Soluna Holdings Inc

Previous wording

We are a digital infrastructure company specializing in transforming surplus renewable energy into computing resources. Our modular data centers can co-locate with wind, solar, or hydroelectric power plants and support compute intensive applications including Bitcoin Mining, Generative AI, and Scientific Computing. This pioneering approach to data centers helps energize a greener grid while delivering cost-effective and sustainable computing solutions.

Current wording

We are a digital infrastructure company specializing in transforming surplus renewable energy into computing resources. Our modular data centers can co-locate with wind, solar, hydroelectric and other renewable power plants and support compute intensive applications including Bitcoin Mining, Generative AI, Scientific Computing and other forms of High Performance Computing (HPC). This pioneering approach to data centers helps energize a greener grid while delivering cost-effective and sustainable computing solutions.

Previous wording

SHI through its subsidiaries operates across several business divisions:

Current wording

SHI through its subsidiaries operates across several business lines:

Previous wording

In 2023, we executed on the following four-pronged strategy: (1) Energize Project Dorothy; (2) Cash Flow, Site and Process Optimization; (3) Flagship Expansion; (4) Pipeline growth. A summary of our developments in these areas follows below.

Current wording

In 2023, we executed on the following four-pronged strategy: (1) Energize Project Dorothy; (2) Cash Flow, Site and Process Optimization; (3) Flagship Expansion; (4) Pipeline growth. In 2024, we continue to execute upon: (1) Optimize Projects; (2) Grow Pipeline; (3) Launch AI; and (4) Finance Opportunities. A summary of our overview and developments in these areas follows below.

Previous wording

D1A is focused on Bitcoin Hosting. On April 26, 2023 we signed a 5 MW 2-year hosting deal with Compass Mining at D1A. On April 24, 2023 we signed a 20 MW 2-year hosting agreement with another strategic hosting partner at Dorothy 1A. In the summer of 2023, we completed the construction of D1A and the installation of approximately 7,700 Bitcoin miners between the two customers, resulting in an installed hashrate of approximately 950 PH/s. From May 2023 through December 31, 2023, D1A has consumed over 11,900 MWh of Curtailed Energy from the co-located power plant and achieved a power usage effectiveness (“PUE”) of 1.03. For the three months ended March 31, 2024, D1A has consumed over 15,100 MWh of Curtailed Energy from the co-located power plant and has achieved a PUE of 1.03.

Current wording

D1A is focused on Bitcoin Hosting. On April 26, 2023 we signed a 5 MW 2-year hosting deal with Compass Mining at D1A. On April 24, 2023 we signed a 20 MW 2-year hosting agreement with another strategic hosting partner at Dorothy 1A. In the summer of 2023, we completed the construction of D1A and the installation of approximately 7,700 Bitcoin miners between the two customers, resulting in an installed hashrate of approximately 950 PH/s. From May 2023 through December 31, 2023, D1A has consumed over 11,900 MWh of Curtailed Energy from the co-located power plant and achieved a power usage effectiveness (“PUE”) of 1.03. For the three and six months ended June 30, 2024, D1A has consumed over 12,900 MWh and 28,100 MWh of Curtailed Energy from the co-located power plant and has achieved a PUE of 1.01 as of June 30, 2024.

Previous wording

D1B is focused on Bitcoin Mining through a strategic partnership with Navitas Global (“Navitas”). On May 9, 2023, we consummated a project-level financing with Navitas, which included a $2 million loan to D1B to complete the construction and a $12.1 million equity investment in the project. After consummating the financing, Navitas owned 49% of D1B and Soluna owned 51%. As of March 31, 2024, Navitas owns 46.7% of D1B, and Soluna owns 53.3%. In June 2023, D1B purchased 8,378 Bitmain Antminer S19s, S19j Pro and S19j Pro+ machines for the partnership. The purchase resulted in an estimated 868 PH/s of hashrate with an average efficiency of 29.9 J/TH and at a cost of $10.59 $/TH. As of December 31, 2023, over 7,900 of the miners had been deployed. D1B was fully energized and began ramping in late October 2023. D1B now has an installed hashrate of 817 PH/s. From July 2023 through December 31, 2023, D1B has consumed over 10,600 MWh of Curtailed Energy from the co-located power plant and achieved a power usage effectiveness (“PUE”) of 1.03. For the three months ended March 31, 2024, D1B has consumed over 15,400 MWh of Curtailed Energy from the co-located power plant and achieved a PUE of 1.03.

Current wording

D1B is focused on Bitcoin Mining through a strategic partnership with Navitas Global (“Navitas”). On May 9, 2023, we consummated a project-level financing with Navitas, which included a $2 million loan to D1B to complete the construction and a $12.1 million equity investment in the project. After consummating the financing, Navitas owned 49% of D1B and Soluna owned 51%. As of March 31, 2024, Navitas owns 46.7% of D1B, and Soluna owns 53.3%. In June 2023, D1B purchased 8,378 Bitmain Antminer S19s, S19j Pro and S19j Pro+ machines for the partnership. The purchase resulted in an estimated 868 PH/s of hashrate with an average efficiency of 29.9 J/TH and at a cost of $10.59 $/TH. As of December 31, 2023, over 7,900 of the miners had been deployed. D1B was fully energized and began ramping in late October 2023. D1B now has an installed hashrate of 817 PH/s. From July 2023 through December 31, 2023, D1B has consumed over 10,600 MWh of Curtailed Energy from the co-located power plant and achieved a power usage effectiveness (“PUE”) of 1.03. For the three and six months ended June 30 2024, D1B has consumed over 12,700 and 28,100 MWh of Curtailed Energy from the co-located power plant and achieved a PUE of 1.01 as of June 30, 2024.

Previous wording

In November 2023, we completed our registration of Project Dorothy for one of ERCOT’s demand response programs establishing the project as key contributor to intelligent and flexible energy solutions, promoting environmental and economic advantages for the state of Texas. It also allowed us to diversify our revenue. Under the program, we have a single promise to stand ready, on a monthly basis, to deliver a set amount of curtailment (committed capacity) per month when and if called upon by ERCOT. Soluna will be able to make additional revenue for Project Dorothy by providing this grid resilience support and potentially reduce its power costs, making it among the lowest cost players in the industry.

Current wording

In November 2023, we completed our registration of Project Dorothy for one of ERCOT’s demand response programs establishing the project as a key contributor to intelligent and flexible energy solutions, promoting environmental and economic advantages for the state of Texas. It also allowed us to diversify our revenue. Under the program, we have a single promise to stand ready, on a monthly basis, to deliver a set amount of curtailment (committed capacity) per month when and if called upon by ERCOT. Soluna will be able to generate additional revenue for Project Dorothy by providing this grid resilience support and potentially reduce its power costs, making it among the lowest cost players in the industry. Since November 2023, Project Dorothy has successfully participated and completed in the Winter and Spring demand response periods in ERCOT, and is currently in the summer standby period.

Previous wording

The Company owns 100% of the facility and completed its construction in 2021. In the second quarter of fiscal year 2023, we shifted Project Sophie to Data Hosting, signing contracts with leading Bitcoin miners. We sold older, less efficient Bitcoin mining equipment and used the cash to make operational improvements to the site and to fund corporate operations. Throughout 2023, Sophie progressively secured new more profitable hosting contracts. We have deployed over 8,000 mining machines for hosting in 2023 and 2024 at the site. The Data Hosting agreements are a combination of a fixed services fee and a profit share component. The cost of power is passed through to customers. Customers at the site now include leading public Bitcoin Miners such as Bit Digital, Compass Mining, and other leading sustainability focused customers.

Current wording

The Company owns 100% of the facility and completed its construction in 2021. In the second quarter of fiscal year 2023, we shifted Project Sophie to Data Hosting, signing contracts with leading Bitcoin miners. We sold older, less efficient Bitcoin mining equipment and used the cash to make operational improvements to the site and to fund corporate operations. Throughout 2023, Sophie progressively secured new more profitable hosting contracts. We have deployed over 8,000 mining machines for hosting in 2023 and 2024 at the site. The Data Hosting agreements generate revenue for a combination of a fixed services fee and a profit share component. The cost of power is passed through to customers. Customers at the site now include leading public Bitcoin Miners such as Bit Digital, Compass Mining, and other leading sustainability focused customers. During the second quarter of 2024, Project Sophie’s team executed well, mitigating the effects of Kentucky tornadoes. Critical infrastructure optimizations were implemented to prepare for the summer heat to improve efficiency and utilize additional available capacity to prepare for Sophie’s AI hosting customer.

Previous wording

In 2023, we implemented a number of cost cutting measures including staff reductions, renegotiations or termination of key advisory agreements. We ramped up a new Financial Planning and Analysis (“FP&A”) function to provide our management and operations teams better insight into the financial performance of our data centers. This helped us find opportunities to improve profitability and proactively address critical issues with infrastructure equipment at all sites. Our MaestroOS software platform managed the efficient operations of projects Dorothy and Sophie through record setting temperatures (hot and cold) in both Texas and Kentucky in 2023.

Current wording

In 2023, we implemented a number of cost cutting measures including staff reductions, renegotiations or termination of key advisory agreements. We ramped up a new Financial Planning and Analysis (“FP&A”) function to provide our management and operations teams better insight into the financial performance of our data centers. This helped us find opportunities to improve profitability and proactively address critical issues with infrastructure equipment at all sites. Our MaestroOS software platform managed the efficient operations of projects Dorothy and Sophie through record setting temperatures (hot and cold) in both Texas and Kentucky in 2023. In 2024, our Maestro control system has continued to respond to increases in grid demand throughout the summer.

Previous wording

Our objective is to achieve operational excellence across all data centers, targeting a budgeted EBITDA and maintaining high customer satisfaction.

Current wording

Continuing in 2024, our objective is to achieve operational excellence across all data centers, targeting a budgeted EBITDA and maintaining high customer satisfaction. Our infrastructure optimization efforts have been completed to protect equipment against the severe summer heat to include miner heat shielding, building insulation upgrades, and transformer fan kit installations.

Previous wording

In 2023, we began the planning process for building out the second 50 MW phase of Project Dorothy – Dorothy 2. We completed the design, established new procurement partners, and submitted an updated approval to ERCOT.

Current wording

In 2023, we began the planning process for building out the second 50 MW phase of Project Dorothy – Dorothy 2. We completed the design, established new procurement partners, and submitted an updated approval to ERCOT. In May 2024, the Company partnered with Spring Lane Capital (“SLC”) to finance up to $30 million. The financing will facilitate the construction of the Dorothy 2 facility, in which the parties will begin construction with the goal of achieving initial energization and ramp-up by the end of the first quarter of 2025. Dorothy 2 will feature a stronger waterfall structure and enhanced management and development fees compared to Dorothy 1A, allowing Soluna to benefit from substantial current income during operational phase. On July 22, 2024, the financing on the Dorothy 2 project closed. Project Dorothy 2 will be adjacent to two other Soluna modular data center projects co-located at the same site. Project Dorothy 2 is financed by SLC, which will make a capital contribution up to approximately $29.98 million, and the Company, which will make a capital contribution up to approximately $4.6 million, and as of July 22, 2024 became co-owners of ComputeCo with Soluna Digital, Inc.

Previous wording

We have 2 MW of our Project Dorothy 2 site slated for our Helix Pilot, focused on next generation data centers for AI. We will partner with industry leaders to bring this online and create a repeatable blueprint for our new AI business.

Current wording

In addition, we have 2 MW of our Project Dorothy 2 site slated for our Helix Pilot, focused on next generation data centers for AI.

Previous wording

We signed a term sheet for a new 166 MW data center called Kati that will be integrated with a 300 MW wind farm that has surplus energy due to increasing curtailment by the grid. We worked throughout 2023 to advance the project through grid operator’s, ERCOT planning process.

Current wording

In 2023, we signed a term sheet for a new 166 MW data center called Kati that will be integrated with a 300 MW wind farm that has surplus energy due to increasing curtailment by the grid. We worked throughout 2023 to advance the project through grid operator’s, ERCOT planning process, and in 2024 have resubmitted a key study to take into account a change in distance from substation. In May 2024, we announced the signing of a Power Purchase Agreement (“PPA”) for Project Kati with EDF Renewables and Abu Dhabi Future Energy Company- Masdar. Project Kati will be co-located at a wind facility owned by EDF Renewables and Masdar. Project Kati will be executed in two phases, with each phase delivering 83 MW of renewable energy capacity to power high-performance computing applications including AI.

Previous wording

We aim to double our assets under management to 150 MW by the end of fiscal year 2024, focusing on constructing and energizing 48 MW of Project Dorothy 2, and breaking ground on Project Kati.

Current wording

For 2024, we aim to double our assets under management to 150 MW by the end of fiscal year 2024 or the beginning of 2025, focusing on constructing and energizing 48 MW of Project Dorothy 2 as noted above, and breaking ground on Project Kati.

Previous wording

In 2023, the Company negotiated three amendments to the October Convertible Notes. On February 28, 2024, a fourth amendment was executed. These amendments were focused on extending the maturity date of the notes, lowering the conversion price of the notes, adding features to the notes to allow early payoff with predetermined cost, and the repricing of certain warrants to assist the company in raising capital for operations.

Current wording

In 2023, the Company negotiated three amendments to the October Convertible Notes. On February 28, 2024, a fourth amendment was executed. These amendments were focused on extending the maturity date of the notes, lowering the conversion price of the notes, adding features to the notes to allow early payoff with predetermined cost, and the repricing of certain warrants to assist the Company in raising capital for operations. Additionally on May 17, 2024, certain warrants were further repriced to assist in raising additional capital.

Previous wording

We plan to raise funds to support our growth initiatives, particularly in our AI business, which we believe is a great fit for our renewable computing data center model.

Current wording

We plan to raise funds to support our growth initiatives, particularly in our AI hosting business, which we believe is a great fit for our renewable computing data center model.

Previous wording

In April 2024, Bitcoin underwent its fourth halving event, occurring approximately every four years or after every 210,000 blocks are mined. During a halving, miners’ rewards for validating transactions and creating new blocks on the Bitcoin blockchain are cut in half, reducing the rate of new Bitcoin generation. This event typically triggers anticipation and speculation within the Bitcoin community and among investors, leading to increased market activity. Price volatility tends to rise before and after a halving as the market reacts to perceived supply scarcity. Mining profitability decreases post-halving, potentially prompting some miners to shut down operations. This often sparks consolidations in the space reducing the number of mining companies. However, the network automatically adjusts mining difficulty to ensure consistent block production. The halving also causes a supply shock, reducing Bitcoin’s inflation rate and potentially driving long-term price appreciation, although past performance does not guarantee future outcomes. The 2024 halving will be the first to happen during a high interest rate environment, and in the presence of strong institutional demand for Bitcoin driven by ETFs. Reduction in block-reward will represent a short-term reduction in revenue. But, the supply-shock effect and the growth of ETF may lessen the volatility. A projected rise in Bitcoin price after the halving would increase revenues and increase demand for our low-cost data centers.

Current wording

In April 2024, Bitcoin underwent its fourth halving event, occurring approximately every four years or after every 210,000 blocks are mined. During a halving, miners’ rewards for validating transactions and creating new blocks on the Bitcoin blockchain are cut in half, reducing the rate of new Bitcoin generation. This event typically triggers anticipation and speculation within the Bitcoin community and among investors, leading to increased market activity. Price volatility tends to rise before and after a halving as the market reacts to perceived supply scarcity. Mining profitability decreases post-halving, potentially prompting some miners to shut down operations. This often sparks consolidations in the space, reducing the number of mining companies. However, the network automatically adjusts mining difficulty to ensure consistent block production. The halving also causes a supply shock, reducing Bitcoin’s inflation rate and potentially driving long-term price appreciation, although past performance does not guarantee future outcomes. The 2024 halving was the first to happen during a high interest rate environment, and in the presence of strong institutional demand for Bitcoin driven by ETFs. Reduction in block-reward will represent a short-term reduction in revenue. But, the supply-shock effect and the growth of ETF may lessen the volatility in the long run. A projected rise in Bitcoin price in the months after the halving would increase revenues and increase demand for our low-cost data centers.

Previous wording

The Inflation Reduction Act of 2022 (“IRA”), signed into law by President Biden, is a significant investment in climate and energy in the U.S. At the time of its passage, legislators estimated that the bill would allocate $370 billion, primarily in the form of tax credits, to a wide array of decarbonization efforts. Recent private estimates are much higher. In March, the Brookings Institute released a study estimating the spending at $1.2 trillion, which is three times the Congressional estimate. The Act aims to tackle the climate crisis, advance environmental justice, secure America’s position as a world leader in clean energy manufacturing, and work towards achieving a net-zero economy by 2050. Since its enactment, the Inflation Reduction Act has driven substantial investment in clean energy projects, with over $110 billion announced in new clean-energy manufacturing investments. This includes investments in electric vehicle supply chains and solar manufacturing. Overall, the IRA stimulates economic growth through renewable energy development and infrastructure reinvestment in the United States. The IRA is accelerating the development of new renewable power plants across the country and extending the tax incentives. This growth is likely to exacerbate the wasted energy problem as grid transmission will not keep pace. This would help to increase the company’s long-term project pipeline.

Current wording

The Inflation Reduction Act of 2022 (“IRA”), signed into law by President Biden, is a significant investment in climate and energy in the U.S. At the time of its passage, legislators estimated that the bill would allocate $370 billion, primarily in the form of tax credits, to a wide array of decarbonization efforts. Recent private estimates are much higher. In March, the Brookings Institute released a study estimating the spending at $1.2 trillion, which is three times the Congressional estimate. The Act aims to tackle the climate crisis, advance environmental justice, secure America’s position as a world leader in clean energy manufacturing, and work towards achieving a net-zero economy by 2050. Since its enactment, the Inflation Reduction Act has driven substantial investment in clean energy projects, with over $110 billion announced in new clean-energy manufacturing investments. This includes investments in electric vehicle supply chains and solar manufacturing. Overall, the IRA stimulates economic growth through renewable energy development and infrastructure reinvestment in the United States. The IRA is accelerating the development of new renewable power plants across the country and extending the tax incentives. This growth is likely to exacerbate the wasted energy problem as grid transmission will not keep pace. In 2024, new guidance was issued allowing eligible taxpayers to sell their energy tax credits to unrelated parties, further incentivizing clean energy investments and potentially increasing the company’s long-term project pipeline.

Previous wording

Demand Response Service: In November 2023, we completed our registration of Project Dorothy for one of ERCOT’s demand response programs, in which we began services in December 2023. On a monthly basis we stand ready to deliver a set amount of committed capacity per month when and if called upon by ERCOT. No such services were performed for the three months ended March 31, 2023.

Current wording

Demand Response Service: In November 2023, we completed our registration of Project Dorothy for one of ERCOT’s demand response programs, in which we began services in December 2023. On a monthly basis we stand ready to deliver a set amount of committed capacity per period when and if called upon by ERCOT. We note that based on the time of the year, certain months and weather create more lucrative rewards. No such services were performed for the three ended June 30, 2023.

Previous wording

Cost of revenue- depreciation: Depreciation costs associated with cryptocurrency and data hosting revenue was approximately $1.5 million for the three months ended March 31, 2024 compared to approximately $625 thousand for the three months ended March 31, 2023. The increase related to the capital additions to fixed assets between the second quarter of fiscal year 2023 through the first quarter of 2024, totaling approximately $12.4 million. As the Company has begun to invest more in capital expenditures, we expect to see depreciation costs to significantly increase over the next several quarters.

Current wording

Cost of revenue- depreciation: Depreciation costs associated with cryptocurrency and data hosting revenue was approximately $1.5 million for the three months ended June 30, 2024 compared to approximately $539 thousand for the three months ended June 30, 2023. The increase related to the capital additions to fixed assets between the second quarter of fiscal year 2023 through the second quarter of 2024. It was noted that Project Marie was discontinued in February of 2023, Project Sophie had sold a majority of its miners in the second quarter of 2023, and the significant additions of capital expenditures at Project Dorothy, causing an increase in depreciation costs period over period. As the Company has begun to invest more in capital expenditures, we expect to see depreciation costs to significantly increase over the next several quarters.

Previous wording

General and Administrative Expenses: General and administrative expenses 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.

Current wording

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.

Previous wording

Income Tax Benefit: Income tax benefit for the three months ended March 31, 2024 and March 31, 2023 was $548 thousand and $547 thousand. The balance mainly related to deferred tax amortization 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 $10.9 million at inception date (October 29, 2021), in which was recorded as a deferred tax liability and this amount will be amortized over the life of the asset. For the three months ended March 31, 2024 and March 31, 2023, the Company amortized $547 thousand. There was an additional state income tax benefit of approximately $1 thousand for the three months ended March 31, 2024.

Current wording

Income Tax Benefit: Income tax benefit for the three months ended June 30, 2024 was $649 thousand, compared to $547 thousand for the three months ended June 30, 2023. The comparable balances were mainly related to deferred tax amortization 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 $10.9 million at inception date (October 29, 2021), in which was recorded as a deferred tax liability and this amount will be amortized over the life of the asset. For the three months ended June 30, 2024 and June 30, 2023, the Company amortized $547 thousand, respectively. In addition, for the three months ended June 30, 2024, the income tax benefit increased due to changes in estimable income and permanent differences in 2024.

Previous wording

Net income / (loss) attributable to non-controlling interest: Net income attributable to non-controlling interest for the three months ended March 31, 2024 was $2.7 million compared to a net loss of approximately $370 thousand for the three months ended March 31, 2023. This amount relates to Spring Lane’s 85% noncontrolling interest of the net profit in Soluna DVSL and Navitas 46.7% through 49% noncontrolling interest of the net profit in Soluna DV ComputeCo for the three months ended March 31, 2024, compared to the Spring Lane’s 32.2% noncontrolling interest of Net loss in Soluna DVSL for the three months ended March 31, 2023. Note, there was no noncontrolling interest of DV ComputeCo for the three months ended March 31, 2023. The change in non-controlling interest relates to continued profitability at Dorothy 1A and Dorothy 1B, creating a total net profit which started to grow in the third quarter of fiscal year 2023. There was no minority interest for Dorothy 1B (DV ComputeCo), until the 2nd quarter of 2023, when Navitas obtained interest in DV ComputeCo. Dorothy 1A had a net profit of approximately $1.4 million for three months ended March 31, 2024, creating a non-controlling interest profit of approximately $1.2 million, compared to a $433 thousand net loss for the three months ended March 31, 2023, creating a non-controlling interest loss of $370 thousand. In addition, the increase also related to Dorothy 1B, which had a zero balance for the three months ended March 31, 2023 for non-controlling interest to a non-controlling interest profit of $1.5 million for the three months ended March 31, 2024. As the Company was generating revenue from energization at Project Dorothy, the Company began to see a shift from a net loss to profit within non-controlling interest.

Current wording

Net income / (loss) attributable to non-controlling interest: Net income attributable to non-controlling interest for the three months ended June 30, 2024 was $1.7 million compared to a net loss of approximately $482 thousand for the three months ended June 30, 2023. This amount relates to Spring Lane’s 85% noncontrolling interest of the net profit in Soluna DVSL and Navitas 45.0% through 46.7% noncontrolling interest of the net profit in Soluna DV ComputeCo for the three months ended June 30, 2024 and 2023. The change in non-controlling interest relates to continued profitability at Dorothy 1A and Dorothy 1B, creating a total net profit which started to grow in the third quarter of fiscal year 2023. There was no minority interest for Dorothy 1B until the 2nd quarter of 2023, when Navitas obtained interest in DV ComputeCo. Dorothy 1A had a net profit of approximately $1.4 million for three months ended June 30, 2024, creating a non-controlling interest profit of approximately $1.2 million, compared to a $463 thousand net loss for the three months ended June 30, 2023, creating a non-controlling interest loss of $396 thousand. In addition, the increase also related to Dorothy 1B, which had a $87 thousand non-controlling interest loss for the three months ended June 30, 2023 to a non-controlling interest profit of $564 thousand for the three months ended June 30, 2024. As the Company was generating revenue from energization at Project Dorothy, the Company began to see a shift from a net loss to profit within non-controlling interest.

Previous wording

Cryptocurrency Mining Revenue: Cryptocurrency revenue consists of revenue recognized from Soluna’s cryptocurrency mining operations. Cryptocurrency revenue was approximately $6.4 million for the three months ended March 31, 2024 compared to $2.8 million for the three months ended March 31, 2023. We noted the significant increase of approximately $3.6 million related to the average price of Bitcoin increasing by 134% from the first three months of March 2023 compared to the same period in 2024. We also noted that the dollar Petahash per day between the two periods is 26.6% higher for the three months ended March 31, 2024 compared to same period in 2023. For the three months ended March 31, 2024, all cryptocurrency mining revenue related to Project Dorothy 1B, which began energization in the fourth quarter of 2023, and has been running at a full 25 MWs. Operations were stopped for Project Marie in February 2023 with the CCMA termination and NYDIG repossession of collateralized assets, and Project Sophie switched to Data Hosting beginning in the second quarter of fiscal year 2023, as such no revenue was recognized for either Project Marie or Sophie for the three months ended March 31, 2024. The Company also noted for the three months ended March 31, 2023, that Project Marie shut down when only 8 MW was running for Proprietary Mining and Project Sophie was beginning to struggle and not being able to maintain running at 25 MW, therefore we started our transition to a hosting model.

Current wording

Cryptocurrency Mining Revenue: Cryptocurrency revenue consists of revenue recognized from Soluna’s cryptocurrency mining operations. Cryptocurrency revenue was approximately $10.9 million for the six months ended June 30, 2024 compared to $3.7 million for the six months ended June 30, 2023. For the six months ended June 30, 2024, all cryptocurrency mining revenue related to Project Dorothy 1B, which began energization in the fourth quarter of 2023, and has been running at a full 25 MWs. Operations were stopped for Project Marie in February 2023 with the CCMA termination and NYDIG repossession of collateralized assets, and Project Sophie switched to Data Hosting beginning in the second quarter of fiscal year, as such no revenue was recognized for either Project Marie or Sophie for the six months ended June 30, 2024. The Company also noted for the six months ended June 30, 2024, that Project Marie shut down when only 8 MW was running for Proprietary Mining and Project Sophie was beginning to struggle and was not able to maintain running at 25 MW, therefore we started our transition to a hosting model and was fully switched by June 2023. In addition to the above, the average price of Bitcoin increased by 134% in the six months ended June 30, 2023 compared to the same period for June 2024.

Previous wording

Data Hosting Revenue: The Company’s cryptocurrency hosting services provide energized space and operating services to third-party mining companies who locate their mining hardware at one of our mining locations. 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. Data hosting revenue was approximately $5.3 million for the three months ended March 31, 2024 compared to $286 thousand for the three months ended March 31, 2023. The significant increase was primarily related to energization and the deployment of hosting customers at Project Dorothy 1A in the second quarter of 2023 creating approximately $3.5 million in data hosting revenue. In addition, Project Sophie switched their business model from proprietary mining to data hosting in the second quarter of 2023, which created an additional increase of approximately $1.7 million. As such, the Company was performing hosting services utilizing approximately 50 MW between Project Dorothy 1A and Project Sophie. Offsetting the increase was the decommission of Project Marie operations in February 2023 causing a decline of approximately $276 thousand quarter over quarter. For the three months ended March 31, 2023, Project Marie was hosting at approximately 10 MW.

Current wording

Data Hosting Revenue: The Company’s cryptocurrency hosting services provide energized space and operating services to third-party mining companies who locate their mining hardware at one of our mining locations. 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. Data hosting revenue was approximately $10.2 million for the six months ended June 30, 2024 compared to $1.4 million for the six months ended June 30, 2023. The significant increase was primarily related to energization and the deployment of hosting customers at Project Dorothy 1A in the second quarter of 2023 creating approximately $7.1 million in data hosting revenue for the six months ended June 30, 2024 compared to approximately $456 thousand for the same period in 2023, approximately a $6.7 million increase. In addition, Project Sophie switched their business model from proprietary mining to data hosting in the second quarter of 2023 which created an additional increase of approximately $2.4 million from approximately $692 thousand for the six months ended June 30, 2023 to approximately $3.1 million for the six months ended June 30, 2024. As such, the Company was performing hosting services utilizing approximately 50 MW between Project Dorothy 1A and Project Sophie. Offsetting the increase was the decommission of Project Marie operations in February 2023 causing a decline of approximately $276 thousand six months ended June 30, 2024 compared to June 30, 2023. For the first quarter of 2023, Project Marie was hosting at approximately 10 MW.

Previous wording

Cost of cryptocurrency revenue, exclusive of depreciation costs was approximately $1.8 million and $2.3 million for the three months ended March 31, 2024 and 2023, respectively, approximately a $410 thousand decrease. The decline in costs related to the Company operating only one facility for the three months ended March 31, 2024, compared to two facilities for the three months ended March 31, 2023. Also, the electricity costs at Project Dorothy 1B are comparatively cheaper than the costs were at Project Sophie and Marie.

Current wording

Cost of cryptocurrency revenue, exclusive of depreciation costs was approximately $3.7 million and $3.4 million for the six months ended June 30, 2024 and 2023, respectively, approximately a $314 thousand increase. The higher costs during the six months ended June 30, 2024 compared to 2023 were due to the full Project Dorothy 1B site being active the entire six months ended June 30, 2024, versus as a start up beginning in the second quarter of 2023. Also noted, Project Sophie was no longer a proprietary mining site in the second quarter of 2023. The increase was slightly offset with the Company operating only one facility for the six months ended June 30, 2024, compared to two facilities for the six months ended June 30, 2023. Also, the electricity costs at Project Dorothy 1B are comparatively lower than the costs were at Project Sophie and Marie.

Previous wording

Cost of data hosting revenue was approximately $2.3 million for the three months ended March 31, 2024 compared to $272 thousand for the same period in 2023. This increase was due to Project Dorothy 1A which began operations and hosting services in May 2023, creating costs of approximately $1.7 million for the three months ended March 31, 2024. Also, the Company began data hosting operations at Project Sophie in mid-April 2023, which created an increase in costs of approximately $514 thousand. The increase was offset as a direct result by Project Marie’s operations ceasing in February 2023, where the main hosting contract was also simultaneously terminated, creating a decline in costs of approximately $214 thousand.

Current wording

Cost of data hosting revenue was approximately $4.4 million for the six months ended June 30, 2024 compared to $1.0 million for the six months ended June 30, 2023. This increase was due to Project Dorothy 1A which began operations and hosting services in May 2023, creating costs of approximately $3.5 million for the six months ended June 30, 2024, compared to $566 thousand for the six months ended June 30, 2023. Also, the Company began data hosting operations at Project Sophie in mid-April 2023, which created an increase in costs of approximately $680 thousand between the comparable periods. The increase was offset as a direct result by Project Marie’s operations ceasing in February 2023, where the main hosting contract was also simultaneously terminated, creating a decline in costs of approximately $214 thousand.

Previous wording

Impairment on Fixed Assets: During the three months ended March 31, 2024, the Company had impairment charges of approximately $130 thousand related to the sale S19 miners that occurred in April 2024, in which the Company wrote down the net book value of the miners to the subsequent sales price. During the three months ended March 31, 2023 the Company had impairment charges of approximately $209 thousand in which related to impairment of approximately $166 power supply units (PSUs) at their Sophie location and $43 thousand for M31 miners in which were subsequently sold in April 2023, in which the Company wrote down the net book value to subsequent sale price.

Current wording

***Impairment on Fixed Assets:***During the six months ended June 30, 2024, the Company had impairment charges of approximately $130 thousand. This charge related to the sale of S19 miners that occurred in April 2024, whereas the Company wrote down the net book value of the miners to the subsequent sales price. During the six months ended June 30, 2023, the Company had impairment charges of approximately $377 thousand in which related to impairment of approximately $165 thousand for power supply units (PSUs) at the Sophie location and $43 thousand for M31 miners in which were subsequently sold in April 2023, in which the Company wrote down the net book value to subsequent sale price.

Previous wording

Interest expense: Interest expense for the three months ended March 31, 2024 was approximately $424 thousand related to approximately $361 thousand to the NYDIG loan and approximately $63 thousand to the Navitas loan. Comparatively, interest expense for the three months ended March 31, 2023 was approximately $1.4 million and related to default and continuing interest expense relating to the NYDIG loan of approximately $377 thousand, interest and other charges of approximately $220 thousand for the promissory notes issued in January and February of 2023, and interest on amortization of warrants for the convertible debt of approximately $360 thousand, as well as default interest charged through March 10, 2023 for the convertible holders of approximately $420 thousand.

Current wording

Interest expense: Interest expense for the six months ended June 30, 2024 was approximately $873 thousand related to approximately $722 thousand to the NYDIG loan and $100 thousand to the Navitas loan. In addition there was compounded interest and deferred financing amortization expense of approximately $50 thousand for the equipment financing loan and June 2024 secured note financing. Interest expense for the six months ended June 30, 2023 was $1.8 million and related to default and continuing interest expense of the NYDIG loan of approximately $692 thousand, interest and other charges of approximately $220 thousand for the promissory notes issued in January and February of 2023, and interest on amortization of warrants for the convertible debt of approximately $475 thousand, as well as default interest charged through March 10, 2023 for the convertible holders of approximately $420 thousand.

Previous wording

Loss (Gain) on Debt Extinguishment and Revaluation: 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, in which created a gain on revaluation of approximately $1.5 million. The Company did a fair value assessment of the Notes as of March 31, 2023, in which a gain of $473 thousand was recognized for the three months ended March 31, 2023. See Note 8 for further details.

Current wording

Loss on Debt Extinguishment and Revaluation: For the six months ended June 30, 2024, the Company had a loss on debt extinguishment and revaluation of approximately $8.7 million. This was due to 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, in which created a gain on revaluation of approximately $1.5 million. The Company did a fair value assessment of the notes as of June 30, 2024, in which created a loss on revaluation of approximately $4.0 million in which was noted above. In addition, in the second quarter of fiscal year 2024, the Company did a revaluation of the warrants through May 30, 2024 in which was the date of Annual Shareholder approval, in which created a loss on revaluation of approximately $1.6 million. The Company notes for the six months ended June 30, 2023, the Company had a net loss on debt extinguishment and revaluation of $1.6 million due to the extinguishment and revaluation noted above in the second quarter of 2023, offset with a gain of $473 thousand in the first quarter of 2023. See Note 8 for further details.

Previous wording

Loss on Sale of Fixed Assets: The Company incurred an immaterial loss on sale of assets of approximately $1 thousand for in which they received proceeds of approximately $78 thousand compared to the net book value of the assets of approximately $79 thousand at the time of sale. The Company incurred a $78 thousand loss for the three months ended March 31, 2023 in connection with mainly the sale of their M20 and M21 miners in which contributed to a loss on sale of equipment of approximately $82 thousand in which they received proceeds of $213 thousand for their M20 and M21 miners, in which had a net book value of $295 thousand prior to the sale. There were additional proceeds of $36 thousand from sale on equipment in March 2023, in which resulted in a gain of approximately $3 thousand of scrap and other equipment.

Current wording

For the six months ended June 30, 2023, the Company had a loss on sale of equipment of approximately $30 thousand. In January 2023, the Company sold M20 and M21 miners for a loss on sale of equipment of approximately $82 thousand in which the Company received proceeds of $213 thousand for our M20 and M21 miners which were previously reported as held for sale as of December 31, 2022, in which had a net book value of $295 thousand. There were additional proceeds of $36 thousand in March 2023, in which resulted in a gain of approximately $3 thousand of scrap and other equipment. This was offset with a gain on sale of approximately $48 thousand in relation to the sale of M30 miners in May and June of 2023, which the Company sold the miners for a higher value than the current net book value. The Company received proceeds of approximately $561 thousand in which the miners had a net book value of approximately $513 thousand. In addition, the Company sold Switchgear and M31 miners for cash proceeds of approximately $476 thousand in which no gain or loss was recognized as the switchgear and miners were sold at net book value.

Previous wording

Stock based compensation costs represented $468 thousand non-cash restricted stock units and $193 thousand non-cash stock options for the three months ended March 31, 2024 to members of our Board of Directors and certain Company employees compared to $687 thousand non-cash restricted stock units and $192 thousand non-cash stock options for the three months ended March 31, 2023 to members of our Board of Directors and certain Company employees .

Current wording

Stock based compensation costs represented approximately $1.4 million non-cash restricted stock awards, units and options for the three months ended June 30, 2024 to members of our Board of Directors and certain Company employees compared to non-cash restricted stock units and options of $2.2 million to members of our Board of Directors and certain Company employees for the three months ended June 30, 2023. Stock based compensation costs represented approximately $2.0 million non-cash restricted stock units, awards and options for the six months ended June 30, 2024 to members of our Board of Directors and certain Company employees compared to non-cash restricted stock units and options of approximately $3.1 million to members of our Board of Directors and certain Company employees for the six months ended June 30, 2023.

Previous wording

The Company had a consolidated accumulated deficit of approximately $256.2 million as March 31, 2024. As of March 31, 2024, the Company had negative working capital of approximately $15.5 million, $7.7 million outstanding principal in notes payable that may be converted to common stock, a subsidiary of the Company that defaulted on equipment financing and has a current outstanding loan of $9.2 million, and a 2-year $2.05 million principal loan commitment to Navitas, in which as of March 31, 2024 has an outstanding principal balance of approximately $1.1 million. The Company had outstanding commitments as of March 31, 2024, related to SDI of 3.4 million in capital expenditures, in which 95% relate to Project Dorothy 2, and approximately $8.4 million of cash available to fund its operations.

Current wording

The Company had a consolidated accumulated deficit of approximately $267.1 million as June 30, 2024. As of June 30, 2024, the Company had negative working capital of approximately $5.0 million, $5.3 million outstanding principal in notes payable that may be converted to common stock, a subsidiary of the Company that defaulted on equipment financing and has a current outstanding loan of $9.2 million, a 3-year secured loan financing of approximately $12.5 million, an equipment financing of approximately $720 thousand, and a 2-year $2.05 million principal loan commitment to Navitas, in which as of June 30, 2024 has an outstanding principal balance of approximately $472 thousand. The Company had outstanding commitments as of June 30, 2024, related to SDI of $2.4 million in capital expenditures related to Project Dorothy 2 and $34.3 million related to Cloudco with HPE, and approximately $9.6 million of cash available to fund its operations.

Previous wording

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.

Current wording

Net cash used by operations was approximately $3.5 million during the six months ended June 30, 2024. The Company had a net loss for the six months ended June 30, 2024 of approximately $11.7 million. Non-cash items included approximately $3.1 million of depreciation expense and $4.7 million of amortization expenses, $2.0 million of stock compensation expenses, $8.7 million of loss on debt extinguishment and revaluation, $244 thousand in provision for credit losses, and $130 thousand of impairment of fixed assets. These non-cash items were offset with a deferred tax benefit of $1.2 million. The change in asset and liabilities of $9.7 million is mainly due to an increase in prepaid expenses by $10.8 million due to a prepayment of an arrangement with HPE of $10.3 million, an increase in accounts receivable of $486 thousand attributable for demand service revenue and data hosting customer receivables increasing, offset with an increase in accrued expenses and accounts payable of $2.1 million in relation to bonus accruals, NYDIG interest, and Project Dorothy 2 and Kati related bills. The other changes in assets and liabilities were not material.

Previous wording

Net cash used in operations was approximately $3.1 million during the three months ended March 31, 2023. The Company had a net loss for the three months ended March 31, 2023 of $7.4 million. Non-cash items included $632 thousand of depreciation expense and $2.4 million of amortization expenses, as well as amortization on discount on notes payable of approximately $500 thousand, $879 thousand of stock compensation expenses, and $209 thousand of impairment of fixed assets. These non-cash items were offset with a deferred tax benefit of $547 thousand and revaluation gain on debt of $473 thousand. The change in asset and liabilities of $675 thousand related to increase in accounts payable of $1.4 million in which Spring Lane made noncash contributions to pay off approximately $1.1 million that was outstanding as of December 31, 2022, offset by increases in other long term liabilities related to electricity deposits to Western Kentucky and Washington state, and a decrease in deferred revenue of $453 thousand in which the balance had been written off as of March 31,2023. The other changes in assets and liabilities were not material.

Current wording

Net cash used in operations for continuing operations was approximately $3.8 million during the six months ended June 30, 2023. The Company had a net loss for the six months ended June 30, 2023 of $16.7 million. Non-cash items included $1.2 million of depreciation expense and approximately $4.7 million of amortization expenses, as well as amortization on deferred financing costs and discount on notes of approximately $739 thousand, $3.1 million of stock-based compensation expenses, and $1.6 million loss on debt extinguishment and revaluation, net. These non-cash items were offset with a deferred tax benefit of $1.1 million. The change in asset and liabilities of approximately $2.1 million related to increase in accounts payable of $696 thousand in which Spring Lane made noncash contributions to pay off approximately $1.1 million that was outstanding as of December 31, 2022, increases of $1.3 million in other long term liabilities related to electricity deposits to Western Kentucky and Washington state, increases in accrued expenses of $995 thousand for interest on NYDIG loan, utility accruals, and security deposits, and increases of $532 to deferred revenue for receipt of cash for hosting services for more customers, offset with an increase in accounts receivable of $924 thousand in relation to performing further hosting services as of June 30, 2023. The other changes in assets and liabilities were not material.

Previous wording

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. Net cash used in investing activities during the three months ended March 31, 2023 was approximately $435 thousand consisting mainly of capital expenditures of $860 thousand less cash proceeds from sale of equipment and $200 thousand net change in deposits on equipment.

Current wording

Net cash used in investing activities during the six months ended June 30, 2024 was approximately $2.2 million consisting mainly of capital expenditures of $278 thousand and increase in deposits on equipment of $2.1 million. Net cash used in investing activities during the six months ended June 30, 2023 was approximately $9.6 million consisting mainly of capital expenditures of $2.9 million, in addition to net increase through purchases on deposits and credits on equipment of $7.9 million, less cash proceeds from sale of equipment of $1.3 million. Net cash used in investing activities from continuing operations during the six months ended June 30, 2022 was approximately $50.6 million.

Previous wording

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. Net cash provided by financing activities was approximately $6.7 million during the three months ended March 31, 2023, which consisted of cash contributions for non-controlling interest of approximately $6.0 million. The Company also received net proceeds from debt issuances of $900 thousand less costs of $215 thousand.

Current wording

Net cash provided by financing activities was approximately $7.8 million consisting mainly of proceeds from financing of approximately $13.2 million in which $12.5 million was from 2024 secured loan financing and $720 thousand was drawn down for equipment financing. In addition, there was $2.3 million in warrants exercised. Offsetting the net cash provided by financing activities was $5.8 million in cash distributions to non-controlling interest members, and payments of $1.9 million relation to Navitas loan and deferred financing charges. Net cash provided by financing activities was approximately $21.8 million during the six months ended June 30, 2023, which consisted of cash contributions for non-controlling interest of approximately $19.4 million. The Company also received net proceeds from debt issuances of $2.9 million less debt payment costs of $175 thousand and $350 thousand for payment on the Company’s line of credit.

Previous wording

On October 25, 2021, the Company issued to certain institutional investors secured convertible notes in the aggregate principal amount of approximately $16.3 million for an aggregate purchase price of $15.0 million. The notes are convertible, subject to certain conditions, at any time at the option of the investors, into an aggregate of 71,043 shares of the Company’s common stock. On May 11, 2023, the Company entered into the Second Amendment with the Noteholders in which increased the principal outstanding balance to approximately $13.3 million and extending the maturity date to July 2024. On November 20, 2023 the Company and the Noteholders entered into a Third Amendment Agreement to amend the Notes, the October SPA and related agreements to facilitate future financings by the Company that may include funds for prepayment of the Notes by permitting the Company to force conversion of up to $1.5 million of the Notes under certain circumstances and reduce the prepayment penalty in return for reducing the conversion price of the $4.7 million of the Notes to $3.78 and reducing the exercise price of 150 thousand of the Warrants to $0.01.The Noteholders have converted approximately $4.6 million between May 11, 2023 to December 31, 2023, reducing the principal balance to approximately $8.7 million as of December 31, 2023. On February 28, 2024, the Company and the Noteholders have entered into a Fourth Amendment which allowed all the outstanding debt to be converted at a rate of $3.78. The Noteholders converted approximately $1.0 million between January 1, 2024 through March 31, 2024, reducing the outstanding principal balance to approximately $7.7 million as of March 31, 2024.

Current wording

On October 25, 2021, the Company issued to certain institutional investors secured convertible notes in the aggregate principal amount of approximately $16.3 million for an aggregate purchase price of $15.0 million. The notes are convertible, subject to certain conditions, at any time at the option of the investors, into an aggregate of 71,043 shares of the Company’s common stock. On May 11, 2023, the Company entered into the Second Amendment with the Noteholders in which increased the principal outstanding balance to approximately $13.3 million and extending the maturity date to July 2024. On November 20, 2023 the Company and the Noteholders entered into a Third Amendment Agreement to amend the Notes, the October SPA and related agreements to facilitate future financings by the Company that may include funds for prepayment of the Notes by permitting the Company to force conversion of up to $1.5 million of the Notes under certain circumstances and reduce the prepayment penalty in return for reducing the conversion price of the $4.7 million of the Notes to $3.78 and reducing the exercise price of 150 thousand of the Warrants to $0.01.The Noteholders have converted approximately $4.6 million between May 11, 2023 to December 31, 2023, reducing the principal balance to approximately $8.7 million as of December 31, 2023. On February 28, 2024, the Company and the Noteholders have entered into a Fourth Amendment which allowed all the outstanding debt to be converted at a rate of $3.78. The Noteholders converted approximately $3.7 million between January 1, 2024 through June 30, 2024, reducing the outstanding principal balance to approximately $5.3 million as of June 30, 2024, which included an extension fee of approximately $325 thousand.

Previous wording

On January 14, 2022, the Company effected an initial drawdown under the Master Equipment Finance Agreement with NYDIG in the aggregate principal amount ofapproximately $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 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. 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 Master Agreement. 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. This included legal and other expenses associated with the sale of the assets net a modest gain on the estimated net book value of the assets totaling $251 thousand that was expensed as a loss on disposition of assets for the year ended December 31, 2023. On December 7, 2023, NYDIG filed its Motion for Summary Judgment seeking entry of a judgment against Soluna in the approximate amount of $10.3 million for principal and interest and penalties. On January 12, 2024, Soluna filed its objection to NYDIG’s motion for summary judgment on the grounds that NYDIG failed to explain what collateral of which loan was sold and how the sale proceeds were allocated to each loan. 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, 2024, the Company still has an outstanding loan principal of approximately $9.2 million and outstanding interest and penalty balance of approximately $1.3 million.

Current wording

On January 14, 2022, the Company effected an initial drawdown under the Master Equipment Finance Agreement with NYDIG in the aggregate principal amount ofapproximately $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 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. 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 Master Agreement. 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. This included legal and other expenses associated with the sale of the assets net a modest gain on the estimated net book value of the assets totaling $251 thousand that was expensed as a loss on disposition of assets for the year ended December 31, 2023. On December 7, 2023, NYDIG filed its Motion for Summary Judgment seeking entry of a judgment against Soluna in the approximate amount of $10.3 million for principal and interest and penalties. On January 12, 2024, Soluna filed its objection to NYDIG’s motion for summary judgment on the grounds that NYDIG failed to explain what collateral of which loan was sold and how the sale proceeds were allocated to each loan. 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 June 30, 2024, the Company still has an outstanding loan principal of approximately $9.2 million and outstanding interest and penalty balance of approximately $1.5 million.

Previous wording

On May 9, 2023, Soluna DV ComputeCo, LLC 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 March 31, 2024, the Company has an outstanding principal balance of approximately $1.1 million.

Current wording

On May 9, 2023, Soluna DV ComputeCo, LLC 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 June 30, 2024, the Company has an outstanding principal balance of approximately $472 thousand.

Previous wording

1.Hosting Revenues: We provide electrical power and network connectivity to cryptocurrency mining customers, who pay a specified amount and rate for these services. In the first quarter of 2024, we have engaged in a co-location agreement with a GPU startup delivering specialized GPU services for AI computing.

Current wording

1.Hosting Revenues: We provide electrical power and network connectivity to cryptocurrency mining customers, who pay a specified amount and rate for these services. In the first quarter of 2024, we have entered in a co-location agreement with a GPU startup delivering specialized GPU services for AI computing.