Company: SLNH
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001493152-25-023503
Chunk: 136

Company: Soluna Holdings, Inc
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 136
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 apply our judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on this evaluation, our management concluded
that our disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2025,
due to the following material weakness:

●The
                                            Company did not maintain effective control over the accurate calculation of both basic and
                                            diluted EPS. Specifically, controls failed to ensure the correct treatment of complex equity
                                            instruments, as evidenced by an error identified in the financial statements concerning the
                                            calculation of earnings per share (EPS). This error involved the incorrect inclusion of unvested
                                            Restricted Stock Award (RSA) shares in the denominator used for calculating basic and diluted
                                            EPS for the periods ranging from June 30, 2024, through June 30, 2025.

    ●
    During
    the quarter ended September 30, 2025, the Company processed the exercise of liability-classified warrants. Due to complexity surrounding
    the accounting for the derivative liability settlement and the subsequent fair value assessment, an additional material adjustment
    was required. This adjustment was identified, calculated, recorded, and reported in the condensed consolidated financial statements
    late in the quarterly review process. This control deficiency indicates that the Company did not maintain effective controls over
    the accounting for complex or non-routine equity transactions and the associated valuation processes, specifically regarding derivative
    warrant liabilities, resulting in the material adjustment.

Notwithstanding the existence of this material weakness,
management has concluded that the Company’s unaudited condensed consolidated financial statements in its Quarterly Report on Form
10-Q for the period ended September 30, 2025 are fairly stated in all material respects in accordance with generally accepted accounting
principles in the United States of America.

Remediation:

Our Board of
Directors and management take internal control over financial reporting and the integrity of our financial statements seriously. Management
continues to work to improve its controls related to our material weaknesses.  The remediation actions include: (i) enhancing design
and documentation related to complex transactions and control activities, and (ii) developing robust review procedures to ensure
the proper recording and reporting of the complex transactions. To achieve the timely implementation
of the above, management has commenced the following actions and will continue to assess additional opportunities for remediation on an
ongoing basis:

    ●
    Implement more robust internal
    policies and procedures relating to complex transactions and fair value assessments, with a