Soluna Holdings, Inc: Form 10-K for the period ended Dec 31, 2024

Unless the context requires otherwise in this Annual Report, the terms “SHI,” “Soluna,” the “Company,” “we,” “us,” and “our” refer to Soluna Holdings, Inc. together with its consolidated subsidiaries, “SDI” refers to Soluna Digital, Inc. “SCI” refers to Soluna Computing, Inc., formerly known as EcoChain, Inc., “Soluna Cloud” or “Cloud” refer to Soluna Cloud, Inc., and “SEI” refers to Soluna Energy, Inc. Other trademarks, trade names, and service marks used in this Annual Report are the property of their respective owners.

Overview

Our mission is to make renewable energy a global superpower using computing as a catalyst.

We develop and operate digital infrastructure that taps into a growing global opportunity: the convergence of renewable energy and High-Performance Computing (HPC). We call this model Renewable Computing™.

Across the world, vast amounts of clean energy go to waste due to curtailment. At the same time, there is a critical shortage of power for energy-intensive infrastructure like AI, HPC, and Bitcoin mining. Renewable Computing™ bridges this gap—unlocking stranded renewable energy and turning it into scalable computing power.

We build, own or co-own, and operate data centers co-located with wind, solar, and hydroelectric plants. Our modular and scalable design supports high-throughput, batchable applications such as AI, Bitcoin, and—soon—HPC workloads. These facilities are managed by MaestroOS™, our proprietary operating system (“MaestroOS”), which continuously analyzes signals like local power pricing, weather, grid demand, and market conditions to optimize performance and economics.

This intelligent orchestration enables long-term asset monetization and attractive returns on invested capital.

Our approach is purpose-built for the energy transition. We specialize in curtailment solutions, working closely with leading renewable energy developers to access underutilized, low-cost power. Our behind-the-meter model allows us to draw energy directly from the plant or the grid, while also providing demand response services—reducing costs and enhancing grid resilience.

A key strategic advantage is our model of co-locating data centers directly with renewable power generation assets. By building behind the meter, we are able to bypass long interconnection queues and source electricity directly from the generation site. This structure not only improves power economics, but also accelerates time-to-market—an increasingly important factor for companies with large, time-sensitive computing workloads such as AI and HPC.

With a repeatable strategy and a growing pipeline of projects, we are scaling a new category of digital infrastructure—one that energizes the grid, lowers computing costs, and advances a more sustainable future.

We operate across multiple business lines and generate revenue from four primary sources, as described below:

• Bitcoin Mining Business – We mine Bitcoin through proprietary operations and joint ventures located at our data centers.
• Bitcoin Hosting Business – We provide hosting services to third-party Bitcoin mining customers at our data centers.
• High Performance Computing (HPC) Business – We offer colocation and hosting services for companies seeking to train large language models (LLMs), fine-tune existing artificial intelligence models, and deploy other compute-intensive AI or HPC workloads.
• Demand Response Business – We leverage our data center infrastructure to provide demand response services to grid operators.

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In 2024, our execution strategy was centered around four key initiatives:

1. Project Optimization – Enhancing the profitability, operational efficiency, and customer mix of our operating data centers, while improving overall customer satisfaction.

2. Pipeline Expansion – Increasing the number of curtailment assessments completed with power partners, advancing more projects to shovel-ready status, and executing additional project term sheets.

3. Launch AI – Initiating the entry into the AI market, by starting project development activities focused on supporting artificial intelligence workloads, and the formation of strategic partnerships with major HPC original equipment manufacturers.

4. Capital Formation – Pursuing financing opportunities to support key growth initiatives, including Project Dorothy 2 (“D2”) and Project Kati.

Lines of Business

Bitcoin Mining Business

We engage in proprietary Bitcoin mining, a process that verifies transactions and secures the Bitcoin blockchain. This process involves the use of specialized computing equipment to solve complex cryptographic algorithms. Miners compete to solve these algorithms; the first to do so is awarded a predetermined number of newly issued Bitcoins (the “Block Reward”) and any transaction fees associated with that block.

We participate in one or more mining pools—collaborative networks of miners who combine computing power to improve the probability of earning rewards. Block Rewards earned by the pool are distributed among participants based on each member’s proportional contribution. This model helps reduce revenue volatility compared to solo mining operations.

Our mining operations are energy-intensive and require significant computational resources. We operate data centers equipped with both proprietary and third-party hardware and software. Our proprietary data center operating system, MaestroOS, is used to optimize performance, manage power consumption, and increase operational efficiency.

Revenue from Bitcoin mining consists of Block Rewards and transaction fees and is recognized upon receipt in accordance with applicable accounting guidance. Upon receipt, all digital assets are promptly converted into U.S. dollars through the Coinbase cryptocurrency exchange.

The profitability of this business is affected by several variables, including the market price of Bitcoin, global network hash rate, mining difficulty, electricity and infrastructure costs, and mining pool fees. In addition, Bitcoin undergoes a periodic “halving” event approximately every four years, reducing the Block Reward and potentially impacting future revenue. For the year ended December 31, 2024, our Bitcoin Mining Business represented approximately 45% of total revenue.

Bitcoin Hosting Business

We provide colocation and hosting services for third-party Bitcoin mining customers at our data centers. Customers lease space based on their power requirements. Our current customer base includes several large-scale (“Hyperscale”) Bitcoin miners. Contracts typically range from 12 to 24 months in duration.

We offer two primary commercial structures:

1. Fixed-Fee Model – Customers pay a fixed fee based on the volume of energy consumed.

2. Profit-Share Model – Customers pay a share of the profits from their mining activity, with power costs passed through.

In 2024, our Bitcoin Hosting Business accounted for approximately 50% of total revenue. Revenue in this business was concentrated among a small number of customers. One customer accounted for 56% of hosting revenue and 28% of total revenue in 2024. This customer terminated its agreement during the fourth quarter of 2024. As of March 2025, we replaced 100% of the lost hosting capacity with minimal operational disruption.

High Performance Computing (HPC) Business

In June 2024, we began providing GPU-as-a-Service in partnership with Hewlett Packard Enterprise Company (“HPE”), offering GPU resources to startups, enterprises, and GPU marketplaces for a fee. As further described in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report, in March 2025, we terminated our agreement with HPE.

We are currently developing new infrastructure projects intended to support AI and HPC workloads. These efforts include engagement with potential joint venture partners, conducting site and feasibility studies, securing access to power and land, and performing other early-stage development activities.

Our first planned AI/HPC colocation project is Project Kati, which is in advanced development. Additional projects, including the announced Project Rosa, are also in progress. For the year ended December 31, 2024, we generated minimal revenue from our HPC Business.

Demand Response Business

We provide demand response services to grid operators and utilities by leveraging our data centers as dispatchable energy resources. In select states where we operate, our data centers are enrolled in ancillary services programs that support grid reliability.

Under these programs, we commit to reducing a facility’s power consumption to a predetermined level when called upon by the grid operator. In return, we receive compensation for maintaining this dispatch capability, provided we meet specific performance criteria. For example, to qualify for compensation in a given period—typically monthly—the data center must meet minimum uptime and availability requirements.

For the year ended December 31, 2024, our Demand Response Business represented approximately 6% of total revenue.

Operations and Project Pipeline

As of December 31, 2024, we operate approximately 75 MW of capacity across two active sites located in Murray, Kentucky and Silverton, Texas. An additional 48 MW is under construction at our D2 project site, and as of December 31, 2024, we had over 403 MW of facilities in advanced development or near shovel-ready status. In total, our project pipeline includes approximately 2.6 gigawatts (GW) of renewable energy-powered data center developments.

A summary of our pipeline, current and anticipated operating locations are as follows (as of December 31, 2024):

We manage our data center operations using MaestroOS. MaestroOS continuously monitors and analyzes a variety of real-time signals, including local electricity prices, weather conditions, Bitcoin market metrics, and grid demand signals, to optimize facility performance. In addition, MaestroOS is used to coordinate and execute our participation in demand response programs.

We finance the development and construction of our data centers through a combination of public equity offerings, debt instruments, and partnerships with project-level capital providers. As of December 31, 2024, we had two primary project-level financing partners:

• Spring Lane Capital (“SLC”) – A private venture capital firm with approximately $450 million in assets under management, focused on sustainability-oriented infrastructure. On May 3, 2022, SLC committed $35 million to finance Soluna’s Project Dorothy 1A (“D1A”). On July 22, 2024, SLC committed an additional $30 million to support the development of D2.
• Navitas West Texas Investments SPV, LLC (“Navitas”) – an investment vehicle organized by Navitas Global, a private equity firm focused on sustainable Bitcoin mining. On May 9, 2023, we entered into a strategic partnership with Navitas to support mining operations at Project Dorothy 1B (“D1B”).

Project Dorothy

During 2023, we transitioned our flagship data center Project Dorothy from construction to operations. This data center is co-located with Briscoe Wind Farm (“Briscoe”), a 150 MW wind power generation facility in Silverton, Texas. The project comprises three phases, D1A, and D1B, each 25 MW facilities, and D2 (48 MW).

Project Dorothy 1A

D1A is focused on Bitcoin Hosting for some of the industry’s hyperscale miners. There are approximately 7,800 Bitcoin miners installed at D1A, which as of December 31, 2024, resulted in a hashrate of approximately 1.01 EH/s. From May 2023 through December 31, 2023, D1A consumed over 11,900 MWh of Curtailed Energy and achieved a PUE of 1.03. For the year ended December 31, 2024, D1A consumed over 45,700 MWh of Curtailed Energy and achieved a PUE of 1.01.

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

Project Dorothy 1B

D1B is focused on proprietary Bitcoin Mining. There are approximately 7,700 Bitmain Antminer S19s, S19j Pro and S19j Pro+ machines installed, resulting in an installed hashrate of 817 PH/s. 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 year ended December 31, 2024, D1B consumed over 44,500 MWh of Curtailed Energy and achieved a PUE of 1.01. D1B is co-owned by Navitas, which owns approximately 49% of D1B, while we own the remaining 51%.

In November 2023, we completed registration of Project Dorothy in one of the ERCOT’s Demand Response Services (“DRS”) programs. This designation positioned Project Dorothy as a contributor to grid flexibility and resilience in the Texas power market, while also enabling us to diversify our revenue streams.

Under the DRS program, we commit to maintaining a specified level of curtailment capacity—measured as load reduction availability—on a monthly basis. When called upon by ERCOT, we are required to reduce the facility’s power consumption by the committed amount. In exchange, we receive compensation for maintaining this curtailment readiness, regardless of whether an actual dispatch occurs.

Participation in the program allows us to generate incremental revenue and offset power costs at Project Dorothy, enhancing its cost-efficiency. As a result, the facility ranks among the lowest-cost operators in the sector. Since registration, Project Dorothy has successfully fulfilled its obligations in the Winter, Spring, and Summer DRS periods, and is currently enrolled in the Fall standby period.

Project Dorothy 2

We began planning for the 48 MW expansion of Project Dorothy in 2023 – known as Project Dorothy 2. We partnered with SLC who agreed to finance up to $30 million of the project cost. We closed the initial financing contribution and operation agreement with SLC in July 2024 and broke ground in the third quarter of 2024. Initial energization and ramp-up is expected by the end of the second quarter of 2025. D2 features a superior financial waterfall structure and enhanced management and development fees for Soluna compared to D1A, allowing us to benefit from improved income once the facility is operational.

Project Grace

Project Grace is a 2 MW project located at the D2 site focused on next generation data center designs for AI. It contemplates new direct liquid cooling technologies, proprietary building and power designs – called Helix.

Project Sophie

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

Sophie is focused on Bitcoin Hosting of multiple large customers. The data center generates revenue via a combination of fixed services fees and profit share, while energy cost is passed through. For the year ended December 31, 2024, there are approximately 9,300 Bitcoin miners installed, resulting in an installed hashrate of approximately 1.03 EH/s and achieved a PUE of 1.03.

Our Growth Strategy

Our growth strategy is focused on expanding our pipeline of renewable energy-powered data center projects and accelerating their development through joint ventures, co-ownership structures, and other strategic partnerships. Over time, we intend to increase our ownership stake in these projects to enhance long-term value.

We believe our renewable energy project pipeline—currently estimated at over 2.6 gigawatts (GW)—represents our most valuable strategic asset. We believe this pipeline has the potential to support the development of approximately 300 to 400 MW of new digital infrastructure annually over the next six to eight years.

In parallel with new project development, we are refining our operational model across existing sites to position ourselves as a partner of choice for both AI/HPC colocation and Bitcoin Hosting.

We continue to grow our pipeline by increasing the number of Curtailment Assessments completed with power generation partners. These assessments serve as a precursor to securing exclusive power purchase agreements (PPAs), acquiring or leasing land, and executing other pre-construction development activities necessary to advance projects to shovel-ready status.

In 2025, we are focused on advancing the following key initiatives:

• Power Pipeline Expansion – We plan to scale our operational footprint by energizing D2 and commencing construction of the 83 MW Bitcoin Hosting phase of Project Kati. Together, these projects are expected to advance our path toward over 200 MW of operational capacity under management.
• AI Infrastructure Development – We aim to form joint ventures with leading U.S. data center developers, including top global infrastructure funds and hyperscaler-aligned development and financing partners. Our initial efforts will focus on launching the 83 MW AI phase of Project Kati, with the goal of establishing our first portfolio of advanced data centers purpose-built for AI workloads.
• Project Optimization – We continue to prioritize improvements in profitability, operational efficiency, customer mix, and satisfaction across our existing data centers. Our goal is to drive consistent execution and deliver best-in-class performance for our customers using a new service model called Relentless Stewardship.
• Capital Formation – We plan to pursue targeted capital-raising initiatives to support both near-term project development and long-term growth across our platform.

Project Kati

We are developing Project Kati in Willacy County, Texas, which is expected to be up to 166 MW of data centers for HPC, Bitcoin Hosting and other computing-intensive applications. It is co-located with a 272.6MW wind farm in Texas. We have completed the necessary studies for the ERCOT planning phase, which is the last formal step to secure approvals by regulatory agencies or grid operators, such as ERCOT in Texas, to proceed with project construction and commissioning. We have also completed the necessary amendments to the interconnection agreements with American Electric Power, the transmission service provider. We have also secured land for the project and have started capital formation activities.

Project Rosa

We are developing Project Rosa in Snyder, Texas, which is expected to be up to 187 MW of data center capacity for AI and Bitcoin Hosting and other computing-intensive applications. It will be co-located with a 242.5 MW wind farm in Texas. We have signed term sheets for both power and land purchase agreements in connection with this project.

Competition

We operate in a highly competitive sector characterized by a growing number of participants and increasing capital investment. Our approach to sourcing renewable energy focuses on curtailed or underutilized power, which is typically priced below market rates. This enables us to offer competitively priced, sustainability-aligned computing solutions.

We believe one of our key strategic advantages is our model of co-locating data centers directly with renewable power generation assets. By building behind the meter, we are able to bypass long interconnection queues and source electricity directly from the generation site. This structure not only improves power economics, but also accelerates time-to-market—an increasingly important factor for companies with large, time-sensitive computing workloads such as AI and HPC.

We believe this combination of low-cost power access, grid efficiency, and sustainability focus positions us as a differentiated provider in the digital infrastructure space.

Our emerging HPC Business competes with leading NeoCloud companies such as Crusoe, CoreWeave, Lambda, and Nebius. While these companies are much larger than we are today, we believe our competitive advantage lies in our ability to source renewable energy for the growth of this business faster and at better costs than our competitors.

Our Bitcoin Hosting Business competes with a large number of other hosting operators. We compete with public and private companies including: BitFuFu, Border, Blockstream, Blockware, Foundry, Compass Mining, Hut8, Bitdeer, and Core Scientific. Our success in our hosting operations depends on our ability to supply hosting space and power, our performance with respect to installation, operation and repair of customer equipment, our ability to obtain replacement parts, the value of our service offering to our customers and the availability of mining equipment.

Our proprietary Bitcoin Mining Business competes globally to complete new blocks and earn Bitcoin rewards.

We may compete with the following publicly traded Bitcoin mining companies: Riot Platforms, Marathon Digital Holdings, Core Scientific, Cipher Mining, Hut 8 Mining, Hive Blockchain Technologies, Bitfarms, Bitdeer Technologies Group, Cleanspark, IREN, Bit Digital, TeraWulf, and Greenidge Generation Holdings.

Key competitive factors include our number of miners, mining difficulty, operational efficiency, and the fiat value of rewards. Bitcoin mining has shifted from individual participants to large-scale, industrial facilities. Mining pools allow participants to combine processing power and share rewards based on contributed hash power. We also compete for new miners, capital, and technological advancements to enhance mining efficiency.

Many of our competitors offer more locations in more markets worldwide and have well-established international operations. Many of our competitors may have significant advantages over us, including greater name recognition, longer operating histories and higher operating margins, pre-existing relationships with current or potential customers, the capacity to provide the same or additional products and services at a lower cost, more significant marketing budgets and other financial and operational resources, more robust internal controls and systems, and better established, more extensive scale and lower cost suppliers and supplier relationships.

We face significant competition from our competitors, and we expect such competition to continue to increase, which could significantly harm our business, financial condition, and results of operations. If we cannot compete successfully against our current and future competitors, we may not be able to retain and grow our customer base, and our business and prospects may be harmed.

Intellectual Property

We seek protection for our intellectual property as appropriate. To establish and protect our proprietary rights, we rely upon a combination of patent, copyright, trade secret and trademark laws and contractual restrictions such as confidentiality agreements and intellectual property assignment agreements.

As of the date of this Annual Report, Soluna has two issued US patents, seven pending US patent applications with the U.S. Patent and Trademark Office, and 13 pending non-US patent applications. The non-US jurisdictions include Australia, Canada, China, Europe, and Japan. Among other things, concepts in these patents/patent applications generally relate to modular architecture, cooling technology, data center control, simulation, variable power consumption and local co-optimization of power generation supply with demand. Specifically, the two issued patents (US11,974,415 and US12,250,794) focus on the layout of modular data center buildings on a site, which is crucial for thermal efficiency.

We meet regularly with IP counsel to manage the portfolio and determine strategies to pursue protection of additional technologies. We maintain company policies requiring our employees, contractors, consultants and other third parties to enter into confidentiality and proprietary rights agreements to control access to our proprietary information. While there is no assurance that our pending applications will result in issued patents, we believe that our intellectual property portfolio provides us with a competitive advantage in our industry.

We also rely on trade secrets, proprietary know-how, and contractual agreements to protect our technology. However, our ability to maintain and enforce our intellectual property rights may be subject to challenges, including the risk of third-party disputes, opposition proceedings, and evolving patent laws in various jurisdictions. Loss of key patent rights or failure to obtain additional protections could adversely impact our business and competitive position.

We also hold a registered trademark for our Company name, Soluna.

We have developed a proprietary software system called MaestroOS™ to enable the automation, management, and operations of critical elements of our data centers. We have a dedicated team that engages in activities to continue to enhance the MaestroOS to drive innovation and growth in its business. MaestroOS incorporates software components licensed to the general public under open-source software licenses. We obtain many components from software developed and released by contributors to independent open-source components of our platform. Open-source licenses grant licensees broad permissions to use, copy, modify and redistribute those open-source components of our platform. As a result, open-source development and licensing practices can limit the value of our software copyright assets.

Environmental

There are increasing concerns about the quantity of carbon-intensive energy used by data centers, especially those used for Bitcoin Mining and increasingly Generative AI. We believe the integration of computing and renewable energy is the future of the modern grid.

By colocating our data centers with underutilized renewable resources, we aim to reduce the carbon footprint of our data centers and encourage renewable power plant development. An independent study done by REsurety found our data centers are 18% greener than traditional data centers. This is driven by our flexible design, our MaestroOS software platform, and our location on the grid close to renewable resources.

We participate in ERCOT emergency demand response programs, which allows the grid to redirect our power allotment back into the market during extreme weather events when needed. By taking such actions, we immediately help to stabilize the grid by allowing our power allotment to be delivered to the areas of greatest need, such as heating homes and powering hospitals. Overall, our operations incentivize the development of new renewable power generation, and they help to reduce the frequency and impact of power failures and electricity price surges.

The use of water in data centers has become a central concern in recent years. We aim to develop data centers that reduce their water consumption using the latest in direct liquid cooling technology and advanced HVAC systems that rely less on the evaporation of water.

In addition to our low-carbon execution strategy, we also monitor climate change legislation, regulation, and international treaties for any material effect on our business and the markets we serve.

Existing or Potential Governmental Regulations

Cryptocurrency mining remains largely unregulated at the federal and state levels; however, we anticipate increased regulatory attention over the near and long term. The impact of future regulatory changes on our operations is uncertain and may vary by jurisdiction.

A substantial portion of our operations, including our Project Dorothy facilities, are located in Texas, which has historically maintained a favorable regulatory environment for digital asset mining. In March 2022, ERCOT began requiring large-scale digital asset miners to apply for interconnection approval. Subsequently, in April 2022, ERCOT established a task force to develop policy recommendations for integrating large flexible loads, including Bitcoin mining operations, into the ERCOT market. This process has caused energization delays for some market participants, and we may experience similar impacts in the future.

At the federal level, regulatory momentum continues to evolve. In January 2024, the SEC approved a series of spot Bitcoin exchange-traded funds (ETFs), which have since attracted substantial investment. In February 2024, the U.S. Energy Information Administration (EIA) initiated a six-month survey to collect data on electricity usage within the cryptocurrency mining sector. The stated aim was to assess geographic growth trends and energy sourcing. Following a lawsuit, the U.S. Department of Energy suspended the survey and ordered destruction of previously collected data. Although the EIA indicated in July 2024 that it intended to restart the survey, no formal restart has occurred as of the date of this filing.

In January 2025, President Donald Trump issued an executive order establishing a presidential working group focused on regulatory clarity for digital assets, and on March 6, 2025, he signed an executive order establishing a Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile. Legislative bodies in both chambers of Congress have also announced a bipartisan working group with the stated objective of drafting comprehensive legislation to regulate digital assets, and multiple hearings have been held on the subject of fair access to financial services for digital asset companies.

Although recent regulatory signals appear favorable, the long-term trajectory of regulation remains uncertain. For example, in November 2022, the State of New York enacted legislation prohibiting new fossil fuel permits for power plants hosting proof-of-work mining, underscoring the risk of geographically targeted restrictions. While we do not operate in New York, similar measures elsewhere could materially affect our business model.

We continue to monitor evolving regulatory frameworks and potential impacts to our operations. Future legislation or rulemaking—whether related to energy consumption, environmental compliance, or digital asset classification—could have a material adverse effect on our business, financial condition, or results of operations. For additional information on regulatory risks, see the section titled “Risk Factors” in this Annual Report.

Human Capital Resources

As of December 31, 2024, we had forty-eight (48) employees, including forty-seven (47) full-time employees and one full-time consultant. Of these employees, thirteen were in finance, twenty-two in operations, two in corporate development, six in information technology and engineering, one in sales, one in human capital, one in power, and two executives. The operations personnel include both individuals directly involved in the strategy of our data centers as well as data center maintenance and supervisory roles. Certain positions within our organization require industry-specific technical knowledge. We have been successful in attracting and retaining qualified technical personnel for these positions.

None of our employees are subject to a collective bargaining agreement and we believe our relations with our employees to be positive, as reflected in our low voluntary turnover rate.

Diversity, Equity, and Inclusion

We support diversity and inclusion by ensuring a workplace where employees can thrive, and our policies are designed to promote equality and respect for everyone. Diverse backgrounds, experiences and opinions are encouraged and welcomed. In support of such diversity and inclusion, we act in accordance with our Code of Ethics and Business Conduct and our Non-Discrimination and Anti-Harassment Policy to create a safe environment free from discrimination or harassment that respects the human rights of our employees. We strive to achieve a workplace where opportunities for success are created and available for everyone equally. In support of this goal, in 2024, we required all employees to complete unconscious bias and harassment training.

Company History, Information and Organization

Soluna Holdings, Inc. (“SHI”), formerly known as Mechanical Technology, Incorporated, which was originally incorporated in the State of New York in 1961, reincorporated in the State of Nevada on March 24, 2021, and is headquartered in Albany, New York. Effective November 2, 2021, the Company changed its name from “Mechanical Technology, Incorporated” (or “MTI”) to “Soluna Holdings, Inc.” On October 29, 2021, Soluna Callisto Holdings, Inc. merged into Soluna Computing, Inc. (“SCI”), a private green data center development company and a subsidiary of SHI. MTI Instruments, Inc., a subsidiary of SHI, was sold on April 11, 2022. On March 23, 2021, our common stock commenced trading on the Nasdaq Stock Market LLC (“Nasdaq”). We formed a wholly owned subsidiary of SHI on December 31, 2023, Soluna Digital, Inc. (“Soluna Digital,” or “SDI”). Effective December 31, 2023, SCI transferred substantially all of its assets to SHI or its subsidiaries, including SDI.

Additional Information

We file or furnish periodic reports and amendments thereto, including our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC. These reports, and any amendments thereto, as filed with the SEC, can be accessed, free of charge, on the SEC’s website www.sec.gov (http://www.sec.gov). These documents may also be accessed on our website: http://www.solunacomputing.com through a link in the “Investors” section. The contemplated documents are placed on our website as soon as practicable after their filing with the SEC. The information posted on our website is not incorporated by reference into this Annual Report.

An investment in our securities is highly speculative and involves a high degree of risk. We face a variety of risks that may affect our operations or financial results and many of those risks are driven by factors that we cannot control or predict. You should carefully consider the risks described below together with all of the other information in this Annual Report, including our consolidated financial statements and the related notes and the information described in the section entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in our other filings with the SEC. If any of the risks described below occur, our business, financial condition, results of operations and prospects could be materially adversely affected. In that case, the market price of our common stock would likely decline, and investors could lose all or a part of their investment. Only those investors who can bear the risk of loss of their entire investment should consider an investment in our securities. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our operations.

Summary Risk Factors

• Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern, and we will require additional capital to support our business and objectives and grow our business.
• We have a limited operating history, and we may not recognize operating income in the future.
• We have financed our strategic growth primarily by issuing new shares of our common stock in public offerings and the issuance of debt, and plan to raise additional capital through similar offerings in the future, and our inability to do so on favorable terms may adversely affect our operations and the market price of our securities.
• If we cannot achieve or maintain profitability, stockholders could lose all or part of their investment.
• Our level of existing debt may negatively impact our liquidity, restrict our operations and ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.
• We may be unable to meet our remaining obligations under the terminated HPE Agreement (as defined below) which could lead to a default under that agreement.
• Joint ventures, joint ownership and strategic partner arrangements and other projects pose unique challenges, and we may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.
• We may not be able to timely complete our future strategic growth initiatives or within our anticipated costs estimates, if at all.
• Our business plan is heavily dependent upon acquisitions and strategic alliances and our ability to identify, acquire or ally on appropriate terms, and successfully integrate and manage any acquired companies or alliances will impact our financial condition and operating results.
• We are subject to risks associated with our need for significant electrical power.
• Global economic and geopolitical events, policies and conflicts may adversely affect our business, financial condition and results of operations.
• We may not be able to continue to develop our technology and keep pace with technological developments, or otherwise compete with other companies, many of which have greater resources and experience.
• If we fail to effectively manage our growth, our business, financial condition, and results of operations could be harmed.
• Our new services and changes to existing services could fail to attract or retain users or generate revenue and profits, or otherwise adversely affect our business.
• We have concentrated our operations and, thus, are particularly exposed to changes in the regulatory environment, market conditions and natural disasters in the state of Texas where our data centers are located.
• Our success depends on external factors affecting the Bitcoin industry.
• Our profitability depends on Bitcoin prices and the stability of Digital Asset markets, which are highly volatile and largely unregulated.
• Regulatory changes or actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects our business, prospects, or operations.
• Security breaches and irreversible transactions could result in the loss of our cryptocurrencies.
• Uncertainty around the adoption, use, and global demand for cryptocurrencies could adversely affect our business.
• Because most of our and our hosted customers’ miners are designed specifically to mine Bitcoin and may not be readily adaptable to mining other cryptocurrencies, a sustained decline in Bitcoin’s value could adversely affect our business and results of operations.
• Our data center business could be harmed by prolonged power outages, power and fuel shortages, capacity constraints and increases in power costs.
• The Dorothy facility is subject to a five-year ground lease, and if we are unable to renew its term, we may be unable to fully realize the anticipated benefits of the ongoing development of the site.
• Our reliance on a third-party pool service provider for our mining revenue payouts may have a negative impact on our operations. The same may be true in the case of our hosted customers.
• Declining block rewards, reliance on transaction fees, and network forks could adversely affect our mining operations.
• Climate change and evolving regulations could adversely impact our business.
• We may be affected by price fluctuations in the wholesale and retail power markets.
• The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or other alternatives.
• Our business has and is expected to continue to have significant customer concentration.
• Failure to attract, grow and retain a diverse and balanced customer base, including key magnet customers, could harm our business and operating results.
• We are heavily dependent on our senior management, and a loss of a member of our senior management team could cause the market prices of our securities to suffer.
• We depend upon third-party suppliers for power, and we are vulnerable to service failures and price increases by such suppliers and to volatility in the supply and price of power in the open market.
• Our business model depends upon the demand for data centers.
• Insiders continue to have substantial control over the Company.
• We are subject to complex environmental, health and safety laws and regulations that may expose us to significant liabilities for penalties, damages or costs of remediation or compliance.
• Provisions in our Articles (as defined below), our Bylaws (as defined below), and Nevada law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.
• If we are unable to protect our information systems against service interruption or failure, misappropriation of data or breaches of security, our operations could be disrupted, we could be subject to costly government enforcement actions and private litigation and our reputation may be damaged.
• We incur significant costs as a result of operating as a public company.
• We may become involved in litigation arising in the ordinary course of our business that may materially adversely affect us.
• The market price of our securities is likely to be volatile, which may cause investment losses for our shareholders.
• Because there has been limited precedent set for financial accounting of Bitcoin and other cryptocurrency assets, the determination that we have made for how to account for cryptocurrency assets transactions may be subject to change.
• If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our common stock or Series A Preferred Stock or broker-dealers may be discouraged from effecting transactions in shares of our securities.
• Substantial blocks of our common stock may be sold into the market as a result of our being party to the SEPA and you may experience immediate and substantial dilution in the net tangible book value per share of our common stock.
• It is not possible to predict the actual number of shares we will sell under the SEPA, or the actual gross proceeds resulting from those sales.

Risks Relating to the Company and its Growth Strategy

Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern, and we will require additional capital to support our business and objectives and grow our business.

We have incurred recurring losses since inception and, as of December 31, 2024, had an accumulated deficit of approximately $314.3 million. We anticipate operating losses to continue for the foreseeable future as we grow our business, and it is possible we will never achieve profitability.

We expect our unrestricted cash and cash equivalents of $7.8 million as of December 31, 2024 to be insufficient to meet our operating expenses and capital expenditure requirements for at least 12 months from the filing of this Form 10-K. Our consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional working capital through public or private equity or debt financings or other sources. There can be no assurance, however, that such financing will be available, on acceptable terms and conditions, or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including our ability to generate significant revenue, the market demand for our services, management of working capital, and the continuation of normal payment terms.

Until such time as we can generate substantial revenue, we expect to finance our working capital requirements through a combination of equity offerings and debt financing. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to scale back or curtail our operations or expansion efforts, including limiting our ability to expand our hosting and cryptocurrency business to a larger-scale operation. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.

We have a limited operating history and we may not recognize operating income in the future.

We began our cryptocurrency and computer hosting operations in January 2020 and therefore our business is subject to all the risks inherent in a business with limited operating history in a rapidly developing and changing industry. Furthermore, in 2024 we began to implement a strategy to move into the HPC/AI hosting business to provide green energy to power-intensive AI applications, in an attempt to leverage our expertise in advanced data processing applications. This is a new strategic direction for the Company and we have no prior history of operations in either of these lines of business, from which we can evaluate our future operating performance in this segment. We have not yet been able to confirm that our business model can or will be successful over the long term, and we may not ever recognize operating income from this business. Our projections have been developed internally and may not prove to be accurate and our operating results will likely fluctuate moving forward as we focus on growing our operations. We may need to make business decisions that could adversely affect our operating results, such as modifications to our business structure or operations. There can be no assurance that we will be successful in either of these lines of business, which could significantly adversely affect our ability to scale the growth of our customer base or increase our revenue, which could have a material adverse effect on our results of operations in the future.

Given our status as an early operating stage company, without positive operating income, there is a substantial risk regarding our ability to succeed. You should consider our business and prospects in light of these risks and the risks and difficulties that we will encounter as we continue to develop our business model. We may not be able to address these risks and difficulties successfully, which would materially harm our business and operating results, and we could be forced to terminate our business, liquidate our assets and dissolve, and you could lose part or all of your investment.

We have financed our strategic growth primarily by issuing new shares of our common stock in public offerings and the issuance of debt, and plan to raise additional capital through similar offerings in the future, and our inability to do so on favorable terms may adversely affect our operations and the market price of our securities.

We have raised capital to finance the strategic growth of our business through public offerings of our common stock and the issuance of debt, and plan to raise additional capital through similar offerings to fund current and future expansion initiatives. We may not be able to secure additional debt or equity financing on favorable terms, if at all, which could hinder our growth and adversely impact our operations. In 2022 and 2023, a number of digital asset platforms and exchanges filed for bankruptcy and/or became the subjects of investigation by various governmental agencies for, among other things, fraud. These disruptions in the crypto asset market may impact our ability to obtain favorable financing. If we raise additional equity financing, stockholders may experience dilution of their ownership interests, and the per share value of our common stock could decline. If we are unable to generate sufficient cash flows to support our strategic growth, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, or obtaining additional equity financing on terms that may be onerous or highly dilutive. Furthermore, as we engage in debt financing, in the event of bankruptcy, the holders of any debt we issue would likely have priority over the holders of shares of our common stock in terms of order of payment preference. We may be required to accept terms that restrict our ability to incur additional debt or take other actions, including accepting terms that require us to maintain specified liquidity or other ratios that could otherwise not be in the interests of our stockholders.

If we cannot achieve or maintain profitability, stockholders could lose all or part of their investment.

We intend to continue scaling our company to increase our customer base and implement initiatives, including new business lines. As a result, we will incur increased costs associated with growth, expanding our customer base and being a public company. Our efforts to grow our business may be costlier than we expect, or the revenue growth rate may be slower than we expect and may not result in increased profitability in the short term or at all. As we pivot towards new markets such as the HPC/AI hosting business, our limited experience in these areas may impact our ability to accurately assess our prospects. The likelihood of our success must be considered in light of the expenses, difficulties, complications, problems, and delays frequently encountered in connection with the expansion of a business and operating a business in a competitive industry. There can be no assurance that we will ever operate profitably, and if we do, there can be no assurance that we would be able to maintain profitability. If we cannot achieve or maintain profitability, our stockholders could lose all or a part of their investment.

Our level of existing debt may negatively impact our liquidity, restrict our operations and ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.

We currently use debt as part of our capital structure and may take on more debt in the future.

On June 20, 2024, we issued a $12.5 million secured promissory note, with approximately $11.8 million of principal outstanding as of December 31, 2024. This note, along with accrued interest, is due on June 20, 2027.

On December 20, 2022, Soluna MC Borrowings, LLC 2021-1 (“Borrower”), a subsidiary of Soluna MC, LLC, a subsidiary of Soluna Digital, a subsidiary of the Company, defaulted on equipment loans from NYDIG, made under a Master Equipment Finance Agreement dated December 30, 2021 (the “MEFA”). The loans were secured by borrower assets and guaranteed by Soluna MC, LLC (“Guarantor”). We are currently in litigation with NYDIG, which foreclosed on the collateral on February 23, 2023. As of December 31, 2024, the Borrower owes $9.2 million in principal plus approximately $2.3 million in interest and penalties.

On March 12, 2025, Soluna SW, LLC, a subsidiary of Soluna Digital, Inc. (“SSW”), entered into a $5 million term loan with Galaxy Digital LLC under a loan agreement that matures on March 12, 2030.

Our current level of debt could limit our flexibility and pose risks to our business. It may:

• Restrict our ability to raise new financing or make strategic investments;
• Require significant cash flows to cover interest and principal payments;
• Impose covenants that limit our ability to pay dividends, repurchase shares, make acquisitions, incur additional debt, or create liens;
• Make us more vulnerable to downturns or limit our ability to pursue growth opportunities.

Our ability to manage our debt depends on our financial performance, which is subject to business and market conditions. If we fail to meet our debt obligations or violate covenants, lenders could declare defaults and accelerate repayment. This could trigger defaults on other obligations and, in the case of secured debt, lead to foreclosure on our assets.

We also provide guarantees for certain subsidiary debts. If called upon, we may need to cover those obligations, which could impact our cash position and require us to seek additional funding—potentially on unfavorable terms.

To manage our debt, we may pursue refinancing options, which could include issuing new shares or convertible securities. This could dilute existing stockholders and reduce the market value of our stock.

We may be unable to meet our remaining obligations under the terminated HPE Agreement which could lead to a default under that agreement.

On March 24, 2025, we notified HPE of our termination of the HPC & AI Cloud Services Agreement and HPE-Soluna Greenlake Statement of Work, dated June 18, 2024, entered into between Soluna AL CloudCo, LLC, a subsidiary of Soluna Cloud (“CloudCo”), and HPE (together with the associated Statement of Work, the “HPE Agreement”). Under the HPE Agreement, we agreed to pay HPE an aggregate of $34 million payable over 36 months beginning June 2024, with $10.3 million pre-paid in June 2024 at contract execution and monthly payments of $667 thousand due until June 2027.

In accordance with the terms of the HPE Agreement, upon our notice of termination for convenience, our obligations under the HPE Agreement accelerated and the remaining payments of $19.3 million owed by us became immediately due and payable, including all upfront payments and monthly charges, plus any fees incurred for the terminated Services (as defined in the HPE Agreement). Due to the termination of the HPE Agreement, we reduced our prepaid assets and other long-term assets by approximately $8.6 million, increased termination liability by approximately $20.0 million and recorded a loss on contract of approximately $28.6 million for the year ended December 31, 2024 to account for the termination and our contractual payments. We are currently in the process of renegotiating the HPE Agreement, but this is not considered probable to occur.

Subsequently, on March 26, 2025, HPE sent notice of its termination of the HPE Agreement for cause, effective immediately, due to CloudCo’s material breach of its payment obligations that remained uncured for more than thirty (30) days. This default could result in a range of actions that could include legal or collections actions by HPE against CloudCo, any and all of which could have a material adverse effect on our business, financial condition, and results of operations.

We may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness.

It is likely that we will need to refinance at least a portion of our outstanding debt as it matures. If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds of other capital transactions, then our cash flow may not be sufficient in all years to repay all such maturing debt and to pay distributions. Further, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. Refinancing our indebtedness may also require us to expense previous debt issuance costs or to incur new debt issuance costs.

Joint ventures, joint ownership and strategic partner arrangements and other projects pose unique challenges, and we may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.

From time to time, and as we expand our operations into the cloud and HPC/AI hosting business, we may be involved in strategic joint ventures and other joint ownership and strategic partnership arrangements. As of December 31, 2024, we had two primary project-level partners: SLC and Navitas. We may not always be in complete alignment with our joint venture, joint owner or strategic partner counterparties; we may have differing strategic or commercial objectives and may be outvoted by our joint venture or other strategic partners, or we may disagree on governance matters with respect to the joint venture entity or the jointly owned assets. As a result, when we enter into joint ventures, joint ownership, and strategic partnership arrangements, we may be subject to a number of risks. In some joint ventures and joint ownership arrangements we may not be responsible for the operation of projects and will rely on our joint venture. joint owner or strategic partner counterparties for such services. Joint ventures, joint ownership and strategic partnership arrangements may also require us to expend additional internal resources that could otherwise be directed to other projects. If we are unable to successfully execute and manage our existing and any proposed joint venture and joint owner arrangements, it could adversely impact our financial and operating results. Our inability to successfully execute and manage our joint venture/joint owner/strategic partner arrangements could also significantly impact our expansion strategy as we are heavily dependent on these arrangements to finance the expansion of our operations.

We may not be able to timely complete our future strategic growth initiatives or within our anticipated costs estimates, if at all.

Our strategic growth initiatives may require construction, expansion or conversion of associated power facilities, which may expose us to significant risks that we may otherwise not be exposed to, including risks related to: construction delays; lack of availability of parts and/or labor; increased prices as a result, in part, of inflation, and delays for data center equipment; labor disputes and work stoppages, including interruptions in work due to pandemics or other public health crises; unanticipated environmental issues and geological problems; delays related to permitting and approvals to commence operations from public agencies and utility companies; delays in site readiness leading to our failure to meet commitments made in connection with such expansion; and delay or halts related to evaluations of strategic growth initiatives.

All construction-related projects depend on the skill, experience, and attentiveness of our personnel throughout the design and construction process. Should a designer, general contractor, subcontractor or key supplier experience financial difficulties or other problems during the design or construction process, we could experience significant delays, increased costs to complete the project and/or other negative impacts to our expected returns.

If we are unable to mitigate these risks and complete our growth initiatives on schedule and within our anticipated costs, such delays or implementation failures may hinder our ability to realize anticipated benefits, and our business and financial condition may suffer as a result.

We may have difficulty in obtaining banking services for our cryptocurrency activities.

While the banking authorities in the United States do not prohibit banks from providing banking services to cryptocurrency-related businesses such us, the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency have issued directives to banks in the United States relating to their crypto-asset risks and as a result a significant number of banks have determined to limit such activities. Accordingly, we have had and may have in the future, difficulty in opening bank accounts, obtaining letters of credit and generally accessing the banking system for our operational needs.

Our business plan is heavily dependent upon acquisitions and strategic alliances and our ability to identify, acquire or ally on appropriate terms, and successfully integrate and manage any acquired companies or alliances will impact our financial condition and operating results.

As part of our growth strategy, we may seek to acquire other businesses or form strategic alliances and partnerships that expand our market presence, complement our offerings, or provide access to new technologies. We may also need to do so to remain competitive. However, we may not be able to identify suitable opportunities, negotiate favorable terms, secure necessary financing, or successfully complete or integrate any such transactions.

Even when successful, acquisitions and partnerships carry significant risks, including:

• Failure to realize expected benefits or synergies;
• Challenges integrating operations, systems, personnel, or cultures;
• Disruption to ongoing operations and diversion of management time;
• Loss of key employees, customers, or partners;
• Incompatibility of business practices or internal controls;
• Financial risks, including write-offs, increased expenses, or underperformance;
• Entry into unfamiliar markets with greater competition;
• Potential liabilities or unforeseen costs; and
• Negative impacts on our financial results, including accounting and tax implications.

We may finance future deals by issuing equity or convertible debt, which could dilute existing stockholders or increase leverage.

Our strategic relationships, including those with SLC and Navitas, or any future partnerships, must be well-managed to avoid harming our operations or results. There is no guarantee that any acquisition or alliance will achieve its intended goals or deliver the expected return, and differences in cost structures could cause fluctuations in our financial performance.

We are subject to risks associated with our need for significant electrical power.

Our operations currently require significant amounts of electrical power, and we anticipate our demand for electrical power will continue to grow as we continue to expand our mining fleet and begin to operate our Dorothy Facility, and as we expand our business to implement our strategy to move into the cloud service business and HPC/AI hosting business. The fluctuating price of electricity required for our operations and to power our expansion may inhibit our profitability. If we are unable to continue to obtain sufficient electrical power on a cost-effective basis, we may not realize the anticipated benefits of our significant capital investments.

Global economic and geopolitical events, policies and conflicts may adversely affect our business, financial condition, and results of operations.

We may be exposed to price volatility and uncertainty in our supply chain due to geopolitical crises and economic downturns such as recessions, rising inflation, tariffs, social, political, and economic risks, conflicts and acts of war, sanctions and other restrictive actions by the United States and/or other countries. Changes in policy positions and priorities from the new U.S. government administration could increase this price volatility and uncertainty. Such crises will likely continue to influence our ability to do business in a cost-effective manner. Inflationary pressures, as well as disruptions in our supply chain, have increased the costs of goods, services, and personnel, which have in turn caused our capital expenditures and operating costs to rise. Additionally, these crises may discourage investment in Bitcoin and investors may shift their investments to less volatile assets. The effects of such global economic shifts, worsening inflationary issues, changes in policy, and geopolitical events could adversely affect our ability to access the capital and other financial markets, as such, we may be required to consider alternative sources of funding for our growth and operations which may increase our cost of capital. Such events and conditions could have a materially adverse effect on our business, operations, or financial results and the value of the Bitcoin we mine.

We may not be able to continue to develop our technology and keep pace with technological developments, or otherwise compete with other companies, many of which have greater resources and experience.

We currently lack the financial resources to compete directly with larger, well-funded companies in cryptocurrency mining and advanced data processing, including cloud, AI, and HPC data center operators. These markets attract major players with far greater capital and scale, making it difficult for us to expand or introduce new offerings.

Rapid changes in technology further increase this challenge. We may not be able to keep up with new developments, adopt new technologies quickly, or do so in a cost-effective way. Some of our equipment may become outdated, and upgrading or replacing it—especially mining hardware or advanced AI infrastructure—could be costly and time-consuming. Supply chain constraints, long lead times, and competition for key components like semiconductors could further limit our ability to stay current.

Implementing new technology may also lead to system disruptions or fail to deliver expected benefits. If we cannot adapt effectively, our competitiveness and growth prospects could suffer.

Additionally, other North American companies with greater access to low-cost energy may outcompete us in securing strategic acquisitions or partnerships. If we are unable to expand, innovate, or maintain our position in the market, it could negatively impact our business, financial condition, and the trading price of our securities.

If we fail to effectively manage our growth, our business, financial condition, and results of operations could be harmed.

We are an early operating stage company with a small management team and are subject to the strains of ongoing development and growth, which will place significant demands on our management and our operational and financial infrastructure. Although we may not grow as we expect, if we fail to manage our growth effectively or to develop and expand our managerial, operational, and financial resources and systems, our business and financial results could be materially harmed.

In addition, our failure to effectively manage our growth could damage our reputation, further limiting our growth and negatively affecting our operating results. Further, we cannot provide any assurance that we will successfully identify emerging trends and growth opportunities in this business sector, and we may lose out on opportunities. Such circumstances could have a material adverse effect on our business, prospects, or operations.

Our new services and changes to existing services could fail to attract or retain users or generate revenue and profits, or otherwise adversely affect our business.

Our ability to retain, increase, and engage our customer base and to increase our revenue depends heavily on our ability to continue to evolve our existing services and to create successful new services, both independently and in conjunction with developers or other third parties. We may introduce significant changes to our existing services or acquire or introduce new and unproven services, including using technologies with which we have little or no prior development or operating experience. These efforts, including the introduction of new services or changes to existing services, may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results. If our new services fail to engage users or developers, or if our business plans are unsuccessful, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, and our business may be adversely affected.

We have concentrated our operations and, thus, are particularly exposed to changes in the regulatory environment, market conditions and natural disasters in the state of Texas where our data centers are located.

We currently operate data centers in Texas, which generated the majority of our revenue in both 2023 and 2024. Our growth plans also focus on new projects in Texas, making our business highly dependent on the state’s regulatory environment, market conditions, and exposure to weather events or natural disasters.

Texas has supported Bitcoin mining through favorable regulations and economic incentives, but this has also led to increased competition for suitable sites and skilled labor. Our operations could be impacted by construction delays, rising costs for equipment or labor, supply chain disruptions, or disputes with contractors.

In 2022, ERCOT—the operator of Texas’ power grid—began requiring large-scale digital asset miners to apply for grid connection approval and established a task force to review how large flexible loads (like Bitcoin data centers) interact with the grid. This has led to delays for some miners in getting energized, and we could face similar delays in the future.

If Texas were to change its policies, increase taxes, or reduce its support for Bitcoin mining, our concentration in the state could significantly affect our business, financial condition, and results of operations.

Risks Related to our Bitcoin Mining and Hosting Business

Our success depends on external factors affecting the Bitcoin industry.

Our success is closely tied to the health of the Bitcoin market, which is influenced by factors beyond our control. Historically, Bitcoin ownership has been concentrated among a small number of holders, often called “whales.” Although ownership has become more distributed, large holders still exist and could impact the market by selling large amounts of Bitcoin, which may reduce demand and drive down prices.

While more regulated and transparent exchanges have emerged, the Bitcoin market remains relatively new and less regulated than traditional financial markets. Some trading platforms may be more prone to technical issues, fraud, or unethical practices such as:

• Wash trading (creating artificial trading volume),
• Front-running (using early access to trade information for unfair advantage), and
• Lack of transparency in ownership, governance, and compliance.

These issues may erode public trust in Bitcoin markets and lead to price volatility. A significant drop in the price or perceived reliability of Bitcoin could negatively impact our business and financial results.

Our profitability depends on Bitcoin prices and the stability of Digital Asset markets, which are highly volatile and largely unregulated.

Our ability to achieve and maintain profitability is closely tied to the market price of Bitcoin, which has historically been highly volatile and influenced by factors beyond our control. These include market speculation, global economic and political events, regulatory changes, energy prices, activity by large holders (“whales”), and technical or operational issues at major exchanges.

Digital asset exchanges—where Bitcoin and other cryptocurrencies are traded—are relatively new and largely unregulated. Many lack transparency in ownership, management, and compliance practices. This has led to market instability, particularly when major exchanges have collapsed, faced hacking incidents, or become subject to regulatory investigations. Notable examples include the collapse of FTX and scrutiny of Binance, which contributed to sharp price declines and increased negative publicity across the cryptocurrency industry. In 2022 and 2023, average Bitcoin prices were $27,796 and $29,870, respectively. While the price rebounded to $93,429 by the end of 2024, it remains unpredictable.

A lack of trust in digital asset exchanges or their closure—whether due to fraud, government action, or business failure—can further undermine public confidence in Bitcoin, increase market volatility, and negatively impact our business. These risks may continue to evolve in ways we cannot fully anticipate.

In addition, Bitcoin has a fixed supply of 21 million coins, with about 19.8 million already mined. As block rewards decline through scheduled “halvings” and eventually phase out, our revenue from mining will increasingly rely on transaction fees. While these fees have grown, there is no guarantee they will be sufficient to support profitability in the long term.

Volatility also affects how much revenue we realize from converting mined Bitcoin into U.S. dollars and makes financial planning more difficult. A prolonged decline in Bitcoin prices could also affect the ability of our co-hosting customers to pay for services, reducing our revenue and delaying expansion.

If Bitcoin prices fall or fail to meet our expectations, or if instability in the broader digital asset market increases, our financial condition and results of operations could be materially and adversely affected.

Regulatory changes or actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects our business, prospects, or operations.

The regulatory environment for cryptocurrencies is evolving and uncertain. Governments around the world have taken varied approaches—some banning cryptocurrencies entirely, others permitting them with little restriction, and many (including the U.S.) applying complex and changing rules to mining, ownership, and trading.

In the U.S., regulatory momentum has increased. In January 2025, President Trump issued an executive order to create a federal framework for digital assets, and Congress has formed bipartisan working groups to pursue legislation on the topic. Discussions have included creating a national digital asset reserve that could include Bitcoin, and multiple states have proposed similar reserves. While these developments may ultimately bring more clarity, their outcomes remain uncertain.

Past actions have shown that regulation can also become more restrictive. For example:

• In November 2022, New York banned new fossil fuel permits for proof-of-work mining.
• In January 2024, the SEC approved spot Bitcoin ETFs, leading to increased institutional adoption.
• In February 2024, the EIA launched, then suspended, a survey to monitor electricity use in crypto mining. The long-term regulatory impact of that effort remains unclear.

Although some recent enforcement actions have been scaled back, future regulations—especially those targeting electricity use, financial reporting, or market oversight—could increase our compliance burden, restrict our operations, or affect demand for our services.

Given this uncertainty, we cannot predict how future laws or agency actions may impact our business. Even well-intentioned or positive regulatory initiatives could have unintended consequences that negatively affect our operations, financial condition, or growth prospects.

Our interactions with a blockchain may expose us to specially designated nationals (“SDNs”) or blocked persons and new legislation or regulation could adversely impact our business or the market for cryptocurrencies.

The Office of Financial Assets Control (“OFAC”) of the U.S. Department of Treasury requires us to comply with its sanction program and not conduct business with persons named on its SDN list. However, because of the pseudonymous nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list. Our policy prohibits any transactions with such SDN individuals, but we may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to selling cryptocurrency assets. We are unable to predict the nature or extent of new and proposed legislation and regulation affecting the cryptocurrency industry, or the potential impact of the use of cryptocurrencies by SDN or other blocked or sanctioned persons, which could have material adverse effects on our business and our industry more broadly. Further, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties as a result of any regulatory enforcement actions, all of which could harm our reputation and affect the value of our securities.

Security breaches and irreversible transactions could result in the loss of our cryptocurrencies.

Our operations rely on third-party platforms such as the Luxor mining pool and exchanges like Coinbase to store and manage our cryptocurrencies. Like others in the industry, we face risks from security breaches, including hacking, malware, or insider error. A successful attack on our systems or those of our partners could result in the theft or loss of our digital assets, compromise confidential information, disrupt operations, and damage our reputation.

Additionally, cryptocurrency transactions are typically irreversible. If coins are accidentally sent to the wrong address or stolen through fraud or theft, we may have no way to recover them. Any such losses—whether from security incidents or transactional errors—could negatively affect our business, financial condition, and results of operations, and may also impact investor confidence.

Uncertainty around the adoption, use, and global demand for cryptocurrencies could adversely affect our business.

Our business depends on the continued demand for, and value of, cryptocurrencies—particularly Bitcoin—which is influenced by a variety of factors, including adoption, usability, and global economic and geopolitical events. However, the future of cryptocurrency as a widely used payment method remains uncertain.

Despite growing awareness, cryptocurrencies face major adoption and scaling challenges. High transaction costs, slow processing times, and limited throughput have restricted their use in everyday transactions. Although efforts are underway to address these issues through protocol upgrades and second-layer technologies, there is no assurance that such solutions will succeed or gain broad acceptance. If these problems persist, demand for cryptocurrencies may decline, reducing the viability of mining and the need for services like ours.

Additionally, most cryptocurrency demand today is driven by investment and speculation rather than retail or commercial use. Widespread acceptance as a medium of exchange has not occurred—and may never occur. If adoption stalls or declines, the value of the cryptocurrencies we or our hosted customers mine could drop, impacting our revenues and growth prospects.

Geopolitical and economic events also create uncertainty. Crises can lead to sudden surges in demand, driving up prices temporarily, but also increasing the risk of sharp price declines once the crisis subsides. Alternatively, in times of global instability or economic downturns, investors may shift away from volatile assets like cryptocurrencies toward more traditional safe-haven investments, weakening demand further.

Taken together, these factors could materially impact our business, financial condition, and the long-term sustainability of our operations.

Because most of our and our hosted customers’ miners are designed specifically to mine Bitcoin and may not be readily adaptable to mining other cryptocurrencies, a sustained decline in Bitcoin’s value could adversely affect our business and results of operations.

We and our hosted customers have invested substantial capital in acquiring miners designed specifically to mine Bitcoin as efficiently and as rapidly as possible on our assumption that we will be able to use them to mine Bitcoin and generate revenue from our operations. Therefore, our mining and hosting operations focus primarily on mining Bitcoin, and our revenue is largely based on the value of Bitcoin. Accordingly, if the value of Bitcoin declines and fails to recover, for example, because of the development and acceptance of competing blockchain platforms or technologies, including competing cryptocurrencies which our miners or our customers’ miners may not be able to mine, the revenue we generate from our operations will likewise decline. Moreover, we may not be able to successfully repurpose our operations in a timely manner, if at all, if we or our customers decide to switch to mining a different cryptocurrency (or to another purpose altogether) following a sustained decline in Bitcoin’s value or if Bitcoin is replaced by another cryptocurrency. This could have a material adverse effect on our business, prospects, operations, and financial condition, as well as on the market value of our securities.

Our data center business could be harmed by prolonged power outages, power and fuel shortages, capacity constraints and increases in power costs.

Our data centers rely on consistent, high-capacity electricity supply, and any disruption—planned or unplanned—could negatively impact our operations and customer experience. Power outages caused by storms, fires, cyberattacks, utility failures, or infrastructure issues may lead to downtime and revenue loss. In some leased facilities, we may depend on landlords or utility providers to restore power, limiting our control in an outage.

While we may use backup generators and other measures to reduce downtime, they may not always be sufficient. Additionally, as customer equipment becomes more power-intensive, total energy consumption at our facilities may exceed original design expectations, potentially limiting available capacity and future growth.

We also face rising electricity costs driven by global energy market volatility, including supply disruptions from the Russia-Ukraine conflict, increased seasonal demand, and broader macroeconomic pressures. Over time, electricity prices may continue to rise due to climate change impacts, new environmental regulations, or our use of renewable energy. These cost increases could materially affect our financial condition, operating results, and cash flows.

The Dorothy Facility is subject to a five-year ground lease, and if we are unable to renew its term, we may be unable to fully realize the anticipated benefits of the ongoing development of the site.

The Dorothy Facility is subject to a ground lease with an initial term of five years, followed by five one-year renewal options, unless terminated earlier. The long-term success of our plans for the Dorothy Facility is largely based on our ability to maintain the lease in effect and to renew it going forward. If we fail to maintain the lease or renew it once its initial term expires and the landlord requires us to vacate the premises, we will likely incur significant costs in relocating our operations, if we could do so at all, and our operations would be interrupted during such relocation. Further, if we fail to renew the lease on terms favorable to us, and our costs are increased, then we may not realize the anticipated benefits of our investment in the facility or any future development of its remaining available capacity. Any disruptions or changes in our present relationship with the landlord for the Dorothy Facility could disrupt our business and our results of operations negatively.

Our properties may experience damages, including damages that are not covered by insurance.

Our properties are subject to a variety of risks relating to physical condition and operation, including:

• the presence of construction or repair defects or other structural or building damage;
• any noncompliance with or liabilities under applicable environmental, health or safety regulations or requirements or building permit requirements; and
• any damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods, and windstorms.

For example, our facilities could be rendered inoperable, temporarily, or permanently, as a result of a fire or other natural disaster or by a terrorist or other attack on the site. The security and other measures we take to protect against these risks may not be sufficient. Additionally, our processing equipment could be materially adversely affected by a power outage, loss of access to the electrical grid, or loss by the grid of cost-effective sources of electrical power generating capacity. Given the power requirement, it would not be feasible to run miners on back-up power generators in the event of a power outage. Our insurance covers the replacement cost of any lost or damaged miners but does not cover any interruption of our mining activities; our insurance therefore may not be adequate to cover the losses we suffer as a result of any of these events. In the event of an uninsured loss, including a loss in excess of insured limits, at any of the mines in our network, such mines may not be adequately repaired in a timely manner or at all and we may lose some or all of the future revenues anticipated to be derived from such mines. The potential impact on our business is currently magnified because we are currently operating only a single mine.

Our reliance on a third-party mining pool service provider for our mining revenue payouts may have a negative impact on our operations. The same may be true in the case of our hosted customers.

We currently rely on Luxor’s mining pool that supports Bitcoin to receive our mining rewards and fees from the network. Our mining pool has the sole discretion to modify the terms of our agreement at any time, and, therefore, our future rights and relationship with our mining pool may change. In general, mining pools allow miners to combine their computing power, increasing their chances of solving a block and getting paid by the network. The rewards are distributed by the mining pool operator, proportionally to our contribution to the mining pool’s overall mining power, used to generate each block. Should the mining pool operator’s system suffer downtime due to a cyber-attack, software malfunction, or similar issues, it will negatively impact our ability to mine and receive revenue. Furthermore, we and many other Bitcoin miners are dependent on the accuracy of the mining pool operator’s recordkeeping to accurately record the total processing power provided to the mining pool for a given Bitcoin mining application in order to assess the proportion of that total processing power we provided. While we have internal methods of tracking both our power provided and the total used by the mining pool, the mining pool operator uses its own recordkeeping to determine our proportion of a given reward. We and other miners have little means of recourse against the mining pool operator if we determine that the proportion of the reward that the mining pool operator pays out to us is incorrect, other than leaving the mining pool. If we are unable to consistently obtain accurate proportionate rewards from our mining pool operator, we may experience reduced reward for our efforts, which would have an adverse effect on our results of operations and financial condition.

Declining block rewards, reliance on transaction fees, and network forks could adversely affect our mining operations.

Our ability to generate revenue from Bitcoin mining depends on rewards received for solving new blocks. These rewards are designed to decrease over time through regularly scheduled “halvings.” For example, the most recent halving on April 19, 2024, reduced the reward from 6.25 to 3.125 Bitcoin per block. This process will continue roughly every four years until the total supply reaches 21 million Bitcoin, expected around the year 2140.

If the price of Bitcoin does not increase proportionally—or if mining difficulty does not decrease—halvings may reduce our mining revenue and profitability. This may also impact our hosted customers, whose ability to cover operating costs depends on the value of rewards earned. Over time, the Bitcoin network is expected to rely more on transaction fees instead of block rewards. However, if those fees are not high enough to support ongoing mining activity, it could reduce incentives to mine and weaken the network’s stability. Conversely, if transaction fees rise too high, users may avoid using Bitcoin, reducing transaction volume and fee opportunities.

If the aggregate computing power or has rate on the Bitcoin network increases significantly, for proprietary Bitcoin mining, we may incur elevated capital expenses to maintain and upgrade our mining fleet in order to maintain market share.

In addition, we face risks from network “forks”, where a blockchain splits into two incompatible versions—usually due to changes in protocol adopted by only part of the network. Forks can lead to the creation of new cryptocurrencies and may cause confusion, market volatility, or incompatibility with existing mining equipment. If we are unable to support both versions or secure the economic benefit of the new asset, our operations and financial results could be negatively affected. Forks can also expose our systems to cybersecurity risks and disrupt mining activity.

Together, declining rewards, uncertain transaction fee dynamics, and network forks pose significant risks to our mining business, which could materially impact our revenue, profitability, and overall financial condition.

Climate change and evolving regulations could adversely impact our business.

Our operations depend heavily on access to reliable and cost-effective electricity. As a result, our business is exposed to both the physical effects of climate change and the potential for new environmental and energy regulations. Physical risks—such as extreme weather, water shortages, and temperature changes—could disrupt our data centers, damage infrastructure, or impair our ability to operate efficiently, particularly in regions like Texas where we have significant operations.

At the same time, the regulatory environment surrounding climate change is evolving rapidly. Governments at all levels are considering or enacting new legislation related to energy use, emissions, and environmental impact. We, along with our hosted customers, could face higher compliance costs for energy use, environmental monitoring, capital equipment upgrades, or operational changes. These rules may not distinguish between operations powered by renewable energy (as many of ours are) and those powered by fossil fuels, potentially putting us at a disadvantage despite our cleaner energy profile.

The lack of consistent regulation also creates uncertainty, especially as investor groups, policymakers, and the public increasingly scrutinize companies for their environmental practices. Increased focus on ESG (Environmental, Social, and Governance) performance could require additional time and resources to address stakeholder concerns or respond to reputational risk.

Additionally, future regulatory changes could affect our business planning and capital investment decisions. For example, assumptions we have made about the regulatory landscape—such as for our Dorothy facility—may change, resulting in unexpected costs or challenges in execution. In Texas, we currently participate in demand response programs to reduce strain on the grid during high-demand periods. While beneficial today, future regulatory changes could impact our ability to participate in or benefit from such programs.

Given the uncertainty surrounding climate change policy and energy regulation, we cannot predict how these issues will evolve or the long-term effects on our operations. However, any of the risks described above could materially impact our financial condition, operating performance, and ability to compete.

We may be affected by price fluctuations in the wholesale and retail power markets.

While the majority of our power and hosting arrangements contain fixed power prices, some also contain certain price adjustment mechanisms in case of certain events. Furthermore, a portion of our power and hosting arrangements includes merchant power prices, or power prices reflecting market movements. Market prices for power, generation capacity and ancillary services are unpredictable. Over the past year, the market prices for power have generally been increasing, driven in part by the price increases in various commodities, including natural gas. Depending upon the effectiveness of any price risk management activity undertaken by us, an increase in market prices for power, generation capacity, and ancillary services may adversely affect our business, prospects, financial condition, and operating results. Long- and short-term power prices may fluctuate substantially due to a variety of factors outside of our control, including, but not limited to:

• increases and decreases in generation capacity;
• changes in power transmission or fuel transportation capacity constraints or inefficiencies;
• volatile weather conditions, particularly unusually hot or mild summers or unusually cold or warm winters;
• technological shifts resulting in changes in the demand for power or in patterns of power usage, including the potential development of demand-side management tools, expansion and technological advancements in power storage capability and the development of new fuels or new technologies for the production or storage of power;
• federal and state power, market and environmental regulation and legislation; and
• changes in capacity prices and capacity markets.

If we are unable to secure power supply at prices or on terms acceptable to us, it would have a material adverse effect on our business, financial condition, operating results, and prospects.

The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or other alternatives.

The development and acceptance of competing blockchain platforms or technologies may cause consumers to abandon Bitcoin. As we exclusively mine Bitcoin, and expect to exclusively mine Bitcoin in the future, we could face difficulty adapting to emergent digital ledgers, blockchains or alternatives thereto. This could prevent us from realizing the anticipated profits from our investments. Such circumstances could have a material adverse effect on our business, prospects, or operations and potentially the value of any Bitcoin we mine or otherwise acquire or hold for our own account and therefore harm investors.

We have an evolving business model which is subject to various uncertainties.

As crypto assets and blockchain technologies become more widely available, we expect the services and products associated with them to evolve. Future regulations may require us and our co-hosting customers to change our or their business in order to comply fully with federal and state laws regulating crypto asset (including Ethereum and Bitcoin) mining. In order to stay current with the industry, our business model may need to continue to evolve as well. From time to time, we may modify aspects of our business model relating to our strategy. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to our business.

Risks Related to our Company Generally

Our business has and is expected to continue to have significant customer concentration.

We generate a large portion of our revenue from a small number of customers. If we were to lose one or more of our large customers, our operating results could suffer dramatically. For example, one of our hosting customers accounted for 56% of our hosting revenue and 28% of our total revenue in 2024 and such customer terminated its contract with us during the fourth quarter of 2024. Although we were able to quickly address the loss of this customer without a substantial impact on our revenue, there can be no assurance that if we lose a major customer in the future, we will be able to successfully replace such customer in a timely manner, or at all, without any significant impact to our results of operations.

We expect that the limited number of customers will continue to account for a high percentage of our revenue for the foreseeable future. In addition, demand for our services generated by these customers may fluctuate significantly from quarter to quarter. The concentration of our customer base increases risks related to the financial condition of our customers, and the deterioration in financial condition of a single customer or the failure of a single customer to perform its obligations could have a material adverse effect on our results of operations and cash flow. If a subset or all of our customers were to experience harm or loss due to unforeseen circumstances, it could negatively impact their businesses. In the event that any of our customers experience a decline in their equipment usage for any reason, or decide to discontinue the use of our facilities, we may be compelled to lower our lease prices or risk losing a significant customer. Such developments could adversely affect our profit margins and financial position, leading to a negative impact on our revenue and operating results.

Failure to attract, grow and retain a diverse and balanced customer base, including key magnet customers, could harm our business and operating results.

Our ability to attract, grow and retain a diverse and balanced customer base, consisting of enterprises, cloud service providers, network service providers, and digital economy customers, some of which we consider to be key magnets drawing in other customers, may affect our ability to maximize our revenues. Dense and desirable customer concentrations within a facility enable us to better generate significant interconnection revenues, which in turn increases our overall revenues. In the future, our ability to attract customers to our data centers will depend on a variety of factors, including our product offerings, the presence of carriers, the overall mix of customers, the presence of key customers attracting business through ecosystems, the data center’s operating reliability and security and our ability to effectively market our product offerings. Our inability to develop, provide or effectively execute any of these factors may hinder the development, growth and retention of a diverse and balanced customer base and adversely affect our business, financial condition, and results of operations.

We are heavily dependent on our senior management, and a loss of a member of our senior management team could cause the market prices of our securities to suffer.

If we lose the services of John Belizaire, our Chief Executive Officer and member of our board of directors, and/or certain key employees, we may not be able to find appropriate replacements on a timely basis, and our business could be adversely affected. We do not currently maintain key life insurance policies on these officers or key employees. Our existing operations and continued future development depend to a significant extent upon the performance and active participation of these individuals and certain key employees. We may not be successful in retaining the services of these individuals, and if we were to lose any of these individuals, we may not be able to find appropriate replacements on a timely basis and our financial condition and results of operations could be materially adversely affected.

We depend upon third-party suppliers for power, and we are vulnerable to service failures and price increases by such suppliers and to volatility in the supply and price of power in the open market.

Our data centers depend on third-party utility providers for electricity. If these providers fail to deliver sufficient power—due to supply shortages, outages, or delays in adding new capacity—our operations and customer service could be disrupted. Power outages, even temporary ones, may exceed the limits of our backup systems, potentially damaging equipment, harming customer relationships, and impacting our ability to generate revenue.

We are also exposed to rising and unpredictable energy costs. Power prices may increase due to fuel cost volatility (e.g., natural gas or coal), carbon regulations, grid modernization fees, recovery charges from extreme weather events, or geopolitical instability. Higher power costs at specific sites could make those data centers less competitive compared to others with cheaper electricity.

In some cases, we have entered long-term power purchase agreements (PPAs) for renewable energy and credits at fixed prices. If market prices fall, we may pay more under these agreements than we would on the open market. Additionally, disruptions to our renewable energy suppliers—such as from extreme weather or equipment failure—could limit our access to renewable energy or credits.

Any of these issues—supply failures, price increases, or contract imbalances—could materially affect our business, operations, and financial results.

Our confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information, which could limit our ability to compete.

In addition to the protection afforded by patents, we rely on trade secrets to protect much of our proprietary technology and processes. Despite such protection, however, it is possible that a third party may copy or otherwise obtain and use our proprietary information without our authorization and trade secrets can be difficult to protect. Policing unauthorized use of our intellectual property and trade secrets is difficult, particularly in light of the global nature of the Internet and because the laws of other countries may afford us little or no effective protection of our intellectual property. Potentially expensive litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Additionally, we enter into confidentiality and intellectual property assignment agreements with our employees, consultants, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties’ confidential information developed by the party under such agreements or made known to the party by us during the course of the party’s relationship with us. Our employees, consultants, and other advisors, however, may not honor these agreements and enforcing a claim that a party illegally obtained and is using our trade secrets is difficult, expensive and time-consuming and the outcome is unpredictable. Our failure to obtain and maintain trade secret protection could adversely affect our competitive position.

We may not be able to compete with other companies, some of which have greater resources and experience.

We may not be able to compete successfully against present or future competitors. We do not have the resources to compete with larger providers of similar products or services at this time. The crypto asset industry (mining and hosting) as well as the cloud and AI/HPC industry has attracted various high-profile and well-established operators, some of which have substantially greater liquidity and financial resources than we do. With the limited resources we have available, we may experience great difficulties in expanding and improving our services and product offerings to remain competitive. Competition from existing and future competitors, particularly those that have access to competitively priced energy, could result in our inability to secure acquisitions and partnerships that we may need to expand our business in the future. This competition from other entities with greater resources, experience and reputations may result in our failure to maintain or expand our business, as we may never be able to successfully execute our business plan. If we are unable to expand and remain competitive, our business could be negatively affected which would have an adverse effect on our business, results of operations, financial condition, and the trading price of our common stock, which would harm our investors.

Our business model depends upon the demand for data centers.

We intend to be in the business of owning, leasing and operating data centers. A reduction in the demand for data center space, power or connectivity would have an adverse effect on our business and financial condition. We are susceptible to general economic slowdowns as well as adverse developments in the data center, internet and data communications and broader technology industries. Any such slowdown or adverse development could lead to reduced corporate information technology (“IT”) spending or reduced demand for data center space. Reduced demand could also result from business relocations, including to markets that we do not currently serve. Changes in industry practice or in technology could also reduce demand for the physical data center space we provide. In addition, our customers may choose to develop new data centers or expand their own existing data centers or consolidate into data centers that we do not own or operate, which could reduce demand for our data centers or result in the loss of one or more key customers. If any of our key customers were to do so, it could result in a reduction in our revenues and/or put pressure on our pricing. If we lose a customer, we may not be able to replace that customer at a competitive rate or at all. Mergers or consolidations could further reduce the number of our customers and potential customers and make us more dependent on a more limited number of customers. If our customers merge with or are acquired by other entities that are not our customers, they may discontinue or reduce the use of our data centers in the future. Our financial condition, results of operations, cash flows and ability to satisfy our debt service obligations could be materially adversely affected as a result of any or all of these factors.

We rely on highly skilled personnel and the continuing efforts of our executive officers and, if we are unable to retain, motivate or hire qualified personnel, our business may be severely disrupted. In addition, increased labor costs and the unavailability of skilled workers could hurt our business, financial condition, and results of operations.

Our performance largely depends on the talents, knowledge, skills, know-how and efforts of highly skilled individuals Our future success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization. Our continued ability to compete effectively depends on our ability to attract, among others, new technology developers and to retain and motivate our existing contractors. If one or more of our key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. In such cases, our business may be severely disrupted, and we may incur additional expenses to recruit and retain new officers or other key personnel. In addition, if any of our executives or key personnel joins a competitor or forms a competing company, we may lose customers.

In addition, we compete with other businesses in our industries and other similar employers to attract and retain qualified personnel with the technical skills and experience required to successfully operate our businesses. The demand for skilled workers is high and the supply is limited, and a shortage in the labor pool of skilled workers or other general inflationary pressures or changes in applicable laws and regulations could make it more difficult for us to attract and retain personnel and could require us to enhance our wage and benefits packages, which could increase our operating costs.

Insiders continue to have substantial control over the Company.

As of December 31, 2024, the Company’s directors and executive officers held the current right to vote approximately 28% of the Company’s outstanding voting stock. In addition, the Company’s directors and executive officers have the right to acquire additional shares of our common stock by exercising their equity awards under our equity compensation plans, which could increase their voting percentage significantly. As a result, many of the Company’s officers and directors acting together, may have the ability to exert significant control over the Company’s decisions and control the management and affairs of the Company, and also to determine the outcome of matters submitted to stockholders for approval, including the election or removal of a director, and any merger, consolidation, or sale of all or substantially all of the Company’s assets. Accordingly, this concentration of ownership may harm the future market prices of our securities by:

• delaying, deferring, or preventing a change in control of the Company;
• impeding a merger, consolidation, takeover, or other business combination involving the Company; or
• discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.

We are subject to complex environmental, health and safety laws and regulations that may expose us to significant liabilities for penalties, damages or costs of remediation or compliance.

We are subject to various federal, state, local and foreign environmental, health and safety laws and regulations. These laws and regulations govern matters such as: the emission and discharge of hazardous materials into the ground, air, or water; the generation, use, storage, handling, treatment, packaging, transportation, exposure to, and disposal of hazardous and biological materials, including recordkeeping, reporting and registration requirements; and the health and safety of our employees. We may incur significant additional costs beyond those currently contemplated to comply with these regulatory requirements. Further, if we fail to comply with these requirements we may be exposed to fines, penalties and/or interruptions in our operations that could have a material adverse effect on our business, operating results, and financial condition. Certain environmental laws may impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances have been disposed or otherwise released into the environment, even under circumstances where the hazardous substances were released by prior owners or operators, or the activities conducted and from which a release emanated complied with applicable law. Please see “We could incur significant costs related to environmental matters, including from government regulation, private litigation, and existing conditions at some of our properties” below for more detail.

Further, existing regulations, particularly in the environmental area, could be revised or reinterpreted, or new laws and regulations could be adopted or become applicable to us or our facilities and future changes in environmental laws and regulations could occur, including potential regulatory and enforcement developments related to air emissions, any of which could result in significant additional costs. Any of the foregoing could have a material adverse effect on our results of operations and financial condition.

We could incur significant costs related to environmental matters, including from government regulation, private litigation, and existing conditions at some of our properties.

We may face costs or obligations related to environmental laws and regulations, including for investigating or cleaning up contamination on our properties, even if the issue was caused by prior owners or operators. U.S. environmental laws, like Comprehensive Environmental Response, Compensation, and Liability Act of 1980, can hold current or past property owners liable for contamination, regardless of fault, and these costs can be significant.

That said, we typically conduct environmental assessments on our project sites, and to date, we have not identified any material issues. Most of our sites have historically been farmland or similar low-risk uses. While these assessments do not include full subsurface testing or asbestos surveys, no significant concerns have been found.

We may also be subject to permitting requirements, including for air quality when installing backup diesel generators, or for water usage in certain markets. Climate-related risks—such as droughts, flooding, or regulations around energy efficiency—may increase over time and could affect data center development or operations. However, at present, we have not encountered any significant environmental obstacles.

Provisions in our Articles (as defined below), our Bylaws (as defined below), and Nevada law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.

Provisions contained in our Articles of Incorporation (as amended, the “Articles”) and our Bylaws (the “Bylaws”) could make it more difficult for a third party to acquire us if we have become a publicly traded company. Provisions of our Articles and Bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. For example, our Articles authorize our Board to determine the rights, preferences, privileges, and restrictions of unissued series of preferred stock without any vote or action by our stockholders. Thus, our Board can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our other series of capital stock. These rights may have the effect of delaying or deterring a change of control of our company. Additionally, our Bylaws establish limitations on the removal of directors and on the ability of our stockholders to call special meetings.

For a more complete understanding of these provisions, please refer to the Nevada Revised Statutes (“NRS”) and our Articles and Bylaws filed with the SEC. Though we are not currently, in the future we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (i) one-fifth or more but less than one-third; (ii) one-third or more but less than a majority; or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.

The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law. If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for the redemption of such stockholder’s shares. Nevada’s control share law may have the effect of discouraging takeovers of the corporation.

In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for two years after the “interested stockholder” first becomes an “interested stockholder,” unless our Board approves the combination in advance or thereafter by both the Board and 60% of the disinterested stockholders. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders. The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our Board.

General Risk Factors

We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from selling our products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief.

While we believe our current offerings—including Bitcoin hosting, renewable energy curtailment, demand response services, and GPU-as-a-Service —do not infringe on others’ intellectual property, there is a risk that third parties could claim otherwise. For example, we may receive claims alleging that our services infringe on existing or future patents, including in areas where patent applications may still be pending and not yet publicly known.

Defending against such claims could result in legal costs or require us to modify our offerings or obtain licenses, which may not always be feasible or cost-effective. Although we believe this risk is currently low, any disputes could potentially impact our operations or financial condition if they were to arise.

If we are unable to protect our information systems against service interruption or failure, misappropriation of data or breaches of security, our operations could be disrupted, we could be subject to costly government enforcement actions and private litigation and our reputation may be damaged.

We rely heavily on complex information systems—both internal and from third-party providers—to run our operations, manage data, and support our customers and employees. These systems store sensitive information, including personal and financial data, and are critical to our day-to-day activities.

Our systems face constant threats, including hacking, phishing, malware, ransomware, and other cyberattacks, as well as risks from human error, software bugs, and system failures. Some threats may come from sophisticated or state-sponsored actors and may not be detected until after they cause harm. Third-party vendors who handle data or support our systems may also introduce risk if they fail to follow proper security practices.

A security breach or system failure could lead to loss or theft of data, service disruptions, reputational damage, regulatory penalties, legal liability, and costly repairs. It could also result in the loss of customers or increased security and insurance expenses. Even with insurance coverage, the financial and reputational impact of a significant cybersecurity incident could materially affect our business and financial results.

Our risk management process may not identify all risks that we are subject to and will not eliminate all risk.

Our Enterprise Risk Management (“ERM”) process seeks to identify and address significant risks. Our ERM process uses the most recent integrated risk framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission to assess, manage, and monitor risks. We believe that risk-taking is an inherent aspect of the pursuit of our growth and performance strategy. Our goals are to proactively manage risks in a structured approach in conjunction with strategic planning, with the intent to preserve and enhance shareowner value, and to manage prudently, rather than wholly avoiding, risks. We can mitigate risks and their impact on the Company, however, only to a limited extent, and no ERM process can identify all risks that we may face. Therefore, there may be risks that we are currently unaware of, that may develop in the future or that we currently consider immaterial. Further, our management of risks may prove inadequate. The emergence of risks of which we were unaware or are unable to manage could have a material adverse effect on our business, financial condition, results of operations and prospects,

Our officers and directors are indemnified against certain conduct that may prove costly to defend.

Our Articles and Bylaws generally provide broad indemnification to our officers and directors against judgments, fines, amounts paid in settlement and expenses, including attorneys’ fees actually incurred in connection with most actions or proceedings to which they are or are threatened to be made a party that relates to their service as an officer or director, except as limited as set forth therein. We are also obligated to advance expenses as they are incurred by a director or officer in defending an action or proceeding prior to final disposition upon receipt of an undertaking by the applicable person to repay such advanced amount if the advancement is ultimately found to not be permitted by law or otherwise.

In addition, the NRS provides that no director or officer is individually liable for damages as a result of an act or failure to act in his or her capacity as a director or officer except if (i) the presumption that such director or officer acted in good faith, on an informed basis and with a view to the interests of the Company is rebutted, and (ii) it is proven that such director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer, and such breach involved intentional misconduct, fraud or a knowing violation of law. Consequently, subject to the applicable provisions of the NRS and to certain limited exceptions in the Articles and Bylaws, the Company’s officers and directors will not be liable to the Company or to its stockholders for monetary damages resulting from their conduct as an officer or director. As a result, we may have to spend significant resources indemnifying our officers and directors or paying for damages caused by their conduct.

We incur significant costs as a result of operating as a public company.

As a public company, we incur significant legal, accounting, and other expenses. For example, we are subject to the information and reporting requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, the Nasdaq listing requirements and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel are required to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations significantly increase our legal and financial compliance costs and make some activities more time-consuming and costly. Among other things, we are required to:

• maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404(a) of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
• maintain policies relating to disclosure controls and procedures;
• prepare and distribute periodic reports in compliance with our obligations under federal securities laws; institute a more comprehensive compliance function, including with respect to corporate governance; and
• involve, to a greater degree, our outside legal counsel, and accountants in the above activities.

The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive and compliance with these rules and regulations involves a material increase in regulatory, legal, and accounting expenses and the attention of our board of directors and management. In addition, being a public company makes it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives and members of our board of directors. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to fines, sanctions and other regulatory action and potentially civil litigation

Certain natural disasters or other external events, including climate change or mechanical failures, could harm our business, financial condition, results of operations, cash flows, and prospects.

As with any business, we could experience disruptions due to mechanical failure, human error, physical or electronic security breaches, war, terrorism, fire, earthquake, pandemics, hurricane, flood, and other natural disasters, sabotage, and vandalism. Our systems may be susceptible to damage, interference, or interruption from modifications or upgrades, power loss, telecommunications failures, computer viruses, ransomware attacks, computer denial of service attacks, phishing schemes, or other attempts to harm or access our systems. Such disruptions could materially and adversely affect our business and our financial condition, operating results, cash flows, and prospects.

We may become involved in litigation arising in the ordinary course of our business that may materially adversely affect us.

From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including intellectual property, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. Attending to such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability or require us to change our business practices. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses, and we cannot assure you that the results of any of these actions will not have a material adverse effect on our business. For example, Borrower, a subsidiary of Soluna MC, LLC, a subsidiary of Soluna Digital, a subsidiary of the Company, and Guarantor are currently in litigation with NYDIG regarding the default on a series of loans made by NYDIG to Borrower pursuant to the MEFA that were secured by certain assets of Borrower and guaranteed by Guarantor pursuant to a written guaranty agreement executed by Guarantor. On February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA. Additionally, we recently entered into a settlement agreement with Atlas Technology Group LLC (“Atlas”) and Soluna MC LLC (“Soluna MC”), SCI, and Soluna Holdings, Inc. (collectively, the “Atlas Defendants”). In September 2023, Atlas filed a complaint against the Atlas Defendants regarding a co-location services agreement. Atlas alleged, among other claims, that Soluna MC’s termination of the agreement was a breach. On June 25, 2024, Atlas and the Atlas Defendants entered into a settlement agreement. Adverse outcomes in any current or future proceedings that we are involved in or claims against us could result in significant liabilities, monetary damages, fines, or injunctive relief, which may materially impact our financial condition, results of operations, or cash flows. Additionally, the uncertainty surrounding litigation and the potential for adverse publicity related to such matters could harm our reputation and brand image, affecting customer confidence and investor perception.

If we fail to maintain effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business or share price.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in those controls. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 and 15d-15(e) under the Exchange Act, as of December 31, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2024. See “Item 9A Controls and Procedures.”

Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to effectively prevent financial fraud. Pursuant to the Sarbanes-Oxley Act, we are required to periodically evaluate the effectiveness of the design and operation of our internal controls. Internal controls over financial reporting may not prevent or detect misstatements because of inherent limitations, including the possibility of human error or collusion, the circumvention or overriding of controls, or fraud. If we fail to maintain an effective system of internal controls, our business and operating results could be harmed, and we could fail to meet our reporting obligations, which could have a material adverse effect on our business and our share price. Additionally, for as long as we are a “smaller reporting company” under the U.S. securities laws, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. An independent assessment of the effectiveness of internal control over financial reporting could detect problems that management’s assessment might not. Undetected material weaknesses in our internal control over financial reporting could lead to further financial statement restatements and require us to incur the expense of remediation.

If we fail to maintain proper disclosure controls and procedures or have additional material weaknesses in our internal control over financial reporting, we may be unable to accurately report our financial results or report them within the timeframes required by law or any stock exchange regulations, and we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline. Failure to maintain effective internal control over financial reporting also could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities or stockholder lawsuits, which could require additional financial and management resources.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below the expectations of investors, resulting in a decline in the market price of our common stock.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our financial statements. Significant assumptions and estimates used in preparing our financial statements include those related to assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of investors, resulting in a decline in the market price of our common stock.

Public health crises, such as pandemics, epidemics, or widespread outbreaks of infectious disease, have had, and could in the future have, an adverse effect on our business, financial condition, and results of operations.

The occurrence of pandemics, epidemics, or widespread outbreaks of infectious diseases, as well as the imposition of related public health measures and travel and business restrictions or other actions that may be taken by governmental authorities in an effort to contain such pandemics, epidemics, or outbreaks, have had, and could in the future have, a material adverse effect on our business. Future pandemics and similar events could materially increase our costs, severely negatively impact business development, net income, and other results of operations, and impact our liquidity position. The duration of any such impacts cannot be predicted, and such impacts may also have the effect of heightening many of the other material risks we face.

Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change our compensation policies.

Accounting methods and policies for companies such as ours, including policies governing revenue recognition, leases, research and development and related expenses, and accounting for stock-based compensation, are subject to review, interpretation and guidance from our auditors and relevant accounting authorities, including the SEC. Changes to accounting methods or policies, or interpretations thereof, may require us to reclassify, restate or otherwise change or revise our historical financial statements, including those contained in this Annual Report.

Risks Related to Our Securities

The market price of our securities are likely to be volatile, which may cause investment losses for our shareholders.

The market price of our securities has been and is likely to continue to be volatile, and investors in our securities may experience a decrease, which could be substantial, in the value of their securities or the loss of their entire investment in the Company for a number of reasons, including reasons unrelated to our operating performance or prospects. The market price of our securities could be subject to wide fluctuations in response to a broad and diverse range of factors, including those described elsewhere in this “Risk Factors” section as well as the following:

• announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures, addition or loss of significant customers and contracts, capital expenditure commitments and litigation;
• our issuance of securities or debt, particularly if in connection with acquisition activities;
• the sale of a significant number of shares of our common stock by shareholders;
• recent changes in financial condition or results of operations, such as in earnings, revenues, or other measure of company value;
• general market and economic conditions; and
• announcements of technological innovations or new product introductions by us or our competitors.
• Further, broad market and industry factors may have a material adverse effect on the market price of our securities regardless of our actual operating performance.

In addition, stock markets have experienced in the past and may in the future experience a high level of price and volume volatility, and the market prices of equity securities of many companies have experienced in the past and may in the future experience wide price fluctuations not necessarily related to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of our securities.

Finally, our relatively small public float and daily trading volume have in the past caused, and may in the future result in, significant volatility in the price of our securities. As of December 31, 2024, we had approximately 7,646,277 shares of our common stock outstanding held by non-affiliates and 3,161,356 shares of our 9.0% Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”), outstanding held by non-affiliates. Our daily trading volume for the year ended December 31, 2024, averaged approximately 238,987 shares of common stock and 12,516 shares of Series A Preferred Stock.

Because there has been limited precedent set for financial accounting of Bitcoin and other cryptocurrency assets, the determination that we have made for how to account for cryptocurrency assets transactions may be subject to change.

Because there has been limited precedent set for the financial accounting of cryptocurrencies and related revenue recognition and no official guidance has yet been provided by the FASB or the SEC, it is unclear how companies may in the future be required to account for cryptocurrency transactions and assets and related revenue recognition. A change in regulatory or financial accounting standards could result in the necessity to change our accounting methods and restate our financial statements. Such a restatement could adversely affect the accounting for our newly mined cryptocurrency rewards and more generally negatively impact our business, prospects, financial condition, and results of operations. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which would have a material adverse effect on our business, operations and prospects, as well as potentially on the value of any cryptocurrencies we hold or expect to acquire for our own account, and harm our investors

If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our common stock or Series A Preferred Stock or broker-dealers may be discouraged from effecting transactions in shares of our securities.

Our common stock has been listed on Nasdaq since March 2020, and our Series A Preferred Stock since August 2021. To maintain these listings, we must continue to meet Nasdaq’s financial and corporate governance standards, including requirements for stock price, stockholders’ equity, and board independence. While we are currently in compliance, our share price has previously fallen below Nasdaq’s minimum, and there is no guarantee we will continue to meet all listing requirements.

If we are unable to maintain our Nasdaq listings, our securities may be delisted and quoted on over-the-counter (OTC) markets instead. This would likely reduce the liquidity, market price, and visibility of our stock, and could make it more difficult for investors to sell their shares.

Delisting may also limit our ability to raise capital or use our stock as consideration for acquisitions. In addition, if our common stock trades below $5.00 per share and is no longer listed on a national exchange, it could be classified as a “penny stock.” This would subject trading in our stock to additional regulatory requirements, which could discourage broker-dealers from making a market in our shares and make it harder for investors to buy or sell our stock.

The rights of holders of our Series A Preferred Stock and Series B Preferred Stock (as defined below) rank senior to the rights of the holders of our common stock.

The rights of the holders of shares of our Series A Preferred Stock and Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock” together with the Series A Preferred Stock, the “Preferred Stock”), while such shares remain outstanding, rank senior to the rights of the holders of shares of our common stock as to dividends and payments upon liquidation, dissolution or winding up of our affairs. Upon liquidation, dissolution or winding up of our affairs, the holders of shares of our Series A Preferred Stock are entitled to receive a liquidation preference of the stated value per share of $25 and the holders of shares of our Series B Preferred Stock are entitled to receive a liquidation preference of the stated value per share of $100, plus all accrued but unpaid dividends, prior and in preference to any distribution to the holders of shares of our common stock or any other class of our equity securities junior to the Preferred Stock. In addition, the holders of the Series A Preferred Stock are entitled to receive, when, as and if declared by the board of directors, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year. Our holders of Series B Preferred Stock are entitled to receive an annual 10% dividend, which may be paid in cash or stock at our discretion at the earlier of (i) the date the Series B Preferred Stock is converted, or (ii) the Series B Dividend Termination Date (as defined in the Certificate of Designations of Preferences, Rights and Limitations for the Series B Preferred Stock).

These dividend payment obligations could impact our liquidity and reduce the amount of cash available to us for our working capital needs, capital expenditures, funding growth opportunities, acquisitions, and other general corporate purposes. Our obligations to the holders of Preferred Stock could also limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial condition. The preferential rights could also result in divergent interests between the holders of Preferred Stock and holders of our common stock.

We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment.

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. Any future determination about the payment of dividends will be made at the discretion of our board of directors and will depend upon our earnings, if any, capital requirements, operating and financial conditions, contractual restrictions, including any loan or debt financing agreements, and on such other factors as our board of directors deems relevant. In addition, we may enter into agreements in the future that could contain restrictions on payments of cash dividends. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of our common stock. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares of our common stock, nor can we assure that stockholders will not lose the entire amount of their investment.

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. We cannot assure you that brokerage firms will provide analyst coverage of our company in the future or continue such coverage if started. In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we became a public reporting company by means of an underwritten initial public offering, because they may be less familiar with our company as a result of more limited coverage by analysts and the media, which could harm our ability to raise additional funding in the future. The failure to receive research coverage or support in the market for shares of our common stock will have an adverse effect on our ability to develop a liquid market for our common stock, which will negatively impact the trading price of our common stock.

In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, or if our operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Risks Related to the SEPA

Substantial blocks of our common stock may be sold into the market as a result of our being party to the SEPA and you may experience immediate and substantial dilution in the net tangible book value per share of our common stock.

The price of our common stock could decline if there are substantial sales of shares of our common stock, if there is a large number of shares of our common stock available for sale, or if there is the perception that these sales could occur.

Any issuances of shares of our common stock pursuant to the terms of the Standby Equity Purchase Agreement, dated August 12, 2024 (“SEPA”), between the Company and YA II PN, Ltd. (“YA”), will dilute the percentage ownership of stockholders and may dilute the per share projected earnings (if any) or book value of our common stock. Sales of a substantial number of shares of our common stock in the public market or other issuances of shares of our common stock, or the perception that these sales or issuances could occur, could cause the market price of our common stock to decline and may make it more difficult for you to sell your shares at a time and price that you deem appropriate. Additionally, the offering price per share of our common stock under the SEPA may or may not exceed the net tangible book value per share of our common stock outstanding prior to the offering under the SEPA.

It is not possible to predict the actual number of shares we will sell under the SEPA, or the actual gross proceeds resulting from those sales.

The SEPA provides that, during the term of the agreement, and subject to issuance and effective registration of the shares issued thereunder and certain obligations and limitations, we may, at our discretion, from time to time direct YA to purchase our shares of common stock from us in one or more purchases under the agreement, for a maximum aggregate purchase price of up to $25 million. The purchase price per share to be paid by YA for the shares of common stock that we may elect to sell to YA under the SEPA, if any, will fluctuate based on the market prices of our shares of common stock at the time we elect to sell shares to YA pursuant to the SEPA. Therefore, it is not possible for us to predict the number of shares of common stock that we will sell to YA under the SEPA, the purchase price per share that YA will pay for shares purchased from us under the SEPA, or the aggregate gross proceeds that we will receive from those purchases by YA under the SEPA.

Although we may, at our discretion, from time to time direct YA to purchase our shares of common stock from us in one or more purchases under the SEPA, we shall not effect any sales under the SEPA to the extent that after giving effect to such sale YA would beneficially own more than 9.99% of the Company’s outstanding common stock at the time of such issuance. Thus, the Company may not have access to the right to sell the full $25 million of shares of common stock to YA.

We, like other companies in our industry, face several cybersecurity risks in connection with our business. Our business strategy, results of operations, and financial condition have not, to date, been affected by risks from cybersecurity threats. During the reporting period, we have not experienced any material cyber incidents, nor have we experienced a series of immaterial incidents, which would require disclosure. We proactively approach cybersecurity through a systemized thorough process established by our internal Management and IT teams as well as external IT providers.

These processes are specifically designed to adapt to the evolving cybersecurity environment, enabling us to respond swiftly and effectively to new and emerging threats. Our cybersecurity initiative incorporates elements from multiple industry benchmarks, including frameworks from the National Institute of Standards and Technology and the Center for Internet Security.

We regularly assess the threat landscape and take a holistic view of cybersecurity risks with a layered cybersecurity strategy based on prevention, detection, and mitigation. Our internal IT team works closely with our external IT management provider to comprehensively evaluate cybersecurity risks. They focus on monitoring, identifying, and addressing significant cybersecurity issues in real-time by employing advanced software monitoring platforms for effective mitigation and management. In addition, we have several avenues to gather risk intelligence and potential threats identified by various services and capabilities to adjust our security strategy.

We also have Company-wide policies and procedures concerning cybersecurity and technology standards, including a Resource and Data Recovery policy. In addition, we have other policies related to endpoint and network protection, encryption standards, malware/ransomware protection, multi-factor authentication, operational security, and confidential information. These policies go through an internal review process and are approved by appropriate members of management.

We have invested in IT security, encompassing various strategies such as enhanced end-user training, implementing layered defense systems, identifying and safeguarding critical assets, bolstering monitoring and alert capabilities, and consulting with expert advisors. On the management front, our IT security team diligently oversees alert systems and routinely convenes to evaluate current threat levels, analyze trends, and strategize effective remediation methods.

In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with the use of third-party vendors and service providers. The internal business owners of the hosted applications are required to review user access at least annually and provide a System and Organization Controls (“SOC”) 1 or SOC 2 report from the vendor. If a third-party vendor is unable to provide a SOC 1 or SOC 2 report, we take additional steps to assess their cybersecurity preparedness and assess our relationship on that basis.

Governance

Under the direction of the Company’s Chief Technology Officer (“CTO”) and Director of Information Technology, with oversight from the Board, we maintain a security governance structure to evaluate and address cyber risk. The CTO and the Director of IT are responsible for developing and implementing our information security program. Our CTO is an Executive Sponsor of the Cyber Security Program and has over a decade of experience in the Defense sector working directly with technology-driven Operational Security.

The Director of IT regularly oversees the Company’s cybersecurity program. This comprehensive review includes examining management’s initiatives to identify and detect potential threats, outlining planned responses and recovery strategies for potential incidents, evaluating recent improvements made to the Company’s security detection and response capabilities, and assessing management’s advancement along the cybersecurity strategic roadmap. The internal IT team also subscribes to various threat intelligence services to evaluate our security strategy or defense mechanism against such threats.

Our board of directors has ultimate oversight of our strategic and business risk management and, as such, has oversight responsibilities for risks and incidents relating to cybersecurity threats, including compliance with disclosure requirements, cooperation with law enforcement, and related effects on financial and other risks. Management is responsible for identifying, assessing, and managing material cybersecurity risks on an ongoing basis, establishing and updating processes to ensure such potential risks are monitored, putting in place appropriate mitigation measures, and will be providing regular reports on cybersecurity trends and risks, and should they arise, any material incidents with our board of directors.

We lease approximately 3,478 square feet of office, in Albany, New York, which houses the corporate offices of SHI. The current lease agreement expires on December 31, 2027.

On March 4, 2021, SSW acquired a 3.2-acre tract of real property located in Murray, Kentucky on which it has built an energy-efficient cryptocurrency mining facility, Project Sophie, that includes 22 buildings for data facility hosting or mining.

On February 24, 2023, DVSV entered into a lease agreement for a 33.19-acre tract of land in Silverton, Texas. The agreement has an initial five-year term with the right to extend the term of the agreement for five additional one-year terms.

We believe these facilities are generally well-maintained and adequate for the Company’s current needs and for expansion, if required. Our business growth, however, is dependent on developing additional properties, and we believe our project pipeline is strong enough to support our current business plan.

At any point in time, we may be involved in various lawsuits or other legal proceedings. Such lawsuits could arise from the sale of products or services or from other matters relating to our regular business activities, compliance with various governmental regulations and requirements, or other transactions or circumstances.

On December 29, 2022, NYDIG filed a complaint against Borrower, a subsidiary of Soluna MC, LLC, a subsidiary of Soluna Digital, a subsidiary of the Company, and Guarantor in Marshall Circuit Court of the Commonwealth of Kentucky regarding the NYDIG Loans made by NYDIG to Borrower pursuant to the MEFA that were secured by certain assets of Borrower and guaranteed by Guarantor pursuant to a written guaranty agreement executed by Guarantor. On February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA and repossessed the collateralized assets. Subsequently, NYDIG filed its Motion for Summary Judgment seeking entry of a judgment against the NYDIG Defendants in the approximate amount of $10.3 million, and NYDIG and the NYDIG Defendants consensually resolved the motion in the form of a Stipulation and Agreed Judgment, which the Court approved on February 23, 2024.

On March 13, 2024, NYDIG served the NYDIG Defendants with a post-judgment discovery seeking information regarding the NYDIG Defendants’ assets and liabilities. The NYDIG Defendants completed responding to NYDIG’s initial document requests on May 13, 2024. On September 24, 2024, NYDIG sent a letter seeking supplemental discovery from the NYDIG Defendants, and the NYDIG Defendants completed responding to NYDIG’s additional/supplemental document requests by November 20, 2024 and the deposition of a representative of the Defendants on or before December 15, 2024. Per agreement between NYDIG and the NYDIG Defendants, (i) the deadline to respond to the supplemental discovery demands was extended to December 12, 2024 but with rolling weekly production to commence on November 21, 2024, and (ii) a deposition of a representative of the NYDIG Defendants occurred on January 23, 2025.

Additionally, NYDIG has stated its intention to pursue the parent company of Guarantor (the “Parent Entity”) under a piercing of the corporate veil theory relating to NYDIG Defendants’ debts and liabilities under the loan documents. Parent Entity intends to vigorously defend itself from NYDIG’s parent company claims. Parent Entity denies any such liability and filed a complaint for a declaratory judgment against NYDIG in the Eighth Judicial District Court in Clark County, Nevada on March 16, 2023, seeking a declaratory judgment as to such matter. On June 22, 2023, the court issued an order granting NYDIG’s motion to dismiss without prejudice. Parent Entity intends to continue to vigorously defend any allegations regarding liability on account of NYDIG Defendants’ debts and liabilities to NYDIG under their loan documents.

The following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements, which involve risk and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including those discussed in Item 1A: “Risk Factors” and elsewhere in this Annual Report.

Recent Developments

Soluna Cloud – Termination of HPE Agreement

Soluna launched Project Ada- its GPU-as-a-Service business via Soluna Cloud, Inc. (“Soluna Cloud”) earlier in 2024 in order to achieve two primary goals:

1. Gain commercial experience in the AI/HPC market in support of future data center development focused on large language models (LLMs) and other AI workloads.

2. Capitalize on lower-cost capital to pursue high-growth revenue opportunities in the compute infrastructure market.

As a point of entry into Project Ada, Soluna AL CloudCo, LLC (“CloudCo”), a subsidiary of Soluna Cloud, entered into the HPC & AI Cloud Services Agreement and HPE Greenlake Services Custom Statement of Work with Hewlett Packard Enterprise Company (“HPE”) on June 18, 2024 (together with the associated Statement of Work, the “HPE Agreement”), that provided data center and cloud services for artificial intelligence (“AI”) and supercomputing applications, utilizing NVIDIA H100 Graphic Processing Units (“GPUs”).

At the time of launch, the market for NVIDIA H100 GPUs was characterized by constrained supply and strong pricing, which aligned with the economics of the fixed-cost HPE Agreement. However, by the end of 2024, the GPU market shifted significantly. Lead times for NVIDIA H100 GPUs shortened from over 50 weeks in 2023 to 8–12 weeks by the end of 2024, easing supply constraints and reducing urgency among buyers. At the same time, market demand shifted toward larger GPU clusters than those available under the HPE Agreement, making it difficult to secure long-term, reserved contracts at profitable rates. The expected release of NVIDIA’s H200 Blackwell architecture also caused some customers to delay purchases. Although release timelines were impacted by design issues, the prospect of next-generation technology contributed to hesitancy in NVIDIA H100 GPU acquisition. Competitive pressure from alternative GPU vendors further softened demand and market pricing. As a result, Soluna Cloud’s business progressed more slowly than anticipated. Revenues were first recognized in December 2024, with modest growth in early 2025. During the last six months, our engagement with potential financing and operating partners for AI/HPC confirmed that rather than continuing the effort to lease and resell GPU/HPC chips, refocusing on our core strength - creating, developing, financing and operating our extensive pipeline of potential bitcoin and AI hosting facilities - will create far more value for us and our shareholders.

In light of these developments, on March 24, 2025, CloudCo sent notice of its termination of the HPE Agreement for convenience. Subsequently, on March 26, 2025, HPE sent notice of its termination of the HPE Agreement for cause, effective immediately, due to CloudCo’s material breach of its payment obligations that remained uncured for more than thirty (30) days. In accordance with the terms of the HPE Agreement, upon a termination for cause by HPE, CloudCo must pay HPE the remaining payment stream under the term of the HPE Agreement of approximately $19.3 million as of March 31, 2025 (approximately $20.0 million as of December 31, 2024), including all upfront payments and monthly charges, plus any fees incurred for the terminated Services (as defined in the HPE Agreement).

SEPA

On August 12, 2024, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD., a Cayman Islands exempt limited company (“YA”). Pursuant to the terms of the SEPA, we agreed to issue and sell to YA, from time to time, and YA agreed to purchase from us, up to $25 million of shares of our common stock (the “SEPA Shares”). We and YA also entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which we agreed to prepare and file with the SEC a Registration Statement on Form S-1, registering the resale of the SEPA Shares. On November 12, 2024, we filed a registration statement on Form S-1 (File No. 333-282559) with the SEC for the resale by YA of 3,000,000 SEPA Shares, which was declared effective by the SEC on February 5, 2025. As of the date of this Annual Report, we have issued and sold approximately 1.5 million shares of our common stock to YA pursuant to the SEPA for aggregate net proceeds to us of approximately $2.0 million. We intend to continue issuing shares of our common stock to YA pursuant to the SEPA in future periods.

Assignment and Assumption Agreements

CloudCo, Soluna Cloud, and the Company, entered into assignment and assumption agreements on October 1, 2024, with one of the accredited investors issued convertible notes and Class A, Class B and Class C common stock purchase warrants on October 25, 2021 (the “ Purchasers”), and two other parties introduced by that Purchaser, with respect to an aggregate of $1.25 million of notes (“Additional Notes”) issued by CloudCo (the “Assignment Agreements”). Pursuant to the Assignment Agreements, we will be able to purchase such notes for a purchase price of $750 thousand, or 60% of face value. The assignment and assumption will be effective once all conditions of the agreement are met including fulfilling the purchase price. As of December 31, 2024, the assignment and assumption of the Additional Notes has not been become effective, however on March 14, 2025, the Company has fulfilled the agreement and assumed the assignment and assumption of the Additional Notes for the remaining outstanding balance.

Galaxy Note

On March 12, 2025, Soluna SW LLC (the “SW Borrower”), a Delaware limited liability company and a subsidiary of Soluna SW Holdings LLC (“SW Holdings”), a Delaware limited liability company and a subsidiary of Soluna Digital, Inc. (“SDI”), a Nevada corporation and a subsidiary of Soluna Holdings, Inc. (the “Company”), entered into a Loan Agreement (the “Galaxy Loan Agreement”) with SW Holdings and Galaxy Digital LLC (the “Lender”). The Galaxy Loan Agreement comprises a term loan facility in the principal amount of $5.0 million (the “Term Loan Facility”). The Term Loan Facility bears interest at 15.0% per annum, unless an Event of Default (as defined therein) has occurred and is continuing, in which case the Galaxy Term Loan Facility shall bear interest at a rate of 5% above the then applicable interest rate. The Term Loan Facility will mature on March 12, 2030 and will be paid over a five-year term.

June SPA Modification

On June 20, 2024, pursuant to the terms and subject to the conditions of a Note Purchase Agreement (the “June SPA”) by and among (i) Soluna AL CloudCo, LLC, a Delaware limited liability company (“CloudCo”), and indirect wholly owned subsidiary of the Company, (ii) Soluna Cloud, Inc., a Nevada corporation, indirect wholly owned subsidiary of the Company, and parent of CloudCo (“Soluna Cloud”), (iii) the Company and (iv) the accredited investor named therein (the “Investor” and collectively, the “Note Parties), CloudCo issued to the Investor a secured promissory note in a principal amount equal to $12.5 million (the “Note”).

On March 23, 2025, the Note Parties entered into a Modification Agreement (the “Modification Agreement”) to, among other things, (i) provide for the deposit of 1,000,000 shares (the “Escrow Shares”) of our common stock into an escrow account maintained by Northland Securities, Inc., pursuant to an escrow agreement (as further described below), (ii) provide for the issuance to the Investor of a warrant to purchase shares of our common stock upon the release by the Investor of its lien on our property, (iii) amend the payment schedule of the Note to provide (a) for each of the six scheduled payments occurring after the earlier of the effectiveness of a registration statement for the resale of the Registrable Securities (as defined below) or the date that the Registrable Securities may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), without any information requirements, the amount of principal and interest payable on such date shall be reduced by 50% (the aggregate amount of the six months of such reductions, the “Specified Amount”) and (b) if the aggregate amount of payments on the Amended Note applied from the proceeds of the sale of the Escrow Shares on or prior to the last six scheduled payments is less than the Specified Amount (such difference, the “Make Whole Amount”), than the amount of each of the remaining scheduled payments shall be increased by an amount equal to the Make Whole Amount divided by the number of remaining scheduled payments, (iv) modify the Note such that the Note is now convertible into up to 2,500,000 shares (the “Conversion Shares”) of Common Stock based on a conversion price of $5.00, (v) amend the Note to provide that we will be a direct co-obligor with CloudCo under the Note, and (vi) amend the SPA to allow us to organize or incorporate any subsidiary, over which we shall have voting or beneficial control, which is being formed with the intent to engage in a business or line of business substantially similar to that of Soluna Cloud or the Company, without first paying all of the principal and interest due under the Note and without first obtaining Investor’s prior written consent.

The net proceeds from dispositions of the Escrow Shares (i) at a price of up to $4.00 per share shall be applied to reduce the outstanding principal balance of the Note and (ii) at a price greater than $4.00 per share shall be applied first to reduce the outstanding principal balance of the Note in an amount equal to $4.00 per share of our common stock and then to the Investor.

Also under the Modification Agreement, we agreed to register for resale the Escrow Shares and Conversion Shares (together, the “Registrable Securities”) as promptly as commercially practicable, as determined by us, following the registration for resale of certain other securities. We also agreed to register for resale the shares of our common stock issuable upon exercise of the Warrant as promptly as commercially practicable, as determined by us, after the issuance of the Warrant.

Project Specific Developments

Project Dorothy 2

We are constructing Project Dorothy 2 which is a 48MW expansion of our flagship Project Dorothy that will be dedicated to Bitcoin Hosting. The site is expected to energize soon in the second quarter of 2025. This will enable the commencement of the commissioning of the first of 3 phases, each of 16MW, that will occur between May and October 2025 when the site is expected to be fully operational. As each phase is commissioned, it will begin to generate revenue, both due to Bitcoin Hosting and Demand Response Services.

Project Rosa

We are developing Project Rosa which is expected to be a 187MW data center for AI and Bitcoin hosting and other computing-intensive applications, as well as joint venture potential. It will be co-located with a wind farm in Texas. We have signed term sheets for both power and land purchase agreements in connection with this project.

Project Kati

We are developing Project Kati which is expected to be a 166MW data center for AI, machine learning, Bitcoin hosting and other computing-intensive applications, as well as joint venture potential. It will be co-located with a wind farm in Texas. We have received final ERCOT approval for the Reactive Power Study which is the last study required to exit planning. It is also waiting for required amendments to Las Majadas Wind Farm’s agreement with the transmission service provider to be completed.

Project Grace

We continue to develop a 2MW AI/HPC data center to be co-located with the same windfarm as Project Dorothy that will be the first construction of Soluna’s proprietary Helix design that remains in the concept design phase.

Consolidated Results of Operations

Results of Operations for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023.

The following table summarizes changes in the various components of our net loss during the year ended December 31, 2024 compared to the year ended December 31, 2023.

(Dollars in thousands)

47

The following table summarizes the balances for the Project sites for cryptocurrency mining revenue, data hosting revenue, high-performance computing service revenue, demand response revenue, cost of cryptocurrency mining revenue, exclusive of depreciation, cost of data hosting revenue, exclusive of depreciation, cost of high-performance computing services, and cost of depreciation during the year ended December 31, 2024:

(Dollars in thousands)

The following table summarizes the balances for the Project sites for cryptocurrency mining revenue, data hosting revenue, high-performance computing service revenue, demand response revenue, cost of cryptocurrency mining revenue, exclusive of depreciation, cost of data hosting revenue, exclusive of depreciation, cost of high-performance computing services, and cost of depreciation during the year ended December 31, 2023:

(Dollars in thousands)

48

Cryptocurrency Mining Revenue: Cryptocurrency mining revenue increase year over year consists of revenue recognized from Soluna’s cryptocurrency mining operations related to Project Dorothy 1B, which began energization in the third quarter of 2023. Project Marie discontinued site operations in the second quarter of 2023 and Project Sophie converted to a hosting facility within the 2023 year.

Data Hosting Revenue: Cryptocurrency hosting services provide energized space and operating services to third-party mining companies who locate their mining hardware at our mining locations. Services include fees for hosting the miners which could be fixed fees or profit sharing, as well as potential additional fees for services provided such as installation charges or other services fees. The increase was due to a full year of revenues in Project Dorothy 1A and Project Sophie switched their business model from proprietary mining to data hosting in the second quarter of 2023 resulting in a full year of revenue in 2024.

Demand Response Service: We saw an increase in demand response service revenue due to a full year of service for the year ended December 31, 2024 compared to only one month of service for the year ended December 31, 2023.

Cost of Cryptocurrency Mining Revenue, exclusive of depreciation: Cost of cryptocurrency mining revenue includes direct utility costs, site overhead expenses, and overhead costs that relate to the operations of our cryptocurrency mining facilities in Kentucky and Texas.

The increase in costs during the year ended December 31, 2024 compared to 2023 were due to the full Project Dorothy 1B site being active the entire year ended December 31, 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 year ended December 31, 2024, compared to three facilities for the year ended December 31, 2023.

Cost of Data Hosting Revenue, exclusive of depreciation: Cost of data hosting revenue includes utility charges, site overhead expenses, and other charges.

Cost of data hosting revenue increase was due to Project Dorothy 1A which began operations and hosting services in May 2023 with full year hosting expense in 2024. Also, we transitioned to data hosting at Project Sophie in April 2023, which created an increase in costs.

Cost of High-Performance Computing Services: Cost of high-performance computing services include operating expenses related to high performance computing services.

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.

• We had an increase of approximately $600 thousand in wages, bonus and employee related expenses for the year ended December 31, 2024 compared to the year ended December 31 2023, due to an increase in resources and salaries.
• Stock based compensation expense was $5.2 million in 2024, of which $4.0 million was related to a modification for the cancellation of stock options granted and replaced with new awards of restricted stock in April 2024, which created incremental compensation costs. Stock based compensation increased by approximately $1.4 million due to an acceleration of grants and awards that occurred in May of 2023, compared to the current year. We issued grants in April, June, September, and December of 2024, in which some of the grants provided for immediate vesting, therefore further increasing the expense compared to prior comparable periods.
• Other increases include legal fees, professional services, and a provision for credit loss, offset by a reduction in investor relations.

Depreciation and Amortization associated with general and administrative expenses: Depreciation and amortization expense was comparable for the year ended December 31, 2024 and the year ended December 31, 2023 in which the balances totaled approximately $9.6 million and $9.5 million, respectively. The balances mainly related to amortization expense related to the strategic pipeline contract that was acquired in October 2021.

Loss on contract: Due to CloudCo’s termination of the HPE Agreement on March 24, 2025, and HPE’s subsequent termination of the HPE Agreement on March 26, 2025, and the acceleration of the remaining unpaid amounts of the contract in accordance with Section 8(h)(ii) of the HPE Agreement, a Type 1 Subsequent Event, we have recognized a liability for the remainder of the HPE Agreement on the consolidated balance sheet of our subsidiary CloudCo, and corresponding loss on contract on our consolidated income statement, in line with the terms and conditions of the HPE Agreement and relevant accounting standards. We have also recognized a loss on the termination of the HPE Agreement for $28.6 million representing the remaining obligations, and a contract liability in the same amount. In addition, the outstanding balance of the prepaid deposit of $8.6 million was offset to the liability, leaving a net liability balance of $20.0 million as of December 31, 2024.

Interest expense: Interest expense for the year ended December 31, 2024 was approximately $2.5 million related to approximately $1.5 million to the NYDIG loan, $900 thousand to compounded interest and deferred financing amortization expense of equipment financing loan and June and July 2024 secured note financing, and $138 thousand to the Navitas loan. Interest expense for the year ended December 31, 2023 was $2.7 million and related to default and continuing interest expense of the NYDIG loan of approximately $1.4 million, a financing loan with Navitas of approximately $228 thousand, interest and other charges of approximately $212 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.

Loss on Debt Extinguishment and Revaluation, net: For the year ended December 31, 2024, we recorded a loss on debt extinguishment and revaluation of approximately $7.3 million. On February 28, 2024, we entered into the Fourth Amendment Agreement with the Noteholders, dated February 28, 2024 (the “Fourth Amendment”), and lowered the conversion price of the Convertible Notes as well as issued new warrants and repriced additional warrants with certain exercise features. The issuance and reprice of warrants created a loss on extinguishment of debt of approximately $5.8 million, which was partially offset by a gain on debt revaluation of the convertible debt of approximately $1.3 million as of February 28, 2024 (date of the 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 revaluations. In addition, there was a revaluation of the warrant liability, as a result of which we recorded a gain on revaluation of approximately $1.5 million. We also performed a fair value assessment of the Convertible Notes as of June 30, 2024, as a result of which we recorded 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 revaluations compared to what the noteholders could convert at as of June 30, 2024. The Convertible Notes were revalued again on September 30, 2024, as a result of which we recorded a gain of approximately $2.3 million due mainly to the change in the price or our common stock offsetting the previous quarter assessments. In the fourth quarter of 2024, we had additional conversions and ultimately fully converted the Convertible Notes payable creating an additional $247 thousand gain on debt extinguishment. As of December 31, 2024, no Convertible Notes remain outstanding. In addition, in the second quarter of fiscal year 2024, we performed a revaluation of the warrants through May 30, 2024, the date of Annual Shareholder approval to approve the repricing of the existing warrants, as a result of which we recorded a loss on revaluation of approximately $1.6 million. In addition to the revaluation of the Convertible Notes and warrants, we also recorded an additional loss on debt extinguishment 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).

We incurred a loss on debt extinguishment and revaluation of approximately $3.9 million for the year ended December 31, 2023. On May 11, 2023, we entered into a new debt amendment agreement (the “Second Amendment”) with the Noteholders and issued new warrants, creating a loss on debt extinguishment of approximately $1.8 million. The main factor for the loss was the valuation of the new warrants. On November 20, 2023, we entered into another amendment with the convertible noteholders (the “Third Amendment”) and incurred an additional loss on extinguishment and revaluation of approximately $911 thousand. With quarterly fair value assessments and conversions of debt throughout the year ending December 31, 2023, we incurred an additional loss on revaluation of approximately $1.2 million with changes in annual volatility of the debt at each quarter end, in addition to note conversions that occurred throughout the year. See Note 8 to our consolidated financial statements included in this Annual Report for further details.

Other expense, net: For the year ended December 31, 2024, other expense, net was approximately $3.4 million respectively, compared to $1.5 million for the year ended December 31, 2023. The increase in other expense, net, for the year ended December 31, 2024 was primarily as a result of $1.0 million general release agreement with our former placement agent; approximately $1.9 million in consent fees, waiver fees, and other financing expenses in relation to the SEPA and related consents for the SEPA on October 1, 2024; a conversion debt inducement expense of approximately $388 thousand; and an extension fee expense of approximately $325 thousand, partially offset by a gain on settlement of litigation with Atlas of approximately $254 thousand. For the year ended December 31, 2023, other expense, net was approximately $1.5 million, consisting of primarily an approximate $1.0 million penalty charge in relation to moving further in the settlement litigation with NYDIG and a $250 thousand expense in relation to an extension fee for the Noteholders when the Second Amendment was signed on May 11, 2023, in addition to the prepayment penalty for the notes payable in the third quarter of fiscal 2023.

Income Tax Benefit: Income tax benefit for the year ended December 31, 2024 was approximately $2.5 million, compared to approximately $1.1 million thousand for the year ended December 321, 2023. The 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, we are 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 year ended December 31, 2024 and 2023, we amortized approximately $2.2 million in each year, respectively. In addition, for the year ended December 31, 2023, there were timing differences due to significant increase for in-service capital assets for the year ended December 31, 2023 which created an offset of approximately $1.1 million in deferred income tax expense.

Net income attributable to non-controlling interest: Net income attributable to non-controlling interest for the year ended December 31, 2024 was approximately $5.0 million compared to a net income of approximately $1.5 million for the year ended December 31, 2023. This amount relates to Spring Lane’s 85% noncontrolling interest of the net profit in Soluna DVSL ComputeCo, LLC (“DVSL”) and Navitas 49% noncontrolling interest of the net profit in Soluna DV ComputeCo, LLC (“DVCC”) for the year ended December 31, 2024. The change in non-controlling interest relates to continued profitability at Dorothy 1A and Dorothy 1B, creating a total net profit in noncontrolling interest of approximately $6.9 million attributable to non-controlling interest for the year ended December 31, 2024, which started to grow in the third quarter of fiscal year 2023. The total net income was offset by noncontrolling interest loss of approximately $1.9 million associated with Dorothy 2, which site is in development stage and would expect losses, where Spring Lane had noncontrolling interest of 58% - 85% for the year ended December 31, 2024. The $1.5 million net income attributable to non-controlling interest for the year ended December 31, 2023 related only to Dorothy 1A and Dorothy 1B. For the first six months of fiscal 2023, DVSL was generating a non-controlling interest net loss, but with the energization at Dorothy 1A in effect beginning in the second quarter of 2023, the DVSL entity began to generate net profits, while DVCC was generating a net loss for the first four months of operations, but with energization beginning in the third quarter of fiscal 2023, the DVCC entity began to generate a net profit in non-controlling interest

Non-GAAP Measures

To supplement our consolidated financial statements included in this Annual Report presented under U.S. generally accepted accounting principles (“GAAP”), we are presenting certain non-GAAP financial measures. We are providing these non-GAAP financial measures to disclose additional information to facilitate the comparison of past and present operations by providing perspective on results absent one-time or significant non-cash items. We utilize these measures in the business planning process to understand expected operating performance and to evaluate results against those expectations. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our business operating results regarding factors and trends affecting our business and provide a reasonable basis for comparing our ongoing results of operations.

These non-GAAP financial measures are provided as supplemental measures to our performance measures calculated in accordance with GAAP and therefore, are not intended to be considered in isolation or as a substitute for comparable GAAP measures. Further, these non-GAAP financial measures have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. Because of the non-standardized definitions of non-GAAP financial measures, we caution investors that the non-GAAP financial measures as used by us in this Annual Report have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. Further, investors should be aware that when evaluating these non-GAAP financial measures, these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, from time to time in the future there may be items that we may exclude for purposes of our non-GAAP financial measures and we may in the future cease to exclude items that we have historically excluded for purposes of our non-GAAP financial measures. Likewise, we may determine to modify the nature of the adjustments to arrive at our non-GAAP financial measures. Investors should review the non-GAAP reconciliations provided below and not rely on any single financial measure to evaluate our business.

EBITDA and Adjusted EBITDA

In addition to financial measures calculated in accordance with GAAP, we also use “EBITDA” and “Adjusted EBITDA.” “EBITDA” is defined as earnings before interest, taxes, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation costs, loss on sale of fixed assets, loss on debt extinguishment and revaluation, placement agent release expense, loss on contract, provision for credit losses, convertible note inducement expense and impairment on fixed assets. Management believes that EBITDA and Adjusted EBITDA results in a performance measurement that represents a key indicator of our business operations of cryptocurrency mining, hosting customers engaged in cryptocurrency mining, demand service revenue, and high-performance computing services.

We believe EBITDA and Adjusted EBITDA can be important financial measures because they allow management, investors, and the Board to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments. Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. For example, we expect that stock-based compensation costs, which is excluded from the non-GAAP financial measures, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers, and directors. Similarly, we expect that depreciation and amortization of fixed assets will continue to be a recurring expense over the term of the useful life of the assets.

EBITDA and Adjusted EBITDA are provided in addition to and should not be considered to be substitutes for, or superior to net income, the comparable measure calculated in accordance with GAAP. Further, EBITDA and Adjusted EBITDA should not be considered as alternatives to revenue growth, net income, or any other performance measure calculated in accordance with GAAP, or as alternatives to cash flow from operating activities as a measure of our liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP.

Reconciliations of EBITDA and Adjusted EBITDA to net loss, the most comparable GAAP financial metric, for historical periods are presented in the table below:

(Dollars in thousands)

The following table represents the EBITDA and Adjusted EBITDA activity between each three-month period from January 1, 2024 through December 31, 2024.

(Dollars in thousands)

53

The following table represents the EBITDA and Adjusted EBITDA activity between each three-month period from January 1, 2023 through December 31, 2023.

(Dollars in thousands)

We continued positive Adjusted EBITDA from the third quarter of 2023 through the second quarter of 2024. Effective July 1, 2025 we entered into an agreement for services where the quarterly service expense was approximately one million in each third and fourth quarter of 2024.

Liquidity and Capital Resources

Several key indicators of our liquidity are summarized in the following table:

(Dollars in thousands)

As of December 31, 2024, we had a consolidated accumulated deficit of approximately $314.3 million and we had negative working capital of approximately $34.4 million. As of December 31, 2024, we had total debt outstanding of approximately $21.5 million as summarized further below in the Debt table. In addition, we had outstanding commitments related to Soluna Digital Inc. (“SDI”) of approximately $8.5 million in capital expenditures related to Project Dorothy 2. In addition, due to CloudCo’s termination of the HPE Agreement on March 24, 2025, and HPE’s termination of the HPE Agreement on March 26, 2025, and the acceleration of the remaining unpaid amounts of the contract in accordance with Section 8(h)(ii) of the HPE Agreement, a Type 1 Subsequent Event, we have recognized a liability for the remainder of the HPE Agreement on the balance sheet of our subsidiary, CloudCo, of approximately $20.0 million , net of a prepaid deposit of $8.6 million. As of December 31, 2024, we had $7.8 million of cash available to fund our operations.

Based on business developments, including changes in production levels, staffing requirements, and network infrastructure improvements, we will require additional capital equipment in the foreseeable future. We are focused on developing and monetizing green, zero-carbon computing and cryptocurrency mining facilities, as well as facilities capable of hosting customers engaged in cryptocurrency mining, and data centers to provide specialized AI Cloud and colocation services.

We plan to continue funding operations, including working capital and operating deficits, from operating cash flows and cash flow debt and equity financings, including the YA SEPA and others to be closed as needed consistent with management’s plans.

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. In the near term, management is evaluating and implementing different strategies to obtain financing to fund the Company’s expenses and growth to achieve a level of revenue adequate to support the Company’s current cost structure. Financing strategies may include, but are not limited to, stock issuances, project level equity, debt borrowings, partnerships and/or collaborations. If the Company is unable to meet its financial obligations, it could be forced to restructure or refinance, seek additional equity capital or sell its assets. The Company might then be unable to obtain such financing or capital or sell its assets on satisfactory terms. There can be no assurance that additional financing will be available to the Company when needed or, if available, that it can be obtained on commercially reasonable terms. If the Company is not able to obtain the additional financing on a timely basis, if and when it is needed, it will be forced to delay or scale down some or all of its development activities or perhaps even cease the operation of its business.

Operating Activities

Net cash used in operations was approximately $5.1 million during the year ended December 31, 2024. We had a net loss for the year ended December 31, 2024 of approximately $58.3 million. Results included cost of revenue in connection with the HPE Agreement for $5.7 million. Non-cash items included approximately $6.2 million of depreciation expense and $9.5 million of amortization expenses, approximately $28.6 million on loss on contract, $5.3 million of stock compensation expenses, $7.3 million of loss on debt extinguishment and revaluation, $2.1 million in debt issuance costs, $760 thousand in provision for credit losses, and $351 thousand amortized deferred financing costs. These non-cash items were offset with a deferred tax benefit of $2.5 million. The change in assets and liabilities is mainly due to an increase in prepaid expenses and other long term assets by $8.1 million due to a prepayment of an arrangement with HPE of $10.3 million that was being amortized over the life of the agreement and a decrease in customer deposits of $1.4 million due to timing of deposits applied in December 2024, offset by an increase in accrued expenses and accounts payable of approximately $5.5 million in relation to NYDIG interest, and related bills associated with Project Dorothy 2 and Project Kati. The other changes in assets and liabilities were not material.

Net cash used in operating activities from continuing operations was approximately $3.0 million for the year ended December 31, 2023. We had a net loss of approximately $27.7 million, which was offset by non-cash items of approximately $22.5 million. The non-cash items consisted primarily of approximately $13.4 million of amortization and depreciation expenses for the intangible assets acquired in 2021 and the fixed assets still in service and capital additions in 2023. There was also approximately $4.3 million in stock-based compensation expenses, $3.9 million on loss on debt extinguishment and revaluation, and additional $1.2 million in relation to fixed asset impairments, loss on sale of fixed assets, and amortization of operating lease assets. The non-cash items were offset with a $1.1 million deferred income tax benefit. The change in assets and liabilities of approximately $2.4 million related to increases in accrued expenses of $3.9 million in which related to interest for the NYDIG loan, sales and real estate tax accruals, and bonus accrual, as well as increase in customer deposits of $2.8 million with data hosting customers for the facility sites, offset with an increase in accounts receivable related to performing further hosting services and demand response services as of December 31, 2023.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2024 was approximately $13.2 million consisting mainly of capital expenditures of $9.2 million and increase in deposits on equipment of $4.1 million, primarily related to the development build of Project Dorothy 2. Net cash used in investing activities during the year ended December 31, 2023 was approximately $10.3 million consisting mainly of capital expenditures of $12.7 million, primarily related to the completion of the build of Project Dorothy 1A and 1B, less cash proceeds from sale of equipment of $2.3 million, primarily from the sale of miners located at Project Sophie in connection with the decision to convert to a hosting facility.

Financing Activities

(Dollars in thousands)

For fiscal year 2024, funds from financing activities were used to fund an initial deposit for the HPE Agreement, fund construction of D2, continued project pipeline development and general operating cash. Net cash provided by financing activities was approximately $18.3 million consisting mainly of proceeds from financing of approximately $14.5 million in which $13.75 million was from 2024 secured loan financing in June and July, and $720 thousand was drawn down for equipment financing. In addition, there was $2.3 million in warrants exercised, as well as $14.7 million in contributions of non-controlling membership interest. Offsetting the net cash provided by financing activities was $8.3 million in cash distributions to non-controlling interest members, and payments of $4.9 million relation to Navitas loan, the June and July 2024 note agreements, and payments in relation to the convertible holders. Net cash provided by financing activities was approximately $21.8 million during the year ended December 31, 2023, which consisted of cash contributions for noncontrolling interest of approximately $20.4 million, offset with distributions for non-controlling interest of $1.0 million. We also received net proceeds of approximately $817 thousand from the subsequent SPA offerings, in addition to proceeds from debt issuances of $3.1 million less debt payment costs of $1.1 million on promissory notes and the Navitas loan, and $350 thousand for payment on the Company’s line of credit.

Debt

(Dollars in thousands)

On June 20, 2024, pursuant to the terms and subject to the conditions of the June SPA by and among (i) CloudCo, (ii) Soluna Cloud, (iii) the Company and (iv) the Investor, CloudCo issued to the Investor a secured promissory note in a principal amount equal to $12.5 million (the “Soluna CloudCo Secured Note”). The Soluna CloudCo Secured Note accrues interest at a rate 9.0% per annum, subject to adjustment upon an event of default. The Soluna CloudCo Secured Note matures on June 20, 2027. On July 12, 2024, the Company, CloudCo, Soluna Cloud, and the Existing Investor entered into a First Amendment to the Note Purchase Agreement. Additional Notes were issued for $1,250,000 (“Soluna CloudCo Additional Secured Note”) on July 12, 2024 and are subject to the same terms and conditions as the June SPA financing. On October 1, 2024, CloudCo, Soluna Cloud and the Company entered into assignment and assumption agreements (the “Assignment Agreements”) with the Additional Investors with respect to an aggregate of $1.25 million of notes issued by CloudCo. Pursuant to the Assignment Agreements, the Company will be able to purchase such notes for a purchase price of $750 thousand, or 60% of face value. The assignment and assumption will be effective once all conditions of the agreement are met including fulfilling the purchase price. As of December 31, 2024, the Company has an outstanding principal balance of approximately $13.0 million in relation to the Soluna CloudCo Secured Note and Soluna CloudCo Additional Secured Note.

On January 14, 2022, the Company effected an initial drawdown under the Master Equipment Finance Agreement (“MEFA”) with NYDIG in the aggregate principal amount of approximately $4.6 million that bore interest at 14%. On January 26, 2022, the Company had a subsequent drawdown of $9.6 million. On December 20, 2022, Soluna MC Borrowing 2021-1 LLC (“Borrower”) received a Notice of Acceleration and Repossession (the “NYDIG Notice”) from NYDIG with respect to the MEFA, by and between Borrower, a subsidiary of Soluna MC, LLC, a subsidiary of Soluna Digital, a subsidiary of the Company, and NYDIG. The obligations of Borrower under the MEFA and reflected in the NYDIG Notice are ring-fenced to Borrower and its direct parent company, Soluna MC LLC. The Company is not a party to any guaranty, collateral agreement, or other support agreement with or for the benefit of NYDIG. As such, the principal balance of $10.5 million as of December 31, 2022 became due immediately and the Borrower shall bear interest, at a rate per annum equal to 2.0% plus the rate per annum otherwise applicable to such obligations set forth in the MEFA. On February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA, and repossessed the collateralized assets that totaled approximately $3.4 million, in which approximately $560 thousand was first used to pay off accrued interest and penalty to date. On September 5, 2023, NYDIG provided a letter finalizing the accounting for the repossessed collateralized assets totaling proceeds of approximately $3.4 million. A summary judgment motion was performed on February 13, 2024 and was agreed upon by both NYDIG and the Borrower, that the total outstanding loan principal balance would be approximately $9.2 million, in which a penalty fee was applied of approximately $1.0 million to the repossessed collateralized assets, and outstanding interest and penalty balance would be approximately $936 thousand as of December 31, 2023. As of December 31, 2024, the Company still has an outstanding loan principal of approximately $9.2 million and outstanding interest and penalty balance of approximately $2.3 million.

On October 25, 2021, we issued the Convertible Notes to the Noteholders in the aggregate principal amount of approximately $16.3 million for an aggregate purchase price of $15.0 million pursuant to the terms of the SPA. The Convertible Notes were convertible, subject to certain conditions, at any time at the option of the investors, into an aggregate of 71,043 shares of our common stock. On May 11, 2023, we and the Noteholders entered into the Second Amendment with the Noteholders, which increased the principal outstanding balance of the Convertible Notes to approximately $13.3 million and extended the maturity date of the Convertible Notes to July 2024. On November 20, 2023 we and the Noteholders entered into the Third Amendment to the SPA related agreements to facilitate future financings by us that may include funds for prepayment of the Convertible Notes by permitting us to force conversion of up to $1.5 million of the Convertible Notes under certain circumstances and reduce the prepayment penalty in return for reducing the conversion price of the $4.7 million of the Convertible Notes to $3.78 and reducing the exercise price of 150,000 of the Warrants to $0.01.Between May 11, 2023 and December 31, 2023, the Noteholders converted approximately $4.6 million of the principal outstanding balance of the Convertible Notes and received approximately 1.1 million shares of our common stock, reducing the principal balance to approximately $8.7 million as of December 31, 2023. On February 28, 2024, we and the Noteholders entered into the Fourth Amendment which allowed all the outstanding debt in relation to the convertible notes to be converted at a rate of $3.78. Throughout fiscal year 2024, the Noteholders converted the remainder of the outstanding principal balance under the Notes into approximately 2.5 million shares of our common stock. On December 12, 2024, we entered into an agreement with the remaining three Noteholders who held an outstanding principal balance as December 12, 2024 of $772 thousand, pursuant to which the three remaining Noteholders elected to immediately convert all of the outstanding principal of certain convertible notes into shares of our common stock. We recorded a debt inducement conversion expense of approximately $388 thousand in connection with an agreement with the last three remaining Noteholders to convert their portion of the outstanding principal balance, which was recorded within Other Expense, net on the consolidated financial statements included in this Annual Report. No further amounts are owed by us under the Convertible Notes as of December 31, 2024.

On May 9, 2023, DVCC and Navitas West Texas Investments SPV, LLC entered into a 2-year Loan Agreement for $2,050,000. The unpaid principal balance of the Term Loan shall bear interest at per annum rate equal to 15%. As of December 31, 2024, the Company has an outstanding principal balance of approximately $137 thousand. As of the date of these consolidated financial statements, the Navitas loan has been fully paid off.

On May 16, 2024, SDI SL Borrowing – 1, LLC, an affiliate of Soluna Holdings, Inc. (the “Borrower”), entered into a loan agreement (the “Equipment Loan Agreement” or the “Loan”) with Soluna2 SLC Fund II Project Holdco LLC (the “Lender”). The Equipment Loan Agreement provides for Borrower to borrow, from time to time, up to $1.0 million, and further amended on February 28, 2025 to $4.0 million to be used to purchase necessary equipment for the progression of Project Dorothy 2 and Project Kati. Any loans made under the Equipment Loan Agreement have a maturity date of May 16, 2027 and bear interest at a rate of 15% per annum. The Equipment Loan Agreement includes customary covenants for loans of this nature, as well as a multiple on invested capital provision, which requires us to pay, in addition to principal and interest, an amount equal to the difference of (i) the greater of (a) the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan, and (b) the principal amount of the Loan being repaid multiplied by three, minus (ii) the sum of the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan. On May 17, 2024, the Borrower drew down $720 thousand of the Loan. On July 22, 2024, Borrower satisfied and repaid the borrowing amount in full by issuing the Lender Class B Membership Interests in the Dorothy 2 project valued at three times the borrowing amount (i.e., $2.16 million). The redemption of debt through equity created approximately a $1.4 million loss on debt extinguishment for the year ended December 31, 2024. In addition, the Borrower deferred financing costs associated with the Loan of approximately $163 thousand.

Critical Accounting Policies and Use of Estimates

The prior discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. Note 2 of the Consolidated Financial Statements included in this Annual Report includes a summary of our most significant accounting policies. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, income taxes and share-based compensation. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Periodically, our management reviews our critical accounting estimates with the Audit Committee of our Board of Directors.

The significant accounting policies that we believe are most critical to aid in fully understanding and evaluating our consolidated financial statements include the following:

Revenue Recognition

We have entered into customer hosting contracts whereby we provide hosting services which include, electrical power to cryptocurrency mining customers, other utilities, and management of hosting facilities. Customer contracts can be a combination of a stated fixed amount per megawatt-hour (“MWh”) (“Contract Capacity”), a percentage of the profit share of the daily net income from the customer’s mining operations, or a combination thereof. Some contracts also include pass-through expenses which are not recognized in revenue. The actual monthly amounts are calculated after the close of each month and billed to the customers.

Cryptocurrency revenue consists of revenue recognized from our cryptocurrency mining facilities. Revenue is recognized at the cryptocurrency’s realized cash value based upon the rates at cryptocurrency exchanges where we are registered. Cryptocurrencies are earned through participation with mining pool operators where the company provides hash rate services to the mining pool. The consideration received is payable in BitCoin based on a published formula Cryptocurrency is converted to U.S. dollars on a daily basis.

Starting in December 2023, we began providing emergency demand response solutions to ERCOT pursuant to a contractual commitment over defined service delivery periods. This contract includes 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 believes that an output measure based on the monthly contractual MW stand-ready obligation is the best representation of the “transfer of value” to the customer. Accordingly, the Company recognizes monthly revenue based on the proportion of committed stand-ready capacity obligation that has been fulfilled to date.

Fair Value Measurement

The estimated fair value of certain financial instruments, including cash, accounts receivable and short-term debt approximates their carrying value due to their short maturities and varying interest rates. “Fair value” is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation methods, we are required to provide the following information according to the fair value accounting standards. These standards established a fair value hierarchy as specified that ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities are classified and disclosed in one of the following three categories:

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

We had Warrants included within the SPA agreement as noted in Note 8. The Warrants are considered freestanding equity-classified instruments due to their detachable and separately exercisable features and meet the indexation criteria within derivative accounting. Accordingly, the Warrants are presented as a component of Stockholders’ Equity in accordance with derivative accounting.

Following the debt extinguishment on July 19, 2022 as noted further in Note 2 and 8, the Convertible Notes will be recorded at fair value upon issuance (e.g., upon execution of the Addendum) per guidance within ASC 480, and at each subsequent reporting period, with changes in fair value reported in earnings.

On October 1, 2024, we modified the Series B Preferred Stock Agreement, in order to obtain consent from holders, which led to extinguishment accounting. We recorded a deemed dividend between the fair value of the modified preferred stock against the carrying value of the original preferred stock. The fair value of the modified preferred stock considered the conversion price of the preferred stock, assumption on the lockup expiration date, and closing price of the common stock on the lockup expiration date using daily volatility.

Consistent with the guidance in purchase accounting, the value of the Strategic Pipeline Contract, see Note 5, as of the acquisition date of October 2021 was estimated using an expected value approach, which probability-weights various future outcomes and uses certain Level 3 inputs.

As of December 31, 2024, and 2023, the fair values of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximated their carrying values because of the short-term nature of these instruments.

Share-Based Payments

We award restricted stock to our employees and directors under the 2021 Plan and the Soluna Holdings, Inc. Amended and Restated 2023 Stock Incentive Plan (the “2023 Plan,” together with the 2021 Plan, the “Plans”). The benefits provided under these plans are share-based payments and we account for stock-based awards exchanged for employee service in accordance with the appropriate share-based payment accounting guidance. Stock-based compensation represents the cost related to stock-based awards granted to employees and directors. We measure stock-based compensation cost at grant date based on the estimated fair value of the award and recognize the cost as expense on a straight-line basis in accordance with the vesting of the options (net of estimated forfeitures) over the option’s requisite service period. We estimate the fair value of stock-based awards on the grant date using a Black-Scholes valuation model. We use the fair value method of accounting with the modified prospective application, which provides for certain changes to the method for valuing share-based compensation. The valuation provisions apply to new awards and to awards that are outstanding on the effective date and subsequently modified.

The determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate, and expected dividends.

Theoretical valuation models and market-based methods are evolving and may result in lower or higher fair value estimates for share-based compensation. The timing, readiness, adoption, general acceptance, reliability, and testing of these methods is uncertain. Sophisticated mathematical models may require voluminous historical information, modeling expertise, financial analyses, correlation analyses, integrated software and databases, consulting fees, customization, and testing for adequacy of internal controls.

For purposes of estimating the fair value of stock options granted using the Black-Scholes model, we use the historical volatility of our stock for the expected volatility assumption input to the Black-Scholes model, consistent with the accounting guidance. The risk-free interest rate is based on the risk-free zero-coupon rate for a period consistent with the expected option term at the time of grant. The expected option term is calculated based on our historical forfeitures and cancellation rates.

Income Taxes

We are subject to income taxes in the U.S. (federal and state). As part of the process of preparing our consolidated financial statements, we calculate income taxes for each of the jurisdictions in which we operate. This involves estimating actual current taxes due together with assessing temporary differences resulting from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities, loss carryforwards, and tax credit carryforwards, for which income tax benefits are expected to be realized in future years. Deferred tax assets are reported net of a valuation allowance when it is more likely than not that a tax benefit will not be realized. The effect on deferred taxes of a change in tax rates is recognized in the period that includes the enactment date.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our net deferred tax assets. We considered all available evidence, both positive and negative, such as historical levels of income and future forecasts of taxable income amongst other items in determining our valuation allowance. In addition, our assessment requires us to schedule future taxable income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which further requires the exercise of significant management judgment.

We account for taxes in accordance with the asset and liability method of accounting for income taxes. Under this method, we must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The impact of our reassessment of our tax positions for these standards did not have a material impact on its results of operations, financial condition, or liquidity.

We are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income tax liabilities against us. Developments in an audit, litigation, or in applicable laws, regulations, administrative practices, principles, and interpretations could have a material effect on our operating results or cash flows in the period or periods in which such developments occur, as well as for prior and in subsequent periods.

Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as intercompany transactions, earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, the applicability of special tax regimes, losses incurred in jurisdictions for which we are not able to realize the related tax benefit, changes in foreign currency exchange rates, entry into new businesses and geographies, changes to our existing businesses and operations, acquisitions and investments and how they are financed, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices, principles, and interpretations.

Impairment of long-lived assets

Management reviews long-lived assets, including finite lived intangible assets, property, plant and equipment, and other assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, asset group, or investment may not be recoverable.

Recent Accounting Pronouncements

A discussion of recently adopted and new accounting pronouncements is included in Note 2 of the Consolidated Financial Statements included in this Annual Report.

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of SHI’s disclosure controls and procedures as of December 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. We recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and we necessarily apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

(b) Management’s Report on Internal Control Over Financial Reporting

Management of our Company is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth in Internal Control-Integrated Framework (2013 version) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation using the criteria set forth in Internal Control-Integrated Framework, Management has concluded that our internal control over financial reporting was effective as of December 31, 2024.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only Management’s Report in this annual report.

(c) Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our fiscal quarter ended December 31, 2024, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.