Company: SLNH
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001756
Chunk: 2639

Company: Soluna Holdings, Inc
Filing Date: 2025-03-31
Form: 10-K
Item: Item 9A
Chunk 2639
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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 contractual MW stand-ready obligation is the best representation of the
“transfer of value” to the customer. Accordingly, the Company recognizes monthly revenue based on the proportion of committed
stand-ready capacity obligation that has been fulfilled to date.

High
performance computing services

The
Company provided high performance computing (“HPC”) services to support customers’ generative AI workstreams. We have
determined that HPC services were a single continuous service consisting of a series of distinct services that are substantially the same
and have the same pattern of transfer (i.e., distinct days of service).

These
services were consumed as they are received, and the Company recognized revenue over time using the variable allocation exception as it
satisfies performance obligations. We applied this exception because we concluded that the nature of our obligations and the variability
of the payment terms based on the number of GPUs providing HPC services were aligned and uncertainty related to the consideration was resolved
on a daily basis as we satisfied our obligations. The Company recognized revenue net of consideration payable to customers, such as service