Hosting revenue of $4.1 million, BTC Equivalent Mined 883

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, announced financial results for the full year ended December 31, 2022.

Michael Toporek, CEO of Soluna Holdings, stated, "The last 18 months have proven to be challenging for the entire sector. Our team has risen to the occasion and repositioned the Company for future success and to not only have innovative low-cost facilities, but to drive to achieve the scale necessary to have meaningful corporate level Adjusted EBITDA once Project Dorothy is scaled."

Toporek further added, "These accomplishments have come as we have reduced headcount and operating costs while focusing our resources to achieve maximum return on investment."

Fiscal Year 2022 Financial and Recent Operational Highlights

Project Dorothy regulatory approval for 100MW, Energization expected in April.
Effectuated significant cost reductions through headcount reductions, efficiencies, and focusing resources.
Developed project pipeline to help more renewable energy power plants benefit from monetizing curtailed energy.
Fully ramped project Sophie by March of last year with an operational capacity of 25 MW.
Proprietary-mining produced 883 equivalent in Bitcoin for 2022.
Cryptocurrency mining revenue of $24.4 million for 2022.
Data hosting revenue of $4.1 million for 2022.

Fiscal Year 2022 Financial Results

Total revenue in 2022 increased by 99% to $28.5 million compared to $14.3 million in 2021. The increase is attributable to the significant increase in mining operations at the Project Sophie facility following the March 2022 full energization. Adjusted EBITDA was -$4.6 million for 2022 compared to $1.5 million in 2021.

The total cost of revenue excluding depreciation as a percentage of revenue increased to 62% in 2022 compared to 41% in 2021 primarily driven by a decline in Bitcoin pricing and increases in energy costs.

General and administrative expenses, exclusive of depreciation and amortization and stock-based compensation, for the year ending on December 31, 2022, increased by $8.2 million, or 115%, to $15.3 million from $7.1 million for the year ending on December 31, 2021. This increase was driven by an increase in personnel costs of $4.6 million during the year ending on December 31, 2022, compared to the year ending on December 31, 2021, driven by the acquisition and ramp of the Soluna Computing Inc. business unit. Stock-based compensation costs were $3.9 million for 2022 and $2.0 million for 2021 an increase of $1.9 million.

Legal fees increased by approximately $1.5 million during the year ending on December 31, 2022, compared to the year ending on December 31, 2021, due to legal expenses of approximately $1.2 million in relation to Project Dorothy. In addition, there was an increase of approximately $500 thousand in relation to general corporate matters associated with the growth of the business.

Consulting and professional services increased by $959 thousand during the year ending on December 31, 2022, compared to the year ending on December 31, 2021, due to required valuations of complex transactions, advisory fees for complex accounting research matters, and pipeline development project costs, in which the Company involves multiple consultants to help build out future plans.

The audited 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.

Non-GAAP Measures

In addition to financial measures calculated in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), we also use "Adjusted EBITDA." Adjusted EBITDA is a non-GAAP financial measure defined as net income (loss) from continuing operations before interest, taxes, depreciation, and amortization ("EBITDA") adjusted to eliminate the effects of certain non-cash, non-recurring items, that we believe do not reflect our ongoing strategic business operations. Management believes that Adjusted EBITDA results in a performance measurement that represents a key indicator of the Company's business operations of cryptocurrency mining and hosting customers engaged in cryptocurrency mining.

We believe Adjusted EBITDA can be an important financial measure because it allows management, investors, and the Board to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period to period by making such adjustments. Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with U.S. GAAP. For example, we expect that stock-based compensation costs, which is excluded from the non-GAAP financial measures, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers, and directors. Similarly, we expect that depreciation and amortization of fixed assets will continue to be a recurring expense over the term of the useful life of the assets.

Adjusted EBITDA is provided in addition to and should not be considered to be a substitute for, or superior to net income, the comparable measure calculated in accordance with U.S. GAAP. Further, Adjusted EBITDA should not be considered as an alternative to revenue growth, net income, diluted earnings per share or any other performance measure calculated in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. Adjusted EBITDA has limitations as an analytical tool, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under U.S. GAAP.

Reconciliations of Adjusted EBITDA to net income from continuing operations, the most comparable U.S. GAAP financial metric, are presented in the table following the financial statements prepared according to U.S. GAAP.

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 Consolidated Balance Sheets As of December 31, 2022 and December 31, 2021

(Dollars in thousands, except per share)

	December 31,			December 31,
	2022			2021
Assets
Current Assets:
Cash	$	1,136		$	10,258
Restricted cash		685			—
Accounts receivable		320			531
Prepaid expenses and other current assets		1,326			977
Deposits on equipment		1,175			10,188
Current assets associated with discontinued operations		—			3,028
Total Current Assets		4,642			24,982
Other assets		1,150			1,121
Equity investment		—			750
Property, plant and equipment, net		42,504			44,597
Intangible assets, net		36,432			45,839
Operating lease right-of-use assets		233			405
Total Assets	$	84,961		$	117,694

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	3,548		$	2,958
Accrued liabilities		2,721			2,859
Line of credit		350			1,000
Convertible notes payable		11,737			7,121
Current portion of debt		10,546			—
Deferred revenue		453			316
Operating lease liability		161			184
Income taxes payable		—			2
Current liabilities associated with discontinued operations		—			1,243
Total Current Liabilities		29,516			15,683

Other liabilities		203			509
Long term debt		—			—
Operating lease liability		84			237
Deferred tax liability, net		8,886			10,277
Total Liabilities		38,689			26,706

Commitments and Contingencies (Note 14)

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 December 31, 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 December 31, 2022 and 0 shares issued and outstanding as of December 31, 2021		—			—


Common stock, par value $0.001 per share, authorized 75,000,000; 19,712,722 shares issued and 18,694,206 shares issued and outstanding as of December 31, 2022 and 14,769,699 shares issued and 13,754,206 shares issued and outstanding as of December 31, 2021		20			15
Additional paid-in capital		277,410			227,790
Accumulated deficit		(221,769	)		(123,054	)
Common stock in treasury, at cost, 1,018,516 shares at December 31, 2022 and 1,015,493 shares at December 31, 2021		(13,798	)		(13,764	)
Total Soluna Holdings, Inc. Stockholders' Equity		41,866			90,988
Non-Controlling Interest		4,406			—
Total Stockholders' Equity		46,272			90,988
Total Liabilities and Stockholders' Equity	$	84,961		$	117,694

Soluna Holdings, Inc. and Subsidiaries Consolidated Statements of Operations For the Years Ended December 31, 2022 and 2021 (Dollars in thousands, except per share)

	Year Ended
	December 31,
	2022			2021

Cryptocurrency mining revenue	$	24,409		$	10,932
Data hosting revenue		4,138			3,413
Total revenue		28,547			14,345
Operating costs:
Cost of cryptocurrency mining revenue, exclusive of depreciation		14,281			3,504
Depreciation costs associated with cryptocurrency mining		18,708			2,122
Total cost of cryptocurrency mining revenue		32,989			5,626
Cost of data hosting revenue		3,517			2,444
Operating expenses:
General and administrative expenses, exclusive of depreciation and amortization		19,203			9,170
Depreciation and amortization associated with general and administrative expenses		9,506			1,581
Total general and administrative expenses		28,709			10,751
Impairment on equity investment		750			-
Impairment on fixed assets		47,372			-
Operating loss		(84,790	)		(4,476	)
Interest expense		(8,375	)		(1,879	)
Loss on debt extinguishment and revaluation, net		(11,130	)		-
Loss on sale of fixed assets		(4,089	)		-
Other income, net		22			11
Loss before income taxes from continuing operations		(108,362	)		(6,344	)
Income tax benefit (expense) from continuing operations		1,346			(44	)
Net loss from continuing operations		(107,016	)		(6,388	)
Income before income taxes from discontinued operations (including gain on sale of MTI Instruments of $7,751 for year ended December 31, 2022)		7,921			1,087
Income tax benefit from discontinued operations		-			40
Net income from discontinued operations		7,921			1,127
Net loss		(99,095	)		(5,261	)
(Less) Net loss attributable to non-controlling interest		380			-
Net loss attributable to Soluna Holdings, Inc.	$	(98,715	)	$	(5,261	)

Basic and Diluted (loss) earnings per common share:
Net loss from continuing operations per share (Basic & Diluted)	$	(7.42	)	$	(0.59	)
Net income from discontinued operations per share (Basic & Diluted)	$	0.53		$	0.09
Basic & Diluted loss per share	$	(6.89	)	$	(0.50	)

Weighted average shares outstanding (Basic and Diluted)		14,982,510			11,840,242

Soluna Holdings, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Year Ended December 31, 2022 and 2021 (Dollars in thousands)

	Year Ended December 31,
	2022			2021
Operating Activities
Net loss	$	(99,095	)	$	(5,261	)
Net income from discontinued operations (including gain on sale of MTI Instruments of $7,751 for the year ended December 31, 2022)		(7,921	)		(1,127	)
Net loss from continuing operations		(107,016	)		(6,388	)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation expense		18,731			2,124
Amortization expense		9,483			1,579
Stock-based compensation		3,673			1,941
Consultant stock compensation		179			104
Deferred income taxes		(1,388	)		41
Impairment on fixed assets		47,372			-
Amortization of operating lease asset		202			169
Impairment on equity investment		750			-
Loss on debt extinguishment and revaluation, net		11,130			-
Amortization on deferred financing costs and discount on notes		6,538			1,876
Loss on sale of fixed assets		4,089			-
Changes in operating assets and liabilities:
Accounts receivable		211			(471	)
Prepaid expenses and other current assets		146			(956	)
Other long-term assets		(29	)		(812	)
Accounts payable		553			2,765
Deferred revenue		137			316
Operating lease liabilities		(197	)		(156	)
Other liabilities		(308	)		306
Accrued liabilities		(374	)		2,197
Net cash (used in) provided by operating activities		(6,118	)		4,635
Net cash provided by operating activities- discontinued operations		369			917
Investing Activities
Purchases of property, plant, and equipment		(63,684	)		(45,792	)
Purchases of intangible assets		(76	)		(1,567	)
Proceeds from disposal on property, plant, and equipment		2,605			-
Deposits of equipment, net		6,441			(9,909	)
Net cash used in investing activities		(54,714	)		(57,268	)
Net cash provided by (used in) investing activities- discontinued operations		9,084			(37	)
Financing Activities
Proceeds from preferred offerings		16,658			27,965
Proceeds from common stock offering		2,858			17,250
Proceeds from notes and debt issuance		30,543			15,000
Costs of preferred offering		(1,910	)		(2,707	)
Costs of common stock offering		(504	)		(1,847	)
Costs of notes and short-term debt issuance		(2,078	)		(1,338	)
Cash dividend distribution on preferred stock		(3,852	)		(630	)
Borrowings under line of credit		-			1,000
Payments on NYDIG loans and line of credit		(4,491	)		-
Contributions from non-controlling interest		4,786			-
Proceeds from stock option exercises		153			102
Proceeds from common stock warrant exercises		779			4,586
Net cash provided by financing activities		42,942			59,381

(Decrease) increase in cash & restricted cash-continuing operations		(17,890	)		6,748
Increase in cash & restricted cash- discontinued operations		9,453			880
Cash & restricted cash – beginning of period		10,258			2,630
Cash & restricted cash – end of period	$	1,821		$	10,258

Supplemental Disclosure of Cash Flow Information
Noncash equipment financing		4,620			-
Interest paid on NYDIG loans and line of credit		1,311			6
Proceed receivable from sale of MTI Instruments		295			-
Notes converted to common stock		3,295			-
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		210			-
Purchase of miner equipment using restricted stock		-			(207	)
Registration fees in prepaids and accounts payable		-			(200	)
Termination shares issued in conjunction with merger for intangible assets		-			1,917
Warrants exercised prior to year-end not received until subsequent period		-			206
Share consideration in relation to strategic pipeline contract		-			33,000
Deferred tax liability in relation to strategic pipeline contract		-			10,934

Adjusted EBITDA Full Year 2021 and 2022

(Dollars in thousands)	Years Ended December 31,
	2022			2021

Net loss from continuing operations	$	(107,016	)	$	(6,388	)
Interest expense		8,375			1,879
Income tax (benefit) expense		(1,346	)		44
Depreciation and amortization		28,214			3,703
EBITDA		(71,773	)		(762	)

Adjustments: Non-cash items

Stock-based compensation costs		3,852			1,941
Loss on sale of fixed assets		4,089			—
Loss on debt extinguishment and revaluation, net		11,130			—
Impairment of equity investment		750			—
Impairment on fixed assets		47,372			—
Adjustments: Non-recurring items
Exchange registration expenses		—			293
Adjusted EBITDA	$	(4,580	)	$	1,472

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