Company: SLNH
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001756
Chunk: 1387

Company: Soluna Holdings, Inc
Filing Date: 2025-03-31
Form: 10-K
Item: Item 4
Chunk 1387
---
 of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.

Critical
Audit Matters

The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Fair
value of Warrants 

Description
of the Matter

As
discussed in Note 12 to the financial statements, the Company had a total of approximately 2.8 million common stock warrant shares outstanding
as of December 31, 2024. The Company uses option pricing models to estimate the fair value of the warrants using various market-based
inputs.

We
identified the measurement of fair value of the warrants as a critical audit matter. Specifically, there was a high degree of subjectivity
and judgment in evaluating the determination of the expected volatility inputs used in the option pricing models for the warrants. Historical,
implied, and peer group volatility levels provide a range of possible expected volatility inputs and the fair value estimates for the
warrants are sensitive to the expected volatility inputs.

How
We Addressed the Matter in Our Audit

The
primary procedures we performed to address this critical audit matter included gaining an understanding of certain internal controls
over the Company’s process to measure the fair value of the warrants. This included controls related to the evaluation of observable
market information used in the determination of the expected volatility inputs. We also involved our firm’s valuation professionals
with specialized skills and knowledge, who assisted in:

●evaluating
                                            the