Company: SLNH
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001756
Chunk: 422

Company: Soluna Holdings, Inc
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1A
Chunk 422
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venue is primarily from advance monthly payments received and revenue is recognized when service is completed.

Demand
Response Service

The
Company provides emergency demand response solutions to ERCOT pursuant to a contractual commitment over defined service delivery periods.
This contract includes a single promise to stand ready, on a monthly basis, to deliver a set amount of curtailment (committed capacity)
per month when and if called upon by ERCOT. The Company has concluded this represents a series of distinct monthly services that are
substantially the same, with the same pattern of transfer to the customer. Accordingly, the monthly promise to stand ready is accounted
for as a single performance obligation. The Company is the principal in these arrangements as it has control over the services prior
to those services being transferred to the customer.

Capacity
fees are paid to the Company by ERCOT for its stand ready commitment to curtail MWs and are typically based on the Company’s ability
to deliver the committed capacity throughout the contractual delivery period. In general, if the Company fails to curtail the contracted
MWs during energy or emergency dispatches, the MW shortfall results in a penalty that could require the Company to reduce the fees paid
by the customer during the contract period.

In
order to determine the transaction price, the Company estimates the amount of variable consideration at the outset of the contract either
utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. These estimates
consider i) the contractual rate per MW, and ii) historical performance. The Company constrains (reduces) the estimates of variable consideration
such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract.
When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s
control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and
magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. In the event of an emergency
dispatch, any earned energy fees are associated and allocated to the specific month of performance, as these fees meet the criteria to
allocate variable consideration to a distinct monthly service within a series of distinct services that comprise the single performance
obligation. Therefore, energy fees are recognized in the month in which the Company is called upon to deliver on its stand-ready obligation
to curtail capacity.

The
Company believes that an output measure based on the monthly