Company: SLNH
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001493152-25-023503
Chunk: 149

Company: Soluna Holdings, Inc
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 8
Chunk 149
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 debt
modification guidance in ASC 470). Amendments that are considered modifications are accounted for prospectively as yield adjustments,
based on the revised terms, and lender fees and costs directly incurred with third parties, to the extent material, are recorded as debt
discount and amortized to interest expense using the effective interest rate method.

Loan Commitment assets

The
Company’s Generate Credit Agreement (see Note 8) contained a commitment from the lender for an additional tranche of debt under
certain conditions. The Company incurred costs and fees to obtain a nonrevolving loan commitment. The accounting for warrants issued
and fees paid to lenders in connection with a nonrevolving loan commitment are initially treated as an asset. As discussed in Generate
Credit Agreement in Note 8, the Company can draw up to $35.5 million between the first three tranches and can draw an additional $64.5
million upon subsequent approval by the lenders. The Company allocated the warrants issued and fees paid to the lenders in connection
the nonrevolving loan commitment between the initial draw of $12.6 million and the remaining $22.9 million between debt issuance costs
and loan commitment assets. As the $22.9 million remaining commitment gets drawn upon, the Company will reclassify a portion of the
loan commitment asset as a debt discount. 

Warrant
Liability

Under
the guidance in ASC 480: Distinguishing Liabilities from Equity (“ASC 480”), and then further in ASC 815, Derivatives
and Hedging (“ASC 815”), certain Company warrants associated with the July 2025 Equity Financing discussed in Note 9
did not meet the criteria for equity treatment. In addition, due to a side letter execution in relation to the Generate Common
Warrants as discussed in Note 8, the Generate Common Warrants were reclassified to liability treatment. As such, the warrants were
recorded on the balance sheet at fair value. This valuation was subject to re-measurement at each balance sheet date, or when the
warrant was exercised. With each re-measurement, the warrant valuation was adjusted to fair value, with the change in fair value
recognized in the Company’s condensed consolidated statement of operations. The warrants were collectively classified as a
Level 3 measurement within the fair value hierarchy due to the use of a valuation model which involves the use of unobservable
inputs. As of September 30, 2025, the Company had an outstanding warrant liability balance which represents the fair