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Soluna Holdings Reports Q2 Results

Company Boosts Balance Sheet, Optimizes Operations

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

 

 

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