Soluna Holdings Inc

Previous wording

We currently operate 75 MW of facilities across two locations. We have another 216 MW of facilities in development or near shovel ready in the United States. In addition, we have a 2 GW long term pipeline of renewable-energy powered projects. A summary of our pipeline, current and anticipated operating locations are as follows (as of June 30, 2024):

Current wording

We currently operate 75 MW of facilities at two locations. We have another 405 MW of facilities in development or near shovel ready in the United States. In addition, we have a 2 GW+ pipeline of renewable-energy powered projects. A summary of our pipeline, current and anticipated operating locations are as follows (as of September 30, 2024):

Previous wording

2023 and 2024 overview and developments

Current wording

2024 overview and developments

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. 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.

Current wording

A summary of our overview and developments in these areas follows below.

Previous wording

We transitioned our flagship data center Project Dorothy from construction to operations. ERCOT approved the energizing of the first 50 MW of our new data center on April 20, 2023. We completed the construction and ramping of the facility starting in the spring of fiscal year 2023, and completed the full ramp by the end of October 2023. The data center is co-located with Briscoe Wind Farm (“Briscoe”), a 150 MW wind power generation facility in Silverton, Texas. The project is comprised of two elements, Project Dorothy 1A (“D1A”), and Project Dorothy 1B (“D1B”), each 25 MW facilities.

Current wording

We transitioned our flagship data center Project Dorothy from construction to operations during 2023 between spring and fall. The data center is co-located with Briscoe Wind Farm (“Briscoe”), a 150 MW wind power generation facility in Silverton, Texas. The project is comprised of two elements, Project Dorothy 1A (“D1A”), and Project Dorothy 1B (“D1B”), each 25 MW facilities.

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 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.

Current wording

D1A is focused on Bitcoin Hosting of two large customers. There are approximately 7,700 Bitcoin miners installed between the two customers, resulting in an installed hashrate of approximately 950 PH/s. From May 2023 through December 31, 2023, D1A consumed over 11,900 MWh of Curtailed Energy and achieved a power usage effectiveness (“PUE”) of 1.03. For the three and nine months ended September 30, 2024, D1A consumed over 2,900 MWh and 31,000 MWh of Curtailed Energy and achieved a PUE of 0.99.

Previous wording

The construction of D1A was made possible by a partnership with Spring Lane Capital (“SLC”), a leading venture capital firm focused on sustainability solutions. On April 22, 2022, we finalized agreements with SLC for a $35 million capital pool to finance Soluna projects alongside renewable energy power plants. Approximately $12.5 million of this was designated for the Dorothy Project. In July 2022, Soluna began tapping into the SLC managed funds to finance Dorothy construction and repay prior funding provided by the Company. In return, SLC received approximately 32% of Class B Membership Interests of D1A. On March 10, 2023, we completed a new series of project-level agreements for $7.5 million from SLC-managed funds. Due to limited liquidity, and access to the capital markets, we sold a portion of our ownership to SLC in 2023. The funds raised aided in the completion of the substation interconnection, and the final stages of project Dorothy. It also provided capital to fund Soluna’s corporate operations. SLC, increased its stake in D1A from approximately 32% to 85%, reducing Soluna’s ownership from 68% to 15%. After SLC achieves an 18% Internal Rate of Return hurdle, Soluna retains 50% of the profits on D1A.

Current wording

D1A was constructed in partnership with Spring Lane Capital (“SLC”), a leading venture capital firm focused on sustainability solutions. SLC owns approximately 85% of the Class B Membership Units, while we own 15% and own 100% of the Class A Membership Units. After SLC achieves an 18% Internal Rate of Return hurdle, Soluna retains 50% of the profits on D1A.

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 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.

Current wording

D1B is focused on proprietary Bitcoin Mining. There are approximately 7,900 Bitmain Antminer S19s, S19j Pro and S19j Pro+ machines installed, resulting in an installed hashrate of 817 PH/s From July 2023 through December 31, 2023, D1B consumed over 10,600 MWh of Curtailed Energy and achieved a PUE of 1.03. For the three and nine months ended September 30 2024, D1B consumed over 2,650 and 30,800 MWh of Curtailed Energy and achieved a PUE of 0.99.

Previous 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.

Current wording

In November 2023, we completed registration of Project Dorothy for one of ERCOT’s Demand Response Services (“DRS”) 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. The Company is able to generate additional revenue for Project Dorothy by providing this grid resilience support which reduces its power costs, making it one of the lowest cost players in the industry. Since November 2023, Project Dorothy has successfully participated in and completed the Winter, Spring and Summer DRS periods in ERCOT, and is currently in the fall standby period.

Previous wording

Project Sophie is a 25 MW data center, based in Murray, Kentucky connected to the grid, (“Sophie”). The project has a Power Purchase Agreement (“PPA”) that requires the curtailment of the site during certain hours of the day to help balance the Kentucky grid.

Current wording

Project Sophie is a 25 MW data center, based in Murray, Kentucky connected to the grid, (“Sophie”). The project has a Power Purchase Agreement (“PPA”) that requires the curtailment of the site during certain hours of the day to help balance the Kentucky grid. We own 100% of the facility which was completed in 2021.

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. In 2024, our Maestro control system has continued to respond to increases in grid demand throughout the summer.

Current wording

In 2023, we implemented a number of cost improvement initiatives and 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 well to increases in grid demand throughout the summer.

Previous 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.

Current wording

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

On June 18, 2024, CloudCo entered into an HPE Agreement with Hewlett Packard Enterprise Company (“HPE”). Pursuant to the HPE Agreement, HPE agreed to provide datacenter and cloud services for artificial intelligence and supercomputing processes via Nvidia H100 GPUs to CloudCo in exchange for an aggregate of $34.0 million, including an initial pre-payment of $10.3 million made on June 24, 2024. The HPE Agreement has a term of 36 months, and the services thereunder are expandable upon agreement of the parties. Soluna Cloud will begin offering its services by leveraging HPE’s renewable- powered high performance data centers. Their cutting-edge facilities, known for their energy efficiency and sustainability, will support the environmental sustainability of Soluna Cloud’s operations. Additionally, this collaboration expands Soluna Cloud’s offering beyond just bare-metal infrastructure, making available HPE’s comprehensive software solutions for AI pipelines. As an HPE Partner Ready Service Provider partner, Soluna Cloud will offer its advanced cloud solutions to HPE’s global customer base demonstrating AI expertise and delivery capabilities.

Current wording

Soluna Cloud began offering its services by leveraging HPE’s renewable-powered high performance data centers. Their cutting-edge facilities, known for their energy efficiency and sustainability, support the environmental sustainability of Soluna Cloud’s operations. Additionally, this collaboration expands Soluna Cloud’s offering beyond just bare-metal infrastructure, making available HPE’s comprehensive software solutions for AI pipelines. As an HPE Partner Ready Service Provider partner, Soluna Cloud will offer its advanced cloud solutions to HPE’s global customer base demonstrating AI expertise and delivery capabilities. This partnership can be expanded in the future.

Previous wording

Soluna’s new Helix data centers will serve as the growth pathway for customers, addressing the growing demand for more sustainable data centersfor AI powered by renewable energy.

Current wording

Project Grace will leverage Soluna’s new Helix data center model to be built at 2 MW capacity adjacent to Project Dorothy. The Helix model will serve as the growth pathway for customers, addressing the growing demand for more sustainable data centers for AI powered by renewable energy and will demonstrate Soluna’s proprietary data center design and its substantial expected benefits.

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. Additionally on May 17, 2024, certain warrants were further repriced to assist in raising additional capital.

Current wording

In 2023 and early 2024, the Company negotiated four amendments to the Convertible Notes. 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

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.

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 ETFs 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

Recent events, including the Mt. Gox settlement has significantly impacted Bitcoin’s price and supply due to the reintroduction of approximately 141,000 bitcoins into the market, raising concerns about increased selling pressure and market volatility. Despite these concerns, experts believe the market has sufficient liquidity to absorb the selling pressure, and the impact on Bitcoin’s value is expected to be temporary. The announcement of repayments led to a notable decline in cryptocurrency prices, with Bitcoin experiencing a 6% drop in a single day and the overall market capitalization decreasing by over $170 billion. However, the long-term investment prospects for Bitcoin remain positive, influenced by broader economic factors such as potential Federal Reserve rate cuts.

Current wording

Recent events, including the Mt. Gox settlements have significantly impacted Bitcoin’s price and supply due to the reintroduction of approximately 141,000 bitcoins into the market, raising concerns about increased selling pressure and market volatility. Despite these concerns, experts believe the market has sufficient liquidity to absorb the selling pressure, and the impact on Bitcoin’s value is expected to be temporary. The announcement of repayments led to a notable decline in cryptocurrency prices, with Bitcoin experiencing a 6% drop in a single day and the overall market capitalization decreasing by over $170 billion. However, the long-term investment prospects for Bitcoin remain positive, influenced by broader economic factors such as potential Federal Reserve rate cuts.

Previous wording

The global supply chain is facing challenges, particularly in the electric power sector, due to the scarcity of power infrastructure components like transformers. The electric grid component market is experiencing a supply and demand mismatch, leading to an ongoing shortage of transformers and other grid components. Over 70% of transmission and power transformers in the U.S. are over 25 years old, and there is insufficient manufacturing capacity to meet the demand for grid transformers and component parts. Factors contributing to the scarcity include aging infrastructure, increasing demand for electricity, extreme weather events threatening reliability, insufficient domestic manufacturing capacity, and reliance on foreign suppliers. President Biden authorized the use of the Defense Production Act Title III to accelerate domestic production of electric grid transformers and components to address the shortage. Companies are using emergency stocks of components, reviewing scheduled work, substituting materials when possible, improving communication with suppliers, and digitalizing processes to enhance efficiency. The scarcity of power infrastructure components like transformers is a critical issue and efforts are being made to address these challenges through various strategies and actions. Difficult to source equipment could affect our growth. We have developed strategic relationships with key equipment providers with manufacturing facilities in the US and Abroad.

Current wording

The global supply chain is facing challenges, particularly in the electric power sector, due to the scarcity of power infrastructure components like transformers. The electric grid component market is experiencing a supply and demand mismatch, leading to an ongoing shortage of transformers and other grid components. Over 70% of transmission and power transformers in the U.S. are over 25 years old, and there is insufficient manufacturing capacity to meet the demand for grid transformers and component parts. Factors contributing to the scarcity include aging infrastructure, increasing demand for electricity, extreme weather events threatening reliability, insufficient domestic manufacturing capacity, and reliance on foreign suppliers. President Biden authorized the use of the Defense Production Act Title III to accelerate domestic production of electric grid transformers and components to address the shortage. Companies are using emergency stocks of components, reviewing scheduled work, substituting materials when possible, improving communication with suppliers, and digitizing processes to enhance efficiency. The scarcity of power infrastructure components like transformers is a critical issue and efforts are being made to address these challenges through various strategies and actions. Difficult to source equipment could affect our growth. We have developed strategic relationships with key equipment providers with manufacturing facilities in the US and Abroad.

Previous wording

Since the inception of ChatGPT by OpenAI, AI has experienced remarkable growth, transforming the field. Large language models (“LLM”s) have revolutionized AI, fueling interest in generative AI technologies. The introduction of ChatGPT alone has increased AI-related job listings significantly, indicating its impact beyond tech. In 2023, global venture capital investments in AI soared to $50 billion, reflecting confidence in AI’s future potential. Funding focus has shifted to mature companies with proven technologies, signaling market maturation. This growth has driven demand for computing resources and attracted enterprise interest. The generative AI market is projected to reach $1.3 trillion by 2032, with significant energy implications. By 2030, AI could comprise 3-4% of global power demand, with Google already attributing 10-15% of its power use to AI technologies. The widespread adoption of generative AI like ChatGPT may substantially increase energy consumption across various applications and services. The energy demands of AI will increase focus on the sustainability of the industry. We expect increasing demand for specialized AI data centers with access to renewable energy. This will likely open opportunities for Soluna to provide AI Cloud and Co-location services to new companies and enterprises investing in AI initiatives.

Current wording

Since the inception of ChatGPT by OpenAI, AI has experienced remarkable growth, transforming the field. Large language models (“LLM” s) have revolutionized AI, fueling interest in Generative AI technologies. The introduction of ChatGPT alone has increased AI-related job listings significantly, indicating its impact beyond tech. In 2023, global venture capital investments in AI soared to $50 billion, reflecting confidence in AI’s future potential. Funding focus has shifted to mature companies with proven technologies, signaling market maturation. This growth has driven demand for computing resources and attracted enterprise interest. The Generative AI market is projected to reach $1.3 trillion by 2032, with significant energy implications. By 2030, AI could comprise 3-4% of global power demand, with Google already attributing 10-15% of its power use to AI technologies. The widespread adoption of Generative AI like ChatGPT has substantially increased energy consumption across various applications and services.*(In 2023, Google reported a 17% increase in data center energy consumption, driven by AI. Microsoft consumed 24 TWh of energy in a single year—more than some developed nations.)*The energy demands of AI will increase focus on the sustainability of the industry. We expect increasing demand for specialized AI data centers with access to renewable energy. This will likely open opportunities for Soluna to provide AI Cloud and Colocation services to new companies and enterprises investing in AI initiatives.

Previous wording

Cryptocurrency Mining Revenue: Cryptocurrency revenue consists of revenue recognized from Soluna’s cryptocurrency mining operations. Cryptocurrency revenue was approximately $4.5 million for the three months ended June 30, 2024 compared to $915 thousand for the three months ended June 30, 2023. For the three 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 2023 creating only $915 thousand in cryptocurrency revenue for the three months ended June 30, 2023, as such no revenue was recognized for either Project Marie or Sophie for the three months ended June 30, 2024. In addition to the above, the average price of Bitcoin increased by 134% from the three months ended June 30, 2023 compared to the same period for June 2024.

Current wording

Cryptocurrency Mining Revenue: Cryptocurrency revenue consists of revenue recognized from Soluna’s cryptocurrency mining operations. Cryptocurrency revenue was approximately $2.8 million for the three months ended September 30, 2024 compared to $1.8 million for the three months ended September 30, 2023. For the three months ended September 30, 2024, all cryptocurrency mining revenue related to Project Dorothy 1B, which began energization in the third 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 creating only $47 thousand in cryptocurrency revenue for the three months ended September 30, 2023, as such no revenue was recognized for either Project Marie or Sophie for the three months ended September 30, 2024. As noted above, Project Dorothy 1B began operations in the third quarter of 2023 as such was not running at 100% in the third quarter of 2023 and generated approximately $1.7 million of revenue. In addition to the above, the average price of Bitcoin increased by 118% from the three months ended September 30, 2023 compared to the same period for September 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 $4.9 million for the three months ended June 30, 2024 compared to $1.2 million for the three 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 $3.6 million in data hosting revenue for the second quarter of 2024 compared to approximately $456 thousand for the second quarter of 2023, approximately a $3.1 million increase. In addition, Project Sophie switched their business model from proprietary mining to data hosting in the second quarter of 2023 in which created an additional increase of approximately $639 thousand from approximately $692 thousand in the second quarter of 2023 to approximately $1.3 million.

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 $4.3 million for the three months ended September 30, 2024 compared to $4.0 million for the three months ended September 30, 2023. The increase was primarily related to continued energization and the deployment of hosting customers at Project Dorothy 1A which began in the second quarter of 2023 creating approximately $3.5 million in data hosting revenue for the third quarter of 2024 compared to approximately $3.0 million for the third quarter of 2023, approximately a $500 thousand increase, in which was offset by a slight decrease in revenue of $235 thousand at Project Sophie who switched their business model from proprietary mining to data hosting in the second quarter of 2023.

Previous wording

Cost of Cryptocurrency Revenue, exclusive of depreciation*:* Cost of cryptocurrency mining revenue includes direct utility costs, site overhead expenses, and overhead costs that relate to the operations of our cryptocurrency mining facilities in Kentucky and Texas. Going forward, cost of cryptocurrency revenue will include any additional cryptocurrency mining facilities that are part of the Company’s future pipeline.

Current wording

Cost of Cryptocurrency Mining Revenue, exclusive of depreciation*:* Cost of cryptocurrency mining revenue includes direct utility costs, site overhead expenses, and overhead costs that relate to the operations of our cryptocurrency mining facilities in Kentucky and Texas. Going forward, cost of cryptocurrency revenue will include any additional cryptocurrency mining facilities that are part of the Company’s future pipeline.

Previous wording

Cost of cryptocurrency revenue, exclusive of depreciation costs was approximately $1.9 million and $1.2 million for the three months ended June 30, 2024 and 2023, respectively, approximately $723 thousand increase. The higher costs during the three months ended June 30, 2024 compared to 2023 were due to the full Project Dorothy 1B site being active the entire quarter of 2024, versus as a start up in 2023. Also noted was that Project Sophie was dropping from being a proprietary mining site in the second quarter of 2023.

Current wording

Cost of cryptocurrency revenue, exclusive of depreciation costs was approximately $2.0 million and $1.0 million for the three months ended September 30, 2024 and 2023, respectively, approximately $923 thousand increase. The higher costs during the three months ended September 30, 2024 compared to 2023 were due to the full Project Dorothy 1B site being active the entire quarter of 2024, versus as a startup in 2023. Also noted was that Project Sophie was dropping from being a proprietary mining site in the second quarter of 2023.

Previous wording

Cost of data hosting revenue was approximately $2.2 million for the three months ended June 30, 2024 compared to $759 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 $1.8 million for the three months ended June 30, 2024, compared to $508 thousand for the three 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 $166 thousand between the comparable periods.

Current wording

Cost of data hosting revenue was approximately $2.6 million for the three months ended September 30, 2024 compared to $2.2 million 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 $2.0 million for the three months ended September 30, 2024, compared to $1,8 million for the three months ended September 30, 2023. Also, the Company began data hosting operations at Project Sophie in mid-April 2023, which created an increase in costs of approximately $137 thousand between the comparable periods.

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 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.

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 September 30, 2024 compared to approximately $1.2 million for the three months ended September 30, 2023. The increase related to the capital additions to fixed assets between the second quarter of fiscal year 2023 through the third 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

Interest expense: Interest expense for the three months ended June 30, 2024 was approximately $449 thousand related to approximately $361 thousand to the NYDIG loan and $37 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 three months ended June 30, 2023, was $486 thousand which primarily related to amortization of warrants for the convertible notes of $115 thousand and interest on the NYDIG Financing Loan of approximately $315 thousand, as well as interest on the Navitas loan of $47 thousand.

Current wording

Interest expense: Interest expense for the three months ended September 30, 2024 was approximately $821 thousand related to approximately $369 thousand to the NYDIG loan, $431 thousand to compounded interest and deferred financing amortization expense for the equipment financing loan and June and July 2024 secured note financing, and $22 thousand to the Navitas loan. Interest expense for the three months ended September 30, 2023, was $495 thousand which primarily related to mainly related to interest accrued on the Navitas loan of $85 thousand and interest on the NYDIG Financing Loan of approximately $405 thousand.

Previous wording

Loss on Debt Extinguishment and Revaluation: For the three months ended June 30, 2024, the Company had a loss on debt revaluation of approximately $5.6 million, in which was in relation to approximately $4.0 million for the convertible notes due to factors including assumptions on conversions and payouts, annual volatility and stock price conditions on the dates of valuations compared to what the noteholders could convert at as of June 30, 2024. In addition, there was a $1.6 million loss on the valuation of a warrant liability. The warrant liability was ultimately reversed when Shareholder approval occurred on May 30, 2024, however, the Company needed to revalue the warrants as of May 30, 2024, in which created a loss of approximately $1.6 million due to mainly changes in the stock price as amount of warrants outstanding. For the three months ended June 30, 2023, the Company had a loss on debt revaluation of approximately $2.1 million. On May 11, 2023, the Company entered into a new debt agreement with the convertible noteholders and issued new warrants, and with doing so, created a debt extinguishment and loss of approximately $1.8 million, in which the main factor was the valuation of the new warrants. There was an additional $170 thousand valuation loss as of June 30, 2023 due to additional assumptions and assessments on the valuation of the debt at quarter end. See Note 8 for further details.

Current wording

Gain (Loss) on Debt Extinguishment and Revaluation, net: For the three months ended September 30, 2024, the Company had a gain on revaluation of approximately $1.2 million. The gain was in relation to the convertible notes of $2.3 million due to factors including conversion assumptions and payouts, annual volatility and stock price conditions on the dates of valuations compared to what the noteholders could convert at as of September 30, 2024, in addition to a gain on warrant revaluation of the Soluna Cloud warrants for $327 thousand. The gain for the three months ended September 30, 2024 was offset with a loss on debt of approximately $1.4 million due to the satisfaction and redemption of the Dorothy 2 equipment loan through issuance of Class B Membership interests in the Dorothy 2 project valued at three times the borrowing amount (i.e., $2.16 million), in which created approximately a $1.4 million loss. For the three months ended September 30, 2023, the Company had a loss on debt revaluation of approximately $769 thousand due to additional assumptions and assessments on the valuation of the debt at quarter end. See Note 7 for further details.

Previous 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.

Current wording

Income Tax Benefit (expense): Income tax benefit for the three months ended September 30, 2024 was $547 thousand compared to an income tax expense of approximately $569 thousand for the three months ended September 30, 2023. The balance for the three months ended September 30, 2024 and 2023 was 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 September 30, 2024 and September 30, 2023, the Company amortized $547 thousand, respectively. In addition, for the three months ended September 30, 2023, there were timing difference due to significant increase for in-service capital assets for the three months ended September 30, 2023 which created an offset of approximately $1.1 million in deferred income tax expense.

Previous 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.

Current wording

Net (loss) income attributable to non-controlling interest: Net loss attributable to non-controlling interest for the three months ended September 30, 2024 was $903 thousand compared to net income attributable to non-controlling interest of $646 thousand for the three months ended September 30, 2023 This amount relates to Spring Lane’s 85% noncontrolling interest of the net profit in Soluna DVSL and Navitas 45% - 49% noncontrolling interest of the net loss in Soluna DV ComputeCo for the three months ended September 30, 2024 and 2023. The change in non-controlling interest relates to a net loss in noncontrolling interest at Dorothy 1B of approximately $177 thousand, in which was driven by price of Bitcoin and site curtailments, and new for third quarter of 2024 was a noncontrolling interest loss of approximately $1.4 million associated to Dorothy 2 in which Spring Lane had noncontrolling interest of 58% - 72% for the three months ended September 30, 2024 in which the site is in development stage and would expect losses, offset with continued profitability at Dorothy 1A having a noncontrolling interest profit of $648 thousand in which is largely due to strong margins, creating a total net loss attributable to non-controlling interest of $68 thousand. The three-month net income for September 2023 balance in relation to non-controlling interest relates to Spring Lane’s 85% noncontrolling interest of the Net Profit in Soluna DVSL for approximately $759 thousand offset with Navitas 49% noncontrolling interest of the Net Loss of in Soluna DV ComputeCo of $111 thousand for the 3 months ended September 30, 2023.

Previous wording

The following table summarizes changes in the various components of our net loss during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

The following table summarizes changes in the various components of our net loss during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous 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.

Current wording

Cryptocurrency Mining Revenue: Cryptocurrency revenue consists of revenue recognized from Soluna’s cryptocurrency mining operations. Cryptocurrency revenue was approximately $13.7 million for the nine months ended September 30, 2024 compared to $5.5 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, all cryptocurrency mining revenue related to Project Dorothy 1B, which began energization in the third 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 nine months ended September 30, 2024. The Company also noted for the nine months ended September 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 128% in the nine months ended September 30, 2023 compared to the same period for September 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 $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.

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 $14.4 million for the nine months ended September 30, 2024 compared to $5.5 million for the nine months ended September 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 $10.6 million in data hosting revenue for the nine months ended September 30, 2024 compared to approximately $3.5 million for the same period in 2023, approximately a $7.1 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 $2.1 million from approximately $1.7 million for the nine months ended September 30, 2023 to approximately $3.8 million for the nine months ended September 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 nine months ended September 30, 2024 compared to September 30, 2023. For the first quarter of 2023, Project Marie was hosting at approximately 10 MW.

Previous wording

Demand Response Service: In November 2023, we completed our registration of Project Dorothy for one of ERCOT’s demand response programs, and 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 six months ended June 30, 2023.

Current wording

Demand Response Service: In November 2023, we completed our registration of Project Dorothy for one of ERCOT’s demand response programs, and 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 nine months ended September 30, 2023.

Previous wording

Cost of Cryptocurrency Revenue, exclusive of depreciation*:* Cost of cryptocurrency mining revenue includes direct utility costs, site overhead expenses, and overhead costs that relate to the operations of our cryptocurrency mining facilities in Kentucky and Texas. Going forward, cost of cryptocurrency revenue will include any additional cryptocurrency mining facilities that are part of the Company’s future pipeline.

Current wording

Cost of Cryptocurrency Mining Revenue, exclusive of depreciation*:* Cost of cryptocurrency mining revenue includes direct utility costs, site overhead expenses, and overhead costs that relate to the operations of our cryptocurrency mining facilities in Kentucky and Texas. Going forward, cost of cryptocurrency revenue will include any additional cryptocurrency mining facilities that are part of the Company’s future pipeline.

Previous 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.

Current wording

Cost of cryptocurrency mining revenue, exclusive of depreciation costs was approximately $5.7 million and $4.5 million for the nine months ended September 30, 2024 and 2023, respectively, approximately a $1.2 million increase. The higher costs during the nine months ended September 30, 2024 compared to 2023 were due to the full Project Dorothy 1B site being active the entire nine months ended September 30, 2024, versus as a startup beginning in the second quarter of 2023. Also noted, Project Sophie was no longer a proprietary mining site by the second quarter of 2023. The increase was slightly offset with the Company operating only one facility for the nine months ended September 30, 2024, compared to three facilities for the nine months ended September 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 $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.

Current wording

Cost of data hosting revenue was approximately $7.0 million for the nine months ended September 30, 2024 compared to $3.2 million for the nine months ended September 30, 2023. This increase was due to Project Dorothy 1A which began operations and hosting services in May 2023, creating costs of approximately $5.5 million for the nine months ended September 30, 2024, compared to $2.3 million for the nine months ended September 30, 2023. Also, the Company began data hosting operations at Project Sophie in mid-April 2023, which created an increase in costs of approximately $807 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 $204 thousand.

Previous wording

Cost of revenue- depreciation: Depreciation costs associated with cryptocurrency and data hosting revenue was approximately $3.0 million for the six months ended June 30, 2024 compared to approximately $1.2 million for the six 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.

Current wording

Cost of revenue- depreciation: Depreciation costs associated with cryptocurrency and data hosting revenue was approximately $4.5 million for the nine months ended September 30, 2024 compared to approximately $2.4 million for the nine months ended September 30, 2023. The increase related to the capital additions to fixed assets between the second quarter of fiscal year 2023 through the third 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 and energization 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

Depreciation and Amortization associated with general and administrative expenses: Depreciation and amortization expense was comparable for the six months ended June 30, 2024 and the six months ended June, 2023 in which the balances totaled approximately $4.8 million, respectively. The balances mainly related to amortization expense related to the strategic pipeline contract that was acquired in October 2021.

Current wording

Depreciation and Amortization associated with general and administrative expenses: Depreciation and amortization expense was comparable for the nine months ended September 30, 2024 and the nine months ended June, 2023 in which the balances totaled approximately $7.2 million, respectively. The balances mainly related to amortization expense related to the strategic pipeline contract that was acquired in October 2021.

Previous 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.

Current wording

***Impairment on Fixed Assets:***During the nine months ended September 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 nine months ended September 30, 2023, the Company had impairment charges of approximately $418 thousand relating to impairment of approximately $166 thousand in power supply units (PSUs) at their Sophie location, $43 thousand for M31 miners in which were subsequently sold in April 2023, in which the Company wrote down the net book value to the subsequent sale price, $169 thousand of S19 miners to adjust to market value and $41 thousand related to miners held for sale.

Previous 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.

Current wording

Interest expense: Interest expense for the nine months ended September 30, 2024 was approximately $1.7 million related to approximately $1.1 million to the NYDIG loan, $480 thousand to compounded interest and deferred financing amortization expense of equipment financing loan and June and July 2024 secured note financing, and $122 thousand to the Navitas loan. Interest expense for the nine months ended September 30, 2023 was $2.4 million and related to default and continuing interest expense of the NYDIG loan of approximately $1.1 million, 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 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.

Current wording

Loss on Debt Extinguishment and Revaluation, net: For the nine months ended September 30, 2024, the Company had a loss on debt extinguishment and revaluation of approximately $6.1 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 due to factors including assumptions on conversions and payouts, annual volatility and stock price conditions on the dates of valuations compared to what the noteholders could convert at as of June 30, 2024. The convertible notes were revalued again on September 30, 2024, in which a gain was recorded of approximately $2.3 million due mainly to change in Company stock price offsetting the previous quarter assessments. 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. In addition to the revaluation of the notes and warrants the loss on debt extinguishment had an additional loss on debt of approximately $1.4 million due to the satisfaction and redemption of the Dorothy 2 equipment loan through issuance of Class B Membership interests in the Dorothy 2 project valued at three times the borrowing amount (i.e., $2.16 million), in which created approximately a $1.4 million loss for the nine months ended September 30, 2024. The Company notes for the nine months ended September 30, 2023, the Company had a net loss on debt extinguishment and revaluation of $2.4 million due to the extinguishment and revaluation of the convertible debt agreement in the second quarter of 2023, as well as quarter end revaluations effected by changes in annual volatility, offset with a gain of $473 thousand in the first quarter of 2023. See Note 7 for further details.