Blockchain and Cryptocurrency Growth - The company anticipates continued growth in blockchain and cryptocurrency usage, which is critical for its operations[32] - The upcoming Bitcoin halving event in April 2024 may impact profitability and network difficulty, affecting the company's mining operations[32] Infrastructure and Efficiency - The company is focused on expanding its data center infrastructure to enhance operational capacity and efficiency[34] - The company reported a significant increase in hashrate, measuring computational power at 1 Exahash (EH/s), indicating improved mining efficiency[19] - The company aims to maintain a Power Usage Effectiveness (PUE) ratio that optimizes energy consumption in its data centers[28] - The company is committed to improving energy efficiency in Bitcoin mining, measured in joules per hash[24] - The company is leveraging grid demand response services to stabilize power supply during peak demand periods[21] Technological Advancements - The company is exploring new technologies in Artificial Intelligence (AI) to enhance operational capabilities and efficiency[12] Risk Management - The company is actively managing risks associated with economic conditions and regulatory changes that could impact its business[32] Customer Engagement - The company is focused on attracting and retaining hosted customers for its hosting operations to drive revenue growth[32]

Capacity and Projects - The company operates at a 75-megawatt capacity across two sites, Project Sophie and Project Dorothy, with over 2 Gigawatts in the long-term pipeline[201]. - Project Dorothy has a total capacity of 100 MW, with the initial 50 MW phase fully energized[221][222]. - The company has 216 MW in two new data center projects: Project Dorothy 2 (50 MW) and Project Kati (166 MW)[201]. - Project Sophie has deployed over 8,000 machines for hosting customers, filling 25 MW of capacity, and has signed new hosting term sheets for an additional 15 MW[220]. - The Kati Project is a new 166 MW modular data center co-located with a 300 MW wind farm, currently progressing through ERCOT interconnection studies[243]. - Project Dorothy 1A has achieved full capacity with approximately 7,700 Bitcoin miners deployed, resulting in an installed hashrate of 950 PH/s and consuming over 2,500 MWh of curtailed energy[239]. - Project Dorothy 1B has deployed over 7,920 Bitcoin miners, achieving an installed hashrate of 816 PH/s and consuming over 1,500 MWh of curtailed energy[240]. Revenue Streams - The company plans to host AI customers at its data centers in the future, expanding its revenue streams beyond cryptocurrency mining[205]. - Data hosting revenue increased by 307% to $4.011 million in Q3 2023 from $0.985 million in Q3 2022[250]. - Cryptocurrency mining revenue decreased by 67% to $1.786 million in Q3 2023 from $5.387 million in Q3 2022[250]. - The transition from proprietary mining to data hosting at Project Sophie contributed approximately $991 thousand in data hosting revenue in Q3 2023[256]. - The company anticipates future revenues will include block rewards, transaction fees, and hosting revenues from cryptocurrency mining customers[309]. Financial Performance - Operating loss improved by 91% to $(3.736) million in Q3 2023 compared to $(41.716) million in Q3 2022[250]. - Net loss attributable to Soluna Holdings, Inc. decreased by 88% to $(6.662) million in Q3 2023 from $(55.892) million in Q3 2022[250]. - The company reported a gain of approximately $7.8 million from the sale of its subsidiary, MTI Instruments, for about $9.4 million in cash[246]. - The company had a net loss from continuing operations of $22.7 million for the nine months ended September 30, 2023, compared to a net loss of $79.4 million for the same period in 2022[289]. - Adjusted EBITDA for the three months ended September 30, 2023, was $405 thousand, while for the nine months ended September 30, 2023, it was a loss of $4.5 million[288]. Expenses and Cost Management - General and administrative expenses for the nine months ended September 30, 2023, decreased by 27% to $11.219 million from $15.441 million in the same period of 2022[252]. - Cost of cryptocurrency mining revenue, exclusive of depreciation, decreased by 60% to $4.451 million in the nine months ended September 30, 2023, from $11.092 million in the same period of 2022[252]. - Cost of data hosting increased to approximately $2.2 million for Q3 2023, up from $1.1 million in Q3 2022, primarily due to Project Dorothy 1A costs[260]. - General and administrative expenses for Q3 2023 were approximately $2.7 million, a decrease of 52% from $5.7 million in Q3 2022, mainly due to reduced salaries and consulting fees[263]. - Salaries, benefits, and other employee expenses decreased by approximately $589 thousand in Q3 2023 compared to Q3 2022, reflecting a reduction in headcount and recruitment costs[264]. Capital and Financing - The company has secured $35 million in project-level financing for the Dorothy Project, with $12.5 million specifically allocated for its development[229]. - The NYDIG facility has a financing agreement of approximately $14.4 million for equipment financing, which has faced challenges due to cash flow issues[208]. - The company plans to fund growth through project-level capital raising and equity sales, contingent on successfully raising capital[291]. - The company generated approximately $22.8 million in net cash from financing activities during the nine months ended September 30, 2023, including $19.7 million from non-controlling interest contributions[299]. Operational Challenges - The company has experienced financial challenges, including a default on a secured note receivable of $193 thousand as of September 30, 2023[206]. - The company experienced a negative working capital position and insufficient revenue to generate net income, raising substantial doubt about its ability to continue as a going concern within one year[292]. - The shutdown of Project Marie operations in February 2023 caused a revenue decline of approximately $3.4 million[256]. - The company is actively monitoring macroeconomic factors such as inflation and interest rates that could adversely affect its operations and financial condition[294]. Market Conditions and Risks - The average price of Bitcoin increased by approximately 32% for Q3 2023 compared to Q3 2022, while it declined by approximately 17% for the nine months ended September 30, 2023 compared to the same period in 2022[255]. - Block rewards are currently fixed at 6.25 Bitcoin per block, expected to halve to 3.125 Bitcoin in April 2024, which may negatively impact revenues[310]. - The company is subject to risks related to the fluctuating valuations of cryptocurrency and general economic conditions[308]. - The company faces potential adverse impacts from pending legal proceedings and strategic alliances not achieving their objectives[308].

Company Operations - Soluna Holdings, Inc. operates through its subsidiary Soluna Computing, Inc., focusing on cryptocurrency mining using renewable energy sources[186]. - The company is focused on developing green, zero-carbon computing and cryptocurrency mining facilities following the sale of its MTI Instruments business in April 2022[261]. Project Developments - Project Marie, a 20 MW facility, faced financial challenges due to Bitcoin price declines, leading to a default on a $14.4 million loan from NYDIG[193][189]. - Project Sophie transitioned to a hosting model for Bitcoin miners, deploying over 7,600 machines and achieving an installed hash rate of approximately 812 PH/s[198][199]. - Project Dorothy, a 100 MW modular data center, has secured hosting agreements totaling 25 MW and deployed over 7,000 machines as of June 2023[205][206]. - The Company plans to concentrate resources on the Dorothy facility after impairing assets at the Marie facility due to financial difficulties[195]. - The Company plans to begin energization of Dorothy 1B in Q3 2023, having purchased over 8,250 mining machines[218]. - The Company entered into a partnership with Navitas for Project Dorothy 1B, with Navitas contributing $12.1 million for a 49% ownership stake[209]. - The Dorothy Facility is being developed in phases, with a peak demand of 50 MW for the first two phases and a potential total of 150 MW if all four phases are completed[211]. - The Kati Project is a new 166 MW modular data center co-located with a 300 MW wind farm, currently progressing through ERCOT interconnection studies[219]. Financial Performance - Cryptocurrency mining revenue decreased by 88% to $915,000 in Q2 2023 compared to $7.5 million in Q2 2022[224]. - Operating loss improved by 25% to $7.1 million in Q2 2023 from $9.4 million in Q2 2022[224]. - Net loss attributable to Soluna Holdings, Inc. was $8.8 million in Q2 2023, a 34% increase from $6.6 million in Q2 2022[224]. - Cryptocurrency mining revenue decreased by approximately $11.6 million or 76% for the six months ended June 30, 2023, totaling $3.7 million compared to $15.3 million for the same period in 2022[226]. - Data hosting revenue for the six months ended June 30, 2023 was approximately $1.4 million, a decline of $1.2 million or 46% compared to $2.7 million for the same period in 2022[226]. - Operating loss improved by $2.1 million or 13%, totaling $14.1 million for the six months ended June 30, 2023, compared to $16.2 million for the same period in 2022[226]. - Net loss from continuing operations decreased by $6.5 million or 28%, amounting to $16.7 million for the six months ended June 30, 2023, compared to $23.2 million for the same period in 2022[226]. - General and administrative expenses for the six months ended June 30, 2023 were approximately $8.5 million, a decrease of $1.3 million or 13% compared to $9.8 million for the same period in 2022[240]. - The Company recognized a gain of approximately $7.8 million from the sale of its subsidiary, MTI Instruments, in 2022[221]. - The Company reported a net loss of $16.7 million for the six months ended June 30, 2023, with approximately $3.8 million used in operations[265]. Costs and Expenses - Salaries, benefits, and other employee expenses decreased by approximately $1.6 million for the six months ended June 30, 2023, primarily due to reduced recruitment fees and bonuses[241]. - Cost of cryptocurrency mining revenue, exclusive of depreciation, decreased by approximately $3.6 million or 51% for the six months ended June 30, 2023, totaling $3.4 million compared to $7.0 million for the same period in 2022[231]. - Depreciation costs associated with cryptocurrency and data hosting revenue significantly declined to approximately $1.2 million for the six months ended June 30, 2023, compared to $9.9 million for the same period in 2022[233]. - Stock-based compensation increased by approximately $917 thousand for the six months ended June 30, 2023, due to the acceleration of grants and awards in May 2023[244]. Debt and Interest - Interest expense for the three months ended June 30, 2023, was $439 thousand, a significant decrease from $3.3 million for the same period in 2022[247]. - For the six months ended June 30, 2023, interest expense totaled $1.8 million, down from $6.2 million in the prior year[248]. - The Company reported a net loss on debt extinguishment and revaluation of $1.6 million for the six months ended June 30, 2023, primarily due to a new debt agreement with convertible noteholders[249]. - The company incurred approximately $651 thousand in accrued interest and penalties related to a $10.5 million principal balance due to NYDIG as of June 30, 2023[271]. - As of June 30, 2023, the company had an outstanding principal balance of approximately $12.9 million on secured convertible notes[270]. Cash Flow and Working Capital - Cash used in investing activities was approximately $9.6 million for the six months ended June 30, 2023, primarily due to capital expenditures of $2.9 million and equipment purchases of $7.9 million[267]. - Net cash provided by financing activities was approximately $21.8 million during the six months ended June 30, 2023, mainly from cash contributions for non-controlling interest of $19.4 million[268]. - The company has a cash position that it plans to use to fund operations and may seek additional credit facilities if necessary[262]. - As of June 30, 2023, the Company had positive working capital of approximately $6.1 million and $12.9 million in outstanding principal notes payable[260]. - The company experienced a significant increase in accounts payable, with a rise of $696 thousand as of June 30, 2023[265]. Market Conditions and Future Outlook - The average price of Bitcoin decreased approximately 31% for the six months ended June 30, 2023, compared to the same period in 2022[227]. - Bitcoin price increased from $28,478 in March 2023 to $30,477 as of June 30, 2023, following a decline from $45,539 in March 2022 to $19,784 on June 30, 2022[281]. - Current block rewards are fixed at 6.25 Bitcoin per block, expected to halve to 3.125 Bitcoin in April 2024, potentially impacting revenues negatively[281]. - Miners collect transaction fees for confirming transactions, which may vary based on network consensus, unlike fixed block rewards[282]. - As Bitcoin availability declines, the mining incentive structure is expected to shift towards a higher reliance on transaction confirmation fees[283]. - Transaction fees are anticipated to become a larger proportion of revenues for miners as the Bitcoin network expands[283]. - The company is actively monitoring macroeconomic factors such as inflation and interest rates that could adversely affect its operations and financial condition[264]. Revenue Composition - Revenues are expected to comprise block rewards in Bitcoin, transaction fees, and hosting revenues from cryptocurrency mining customers[279].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR Washington, D.C. 20549 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-K For the transition period from _____to _____ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-40261 For the fiscal year ended December 31, 2022 Soluna Holdings, Inc. (Exact name of registrant as specified in its charter) Nevada 14-1462255 State or other jurisdiction (I. ...