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Nature of Operations

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

1.

Nature of Operations

Description of Business

Unless the context requires otherwise in these notes to the consolidated financial statements, the terms “SHI,” the “Company,” “we,” “us,” and “our” refer to Soluna Holdings, Inc. together with its consolidated subsidiaries, “SCI” refers to Soluna Computing, Inc., formerly known as EcoChain, Inc., and “MTI Instruments” refers to MTI Instruments, Inc.

SHI currently conducts our business through our wholly-owned subsidiary, SCI. SCI is engaged in the mining of cryptocurrency through data centers that can be powered by renewable energy sources. Recently, SCI has built, and intends to continue to develop and build, modular data centers that are used for cryptocurrency mining and that in the future can be used for computing intensive, batchable applications, such as artificial intelligence and machine learning, with the goal of providing a cost-effective alternative to battery storage or transmission lines. Headquartered in Albany, New York, the Company uses technology and intentional design to solve complex, real-world challenges.

SCI incorporated in Delaware on January 8, 2020 as EcoChain, Inc., which operates a cryptocurrency mining facility that integrates with the cryptocurrency blockchain network in the State of Washington. Through the October 2021 acquisition by EcoChain, Inc. of an entity at the time named Soluna Computing, Inc., SCI also has a pipeline of certain cryptocurrency mining projects previously owned by Harmattan Energy, Ltd. (“HEL”) (formerly known as Soluna Technologies, Ltd.), a Canadian corporation incorporated under the laws of the Province of British Colombia that develops vertically-integrated, utility-scale computing facilities focused on cryptocurrency mining and cutting-edge blockchain applications. Following such acquisition, on November 15, 2021, SCI completed its conversion and redomicile to Nevada and changed its name from “EcoChain, Inc.” to “Soluna Computing, Inc.”. The following day, the acquired entity, Soluna Computing, Inc., changed its name to “Soluna Callisto Holdings Inc.” (“Soluna Callisto”).

Until the April 11, 2022 sale described below, we also operated though our wholly owned subsidiary, MTI Instruments, an instruments business engaged in the design, manufacture and sale of vibration measurement and system balancing solutions, precision linear displacement sensors, instruments and system solutions, and wafer inspection tools. MTI Instruments was incorporated in New York on March 8, 2000. MTI Instruments’ products consist of engine vibration analysis systems for both military and commercial aircraft and electronic gauging instruments for position, displacement and vibration application within the industrial manufacturing markets, as well as in the research, design and process development markets. These systems, tools and solutions are developed for markets and applications that require consistent operation of complex machinery and the precise measurements and control of products, processes, and the development and implementation of automated manufacturing and assembly. On December 17, 2021, we announced that we had entered into a non-binding letter of intent with a potential buyer (the “Buyer”) regarding the potential sale of MTI Instruments (the “LOI”) to an unrelated third party. Pursuant to the LOI, the Buyer would acquire 100% of the issued and outstanding common stock of MTI Instruments (the “Sale”). As a result of the foregoing, the MTI Instruments business was reported as discontinued operations in our consolidated financial statements as of December 31, 2021 and prior periods included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022 (our “Annual Report”), as well as in these consolidated financial statements as of March 31, 2022 and prior periods . On April 11, 2022, we consummated the Sale, MTI Instruments ceased to be our wholly-owned subsidiary and, as a result, we have exited the instruments business. See Note 14 for additional information on the Sale.

Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated was incorporated in Nevada on March 24, 2021, and is the successor to Mechanical Technology, Inc., which was incorporated in the State of New York in 1961, as a result of a merger which became effective on March 29, 2021, and is headquartered in Albany, New York. Effective November 2, 2021, the Company changed its name from “Mechanical Technology, Incorporated” to “Soluna Holdings, Inc.”

On April 11, 2022, SHI entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with NKX Acquiror, Inc. (the “Purchaser”), pursuant to which the Company sold on such date all of the issued and outstanding shares of capital stock of its wholly-owned subsidiary, MTI Instruments for approximately $9.25 million in cash, subject to certain adjustments as set forth in the Stock Purchase Agreement. The consideration paid by the Purchaser to the Company was based on an aggregate enterprise value of approximately $10.75 million.

Liquidity

The Company has historically incurred significant losses primarily due to our past efforts to fund direct methanol fuel cell product development and commercialization programs and had a consolidated accumulated deficit of approximately $131.9 million as of March 31, 2022. As of March 31, 2022, the Company had negative working capital of approximately $10.1 million, a line of credit outstanding of $1.0 million, $8.2 million outstanding note payable that can be converted to common stock, received additional equipment financing for up to $14.4 million of which $7.1 million was current, as well as received financing of approximately $10.0 million from promissory notes. The Company had outstanding commitments as of March 31, 2022 related to SCI for $37.3 million for capital expenditures, approximately $801 thousand in cash provided by operating activities for continuing operations, and approximately $2.8 million of cash available to fund our operations.

During the three months ended March 31, 2022, the Company paid approximately $25.4 million in capital expenditures and had approximately $14.8 million outstanding in deposits for equipment. Subsequent to the three months ended March 31, 2022, the Company received the third tranche of financing of approximately $10.0 million from promissory notes. Please refer to Footnote 16 “Subsequent Events”, for further details.

Recently, the Company has seen a decline in the price of Bitcoin due its volatility, which could have material and negative impact to our operations. Management has assessed volatility and has determined that we will have sufficient cash flow to fund operations for the next twelve months.

The COVID-19 global pandemic has been unprecedented and unpredictable and our impact is likely to continue to result in significant national and global economic disruption, which may adversely affect our business. Although the Company has experienced some minor changes to our miner shipments due to disruptions in the global supply chain, the Company does not expect any material impact on our long-term strategic plans, our operations, or our liquidity due to the impacts of COVID-19. However, the Company is actively monitoring this situation and the possible effects on our financial condition, liquidity, operations, suppliers, and the industry