Ramps Project Dorothy and Kicks Off New Business Plan

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, reported financial results for the first quarter ended March 31, 2023.

John Belizaire, CEO of Soluna Holdings, said, "Soluna has been busy the last few months. In the first quarter, we began our transition to a new business model, focused on monetizing our sites through hosting and joint ventures. We continue to reduce G&A costs to put us on a trajectory to reach positive cash flows from operations. We expect the first two quarters of this year to be transition quarters as we ramp up Project Dorothy and Project Sophie's new hosting customers. In the coming weeks I will provide a more fulsome Earnings Power Illustration for our shareholders."

Operating Highlights:

Revenue:

Completed Project Dorothy interconnection work and received ERCOT approval to energize.
Project Dorothy 1A: 25 MW of hosting contracts executed with strategic customers. Thousands of machines are being delivered the week of May 15th as the facility ramps up.
Project Dorothy 1B: Secured Navitas Global as investment partner for $14 million proprietary mining partnership. Construction is currently being completed and we expect it to energize in June 2023.
Project Sophie: Secured 25 MW hosting agreement with Sustainability-focus Bitcoin Miner.

Expenses:

Continued G&A expense reductions.

Capital Structure:

Obtained a 14-month Extension from October Noteholders, to July 25, 2024.
Returned approximately $3 million of collateral to NYDIG.
Decommissioned Project Marie facility in Kentucky.

Financial Summary:

Key financial results for the first quarter include:

Total revenue in the first quarter of 2023 decreased by 67% to $3.1 million compared to $9.3 million in the first quarter of 2022. The decrease is primarily attributable to decommissioning of Project Marie impacting both proprietary mining and hosting. In addition, the average Bitcoin pricing decreased by 45% in the first quarter of 2023 versus the first quarter of 2022.
Net loss improved from $8.9 million in the first quarter of 2022 to $7.1 million in the first quarter of 2023 - due mainly to a reduction in depreciation expense, which resulted from an impairment charge at the end of 2022 and cost reductions implemented during the first quarter.
General and Administrative expenses declined by 10% to $4.4 million in the first quarter of 2023, as compared to $4.9 million in the first quarter of 2022, primarily due to cost reductions related to salaries and benefits, consulting and professional fees, offset in part by an increase in investor relations costs. Stock compensation in the first quarter 2023 was $847 thousand versus $927 thousand in the first quarter of 2022.
Non-GAAP Adjusted EBITDA for the quarter ended March 31, 2023, was negative ($2.9) million, as compared to positive $853 thousand in the first 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 March 31, 2023 (Unaudited) and December 31, 2022


(Dollars in thousands, except per share)


	March 31,			December 31,
	2023			2022
Assets
Current Assets:
Cash	$	4,553		$	1,136
Restricted cash		493			685
Accounts receivable		452			320
Prepaid expenses and other current assets		1,346			1,326
Deposits on equipment		975			1,175
Total Current Assets		7,819			4,642
Other assets		2,950			1,150
Property, plant and equipment, net		38,808			42,504
Intangible assets, net		34,087			36,432
Operating lease right-of-use assets		577			233
Total Assets	$	84,241		$	84,961

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	3,822		$	3,548
Accrued liabilities		2,847			2,721
Line of credit		135			350
Convertible notes payable		10,270			11,737
Current portion of debt		7,758			10,546
Deferred revenue		—			453
Operating lease liability		205			161
Total Current Liabilities		25,037			29,516

Other liabilities		307			203
Operating lease liability		379			84
Deferred tax liability, net		8,339			8,886
Total Liabilities		34,062			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 March 31, 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 March 31, 2023 and December 31, 2022		—			—

Common stock, par value $0.001 per share, authorized 75,000,000; 26,433,162 shares issued and 25,414,646 shared outstanding as of March 31, 2023 and 19,712,722 shares issued and 18,694,206 shares outstanding as of December 31, 2022		26			20
Additional paid-in capital		279,985			277,410
Accumulated deficit		(228,831	)		(221,769	)
Common stock in treasury, at cost, 1,018,516 shares at March 31, 2023 and December 31, 2022		(13,798	)		(13,798	)
Total Soluna Holdings, Inc. Stockholders' Equity		37,385			41,866
Non-Controlling Interest		12,794			4,406
Total Stockholders' Equity		50,179			46,272
Total Liabilities and Stockholders' Equity	$	84,241		$	84,961

Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
For the Three Months Ended March 31, 2023 and 2022


(Dollars in thousands, except per share)


	For the three months ended
	March 31,
	2023			2022

Cryptocurrency mining revenue	$	2,796		$	7,812
Data hosting revenue		286			1,504
Total revenue		3,082			9,316
Operating costs:
Cost of cryptocurrency mining revenue, exclusive of depreciation		2,299			3,397
Depreciation costs associated with cryptocurrency mining		625			4,324
Total cost of cryptocurrency mining revenue		2,924			7,721
Cost of data hosting revenue		214			1,138
Operating expenses:
General and administrative expenses, exclusive of depreciation and amortization		4,370			4,882
Depreciation and amortization associated with general and administrative expenses		2,377			2,373
Total general and administrative expenses		6,747			7,255
Impairment on fixed assets		209			-
Operating loss		(7,012	)		(6,798	)
Interest expense		(1,374	)		(2,881	)
Gain on debt revaluation, net		473			-
Loss on sale of fixed assets		(78	)		-
Other income, net		12			-
Loss before income taxes from continuing operations		(7,979	)		(9,679	)
Income tax benefit from continuing operations		547			547
Net loss from continuing operations		(7,432	)		(9,132	)
Income before income taxes from discontinued operations		-			226
Income tax benefit from discontinued operations		-			-
Net income from discontinued operations		-			226
Net loss		(7,432	)		(8,906	)
(Less) Net loss attributable to non-controlling interest		370			-
Net loss attributable to Soluna Holdings, Inc.	$	(7,062	)	$	(8,906	)

Basic and Diluted (loss) earnings per common share:
Net loss from continuing operations per share (Basic & Diluted)	$	(0.35	)	$	(0.71	)
Net income from discontinued operations per share (Basic & Diluted)	$	-		$	0.02
Basic & Diluted loss per share	$	(0.35	)	$	(0.69	)

Weighted average shares outstanding (Basic and Diluted)		21,621,320			13,870,646

Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2023 and 2022


(Dollars in thousands)


	Three Months Ended March 31,
	2023			2022
Operating Activities
Net loss	$	(7,432	)	$	(8,906	)
Net income from discontinued operations		-			(226	)
Net loss from continuing operations		(7,432	)		(9,132	)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation expense		632			4,328
Amortization expense		2,369			2,369
Stock-based compensation		847			927
Consultant stock compensation		32			28
Deferred income taxes		(547	)		(547	)
Impairment on fixed assets		209			-
Amortization of operating lease asset		56			50
Gain on debt revaluation, net		(473	)		-
Amortization on deferred financing costs and discount on notes		501			2,447
Loss on sale of fixed assets		78			-
Changes in operating assets and liabilities:
Accounts receivable		41			206
Prepaid expenses and other current assets		(26	)		(594	)
Other long-term assets		(300	)		59
Accounts payable		1,368			1,405
Deferred revenue		(453	)		(9	)
Operating lease liabilities		(54	)		(49	)
Other liabilities		104			-
Accrued liabilities		(5	)		(687	)
Net cash (used in) provided by operating activities		(3,053	)		801
Net cash provided by operating activities- discontinued operations		-			510
Investing Activities
Purchases of property, plant, and equipment		(860	)		(25,438	)
Purchases of intangible assets		(24	)		(40	)
Proceeds from disposal on property, plant, and equipment		249			-
Deposits of equipment, net		200			(2,590	)
Net cash used in investing activities		(435	)		(28,068	)
Net cash provided by (used in) investing activities- discontinued operations		-			-
Financing Activities
Proceeds from preferred offerings		-			1,170
Proceeds from common stock securities purchase agreement offering		41			-
Proceeds from notes and debt issuance		900			19,767
Costs of preferred offering		-			(155	)
Costs of common stock securities purchase agreement offering		(4	)		-
Costs of notes and short-term debt issuance		-			(465	)
Cash dividend distribution on preferred stock		-			(749	)
Payments on NYDIG loans and line of credit		(215	)		(980	)
Contributions from non-controlling interest		5,991			-
Proceeds from common stock warrant exercises		-			738
Net cash provided by financing activities		6,713			19,326

Increase (decrease) in cash & restricted cash-continuing operations		3,225			(7,941	)
Increase in cash & restricted cash- discontinued operations		-			510
Cash & restricted cash – beginning of period		1,821			10,258
Cash & restricted cash – end of period	$	5,046		$	2,827

Supplemental Disclosure of Cash Flow Information
Noncash equipment financing		-			4,620
Interest paid on NYDIG loans and line of credit		6			345
Noncash disposal of NYDIG collateralized equipment		3,388			-
Notes converted to common stock		1,394			1,342
Warrant consideration in relation to promissory notes and convertible notes		-			2,257
Promissory note and interest conversion to common shares		401			-
Registration fees in prepaids and accounts payable		-			(58	)
Noncash non-controlling interest contributions		2,767			-
Series B preferred dividend in accrued expense		(131	)		-
Noncash activity right-of-use assets obtained in exchange for lease obligations		397			-

Reconciliations of Adjusted EBITDA to net income from continuing operations, the most comparable GAAP financial metric, for historical periods are presented in the table below:

(Dollars in thousands)	March 31, 2023			March 31, 2022

Net loss from continuing operations	$	(7,432	)	$	(9,132	)
Interest expense, net		1,374			2,880
Income tax benefit		(547	)		(547	)
Depreciation and amortization		3,002			6,697
EBITDA		(3,603	)		(102	)
Adjustments- Non-cash items

Stock-based compensation costs		879			955
Impairment on fixed assets		209			-
Loss on sale of fixed assets		78			-
Gain on debt revaluation, net		(473	)		-
Adjusted EBITDA	$	(2,910	)	$	853

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