Company: SLNH
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001756
Chunk: 532

Company: Soluna Holdings, Inc
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1B
Chunk 532
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, an affiliate of Soluna Holdings, Inc. (the “Borrower”), entered into a loan
agreement (the “Equipment Loan Agreement” or the “Loan”) with Soluna2 SLC Fund II Project Holdco LLC (the “Lender”).
The Equipment Loan Agreement provides for Borrower to borrow, from time to time, up to $1.0 million, and further amended on February
28, 2025 to $4.0 million to be used to purchase necessary equipment for the progression of Project Dorothy 2 and Project Kati. Any loans
made under the Equipment Loan Agreement have a maturity date of May 16, 2027 and bear interest at a rate of 15% per annum. The Equipment
Loan Agreement includes customary covenants for loans of this nature, as well as a multiple on invested capital provision, which requires
us to pay, in addition to principal and interest, an amount equal to the difference of (i) the greater of (a) the principal amount of
the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of
the Loan, and (b) the principal amount of the Loan being repaid multiplied by three, minus (ii) the sum of the principal amount
of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal
of the Loan. On May 17, 2024, the Borrower drew down $720 thousand of the Loan. On July 22, 2024, Borrower satisfied and repaid the borrowing
amount in full by issuing the Lender Class B Membership Interests in the Dorothy 2 project valued at three times the borrowing amount
(i.e., $2.16 million). The redemption of debt through equity created approximately a $1.4 million loss on debt extinguishment for the
year ended December 31, 2024. In addition, the Borrower deferred financing costs associated with the Loan of approximately $163 thousand.

Critical
Accounting Policies and Use of Estimates

The
prior discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements,
which have been prepared in accordance with GAAP. Note 2 of the Consolidated Financial Statements included in this Annual Report includes a summary of our most significant accounting policies. The preparation of these consolidated financial statements requires
management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue