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].

PART I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Soluna Holdings, Inc. transitioned to renewable energy-powered cryptocurrency mining and data centers, selling its MTI Instruments business and developing projects like Dorothy amidst market volatility and regulatory challenges - SHI transitioned its business focus from MTI Instruments to cryptocurrency mining via **Soluna Computing, Inc. (SCI)** in 2022, aiming to utilize **renewable energy** for data centers and future **AI/machine learning** applications[17](index=17&type=chunk)[18](index=18&type=chunk)[211](index=211&type=chunk) MTI Instruments Sale Details (April 11, 2022) | Metric | Value (approx.) | | :--------------------------------- | :----------------- | | Sale Price | $9.4 million | | Aggregate Enterprise Value | $10.75 million | | Gain on Sale | $7.8 million | | Business Status | Exited | - Project Edith's GPU mining assets were sold in September 2022 for **$790 thousand** due to the Ethereum merge to proof-of-stake[21](index=21&type=chunk) - Project Marie, a **20 MW** co-location facility, experienced unplanned outages and financial difficulties in 2022, leading to a default on its NYDIG loan and eventual shutdown in February 2023. The company is concentrating resources on Project Dorothy[26](index=26&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk) - Project Sophie, a **25 MW** modular data center, upgraded its mining equipment in 2022, replacing older models with newer Bitmain S19s to increase hashrate and power efficiency[31](index=31&type=chunk)[32](index=32&type=chunk) - Project Dorothy, a **100 MW** modular data center co-located at Briscoe Wind Farm in Texas, received ERCOT approval in December 2022 and resumed construction of Dorothy 1B in March 2023. Spring Lane Capital provided **$35 million** in financing, with **$12.5 million** earmarked for Dorothy, and increased its stake in Soluna DVSL ComputeCo, LLC to **85%** in March 2023[34](index=34&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - The company differentiates itself by focusing on **stranded renewable energy**, operating in the United States (Texas and Kentucky), and diversifying revenue streams to include hosting and potentially other high-performance computing needs like **AI/machine learning**[65](index=65&type=chunk) - Soluna has filed **eight provisional patent applications** and **two full utility patent applications** related to its modular data center design, cooling technology, simulations, and local co-optimization of power generation with data center demand[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - The company fully impaired its **$750,000** equity investment in Harmattan Energy, Ltd. (HEL) in fiscal year 2022 due to current projections[74](index=74&type=chunk) - Cryptocurrency mining faces increasing regulation at state and federal levels, with potential for new standards on environmental performance and energy consumption, and stricter scrutiny on crypto-asset industries by financial regulators[75](index=75&type=chunk)[78](index=78&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) Human Capital Resources (as of March 20, 2023) | Category | Number of Employees | | :-------------------------------- | :------------------ | | Total Employees | 32 | | Full-time Employees | 30 | | Part-time Employees | 1 | | Full-time Consultant | 1 | | SHI Employees (Finance/Executives) | 9 | | SCI Employees (Finance/Operations/Corporate Dev/Tech & Eng/Executives) | 23 | [Item 1A. Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks including going concern doubts, significant debt, volatile cryptocurrency prices, regulatory changes, supply chain issues, and construction delays, all threatening its financial viability - The company's ability to continue as a going concern is in doubt due to accumulated deficit of **$221.8 million** and negative working capital as of December 31, 2022, requiring significant capital raising[89](index=89&type=chunk)[90](index=90&type=chunk)[254](index=254&type=chunk) - The company needs to raise significant debt or equity capital to repay approximately **$11.6 million** in principal to convertible noteholders by April 25, 2023, with potential default leading to foreclosure on assets[92](index=92&type=chunk) - Global supply chain issues and increased demand for semiconductors continue to drive up costs and create difficulties in acquiring new cryptocurrency miners, impacting expansion plans and profitability[93](index=93&type=chunk)[96](index=96&type=chunk) - Construction of new facilities like Dorothy exposes the company to risks such as delays, labor shortages, increased costs, and permitting issues[98](index=98&type=chunk)[99](index=99&type=chunk) - The company may face difficulties obtaining banking services due to increased scrutiny and directives from U.S. banking authorities regarding crypto-asset industries[101](index=101&type=chunk)[124](index=124&type=chunk) - Extreme volatility in cryptocurrency prices, especially **Bitcoin**, poses a significant risk to SCI's revenue and profitability, as mined cryptocurrencies may be converted to dollars when values are low[118](index=118&type=chunk) - The company's business model is evolving and subject to uncertainties in the cryptocurrency and data center development industries, with no guarantee of long-term success or ability to manage growth effectively[119](index=119&type=chunk) - Competition from larger, more resource-rich cryptocurrency mining entities and rapid technological changes in the industry could hinder the company's ability to expand and remain competitive[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Regulatory changes, including potential bans or harsh restrictions on cryptocurrency mining, could force relocation of operations or adversely affect business prospects[123](index=123&type=chunk)[127](index=127&type=chunk) - Security breaches, including hacking and malware, could lead to loss of cryptocurrencies, confidential information, and damage to the company's reputation[130](index=130&type=chunk) - The Bitcoin halving events, expected around **April 2024**, will reduce mining rewards, potentially negatively impacting revenues if Bitcoin's value does not adjust proportionally[145](index=145&type=chunk) - Climate change and related environmental regulations pose risks, as the energy-intensive cryptocurrency mining industry may face increased scrutiny and costs, potentially impacting profitability and competitiveness[151](index=151&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - The company is heavily dependent on its senior management, and the loss of key executives like **Michael Toporek (CEO)** or **John Belizaire (SCI CEO)** could severely disrupt business operations[163](index=163&type=chunk)[174](index=174&type=chunk) - **Brookstone XXIV**, a controlling shareholder, and its director designees have significant influence over corporate actions and may have interests that conflict with those of minority stockholders[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - The market price of the company's securities is highly volatile, influenced by operational performance, market conditions, and specific company announcements, potentially leading to investment losses[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - Non-compliance with Nasdaq's minimum bid price requirement (**$1.00 per share**) could lead to delisting, adversely affecting market price and liquidity. The company has until **June 21, 2023**, to regain compliance[54](index=54&type=chunk)[55](index=55&type=chunk)[188](index=188&type=chunk) [Item 1B. Unresolved Staff Comments](index=44&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - Not applicable[194](index=194&type=chunk) [Item 2. Properties](index=44&type=section&id=Item%202.%20Properties) The company leases office space in Albany, New York, and data center space in East Wenatchee, Washington, and owns property in Murray, Kentucky, and leases land in Briscoe County, Texas - Leases **3,478 sq ft** of corporate office space in Albany, New York, expiring **December 31, 2024**[195](index=195&type=chunk) - Leases approximately **19,000 sq ft** in four buildings in East Wenatchee, Washington, for hosted operations, with leases expiring between **July 2023** and **November 2024**[195](index=195&type=chunk) - Acquired a **3.2-acre** tract in Murray, Kentucky, on **March 4, 2021**, for an energy-efficient cryptocurrency mining facility with **22 buildings**[196](index=196&type=chunk) - Leased a **33.19-acre** tract in Briscoe County, Texas, for the Dorothy Facility on **February 24, 2023**, with an initial **five-year term** and **five one-year extension options**[197](index=197&type=chunk) [Item 3. Legal Proceedings](index=44&type=section&id=Item%203.%20Legal%20Proceedings) The company faces an EPA claim and a significant loan default lawsuit from NYDIG, which includes a potential "piercing of the corporate veil" claim against SCI - Named in a December 2019 EPA Demand Letter for the Malta Rocket Fuel Area Superfund Site, seeking **$358,000** reimbursement for hazardous materials release. The company considers a material adverse outcome remote[200](index=200&type=chunk) - **NYDIG** filed a complaint against **Soluna MC Borrowing 2021-1 LLC** (Borrower) and **Soluna MC LLC** (Guarantor) for loan default, resulting in a writ of possession for collateral. NYDIG intends to pursue **SCI** under a 'piercing of the corporate veil' claim, which SCI denies and has filed a declaratory judgment against[201](index=201&type=chunk)[202](index=202&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures to report - Not applicable[203](index=203&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=46&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common and preferred stocks are listed on Nasdaq, with significant preferred stock dividends paid and accumulated arrears, while no common stock dividends are anticipated - Common stock (**SLNH**) and preferred stock (**SLNHP**) are listed on the Nasdaq Capital Market[3](index=3&type=chunk) Shares Outstanding (as of December 31, 2022) | Class of Stock | Shares Outstanding | | :--------------------------------- | :----------------- | | Common Stock | 18,694,206 | | 9.0% Series A Cumulative Perpetual Preferred Stock | 3,061,245 | | Series B Preferred Stock | 62,500 | Preferred Stock Dividends | Year | Series A Dividends Paid (approx.) | Series A Dividends in Arrears (as of Dec 31, 2022) | Series B Accrued Dividends (as of Dec 31, 2022) | | :--- | :-------------------------------- | :------------------------------------------------- | :--------------------------------------------- | | 2022 | $3.9 million | $1.7 million (since Oct 2022) | $236 thousand | | 2021 | $630 thousand | N/A | N/A | - The company does not intend to pay dividends on its common stock in the foreseeable future, prioritizing funds for business development[208](index=208&type=chunk) [Item 6. Selected Financial Data](index=47&type=section&id=Item%206.%20Selected%20Financial%20Data) The company has omitted selected financial data, stating it is not applicable - Not applicable[209](index=209&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's 2022 financial results reflect a significant net loss of $99.1 million, driven by impairment charges and increased costs, highlighting liquidity concerns and reliance on future financing amidst industry volatility - The company's primary business is cryptocurrency mining and data center hosting, with a focus on **renewable energy** and future applications in **AI/machine learning**[211](index=211&type=chunk) - Net proceeds from debt financing and stock offerings in 2022 were primarily used for Project Dorothy construction, additional miners for Kentucky facilities, and operational expenses[212](index=212&type=chunk) - Industry trends in 2022 saw many **Bitcoin** ecosystem companies face bankruptcy due to declining Bitcoin prices and macroeconomic factors, leading to compressed margins[213](index=213&type=chunk) Miner Deployment Status (as of December 31, 2022) | Status | Number of Miners | | :------------------------------------ | :----------------- | | Deployed as of Jan 1, 2022 | 13,240 | | Received and deployed in 2022 | 12,289 | | In storage, not deployed | (7,876) | | Collateralized for repossession | (3,416) | | Held for sale | (1,835) | | Disposed or sold in 2022 | (7,331) | | **Total Active and Unencumbered Miners** | **5,071** | Key Financial Results (Years Ended December 31, 2022 vs. 2021) | Metric (in thousands) | 2022 | 2021 | Change ($) | Change (%) | | :------------------------------------------------- | :----- | :----- | :--------- | :--------- | | Cryptocurrency mining revenue | $24,409 | $10,932 | $13,477 | 123% | | Data hosting revenue | $4,138 | $3,413 | $725 | 21% | | Total revenue | $28,547 | $14,345 | $14,202 | 99% | | Cost of cryptocurrency mining revenue (excl. dep.) | $14,281 | $3,504 | $10,777 | 308% | | Depreciation (crypto mining) | $18,708 | $2,122 | $16,586 | 782% | | Cost of data hosting revenue | $3,517 | $2,444 | $1,073 | 44% | | General and administrative expenses (excl. dep. & amort.) | $19,203 | $9,170 | $10,033 | 109% | | Depreciation and amortization (G&A) | $9,506 | $1,581 | $7,925 | 501% | | Impairment on equity investment | $750 | $- | $750 | 100% | | Impairment on fixed assets | $47,372 | $- | $47,372 | 100% | | Operating loss | $(84,790) | $(4,476) | $(80,314) | 1,794% | | Interest expense | $(8,375) | $(1,879) | $(6,496) | 346% | | Loss on debt extinguishment and revaluation, net | $(11,130) | $- | $(11,130) | (100)% | | Loss on sale of fixed assets | $(4,089) | $- | $(4,089) | (100)% | | Net loss from continuing operations | $(107,016) | $(6,388) | $(100,628) | 1,575% | | Net income from discontinued operations | $7,921 | $1,127 | $6,794 | 603% | | **Net loss** | **$(99,095)** | **$(5,261)** | **$(93,834)** | **1,784%** | - Cryptocurrency mining revenue increased by **123%** to **$24.4 million** in 2022, driven by increased capacity and hashrate from Project Sophie and Marie[216](index=216&type=chunk)[217](index=217&type=chunk) - Data hosting revenue increased by **21%** to **$4.1 million** in 2022, primarily from Project Marie, despite a contract term change in August 2022 to a lower flat fee with electricity as a pass-through[216](index=216&type=chunk)[218](index=218&type=chunk) - Cost of cryptocurrency mining revenue (excluding depreciation) surged by **308%** to **$14.2 million**, and depreciation costs increased by **782%** to **$18.7 million**, reflecting the ramp-up of mining operations[216](index=216&type=chunk)[220](index=220&type=chunk) - General and administrative expenses (excluding D&A) increased by **109%** to **$19.2 million**, mainly due to new employee hires, stock-based compensation, consulting fees, legal fees for Project Dorothy, and increased insurance and audit costs[216](index=216&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - The company recognized **$47.4 million** in impairment charges on fixed assets in 2022, including **$1.9 million** for S-9 and L3 miners in storage, **$39.4 million** for active miners due to declining market value, **$1.8 million** for M20/M21 miners held for sale, **$1.9 million** for equipment held at vendor, and **$2.4 million** for Project Marie assets not attached to NYDIG collateral[216](index=216&type=chunk)[235](index=235&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - Interest expense increased by **346%** to **$8.4 million**, primarily from October Secured Notes and the NYDIG facility[216](index=216&type=chunk)[242](index=242&type=chunk) - A net loss of **$11.1 million** was incurred from debt extinguishment and revaluation in 2022, primarily due to the fair value valuation of October Secured Notes[216](index=216&type=chunk)[243](index=243&type=chunk) - Net loss from continuing operations was **$107.0 million** in 2022, a significant increase from **$6.4 million** in 2021, driven by impairments, increased depreciation, and G&A expenses[216](index=216&type=chunk)[246](index=246&type=chunk) - Net income from discontinued operations was **$7.9 million** in 2022, primarily due to a **$7.7 million** gain on the sale of MTI Instruments[216](index=216&type=chunk)[247](index=247&type=chunk) Adjusted EBITDA Reconciliation (Years Ended December 31, in thousands) | Metric | 2022 | 2021 | | :------------------------------------------ | :------- | :----- | | Net loss from continuing operations | $(107,016) | $(6,388) | | Interest expense | 8,375 | 1,879 | | Income tax (benefit) expense | (1,346) | 44 | | Depreciation and amortization | 28,214 | 3,703 | | **EBITDA** | **$(71,773)** | **$(762)** | | Stock-based compensation costs | 3,852 | 1,941 | | Loss on sale of fixed assets | 4,089 | — | | Loss on debt extinguishment and revaluation, net | 11,130 | — | | Impairment of equity investment | 750 | — | | Impairment on fixed assets | 47,372 | — | | Exchange registration expenses | — | 293 | | **Adjusted EBITDA** | **$(4,580)** | **$1,472** | - Adjusted EBITDA for continuing operations was **$(4.6) million** in 2022, down from **$1.5 million** in 2021, reflecting the significant non-cash charges and increased operating costs[253](index=253&type=chunk) Liquidity Indicators (Years Ended December 31, in thousands) | Metric | 2022 | 2021 | | :------------------------------------------ | :------- | :------- | | Cash | $1,136 | $10,258 | | Restricted cash | $685 | $- | | Working capital (deficit) | $(24,874) | $9,299 | | Net loss from continuing operations | $(107,016) | $(6,388) | | Net income from discontinued operations | $7,921 | $1,127 | | Net cash provided by (used in) operating activities | $(6,118) | $4,635 | | Net cash provided by operating activities for discontinued operations | $369 | $917 | | Purchase of property, plant and equipment | $(63,684) | $(45,792) | | Cash dividends paid on preferred stock | $(3,852) | $(630) | - The company had a negative working capital of **$24.9 million** as of December 31, 2022, and an accumulated deficit of **$221.8 million**, raising substantial doubt about its ability to continue as a going concern[254](index=254&type=chunk)[257](index=257&type=chunk) - Net cash used in operating activities from continuing operations was **$6.1 million** in 2022, compared to **$4.6 million** provided in 2021, primarily due to the increased net loss and non-cash adjustments[259](index=259&type=chunk)[260](index=260&type=chunk) - Net cash used in investing activities from continuing operations was **$54.7 million** in 2022, mainly for capital expenditures of **$63.7 million**[262](index=262&type=chunk) - Net cash provided by financing activities was **$42.9 million** in 2022, including proceeds from preferred stock (**$14.7 million**), notes/debt (**$23.9 million**), and common stock offerings (**$2.3 million**)[264](index=264&type=chunk) - The company had **$13.0 million** in outstanding convertible notes payable as of December 31, 2022, with a maturity date of **April 25, 2023**, and a subsidiary defaulted on a **$10.5 million** NYDIG equipment financing loan[254](index=254&type=chunk)[268](index=268&type=chunk)[270](index=270&type=chunk) - The company's revenue is directly impacted by **Bitcoin's** market value and the periodic halving of block rewards, which is expected to reduce rewards to **3.125 Bitcoin** per block around **April 2024**[301](index=301&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has omitted quantitative and qualitative disclosures about market risk, stating it is not applicable - Not applicable[307](index=307&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=65&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The company's consolidated financial statements are incorporated by reference into this item - The Company's Consolidated Financial Statements are incorporated by reference[308](index=308&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=65&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company has no changes in or disagreements with accountants on accounting and financial disclosure to report - Not applicable[309](index=309&type=chunk) [Item 9A. Controls and Procedures](index=65&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes - Disclosure controls and procedures were effective as of **December 31, 2022**[310](index=310&type=chunk) - Management concluded that internal control over financial reporting was effective as of **December 31, 2022**, based on the COSO framework[313](index=313&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended **December 31, 2022**[315](index=315&type=chunk) [Item 9B. Other Information](index=66&type=section&id=Item%209B.%20Other%20Information) The company has no other information to report - Not applicable[316](index=316&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=66&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) The company has no disclosures regarding foreign jurisdictions that prevent inspections - Not applicable[316](index=316&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=67&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company adopted a Code of Conduct and Ethics, with further governance details incorporated from its 2023 Annual Meeting of Shareholders Proxy Statement - A Code of Conduct and Ethics has been adopted for employees, officers, and directors, available on the company's website[318](index=318&type=chunk) - Further information is incorporated by reference from the **2023 Annual Meeting of Shareholders Proxy Statement**[319](index=319&type=chunk) [Item 11. Executive Compensation](index=67&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - Information on executive compensation is incorporated by reference from the **2023 Annual Meeting of Shareholders Proxy Statement**[320](index=320&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=67&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Details regarding security ownership of beneficial owners and management are incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - Information on security ownership of certain beneficial owners and management is incorporated by reference from the **2023 Annual Meeting of Shareholders Proxy Statement**[321](index=321&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=67&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information concerning certain relationships, related transactions, and director independence is incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the **2023 Annual Meeting of Shareholders Proxy Statement**[322](index=322&type=chunk) [Item 14. Principal Accounting Fees and Services](index=67&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Details regarding principal accounting fees and services are incorporated by reference from the company's 2023 Annual Meeting of Shareholders Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the **2023 Annual Meeting of Shareholders Proxy Statement**[323](index=323&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=68&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and supplementary data, along with a comprehensive list of exhibits filed with the Form 10-K - Financial statements are set forth on the Index to Consolidated Financial Statements on page **F-1**[325](index=325&type=chunk) - Financial statement schedules not listed are omitted as not required, not applicable, or included elsewhere[326](index=326&type=chunk) - A detailed list of exhibits (**2.1 to 10.69, 21, 23.1, 31.1, 31.2, 32.1, 32.2, 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104**) is provided, including merger agreements, articles of incorporation, bylaws, preferred stock certificates, convertible notes, warrants, employment agreements, and various other contracts[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk)[340](index=340&type=chunk) [Item 16. Form 10-K Summary](index=77&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a Form 10-K summary - None[339](index=339&type=chunk) Financial Statements [INDEX TO CONSOLIDATED FINANCIAL STATEMENTS](index=79&type=section&id=INDEX%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides an index to the consolidated financial statements, including the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, Statements of Changes in Equity, Statements of Cash Flows, and Notes - The index lists the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Statements of Changes in Equity, Statements of Cash Flows, and Notes to Consolidated Financial Statements[346](index=346&type=chunk) [Report of Independent Registered Public Accounting Firm](index=80&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) UHY LLP issued an unqualified opinion but noted substantial doubt about the company's going concern ability, highlighting critical audit matters like asset impairment and fair value measurements - UHY LLP issued an unqualified opinion on the financial statements for **2022** and **2021**[347](index=347&type=chunk) - The auditors noted substantial doubt about the company's ability to continue as a going concern due to recurring losses, significant accumulated deficit, and negative working capital[348](index=348&type=chunk) - Critical audit matters included the impairment analysis of strategic pipeline contract intangible assets, the fair value measurement of warrants and convertible notes, and the impairment analysis of fixed assets, all requiring significant judgment and specialized audit skills[352](index=352&type=chunk)[353](index=353&type=chunk)[357](index=357&type=chunk)[360](index=360&type=chunk) [Consolidated Financial Statements](index=83&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's core consolidated financial statements: Balance Sheets, Statements of Operations, Statements of Changes in Equity, and Statements of Cash Flows for 2022 and 2021 Consolidated Balance Sheets (as of December 31, in thousands) | Asset/Liability/Equity | 2022 | 2021 | | :------------------------------------------------- | :----- | :------- | | **Assets:** | | | | Cash | $1,136 | $10,258 | | Restricted cash | $685 | $- | | Total Current Assets | $4,642 | $24,982 | | Property, plant and equipment, net | $42,504 | $44,597 | | Intangible assets, net | $36,432 | $45,839 | | Total Assets | $84,961 | $117,694 | | **Liabilities:** | | | | Accounts payable | $3,548 | $2,958 | | Convertible notes payable | $11,737 | $7,121 | | Current portion of debt | $10,546 | $- | | Total Current Liabilities | $29,516 | $15,683 | | Deferred tax liability, net | $8,886 | $10,277 | | Total Liabilities | $38,689 | $26,706 | | **Stockholders' Equity:** | | | | Total Soluna Holdings, Inc. Stockholders' Equity | $41,866 | $90,988 | | Non-Controlling Interest | $4,406 | $- | | Total Stockholders' Equity | $46,272 | $90,988 | Consolidated Statements of Operations (Years Ended December 31, in thousands) | Metric | 2022 | 2021 | | :------------------------------------------------- | :------- | :------- | | Total revenue | $28,547 | $14,345 | | Total cost of cryptocurrency mining revenue | $32,989 | $5,626 | | Cost of data hosting revenue | $3,517 | $2,444 | | Total general and administrative expenses | $28,709 | $10,751 | | Impairment on equity investment | $750 | $- | | Impairment on fixed assets | $47,372 | $- | | Operating loss | $(84,790) | $(4,476) | | Interest expense | $(8,375) | $(1,879) | | Loss on debt extinguishment and revaluation, net | $(11,130) | $- | | Loss on sale of fixed assets | $(4,089) | $- | | Net loss from continuing operations | $(107,016) | $(6,388) | | Net income from discontinued operations | $7,921 | $1,127 | | **Net loss** | **$(99,095)** | **$(5,261)** | | Net loss attributable to Soluna Holdings, Inc. | $(98,715) | $(5,261) | | Basic & Diluted loss per share | $(6.89) | $(0.50) | Consolidated Statements of Cash Flows (Years Ended December 31, in thousands) | Activity | 2022 | 2021 | | :------------------------------------------------- | :------- | :------- | | Net cash (used in) provided by operating activities | $(6,118) | $4,635 | | Net cash provided by operating activities- discontinued operations | $369 | $917 | | Net cash used in investing activities | $(54,714) | $(57,268) | | Net cash provided by (used in) investing activities- discontinued operations | $9,084 | $(37) | | Net cash provided by financing activities | $42,942 | $59,381 | | (Decrease) increase in cash & restricted cash-continuing operations | $(17,890) | $6,748 | | Increase in cash & restricted cash- discontinued operations | $9,453 | $880 | | Cash & restricted cash – end of period | $1,821 | $10,258 | [Notes to Consolidated Financial Statements](index=90&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's operations, accounting policies, financial instruments, debt, equity, and recent events, including going concern uncertainty, asset sales, and impairment charges - The company's ability to continue as a going concern is in substantial doubt due to insufficient revenue, negative working capital, and declining **Bitcoin** prices in **2022**, necessitating additional financing[383](index=383&type=chunk)[384](index=384&type=chunk)[392](index=392&type=chunk) - The MTI Instruments business was sold in **April 2022** for approximately **$9.4 million** cash, resulting in a **$7.8 million** gain, as the company shifted focus to green, zero-carbon computing and cryptocurrency mining[381](index=381&type=chunk)[385](index=385&type=chunk) - The company entered into a **$35 million** project financing agreement with Spring Lane Capital for green data centers, with **$4.8 million** contributed by Spring Lane for Project Dorothy as of **December 31, 2022**[386](index=386&type=chunk) - A subsidiary defaulted on a **$10.5 million** NYDIG equipment financing loan, leading to collateral repossession in **February 2023** and the shutdown of Project Marie. **SCI** denies liability for a 'piercing of the corporate veil' claim by **NYDIG**[387](index=387&type=chunk)[509](index=509&type=chunk)[599](index=599&type=chunk) - The company recorded **$47.4 million** in impairment charges on property, plant, and equipment in **2022**, primarily due to declining market values of miners and the closure of Project Marie[460](index=460&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk) - The Soluna Callisto acquisition in **October 2021**, valued at approximately **$33.0 million**, was accounted for as an asset acquisition, primarily for a strategic pipeline contract of cryptocurrency mining projects[465](index=465&type=chunk)[466](index=466&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk) Intangible Assets (as of December 31, in thousands) | Asset | 2022 (Net) | 2021 (Net) | | :------------------------ | :--------- | :--------- | | Strategic pipeline contract | $35,945 | $45,323 | | Assembled workforce | $383 | $483 | | Patents | $104 | $33 | | **Total** | **$36,432** | **$45,839** | - The company's effective income tax rate was **1%** for both **2022** and **2021**. A valuation allowance of **$30.7 million** was recorded against deferred tax assets in **2022** due to uncertainty regarding future taxable income[477](index=477&type=chunk)[480](index=480&type=chunk)[481](index=481&type=chunk) Accrued Liabilities (as of December 31, in thousands) | Category | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Salaries, wages and related expenses | $178 | $611 | | Liability to shareholders for previous acquisition | $363 | $363 | | Legal, audit, tax and professional fees | $214 | $363 | | Sales tax accrual | $- | $248 | | Development fees | $- | $373 | | Hosting and utility fees | $626 | $626 | | Interest payable | $477 | $- | | Dividend payable | $243 | $- | | Construction fees | $590 | $- | | Other | $30 | $275 | | **Total** | **$2,721** | **$2,859** | - The October Secured Notes, with an aggregate principal of **$13.0 million** and an **18%** interest rate due **April 25, 2023**, were subject to debt extinguishment and revaluation in **2022**, resulting in a net loss of **$11.1 million**[487](index=487&type=chunk)[493](index=493&type=chunk) - The company issued Series B Preferred Stock for **$5.0 million** in **July 2022**, convertible into common stock at a **20% premium**, and issued Series B Warrants to purchase up to **1,000,000** common shares[512](index=512&type=chunk)[513](index=513&type=chunk) - Total share-based compensation expense was **$3.9 million** in **2022**, up from **$1.9 million** in **2021**, due to grants of stock options and restricted stock units to employees and directors[540](index=540&type=chunk) - As of **December 31, 2022**, the company had **1,309,789** stock options outstanding and **830,590** non-vested restricted stock units, with unrecognized compensation costs of **$1.0 million** and **$4.8 million**, respectively[517](index=517&type=chunk)[540](index=540&type=chunk)[541](index=541&type=chunk)[543](index=543&type=chunk) - The company's ownership in Soluna DVSL ComputeCo, LLC (a VIE for Project Dorothy) was reduced from **67.8%** to **15%** in **March 2023** after Spring Lane Capital increased its stake for **$7.5 million**[589](index=589&type=chunk)[609](index=609&type=chunk)