||
| Accounts payable, trade | $ | $ | ||||||
| Accounts payable, related party | ||||||||
| Accrued expense | ||||||||
| Due to intercompany | ||||||||
| Operating lease liability | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability | ||||||||
| Total liabilities | $ | $ | ||||||
15. Segment Information
The Company applies ASC 280, Segment Reporting,
in determining its reportable segments. The Company has adopted ASU) 2023-07, Segment Reporting (Topic 280): Improvement to Reportable
Segment Disclosures (ASU 2023-07), which requires disclosure of incremental segment information on an annual and interim basis, primarily
through enhanced disclosures of significant segment expenses. Operating segments are aggregated into a reportable segment if the operating
segments have similar quantitative economic characteristics and if the operating segments are similar in the following qualitative characteristics:
(i) nature of products and services; (ii) nature of production processes; (iii) type or class of customer for their products and services;
(iv) methods used to distribute the products or provide services; and (v) if applicable, the nature of the regulatory environment. The
Company’s reportable segments are identified based on the types of service performed. The Company has
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The guidance requires that segment disclosures present the measure(s) used by the Chief Operating Decision Maker (“CODM”) to decide how to allocate resources and for purposes of assessing such segments’ performance. The Company’s CODM is composed of several members of its senior leadership team directed by the CEO and CFO who use revenue and cost of revenues which formulate gross profit (loss), as well as total general and administrative expenses of the reporting segments to assess the performance of the business of our reportable operating segments and allocate resources. Operating profit (loss) is used to evaluate actual results against expectations, which are based on comparable prior results, current budget, and current forecast. Non-cash items of depreciation and amortization are included within both costs of sales and general and administrative expenses, however only depreciation through the Company’s site levels are evaluated for segment performance.
In the adoption of ASU 2023-07, the most significant provision was for the Company to disclose significant segment expenses (ie: costs of revenue) that are regularly provided to the CODM. Utility costs, wages and benefit related costs, facility and equipment costs, and depreciation costs at the site level were determined to be significant segment expenses. The CODM only reviews general and administrative expenses by site level as a whole, and not by significant expenses. No operating segments have been aggregated to form the reportable segments. The Company does not allocate all assets to the reporting segments as these are managed on an entity-wide basis. Therefore, the Company does not separately disclose the total assets of its reportable operating segments.
The Cryptocurrency Mining segment generates revenue
from the cryptocurrency the Company earns through its Bitcoin mining activities, which is currently generated from Project Dorothy, and
previously from Project Sophie and Marie. The Data Center Hosting segment generated revenue from hosting services provided to third-party
Bitcoin mining customers at the Company’s data centers, which were previously at Project Marie and are currently from Project Sophie
and Project Dorothy. The High-Performance Computing Services segment may generate revenue from either the sale or lease of HPC assets
(such as Project Ada which leased GPUs), or from HPC/AI data centers to be leased to third-party HPC/AI customers. This segment began
generating revenue in December 2024, as Project Ada worked to build its customer base. With the termination of the HPE Agreement, revenue
was minimal for the three months ended March 31, 2025 and a majority of the costs associated with the termination of approximately $
The Company includes demand response revenue as a reconciling item of revenue and is not included within the three reportable segments. The Company utilizes its data centers to deliver demand response services to grid operators or utilities. Under these arrangements with a grid operator, the Company agrees to be available to ramp down a registered data center’s power consumption to a specific target level. In exchange, the grid pays the company a fee for this dispatch right, provided the Company can perform within certain parameters. The Company can be providing any type of service at the data centers whether it be Cryptocurrency Mining, Data Center Hosting, or AI to generate demand response service revenue.
The following table details revenue, cost of revenues, and other operating costs for the Company’s reportable segments for three months ended March 31, 2025 and 2024, and reconciles to net income (loss) on the condensed consolidated statements of operations:
For the three months ended March 31, 2025
| Cryptocurrency Mining | Data Center Hosting | High-Performance Computing Services | Total | |||||||||||||
| Segment Revenue: Revenue from external customers | $ | $ | $ | $ | ||||||||||||
| Reconciliation of revenue | ||||||||||||||||
Demand response revenue (a) | ||||||||||||||||
| Total consolidated revenue | ||||||||||||||||
| Less: Segment cost of revenue | ||||||||||||||||
| Utility costs | ||||||||||||||||
| Wages, benefits, and employee related costs | ||||||||||||||||
| Facilities and Equipment costs | ||||||||||||||||
Cost of revenue- depreciation | ||||||||||||||||
| Other cost of revenue* | ||||||||||||||||
| Total segment cost of revenue | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Segment operating income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
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For the three months ended March 31, 2024
| Cryptocurrency Mining | Data Center Hosting | High-Performance Computing Services | Total | |||||||||||||
| Segment Revenue: Revenue from external customers | $ | $ | $ | $ | ||||||||||||
| Reconciliation of revenue | ||||||||||||||||
| Demand response revenue (a) | ||||||||||||||||
| Less: Segment cost of revenue | ||||||||||||||||
| Utility costs | ||||||||||||||||
| Wages, benefits, and employee related costs | ||||||||||||||||
| Facilities and Equipment costs | ||||||||||||||||
| Cost of revenue- depreciation | ||||||||||||||||
| Other cost of revenue* | ||||||||||||||||
| Total segment cost of revenue | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Impairment on fixed assets | ||||||||||||||||
| Segment operating income | $ | $ | $ | $ | ||||||||||||
| (a) |
| * |
The following table presents the reconciliation of segment operating income (loss) to net income (loss) before taxes:
| For the three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Segment operating income | $ | $ | ||||||
| Reconciling Items: | ||||||||
| Elimination of intercompany costs | ||||||||
| Other revenue (a) | ||||||||
| General and administrative, exclusive of depreciation and amortization (b) | ( | ) | ( | ) | ||||
| General and administrative, depreciation and amortization | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain (loss) on debt extinguishment and revaluation, net | ( | ) | ||||||
| Loss on sale of fixed assets | ( | ) | ||||||
| Other (expense) income, net | ( | ) | ||||||
| Net loss before taxes | $ | ( | ) | $ | ( | ) | ||
| (a) |
| (b) |
Concentrations
During
the three months ended March 31, 2025 and March 31, 2024, aside from the Bitcoin Mining revenue generated as a result of the Company’s
participation in a mining pool and the Company’s participation in the demand response program, three customers contributed more
than 10% of the Company’s total consolidated revenue constituting approximately
For the three months ended March 31, 2025 and 2024, all of the Company’s cryptocurrency mining revenue was generated from Project Dorothy 1B (data center located in Silverton, Texas).
For the three months ended March 31, 2025 and March
31, 2024, approximately
16. Subsequent Events
At the Market Offering
On
April 29, 2025, the Company entered into an At the Market Offering Agreement (the “Agreement”) with H.C. Wainwright &
Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may offer and sell, from time to time, through Wainwright,
up to $
Notice of Failure to Satisfy a Continued Listing Rule or Standard- Nasdaq Minimum Bid Price Rule
On May 8, 2025, the Company received written notice (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) that the closing bid price for the Company’s common stock had been below $1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(a)(2).
The Notice has no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market.
In accordance with the Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days, or until November 4, 2025, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context requires otherwise in these condensed consolidated financial statements, the terms “SHI,” “Soluna,” the “Company,” “we,” “us,” and “our” refer to Soluna Holdings, Inc. together with its consolidated subsidiaries, “SDI” refers to Soluna Digital, Inc. “SCI” refers to Soluna Computing, Inc., formerly known as EcoChain, Inc., “Soluna Cloud” or “Cloud” refer to Soluna Cloud, Inc., and “SEI” refers to Soluna Energy, Inc. Other trademarks, trade names, and service marks used in this Quarterly Report on Form 10-Q are the property of their respective owners.
The following discussion of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and the related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2024 contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2025.
In addition to historical information, the following discussion contains forward-looking statements, which involve risk and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements. Important factors that could cause actual results to differ include those set forth in Part I Item 1A-Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and elsewhere in this Quarterly Report on Form 10-Q. Readers should not place undue reliance on our forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made and are not guarantees of future performance. Except as may be required by applicable law, we do not undertake or intend to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q. Please see “Statement Concerning Forward-Looking Statements” below.
Overview and Recent Developments
Our mission is to make renewable energy a global superpower using computing as a catalyst.
We develop and operate digital infrastructure that taps into a growing global opportunity: the convergence of renewable energy and High-Performance Computing (HPC). We call this model Renewable Computing™.
Across the world, vast amounts of clean energy go to waste due to curtailment. At the same time, there is a critical shortage of power for energy-intensive infrastructure like AI, HPC, and Bitcoin mining. Renewable Computing™ bridges this gap—unlocking stranded renewable energy and turning it into scalable computing power.
We build, own or co-own, and operate data centers co-located with wind, solar, and hydroelectric plants. Our modular and scalable design supports high-throughput, batchable applications such as Bitcoin, and soon, HPC/AI workloads. These facilities are managed by MaestroOS™, our proprietary operating system (“MaestroOS”), which continuously analyzes signals like local power pricing, weather, grid demand, and market conditions to optimize performance and economics.
This intelligent orchestration enables long-term asset monetization and attractive returns on invested capital. Our approach is purpose-built for the energy transition. We specialize in curtailment solutions, working closely with leading renewable energy developers to access underutilized, low-cost power. Our behind-the-meter model allows us to draw energy directly from the plant or the grid, while also providing demand response services—reducing costs and enhancing grid resilience.
A key strategic advantage is our model of co-locating data centers directly with renewable power generation assets. By building behind the meter, we are able to bypass long interconnection queues and source electricity directly from the generation site. This structure not only improves power economics, but also accelerates time-to-market—an increasingly important factor for companies with large, time-sensitive computing workloads such as AI and HPC.
With a repeatable strategy and a growing pipeline of projects, we are scaling a new category of digital infrastructure—one that energizes the grid, lowers computing costs, and advances a more sustainable future.
We operate across multiple business lines and generate revenue from four primary sources, as described below:
| ● | Bitcoin Mining Business – We mine Bitcoin through proprietary operations and joint ventures located at our data centers. | |
| ● | Bitcoin Hosting Business – We provide hosting services to third-party Bitcoin mining customers at our data centers. | |
| ● | High Performance Computing (HPC) Business – We offer colocation and hosting services for companies seeking to train large language models (LLMs), fine-tune existing artificial intelligence models, and deploy other compute-intensive AI or HPC workloads. | |
| ● | Demand Response Business – We leverage our data center infrastructure to provide demand response services to grid operators. |
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In 2024, our execution strategy was centered around four key initiatives:
| 1. | Project Optimization – Enhancing the profitability, operational efficiency, and customer mix of our operating data centers, while improving overall customer satisfaction. | |
| 2. | Pipeline Expansion – Increasing the number of curtailment assessments completed with power partners, advancing more projects to shovel-ready status, and executing additional project term sheets. | |
| 3. | Launch AI – Initiating the entry into the AI market, by starting project development activities focused on supporting artificial intelligence workloads, and the formation of strategic partnerships with major HPC original equipment manufacturers. | |
| 4. | Capital Formation – Pursuing financing opportunities to support key growth initiatives, including Project Dorothy 2 (“D2”) and Project Kati. |
Revenue Sources
Bitcoin Mining Business
We engage in proprietary Bitcoin mining, a process that verifies transactions and secures the Bitcoin blockchain. This process involves the use of specialized computing equipment to solve complex cryptographic algorithms. Miners compete to solve these algorithms; the first to do so is awarded a predetermined number of newly issued Bitcoins (the “Block Reward”) and any transaction fees associated with that block.
We participate in one or more mining pools—collaborative networks of miners who combine computing power to improve the probability of earning rewards. Block Rewards earned by the pool are distributed among participants based on each member’s proportional contribution. This model helps reduce revenue volatility compared to solo mining operations.
Our mining operations are energy-intensive and require significant computational resources. We operate data centers equipped with both proprietary and third-party hardware and software. Our proprietary data center operating system, MaestroOS, is used to optimize performance, manage power consumption, and increase operational efficiency.
Revenue from Bitcoin mining consists of Block Rewards and transaction fees and is recognized upon receipt in accordance with applicable accounting guidance. Upon receipt, all digital assets are promptly converted into U.S. dollars through the Coinbase cryptocurrency exchange.
The profitability of this business is affected by several variables, including the market price of Bitcoin, global network hash rate, mining difficulty, electricity and infrastructure costs, and mining pool fees. In addition, Bitcoin undergoes a periodic “halving” event approximately every four years, reducing the Block Reward and potentially impacting future revenue. For the three months ended March 31, 2025, our Bitcoin Mining Business represented approximately 51% of total revenue.
Bitcoin Hosting Business
We provide colocation and hosting services for third-party Bitcoin mining customers at our data centers. Customers contract space based on their power requirements. Our current customer base includes several large-scale (“Hyperscale”) Bitcoin miners. Contracts typically range from 12 to 24 months in duration.
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We offer two primary commercial structures:
| 1. | Fixed-Fee Model – Customers pay a fixed fee based on the volume of energy consumed. | |
| 2. | Profit-Share Model – Customers pay a share of the profits from their mining activity, with power costs passed through. |
For the three months ended March 31, 2025, our Bitcoin Hosting Business accounted for approximately 40% of total revenue. Revenue in this business was concentrated among a small number of customers. For the three months ended March 31, 2025, three customers made up approximately 83% of hosting revenue and 33% of total revenue.
High Performance Computing (HPC) Business
In June 2024, we began providing GPU-as-a-Service in partnership with Hewlett Packard Enterprise Company (“HPE”), offering GPU resources to startups, enterprises, and GPU marketplaces for a fee. As further described below in “Recent Developments”, we terminated our agreement with HPE.
We are currently developing new infrastructure projects intended to support AI and HPC workloads. These efforts include engagement with potential joint venture partners, conducting site and feasibility studies, securing access to power and land, and performing other early-stage development activities.
Our first planned AI/HPC colocation project is Project Kati, which is in advanced development. Additional projects, including the announced Project Rosa, are also in progress. For the fiscal year 2024 and the three months ended March 31, 2025, we generated minimal revenue from our HPC Business.
Demand Response Business
We provide demand response services to grid operators and utilities by leveraging our data centers as dispatchable energy resources. In select states where we operate, our data centers are enrolled in ancillary services programs that support grid reliability.
Under these programs, we commit to reducing a facility’s power consumption to a predetermined level when called upon by the grid operator. In return, we receive compensation for maintaining this dispatch capability, provided we meet specific performance criteria. For example, to qualify for compensation in a given period—typically monthly—the data center must meet minimum uptime and availability requirements.
For the three months ended March 31, 2025, our Demand Response Business represented approximately 9% of total revenue.
Operations and Project Pipeline
As of March 31, 2025, we operate approximately 75 MW of capacity across two active sites located in Murray, Kentucky and Silverton, Texas. An additional 48 MW is under construction at our D2 project site, and as of March 31, 2025, we had over 623 MW of facilities in advanced development or near shovel-ready status. In total, our project pipeline includes over 2.6 gigawatts (GW) of renewable energy-powered data center developments.
A summary of our pipeline, current and anticipated operating locations are as follows (as of March 31, 2025):
| Project Name | Location | MW | Status | Line of Business | Power Source | |||||
| Sophie | Murray, KY | 25 | Operating | Bitcoin Hosting | Grid / Hydro | |||||
| Dorothy 1A | Silverton, TX | 25 | Operating | Bitcoin Hosting | Wind | |||||
| Dorothy 1B | Silverton, TX | 25 | Operating | Bitcoin Mining | Wind | |||||
| Dorothy 2 | Silverton, TX | 48 | In Construction | Bitcoin Hosting | Wind | |||||
| Grace | Silverton, TX | 2 | Development | HPC | Wind | |||||
| Kati | Willacy County, TX | 166 | Development | Bitcoin Hosting / AI or HPC | Wind | |||||
| Rosa | Snyder, TX | 187 | Development | Bitcoin Hosting / AI or HPC | Wind | |||||
| Hedy | Cameron County, TX | 120 | Development | Bitcoin Hosting / AI or HPC | Wind | |||||
| Ellen | Cameron County, TX | 100 | Development | Bitcoin Hosting / AI or HPC | Wind |
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We manage our data center operations using MaestroOS. MaestroOS continuously monitors and analyzes a variety of real-time signals, including local electricity prices, weather conditions, Bitcoin market metrics, and grid demand signals, to optimize facility performance. In addition, MaestroOS is used to coordinate and execute our participation in demand response programs.
We finance the development and construction of our data centers through a combination of public equity offerings, debt instruments, and partnerships with project-level capital providers. As of December 31, 2024, we had two primary project-level financing partners:
| ● | Spring Lane Capital (“SLC”) – A private venture capital firm with approximately $450 million in assets under management, focused on sustainability-oriented infrastructure. On May 3, 2022, SLC committed $35 million to finance Soluna’s Project Dorothy 1A (“D1A”). On July 22, 2024, SLC committed an additional $30 million to support the development of D2. | |
| ● | Navitas West Texas Investments SPV, LLC (“Navitas”) – an investment vehicle organized by Navitas Global, a private equity firm focused on sustainable Bitcoin mining. On May 9, 2023, we entered into a strategic partnership with Navitas to support mining operations at Project Dorothy 1B (“D1B”). |
Project Dorothy
During 2023, we transitioned our flagship data center Project Dorothy from construction to operations. This data center is co-located with Briscoe Wind Farm (“Briscoe”), a 150 MW wind power generation facility in Silverton, Texas. The project comprises three phases, D1A, and D1B, each 25 MW facilities, and D2 (48 MW).
Project Dorothy 1A
D1A is focused on Bitcoin Hosting for some of the industry’s hyperscale miners. There are approximately 7,800 Bitcoin miners installed at D1A, which as of March 31, 2025, resulted in a hashrate of approximately 900 TH/s. For the year ended December 31, 2024, D1A consumed over 45,700 MWh of Curtailed Energy and for the three months ended March 31, 2025, D1A consumed over 11,900 MWh of Curtailed Energy.
D1A was constructed in partnership with SLC, a leading venture capital firm focused on sustainability solutions. SLC owns approximately 85% of the Class B Membership Units of D1A, while we own 15% of the Class B Membership Units of D1A and own 100% of the Class A Membership Units of D1A. After SLC achieves an 18% Internal Rate of Return hurdle, Soluna retains 50% of the profits on D1A.
Project Dorothy 1B
D1B is focused on proprietary Bitcoin Mining. There are approximately 7,700 Bitmain Antminer S19s, S19j Pro and S19j Pro+ machines installed, resulting in an installed hashrate of 817 PH/s. For the year ended December 31, 2024, D1B consumed over 44,500 MWh of Curtailed Energy and for the three months ended March 31, 2025, D1B consumed over 13,000 MWh of Curtailed Energy. D1B is co-owned by Navitas, which owns approximately 49% of D1B, while we own the remaining 51%.
In November 2023, we completed registration of Project Dorothy in one of the ERCOT’s Demand Response Services (“DRS”) programs. This designation positioned Project Dorothy as a contributor to grid flexibility and resilience in the Texas power market, while also enabling us to diversify our revenue streams.
Under the DRS program, we commit to maintaining a specified level of curtailment capacity—measured as load reduction availability—on a monthly basis. When called upon by ERCOT, we are required to reduce the facility’s power consumption by the committed amount. In exchange, we receive compensation for maintaining this curtailment readiness, regardless of whether an actual dispatch occurs.
Participation in the program allows us to generate incremental revenue and offset power costs at Project Dorothy, enhancing its cost-efficiency. As a result, the facility ranks among the lowest-cost operators in the sector. Since registration, Project Dorothy has successfully fulfilled its obligations in the Winter, Spring, and Summer DRS periods, and is currently enrolled in the Fall standby period.
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Project Dorothy 2
We began planning for the 48 MW expansion of Project Dorothy in 2023 – known as Project Dorothy 2. We partnered with SLC who agreed to finance up to $30 million of the project cost. We closed the initial financing contribution and operation agreement with SLC in July 2024 and broke ground in the third quarter of 2024. Initial energization and ramp-up is expected by the end of the second quarter of 2025. This will enable the commencement of the commissioning of the first of 3 phases, each of 16MW, that will occur between May and October 2025 when the site is expected to be fully operational. As each phase is commissioned, it will begin to generate revenue, both due to Bitcoin Hosting and Demand Response Services. D2 features a superior financial waterfall structure and enhanced management and development fees for Soluna compared to D1A, allowing us to benefit from improved income once the facility is operational.
Project Grace
Project Grace is a 2 MW project located at the D2 site focused on next generation data center designs for AI. It contemplates new direct liquid cooling technologies, proprietary building and power designs – called Helix.
Project Sophie
Project Sophie is a 25 MW data center, based in Murray, Kentucky connected to the grid (“Sophie”). The project has a Power Purchase Agreement (“PPA”) that requires the curtailment of the site during certain hours of the day to help balance the Kentucky grid. We own 100% of the facility, which was completed in 2021.
Sophie is focused on Bitcoin Hosting of multiple large customers. The data center generates revenue via a combination of fixed services fees and profit share, while energy cost is passed through. As of March 31, 2025, there are approximately 8,600 Bitcoin miners installed or contracted to be installed, resulting in an installed hashrate of approximately 1.07 EH/s and achieved a PUE of 1.03.
Project Kati
We are developing Project Kati in Willacy County, Texas, which is expected to be developed into 166 MW of data centers for HPC, Bitcoin Hosting and other computing-intensive applications. It is co-located with a 272.6MW wind farm in Texas. We have completed the necessary studies for the ERCOT planning phase, which is the last formal step to secure approvals by regulatory agencies or grid operators, such as ERCOT in Texas, to proceed with project construction and commissioning. We have also completed the necessary amendments to the interconnection agreements with American Electric Power, the transmission service provider. We have also secured land, contingent on reaching final agreement with local government and schools regarding taxation, for the project and have started capital formation activities.
Project Rosa
We are developing Project Rosa in Snyder, Texas, which is expected to be up to 187 MW of data center capacity for AI and Bitcoin Hosting and other computing-intensive applications. It will be co-located with a 242.5 MW wind farm in Texas. We have signed term sheets for both power and land purchase agreements in connection with this project.
Our Growth Strategy
Our growth strategy is focused on expanding our pipeline of renewable energy-powered data center projects and accelerating their development through joint ventures, co-ownership structures, and other strategic partnerships. Over time, we intend to increase our ownership stake in these projects to enhance long-term value.
We believe our renewable energy project pipeline—currently estimated at over 2.6 gigawatts (GW)—represents our most valuable strategic asset. We believe this pipeline has the potential to support the development of approximately 300 to 400 MW of new digital infrastructure annually over the next six to eight years.
In parallel with new project development, we are refining our operational model across existing sites to position ourselves as a partner of choice for both AI/HPC colocation and Bitcoin Hosting.
We continue to grow our pipeline by increasing the number of curtailment assessments completed with power generation partners. These assessments serve as a precursor to securing exclusive Power Purchase Agreements (“PPAs”), acquiring or leasing land, and executing other pre-construction development activities necessary to advance projects to shovel-ready status.
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In 2025, we are focused on advancing the following key initiatives:
| ● | Power Pipeline Expansion – We plan to scale our operational footprint by energizing D2 and commencing construction of the 83 MW Bitcoin Hosting phase of Project Kati. Together, these projects are expected to advance our path toward over 200 MW of operational capacity under management. | |
| ● | AI Infrastructure Development – We aim to form joint ventures with leading U.S. data center developers, including top global infrastructure funds and hyperscaler-aligned development and financing partners. Our initial efforts will focus on launching the 83 MW AI phase of Project Kati, with the goal of establishing our first portfolio of advanced data centers purpose-built for AI workloads. | |
| ● | Project Optimization – We continue to prioritize improvements in profitability, operational efficiency, customer mix, and satisfaction across our existing data centers. Our goal is to drive consistent execution and deliver best-in-class performance for our customers using a new service model called Relentless Stewardship. | |
| ● | Capital Formation – We plan to pursue targeted capital-raising initiatives to support both near-term project development and long-term growth across our platform. |
Recent Developments
ATM Agreement
On April 29, 2025, the Company entered into an At the Market Offering Agreement (the “Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may offer and sell, from time to time, through Wainwright, up to $3.75 million of shares of common stock. The Company will pay Wainwright a commission of 3.0% of the aggregate gross proceeds from each sale of shares and has agreed to provide Wainwright with customary indemnification and contribution rights.
The shares of common stock sold under the Agreement will be offered and sold pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-286638) filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2024, and declared effective by the SEC on April 29, 2025.
Soluna Cloud – Termination of HPE Agreement
Soluna launched Project Ada- its GPU-as-a-Service business via Soluna Cloud, Inc. (“Soluna Cloud”) earlier in 2024 in order to achieve two primary goals:
| 1. | Gain commercial experience in the AI/HPC market in support of future data center development focused on large language models (LLMs) and other AI workloads. | |
| 2. | Capitalize on lower-cost capital to pursue high-growth revenue opportunities in the compute infrastructure market. |
As a point of entry into Project Ada, Soluna AL CloudCo, LLC (“CloudCo”), a subsidiary of Soluna Cloud, entered into the HPC & AI Cloud Services Agreement and HPE Greenlake Services Custom Statement of Work with Hewlett Packard Enterprise Company (“HPE”) on June 18, 2024 (together with the associated Statement of Work, the “HPE Agreement”), that provided data center and cloud services for artificial intelligence (“AI”) and supercomputing applications, utilizing NVIDIA H100 Graphic Processing Units (“GPUs”).
At the time of launch, the market for NVIDIA H100 GPUs was characterized by constrained supply and strong pricing, which aligned with the economics of the fixed-cost HPE Agreement. However, by the end of 2024, the GPU market shifted significantly. Lead times for NVIDIA H100 GPUs shortened from over 50 weeks in 2023 to 8–12 weeks by the end of 2024, easing supply constraints and reducing urgency among buyers. At the same time, market demand shifted toward larger GPU clusters than those available under the HPE Agreement, making it difficult to secure long-term, reserved contracts at profitable rates. The expected release of NVIDIA’s H200 Blackwell architecture also caused some customers to delay purchases. Although release timelines were impacted by design issues, the prospect of next-generation technology contributed to hesitancy in NVIDIA H100 GPU acquisition. Competitive pressure from alternative GPU vendors further softened demand and market pricing. As a result, Soluna Cloud’s business progressed more slowly than anticipated. Revenues were first recognized in December 2024, with modest growth in early 2025. During the last six months, our engagement with potential financing and operating partners for AI/HPC confirmed that rather than continuing the effort to lease and resell GPU/HPC chips, refocusing on our core strength - creating, developing, financing and operating our extensive pipeline of potential bitcoin and AI hosting facilities - will create far more value for us and our shareholders.
In light of these developments, on March 24, 2025, CloudCo sent notice of its termination of the HPE Agreement for convenience. Subsequently, on March 26, 2025, HPE sent notice of its termination of the HPE Agreement for cause, effective immediately, due to CloudCo’s material breach of its payment obligations that remained uncured for more than thirty (30) days. In accordance with the terms of the HPE Agreement, upon a termination for cause by HPE, CloudCo must pay HPE the remaining payment stream under the term of the HPE Agreement of approximately $19.3 million as of March 31, 2025, including all upfront payments and monthly charges, plus any fees incurred for the terminated Services (as defined in the HPE Agreement).
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June SPA Modification
On June 20, 2024, pursuant to the terms and subject to the conditions of a Note Purchase Agreement (the “June SPA”) by and among (i) CloudCo, (ii) Soluna Cloud, (iii) the Company and (iv) the accredited investor named therein (the “Investor” and collectively, the “Note Parties), CloudCo issued to the Investor a secured promissory note in a principal amount equal to $12.5 million (the “Note”).
On March 23, 2025, the Note Parties entered into a Modification Agreement (the “Modification Agreement”) to, among other things, (i) provide for the deposit of 1,000,000 shares (the “Escrow Shares”) of our common stock into an escrow account maintained by Northland Securities, Inc., pursuant to an escrow agreement (as further described below), (ii) provide for the issuance to the Investor of a warrant to purchase shares of our common stock upon the release by the Investor of its lien on our property, (iii) amend the payment schedule of the Note to provide (a) for each of the six scheduled payments occurring after the earlier of the effectiveness of a registration statement for the resale of the Registrable Securities (as defined below) or the date that the Registrable Securities may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), without any information requirements, the amount of principal and interest payable on such date shall be reduced by 50% (the aggregate amount of the six months of such reductions, the “Specified Amount”) and (b) if the aggregate amount of payments on the Note applied from the proceeds of the sale of the Escrow Shares on or prior to the last six scheduled payments is less than the Specified Amount (such difference, the “Make Whole Amount”), than the amount of each of the remaining scheduled payments shall be increased by an amount equal to the Make Whole Amount divided by the number of remaining scheduled payments, (iv) modify the Note such that the Note is now convertible into up to 2,500,000 shares (the “Conversion Shares”) of our common stock based on a conversion price of $5.00, (v) amend the Note to provide that we will be a direct co-obligor with CloudCo under the Note, and (vi) amend the SPA to allow us to organize or incorporate any subsidiary, over which we shall have voting or beneficial control, which is being formed with the intent to engage in a business or line of business substantially similar to that of Soluna Cloud or the Company, without first paying all of the principal and interest due under the Note and without first obtaining Investor’s prior written consent.
The net proceeds from dispositions of the Escrow Shares (i) at a price of up to $4.00 per share shall be applied to reduce the outstanding principal balance of the Note and (ii) at a price greater than $4.00 per share shall be applied first to reduce the outstanding principal balance of the Note in an amount equal to $4.00 per share of our common stock and then to the Investor. The outstanding share numbers in this filing do not give effect to the 1,000,000 Escrow Shares to be deposited by the Company in escrow.
Also under the Modification Agreement, we agreed to register for resale the Escrow Shares and Conversion Shares (together, the “Registrable Securities”) as promptly as commercially practicable, as determined by us, following the registration for resale of certain other securities. We also agreed to register for resale the shares of our common stock issuable upon exercise of the Warrant as promptly as commercially practicable, as determined by us, after the issuance of the Warrant.
Subsequently, we and the Investor mutually agreed that the 1,000,000 Escrow Shares would instead be issued directly to the Investor, and, on April 29, 2025, we issued 1,000,000 shares of common stock to the Investor.
Galaxy Note
On March 12, 2025, Soluna SW LLC (the “SW Borrower”), a Delaware limited liability company and a subsidiary of Soluna SW Holdings LLC (“SW Holdings”), a Delaware limited liability company and a subsidiary of Soluna Digital, Inc. (“SDI”), a Nevada corporation and a subsidiary of the Company, entered into a Loan Agreement (the “Galaxy Loan Agreement”) with SW Holdings and Galaxy Digital LLC (the “Lender”). The Galaxy Loan Agreement comprises a term loan facility in the principal amount of $5.0 million (the “Term Loan Facility”). The Term Loan Facility bears interest at 15.0% per annum, unless an Event of Default (as defined therein) has occurred and is continuing, in which case the Galaxy Term Loan Facility shall bear interest at a rate of 5% above the then applicable interest rate. The Term Loan Facility will mature on March 12, 2030 and will be paid over a five-year term.
SEPA
On August 12, 2024, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD., a Cayman Islands exempt limited company (“YA”). Pursuant to the terms of the SEPA, we agreed to issue and sell to YA, from time to time, and YA agreed to purchase from us, up to $25 million of shares of our common stock (the “SEPA Shares”). We and YA also entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which we agreed to prepare and file with the SEC a Registration Statement on Form S-1, registering the resale of the SEPA Shares. On November 12, 2024, we filed a registration statement on Form S-1 (File No. 333-282559) with the SEC for the resale by YA of 3,000,000 SEPA Shares, which was declared effective by the SEC on February 5, 2025. As of the date of this report, we have issued and sold approximately 1.5 million shares of our common stock to YA pursuant to the SEPA for aggregate net proceeds to us of approximately $2.0 million. We intend to continue issuing shares of our common stock to YA pursuant to the SEPA in future periods.
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Project Specific Developments
Project Hedy
We have signed a term sheet for power for Project Hedy, a new 120 MW data center co-located with a 200 MW wind farm in South Texas. The wind farm is owned by a new power partner–a multinational conglomerate that focuses on developing and managing sustainable infrastructure solutions, with a strong emphasis on renewable energy, water management, and services, aiming to contribute to a low-carbon economy and a better planet.
Project Ellen
We have signed a term sheet for power for Project Ellen, a new 100 MW data center co-located with a 145 MW wind farm in South Texas. The wind farm is owned by a new power partner—a leader in renewable energy and sustainable infrastructure in the U.S. and internationally. Project Ellen will be developed in two 50MW phases, leveraging wind energy to drive sustainable computing at scale.
Consolidated Results of Operations (unaudited)
Consolidated Results of Operations (unaudited) for the Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024.
The following table summarizes changes in the various components of our net loss during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.
| (Dollars in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 |
$ Change |
% Change |
||||||||||||
| Cryptocurrency mining revenue | $ | 2,999 | $ | 6,396 | $ | (3,397) | (53) | % | ||||||||
| Data hosting revenue | 2,402 | 5,278 | (2,876) | (54) | % | |||||||||||
| Demand response service revenue | 507 | 875 | (368) | (42) | % | |||||||||||
| High-performance computing service revenue | 28 | - | 28 | 100 | % | |||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Cost of cryptocurrency mining revenue, exclusive of depreciation | 1,954 | 1,841 | 113 | 6 | % | |||||||||||
| Cost of data hosting revenue, exclusive of depreciation | 1,327 | 2,251 | (924) | (41) | % | |||||||||||
| Cost of high-performance computing service revenue | 7 | - | 7 | 100 | % | |||||||||||
| Cost of cryptocurrency mining revenue- depreciation | 1,074 | 1,087 | (13) | (1) | % | |||||||||||
| Cost of data hosting revenue- depreciation | 401 | 436 | (35) | (8) | % | |||||||||||
| General and administrative expenses, exclusive of depreciation and amortization | 5,946 | 3,994 | 1,952 | 49 | % | |||||||||||
| Depreciation and amortization associated with general and administrative expenses | 2,404 | 2,403 | 1 | - | % | |||||||||||
| Impairment on fixed assets | - | 130 | (130 | ) | (100 | )% | ||||||||||
| Operating (loss) profit | (7,177 | ) | 407 | (7,584 | ) | (1,863) | % | |||||||||
| Other (expense) income, net | (315 | ) | 23 | (338 | ) | (1,470) | % | |||||||||
| Interest expense | (838 | ) | (424 | ) | (414) | 98 | % | |||||||||
| Loss on sale of fixed assets | - | (1 | ) | 1 | (100 | )% | ||||||||||
| Gain (loss) on debt extinguishment and revaluation, net | 551 | (3,097 | ) | 3,648 | (118) | % | ||||||||||
| Loss before income taxes | (7,779 | ) | (3,092 | ) | (4,687 | ) | 152 | % | ||||||||
| Income tax benefit, net | 425 | 548 | (123) | (22) | % | |||||||||||
| Net loss | (7,354 | ) | (2,544 | ) | (4,810 | ) | 189 | % | ||||||||
| Net income attributable to non-controlling interest, net | (202 | ) | (2,710 | ) | 2,508 | (93) | % | |||||||||
| Net loss attributable to Soluna Holdings, Inc. | $ | (7,556 | ) | $ | (5,254 | ) | $ | (2,302 | ) | 44 | % | |||||
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The following table summarizes the balances for the project sites for cryptocurrency mining revenue, data hosting revenue, high-performance computing service revenue, demand response revenue, cost of cryptocurrency mining revenue, exclusive of depreciation, cost of data hosting revenue, exclusive of depreciation, cost of high-performance computing services, and cost of depreciation during the three months ended March 31, 2025:
| Soluna Digital | Soluna Cloud | |||||||||||||||||||||||||||
| (Dollars in thousands) | Project Dorothy 1B | Project Dorothy 1A | Project Sophie | Other | Soluna Digital Subtotal | Project Ada | Total | |||||||||||||||||||||
| Cryptocurrency mining revenue | $ | 2,999 | $ | - | $ | - | $ | - | $ | 2,999 | $ | - | $ | 2,999 | ||||||||||||||
| Data hosting revenue | - | 1,371 | 1,031 | - | 2,402 | - | 2,402 | |||||||||||||||||||||
| Demand response services | - | - | - | 507 | 507 | - | 507 | |||||||||||||||||||||
| High-performance computing services | - | - | - | - | - | 28 | 28 | |||||||||||||||||||||
| Total revenue | 2,999 | 1,371 | 1,031 | 507 | 5,908 | 28 | 5,936 | |||||||||||||||||||||
| Cost of cryptocurrency mining, exclusive of depreciation | $ | 1,954 | - | - | - | 1,954 | - | 1,954 | ||||||||||||||||||||
| Cost of data hosting revenue, exclusive of depreciation | - | 885 | 372 | 70 | 1,327 | - | 1,327 | |||||||||||||||||||||
| Cost of high-performance computing service revenue | - | - | - | - | - | 7 | 7 | |||||||||||||||||||||
| Cost of cryptocurrency mining revenue- depreciation | 1,074 | - | - | - | 1,074 | - | 1,074 | |||||||||||||||||||||
| Cost of data hosting revenue- depreciation | - | 295 | 106 | - | 401 | - | 401 | |||||||||||||||||||||
| Total cost of revenue | 3,028 | 1,180 | 478 | 70 | 4,756 | 7 | 4,763 | |||||||||||||||||||||
| Gross (loss) profit | $ | (29 | ) | $ | 191 | $ | 553 | $ | 437 | $ | 1,152 | $ | 21 | $ | 1,173 | |||||||||||||
The following table summarizes the balances for the project sites for cryptocurrency mining revenue, data hosting revenue, high-performance computing service revenue, demand response revenue, cost of cryptocurrency mining revenue, exclusive of depreciation, cost of data hosting revenue, exclusive of depreciation, cost of high-performance computing services, and cost of depreciation during the three months ended March 31, 2024:
| Soluna Digital | Soluna Cloud | |||||||||||||||||||||||||||
| (Dollars in thousands) | Project Dorothy 1B | Project Dorothy 1A | Project Sophie | Other | Soluna Digital Subtotal | Project Ada | Total | |||||||||||||||||||||
| Cryptocurrency mining revenue | $ | 6,396 | $ | - | $ | - | $ | - | $ | 6,396 | $ | - | $ | 6,396 | ||||||||||||||
| Data hosting revenue | - | 3,542 | 1,736 | - | 5,278 | - | 5,278 | |||||||||||||||||||||
| Demand response services | - | - | - | 875 | 875 | - | 875 | |||||||||||||||||||||
| High-performance computing services | - | - | - | - | - | - | - | |||||||||||||||||||||
| Total revenue | 6,396 | 3,542 | 1,736 | 875 | 12,549 | - | 12,549 | |||||||||||||||||||||
| Cost of cryptocurrency mining, exclusive of depreciation | $ | 1,841 | - | - | - | 1,841 | - | 1,841 | ||||||||||||||||||||
| Cost of data hosting revenue, exclusive of depreciation | - | 1,737 | 514 | - | 2,251 | - | 2,251 | |||||||||||||||||||||
| Cost of high-performance computing service revenue | - | - | - | - | - | - | - | |||||||||||||||||||||
| Cost of cryptocurrency mining revenue- depreciation | 1,084 | - | - | 3 | 1,087 | - | 1,087 | |||||||||||||||||||||
| Cost of data hosting revenue- depreciation | - | 284 | 150 | 2 | 436 | - | 436 | |||||||||||||||||||||
| Total cost of revenue | 2,925 | 2,021 | 664 | 5 | 5,615 | - | 5,615 | |||||||||||||||||||||
| Gross profit | $ | 3,471 | $ | 1,521 | $ | 1,072 | $ | 870 | $ | 6,934 | $ | - | $ | 6,934 | ||||||||||||||
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Cryptocurrency Mining Revenue: Cryptocurrency mining revenue decreased between the three months ended March 31, 2025 compared to the three months ended March 31, 2024 related to the Bitcoin halving event that occurred in April 2024, which reduced the block reward by 50%, which was offset by a change in bitcoin price. We were rewarded 32.5 Bitcoins for the three months ended March 31, 2025 compared to 119.6 Bitcoins for the three months ended March 31, 2024.
Data Hosting Revenue: Cryptocurrency hosting services provide energized space and operating services to third-party mining companies who locate their mining hardware at our mining locations- D1A and Project Sophie. Services include fees for hosting the miners which could be fixed fees or profit sharing, as well as potential additional fees for services provided such as installation charges or other services fees. The decrease for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 relate to the Bitcoin halving event that occurred in April 2024, which drove down the dollar Petahash (“PH”) per day. Also, in December 2024, one of our largest customers exited leaving 20 MW of capacity to fill that was ultimately filled slowly over December 2024 and into March 2025.
Demand Response Service: Demand response service revenue was lower in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 due to the ERCOT Clearing price decreasing by approximately $30 per MW between the comparable periods, in addition to the capacity that we bid on was reduced by 7 MW from 38 MW capacity for the first quarter of 2024 compared to 31 MW capacity for the first quarter of 2025.
Cost of Cryptocurrency Mining Revenue, exclusive of depreciation: Cost of cryptocurrency mining revenue includes direct utility costs, site overhead expenses, and overhead costs that relate to the operations of our cryptocurrency mining facilities in Kentucky and Texas.
The increase in costs for the three months ended March 31, 2025 compared to three months ended March 31, 2024 relate mainly to slight increases in operating and electricity costs.
Cost of Data Hosting Revenue, exclusive of depreciation: Cost of data hosting revenue includes utility charges, site overhead expenses, and other charges.
Cost of data hosting decreased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 mainly due to a change in hosting contracts mix, in which contracts were entered that included electricity passthrough contracts replacing fixed rate volume contracts.
Cost of High-Performance Computing Services: Cost of high-performance computing services include operating expenses related to high performance computing services. The costs of high-performance computing services were not material for the three months ended March 31, 2025 and there were no services for the three months ended March 31, 2024. We do note that due to the termination of the HPE Agreement on March 24, 2025, we recognized a loss of approximately $28.6 million for the year ended December 31, 2024, which represented the remaining obligations.
General and Administrative Expenses, exclusive of depreciation and amortization: General and administrative expenses, exclusive of depreciation and amortization include cash and non-cash compensation, benefits, and related costs in support of our general corporate operations, including general management, finance and accounting, human resources, marketing, information technology, corporate development, and legal services.
| ● | Stock based compensation expense was $1.8 million for the three months ended March 31, 2025 compared to approximately $656 thousand in relation to the three months ended March 31, 2024, an increase of approximately $1.2 million. Stock based compensation expense increased approximately $1.7 million during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily related to grants issued to directors and officers in April, June, September, and December of 2024 and grants issued to employees in December of 2024, however this increase was offset by approximately $500 thousand during the comparable periods related to grants that fully vested during 2024 and in January of 2025, as well as reductions in expense related to the modification accounting of grants that occurred in the second quarter of 2024. | |
| ● | Professional fees increased approximately $832 thousand in relation to legal fees associated with registration of the SEPA and other SEC regulatory and compliance matters, in addition to higher fees associated with consulting matters. | |
| ● |
Other changes in general and administrative expenses were not material. |
Depreciation and Amortization associated with general and administrative expenses: Depreciation and amortization expense was comparable for the three months ended March 31, 2025 and three months ended March 31, 2024 in which the balances totaled approximately $2.4 million, respectively. The balances mainly related to amortization expense related to the strategic pipeline contract that was acquired in October 2021.
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Interest expense: Interest expense for the three months ended March 31, 2025 was approximately $837 thousand compared to the $424 thousand for the three months ended March 31, 2024. See table below noting the difference mainly relates to the new loans entered into in fiscal year 2024 and 2025 (June and July SPA, Galaxy Loan, and equipment loan), which includes amortization of deferred financing costs.
| (Dollars in thousands) | Three months ended March 31, | |||||||
| 2025 | 2024 | |||||||
| NYDIG interest expense | $ | 357 | $ | 361 | ||||
| Navitas interest expense | 2 | 63 | ||||||
| June SPA interest expense | 389 | - | ||||||
| July SPA interest expense | 33 | - | ||||||
| Galaxy loan interest expense | 42 | - | ||||||
| Equipment loan interest expense | 15 | - | ||||||
| Interest expense | $ | 838 | $ | 424 | ||||
Gain (Loss) on Debt Extinguishment and Revaluation, net: For the three months ended March 31, 2025, there was a gain on extinguishment of debt of approximately $551 thousand. The gain was in relation to the fulfillment of the Assignment and Assumption Agreement for the Additional Notes on March 14, 2025.
For the three months ended March 31, 2024, the Company incurred a $3.1 million loss on debt extinguishment and revaluation. On February 28, 2024, the Company entered into the Fourth Amendment with the Noteholders and lowered the conversion price and issued new warrants and repriced additional warrants with certain exercise features. The issuance and reprice of warrants created a loss of extinguishment of debt of approximately $5.8 million, in which was offset by a gain on debt revaluation of the convertible debt of approximately $1.3 million as of February 28, 2024 (date of Fourth Amendment) and March 31, 2024 due to several factors including assumptions on conversions and payouts, annual volatility and stock price conditions on the dates of valuations. In addition, there was a revaluation of the warrant liability as of March 31, 2024, in which created a gain on revaluation of approximately $1.5 million.
Other expense (income), net: Other expense, net increased by approximately $338 thousand for the 3 months ended March 31, 2025 compared to March 31, 2024. For the three months ended March 31, 2025, the Company incurred approximately $118 thousand in fair value adjustments in relation to timing of the SEPA draws to when the shares were issued, and a $205 thousand financing expense in relation to consent fees for the SEPA draws. The Company had nominal other income for the three months ended March 31, 2024 of $23 thousand.
Net income attributable to non-controlling interest: Net income attributable to non-controlling interest for the three months ended March 31, 2025 was significantly lower than the three months ended March 31, 2024, due mainly due the variances in gross profit related to D1A and D1B, noted above mainly to the halving event in April 2024, which created about approximately $2.2 million variance between periods in non-controlling interest. In addition, in the third quarter of 2024, D2 began site development creating an additional cost of approximately $311 thousand in non-controlling interest, in which there is no comparable costs for the three months ended March 31, 2024.
Non-GAAP Measures
To supplement our consolidated condensed financial statements included in this quarterly report presented under U.S. generally accepted accounting principles (“GAAP”), we are presenting certain non-GAAP financial measures. We are providing these non-GAAP financial measures to disclose additional information to facilitate the comparison of past and present operations by providing perspective on results absent one-time or significant non-cash items. We utilize these measures in the business planning process to understand expected operating performance and to evaluate results against those expectations. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our business operating results regarding factors and trends affecting our business and provide a reasonable basis for comparing our ongoing results of operations.
These non-GAAP financial measures are provided as supplemental measures to our performance measures calculated in accordance with GAAP and therefore, are not intended to be considered in isolation or as a substitute for comparable GAAP measures. Further, these non-GAAP financial measures have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. Because of the non-standardized definitions of non-GAAP financial measures, we caution investors that the non-GAAP financial measures as used by us in this quarterly report have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. Further, investors should be aware that when evaluating these non-GAAP financial measures, these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, from time to time in the future there may be items that we may exclude for purposes of our non-GAAP financial measures and we may in the future cease to exclude items that we have historically excluded for purposes of our non-GAAP financial measures. Likewise, we may determine to modify the nature of the adjustments to arrive at our non-GAAP financial measures. Investors should review the non-GAAP reconciliations provided below and not rely on any single financial measure to evaluate our business.
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EBITDA and Adjusted EBITDA
In addition to financial measures calculated in accordance with GAAP, we also use “EBITDA” and “Adjusted EBITDA.” “EBITDA” is defined as earnings before interest, taxes, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation costs, loss on sale of fixed assets, loss on debt extinguishment and revaluation, placement agent release expense, loss on contract, provision for credit losses, convertible note inducement expense and impairment on fixed assets. Management believes that EBITDA and Adjusted EBITDA results in a performance measurement that represents a key indicator of our business operations of cryptocurrency mining, hosting customers engaged in cryptocurrency mining, demand service revenue, and high-performance computing services.
We believe EBITDA and Adjusted EBITDA can be important financial measures because they allow management, investors, and the Board to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments. Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. For example, we expect that stock-based compensation costs, which is excluded from the non-GAAP financial measures, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers, and directors. Similarly, we expect that depreciation and amortization of fixed assets will continue to be a recurring expense over the term of the useful life of the assets.
EBITDA and Adjusted EBITDA are provided in addition to and should not be considered to be substitutes for, or superior to net income, the comparable measure calculated in accordance with GAAP. Further, EBITDA and Adjusted EBITDA should not be considered as alternatives to revenue growth, net income, or any other performance measure calculated in accordance with GAAP, or as alternatives to cash flow from operating activities as a measure of our liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP.
Reconciliations of EBITDA and Adjusted EBITDA to net loss, the most comparable GAAP financial metric, for historical periods are presented in the table below:
| (Dollars in thousands) | Three months ended March 31, | |||||||
| 2025 | 2024 | |||||||
| Net loss from continuing operations | $ | (7,354 | ) | $ | (2,544 | ) | ||
| Interest expense | 838 | 424 | ||||||
| Income tax benefit | (425 | ) | (548 | ) | ||||
| Depreciation and amortization | 3,879 | 3,926 | ||||||
| EBITDA | (3,062 | ) | 1,258 | |||||
| Adjustments: Non-cash items | ||||||||
| Stock-based compensation costs | 1,847 | 661 | ||||||
| Loss on sale of fixed assets | - | 1 | ||||||
| (Gain) loss on debt extinguishment and revaluation, net | (551 | ) | 3,097 | |||||
| Fair value adjustment on SEPA draws | 118 | - | ||||||
| Impairment on fixed assets | - | 130 | ||||||
| Adjusted EBITDA | $ | (1,648 | ) | $ | 5,147 | |||
Adjusted EBITDA decreased primarily driven by a decrease in revenue of $6.3 million decline in Cryptocurrency mining and data hosting revenue following the April 2024 Bitcoin halving and a customer ram-up of 20 MW through the first quarter of 2025, partially offset by approximately $900 thousand decline in cost of data hosting revenue, excluding depreciation. General and administrative expenses, excluding stock-based compensation, increased approximately $700 thousand mainly related to legal fees associated with the SEPA and other consulting fees.
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The following table represents the EBITDA and Adjusted EBITDA activity between each three-month period from January 1, 2024 through March 31, 2025 (unaudited).
| (Dollars in thousands) | Three months ended March 31, 2024 | Three months ended June 30, 2024 | Three months ended September 30, 2024 | Three months ended December 31, 2024 | Three months ended March 31, 2025 | |||||||||||||||
| Net loss from continuing operations | $ | (2,544 | ) | $ | (9,145 | ) | $ | (8,093 | ) | $ | (38,518 | ) | $ | (7,354 | ) | |||||
| Interest expense, net | 424 | 449 | 821 | 833 | 838 | |||||||||||||||
| Income tax benefit from continuing operations | (548 | ) | (649 | ) | (547 | ) | (743 | ) | (425 | ) | ||||||||||
| Depreciation and amortization | 3,926 | 3,909 | 3,916 | 3,889 | 3,879 | |||||||||||||||
| EBITDA | 1,258 | (5,436 | ) | (3,903 | ) | (34,539 | ) | (3,062 | ) | |||||||||||
| Adjustments: Non-cash items | ||||||||||||||||||||
| Stock-based compensation costs | 661 | 1,368 | 1,257 | 2,025 | 1,847 | |||||||||||||||
| Loss on sale of fixed assets | 1 | 21 | - | 9 | - | |||||||||||||||
| Provision for credit losses | - | 244 | 367 | 149 | - | |||||||||||||||
| Convertible note inducement expense | - | - | - | 388 | - | |||||||||||||||
| Placement agent release expense | - | - | - | 1,000 | - | |||||||||||||||
| Loss on contract | - | - | - | 28,593 | - | |||||||||||||||
| Impairment on fixed assets | 130 | - | - | - | - | |||||||||||||||
| Fair value adjustment on SEPA draws | - | - | - | - | 118 | |||||||||||||||
| Loss (gain) on debt extinguishment and revaluation, net | 3,097 | 5,600 | (1,203 | ) | (145 | ) | (551 | ) | ||||||||||||
| Adjusted EBITDA | $ | 5,147 | $ | 1,797 | $ | (3,482 | ) | $ | (2,520 | ) | $ | (1,648 | ) | |||||||
We continued positive Adjusted EBITDA from the third quarter of 2023 through the second quarter of 2024. Effective July 1, 2024 we entered into an agreement for services where the quarterly service expense was approximately one million in each third and fourth quarter of 2024. The agreement was terminated in March 2025, and we have seen a Adjusted EBITDA improve from the third quarter of 2024 through the first quarter of 2025.
Liquidity and Capital Resources
Several key indicators of our liquidity are summarized in the following table:
| Three Months Ended or as of | Three Months Ended or as of | Year Ended or as of | ||||||||||
| March 31, | March 31, | December 31, | ||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2024 | |||||||||
| Cash | $9,161 | $8,438 | $7,843 | |||||||||
| Restricted cash | 5,287 | 2,956 | 2,610 | |||||||||
| Working capital (deficit) | (31,802 | ) | (15,502 | ) | (34,378 | ) | ||||||
| Net loss | (7,354 | ) | (2,544 | ) | (58,300 | ) | ||||||
| Net cash (used in) provided by operating activities | (177 | ) | 3,850 | (5,069 | ) | |||||||
| Purchase of property, plant and equipment | (3,808 | ) | (524 | ) | (9,160 | ) | ||||||
As of March 31, 2025, we had a consolidated accumulated deficit of approximately $321.9 million and we had negative working capital of approximately $31.8 million. As of March 31, 2025, we had total debt outstanding of approximately $24.0 million as summarized further below in the Debt table. In addition, we had outstanding commitments related to Soluna Digital Inc. (“SDI”) of approximately $10.4 million in capital expenditures mainly related to Project Dorothy 2 and Project Kati. In addition, due to CloudCo’s termination of the HPE Agreement on March 24, 2025, and HPE’s termination of the HPE Agreement on March 26, 2025, and the acceleration of the remaining unpaid amounts of the contract in accordance with the HPE Agreement, we have recognized a liability for the remainder of the HPE Agreement on the consolidated balance sheet of approximately $19.3 million. As of March 31, 2025, we had $9.2 million of cash available to fund our operations.
Based on business developments, including changes in production levels, staffing requirements, and network infrastructure improvements, we will require additional capital equipment in the foreseeable future. We are focused on developing and monetizing green, zero-carbon computing and cryptocurrency mining facilities, as well as facilities capable of hosting customers engaged in cryptocurrency mining, and data centers to provide specialized AI Cloud and colocation services.
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We plan to continue funding operations, including working capital and operating deficits, from operating cash flows and cash flow debt and equity financings, including the YA SEPA and others to be closed as needed consistent with management’s plans.
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. In the near term, management is evaluating and implementing different strategies to obtain financing to fund the Company’s expenses and growth to achieve a level of revenue adequate to support the Company’s current cost structure. Financing strategies may include, but are not limited to, stock issuances, project level equity, debt borrowings, partnerships and/or collaborations. If the Company is unable to meet its financial obligations, it could be forced to restructure or refinance, seek additional equity capital or sell its assets. The Company might then be unable to obtain such financing or capital or sell its assets on satisfactory terms. There can be no assurance that additional financing will be available to the Company when needed or, if available, that it can be obtained on commercially reasonable terms. If the Company is not able to obtain the additional financing on a timely basis, if and when it is needed, it will be forced to delay or scale down some or all of its development activities or perhaps even cease the operation of its business.
Operating Activities
Net cash used by operations was approximately $177 thousand during the three months ended March 31, 2025. The Company had a net loss for the three months ended March 31, 2025 of approximately $7.4 million. Non-cash items included approximately $1.5 million of depreciation expense, and $2.4 million of amortization expenses, and $1.8 million of stock compensation expenses. These non-cash items were offset with a deferred tax benefit of $437 thousand and gain on extinguishment of debt of approximately $551 thousand. The change in asset and liabilities of $1.9 million mainly relates to decrease in other long term assets of $1.6 million in relation to receipt of Briscoe deposit in January 2025. The other changes in assets and liabilities of approximately $500 thousand mainly related to decrease in accounts receivable due to timing and amounts billed related to March services, an increase in accounts payable related to timing and billing amounts of invoices, including increases in legal fees, an increase in interest payable in relation to NYDIG loan and Galaxy loan, offset with payment made to HPE in January and payment of sales and use tax.
Net cash provided by operations was approximately $3.9 million during the three months ended March 31, 2024. The Company had a net loss for the three months ended March 31, 2024 of approximately $2.5 million. Non-cash items included approximately $1.6 million of depreciation expense, and $2.4 million of amortization expenses, $661 thousand of stock compensation expenses, $3.1 million of loss on debt extinguishment and revaluation, and $130 thousand of impairment of fixed assets. These non-cash items were offset with a deferred tax benefit of $548 thousand. The change in asset and liabilities of $942 thousand related to increase in accounts receivable of $1.5 million attributable for demand service revenue and data hosting customer receivables significantly increasing, offset with increases in accrued expenses and accounts payable of $929 thousand. The other changes in assets and liabilities were not material.
Investing Activities
Net cash used in investing activities during the three months ended March 31, 2025 was approximately $3.6 million consisting mainly of capital expenditures of $3.8 million offset with a decrease in deposits on equipment of $213 thousand. Net cash used in investing activities during the three months ended March 31, 2024 was approximately $827 thousand consisting mainly of capital expenditures of $524 thousand and increase in deposits on equipment of $343 thousand.
Financing Activities
| (Dollars in thousands) | Three months ended March 31, | |||||||
| 2025 | 2024 | |||||||
| Proceeds from debt issuance | $ | 5,000 | $ | - | ||||
| Payments on debt | (1,978 | ) | (616 | ) | ||||
| Contributions from non-controlling interest | 4,310 | - | ||||||
| Distributions to non-controlling interest | (1,525 | ) | (1,680 | ) | ||||
| Proceeds from warrant exercises | - | 300 | ||||||
| Net proceeds from SEPA | 2,005 | - | ||||||
| Net cash provided by (used in) financing activities | $ | 7,812 | $ | (1,996 | ) | |||
Net cash provided by financing activities was approximately $7.8 million consisting mainly of $5.0 million of debt issuance proceeds, $2.0 million of net proceeds from SEPA draws, and $4.3 million of contributions from non-controlling interest, offset with cash distributions to non-controlling interest members of approximately $1.5 million and payments on debt and deferred financing costs of approximately $2.0 million to the CloudCo Secured Loan, CloudCo Additional Secured Loan, Navitas term loan, and for deferred financing costs. For the three months ended March 31, 2024, net cash used in financing activities was approximately $2.0 million consisting mainly of $1.7 million of cash distributions to non-controlling interest members, $616 thousand in principal payments of the Navitas loan, offset with $300 thousand of warrant exercises.
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Debt
| March 31, 2025 | December 31, 2024 | |||||||
| (Dollars in thousands) | ||||||||
| Galaxy loan | $ | 4,550 | $ | - | ||||
| NYDIG Financing | 9,183 | 9,183 | ||||||
| Equipment loan | 250 | - | ||||||
| Navitas Term Loan | - | 137 | ||||||
| CloudCo Secured Loan | 10,055 | 10,983 | ||||||
| CloudCo Additional Secured Loan | - | 1,202 | ||||||
| Total Debt | $ | 24,038 | $ | 21,505 | ||||
On June 20, 2024, pursuant to the terms and subject to the conditions of the June SPA by and among (i) CloudCo, (ii) Soluna Cloud, (iii) the Company and (iv) the Investor, CloudCo issued to the Investor a secured promissory note in a principal amount equal to $12.5 million (the “Soluna CloudCo Secured Note”). The Soluna CloudCo Secured Note accrues interest at a rate 9.0% per annum, subject to adjustment upon an event of default. The Soluna CloudCo Secured Note matures on June 20, 2027. On July 12, 2024, the Company, CloudCo, Soluna Cloud, and the Existing Investor entered into a First Amendment to the Note Purchase Agreement. Additional Notes were issued for $1.25 million (“Soluna CloudCo Additional Secured Note”) on July 12, 2024 and are subject to the same terms and conditions as the June SPA financing. On October 1, 2024, CloudCo, Soluna Cloud and the Company entered into assignment and assumption agreements (the “Assignment Agreements”) with the Additional Investors with respect to an aggregate of $1.25 million of notes issued by CloudCo. Pursuant to the Assignment Agreements, the Company will be able to purchase such notes for a purchase price of $750 thousand, or 60% of face value. The assignment and assumption will be effective once all conditions of the agreement are met including fulfilling the purchase price. The assignment and assumption was on March 14, 2025, therefore we extinguished the remaining third party outstanding debt on the Additional Note, and a gain on extinguishment of the debt of approximately $551 thousand was recorded. In relation to the Soluna Cloudco Secured Note, as of March 31, 2025, the Company had an outstanding principal balance of approximately $10.7 million.
On January 14, 2022, the Company effected an initial drawdown under the Master Equipment Finance Agreement (“MEFA”) with NYDIG in the aggregate principal amount of approximately $4.6 million that bore interest at 14%. On January 26, 2022, the Company had a subsequent drawdown of $9.6 million. On December 20, 2022, Soluna MC Borrowing 2021-1 LLC (“Borrower”) received a Notice of Acceleration and Repossession (the “NYDIG Notice”) from NYDIG with respect to the MEFA, by and between Borrower, a subsidiary of Soluna MC, LLC, a subsidiary of Soluna Digital, a subsidiary of the Company, and NYDIG. The obligations of Borrower under the MEFA and reflected in the NYDIG Notice are ring-fenced to Borrower and its direct parent company, Soluna MC LLC. The Company is not a party to any guaranty, collateral agreement, or other support agreement with or for the benefit of NYDIG. As such, the principal balance of $10.5 million as of December 31, 2022 became due immediately and the Borrower shall bear interest, at a rate per annum equal to 2.0% plus the rate per annum otherwise applicable to such obligations set forth in the MEFA. On February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA, and repossessed the collateralized assets that totaled approximately $3.4 million, in which approximately $560 thousand was first used to pay off accrued interest and penalty to date. On September 5, 2023, NYDIG provided a letter finalizing the accounting for the repossessed collateralized assets totaling proceeds of approximately $3.4 million. A summary judgment motion was performed on February 13, 2024 and was agreed upon by both NYDIG and the Borrower, that the total outstanding loan principal balance would be approximately $9.2 million, in which a penalty fee was applied of approximately $1.0 million to the repossessed collateralized assets, and outstanding interest and penalty balance would be approximately $936 thousand as of December 31, 2023. As of March 31, 2025, the Company still has an outstanding loan principal of approximately $9.2 million and outstanding interest and penalty balance of approximately $2.6 million as of March 31, 2025.
On May 9, 2023, DVCC and Navitas West Texas Investments SPV, LLC entered into a 2-year Loan Agreement for $2,050,000. The unpaid principal balance of the Term Loan shall bear interest at per annum rate equal to 15%. As of December 31, 2024, the Company has an outstanding principal balance of approximately $137 thousand. As of March 31, 2025, the Navitas loan has been fully paid off.
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On May 16, 2024, the SDI Borrower, entered into the Equipment Loan Agreement with the Lender. The Equipment Loan Agreement provides for the SDI Borrower to borrow, from time to time, up to $4.0 million, as further amended on February 28, 2025, to be used to purchase necessary equipment for the progression of D2 and Project Kati. Any loans made under the Equipment Loan Agreement have a maturity date of May 16, 2027 and bear interest at a rate of 15% per annum. The Equipment Loan Agreement includes customary covenants for loans of this nature, as well as a multiple on invested capital provision, which requires us to pay, in addition to principal and interest, an amount equal to the difference of (i) the greater of (a) the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan, and (b) the principal amount of the Loan being repaid multiplied by three, minus (ii) the sum of the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan. On May 17, 2024, the SDI Borrower drew down $720 thousand of the Loan. On July 22, 2024, SDI Borrower satisfied and repaid the borrowing amount in full by issuing the Lender Class B Membership Interests in the D2 valued at three times the borrowing amount (i.e., $2.16 million). The redemption of debt through equity created approximately a $1.4 million loss on debt extinguishment for the year ended December 31, 2024. On March 21, 2025, the SDI Borrower drew down $250 thousand of the Loan, in relation to Project Kati. The amount is outstanding as of March 31, 2025.
On March 12, 2025, the SW Borrower, a Delaware limited liability company and subsidiary of SW Holdings, itself a subsidiary of SDI, a Nevada corporation and wholly owned subsidiary of the Company, entered into the Galaxy Loan Agreement with SW Holdings and Galaxy Digital LLC. The Galaxy Loan Agreement provides for a term loan facility in the principal amount of $5.0 million (the “Term Loan Facility”). The Term Loan Facility bears interest at a rate of 15.0% per annum, subject to an increase of 5.0% (for a total of 20.0%) in the event an Event of Default has occurred and is continuing. The Term Loan Facility matures on March 12, 2030 and includes scheduled payments over a five-year term. As of March 31, 2025, we were compliant with all debt covenants and no principal payments have been made.
Critical Accounting Policies and Significant Judgments and Estimates
The above discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Note 2, Accounting Policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024 includes a summary of our most significant accounting policies. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, income taxes, fair value measurements, and stock-based compensation. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Periodically, our management reviews our critical accounting estimates with the Audit Committee of our Board of Directors.
Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. Any statements contained in this Form 10-Q that are not statements of historical fact may be forward-looking statements. When we use the words “anticipate,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” “should,” “could,” “may,” “will” and similar words or phrases, we are identifying forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding:
| ● | the availability of financing opportunities, risks associated with economic conditions, dependence on management and conflicts of interest; | |
| ● | the ability to service debt obligations and maintain flexibility in respect of debt covenants; | |
| ● | economic dependence on regulated terms of service and electricity rates; | |
| ● | the speculative and competitive nature of the technology sector; | |
| ● | ability of the Company to attract and retain hosted customers for its hosting operations; | |
| ● | dependency in continued growth in blockchain and cryptocurrency usage; |
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| ● | lawsuits and other legal proceedings and challenges; | |
| ● | conflict of interests with directors and management; | |
| ● | government regulations; | |
| ● | The ability of the Company to construct and complete the anticipated expansion of its data centers; and | |
| ● |
other risks and uncertainties discussed under the heading “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. |
Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
The certifications of our Chief Executive Officer and Chief Financial Officers are attached as Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q include, in paragraph 4 of such certification, information concerning our disclosure controls and procedures and internal control over financial reporting. Such certification should be read in conjunction with the information contained in this Item 4 for a more complete understanding of the matters covered by such certification.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of SHI’s disclosure controls and procedures as of March 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the U.S. Securities and Exchange Commission’s (the “SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. We recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and we necessarily apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2025, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
(b) Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our fiscal quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
At any point in time, we may be involved in various lawsuits or other legal proceedings. Such lawsuits could arise from the sale of products or services or from other matters relating to our regular business activities, compliance with various governmental regulations and requirements, or other transactions or circumstances.
NYDIG
On December 29, 2022, NYDIG filed a complaint against Borrower, a subsidiary of Soluna MC, LLC, a subsidiary of Soluna Digital, a subsidiary of the Company, and Guarantor in Marshall Circuit Court of the Commonwealth of Kentucky regarding the NYDIG Loans made by NYDIG to Borrower pursuant to the MEFA that were secured by certain assets of Borrower and guaranteed by Guarantor pursuant to a written guaranty agreement executed by Guarantor. On February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA and repossessed the collateralized assets. Subsequently, NYDIG filed its Motion for Summary Judgment seeking entry of a judgment against the NYDIG Defendants in the approximate amount of $10.3 million, and NYDIG and the NYDIG Defendants consensually resolved the motion in the form of a Stipulation and Agreed Judgment, which the Court approved on February 23, 2024.
On March 13, 2024, NYDIG served the NYDIG Defendants with a post-judgment discovery seeking information regarding the NYDIG Defendants’ assets and liabilities. The NYDIG Defendants completed responding to NYDIG’s initial document requests on May 13, 2024. On September 24, 2024, NYDIG sent a letter seeking supplemental discovery from the NYDIG Defendants, and the NYDIG Defendants completed responding to NYDIG’s additional/supplemental document requests by November 20, 2024 and the deposition of a representative of the Defendants on or before December 15, 2024. Per agreement between NYDIG and the NYDIG Defendants, (i) the deadline to respond to the supplemental discovery demands was extended to December 12, 2024 but with rolling weekly production to commence on November 21, 2024, and (ii) a deposition of a representative of the NYDIG Defendants occurred on January 23, 2025. On April 2, 2025, NYDIG sent another letter seeking supplemental discovery from the NYDIG Defendants or alternatively to commence discovery discussions. The NYDIG Defendants sent a response on April 10, 2025 requesting contact information for potential settlement discussions and proposing a rolling discovery schedule; as of May 15, 2025 there has not been a response on the proposed discovery schedule.
Additionally, NYDIG has stated its intention to pursue the parent company of Guarantor (the “Parent Entity”) under a piercing of the corporate veil theory relating to NYDIG Defendants’ debts and liabilities under the loan documents. Parent Entity intends to vigorously defend itself from NYDIG’s parent company claims. Parent Entity denies any such liability and filed a complaint for a declaratory judgment against NYDIG in the Eighth Judicial District Court in Clark County, Nevada on March 16, 2023, seeking a declaratory judgment as to such matter. On June 22, 2023, the court issued an order granting NYDIG’s motion to dismiss without prejudice. Parent Entity intends to continue to vigorously defend any allegations regarding liability on account of NYDIG Defendants’ debts and liabilities to NYDIG under their loan documents.
Item 1A. Risk Factors
Part II, Item 1A (Risk Factors) of our most recently filed Annual Report on Form 10-K with the SEC, filed on March 31, 2025, sets forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition and operating results. There have been no material changes to our risk factors disclosed in our most recently filed Annual Report on Form 10-K. Those risk factors continue to be relevant to an understanding of our business, financial condition and operating results, however, and, accordingly, you should review and consider such risk factors in making any investment decision with respect to our securities.
If we fail to regain compliance with the continued listing requirements of Nasdaq, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
Our common stock is currently listed for trading on Nasdaq. On May 8, 2025, we received notice from The Nasdaq Stock Market LLC indicating that we are not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq (the “minimum closing bid price requirement”). We were provided an initial compliance period of 180 calendar days from the date of the notice, or until November 4, 2025, to regain compliance with the minimum closing bid price requirement, pursuant to Nasdaq Rule 5810(c)(3)(A). We may be eligible for an additional 180 calendar day compliance period. There can be no assurance that we will regain compliance with the minimum closing bid price requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance or maintain compliance with the other Nasdaq listing requirements.
We will continue to monitor the closing bid price of our common stock and assess potential actions to regain compliance with the minimum closing bid price requirement and may, if appropriate, consider and effectuate available options, including implementation of a reverse stock split of our common stock. If we implement a reverse stock split in order to remain listed on Nasdaq, the announcement or implementation of such a reverse stock split could negatively affect the price of our common stock.
We must regain compliance with Nasdaq’s minimum closing bid price requirement of $1.00 per share (and must continue to maintain compliance with Nasdaq’s other continued listing requirements), or risk delisting, which could have a material adverse effect on our business. If our common stock is delisted from Nasdaq, it could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, contractual counterparties, and employees and fewer business development opportunities. If our common stock were delisted, it could be more difficult to buy or sell our common stock or to obtain accurate quotations, and the price of our common stock could suffer a material decline. Delisting could also impair our ability to raise capital on acceptable terms, if at all.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements and Non-Rule 10b5-1 Trading Arrangements
During the fiscal quarter ended March
31, 2025, none of our officers or directors, as those terms are defined in Rule 16a-1(f),
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Item 6. Exhibits
All other exhibits for which no other filing information is given are filed herewith.
# Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K. Such information is both not material and is the information that the registrant customarily and actually treats as private or confidential. The omitted information is identified in the exhibit with brackets and “**”.
* Submitted electronically herewith. Attached as Exhibit 101 are the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in eXtensible Business Reporting Language (XBRL) and tagged as blocks of text and including detailed tags: (i) Condensed Consolidated Balance Sheets at March 31, 2025 and December 31, 2024; (ii) Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 2024; (iii) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024; and (iv) related notes.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Soluna Holdings, Inc. | ||
| Date: May 15, 2025 | By: | /s/ John Belizaire |
| John Belizaire | ||
| Chief Executive Officer | ||
| By: | /s/ John Tunison | |
| John Tunison Chief Financial Officer | ||
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