Company: SLNH
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001756
Chunk: 2164

Company: Soluna Holdings, Inc
Filing Date: 2025-03-31
Form: 10-K
Item: Item 7A
Chunk 2164
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 share-based payments and the Company accounts for stock-based awards
exchanged for employee service in accordance with the appropriate share-based payment accounting guidance. Stock-based compensation represents
the cost related to stock-based awards granted to employees and directors. The Company measures stock-based compensation cost at grant
date based on the estimated fair value of the award and recognizes the cost as expense on a straight-line basis in accordance with the
vesting of the options (net of estimated forfeitures) over the option’s requisite service period. The Company estimates the fair
value of stock-based awards on the grant date using a Black-Scholes valuation model. The Company uses the fair value method of accounting
with the modified prospective application, which provides for certain changes to the method for valuing share-based compensation. The
valuation provisions apply to new awards and to awards that are outstanding on the effective date and subsequently modified. Under the
modified prospective application, prior periods are not revised for comparative purposes. Stock-based compensation expense is recorded
in the lines titled “Cost of cryptocurrency mining revenue,” “Cost of data hosting revenue,” and “General
and administrative expenses” in the Consolidated Statements of Operations based on the employees’ respective functions.

The
Company records deferred tax assets for awards that potentially can result in deductions on the Company’s income tax returns based
on the amount of compensation cost that would be recognized upon issuance of the award and the Company’s statutory tax rate. All
income tax effects of awards, including excess tax benefits, recognized on stock-based compensation expenses are reflected in the Consolidated
Statements of Operations as a component of the provision for income taxes on a prospective basis.

The
determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s
stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the Company’s
expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free
interest rate, and expected dividends.

Theoretical
valuation models and market-based methods are evolving and may result in lower or higher fair value estimates for share-based compensation.
The timing, readiness, adoption, general acceptance, reliability, and testing of these methods is uncertain. Sophisticated mathematical
models may require voluminous historical information, modeling expertise, financial analyses, correlation analyses, integrated software
and databases, consulting fees, customization, and testing for adequacy of internal controls.

For
purposes of estimating the fair