Soluna Holdings, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; it does not provide a complete standalone fourth-quarter income statement. Unless noted otherwise, amounts below are in U.S. dollars.
Business context
Soluna develops and operates modular data centers that use surplus renewable energy for Bitcoin mining, Bitcoin hosting, and grid demand-response services. AI cloud and colocation services are a planned future business. At year-end, the company reported 75 MW operating across Sophie and Dorothy, with 216 MW in development or near shovel-ready and a 2 GW longer-term project pipeline.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue | $21.1 million | $28.5 million |
| Gross profit (revenue less cost of revenue) | $5.2 million; approximately 24.9% margin | Gross loss of $8.0 million |
| Operating loss | $20.2 million | $84.8 million |
| Net loss from continuing operations | $27.7 million | $107.0 million |
| Net loss attributable to Soluna | $29.2 million | $98.7 million |
| Adjusted EBITDA (non-GAAP) | Loss of $3.5 million | Loss of $4.6 million |
| Net cash used in operating activities | $3.0 million | $6.1 million |
| Capital expenditures | $12.7 million | $63.7 million |
FY2023 total revenue fell 26%. Bitcoin mining revenue decreased 57% to $10.6 million, while data hosting revenue increased 146% to $10.2 million; demand-response revenue was $268,000. The company reported fourth-quarter net loss from continuing operations of $5.0 million and positive fourth-quarter Adjusted EBITDA of $1.0 million.
At December 31, 2023, cash was $6.4 million and restricted cash was $4.0 million. Working capital was negative $13.9 million. Current liabilities were $28.2 million. Balance-sheet debt included $8.5 million of convertible notes at fair value and $10.9 million of current debt, including approximately $9.2 million of NYDIG principal and $1.7 million of Navitas debt. Convertible-note principal was approximately $8.7 million. Series A preferred dividends in arrears totaled approximately $8.6 million.
Material changes versus FY2022
- Soluna shifted from primarily proprietary Bitcoin mining toward hosting. Sophie converted to hosting during 2023; Dorothy 1A began hosting and Dorothy 1B ramped proprietary mining.
- Mining revenue declined with the closure of Marie and Sophie’s business-model change, partly offset by Dorothy 1B’s ramp. Hosting growth reflected Dorothy 1A and Sophie, partly offset by Marie’s closure.
- Operating loss improved substantially, largely because FY2022 included $47.4 million of fixed-asset impairment and higher depreciation. FY2023 impairment was $575,000; management said depreciation could rise as recent capital additions enter service.
- Operating cash use narrowed, while capital expenditures also fell sharply. Financing included $20.4 million of non-controlling-interest contributions, principally at Dorothy projects.
- FY2022 included $7.9 million of discontinued-operation income, largely the gain from selling MTI Instruments; there was no comparable discontinued-operation income in FY2023.
Outlook, risks, contingencies, and unusual items
- Going concern: The auditor and management disclosed substantial doubt about the company’s ability to continue as a going concern within one year after the April 1, 2024 financial-statement issuance date. Soluna reported recurring losses, a $251.0 million accumulated deficit, negative working capital, and dependence on additional financing or improved operating results. The audit opinion was unmodified but included a going-concern emphasis.
- Funding and debt: The company expects to seek project financing and debt or equity capital. Convertible notes were due July 25, 2024, subject to extension options under a February 2024 amendment; extensions increase principal. Failure to repay, extend, or refinance debt could result in default. Equity financing and warrant or note conversions may dilute shareholders.
- Projects and strategy: Management advanced plans for Dorothy 2, a further 50 MW phase, and signed a term sheet for the 166 MW Kati project. Dorothy 2 cleared ERCOT modeling early in 2024. These developments are plans, not completed capacity. AI hosting remains a future initiative and depends on financing, customer demand, and availability of advanced chips.
- Market and operating risks: Results are exposed to Bitcoin prices, network difficulty, the April 2024 halving, electricity prices and availability, curtailment, equipment supply, construction and permitting delays, customer concentration, and evolving crypto, energy, and environmental regulation.
- Litigation: NYDIG pursued a deficiency claim following repossession of collateral; the borrower and NYDIG agreed to approximately $9.2 million in outstanding principal, with interest and penalties of approximately $936,000 at year-end. NYDIG also asserted potential parent-company liability, which Soluna disputes. Atlas sought return of approximately $464,000 in prepaid fees and at least $7.9 million in additional damages; Soluna intends to defend. The EPA demand seeks approximately $358,000 plus interest, which the company considers unlikely to have a material adverse outcome.
- Other notable items: Soluna recorded $3.9 million of debt extinguishment and revaluation losses, $1.5 million of other expense (including an approximately $1.0 million NYDIG-related penalty), and corrected prior-period EPS calculations it characterized as immaterial. A 1-for-25 reverse stock split took effect in October 2023. No Series A preferred dividends were declared from October 2022 through the report date.
The company reported effective disclosure controls and internal control over financial reporting as of year-end; the auditor did not provide an ICFR attestation. The auditor identified impairment valuation of the strategic pipeline contract and fair valuation of warrants and convertible notes as critical audit matters.
Important facts for investors to verify
- Liquidity runway, financing availability, and the status and terms of convertible-note repayment, extensions, and potential defaults.
- NYDIG’s final claim, potential exposure beyond the borrower, and developments in the Atlas litigation.
- Whether Dorothy 2 and Kati obtain financing, permits, power arrangements, and customers, and when planned capacity could generate revenue.
- Actual project-level economics, hosting contract terms, power costs, curtailment revenue, and cash available to the parent after partner interests and debt service.
- Potential dilution from outstanding warrants, convertible securities, preferred obligations, and equity-plan capacity.
- Whether the company can sustain operating cash-flow improvement while funding planned capital spending and managing the Bitcoin halving’s effects.