Company: SLNH
Filing Date: 2025-02-05
Form Type: 424B3
Source: 0001493152-25-005030
Chunk: 203

Company: Soluna Holdings, Inc
Filing Date: 2025-02-05
Form: 424B3
Chunk 203
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 valuation of deferred tax assets is a critical accounting estimate because judgment is required in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. The Company based the estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes.

As a result of its assessment in 2023, the Company increased its valuation allowance against its deferred tax assets. The increase in the valuation allowance caused incremental tax expense of $ 6.1million to be recognized in 2023. The increase of the valuation allowance was based upon the uncertainty surrounding the Company’s projected future taxable income, causing the Company to evaluate what portion of the Company’s deferred tax assets it believes are more likely than not to be realized. The Company has determined that it will not generate sufficient levels of pre-tax earnings in the future to realize the deferred tax assets relating to net operating loss carryforwards and research and development credit carryforwards recorded on the balance sheet as of December 31, 2023. Taking into consideration existing levels of permanent differences, non-deductible expenses and the reversal of significant temporary differences, the Company has determined that all other deferred tax assets recorded on the balance sheet as of December 31, 2023, will be fully realized.

| F-25 |

The valuation allowance on December 31, 2023 and 2022 was $ 36.8million and $ 30.7million, respectively. Activity in the valuation allowance for deferred tax assets is as follows as of December 31:

Schedule of Deferred Tax Asset Valuation Allowance

|                                        | (Dollars in thousands) |   |   2023 |   |     |   |   2022 |
|:---------------------------------------|:-----------------------|:--|-------:|:--|:----|:--|-------:|
| Valuation allowance, beginning of year |                        | $ | 30,651 |   |     | $ | 11,921 |
| Net operating (loss) income            |                        |   |  9,813 |   |     |   |  7,361 |
| Property, plant and equipment          |                        |   | (4,316 | ) |     |   | 10,093 |
| Stock options                          |                        |   |    566 |   |     |   |    996 |
| Research and development credit        |                        |   |