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Commitments and Contingencies
 9 Months Ended
Sep. 30, 2025
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

10. Commitments and Contingencies

 

Commitments:

 

Leases

 

The Company determines whether an arrangement is a lease at inception. The Company and its subsidiaries have operating leases for certain manufacturing, laboratory, office facilities and certain equipment. The leases have remaining lease terms of approximately three years to twenty-two years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of September 30, 2025 and December 31, 2024, the Company has no assets recorded under finance leases.

 

Lease expense for these leases is recognized on a straight-line basis over the lease term. For the three and nine months ended September 30, total lease costs are comprised of the following:

 

   2025   2024   2025   2024 
(Dollars in thousands) 

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2025   2024   2025   2024 
                 
Operating lease cost  $70   $17   $106   $139 
Short-term lease cost   13    —    50    — 
Total net lease cost  $83   $17   $156   $139 

 

Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related asset or liability for such leases. On April 3, 2025, Soluna KK Energy ServiceCo, LLC (“Soluna KK Energy”), a subsidiary of the Company, entered into a lease agreement for 50 acres of property located in Willacy County, Texas, for the purpose of constructing, installing, operating, and maintaining modular data centers and related facilities. Soluna KK Energy can terminate the lease within six months of April 3, 2025. Through July 2025, there was uncertainty over project funding and whether the Company would extend the lease agreement. As such, the Company recorded the lease agreement as short-term. In August 2025, Soluna KK Energy extended the lease agreement for the additional term of twenty-two years. Accordingly, the Company recorded a right-of-use asset and lease liability.

 

Other information related to leases was as follows:

 

  

Nine Months Ended

September 30, 2025

 
     
Weighted Average Remaining Lease Term (in years):     
Operating leases   20.39 
      
Weighted Average Discount Rate:     
Operating leases   6.34%

 

(Dollars in thousands) 

Nine Months Ended

September 30, 2025

  

Nine Months Ended

September 30, 2024

 
         
Supplemental Cash Flows Information:          
Cash paid for amounts included in the measurement of lease liabilities:          
Operating cash flows from operating leases  $109   $141 
           
Non-Cash Activity Right-of-use assets obtained in exchange for lease obligations:          
Operating leases  $3,441   $- 

 

Maturities of noncancellable operating lease liabilities are as follows for the quarter ending September 30:

 

(Dollars in thousands)      
    2025  
2025 (remainder of year)   $ 91  
2026     314  
2027     320  
2028     272  
2029     279  
Thereafter     5,643  
Total lease payments     6,919  
Less: imputed interest     (3,240 )
Total lease obligations     3,679  
Less: current obligations     (96 )
Long-term lease obligations   $ 3,583  

 

 

As of September 30, 2025, there were no additional operating lease commitments that had not yet commenced.

 

Project Dorothy 2 and Project Kati Commitments:

 

As of September 30, 2025, the Company was contractually committed for approximately $11.9 million of capital expenditures, primarily related to infrastructure builds, equipment procurement, and labor associated with the Company’s Project Dorothy 2 and Project Kati datacenters. These capital expenditures are expected to occur over the current year.

 

Contingencies:

 

Spring Lane Capital Contingency

 

The Company has a potential contingency associated with an agreement with SLC of up to $250 thousand which would be reduced by a proportion of funding received from SLC up to the $45.0 million aggregate contribution cap. The Company considers the probability of a payment for the contingency to be remote.

 

Legal

 

We are subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. When applicable, we accrue for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Legal fees are charged to expense as they are incurred.

 

On December 29, 2022, NYDIG filed a complaint against the Soluna Parties in the Court regarding the NYDIG Loans made by NYDIG to Borrower pursuant to a Master Equipment Finance Agreement, dated December 30, 2021, that were secured by certain assets of Borrower and guaranteed by Guarantor pursuant to a written guaranty agreement. The Soluna Parties and NYDIG entered into a Stipulation and Agreed Judgment which was approved by the Court on February 23, 2024, whereby judgment was granted to NYDIG on the counts in the complaint and the Soluna Parties became jointly and severally liable for an aggregate amount of approximately $9.2 million plus interest (the “Agreed Judgment Amount”).

 

On September 29, 2025, the Soluna Parties and NYDIG entered into a Settlement Agreement (the “Settlement Agreement”), pursuant to which the Soluna Parties and NYDIG agreed to fully settle and resolve the Agreed Judgment Amount and all other matters relating to the NYDIG Loans in exchange for the Soluna Parties’ agreement to make certain settlement payments to NYDIG in accordance with the Settlement Agreement. As of the date of filing these condensed financial statements, the Settlement Agreement has been fully satisfied and paid.