Company: SLNH
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001756
Chunk: 1600

Company: Soluna Holdings, Inc
Filing Date: 2025-03-31
Form: 10-K
Item: Item 5
Chunk 1600
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 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.

On
October 25, 2021, pursuant to a securities purchase agreement dated October 20, 2021 (the “SPA), the Company issued to certain
accredited investors Class A, Class B and Class C common stock purchase warrants (collectively, the “Warrants”) The Warrants
were considered freestanding equity-classified instruments due to their detachable and separately exercisable features and meet the indexation
criteria within derivative accounting. Accordingly, the Warrants were presented as a component of Stockholders’ Equity in accordance
with derivative accounting.

Any
modifications or new additional warrants were subsequently revalued, including the warrants attached to the Third Amendment on November
20, 2023 and the Fourth Amendment on February 28, 2024, see Note 8 for details. Inherent in a Black-Scholes simulation are assumptions
related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility
of its common stock warrants based on implied volatility from its traded warrants and historical volatility of select peers’ common
stock with a similar expected term of the Warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield on the
grant date with a maturity similar to the expected remaining term of the warrants. The expected term of the warrants is assumed to be
equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company expects to remain
at zero. The warrants were collectively classified as a Level 3 measurement within the fair value
hierarchy because these valuation models involve the use of unobservable inputs relating to the Company’s estimate