Company: SLNH
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001756
Chunk: 3276

Company: Soluna Holdings, Inc
Filing Date: 2025-03-31
Form: 10-K
Item: Item 11
Chunk 3276
---
 adjust the value of the strategic contract
pipeline by approximately $10.9 million and this amount will be amortized over the life of the asset.

     F-21 

Valuation
Allowance:

The
Company believes that the accounting estimate for the valuation of deferred tax assets is a critical accounting estimate because judgment
is required in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns.
The Company based the estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans
and other expectations about future outcomes.

As
a result of its assessment in 2024, the Company increased its valuation allowance against its deferred tax assets. The increase in the
valuation allowance caused incremental tax expense of $1.7 million to be recognized in 2024. The increase of the valuation allowance
was based upon the uncertainty surrounding the Company’s projected future taxable income, causing the Company to evaluate what
portion of the Company’s deferred tax assets it believes are more likely than not to be realized. The Company has determined that
it will not generate sufficient levels of pre-tax earnings in the future to realize the deferred tax assets relating to net operating
loss carryforwards and research and development credit carryforwards recorded on the balance sheet as of December 31, 2024. Taking into
consideration existing levels of permanent differences, non-deductible expenses and the reversal of significant temporary differences,
the Company has determined that all other deferred tax assets recorded on the balance sheet as of December 31, 2024, will be fully realized.

The
valuation allowance on December 31, 2024 and 2023 was $38.5 million and $36.8 million, respectively. Activity in the valuation allowance
for deferred tax assets is as follows as of December 31:

 Schedule of Deferred Tax Asset Valuation Allowance

    (Dollars in thousands) 
    2024  
    2023 

    Valuation allowance, beginning of year 
    $36,791  
    $30,651 
  
    Net operating (loss) income 
     8,200  
     9,813 
  
    Property, plant and equipment 
     (7,171) 
     (4,316)
  
    Stock options 
     673  
     566 
  
    Research and development credit 
     —  
     53 
  
    Accru