Company: SLNH
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001493152-25-023503
Chunk: 156

Company: Soluna Holdings, Inc
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 8
Chunk 156
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 termination of the HPE Agreement.

7.
Income Taxes

During
the three and nine months ended September 30, 2025, the Company’s effective income tax rate was 2.5% and 4.0%, respectively, and
for the three and nine months ended September 30, 2024, the Company’s effective tax rate was 6.3% and 8.1%, respectively. The projected
annual effective tax rate is less than the Federal statutory rate of 21%, primarily due to the change in the valuation allowance, as
well as changes to estimated taxable income for 2025 and permanent differences. For the three months ended September 30, 2025 and 2024,
there was a deferred income tax benefit of $666 thousand and $547 thousand, respectively. For the nine months ended September 30, 2025
and 2024, there was a deferred income tax benefit of approximately $1.7 million and $1.8 million, respectively, offset by a $9 thousand
and $63 thousand current tax expense for the nine months ended September 30, 2025 and 2024, respectively.

In
connection with the strategic contract pipeline acquired in the acquisition as further discussed in Note 5, ASC 740-10-25-51 requires
the recognition of a deferred tax impact of acquiring an asset in a transaction that is not a business combination when the amount paid
exceeds the tax basis on the acquisition date. As such, the Company is required to adjust the value of the strategic contract pipeline
by approximately $10.9 million at inception date, which was recorded as a deferred tax liability, and this amount will be amortized over
the life of the asset. For the three and nine months ended September 30, 2025 and 2024, the Company amortized $547 thousand and $1.6
million, respectively.

The
Company provides for recognition of deferred tax assets if the realization of such assets is more likely than not to occur in accordance
with accounting standards that address income taxes. Significant management judgment is required in determining the period in which the
reversal of a valuation allowance should occur. The Company has considered all available evidence, both positive and negative, such as
historical levels of income and future forecasts of taxable income amongst other items, in determining its valuation allowance. In addition,
the Company’s assessment requires us to schedule future taxable income in accordance with accounting standards that address income