Company: SLNH
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001756
Chunk: 534

Company: Soluna Holdings, Inc
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1B
Chunk 534
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 short-term debt approximates their carrying
value due to their short maturities and varying interest rates. “Fair value” is the price that would be received to sell
an asset or transfer a liability in an orderly transaction between market participants at the measurement date. We utilize valuation
techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the
inputs used in the valuation methods, we are required to provide the following information according to the fair value accounting standards.
These standards established a fair value hierarchy as specified that ranks the quality and reliability of the information used to determine
fair values. Financial assets and liabilities are classified and disclosed in one of the following three categories:

    Level
    1:
    Quoted
    market prices in active markets for identical assets or liabilities, which includes listed equities.

    Level
    2:
    Observable
    market-based inputs or unobservable inputs that are corroborated by market data. These items are typically priced using models or
    other valuation techniques. These models are primarily financial industry-standard models that consider various assumptions, including
    the time value of money, yield curves, volatility factors, as well as other relevant economic measures.

    Level
    3:
    These
    use unobservable inputs that are not corroborated by market data. These values are generally estimated based upon methodologies utilizing
    significant inputs that are generally less observable from objective sources.

The
fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input
that is significant to the fair value measurement.

We
had Warrants included within the SPA agreement as noted in Note 8. The Warrants are considered freestanding equity-classified instruments
due to their detachable and separately exercisable features and meet the indexation criteria within derivative accounting. Accordingly,
the Warrants are presented as a component of Stockholders’ Equity in accordance with derivative accounting.

Following
the debt extinguishment on July 19, 2022 as noted further in Note 2 and 8, the Convertible Notes will be recorded at fair value upon
issuance (e.g., upon execution of the Addendum) per guidance within ASC 480, and at each subsequent reporting period, with changes
in fair value reported in earnings.

On
October 1, 202