Soluna Holdings, Inc. Announces Q3 2022 Earnings

Project Dorothy Moves to Energization Date

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 cryptocurrency mining and other intensive computing, reported financial results for the third quarter ended September 30, 2022.

Michael Toporek, CEO of Soluna Holdings, Inc., said, “In the quarter, Soluna continued to execute on our business plan delivering healthy hashrate and cash contribution margins despite low BTC prices and energy market volatility. We continue to focus our resources on energizing Project Dorothy, which we expect to double our existing operating footprint. Our team is working with ERCOT to finalize the details for an energization date. Dorothy is anticipated to be one of the lowest cost facilities of its kind in North America.”

Third Quarter 2022 Financial Results

Key Financial Highlights for the third quarter include

• Total revenue of $6.4 million for the three-month period ended September 30, 2022, as compared to $3.1 million for the same year-over-year period. The increase was driven primarily by an additional site operating in 2022.
• BTC equivalent mined increased 12.4% from the second quarter ended June 30, 2022. Peak hashrate remained above 1 EH/s during the quarter.
• Cryptocurrency mining revenue of $5.4 million for the three-month period ended September 30, 2022, as compared to $2.0 million for the same year-over-year period. Megawatts deployed increased from approximately 2 megawatts at the beginning of 2021 to 20 megawatts for the Calvert City facility and 25 megawatts for the Murray facility in 2022.
• Data hosting revenue of $1.0 million for the three-month period ended September 30, 2022, as compared to $1.1 million for the same year-over-year period. Compared to one year ago, hosting revenues now exclude any component related to power costs, which are treated as a pass-through item.
• General and administrative (“G&A”) expenses, excluding depreciation and amortization, totaled $5.7 million for the three-month period ended September 30, 2022 compared to $2.3 million for the three-month period ended September 30, 2021. Of the $3.4 million increase, $1.3 million was due to an increase in personnel and $1.1 million due to certain complex transactions including Dorothy and the convertible note amendments.
• Net Loss for the quarter of $(55.9) million, or $(3.94) per share, for the three-month period ended September 30, 2022, as compared to a net loss of $(0.6) million, or $(0.06) per share during the same year-over-year period, and compared to a net loss of $(6.6) million, or $(0.57) per share in the second quarter. Net loss for the quarter was materially impacted by the impairment of fixed assets ($28.1 million) and a loss on extinguishment of debt ($12.3 million).
• Non-GAAP Adjusted EBITDA for the quarter ended September 30, 2022 was a loss of ($3.6) million during the three-month period ended September 30, 2022.

Revenue & Contribution Margin Summary

*all numbers below exclude legacy hosting
($ in 000s, Unaudited)
	FY 21	Q1 2022	Q2 2022	Q3 2022
Revenue	$13,010	$9,316	$8,676	$6,372
Cash Contribution Margin	$8,888	$5,206	$4,760	$1,194
Annualized Revenue	$13,010	$37,264	$34,704	$25,490
Annualized Contribution Margin	$8,888	$20,824	$19,042	$4,774

Dorothy Facility Update and Potential Contribution

Once the Company energizes Dorothy, anticipated to be one of the lowest cost facilities of its kind in North America, it will continue to refine the economic model of the first 50MW of this 100MW site. The table below updates a recent illustration of the earnings power of the site for current economic conditions, including current Bitcoin pricing and network hashrate.

Illustrative Monthly Earnings Power of Dorothy (Bitmain XP chips, $ in 000)
Illustrative Summary of Monthly Cash Contribution to Soluna from Dorothy
($ in 000)	100% Hosting	50% / 50%	100% Prop
Dorothy 1A	311	539	766
Dorothy 1B	458	792	1,127
Total	769	1,331	1,893

Note: Represents non-GAAP financial metrics and forward looking statements.

Note: Assumes $17k BTC price, 270 EH / s network hash rate, 90% capacity factor, 95% availability factor, and estimated $35 / kWh average annual power costs (including assumed seasonal demand fees and taxes). Hosting contract based on $60 / kWh fixed rate. Assumes that purchased and hosted machines are 140 Th/s Bitmain XPs.

A presentation detailing the Q3 2022 earnings can be found on the company website at www.solunacomputing.com/investors/

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 cryptocurrency 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.’

For more information about Soluna, please visit www.solunacomputing.com or follow us on LinkedIn at linkedin.com/solunaholdings and Twitter @SolunaHoldings.

Forward Looking Statements

The statements in this press release with respect to the progress of Soluna’s development pipeline and the ability to scale the Dorothy project to assist partner organizations constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements reflect management’s current expectations, as of the date of this press release, and are subject to certain risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Actual results could differ materially from those expressed or implied by such forward-looking statements as a result of various factors, including, but not limited to: (1) those risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and other reports filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements.

Adjusted EBITDA to Net Income
(Dollars in thousands)	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Net loss from continuing operations	$	(56,143	)	$	(933	)	$	(79,379	)	$	(2,952	)
Interest expense		1,671			—			7,856			—
Income tax (benefit) expense		(547	)		—			(1,344	)		3
Depreciation and amortization		8,388			157			22,999			381
EBITDA		(46,631	)		(776	)		(49,867	)		(2,568	)
Adjustments: Non-cash items
Stock-based compensation costs		890			334			2,868			1,422
Loss on sale of fixed assets		988			—			2,606			—
Loss on debt extinguishment and revaluation		12,317			—			12,317			—
Impairment of equity investment		750			—			750			—
Impairment on fixed assets		28,086			—			28,836			—
Adjustments: Non-recurring items
Exchange registration expenses					—			—			293
Adjusted EBITDA	$	(3,600	)	$	(442	)	$	(2,490	)	$	(853	)

Reconciliation of Non-GAAP Results Reconciliation from Operating (Loss) Income to Adjusted EBITDA Contribution (Non-GAAP)
	Q3 2022
	Soluna Computing
	Edith	Marie	Sophie	Dorothy	Corporate	Total	Corporate	Consolidated
Net Income (Loss) (GAAP)	(17)	(13,229)	(20,067)	(917)	(4,617)	(38,847)	(17,296)	(56,143)
						-		-
Interest		424				424	1,247	1,671
Income tax (benefit) expense					(547)	(547)		(547)
Depreciation & amortization	96	2,308	3,605		2,374	8,383	5	8,388
EBITDA	79	(10,497)	(16,462)	(917)	(2,790)	(30,587)	(16,044)	(46,631)
Adjustments: Non-cash items
Stock-based compensation costs		9	7	3	321	340	550	890
Loss on sale of fixed assets	(24)				1,012	988		988
Loss on debt extinguishment and revaluation						-	12,317	12,317
Impairment of equity investment						-	750	750
Impairment on fixed assets		10,510	17,474			27,984	102	28,086
						-		-
Adjusted EBITDA Contribution (Non-GAAP)	55	22	1,019	(914)	(1,457)	(1,275)	(2,325)	(3,600)

Soluna Holdings, Inc. and Subsidiaries Condensed Consolidated Balance Sheets As of September 30, 2022 (Unaudited) and December 31, 2021
(Dollars in thousands, except per share)
	September 30,			December 31,
	2022			2021
Assets
Current Assets:
Cash	$	1,083		$	10,258
Accounts receivable		2,029			531
Prepaid expenses and other current assets		1,621			977
Deposits on equipment		1,175			10,188
Current assets associated with discontinued operations		—			3,028
Total Current Assets		5,908			24,982
Other assets		1,190			1,121
Equity investment		—			750
Property, plant and equipment, net		63,511			44,597
Intangible assets, net		38,842			45,839
Operating lease right-of-use assets		282			405
Total Assets	$	109,733		$	117,694
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	3,843		$	2,958
Accrued liabilities		2,477			2,859
Line of credit		650			1,000
Notes payable		13,281			7,121
Current portion of debt		6,462			—
Deferred revenue		434			316
Operating lease liability		186			184
Income taxes payable		2			2
Current liabilities associated with discontinued operations		—			1,243
Total Current Liabilities		27,335			15,683
Other liabilities		201			509
Long term debt		3,841			—
Operating lease liability		109			237
Deferred tax liability, net		8,929			10,277
Total Liabilities		40,415			26,706
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, 2022 and 1,252,299 shares issued and outstanding as of December 31, 2021		3			1
Series B Preferred Stock, par value $0.0001 per share, authorized 187,500; 62,500 shares issued and outstanding as of September 30, 2022 and 0 shares issued and outstanding as of December 31, 2021		—			—
Common stock, par value $0.001 per share, authorized 75,000,000; 16,413,584 shares issued and 15,395,068 shares issued and outstanding as of September 30, 2022 and 14,769,699 shares issued and 13,754,206 shares issued and outstanding as of December 31, 2021		16			15
Additional paid-in capital		273,484			227,790
Accumulated deficit		(194,409	)		(123,054	)
Common stock in treasury, at cost, 1,018,516 shares at September 30, 2022 and 1,015,493 shares at December 31, 2021		(13,798	)		(13,764	)
Total Soluna Holdings, Inc. Stockholders’ Equity		65,296			90,988
Non-Controlling Interest		4,022			—
Total Stockholders’ Equity		69,318			90,988
Total Liabilities and Stockholders’ Equity	$	109,733		$	117,694

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

Soluna Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) For the Three and Nine Months Ended September 30, 2022 and 2021 (Dollars in thousands, except per share)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022				2021
Cryptocurrency mining revenue	$	5,387		$	2,018		$	20,696		$		4,670
Data hosting revenue		985			1,106			3,668				1,106
Total revenue		6,372			3,124			24,364				5,776
Operating costs:
Cost of cryptocurrency mining revenue, exclusive of depreciation		4,100			623			11,092				1,272
Depreciation costs associated with cryptocurrency mining		6,010			156			15,872				380
Total cost of cryptocurrency mining revenue		10,110			779			26,964				1,652
Cost of data hosting revenue		1,078			964			3,192				964
Operating expenses:
General and administrative expenses, exclusive of depreciation and amortization		5,686			2,316			15,441				6,118
Depreciation and amortization associated with general and administrative expenses		2,378			1			7,127				1
Total general and administrative expenses		8,064			2,317			22,568				6,119
Impairment on equity investment		750						750
Impairment on fixed assets		28,086			-			28,836				-
Operating loss		(41,716	)		(936	)		(57,946	)			(2,959	)
Interest expense		(1,671	)		-			(7,856	)			-
Loss on debt extinguishment and revaluation		(12,317	)		-			(12,317	)			-
Loss on sale of fixed assets		(988	)		-			(2,606	)			-
Other income, net		2			3			2				10
Loss before income taxes from continuing operations		(56,690	)		(933	)		(80,723	)			(2,949	)
Income tax benefit (expense) from continuing operations		547			-			1,344				(3	)
Net loss from continuing operations		(56,143	)		(933	)		(79,379	)			(2,952	)
(Loss) Income before income taxes from discontinued operations (including (loss) gain on sale of MTI Instruments of $(21) and $7,581 for three and nine months ended September 30, 2022)		(21	)		323			7,681				500
Income tax benefit from discontinued operations		-			-			70				-
Net (loss) income from discontinued operations		(21	)		323			7,751				500
Consolidated net loss		(56,164	)		(610	)		(71,628	)			(2,452	)
(Less) Net loss attributable to non-controlling interest		272			-			272				-
Net loss attributable to Soluna Holdings, Inc.	$	(55,892	)	$	(610	)	$	(71,356	)		$	(2,452	)
Basic and Diluted (loss) earnings per common share:
Net loss from continuing operations per share (Basic & Diluted)	$	(3.94	)	$	(0.09	)	$	(5.74	)		$	(0.27	)
Net income from discontinued operations per share (Basic & Diluted)	$	-		$	0.03		$	0.53			$	0.04
Basic & Diluted loss per share	$	(3.94	)	$	(0.06	)	$	(5.21	)		$	(0.23	)
Weighted average shares outstanding (Basic and Diluted)		14,698,013			12,702,393			14,494,356				11,413,678

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

Soluna Holdings, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2022 and 2021 (Dollars in thousands)
	Nine Months Ended September 30,
	2022			2021
Operating Activities
Net loss	$	(71,628	)	$	(2,452	)
Net income from discontinued operations (including gain on sale of MTI Instruments of $7,581 for the nine months ended September 30, 2022)		(7,751	)		(500	)
Net loss from continuing operations		(79,379	)		(2,952	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		22,999			381
Stock-based compensation		2,747			1,373
Consultant stock compensation		121			49
Deferred income taxes		(1,344	)		-
Impairment on fixed assets		28,836			-
Amortization of operating lease asset		151			121
Impairment on equity investment		750			-
Loss on debt extinguishment and revaluation		12,317			-
Amortization on deferred financing costs and discount on notes		6,630			-
Loss (gain) on sale of fixed assets		2,606			(6	)
Changes in operating assets and liabilities:
Accounts receivable		(1,498	)		(108	)
Prepaid expenses and other current assets		(154	)		(628	)
Other long-term assets		(69	)		(754	)
Accounts payable		884			3,590
Deferred revenue		118			183
Operating lease liabilities		(148	)		(111	)
Other liabilities		(306	)		306
Accrued liabilities		(382	)		937
Net cash (used in) provided by operating activities		(5,121	)		2,381
Net cash provided by operating activities- discontinued operations		369			496
Investing Activities
Purchases of equipment		(61,867	)		(17,632	)
Purchases of intangible assets		(114	)		-
Proceeds from disposal on equipment		2,525			-
Deposits of equipment, net		6,441			(5,656	)
Net cash used in investing activities		(53,015	)		(23,288	)
Net cash provided by (used in) investing activities- discontinued operations		9,004			(37	)
Financing Activities
Proceeds from preferred offering		16,658			20,165
Proceeds from common stock offering		-			17,250
Proceeds from notes and debt issuance		29,736			-
Costs of preferred offering		(1,910	)		(1,867	)
Costs of common stock offering		-			(1,847	)
Costs of notes and short term debt issuance		(6,269	)		-
Cash dividend distribution on preferred stock		(3,852	)		(176	)
Contributions from non-controlling interest		4,293			-
Proceeds from stock option exercises		153			101
Proceeds from common stock warrant exercises		779			9
Net cash provided by financing activities		39,588			33,635
(Decrease) increase in cash-continuing operations		(18,548	)		12,728
Increase in cash- discontinued operations		9,373			459
Cash – beginning of period		10,258			2,630
Cash – end of period	$	1,083		$	15,817
Supplemental Disclosure of Cash Flow Information
Noncash equipment financing		4,620			-
Interest paid on NYDIG loans		1,148			-
Proceed receivable from sale of MTI Instruments		205			-
Notes converted to common stock		2,441			-
Warrant consideration in relation to promissory notes and convertible notes		14,602			-
Promissory note conversion to preferred shares		15,236			-
Noncash proceed on sale of equipment		290			-
Purchase of miner equipment using restricted stock		-			(207	)
Registration fees in prepaids and accounts payable		-			(8	)

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