Soluna Holdings Reports Q2 Results

Company Boosts Balance Sheet, Optimizes Operations

ALBANY, N.Y.–(BUSINESS WIRE)–Soluna Holdings, Inc. (“SHI” or the “Company”), (NASDAQ: SLNH), the parent company of Soluna Computing, Inc. (“SCI”), a developer of green data centers for Bitcoin mining and other intensive computing applications, reported financial results for the second quarter ended June 30, 2023.

John Belizaire, CEO of Soluna Holdings, said, “Our progress executing the 3-step plan I shared in my letter to shareholders in the first half of the year has resulted in a stronger balance sheet and improved cash flows. This sets us up for continued growth in the second half of 2023 as we complete our transition focused on monetizing our sites through hosting and joint ventures. I am proud of our operating teams and thankful for our investors’ continued support.”

Finance and Operational Highlights:

The cash balance as of June 30, 2023, was $7.5 million compared to $1.1 million as of December 31, 2022. This is driven by new project-level investments, operational execution, and expense management measures implemented in the first half of the year.

The Company is still on track to deploy a record 2 EH/s across all sites by the end of the summer. Project Dorothy 1A and Project Sophie are now fully deployed with three hosting customers.

As of August 14, 2023, Project Dorothy 1B is completing construction and the Company has energized more than 11 MW of the buildings dedicated to the Proprietary Mining Joint Venture with Navitas Global.

The Company completed its tender of equipment purchase, with 8,378 machines purchased for a total of 868 PH/s of hashrate with an average efficiency of 29.9 J/TH, and at a cost of $11.25 $/TH inclusive of all fees, import, and taxes, $10.59 $/TH excluding taxes. Machine deployment at Project Dorothy 1B continues with more than 5,760 deployed to date.

More than 19,500 machines have been deployed across all three data centers as of August 14, 2023.

The Company averaged $30/MWh for energy costs even during the recent heat waves in Texas and Kentucky. The average efficiency across all the machines at the sites is less than 30 J/TH.

As described in the Company’s Earnings Power Illustration on June 21, 2023, the combined revenue potential for Project Dorothy 1A, Project Dorothy 1B, and Project Sophie is $37.5 million on an annualized basis.

Prospective investors visited Project Dorothy with an interest to finance up to 50 MW of Project Dorothy 2. Project Kati, Soluna’s new 166 MW data center, continues its development process, completing the first of three required ERCOT interconnection studies in the planning phase. The company has also advanced legal agreements with its power partner at Project Kati.

Financial Summary:

Key financial results for the second quarter include:

The Company’s balance sheet and liquidity continued to strengthen. Its current ratio, which measures liquidity, improved to 1.4 from 0.2 at the end of 2022 resulting from the combination of new project-level investments and declining operating losses. Working capital improved to $6.1 million as of June 30, 2023, a $30.7 million increase, versus a negative $24.6 million for the period ended June 30, 2022.
Total revenue in the second quarter of 2023 decreased by 76% to $2.1 million compared to $8.7 million in the second quarter of 2022. The decrease is primarily attributable to the decommissioning of Project Marie negatively impacting both proprietary mining and hosting revenues and the transition of Project Sophie from proprietary mining to primarily hosting during the second quarter of 2023.
General and Administrative, exclusive of depreciation and amortization expenses decreased by 15% to $4.1 million in the second quarter of 2023, as compared to $4.9 million in the second quarter of 2022, primarily due to cost reductions related to salaries and benefits, reduced consulting and professional fees, offset in part by an increase in investor relations costs.
Stock compensation expense during the second quarter of 2023 was $2.2 million versus $1.1 million in the second quarter of 2022.
Net loss from continuing operations improved to $9.3 million in the second quarter of 2023 from $14.1 million in the second quarter of 2022.

The unaudited financial statements are available online.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Soluna Holdings, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Soluna’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, further information regarding which is included in the Company’s filings with the Securities and Exchange Commission. All information provided in this press release is as of the date of the press release, and Soluna Holdings, Inc. undertakes no duty to update such information, except as required under applicable law.

About Soluna Holdings, Inc (SLNH)

Soluna Holdings, Inc. is the leading developer of green data centers that convert excess renewable energy into global computing resources. Soluna builds modular, scalable data centers for computing intensive, batchable applications such as Bitcoin mining, AI, and machine learning. Soluna provides a cost-effective alternative to battery storage or transmission lines. Soluna uses technology and intentional design to solve complex, real-world challenges. Up to 30% of the power of renewable energy projects can go to waste. Soluna’s data centers enable clean electricity asset owners to ‘Sell. Every. Megawatt.’


Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
As of June 30, 2023 (Unaudited) and December 31, 2022

(Dollars in thousands, except per share)

	June 30,			December 31,
	2023			2022
Assets
Current Assets:
Cash	$	7,464		$	1,136
Restricted cash		1,780			685
Accounts receivable		1,537			320
Prepaid expenses and other current assets		1,417			1,326
Deposits and credits on equipment		9,091			1,175
Equipment held for sale		1,379			295
Total Current Assets		22,668			4,937
Restricted cash		1,000			–
Other assets		2,958			1,150
Property, plant and equipment, net		37,760			42,209
Intangible assets, net		31,735			36,432
Operating lease right-of-use assets		526			233
Total Assets	$	96,647		$	84,961

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	3,150		$	3,548
Accrued liabilities		4,099			2,721
Line of credit		–			350
Convertible notes payable		–			11,737
Current portion of debt		8,087			10,546
Deferred revenue		985			453
Operating lease liability		207			161
Total Current Liabilities		16,528			29,516

Other liabilities		1,497			203
Long-term debt		1,174			–
Convertible notes payable		10,710			–
Operating lease liability		325			84
Deferred tax liability, net		7,792			8,886
Total Liabilities		38,026			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 June 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 June 30, 2023 and December 31, 2022		—			—

Common stock, par value $0.001 per share, authorized 75,000,000; 30,764,463 shares issued and 29,745,947 shared outstanding as of June 30, 2023 and 19,712,722 shares issued and 18,694,206 shares outstanding as of December 31, 2022		31			20
Additional paid-in capital		284,136			277,410
Accumulated deficit		(237,606	)		(221,769	)
Common stock in treasury, at cost, 1,018,516 shares at June 30, 2023 and December 31, 2022		(13,798	)		(13,798	)
Total Soluna Holdings, Inc. Stockholders’ Equity		32,766			41,866
Non-Controlling Interest		25,855			4,406
Total Stockholders’ Equity		58,621			46,272
Total Liabilities and Stockholders’ Equity	$	96,647		$	84,961


Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
For the Three and Six Months Ended June 30, 2023 and 2022

(Dollars in thousands, except per share)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022

Cryptocurrency mining revenue	$	915		$	7,497		$	3,711		$	15,309
Data hosting revenue		1,153			1,179			1,439			2,683
Total revenue		2,068			8,676			5,150			17,992
Operating costs:
Cost of cryptocurrency mining revenue, exclusive of depreciation		1,160			3,596			3,410			6,992
Cost of data hosting revenue, exclusive of depreciation		759			975			1,031			2,114
Costs of revenue- depreciation		539			5,538			1,164			9,862
Total costs of revenue		2,458			10,109			5,605			18,968
Operating expenses:
General and administrative expenses, exclusive of depreciation and amortization		4,136			4,873			8,496			9,755
Depreciation and amortization associated with general and administrative expenses		2,379			2,376			4,756			4,749
Total general and administrative expenses		6,515			7,249			13,252			14,504
Impairment on fixed assets		169			750			377			750
Operating loss		(7,074	)		(9,432	)		(14,084	)		(16,230	)
Interest expense		(439	)		(3,305	)		(1,814	)		(6,185	)
Loss on debt extinguishment and revaluation, net		(2,054	)		–			(1,581	)		–
Gain (loss) on sale of fixed assets		48			(1,618	)		(30	)		(1,618	)
Other expense, net		(285	)		–			(273	)		–
Loss before income taxes from continuing operations		(9,804	)		(14,355	)		(17,782	)		(24,033	)
Income tax benefit from continuing operations		547			251			1,093			797
Net loss from continuing operations		(9,257	)		(14,104	)		(16,689	)		(23,236	)
Income before income taxes from discontinued operations		–			7,477			–			7,702
Income tax benefit from discontinued operations		–			70			–			70
Net income from discontinued operations		–			7,547			–			7,772
Net loss		(9,257	)		(6,557	)		(16,689	)		(15,464	)
(Less) Net loss attributable to non-controlling interest		482			–			852			–
Net loss attributable to Soluna Holdings, Inc.	$	(8,775	)	$	(6,557	)	$	(15,837	)	$	(15,464	)

Basic and Diluted (loss) earnings per common share:
Net loss from continuing operations per share (Basic & Diluted)	$	(0.34	)	$	(1.11	)	$	(0.69	)	$	(1.82	)
Net income from discontinued operations per share (Basic & Diluted)	$	–		$	0.54		$	–		$	0.56
Basic & Diluted loss per share	$	(0.34	)	$	(0.57	)	$	(0.69	)	$	(1.26	)

Weighted average shares outstanding (Basic and Diluted)		28,150,557			14,048,253			24,903,975			13,958,437


Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2023 and 2022

(Dollars in thousands)

	Six Months Ended June 30,
	2023			2022
Operating Activities
Net loss	$	(16,689	)	$	(15,464	)
Net income from discontinued operations		–			(7,772	)
Net loss from continuing operations		(16,689	)		(23,236	)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation expense		1,179			9,871
Amortization expense		4,741			4,740
Stock-based compensation		3,060			1,952
Consultant stock compensation		51			67
Deferred income taxes		(1,094	)		(797	)
Impairment on fixed assets		377			750
Amortization of operating lease asset		116			100
Loss on debt extinguishment and revaluation, net		1,581			–
Amortization on deferred financing costs and discount on notes		739			5,353
Loss on sale of fixed assets		30			1,618
Changes in operating assets and liabilities:
Accounts receivable		(924	)		(157	)
Prepaid expenses and other current assets		(101	)		(393	)
Other long-term assets		(308	)		56
Accounts payable		696			1,882
Deferred revenue		532			(9	)
Operating lease liabilities		(111	)		(98	)
Other liabilities		1,294			–
Accrued liabilities		995			64
Net cash (used in) provided by operating activities		(3,836	)		1,763
Net cash provided by operating activities- discontinued operations		–			328
Investing Activities
Purchases of property, plant, and equipment		(2,895	)		(52,618	)
Purchases of intangible assets		(44	)		(79	)
Proceeds from disposal on property, plant, and equipment		1,286			465
Deposits and credits on equipment, net		(7,916	)		1,603
Net cash used in investing activities		(9,569	)		(50,629	)
Net cash provided by investing activities- discontinued operations		–			9,025
Financing Activities
Proceeds from preferred offerings		–			11,657
Proceeds from common stock securities purchase agreement offering		43			–
Proceeds from notes and debt issuance		2,900			29,736
Costs of preferred offering		–			(1,904	)
Costs of common stock securities purchase agreement offering		(4	)		–
Costs and payments of notes and short-term debt issuance		(175	)		(1,743	)
Cash dividend distribution on preferred stock		–			(2,131	)
Payments on NYDIG loans and line of credit		(350	)		(2,590	)
Contributions from non-controlling interest		19,414			–
Proceeds from stock option exercises		–			77
Proceeds from common stock warrant exercises		–			779
Net cash provided by financing activities		21,828			33,881

Increase (decrease) in cash & restricted cash-continuing operations		8,423			(14,985	)
Increase in cash & restricted cash- discontinued operations		–			9,353
Cash & restricted cash – beginning of period		1,821			10,258
Cash & restricted cash – end of period	$	10,244		$	4,626

Supplemental Disclosure of Cash Flow Information
Noncash equipment financing		–			4,620
Interest paid on NYDIG loans and line of credit		6			770
Noncash disposal of NYDIG collateralized equipment		3,388			–
Proceed receivable from sale of MTI Instruments		–			205
Notes converted to common stock		1,794			1,342
Warrant consideration in relation to promissory notes and convertible notes		1,330			5,317
Promissory note and interest conversion to common shares		845			15,236
Registration fees in prepaids and accounts payable		–			(58	)
Noncash non-controlling interest contributions		2,887			–
Series B preferred dividend in accrued expense		383			–
Noncash activity right-of-use assets obtained in exchange for lease obligations		397			13