10-Q: Soluna Holdings Q2 Loss Narrows Despite Revenue Plunge

Soluna Holdings reported a narrower net loss attributable to shareholders in Q2 2025, but faced significant revenue declines and widened operating losses, alongside a 'going concern' warning.

Summary

• Net loss attributable to Soluna Holdings, Inc. decreased to $7.38 million for the three months ended June 30, 2025, compared to $10.87 million in the prior year period.
• Total revenue for the three months ended June 30, 2025, was $6.16 million, a 36% decrease from $9.68 million in the same period last year.
• For the six months ended June 30, 2025, total revenue decreased by 46% to $12.09 million from $22.22 million in the prior year.
• Operating loss significantly widened to $6.62 million for Q2 2025 from $3.68 million in Q2 2024, and to $13.80 million for H1 2025 from $3.27 million in H1 2024.
• Adjusted EBITDA declined to $(1.23) million for Q2 2025 from $1.80 million in Q2 2024, and to $(2.88) million for H1 2025 from $6.94 million in H1 2024.
• The company explicitly states 'substantial doubt about the Company's ability to continue as a going concern' within one year.
• Terminated the HPE Agreement, resulting in a $19.3 million contract liability as of June 30, 2025.
• Secured $5.0 million gross proceeds from a public offering in July 2025 and raised $2.2 million net from an At-the-Market (ATM) offering in Q2 2025, with an additional $1.4 million net post-Q2.
• Closed a $20 million financing round from Spring Lane Capital for Project Kati 1 expansion in July 2025.

Sentiment

Score: 3

Explanation: The company faces severe financial distress, including negative working capital, substantial debt, and an explicit 'going concern' warning. While recent capital raises and a strong project pipeline offer some future potential, current operating losses and revenue declines are significant concerns. The improvement in net loss attributable to shareholders is largely due to non-operating factors rather than improved core performance.

Positives

• Net loss attributable to Soluna Holdings, Inc. decreased to $7.38 million in Q2 2025 from $10.87 million in Q2 2024, and to $14.94 million in H1 2025 from $16.13 million in H1 2024.
• Successfully raised $5.0 million gross proceeds from a public offering in July 2025.
• Generated $2.2 million net proceeds from an At-the-Market (ATM) offering in Q2 2025, with an additional $1.4 million net proceeds post-Q2.
• Secured $20 million in financing from Spring Lane Capital for the 35 MW expansion of Project Kati 1, with construction starting in Q3 2025.
• Project Dorothy 2 began initial energization and ramp-up in May 2025, with full operational status expected by October 2025.
• Expanded project pipeline with new term sheets for Project Hedy (120 MW), Project Ellen (100 MW), and Project Annie (75 MW), totaling 295 MW of potential new data center capacity.
• Achieved compliance with all covenants in relation to the Galaxy Loan Agreement as of June 30, 2025.
• Fully paid off the Navitas Term Loan in Q1 2025.

Negatives

• Total revenue decreased by 36% to $6.16 million in Q2 2025 from $9.68 million in Q2 2024.
• Total revenue decreased by 46% to $12.09 million in H1 2025 from $22.22 million in H1 2024.
• Operating loss widened significantly to $6.62 million in Q2 2025 from $3.68 million in Q2 2024, and to $13.80 million in H1 2025 from $3.27 million in H1 2024.
• Adjusted EBITDA declined to $(1.23) million in Q2 2025 from $1.80 million in Q2 2024, and to $(2.88) million in H1 2025 from $6.94 million in H1 2024.
• Cryptocurrency mining revenue decreased due to the Bitcoin halving event in April 2024 and lower volume from aging miners and higher curtailment.
• Data hosting revenue decreased due to a large customer exit in December 2024 and a shift to profit-sharing contracts for replacement customers.
• Demand response service revenue decreased due to lower bid capacity from known outages in Texas and aging D1B machines.
• Termination of the HPE Agreement resulted in a $19.3 million contract liability as of June 30, 2025, for the remaining payment stream.
• Negative working capital of $30.87 million as of June 30, 2025.
• Accumulated deficit of $329.24 million as of June 30, 2025.
• Outstanding debt of $23.28 million as of June 30, 2025.
• Increased interest expense to $1.20 million in Q2 2025 from $449 thousand in Q2 2024, and to $2.03 million in H1 2025 from $873 thousand in H1 2024, primarily due to new loans.
• Increased general and administrative expenses (exclusive of depreciation and amortization) by $1.97 million for H1 2025, mainly due to higher stock-based compensation and professional/legal fees.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern within one year due to net losses, negative working capital, and significant outstanding debt.
• Inability to obtain necessary financing (stock issuances, project-level equity, debt borrowings, partnerships) to fund expenses and growth could force restructuring, refinancing, additional equity capital, or asset sales.
• Risk of delays or scaling down development activities, or even cessation of business operations, if additional financing is not secured timely.
• Ongoing litigation with NYDIG ABL LLC regarding a Master Equipment Finance Agreement, with an outstanding principal of approximately $9.2 million and interest/penalty balance of approximately $3.0 million, including NYDIG's intention to pursue the parent company under a piercing of the corporate veil theory.
• Contractual commitment of $10.1 million in capital expenditures for Project Dorothy 2 and Project Kati.
• Liability of approximately $19.3 million to HPE due to termination of the HPE Agreement for cause, with no additional payments made by CloudCo since termination.
• Risk of forfeiture of $780 thousand credit on equipment for Project Dorothy 2 and Project Kati if orders are not executed by September 1, 2025.
• Dependence on the market price of Bitcoin, global network hashrate, mining difficulty, electricity and infrastructure costs, and mining pool fees for profitability of the Bitcoin mining business.
• Impact of Bitcoin halving events on future revenue and profitability.
• Concentration of revenue in the Bitcoin Hosting Business among a small number of customers (79% of hosting revenue from three customers in Q2 2025).
• Risks associated with the speculative and competitive nature of the technology sector, including AI and HPC.
• Ability to attract and retain hosted customers for hosting operations.
• Dependency on continued growth in blockchain and cryptocurrency usage.
• Lawsuits and other legal proceedings and challenges.
• Conflicts of interest with directors and management due to affiliations with related parties (e.g., Harmattan Energy, Ltd.).
• Government regulations impacting operations.
• Ability to construct and complete anticipated expansion of data centers.

Future Outlook

The company plans to continue evaluating and implementing strategies to obtain financing, including stock issuances, project-level equity, debt borrowings, partnerships, and collaborations, to fund expenses and growth. Project Dorothy 2 is expected to be fully operational by October 2025, with construction for Project Kati 1 commencing in Q3 2025 and initial energization by Q1 2026. The company aims to increase its ownership stake in projects over time to enhance long-term value and leverage its over 2.8 gigawatts renewable energy project pipeline to support 300 to 400 MW of new digital infrastructure annually over the next six to eight years. Strategic focus includes power pipeline expansion, AI infrastructure development, project optimization, and capital formation for Projects Kati and Rosa.

Management Comments

• Our mission is to make renewable energy a global superpower using computing as a catalyst.
• We develop and operate digital infrastructure that taps into a growing global opportunity: the convergence of renewable energy and High-Performance Computing (HPC).
• Renewable Computing bridges this gap—unlocking stranded renewable energy and turning it into scalable computing power.
• A key strategic advantage is our model of co-locating data centers directly with renewable power generation assets.
• By building behind the meter, we are able to bypass long interconnection queues and source electricity directly from the generation site. This structure not only improves power economics, but also accelerates time-to-market—an increasingly important factor for companies with large, time-sensitive computing workloads such as AI and HPC.
• With a repeatable strategy and a growing pipeline of projects, we are scaling a new category of digital infrastructure—one that energizes the grid, lowers computing costs, and advances a more sustainable future.
• The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
• Management cannot provide any assurances that the Company will be successful in accomplishing additional financing or any of its other plans.

Industry Context

The company operates at the convergence of renewable energy and high-performance computing (HPC), including Bitcoin mining and generative AI, addressing the global issue of curtailed clean energy and the critical shortage of power for energy-intensive infrastructure. The Bitcoin mining industry experienced a significant event with the Bitcoin halving in April 2024, which reduced block rewards by 50%, impacting miners' profitability and revenue across the sector. The shift in data hosting contracts from fixed-fee to profit-sharing models reflects market adjustments in response to Bitcoin price volatility and mining economics. The company's focus on AI/HPC workloads, including Project Grace and Project Kati, aligns with the growing demand for specialized computing resources for large language models (LLMs) and AI training, a rapidly expanding segment of the technology industry. Participation in ERCOT's Demand Response Services programs positions the company within broader grid stabilization and energy management trends, leveraging data centers as dispatchable energy resources.

Comparison to Industry Standards

• The significant decline in cryptocurrency mining revenue (46% for H1 2025) is largely attributable to the Bitcoin halving event in April 2024, a systemic industry-wide reduction in block rewards that impacts all Bitcoin miners, consistent with the expected impact on the broader Bitcoin mining industry.
• The decrease in data hosting revenue, partly due to a large customer exit and a shift to profit-sharing models, reflects competitive pressures and evolving contract structures common in the data center hosting sector, particularly for energy-intensive operations like Bitcoin mining.
• The company's Power Usage Effectiveness (PUE) of 1.03 for Project Sophie is highly efficient, comparing favorably to industry averages for data centers, which typically range from 1.5 to 2.0, indicating strong operational efficiency in energy consumption.
• The company's strategy of co-locating data centers with renewable energy assets and providing demand response services aligns with a growing trend in the energy and computing sectors to integrate sustainable practices and enhance grid stability, a differentiator in the competitive data center market.
• The termination of the HPE Agreement and the subsequent $19.3 million liability highlight the risks and challenges associated with rapid expansion into new, capital-intensive areas like GPU-as-a-Service for AI, where market dynamics and contractual obligations can lead to substantial financial impacts, a common risk for companies venturing into nascent, high-growth segments.

Management Changes

Legal Proceedings

• Ongoing litigation with NYDIG ABL LLC (NYDIG) against Soluna MC Borrowings, LLC 2021-1 (Borrower) and Soluna MC, LLC (Guarantor) in Marshall Circuit Court of Kentucky regarding defaulted loans.
• NYDIG foreclosed on collateral in February 2023 and obtained a Stipulation and Agreed Judgment in February 2024 for approximately $10.3 million.
• NYDIG is pursuing post-judgment discovery and has stated its intention to pursue the parent company (Soluna Holdings, Inc.) under a piercing of the corporate veil theory.
• Parent Entity denies liability and filed a complaint for a declaratory judgment against NYDIG in Nevada, which was dismissed without prejudice in June 2023. Parent Entity intends to vigorously defend itself.
• As of June 30, 2025, the outstanding principal for the NYDIG loan is approximately $9.2 million, with an additional $3.0 million in accrued interest and penalties.

Related Party Transactions

• MeOH Power, Inc.: The Company holds a Senior Demand Promissory Note for $380 thousand (plus accrued interest, totaling $394 thousand as of June 30, 2025) from MeOH Power, Inc., which is fully reserved.
• Employee Receivables: Certain employees have receivables due to the Company based on stock-based awards, totaling $128 thousand as of June 30, 2025.
• Harmattan Energy, Ltd. (HEL): Transactions related to the Soluna Callisto acquisition in October 2021. HEL's equity holders are affiliated with Brookstone Partners, and several of the Company's directors have affiliations with HEL, including Michael Toporek (Executive Chairman) and Matthew E. Lipman (Director, President of HEL). John Belizaire (CEO) and John Bottomley (Director) also have ownership interests in HEL.
• Spring Lane Capital (SLC): SLC is a project-level financing partner, committed $35 million to Project Dorothy 1A and an additional $30 million to Project Dorothy 2. Recently committed $20 million for Project Kati 1. The Company has a potential contingency with Spring Lane of up to $250 thousand.
• Navitas West Texas Investments SPV, LLC (Navitas): Investment vehicle organized by Navitas Global, a strategic partner for Project Dorothy 1B.

Stakeholder Impact

• Shareholders: Significant dilution from recent and planned equity raises (SEPA, ATM, July 2025 Offering). The 'going concern' warning poses a substantial risk to investment value. Preferred shareholders have significant accumulated dividends in arrears ($24.1 million for Series A, $1.3 million for Series B).
• Creditors: The NYDIG litigation and the $19.3 million HPE liability represent significant financial obligations and potential risks to creditors. The company's negative working capital and going concern status indicate elevated credit risk.
• Employees: Stock-based compensation is a significant part of compensation. The discretionary bonus program is subject to conditions that are not yet probable of being met. CFO resignation indicates management instability.
• Customers: The exit of a large Bitcoin hosting customer and the termination of the HPE Agreement highlight potential instability in customer relationships and service offerings.
• Suppliers: Capital expenditure commitments for Project Dorothy 2 and Project Kati indicate ongoing business for suppliers, but the company's liquidity challenges could pose payment risks.

Next Steps

• Management will continue to evaluate and implement strategies to obtain financing to fund expenses and growth.
• Project Dorothy 2 is expected to be fully operational by October 2025.
• Construction for Project Kati 1 is expected to begin in Q3 2025, with initial energization by Q1 2026.
• The company intends to utilize the full $780 thousand equipment credit for Project Dorothy 2 and Project Kati prior to the September 1, 2025 expiration date.
• Parent Entity intends to vigorously defend itself from NYDIG's parent company claims in ongoing litigation.
• The company will continue to monitor the status of conditions for the discretionary bonus program and will recognize a liability if and when it becomes probable.

Key Dates

Recommendation

The company faces severe financial challenges, including an explicit 'going concern' warning, significant operating losses, negative working capital, and substantial debt. While recent capital raises provide some short-term liquidity, they come at the cost of significant shareholder dilution. The termination of the HPE agreement resulted in a large liability, and ongoing litigation with NYDIG adds further uncertainty. The core Bitcoin mining and hosting revenues are declining due to market factors (halving) and customer issues. Despite a promising project pipeline, the company's ability to execute and achieve profitability is highly questionable given its current financial state and the explicit doubt about its ability to continue operations. The risks far outweigh any potential future upside, making it a high-risk, low-reward investment.

Keywords

Cryptocurrency Mining, Data Center Hosting, High Performance Computing (HPC), AI Infrastructure, Renewable Energy, Bitcoin Halving, SEC Filing, Financial Results, Going Concern, Capital Raise, Project Development, Soluna Holdings, Nasdaq