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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the quarterly period ended September 30, 2023
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the transition period from _____to _____

 

Commission File Number: 001-40261

 

Soluna Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Nevada   14-1462255
State or other jurisdiction   (I.R.S. Employer
of incorporation or organization   Identification No.)

 

325 Washington Avenue Extension, Albany, New York 12205

(Address of principal executive offices) (Zip Code)

 

(516) 216-9257

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001 per share   SLNH   The Nasdaq Stock Market LLC
9.0% Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share   SLNHP   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

 

As of November 9, 2023, the Registrant had 1,609,788 shares of common stock outstanding.

 

 

 

 

 

 

SOLUNA HOLDINGS, INC. AND SUBSIDIARIES

INDEX

 

PART I. FINANCIAL INFORMATION 2
   
Item 1. Financial Statements 2
   
Condensed Consolidated Balance Sheets As of September 30, 2023 (Unaudited) and December 31, 2022 2
   
Condensed Consolidated Statements of Operations (Unaudited) For the Three and Nine Months Ended September 30, 2023 and 2022 3
   
Condensed Consolidated Statements of Changes in Equity For the Year Ended December 31, 2022 and the Three and Nine Months Ended September 30, 2023 (Unaudited) 4
   
Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2023 and 2022 5
   
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 53
   
Item 4. Controls and Procedures 53
   
PART II. OTHER INFORMATION 54
   
Item 1. Legal Proceedings 54
   
Item 1A. Risk Factors 55
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 56
   
Item 3. Defaults Upon Senior Securities 56
   
Item 4. Mine Safety Disclosures 56
   
Item 5. Other Information 56
   
Item 6. Exhibits 56
   
SIGNATURES 57

 

1

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Soluna Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

As of September 30, 2023 (Unaudited) and December 31, 2022

 

(Dollars in thousands, except per share)

 

   September 30,   December 31, 
   2023   2022 
Assets          
Current Assets:          
Cash  $5,625   $1,136 
Restricted cash   3,428    685 
Accounts receivable   2,024    320 
Notes receivable   446    219 
Prepaid expenses and other current assets   1,593    1,107 
Deposits and credits on equipment   975    1,175 
Equipment held for sale   248    295 
Total Current Assets   14,339    4,937 
Restricted cash   1,000    - 
Other assets   2,957    1,150 
Property, plant and equipment, net   45,938    42,209 
Intangible assets, net   29,370    36,432 
Operating lease right-of-use assets   483    233 
Total Assets  $94,087   $84,961 
           
Liabilities and Stockholders’ Equity          
Current Liabilities:          
Accounts payable  $3,005   $3,548 
Accrued liabilities   4,447    2,721 
Line of credit   -    350 
Convertible notes payable   10,796    11,737 
Current portion of debt   9,053    10,546 
Deferred revenue   -    453 
Operating lease liability   215    161 
Total Current Liabilities   27,516    29,516 
           
Other liabilities   1,497    203 
Long-term debt   1,050    - 
Operating lease liability   273    84 
Deferred tax liability, net   8,362    8,886 
Total Liabilities   38,698    38,689 
           
Commitments and Contingencies (Note 10)   -     -  
           
Stockholders’ Equity:          
9.0% Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share, $25.00 liquidation preference; authorized 6,040,000; 3,061,245 shares issued and outstanding as of September 30, 2023 and December 31, 2022   3    3 
Series B Preferred Stock, par value $0.0001 per share, authorized 187,500; 62,500 shares issued and outstanding as of September 30, 2023 and December 31, 2022        
Common stock, par value $0.001 per share, authorized 75,000,000; 1,492,729 shares issued and 1,451,988 shared outstanding as of September 30, 2023 and 788,578 shares issued and 747,837 shares outstanding as of December 31, 2022(1)   1    1 
Additional paid-in capital   286,799    277,429 
Accumulated deficit   (244,268)   (221,769)
Common stock in treasury, at cost, 40,741 shares at September 30, 2023 and December 31, 2022(1)   (13,798)   (13,798)
Total Soluna Holdings, Inc. Stockholders’ Equity   28,737    41,866 
Non-Controlling Interest   26,652    4,406 
Total Stockholders’ Equity   55,389    46,272 
Total Liabilities and Stockholders’ Equity  $94,087   $84,961 

 

(1)Prior period results have been adjusted to reflect the Reverse Stock Split of the Common Stock at a ratio of 1-for-25 that became effective October 13, 2023. See Note 2, “Basis of Presentation,” for details.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2

 

 

Soluna Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2023 and 2022

(Dollars in thousands, except per share)

 

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
                 
Cryptocurrency mining revenue  $1,786   $5,387   $5,497   $20,696 
Data hosting revenue   4,011    985    5,451    3,668 
Total revenue   5,797    6,372    10,948    24,364 
Operating costs:                    
Cost of cryptocurrency mining revenue, exclusive of depreciation   1,040    4,100    4,451    11,092 
Cost of data hosting revenue, exclusive of depreciation   2,150    1,078    3,181    3,192 
Costs of revenue- depreciation   1,200    6,010    2,364    15,872 
Total costs of revenue   4,390    11,188    9,996    30,156 
Operating expenses:                    
General and administrative expenses, exclusive of depreciation and amortization   2,723    5,686    11,219    15,441 
Depreciation and amortization associated with general and administrative expenses   2,379    2,378    7,134    7,127 
Total general and administrative expenses   5,102    8,064    18,353    22,568 
Impairment on equity investment   -    750    -    750 
Impairment on fixed assets   41    28,086    418    28,836 
Operating loss   (3,736)   (41,716)   (17,819)   (57,946)
Interest expense   (495)   (1,671)   (2,355)   (7,856)
Loss on debt extinguishment and revaluation, net   (769)   (12,317)   (2,350)   (12,317)
Loss on sale of fixed assets   (373)   (988)   (404)   (2,606)
Other (expense) income, net   (74)   2    (301)   2 
Loss before income taxes from continuing operations   (5,447)   (56,690)   (23,229)   (80,723)
Income tax (expense) benefit from continuing operations   (569)   547    524    1,344 
Net loss from continuing operations   (6,016)   (56,143)   (22,705)   (79,379)
Income before income taxes from discontinued operations   -    (21)   -    7,681 
Income tax benefit from discontinued operations   -    -    -    70 
Net income from discontinued operations   -    (21)   -    7,751 
Net loss   (6,016)   (56,164)   (22,705)   (71,628)
(Less) Net (income) loss attributable to non-controlling interest   (646)   272    206    272 
Net loss attributable to Soluna Holdings, Inc.  $(6,662)  $(55,892)  $(22,499)  $(71,356)
                     
Basic and Diluted (loss) earnings per common share:                    
Net loss from continuing operations per share (Basic & Diluted) (1)  $(4.40)  $(95.49)  $(20.11)  $(146.46)
Net income from discontinued operations per share (Basic & Diluted) (1)  $-   $(0.04)  $-   $13.64 
Basic & Diluted loss per share (1)  $(4.40)  $(95.53)  $(20.11)  $(132.82)
                     
Weighted average shares outstanding (Basic and Diluted) (1)   1,374,364    587,921    1,149,745    568,307 

 

(1)Prior period results have been adjusted to reflect the Reverse Stock Split of the Common Stock at a ratio of 1-for-25 that became effective October 13, 2023. See Note 2, “Basis of Presentation,” for details.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

 

 

Soluna Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

For the Year Ended December 31, 2022

And the Three and Nine Months Ended September 30, 2023 (Unaudited)

 

(Dollars in thousands, except per share)

 

   Series A
Shares
   Amount   Series B
Shares
   Amount   Shares (1)   Amount(1)  

Additional

Paid-in Capital (1)

   Accumulated Deficit   Shares   Amount   Non-
Controlling
Interest
   Total
Stockholders’
Equity
 
   Preferred Stock   Common Stock           Treasury Stock         
   Series A
Shares
   Amount   Series B
Shares
   Amount   Shares (1)   Amount(1)  

Additional

Paid-in
Capital (1)

   Accumulated Deficit   Shares   Amount   Non-
Controlling
Interest
   Total
Stockholders’
Equity
 
January 1, 2022   1,252,299   $1            590,851   $  1   $    227,804   $(123,054)   40,620   $(13,764)      $90,988 
                                                             
Net loss                               (8,906)               (8,906)
                                                             
Preferred dividends distribution                           (749)                   (749)
                                                             
Stock-based compensation                           955                    955 
                                                             
Issuance of shares – preferred offering   66,857                        957                    957 
                                                             
Restricted stock units vested                   573                             
                                                             
Issuance of shares – warrant exercises                   3,580        738                    738 
                                                             
Issuance of shares- Notes conversion                   5,847        1,342                    1,342 
                                                             
Warrants issued in relation to debt financing                           2,257                    2,257 
                                                             
March 31, 2022   1,319,156   $1       $    600,851   $1   $233,304   $(131,960)   40,620   $(13,764)  $   $87,582 
                                                             
Net loss                               (6,557)               (6,557)
                                                             
Preferred dividends distribution                           (1,382)                   (1,382)
                                                             
Stock-based compensation                           1,064                    1,064 
                                                             
Issuance of shares – option exercises                   3,642        77                    77 
                                                             
Issuance of shares – preferred offering   599,232    1                    8,796                    8,797 
                                                             
Issuance of shares-restricted stock                   130        23                    23 
                                                             
Restricted stock units vested                   148                             
                                                             
Issuance of shares – warrant exercises                   200        41                    41 
                                                             
Promissory note conversion to preferred shares   1,142,857    1                    13,894                    13,895 
                                                             
Warrants issued in relation to debt financing                           3,060                    3,060 
                                                             
Treasury Shares conversion                                   121    (34)       (34)
                                                             
June 30, 2022   3,061,245   $3       $    604,971   $1   $258,877   $(138,517)   40,741   $(13,798)  $   $106,566 
                                                             
Net loss                               (55,892)           (272)   (56,164)
                                                             
Preferred dividends distribution                           (1,722)                   (1,722)
                                                             
Stock-based compensation                           879                    879 
                                                             
Issuance of shares – option exercises                   3,455        76                    76 
                                                             
Issuance of shares – preferred offering           62,500                4,994                    4,994 
                                                             
Issuance of shares-restricted stock                   130        11