Company: SLNH
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001493152-25-023503
Chunk: 210

Company: Soluna Holdings, Inc
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 8
Chunk 210
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 “ELA”) between SDI SL Borrowing - 1, LLC (the “Borrower”) and SLC. On that date, SLC lent
the Borrower $720,000 to purchase medium voltage cables and low voltage switchboards. This debt was later assigned to DVSL II on the
Effective Date. Subsequently, the borrowing amount was paid in full by issuing SLC Class B Membership Interests in the Dorothy 2 project
valued at three times the borrowing amount (i.e., $2.16 million).

On
April 4, 2025, the Company transferred its Class B Membership to SLC, resulting in 0% Class B Membership Interests held by the Company.
SDI still retains 100% Class A Membership Interests in DVSL II as of September 30, 2025. Based on evaluation, the Company would be able
to consolidate this entity.

The
Company evaluated this legal entity under ASC 810, Consolidations and determined that this entity is a VIE, as the equity holders
as a group do not have the characteristics of a controlling financial interest. Even though SLC has all of the Class B membership, the
Company holds all the Class A membership, which gives them the ability to control the significant decisions made in the ordinary course
of business. The Company has the right to receive benefits that could potentially be significant to the VIE through its Class A membership
interest, as it is eligible to receive 50% of distributions upon SLC obtaining a specified internal rate of return. The non-controlling
shareholders do not hold substantive participating rights, voting rights or liquidation rights.

In
September 2025, the Company agreed to terms of a debt facility with Generate under a Credit and Guarantee Agreement, as discussed in
Note 8. Several events occurred in connection with the debt facility, [1] the Company completed a restructuring of the subsidiaries that
comprise “Project Dorothy 1A” and “Project Dorothy 2” (herein referred to as the “Dorothy Restructuring”),
[2] Soluna DVSL ComputeCo LLC, Soluna DVSL II ComputeCo LLC, and Soluna KK I ComputeCo LLC entered into a First Priority Leasehold Deed
of Trust (the “Deed of Trust”) with Generate which provides Generate with the power of sale and right of entry and possession
of the Trust Property.

Following
the Dorothy Restructuring, Project Dorothy 2 consists of