Soluna Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 15, 2024. Unless otherwise noted, financial figures are in USD millions. Soluna develops and operates modular data centers using renewable energy for Bitcoin mining, hosting, demand-response services and planned AI computing.
Business context and operating footprint
- The company reported 75 MW operating across two locations: 25 MW at Project Sophie, focused on Bitcoin hosting, and 50 MW at Project Dorothy in Texas, comprising 25 MW of hosting (Dorothy 1A) and 25 MW of mining (Dorothy 1B).
- Management described a further 216 MW in development or near shovel-ready and a 2 GW longer-term project pipeline. These are plans, not operating capacity.
- Project Marie was decommissioned in February 2023 following NYDIG’s repossession of collateral and termination of its hosting arrangement. Sophie shifted from proprietary mining to hosting in 2023.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $12.549 | $3.082 |
| Cryptocurrency mining revenue | $6.396 | $2.796 |
| Data hosting revenue | $5.278 | $0.286 |
| Demand-response revenue | $0.875 | — |
| Cost of revenue | $5.615 | $3.148 |
| Operating income (loss) | $0.407 | $(7.012) |
| Consolidated net loss | $(2.544) | $(7.432) |
| Net loss attributable to Soluna Holdings | $(5.254) | $(7.062) |
| Basic and diluted loss per share | $(2.62) | $(10.30), revised |
| Operating cash flow | $3.850 | $(3.053) |
Revenue increased about 307%, reflecting Dorothy’s mining operations, expanded hosting at Dorothy and Sophie, and new demand-response revenue. Gross profit was approximately $6.934 million, or 55% of revenue, compared with a gross loss of $0.066 million in Q1 2023. Operating income turned positive, but the company still recorded a net loss. Soluna’s attributable loss exceeded consolidated net loss because $2.710 million of income was attributed to non-controlling interests.
- Management attributed higher mining revenue to a 134% increase in average Bitcoin price and a 26.6% increase in dollar petahash per day versus the prior-year quarter. All Q1 2024 mining revenue came from Dorothy 1B.
- Hosting revenue grew primarily from Dorothy 1A and Sophie. Management cited lower mining costs from operating one facility rather than two and lower power costs at Dorothy 1B.
- Interest expense fell to $0.424 million from $1.374 million. A $3.097 million net loss on debt extinguishment and revaluation partly offset operating improvement; this reflected complex note and warrant amendments and fair-value changes.
- Adjusted EBITDA, a non-GAAP measure, was $5.147 million versus $(2.910) million. It excludes items including depreciation and amortization, stock compensation, impairment, and debt revaluation/extinguishment; it is not a substitute for GAAP earnings or cash flow.
Liquidity, debt and cash flow
- At March 31, cash was $8.438 million; restricted cash was $2.956 million and is not generally available for operating needs. Current assets were $16.996 million and current liabilities $32.498 million, resulting in a $15.502 million working-capital deficit.
- Total liabilities were $41.786 million. Debt balances included $6.216 million of convertible notes and approximately $10.255 million of current debt, primarily NYDIG and Navitas obligations. NYDIG principal was approximately $9.2 million, with about $1.2 million of accrued interest and penalties; Navitas debt was approximately $1.1 million. The filing classifies the NYDIG financing as current following default.
- Cash and restricted cash together increased by $1.027 million during the quarter. Operating cash flow of $3.850 million included substantial non-cash add-backs, while investing used $0.827 million and financing used $1.996 million, including $1.680 million of distributions to non-controlling interests and $0.616 million of Navitas loan payments.
- Management disclosed $3.4 million of capital-expenditure commitments, approximately 95% related to Dorothy 2. The company expects to need additional capital and says funding may involve project-level financing, debt, equity, partnerships or collaborations.
Material changes, outlook and risks
- Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the financial statements, citing losses, negative working capital and significant debt. Continued operations depend on profitable operations and/or obtaining financing; there is no assurance financing will be available on acceptable terms.
- Debt amendments and dilution: A February 2024 amendment reduced the convertible-note conversion price to $3.78, repriced existing warrants and issued additional warrants. The resulting warrant accounting contributed to the quarter’s debt-extinguishment loss and a warrant liability. The amendment’s share issuance implications required stockholder approval; pending approval, the company could not prepay notes below $5 million. The notes were due July 25, 2024, with specified extension options.
- NYDIG dispute: NYDIG repossessed collateral in 2023. The borrower and NYDIG agreed to an approximately $9.2 million principal balance, with additional interest and penalties. NYDIG has pursued collection and post-judgment discovery; it has also asserted a potential claim against a parent company. Soluna disputes parent-company liability and says it intends to defend itself.
- Other litigation: Atlas seeks return of approximately $0.464 million in prepaid fees and damages of at least $7.9 million. In April 2024, a court dismissed three of four counts; the remaining claim and the status of Soluna entities in the case remained contested. The company reports no reserves for other Atlas claims. It considers the EPA matter’s material adverse outcome remote.
- Operating outlook: Management aims to reach 150 MW of assets under management by year-end 2024, construct and energize 48 MW of Dorothy 2, break ground on Kati, and launch a 2 MW AI pilot. These objectives depend on financing, construction, equipment availability, customer demand and other execution risks. No quantified revenue or earnings guidance was provided.
- Market and execution risks: Bitcoin prices, network difficulty and the April 2024 halving affect mining economics; the halving reduced block rewards after quarter-end. Other cited risks include electricity costs and regulation, capital-market access, supply-chain constraints, customer retention and the company’s limited AI/cloud operating history.
- Controls and reporting: Management concluded disclosure controls were not effective at March 31, 2024 due to a material weakness in accounting for a complex debt amendment, including warrant classification. Remediation efforts include stronger review procedures and use of outside specialists. The filing also revised prior-period EPS for identified errors; Q1 2023 loss per share changed from $(8.74) to $(10.30).
Important facts for investors to verify
- Available liquidity after excluding restricted cash, near-term debt and penalty obligations, and the company’s financing plans to address the going-concern uncertainty.
- Current NYDIG litigation and collection status, including the extent of any potential parent-company exposure and the final amounts due.
- Stockholder approval and final terms of the February note-and-warrant amendment, including potential share issuance and dilution.
- Post-quarter capitalization: the company reported 3,921,503 common shares outstanding as of May 9, 2024; it also disclosed April 15 awards of 929,410 common shares and 1,867,300 Series A preferred shares. Verify issuance, vesting, voting and economic effects.
- Whether Dorothy 2, Kati and the AI pilot secure financing, equipment, power arrangements and customers on the timelines management describes.