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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 FORM

 ANNUAL
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
 the fiscal year ended December 31, 2023

 OR

 TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
 the transition period from _____to _____

 Commission
File Number: 001-40261

Holdings, Inc.

 (Exact
name of registrant as specified in its charter)

 14-1462255

 State
 or other jurisdiction

 (I.R.S.
 Employer

 of
 incorporation or organization

 Identification
 No.)

Washington Avenue Extension, Albany, New York 12205

 (Address
of principal executive offices) (Zip
Code)

 (516) 216-9257

 (Registrant's
telephone number, including area code)

 Securities
registered pursuant to Section 12(b) of the Act:

 Title
 of each class

 Trading
 symbol(s)

 Name
 of each exchange on which

 registered

 Common
 Stock, par value $0.001 per share

 SLNH

 The
 Nasdaq Stock Market LLC

 9.0%
 Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share

 SLNHP

 The
 Nasdaq Stock Market LLC

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large
 accelerated filer

 Accelerated
 filer

 Non-accelerated
 filer

 Smaller
 reporting company

 Emerging
 growth company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

 Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

 The
aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2023 (based on the closing price
of $5.00 per share on the Nasdaq Stock Market LLC for that date) was $ 5,009,308.

 As
of March 28, 2024, the Registrant had 2,841,490 shares of common stock outstanding.

 Documents
incorporated by reference: Portions of the registrant's Proxy Statement for its 2024 Annual Meeting of Shareholders are incorporated
by reference into Part III of this Form 10-K.

TO FORM 10-K

 Page

 Glossary
 of Abbreviations and Acronyms

 Cautionary
 Note Regarding Forward-Looking Statements

 PART
 I

 Item 1.

 Business

 Item
 1A.

 Risk
 Factors

 Item
 1B.

 Unresolved
 Staff Comments

 Item
 1C.

 Cybersecurity

 Item
 2.

 Properties

 Item
 3.

 Legal
 Proceedings

 Item
 4.

 Mine
 Safety Disclosures

 PART
 II

 Item
 5.

 Market
 for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item
 6.

 Selected
 Financial Data

 Item
 7.

 Management's
 Discussion and Analysis of Financial Condition and Results of Operations

 Item
 7A.

 Quantitative
 and Qualitative Disclosures About Market Risk

 Item
 8.

 Financial
 Statements and Supplementary Data

 Item
 9.

 Changes
 in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item
 9A.

 Controls
 and Procedures

 Item
 9B.

 Other
 Information

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 PART
 III

 Item
 10.

 Directors,
 Executive Officers and Corporate Governance

 Item
 11.

 Executive
 Compensation

 Item
 12.

 Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item
 13.

 Certain
 Relationships and Related Transactions, and Director Independence

 Item
 14.

 Principal
 Accounting Fees and Services

 PART
 IV

 Item
 15.

 Exhibits,
 Financial Statement Schedules

 Item
 16.

 Form
 10-K Summary

 Glossary
of Abbreviations and Acronyms for Selected References

 The
following list defines various abbreviations and acronyms used throughout this report, including the Business Section, the Management's
Discussion and Analysis of Financial Condition and Results of Operations, the Consolidated Financial Statements, the Notes to Consolidated
Financial Statements and the Financial Statement Schedules.

 This
glossary covers essential terms related to Bitcoin mining, high-performance computing, Artificial Intelligence ("AI") and
related fields, providing valuable context for readers of the Form10-K. A number of cross-references to additional information included
throughout this Annual Report on Form 10-K are also utilized throughout this report, to assist readers seeking additional information
related to a particular subject.

 1.
 Artificial Intelligence ("AI"): The simulation of human intelligence processes by machines, especially computer systems.
These processes include learning (the acquisition of information and rules for using the information), reasoning (using rules to reach
approximate or definite conclusions), and self-correction. AI applications include expert systems, natural language processing, speech
recognition, and machine vision.

 2.
 Bitcoin: A decentralized digital currency created in 2009 by an unknown person or group of people using the name Satoshi Nakamoto.
It operates on a peer-to-peer network, allowing direct transactions without intermediaries. Transactions are verified by network nodes
through cryptography and recorded on a publicly distributed ledger called a blockchain.

 3.
 Bitcoin Halving: An event occurring approximately every four years where the reward for mining new Bitcoin blocks is halved. This
reduces the number of new Bitcoins generated by miners, impacting their profitability and potentially affecting Bitcoin's value.
It's part of Bitcoin's deflationary monetary policy, designed to control supply.

 4.
 Bitcoin Mining: The process of adding new transactions to the Bitcoin blockchain. It involves solving complex cryptographic puzzles
to discover a new block, rewarding miners with transaction fees and newly created Bitcoins. This process secures and verifies transactions
on the network.

 5.
 Curtailment ("Curtailed" or "Curtailments"): In energy management, the reduction in electrical power supply
by power plants to balance the grid or avoid excess generation. In Bitcoin mining or other computing activities, curtailment —
pausing computing activities and related energy usage — can occur during peak demand periods or insufficient energy supply.

 6.
 Data Center Colocation: A service where businesses can be provided with services and infrastructure such as electrical power and
network connectivity for servers and other computing hardware at a third-party provider's data center. This arrangement allows
for cost savings, better infrastructure, and enhanced security compared to private data centers.

 7.
 Electric Reliability Council of Texas ("ERCOT"): An independent system operator that manages the flow of electric
power to more than 26 million Texas customers, representing about 90 percent of the state's electric load. ERCOT schedules power
on an electric grid that connects more than 46,500 miles of transmission lines and over 680 generation units.

 8.
 Exahash ("EH/s"): A unit of computational power equal to one quintillion (10^18) hashes per second. It is used to
measure the hashrate of the most powerful cryptocurrency mining equipment and the overall computational power of the Bitcoin network.

 9.
 Generative AI: Artificial intelligence that can generate new content, such as text, images, or music, based on its training data.
It learns from vast amounts of data to create outputs that mimic original human-generated content, often used in creative and analytical
applications.

 10.
 Gigawatt ("GW"): A unit of power equal to one billion watts. Often used to measure the capacity of large power plants
or the power usage of large operations like data centers and industrial complexes.

 11.
 Grid Demand Response Services: Services provided to support the basic services of generating and delivering electricity to the
grid. They help maintain power quality, reliability, and efficiency. In the context of Bitcoin mining, the use of mining facilities to
provide grid stabilization services is an emerging concept.

 12.
 Hashprice: The revenue a miner earns for each unit of computational power (hash) over a specific period. It is influenced by factors
such as the price of Bitcoin, network difficulty, and transaction fees. A higher hashprice means more profitability for miners.

 13.
 Hashrate: The measure of computational power per second used in cryptocurrency mining. It indicates the number of hash function
computations per second by a miner's hardware, with higher hashrates implying greater efficiency and network security.

 14.
 High Performance Computing ("HPC"): The use of supercomputers and parallel processing techniques for solving complex
computational problems. HPC is used in fields such as scientific research, simulation, and large-scale data analysis.

 15.
 Joules: A unit of energy in the International System of Units (SI). One joule is the energy transferred when one watt of power
is exerted for one second. In Bitcoin mining, energy efficiency is often measured in joules per hash.

 16.
 Large Language Models (LLMs): Advanced AI models designed to understand, generate, and respond to human language in a way that
mimics human-like understanding. They are trained on vast datasets and can perform a variety of language-based tasks, such as translation,
summarization, and question-answering.

 17.
 Machine Learning: A subset of artificial intelligence involving the creation of algorithms that can learn and make decisions or
predictions based on data. It enables computers to improve their performance on a specific task with experience and data, without being
explicitly programmed.

 18.
 Megawatts ("MW"): A unit of power measurement equivalent to one million watts. Used to measure the electrical power
consumption of large operations like data centers and Bitcoin mining rigs.

 19.
 Mining Pool: A group of cryptocurrency miners who combine their computational resources over a network to increase their chances
of finding a block and receiving rewards. The rewards are then divided among the pool participants, proportional to the amount of hashing
power each contributed.

 20.
 Petahash ("PH/s"): A unit of computational power equal to one quadrillion (10^15) hashes per second. It is used to
measure the hashrate of extremely powerful cryptocurrency mining equipment.

 21.
 Power Usage Effectiveness ("PUE"): A ratio that describes how efficiently a computer data center uses energy; specifically,
how much energy is used by the computing equipment (in contrast to cooling and other overhead that supports the equipment).

 22.
 Terahash ("TH/s"): A unit of computational power equal to one trillion (10^12) hashes per second. It's a common
measure of the performance of cryptocurrency mining hardware, with higher terahash rates indicating more powerful equipment.

 Cautionary
Note Regarding Forward-Looking Statements

 This
Annual Report on Form 10-K, including the discussion in this section, contains forward-looking statements that involve risks and
uncertainties. Any statements herein that are not statements of historical fact may be forward-looking statements. When we use the words
"anticipate," "estimate," "plans," "projects," "continuing," "ongoing,"
"expects," "management believes," "we believe," "we intend," "should," "could,"
"may," "will," and similar words or phrases, we are identifying forward-looking statements which may involve
estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the
forward-looking statements. In making these forward-looking statements, the Company has assumed that the current market will continue
and grow and that the risks listed below will not adversely impact the Company.

 By
their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, which
contribute to the possibility that the predicted outcomes may not occur or may be delayed. Forward-looking statements may relate to future
financial conditions, results of operations, plans, objectives, performance or business developments. These statements speak only as
of the date they are made and are based on information currently available and on the then current expectations and assumptions concerning
future events, which are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from that which was expressed or implied by such forward-looking statements, including,
but not limited to, risks and uncertainties related to:

 the
 availability of financing opportunities, risks associated with economic conditions, dependence on management and conflicts of interest;

 the
 ability to service debt obligations and maintain flexibility in respect of debt covenants;

 economic
 dependence on regulated terms of service and electricity rates;

 the
 speculative and competitive nature of the technology sector;

 ability
 of the Company to attract and retain hosted customers for its hosting operations;

 dependency
 in continued growth in blockchain and cryptocurrency usage;

 lawsuits
 and other legal proceedings and challenges;

 conflict
 of interests with directors and management;

 government
 regulations;

 The
 ability of the Company to construct and complete the anticipated expansion of our data centers; and

 other
 factors beyond the Company's control.

 Other
factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking information include, among others, risks relating to: the Company's
limited operating history; future capital needs and uncertainty of additional financing; share price fluctuations; the need for the Company
to manage its planned growth and expansion; cybersecurity threats and hacking; possibility of cessation of monetization of cryptocurrencies;
limited history of de-centralized financial system; technological obsolescence and difficulty in obtaining hardware; price volatility
of cryptocurrencies; the April 2024 and any future Bitcoin halving events cryptocurrency network difficulty and impact of increased global
computing power; economic dependence on regulated terms of service and electricity rates risks; future profits/losses and production
revenues/expenses; cryptocurrency exchanges are new and mostly unregulated; discretion regarding by the Company of available funds; political
and regulatory risk; permits and licenses; server failures; global financial conditions; tax consequences; environmental regulations;
environmental liability; erroneous transactions and human error; the continued development of existing and planned facilities; risks
of non-availability of insurance; competition; reliance on key personnel; credit risk; uncertainty of widespread use of cryptocurrency;
interest rate risk; fluctuations in currency exchange rates; and controlling shareholder risk. Particular factors which could impact
future results of the business of the Company include but are not limited to: the construction and operation of blockchain infrastructure
may not occur as currently planned, or at all; expansion may not materialize as currently anticipated, or at all; the digital currency
market; the ability to successfully mine digital currency; revenue may not increase as currently anticipated, or at all; it may not be
possible to profitably liquidate the current digital currency inventory, or at all; a decline in digital currency prices may have a significant
negative impact on operations; the volatility of digital currency prices; the anticipated sustainability of the renewable energy on which
the Company depends at economical prices for the purposes of cryptocurrency mining; the ability to complete current and future financings;
any regulations or laws that will prevent the Company from operating its business; historical prices of digital currencies and the ability
to mine digital currencies that will be consistent with historical prices.

 Except
as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements and we assume
no obligation to update any forward-looking statements contained in this registration statement. Thus, assumptions should not be made
that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.

 PART
I

 Item
1: Business

 Unless
the context requires otherwise in this Annual Report on Form 10-K ("Annual Report"), the terms "SHI,", "Soluna,"
the "Company," "we," "us," and "our" refer to Soluna Holdings, Inc. together with its
consolidated subsidiaries, "SCI" refers to Soluna Computing, Inc., formerly known as EcoChain, Inc. Other trademarks, trade
names, and service marks used in this Annual Report on Form 10-K are the property of their respective owners.

 Overview
and Recent Developments

 We
are a digital infrastructure company specializing in transforming surplus renewable energy into computing resources. Our modular data
centers can co-locate with wind, solar, or hydroelectric power plants and support compute intensive applications including Bitcoin Mining,
Generative AI, and Scientific Computing. This pioneering approach to data centers helps energize a greener grid while delivering
cost-effective and sustainable computing solutions.

 Our
mission is to make renewable energy a global superpower using computing as a catalyst.

 SHI
through its subsidiaries operates across several business divisions:

 Mining [current] – we collaborate with project-level financial partners to mine Bitcoin at our proprietary data centers.

 Hosting [current] – we offer data hosting services at our proprietary data centers to prominent Bitcoin Mining companies.

 Response Services [current] – we utilize our data centers to deliver demand response services to grid operators.

 In addition to the services listed above, the Company plans to operate in the following business division:

 AI
 Cloud Services [future] – we plan to utilize our data centers to provide specialized AI Cloud and colocation services
 to companies seeking to train large language models, tune existing AI models, and deploy advanced AI-powered applications for the
 enterprise.

 Operations
and Project Pipeline

 We
currently operate 75 MW of facilities across two locations. We have another 216 MW of facilities in development or near shovel ready in the United States. In addition, we have a 2 GW long term pipeline of renewable-energy powered projects. A summary of
our pipeline, current and anticipated operating locations are as follows (as of December 31, 2023):

 Name

 Location

 MW

 Status

 Business
 Model

 Power
 Source

 Murray,
 KY

 Grid
 / Hydro

 1A

 Silverton,
 TX

 Wind

 1B

 Silverton,
 TX

 Mining

 Wind

 Silverton,
 TX

 Shovel
 Ready

 Wind

 Kati

 Harlington,
 TX

 Development

 Wind

 Capital
Partners

 We
finance our data center projects through a combination of the sale of public equity and project-level capital partners. As of December
31, 2023, the Company had two primary project-level partners:

 Spring
 Lane Capital ("SLC") – A private venture fund with approximately $350 million of assets under management that
 focuses on sustainability solutions. On May 3, 2022 SLC committed a $35 million capital pool to finance Soluna data centers including
 Project Dorothy 1A.

 Navitas
 West Texas Investments SPV, LLC ("Navitas"), organized by Navitas Global – a private equity firm with less
 than $150 million of assets under management focused on sustainable Bitcoin Mining. On May 9, 2023, we formed a strategic
 partnership with Navitas to mine Bitcoin at Project Dorothy 1B.

 Distinctives

 We
are a leading curtailment solutions provider. Our brand is now synonymous with curtailment solutions. We have relationships with
the industry's leading renewable energy developers and have a growing pipeline of projects with access to low-cost power resources.
We have a repeatable way to grow our supply of sustainable, low-cost power from renewable energy generators. Our unique behind-the-meter
structure allows us to draw power from the power plant or grid, and provide demand response services. This approach allows us to offer
a lower cost of power for Bitcoin mining and, in the future AI and other HPC.

 We
are an infrastructure company. We build, own or jointly own, and operate our data centers and related power infrastructure. Our proprietary
design is modular, scalable, and designed to run computing-intensive, batchable applications beyond Bitcoin Mining. We manage our data
centers using MaestroOS(), our proprietary data center operating system. MaestroOS reads a multitude of signals, including: local
power costs, weather, Bitcoin metrics, and grid signals to optimize the operations of our facilities around the country. This allows
us to monetize these facilities over a long period of time with a high return on invested capital.

 Strategic
Focus

 In
2023, we executed on the following four-pronged strategy;

 1.

 Energize
 Project Dorothy – We shifted our flagship data center from construction to operations. We energized and optimized 50MW
 (Dorothy 1A and Dorothy 1B). We partnered with Navitas to establish a new proprietary Bitcoin mining operation. We sold an 85% membership
 interest in Dorothy 1A to SLC to raise capital. We filled Dorothy 1A with 25 MW of strategic hosting partners.

 2.

 Cash
 Flow and Process Optimization – We shifted our business from primarily proprietary Bitcoin mining to mostly Bitcoin
 hosting. We signed 50 MW of hosting at Dorothy and Sophie. Toward the end of 2023 we replaced under-performing deals at Sophie with
 more profitable contracts. We implemented cost cutting measures to achieve positive cash flow from operations in the second half of
 2023. We implemented a new ERP system to improve efficiency and help scale our financial operations. We grew our operating cash
 position by approximately $5.2 million from $1.2 million as of December 31, 2022 to $6.4 million as of December 31,
 2023.

 3.

 Expand
 Flagship – We advanced the process of getting the next 50 MW of our Dorothy data center - Dorothy 2 - developed in 2024
 through project-level partnerships. Dorothy 2 cleared the ERCOT modeling process early in the first quarter of 2024.

 4.

 Grow
 Pipeline – We signed a term sheet for a new 166 MW data center called Project Kati that will be integrated with a 300 MW
 wind farm that has surplus energy from increased curtailments. We worked throughout 2023 to advance the project through the ERCOT
 planning process.

 Competition

 The
Company competes with Bitcoin mining companies, Bitcoin hosting companies, and in the future specialized AI cloud or hosting companies.

miners compete globally, ranging from individuals to large data centers. This competition drives innovation in hardware, software, and
power strategies. Miners often join pools for stability. The mining industry is decentralized and highly competitive. Bitcoin Hosting
is also competitive, with customers seeking reliable, low-cost electricity and capable operating teams.

 We
compete with the following publicly-traded Bitcoin mining companies:

 Riot
 Platforms, Inc.

 Core
 Scientific, Inc.

 Cipher
 Mining Inc.

 Hut
 8 Mining Corp

 Hive
 Blockchain Technologies Ltd.

 Bitfarms,
 Ltd.

 Cleanspark,
 Inc.

 Iris
 Energy Limited

 Bit
 Digital, Inc.

 TeraWulf
 Inc.

 Greenidge
 Generation Holdings Inc.

 Note:
some of these mining companies may be customers of our Bitcoin Hosting division. Our differentiation is our power pipeline and our Distinctives
as noted above.

 As we further develop our data center business, we will compete for HPC applications that large traditional data centers (such as Amazon Web
Services, Google Cloud Platform, and Microsoft Azure), are not suited to compete for due to their higher power and other infrastructure
costs.

 Intellectual
Property

has filed eight provisional patent applications with the U.S. Patent and Trade Market Office for technologies related to their Modular
Data Center ("MDC") concept, covering modular architecture, cooling technology, simulations, and overall data center control.
These patents also include aspects like variable power consumption and local co-optimization of power generation supply with demand.

Soluna has filed two utility patent applications. The first, granted (Patent # US20230013746A1) in 2023, focuses on the layout of modular
data center buildings on a site, crucial for thermal efficiency. The second patent application is for local co-optimization of power
generation supply with demand generated by a data center, detailing a method involving independently metered load co-location with power
generation.

While there is no guarantee of patent approval or competitive advantage, enforcing patents can be resource intensive. Soluna
also holds a registered trademark for its Company name, Soluna.

 Soluna will continue to rely on its rapid innovation
and relentless implementation to compete well, leveraging its strategic relationships, operating experience and technical know-how.

 The
Company has developed a proprietary software system called MaestroOS() to enable the automation, management, and operations of
critical elements of its data centers. We have a dedicated team that engages in activities to continue to enhance the MaestroOS to drive
innovation and growth in its business.

 Environmental

 There
are increasing concerns about the quantity of non-renewable energy used by data centers, especially those used for Bitcoin Mining and
increasingly Generative AI. We believe the integration of computing and renewable energy is the future of the modern grid.

 By
colocating our data centers with underutilized renewable resources, Soluna aims to reduce the carbon footprint of our data centers and
encourage renewable power plant development. An independent study done by REsurety found that Soluna's data centers are 18% greener
than traditional data centers. This is driven by our flexible design, our MaestroOS software platform, and our location on the grid close
to renewable resources. REsurety used Local Marginal Emissions data and analysis for the report. 1

 Beginning
in December 2023, we began participating in an ERCOT emergency demand response program which allows the grid to redirect our power
allotment back into the market during extreme weather events when needed. By taking such actions, we immediately help to stabilize
the grid by allowing our power allotment to be delivered to the areas of greatest need, such as heating homes and powering hospitals.
Overall, our operations incentivize the development of new renewable power generation, and they help to reduce the frequency and impact
of power failures and electricity price surges. Our MaestroOS technology makes this flexible behavior possible and has already performed
well during ERCOT testing of the demand response system.

 The Carbon Footprint of Project Dorothy: An LME Analysis - Soluna (solunacomputing.com)

 Existing
or Probable Governmental Regulations

 Regulatory

mining is largely an unregulated activity at both the state and federal level. We anticipate that cryptocurrency mining will face increased
regulation in the near and long-term. We cannot predict how future regulations may affect our business or operations. State regulation
of cryptocurrency mining is important with respect to where we conduct our mining operations. Our Dorothy Project is located in the State
of Texas. To the extent that there is any state regulation, Texas is one of the most favorable regulatory environments for cryptocurrency
miners.

 The
 effect of any regulatory change by the federal, state, local or foreign governments or any
 self-regulatory agencies on the Company is impossible to predict, but such change could be
 substantial and may have a material adverse effect on the Company's business, financial
 condition, and results of operations. For example, in November 2022, the State of New York
 enacted a law prohibiting new proof-of-work mining activities that use power generated from
 carbon inputs. While the Company does not currently operate in New York, there is no guarantee
 that future regulation or adverse action will not take place and interpretation of existing
 regulations in a manner adverse to our business is possible. In January 2024, a decade after
 initial applications were filed, the SEC approved a series of spot Bitcoin exchange-traded
 funds, which have received billions of dollars of in-flows. In February 2024, the U.S. Energy
 Information Administration (the "EIA") commenced a six-month survey among participants
 in the U.S. cryptocurrency mining industry to collect data to track and analyze the electricity
 consumption by such industry participants. The EIA's analysis will focus
 on how the energy demand for cryptocurrency mining is evolving, identify geographic areas
 of high growth, and quantify the sources of electricity used to meet cryptocurrency mining
 demand. It is unclear what, if any, regulatory policy changes may result following the collection
 and analysis of the data obtained through the EIA's survey, if it proceeds. If regulators
 seek to curb electricity consumption by cryptocurrency mining operations in the future our
 business could be adversely affected. As of February 23, 2024, the U.S. Department of Energy
 (the agency governing the EIA) agreed to temporarily suspend this survey following a lawsuit
 by a cryptocurrency association and B itcoin mining company. The Company will closely monitor
 the outcome of this and other regulatory developments concerning cryptocurrency mining, as
 to the potential effects on our business.

 As
the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other
agencies, which may affect our mining and other activities. For additional discussion regarding our belief about the potential risks
that existing and future regulation pose to our business, see Part I, Item 1A. "Risk Factors" of this Annual
Report.

 Human
Capital Resources

 As
of March 7, 2024, we had 40 employees, including 34 full-time employees, 2 part-time employees,
1 intern, 1 temporary employee and 2 full-time consultants. Of these employees, eleven were in finance, nineteen in operations,
one in corporate development, six in information technology and engineering, one in human capital, one in power, and one executive. The
operations personnel include both individuals directly involved in the strategy of our data centers as well as data center maintenance
and supervisory roles. Certain positions within our organization require industry-specific technical knowledge. We have been successful
in attracting and retaining qualified technical personnel for these positions.

 Our
human capital resources objectives include, as applicable, identifying, recruiting, retaining, engaging, incentivizing, and integrating
our existing and additional employees. The Company supports its employees through a competitive compensation package, including company
equity, generous health benefits and a flexible PTO policy. We have a combination of remote and on-site employees.

 None of our employees are subject to a collective bargaining agreement and we believe our relations with our employees is positive.

 Diversity,
Equity, and Inclusion

 We
support diversity and inclusion by ensuring a workplace where employees can thrive, and our policies are designed to promote equality
and respect for everyone. Diverse backgrounds, experiences and opinions are encouraged and welcomed. In support of such diversity and
inclusion, we act in accordance with our Code of Ethics and Business Conduct and our Non-Discrimination and Anti-Harassment Policy to
create a safe environment free from discrimination or harassment that respects the human rights of our employees. We strive to achieve
a workplace where opportunities for success are created and available for everyone equally. In support of this goal, in 2023, we required
all employees to complete unconscious bias and harassment training.

 Compensation
and Benefits

 Our
compensation programs are designed to provide incentives to attract, retain, and motivate employees to achieve our long-term goals. Specifically,
we compare salary and wages against quantitative benchmarks and adjust monetary compensation to ensure wages are competitive and consistent
with employee positions, skill levels, experience, and geographic location. We maintain a robust process for ensuring pay equity across
the Company and increases in incentives and compensation based on merit and performance.

 We
provide a comprehensive range of health benefits options, including medical, behavioral, dental, and vision insurance for employees and
family members, paid leaves, and life, disability, accident, and cancer care insurance coverage.

 Insurance

 The
Company and its subsidiaries maintain insurance policies with reputable insurers against such risks and in such amounts as management
has determined to be prudent for our operations and that we believe are similar in scope and coverage in all material respects to insurance
policies maintained by other similarly situated businesses. These policies include coverage for D&O, Builders Risk, Property, General
Liability, Auto and other casualty lines of business.

 Factors
Expected to Affect Our Future Results

 Revenue
Sources:

 Our
revenue streams consist of several components:

 1.
 Hosting Revenues: We provide electrical power and network connectivity to cryptocurrency mining customers, who pay a specified
amount and rate for these services.

 2.
 Block Rewards in Bitcoin: These are fixed rewards programmed into the Bitcoin software and awarded to miners for solving cryptographic
problems and creating new blocks on the blockchain.

 3.
 Participation in Demand Response Programs: We also generate revenue by participating in demand response programs.

 Market
Price of Bitcoin

 Changes
in the market value of Bitcoin directly impact our revenues. For example, in 2021 and 2022, the average Bitcoin price was $47,432 and
$28,298, respectively. By December 31, 2023, the price of Bitcoin had reached a high of $44,146.

events occur periodically in the Bitcoin network, reducing block rewards. The reduction is designed to occur irrespective of ongoing
demand. While halving can impact our revenues negatively by reducing the rewards for mining, it will continue until the total Bitcoin
rewards issued reach approximately 21 million, expected around 2140. Currently the block rewards are fixed at 6.25 Bitcoin per block,
and it is estimated that it will halve again to 3.125 Bitcoin in April 2024.

 Network
Hash Rate and Difficulty

 A
miner's chance of earning Bitcoin rewards depends on their hash rate relative to the global network hash rate. As demand for Bitcoin
increases, the global network hash rate rises rapidly, leading to higher network difficulty. This adjustment ensures a ten-minute block
validation time, making the network more secure but requiring more computing power to earn rewards. Failure to keep pace with industry
trends in deploying additional hash rate can decrease a miner's share of the global network hash rate and, consequently, their
chance of earning rewards.

 Company
History, Information and Organization

 History

Holdings, Inc., formerly known as Mechanical Technology, Incorporated which was originally incorporated in the State of New York in 1961,
reincorporated in the State of Nevada on March 24, 2021, and is headquartered in Albany, New York. Effective November 2, 2021, the Company
changed its name from "Mechanical Technology, Incorporated" (or "MTI") to "Soluna Holdings, Inc."
On October 29, 2021, Soluna Callisto merged into Soluna Computing, Inc. ("SCI"), a private green data center development
company. MTI Instruments, Inc., a subsidiary of Soluna Holdings, Inc., was sold on April 11, 2022. We formed a wholly owned subsidiary
of SHI on December 31, 2023, Soluna Digital, Inc. ("Soluna Digital", or "SDI"). Effective December 31, 2023,
SCI transferred substantially all of its assets to SHI or its subsidiaries, including SDI.

 Information
and Organization

 Our
website is at  Information contained on our website does not constitute part of and is not incorporated
into this Annual Report.

 The
following table is a description of each of the entities in the corporate organization chart, under Soluna Holdings, Inc.

 Subsidiary

 Inc.-
 State

 Computing, Inc. ("SCI")

 Successor
 to EchoChain Mining, Inc. and the operating arm of SHI. Owner of the Project Edith data center.

 Digital, Inc. ("SDI")

 Holding
 company focused on cryptocurrency business segments.

 MC, LLC ("SMC")

 Owner
 and operator of Project Marie data center. Decommissioned in December 2022.

 SW, LLC ("SSW")

 Owner
 and operator of Project Sophie data center.

 DV Services ("DVSV")

 Provides
 operations and maintenance services, Engineering, procurement, and construction ("EPC") services to the DVCC, and DVSL
 data centers.

 DV ComputeCo, LLC ("DVCC")

 Delaware

 Owner
 of Project Dorothy 1B data center.

 DVSL ComputeCo, LLC ("DVSL")

 Delaware

 Owner
 of Project Dorothy 1A data center.

 DV Devco, LLC ("DVDC")

 Owner
 of DVSL and indirect owner of Project Dorothy 1B data center and 100% of the Class A units of DVSL.

 MC Borrowings, LLC 2021-1 ("SMCB1")

 Delaware

 A
 borrowing entity to hold assets (miners) that collateralized an equipment loan with NYDIG ABL, LLC

 SW Borrowings, LLC 2022-1 ("SSWB1")

 Delaware

 A
 borrowing entity for any potential loan agreements for Project Sophie

 Reverse
Stock Split

 On
October 13, 2023, the Company executed a 1-for-25 reverse stock split, approved by the Board of Directors and shareholders on June 29,
2023. The reverse split, reflected in trading under the symbol "SLNH" since October 16, 2023, converted every 25 shares into
one share without changing the par value. No fractional shares were issued; holders with fractional shares received an additional fraction
to round up to the next whole share.

 On
October 30, 2023, the Company successfully met Nasdaq's minimum bid price requirement, as confirmed in a Notification Letter. The
closing bid price remained at or above $1.00 per ordinary share for the last 10 consecutive business days from October 16 to October
27, 2023, indicating compliance with the Nasdaq Capital Market Minimum Bid Price Requirement.

 Item
1A. Risk Factors

 Our
business, financial condition and operating results are subject to several risk factors, both those that are known to us and identified
below and others that may arise from time to time. These risk factors could cause our actual results to differ materially from those
suggested by forward-looking statements in this Annual Report on Form 10-K (this "Report") and elsewhere, and may adversely
affect our business, financial condition or operating results. If any of these risk factors should occur, moreover, the trading price
of our securities could decline, and investors in our securities could lose all or part of their investment in our securities. These
risk factors, along with other information contained in this Report, should be carefully considered in evaluating our prospects.

 Risks
Relating to the Company and its Growth Strategy

 The
Company's ability to operate as a going concern is in doubt.

 The
audit opinion and notes that accompany the Company's Consolidated Financial Statements disclose a going concern qualification
to its ability to continue in business. The accompanying Consolidated Financial Statements have been prepared under the assumption
that the Company will continue as a going concern. The Company has incurred losses resulting in an accumulated deficit of
approximately $251 million as of December 31, 2023, and further losses are anticipated in the development of its
business.

 The
accompanying Consolidated Financial Statements show that the Company did not generate sufficient revenue to generate net income and has
negative working capital as of December 31, 2023. The Company's ability to continue as a going concern is dependent on its ability
to raise capital to fund its future data centers and working capital requirements or its ability to profitably execute its business plan.
The Company's plans for the long-term return to and continuation as a going concern include financing its future operations through
sales of securities, which may include common stock, preferred stock, convertible debt and project finance, or through the exercise of
outstanding warrants. The volatility in capital markets and general economic conditions in the U.S. and elsewhere can pose significant
challenges to raising the required funds. These factors raise substantial doubt about the Company's ability to continue as a going
concern.

 The
Company's consolidated financial statements do not give effect to any adjustments required to realize its assets and discharge
its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying Consolidated
Financial Statements.

 We
may not be able to refinance, extend or repay our substantial indebtedness owed to our convertible note debt holders, which would have
a material adverse effect on our financial condition, compliance with our negative covenants, and ability to continue as a going concern.

 We
anticipate that we will need to raise a significant amount of debt or equity capital in the near future in order to repay our outstanding
debt obligations owed to our convertible noteholders when they mature. On October 25, 2021, the Company issued to certain institutional
investors secured convertible notes in the aggregate principal amount of approximately $16.3 million for an aggregate purchase price
of $15.0 million. As of March 15, 2024, we owed our convertible debt holders approximately $7.8 million of principal which is currently
due on July 25, 2024. The Company has recently amended its securities purchase agreement with the convertible note holders that gives
the Company the option to extend the maturity of the notes for two three-month periods with a 2% increase in principal on the notes
for each extension. If we are unable to raise sufficient capital to repay these obligations at maturity and we are otherwise unable to
extend the maturity dates or refinance these obligations, we would be in default. We cannot provide any assurances that we will be able
to raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise
refinance these obligations. Upon a default in the convertible debt our convertible debt holders would have the right to exercise its
rights and remedies to collect, which would include foreclosing on our assets. Accordingly, a default would have a material adverse effect
on our business and, if our convertible noteholders exercise its rights and remedies, we would likely be forced to seek bankruptcy protection.

 Our agreements with our convertible noteholders contain numerous negative covenants, many of which are implicated by our regular business
operations, necessitating frequent loan modifications and consents. Failure to achieve agreement with the convertible noteholders on these
covenants could have an adverse effect on our ability to obtain advanced financing or implement our business plan and a covenant default
would have an adverse effect on our financial condition and results of operations.

 We
may be impacted by macroeconomic conditions due to global pandemics, epidemics or outbreaks of disease and the resulting global supply
chain crisis.

 Global
trade conditions and consumer trends that originated during the COVID-19 pandemic continue to persist and may also have long-lasting
adverse impact on us and our industry. There are continued risks arising from new pandemics, epidemics or outbreaks of disease, and ongoing
COVID-19 related issues which have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in additional
expenses to expedite delivery of new critical equipment, as well as critical materials needed for our expansion plans. Further, equipment
manufacturers have been impacted by the constrained supply of the semiconductors used in the production of advanced computer processing
equipment. Thus, until the global supply chain crisis is resolved, and these extraordinary pressures are alleviated, we expect to continue
to incur higher than usual costs to obtain such equipment and we may face difficulties obtaining equipment we need at prices or in quantities
we find acceptable, if at all, and our business and results of operations may suffer as a result.

 In
addition, labor shortages may lead to increased difficulty and labor costs in hiring and retaining the highly qualified and motivated
people we need to conduct our business and execute on our strategic growth initiatives. Sustaining our growth plans will require the
ongoing readiness and solvency of our suppliers and vendors, a stable and motivated production workforce, and government cooperation,
each of which may be affected by macroeconomic factors outside of our immediate control.

 We
cannot predict the duration or direction of current global trends or their sustained impact. Ultimately, we continue to monitor macroeconomic
conditions to remain flexible and to optimize and evolve our business as appropriate, and we will have to accurately project demand and
infrastructure requirements globally and deploy our workforce and capital resources accordingly. If we experience unfavorable global
market conditions, or if we cannot or do not maintain operations at a scope that is commensurate with such conditions or are later required
to or choose to suspend such operations again, our business, prospects, financial condition and operating results may be harmed.

 The
shortage of advanced semiconductors needed by AI customers may adversely affect the Company's transition to AI data hosting business.

 As
the Company transitions into an AI cloud service provider, its business may be affected by the current severe shortage of advanced semiconductors
needed for processing of AI-related large language models. While the Company's customers are generally responsible for the provision
of processing equipment, any difficulties faced by them in acquiring these advanced chips, our data-hosting business may be adversely
affected by the shortage of equipment required by them.

 Construction
of our future facilities potentially exposes us to additional risks.

 We
intend to continue constructing modular data centers in addition to our Dorothy Facility, which potentially exposes us to significant
risks we may otherwise not be exposed to, including risks related to, among other sources: construction delays; lack of availability
of parts and/or labor, increased prices as a result, in part to inflation, and delays for data center equipment; labor disputes and work
stoppages, including interruptions in work due to unanticipated environmental issues and geological problems; delays related to permitting
and approvals to open from public agencies and utility companies; and delays in site readiness leading to our failure to meet commitments
made in connection with such expansion.

 All
construction related projects depend on the skill, experience, and attentiveness of our personnel throughout the design and construction
process. Should a designer, general contractor, significant subcontractor or key supplier experience financial problems or other problems
during the design or construction process, we could experience significant delays, increased costs to complete the project and/or other
negative impacts to our expected returns.

 If
we are unable to overcome these risks and additional pressures to complete our expansion projects in a timely manner, if at all, we may
not realize their anticipated benefits, and our business and financial condition may suffer as a result.

 We
may have difficulty in obtaining banking services for our cryptocurrency activities.

 While
the banking authorities in the United States do not prohibit banks from providing banking services to cryptocurrency-related businesses
such as the Company, the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency have issued directives to banks
in the United relating to their crypto-asset risks and as a result a significant number of banks have determined to limit such activities.
Accordingly, we have had, and may have in the future have, difficulty in opening bank accounts, obtaining letters of credit and generally
access to the banking system.

 We
may be unable to obtain additional funding to scale the AI hosting and its hosting and proprietary cryptocurrency mining business to
a larger-scale business.

 We
are considering further increasing the size of our business as we seek to leverage our experience and expertise in operating data centers
for advanced data processing, including artificial intelligence and cryptocurrency. To do so, however, we will need to raise additional
debt and/or equity financing, which may not be available to us on acceptable terms or at all. Failure to generate adequate cash from
our operations or find sources of funding would require us to scale back or curtail our operations or expansion efforts, including limiting
our ability to expand our hosting and cryptocurrency business to a larger-scale operation, and would have an adverse impact on our business
and financial condition. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership
interests, and the per-share value of our Common Stock could decline. Furthermore, if we engage in additional debt financing, the holders
of debt likely would have priority over the holders of Common Stock on order of payment preference. We may be required to accept terms
that restrict our ability to incur additional indebtedness or take other actions including terms that require us to maintain specified
liquidity or other ratios that could otherwise not be in the interests of our stockholders.

 We
rely upon strategic partners to finance certain of our facilities.

 In
order to complete construction of the first phase of our Dorothy Facility we have partnered with Spring Lane Capital and Navitas Global,
which provided funding to complete construction and fund corporate expenses, and we may seek similar funding completion of subsequent
phases of the Dorothy Facility and our other projects in development. As a result, we will be requiring financing assistance as well
as cooperation in significant operation decisions affecting the projects. If we are unable to obtain strategic partners for our projects
or if we and our partners disagree on matters affecting our projects, our growth, prospects and financial results may be adversely affected.

 The
lack of regulation of digital asset exchanges which Bitcoin, and other cryptocurrencies, are traded on, may expose us to the effects
of negative publicity resulting from fraudulent actors in the cryptocurrency space, and can adversely affect an investment in the Company.

 The
digital asset exchanges on which Bitcoin is traded are relatively new and largely unregulated. Many digital asset exchanges do not provide
the public with significant information regarding their ownership structure, management teams, corporate practices, or regulatory compliance.
As a result, the marketplace may lose confidence in, or may experience problems relating to, such digital asset exchanges, including
prominent exchanges handling a significant portion of the volume of digital asset trading. In recent years, a number of digital asset
exchanges filed for bankruptcy proceedings and/or became the subjects of investigation by various governmental agencies for, among other
things, fraud, causing a loss of confidence and an increase in negative publicity for the digital asset ecosystem. As a result, many
digital asset markets, including the market for Bitcoin, have experienced increased price volatility. The Bitcoin ecosystem may continue
to be negatively impacted and experience long term volatility if public confidence decreases.

 These
events are continuing to develop, and it is not possible to predict, at this time, every risk that they may pose to us, our service providers,
or the digital asset industry as a whole. A perceived lack of stability in the digital asset exchange market and the closure or temporary
shutdown of digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce
confidence in digital asset networks and result in greater volatility in cryptocurrency values. These potential consequences of a digital
asset exchange's failure could adversely affect an investment in us.

 Our
business plan is heavily dependent upon acquisitions and strategic alliances and our ability to identify, acquire or ally on appropriate
terms, and successfully integrate and manage any acquired companies or alliances will impact our financial condition and operating results.

 Part
of our strategy to grow our business is dependent on the acquisition of other entities or businesses in the future that complement our
current products, enhance our market coverage or technical capabilities, or offer growth opportunities. We may also need to form strategic
alliances or partnerships in order to remain competitive in our market. We may not be able, however, to identify and successfully negotiate
suitable acquisitions alliances, obtain any financing necessary for such acquisitions on satisfactory terms or otherwise complete any
such acquisitions or alliances. Further, any acquisition or alliance may require a significant amount of management's time and
financial resources to complete; furthermore, such acquisitions, strategic alliances or partnerships could be difficult to integrate,
disrupt our business and dilute stockholder value.

 In
the future, we may acquire or form strategic alliances or partnerships with other businesses in order to remain competitive or to acquire
new technologies. Acquisitions, alliances and investments involve numerous risks, including:

 the
 potential failure to achieve the expected benefits of the combination, acquisition or alliance;

 difficulties
 in and the cost of integrating operations, technologies, services and personnel;

 difficulty
 of assimilating geographically dispersed operations and personnel of the companies we acquire or ally with;

 impairment
 of relationships with employees, customers, vendors, distributors or business partners of either an acquired business or our own;

 unanticipated
 difficulties in conforming business practices, policies, procedures, internal controls and financial records of acquisitions with
 our own;

 the
 potential inability to successfully integrate acquired operations and products or to realize cost savings or other anticipated benefits
 from integration;

 diversion
 of financial and managerial resources from existing operations;

 risk
 of entering new markets in which we have little or no experience or where competitors may have stronger market positions;

 potential
 write-offs of acquired assets or investments and potential financial and credit risks associated with acquired customers;

 inability
 to generate sufficient revenue to offset acquisition or investment costs;

 the
 risk of cancellation or early termination of an alliance by either party;

 potential
 unknown liabilities associated with the acquired businesses;

 unanticipated
 expenses related to acquired technology and its integration into the existing businesses;

 negative
 impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets,
 fixed assets and deferred compensation, and the loss of acquired deferred revenue and unbilled deferred revenue;

 loss
 of key employees or customers of acquired companies;

 potential
 disruption of our business or the acquired business;

 inability
 to accurately forecast the performance of recently acquired businesses, resulting in unforeseen adverse effects on our operating
 results;

 the
 tax effects of any acquisitions; and

 Adverse
 accounting impact to our results of operations.

 Our
failure to successfully manage our strategic relationships with Spring Lane and Navitas, or other future acquisitions, strategic alliances
or partnerships, could seriously harm our operating results. In addition, our stockholders would be diluted if we finance the future
acquisitions, strategic alliances or partnerships by incurring convertible debt or issuing equity securities.

 We
cannot offer any assurance that we will be able to identify, complete or successfully integrate any suitable acquisitions or suitable
alliances. Even if successfully negotiated and closed, any acquisitions or alliances may not yield expected synergies, may not advance
our business strategy as expected, may fall short of expected return-on-investment targets, or may otherwise fail to achieve their objectives
or perform as contemplated and not prove successful. Companies that we acquire may operate with different cost and margin structures,
which could further cause fluctuations in our operating results and adversely affect our business, financial condition and results of
operations.

 Risks
Related to our Cryptocurrency and Data Center Business

 Our
cryptocurrency business has a history of operating losses, is affected by the volatility of Bitcoin, and we may report additional operating
losses in the future.

 Our
primary focus has been on the hosting and proprietary cryptocurrency mining business, and we have recorded historical losses and negative
cash flow from our operations when the value of Bitcoin we and our hosted customers mine does not exceed associated costs. Further, as
part of our strategic growth plans, we have made capital investments in expanding and vertically integrating our mining operations, increased
our employee base, and incurred additional costs associated with owning and operating a self-mining facility. However, future market
prices of Bitcoin are difficult to predict, and we cannot guarantee that our future revenues will exceed our associated costs.

 Our
data center business has a limited operating history, and we may not recognize operating income in the future.

 We
began our cryptocurrency and computer hosting operations in January 2020 and therefore is subject to all the risks inherent in a relatively
recently established business venture in a rapidly developing and changing industry. Furthermore, in 2024 we entered the artificial intelligence
market in an attempt to leverage our expertise in advanced data processing applications. This limited operating history also makes it
difficult to evaluate our current business and its future prospects. We have not yet been able to confirm that our business model can
or will be successful over the long term, and we may not ever continue to recognize operating income from this business. Our projections
have been developed internally and may not prove to be accurate. Our operating results will likely fluctuate moving forward as we focus
on growing our operations. We may need to make business decisions that could adversely affect our operating results, such as modifications
to its business structure or operations. In addition, we expect additional growth in this business, which could place significant demands
on the Company's management and other resources and require us to continue developing and improving our operational, financial
and other internal controls. We may not be able to address these challenges in a cost-effective manner or at all. If we do not effectively
manage our growth, it may not be able to execute on its business plan, respond to competitive pressures or take advantage of market opportunities,
and our business, financial condition and results of operations could be materially harmed.

 Given
our early-stage status, without positive operating income, there is a substantial risk regarding our ability to succeed. You should consider
our business and prospects in light of these risks and the risks and difficulties that we will encounter as we continue to develop our
business model. We may not be able to address these risks and difficulties successfully, which would materially harm our business and
operating results, and we could be forced to terminate our business, liquidate our assets and dissolve, and you could lose part or all
of your investment.

 Prices
of cryptocurrencies are extremely volatile, and if our mined cryptocurrencies are converted into dollars when such values are low, we
may not recognize the income from the conversion of the mined cryptocurrencies that we were expecting.

 The
fluctuating prices of cryptocurrencies represent significant uncertainties for our business. A variety of factors, known and unknown,
may affect price and valuation, including, but not limited to (i) the supply of such cryptocurrencies; (ii) global blockchain asset demand,
which can be influenced by the growth of retail merchants' and commercial businesses' acceptance of blockchain assets like
cryptocurrencies as payment for goods and services, the security of online cryptocurrency exchanges and networks and digital wallets
that hold blockchain assets, the perception that the use and holding of blockchain assets is safe and secure, and the regulatory restrictions
on their use; (iii) investors' expectations with respect to the rate of inflation; (iv) changes in the software, software requirements
or hardware requirements underlying a blockchain network; (v) changes in the rights, obligations, incentives or rewards for the various
participants in a blockchain network; (vi) currency exchange rates; (vii) fiat currency withdrawal and deposit policies of cryptocurrency
exchanges and networks and liquidity on such exchanges and networks; (viii) interruptions in service from or failures of major cryptocurrency
exchanges and networks; (ix) investment and trading activities of large subscribers, including private and registered investment funds,
that may directly or indirectly invest in blockchain assets; (x) monetary policies of governments, trade restrictions, currency devaluations
and revaluations; (xi) regulatory measures, if any, that affect the use of blockchain assets; (xii) the maintenance and development of
the open-source software protocol of the cryptocurrency networks; (xiii) global or regional political, economic or financial events and
situations; (xiv) expectations among blockchain participants that the value of blockchain assets will soon change; and (xv) a decrease
in the price of blockchain assets that may have a material adverse effect on our financial condition and operating results. If our mined
cryptocurrencies are converted into dollars when their values are low, we may not recognize the income from the conversion of the mined
cryptocurrencies that we were expecting. Further, the extreme swings in value can make it difficult for us to develop reasonable financial
plans and projections with respect to our business.

 We
may not be able to continue to develop our technology and keep pace with technological developments,
or otherwise compete with other companies, many of whom have greater resources and experience.

 We
do not have the resources to compete with larger cryptocurrency mining and other entities in the advanced data processing space at this
time and may not be able to compete successfully against present or future competitors. These markets have attracted various high-profile
and well-established operators, many of which have substantially greater liquidity and financial resources than we do. With the limited
resources we have available, we may experience great difficulties in expanding and improving our network of miners to remain competitive,
and we may not be in a position to construct additional operational cryptocurrency mines.

 Rapid
technological change is a current feature of the markets in which we operate, and we cannot provide assurance that we will be able to
achieve the technological advances, in a timely manner or at all, that may be necessary for us to remain competitive or that certain
of our equipment will not become obsolete. Our ability to anticipate and manage changes in technology standards on a timely basis will
be a significant factor in our ability to remain competitive. We may not be successful, generally or relative to our competitors, in
timely implementing new technology into our systems, or doing so in a cost-effective manner. During the course of implementing any such
new technology into our operations, we may experience system interruptions and failures. Further, if due to technological developments
we need to replace our equipment entirely to remain competitive in the market, there can be no assurance that we will be able to do so
on a cost-effective basis or in a timely manner, particularly in light of the long production period to manufacture and assemble cryptocurrency
miners, potential large-scale purchases of miners from existing competitors and new entrants into the industry, and the difficulty in
obtaining the advanced semiconductors needed for artificial intelligence applications. Furthermore, there can be no assurance that we
will recognize, in a timely manner or at all, the benefits that we may expect as a result of our implementing new technology into our
operations. As a result, our business, prospects, and operations may suffer, and there may be adverse effects on our financial condition
and on the market prices of our securities.

 In
addition, competition from existing and future competitors, particularly the other North American companies that may have access to greater
volumes of competitively priced energy, could result in our inability to secure acquisitions and partnerships that we may need to expand
our business in the future. This competition from other entities with greater resources, experience and reputations may result in our
failure to maintain or expand our business. If we are unable to expand and remain competitive, our business could be negatively affected
which would have an adverse effect on the trading prices of our securities, which in turn would harm investors in our Company.

 Regulatory
changes or actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects
our business, prospects, or operations.

 As
cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies;
certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while some jurisdictions
subject the mining, ownership and exchange of cryptocurrencies to extensive, and in some cases overlapping, unclear and evolving regulatory
requirements.

 For
example, in January 2023, the Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation issued
a joint statement effectively discouraging banks from doing business with clients in crypto-asset industries, which could potentially
create challenges regarding access to financial services. In January 2023, the Federal Reserve also issued a policy statement broadening
its authority to cover state-chartered institutions. Moreover, in January 2023, the White House issued a statement cautioning deepening
ties between crypto-assets and the broader financial system. Meanwhile, the SEC has announced several actions aimed at curtailing activities
it deems sales of unregistered securities.

 However,
also during January of 2023, the U.S. House of Representatives announced its first ever Financial Services Subcommittee on Digital Assets
and the intention to develop a regulatory framework for the use and trade of digital assets and related financial services products in
the United States. Bipartisan leadership of the Senate Banking Committee announced a similar objective.

 Given
the difficulty of predicting the outcomes of ongoing and future regulatory actions and legislative developments, it is possible that
they could have a material adverse effect on our business, prospects or operations.

and Bitcoin mining, as well as cryptocurrencies generally, may be made illegal in certain jurisdictions, including the ones we operate
in, which could adversely affect our business prospects and operations.

 Although
we do not anticipate any material adverse regulations on Bitcoin mining in our jurisdictions of operation, it is possible that state
or federal regulators may seek to impose harsh restrictions or total bans on cryptocurrency mining which may make it impossible for us
to do business without relocating our mining operations, which could be very costly and time consuming. Further, although Bitcoin and
Bitcoin mining, as well as cryptocurrencies generally, are largely unregulated in most countries (including the United States), regulators
in certain jurisdictions may undertake new or intensify existing regulatory actions in the future that could severely restrict the right
to mine, acquire, own, hold, sell, or use cryptocurrency or to exchange it for traditional fiat currency such as the United States dollar.
Such restrictions may adversely affect us as the large-scale use of cryptocurrencies as a means of exchange is presently confined to
certain regions globally. Such circumstances could have a material adverse effect on our business, prospects or operations and potentially
the value of any Bitcoin or other cryptocurrencies we or our hosted customers mine, and thus harm our investors.

 Our
interactions with a blockchain may expose us to specially designated nationals ("SDN") or blocked persons and new legislation
or regulation could adversely impact our business or the market for cryptocurrencies.

 The
Office of Financial Assets Control ("OFAC") of the U.S. Department of Treasury requires us to comply with its sanction program
and not conduct business with persons named on its SDN list. However, because of the pseudonymous nature of blockchain transactions we
may inadvertently and without our knowledge engage in transactions with persons named on OFAC's SDN list. Our Company's policy
prohibits any transactions with such SDN individuals, but we may not be adequately capable of determining the ultimate identity of the
individual with whom we transact with respect to selling cryptocurrency assets. We are unable to predict the nature or extent of new
and proposed legislation and regulation affecting the cryptocurrency industry, or the potential impact of the use of cryptocurrencies
by SDN or other blocked or sanctioned persons, which could have material adverse effects on our business and our industry more broadly.
Further, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties
as a result of any regulatory enforcement actions, all of which could harm our reputation and affect the value of our securities.

 Security
breaches could result in a loss of our cryptocurrencies.

 Security
breaches including computer hacking or computer malware have been a consistent concern in the cryptocurrency industry. This could involve
hacking in which an unauthorized person obtains access to the systems or information and can cause harm by the transmission of virus
or the corruption of data. These breaches may occur due to an action by an outside party or by the error and negligence of an employee.
We primarily rely on the Luxor mining pool and our cryptocurrencies are stored with exchanges such as Coinbase prior to selling them.
If any breach were to occur of our security system, operations or third-party platforms, the result could cause a loss of our cryptocurrencies,
loss of confidential or proprietary information, force the Company to cease operations or could cause damage to the reputation of the
Company. If an actual or perceived attack were to occur, the market perception of the Company may be damaged, which could adversely affect
potential and current investments in the Company and reduce demand for our securities and cause a reduction in our share prices.

 Incorrect
or fraudulent cryptocurrency transactions may be irreversible.

 It
is possible that, through computer or human error, theft or criminal action, our cryptocurrency could be transferred in incorrect amounts
or to unauthorized third parties or accounts. In general, cryptocurrency transactions are irreversible, and stolen or incorrectly transferred
cryptocurrencies may be irretrievable, and we may have extremely limited or no effective means of recovering any losses as a result of
an incorrect transfer or theft. As a result, any incorrectly executed or fraudulent cryptocurrency transactions could adversely affect
our business, operating results and financial condition.

 The
impact of geopolitical and economic events on the supply and demand for Bitcoin and other cryptocurrencies is uncertain.

 Geopolitical
crises may motivate large-scale purchases of Bitcoin and other cryptocurrencies, which could rapidly increase the price of Bitcoin and
other cryptocurrencies. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior dissipates,
adversely affecting the value of the cryptocurrencies that we or our hosted customers mine. Alternatively, as an emerging asset class
with limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in cryptocurrencies
as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.

 Cryptocurrencies,
which are relatively new, are subject to supply and demand forces. How such supply and demand will be impacted by geopolitical events
is largely uncertain but could be harmful to us and investors in our securities. Political or economic crises may motivate large-scale
acquisitions or sales of cryptocurrencies either globally or locally. Such events could have a material adverse effect on our ability
to continue as a going concern or to pursue our strategy at all, which could have a material adverse effect on our business, prospects
or operations and potentially the value of any cryptocurrencies that we or our hosted customers mine.

 The
failure of cryptocurrencies to become widely accepted and/or used as a medium of exchange and method of payment could adversely affect
our business, prospects and financial condition.

 The
use of cryptocurrencies in the retail and commercial marketplace, despite sporadic adoption, is currently limited. A significant portion
of cryptocurrency demand is generated by investors seeking a long-term store of value or speculators seeking to profit from the short-
or long-term holding of the asset. Price volatility, slow processing speeds and high transaction costs undermine Bitcoin's and
other cryptocurrencies' ability to be used as a medium of exchange, as retailers are less likely to accept it as a direct form
of payment. Large-scale acceptance of cryptocurrencies as a means of payment has not, and may never, occur.

 The
relative lack of acceptance of cryptocurrencies in the retail and commercial marketplace, or a reduction of such use, limits the ability
of end users to use them to pay for goods and services. Such lack of acceptance or a decline in acceptance could have a material adverse
effect on the value of the cryptocurrencies that we or our hosted customers mine, the viability of cryptocurrency mining as a business,
and our ability to continue as a going concern or to pursue our business strategy, which could have a material adverse effect on our
business, prospects, operations and financial condition, as well as on the market value of our securities.

 Cryptocurrencies
face significant scaling and adoption obstacle issues which may lessen the demand for our services over time.

 Cryptocurrencies,
including Bitcoin, face significant scaling and adoption issues, which may lessen the demand for our services over time. The current
limitations of transaction throughput, high transaction fees, and extended processing times hinder widespread adoption and reduce the
feasibility of cryptocurrencies as a daily payment method. As the industry attempts to address these challenges through protocol upgrades,
second-layer solutions, and alternative consensus mechanisms, there is no guarantee that such solutions will be widely adopted or successful
in resolving these issues. Should the scaling and adoption challenges persist or worsen, the demand for cryptocurrencies may decline,
negatively impacting our mining operations and revenue. Furthermore, the emergence of new cryptocurrencies employing alternative, more
scalable technologies could lead to a shift in market preferences, diminishing the value of the cryptocurrencies we mine and potentially
affecting our business prospects and profitability.

 most of our and our hosted customers' miners are designed specifically to mine Bitcoin and may not be readily adaptable to
mining other cryptocurrencies, a sustained decline in Bitcoin's value could adversely affect our business and results of operations.

 We
and our hosted customers have invested substantial capital in acquiring miners designed specifically to mine Bitcoin as efficiently and
as rapidly as possible on our assumption that we will be able to use them to mine Bitcoin and generate revenue from our operations. Therefore,
our mining and hosting operations focus primarily on mining Bitcoin, and our revenue is largely based on the value of Bitcoin. Accordingly,
if the value of Bitcoin declines and fails to recover, for example, because of the development and acceptance of competing blockchain
platforms or technologies, including competing cryptocurrencies which our miners or our customers' miners may not be able to mine,
the revenue we generate from our operations will likewise decline. Moreover, we may not be able to successfully repurpose our operations
in a timely manner, if at all, if we or our customers decide to switch to mining a different cryptocurrency (or to another purpose altogether)
following a sustained decline in Bitcoin's value or if Bitcoin is replaced by another cryptocurrency. This could
have a material adverse effect on our business, prospects, operations and financial condition, as well as on the market value of our
securities.

 Our
business model depends upon the demand for data centers.

 We
intend to be in the business of owning, leasing and operating data centers. A reduction in the demand for data center space, power or
connectivity would have an adverse effect on our business and financial condition. We are susceptible to general economic slowdowns as
well as adverse developments in the data center, internet and data communications and broader technology industries. Any such slowdown
or adverse development could lead to reduced corporate information technology ("IT") spending or reduced demand for data
center space. Reduced demand could also result from business relocations, including to markets that we do not currently serve. Changes
in industry practice or in technology could also reduce demand for the physical data center space we provide. In addition, our customers
may choose to develop new data centers or expand their own existing data centers or consolidate into data centers that we do not own
or operate, which could reduce demand for our data centers or result in the loss of one or more key customers. If any of our key customers
were to do so, it could result in a reduction in our revenues and/or put pressure on our pricing. If we lose a customer, we may not be
able to replace that customer at a competitive rate or at all. Mergers or consolidations could reduce further the number of our customers
and potential customers and make us more dependent on a more limited number of customers. If our customers merge with or are acquired
by other entities that are not our customers, they may discontinue or reduce the use of our data centers in the future. Our financial
condition, results of operations, cash flows and ability to satisfy our debt service obligations could be materially adversely affected
as a result of any or all of these factors.

 Our
data centers and related products may have a long sales cycle that may harm our revenues and operating results.

 A
customer's decision to co-locate in a Soluna data center and to purchase additional services involves a significant commitment
of resources. As a result, we have a long sales cycle for our products and services. Furthermore, we may expend significant time and
resources in pursuing a particular sale or customer that ultimately does not result in revenue.

 Macroeconomic
conditions, including economic and market downturns, may further impact this long sales cycle by making it extremely difficult for customers
to accurately forecast and plan future business activities. This could cause customers to slow spending or delay decision-making on our
products and services, which would delay and lengthen our sales cycle.

 Delays
due to the length of our sales cycle may materially and adversely affect our revenues and operating results, which could harm our ability
to meet our financial forecasts for a given quarter and cause volatility in our stock price.

 Our
data center business could be harmed by prolonged power outages, power and fuel shortages, capacity constraints and increases in power
costs.

 Our
data centers could be affected by problems accessing electricity sources, such as planned or unplanned power outages and limitations
on transmission or distribution. Unplanned power outages, including, but not limited to, those relating to large storms, earthquakes,
fires, tsunamis, cyberattacks and planned power outages by public utilities could harm our customers and our business. Some of our data
centers may be located in leased buildings where, depending upon the lease requirements and number of tenants involved, we may or may
not control some or all of the infrastructure including generators and fuel tanks. As a result, in the event of a power outage, we may
be dependent upon the landlord, as well as the utility company, to restore the power. We attempt to limit our exposure to system downtime
by using backup generators and alternative power supplies, but these measures may not always prevent downtime, which can adversely affect
customer experience and revenues.

 In
each of our markets, we rely on third parties to provide a sufficient amount of power for current and future customers. At the same time,
power and cooling requirements are increasing per unit of equipment. As a result, some customers are consuming an increasing amount of
power for the same amount of infrastructure. We generally do not control the amount of power our customers draw from their installed
circuits, which can result in growth in the aggregate power consumption of our facilities beyond our original planning and expectations.
This means that limitations on the capacity of our electrical delivery systems and equipment could limit customer utilization of our
data centers. These limitations could have a negative impact on the effective available capacity of a given data center and limit our
ability to grow our business, which could have a negative impact on our financial performance, operating results and cash flows. We attempt
to limit our exposure to system downtime by using backup generators and alternative power supplies, but these measures may not always
prevent downtime, which can adversely affect customer experience and revenues.

 Recently,
the cost of electricity has generally risen due to macroeconomic natural gas supply and demand constraints, initially beginning with
inadequate natural gas reserves in Europe to meet European demand in light of sanctions on Russian natural gas supply as a result of
the ongoing military conflict between Russia and Ukraine. In addition, we expect the cost of utilities, specifically electricity, will
generally continue to increase in the future on a cost-per-unit or fixed basis and for growth in consumption of electricity by our customers.
In addition, we expect the cost of utilities, specifically electricity, will generally continue to increase in the future on a cost-per-unit
or fixed basis and for growth in consumption of electricity by our customers. Furthermore, the cost of electricity is generally higher
in the summer months, as compared to other times of the year. Our costs of electricity may also increase as a result of the physical
effects of climate change, increased regulations driving alternative electricity generation due to environmental considerations or as
a result of our election to use renewable energy sources. To the extent we incur increased utility costs, such increased costs could
materially impact our financial condition, results of operations and cash flows.

 The
Dorothy Facility is subject to a five-year ground lease, and if we are unable to renew its term, we may be unable to fully realize the
anticipated benefits of the ongoing development of the site.

 The
Dorothy Facility is subject to a ground lease with an initial term of five years, followed by five one-year renewal options, unless terminated
earlier. The long-term success of our plans for the Dorothy Facility is largely based on our ability to maintain the lease in effect
and to renew it going forward. If we fail to maintain the lease or renew it once its initial term expires and the landlord requires us
to vacate the premises, we will likely incur significant costs in relocating our operations, if we could do so at all, and our operations
would be interrupted during such relocation. Further, if we fail to renew the lease on terms favorable to us, and our costs are increased,
then we may not realize the anticipated benefits of our investment in the facility or any future development of its remaining available
capacity. Any disruptions or changes our present relationship with the landlord for the Dorothy Facility could disrupt our business and
our results of operations negatively.

 Our
properties may experience damages, including damages that are not covered by insurance.

 Our
properties are subject to a variety of risks relating to physical condition and operation, including:

 the
 presence of construction or repair defects or other structural or building damage;

 any
 noncompliance with or liabilities under applicable environmental, health or safety regulations or requirements or building permit
 requirements; and

 any
 damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods and windstorms.

 For
example, our facilities could be rendered inoperable, temporarily or permanently, as a result of a fire or other natural disaster or
by a terrorist or other attack on the site. The security and other measures we take to protect against these risks may not be sufficient.
Additionally, our processing equipment could be materially adversely affected by a power outage, loss of access to the electrical grid,
or loss by the grid of cost-effective sources of electrical power generating capacity. Given the power requirement, it would not be feasible
to run miners on back-up power generators in the event of a power outage. Our insurance covers the replacement cost of any lost or damaged
miners but does not cover any interruption of our mining activities; our insurance therefore may not be adequate to cover the losses
we suffer as a result of any of these events. In the event of an uninsured loss, including a loss in excess of insured limits, at any
of the mines in our network, such mines may not be adequately repaired in a timely manner or at all and we may lose some or all of the
future revenues anticipated to be derived from such mines. The potential impact on our business is currently magnified because we are
currently operating only a single mine.

 Our
reliance on a third-party mining pool service provider for our mining revenue payouts may have a negative impact on our operations. The
same may be true in the case of our hosted customers.

 We
and many Bitcoin miners use a third–party mining pool to receive our mining rewards from the network. Cryptocurrency mining pools
allow miners to combine their computing power, increasing their chances of solving a block and getting paid by the network. The rewards
are distributed by the pool operator, proportionally to our contribution to the pool's overall mining power, used to generate each
block. Should the pool operator's system suffer downtime due to a cyber-attack, software malfunction, or similar issues, it will
negatively impact our ability to mine and receive revenue. Furthermore, we and many other Bitcoin miners are dependent on the accuracy
of the mining pool operator's recordkeeping to accurately record the total processing power provided to the pool for a given Bitcoin
mining application in order to assess the proportion of that total processing power we provided. While we have internal methods of tracking
both our power provided and the total used by the pool, the mining pool operator uses its own recordkeeping to determine our proportion
of a given reward. We and other miners have little means of recourse against the mining pool operator if we determine that the proportion
of the reward that the mining pool operator pays out to us is incorrect, other than leaving the pool. If we are unable to consistently
obtain accurate proportionate rewards from our mining pool operator, we may experience reduced reward for our efforts, which would have
an adverse effect on our results of operations and financial condition.

 Over
time, incentives for Bitcoin miners to continue to contribute processing power to the Bitcoin network may transition from a set reward
to transaction fees. If the incentives for Bitcoin mining are not sufficiently high, we and our hosted customers may not have an adequate
incentive to continue to mine.

 In
general, as the number of Bitcoin rewards awarded for solving a block in a blockchain decreases, our ability to achieve profitability
also decreases. Decreased use and demand for Bitcoin rewards may adversely affect our incentive to expend processing power to solve blocks.
If the Bitcoin rewards for solving blocks and transaction fees are not sufficiently high, fewer Bitcoin miners will mine. At insufficiently
attractive rewards, our costs of operations in total may exceed our revenues from Bitcoin mining and from hosting customers engaged in
Bitcoin mining

 To
incentivize Bitcoin miners to continue to contribute processing power to the Bitcoin network, such network may either formally or informally
transition from a set reward to transaction fees earned upon solving a block. This transition could be accomplished either by Bitcoin
miners independently electing to record in the blocks they solve only those transactions that include payment of a transaction fee or
by the Bitcoin network adopting software upgrades that require the payment of a minimum transaction fee for all transactions. If as a
result transaction fees paid for Bitcoin transactions become too high, Bitcoin users may be reluctant to transfer Bitcoin or accept Bitcoin
as a means of payment, and existing users may be motivated to hold existing Bitcoin and switch from Bitcoin to another digital asset
or back to fiat currency for transactions, diminishing the aggregate amount of available transaction fees for Bitcoin miners. Such reduction
would adversely impact our results of operations and financial condition.

 The
Bitcoin reward for successfully uncovering a block will halve several times in the future, and Bitcoin's value may not adjust to
compensate us for the reduction in the rewards we receive from our Bitcoin mining efforts.

is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a proof of work consensus
algorithm. At a predetermined block, the Bitcoin mining reward is cut in half, hence the term "halving." For Bitcoin, the
reward was initially set at 50 Bitcoin currency rewards per block, and this was cut in half to 25 on November 28, 2012 at block 210,000,
then again to 12.5 on July 9, 2016 at block 420,000. The most recent halving for Bitcoin occurred on May 11, 2020 at block 630,000 and
the reward was reduced to 6.25. It is expected that the next halving will likely occur in April 2024. This process will reoccur until
the total amount of Bitcoin currency rewards issued reaches 21 million, which is expected around the year 2140. While Bitcoin prices
have had a history of fluctuations around the halving of its rewards, there is no guarantee that the price change will be favorable or
would compensate for the reduction in mining reward. If a corresponding and proportionate increase in the trading prices of Bitcoin or
a proportionate decrease in mining difficulty does not follow these anticipated halving events, the revenue we and our hosted customers
earn from our Bitcoin mining operations could see a corresponding decrease, which could have a material adverse effect on our business
and operations.

 We
may not be able to realize the benefits of forks, and forks in a digital asset network may occur in the future, which may affect the
value of the cryptocurrencies that we mine.

 To
the extent that a significant majority of users and miners on a cryptocurrency network install software that changes the cryptocurrency
network or properties of a cryptocurrency, including the irreversibility of transactions and limitations on the mining of new cryptocurrency,
the cryptocurrency network would be subject to new protocols and software. If less than a significant majority of users and miners on
the cryptocurrency network consent to the proposed modification, however, and the modification is not compatible with the software prior
to its modification, a "fork" of the network would occur, with one prong of the network running the pre-modified software
and the other running the modified software. The effect of such a fork would be the existence of two versions of the cryptocurrency running
in parallel yet lacking interchangeability and necessitating exchange-type transaction to convert currencies between the two forks. After
a fork, it may be unclear which fork represents the original asset and which is the new asset.

 If
we hold a specific cryptocurrency at the time of a hard fork into two cryptocurrencies, industry standards would dictate that we would
be expected to hold an equivalent amount of the old and new assets following the fork. We may not, however, be able to secure or realize
the economic benefit of the new asset. Our business may be adversely impacted by forks in an applicable cryptocurrency network.

 In
addition, historically, speculation over a new "hard fork" in the Bitcoin protocol has resulted in Bitcoin price volatility
and future hard forks may occur at any time. A hard fork could lead to a disruption of networks and our information technology systems
could be affected by cybersecurity attacks, replay attacks or security weaknesses, any of which can further lead to temporary or even
permanent loss of its assets. Such disruption and loss could cause us to be exposed to liability, even in circumstances where we have
no intention of supporting an asset compromised by a hard fork. Additionally, a hard fork may result in a scenario where users running
the previous protocol will not recognize blocks created by those running the new protocol, and vice versa. This may render our cryptocurrency
mining hardware, or that of our hosted customers, incompatible with the new protocol. Such changes may have a material effect on our
operations, financial position and financial performance.

 As
the aggregate amount of computing power, or hash rate, in the Bitcoin network increases, the amount of Bitcoin earned per unit of hash
rate decreases; as a result, in order to maintain our market share, we may have to incur significant capital expenditures in order to
expand our fleet of miners.

 The
aggregate computing power of the global Bitcoin network has generally grown over time, and we expect it to continue to grow in the future.
To the extent the global hash rate continues to increase, the market share of and the amount of Bitcoin rewards paid to any fixed fleet
of miners will decrease. Therefore, in order to maintain our market share, we may be required to expand our mining fleet, which may require
significant capital expenditures. If we can't acquire sufficient numbers of new miners or access sufficient capital to fund our
expenditures, our results of operations and financial condition could be adversely materially affected. While a business strategy focused
on hosting could mitigate some of this risk, the fact that hosted clients are ultimately exposed to similar such risk allows for the
continued possibility that this could have an adverse effect on our business operations, strategy and financial performance.

 Climate
change, and the regulatory and legislative developments related to climate change, may materially adversely affect our business and financial
condition.

 The
potential physical impacts of climate change on our operations are highly uncertain and would be particular to the geographic circumstances
in areas in which we operate or in which our third-party providers operate. These may include changes in rainfall and storm patterns
and intensities, water shortages, changing sea levels and changing temperatures. The impacts of climate change may materially and adversely
impact the cost, production and financial performance of our operations. Further, any impacts to our business and financial condition
as a result of climate change are likely to occur over a sustained period of time and are therefore difficult to quantify with any degree
of specificity. For example, extreme weather events may result in adverse physical effects on portions of our infrastructure, which could
disrupt our supply chain and ultimately our business operations.

 In
addition, a number of governments or governmental bodies have introduced or are contemplating legislative and regulatory changes in response
to the potential impact of climate change. Companies across many industries are facing increasing scrutiny related to their environmental,
social, and governance ("ESG") practices. Investor advocacy groups, certain institutional investors, investment funds and
other influential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the
non-financial impacts of their investments. Given the very significant amount of electrical power required to operate cryptocurrency
miners, as well as the environmental impact of mining for the rare earth metals used in the production of mining servers, the cryptocurrency
mining industry may become a target for future environmental and energy regulation, and any such regulation may not distinguish between
cryptocurrency mining powered partially by renewable energy, as is much of the Company's business, and cryptocurrency mining using
traditional (i.e. fossil fuel) sources of energy. Legislation and increased regulation regarding climate change could impose significant
costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring
and reporting, and other costs to comply with such regulations. Any future climate change regulations could also negatively impact our
ability to compete with companies situated in areas not subject to such limitations. Furthermore, increased public awareness and concern
regarding environmental risks, including global climate change, may result in increased public scrutiny of our business and our industry,
and our management team may divert significant time and energy away from our operations and towards responding to such scrutiny and reassuring
our employees. Given the political significance and uncertainty around the impact of climate change and how it should be addressed, we
cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete. Any
of the foregoing could result in a material adverse effect on our business, prospects and financial condition.

 We
are subject to risks associated with our need for significant electrical power.

 Our
operations have required significant amounts of electrical power, and, as we continue to expand our mining fleet and begin to operate
our Dorothy Facility, we anticipate our demand for electrical power will continue to grow. The fluctuating price of electricity we require
for our operations, and to power our expansion, may inhibit our profitability. If we are unable to continue to obtain sufficient electrical
power on a cost-effective basis, we may not realize the anticipated benefits of our significant capital investments.

our operations could be materially adversely affected by prolonged power outages. Although certain critical functions of our facilities
may be powered by backup generators on a temporary basis, it would not be feasible or cost-effective to run miners on back-up power generators
for extended periods of time. Therefore, we may have to reduce or cease our operations in the event of an extended power outage, or as
a result of the unavailability or increased cost of electrical power. If this were to occur, our business and results of operations could
be materially and adversely affected.

 Changing
environmental regulation and public energy policy may expose our business to new risks.

 Our
and our hosted customers' Bitcoin mining operations require a substantial amount of power and can only be successful, and ultimately
profitable, if the costs incurred, including for electricity, are lower than the revenue we generate from operations. As a result, any
mine we or our hosted customers establish can only be successful if we can obtain sufficient electrical power for that mine on a cost-effective
basis, and our establishment of new mines requires us to find locations where that is the case. For instance, our plans and strategic
initiatives for the Dorothy Facility are based, in part, on our understanding of current environmental and energy regulations, policies,
and initiatives enacted by federal and Texas regulators. If new regulations are imposed, or if existing regulations are modified, the
assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our
planned business, if we are able to adapt at all, to such regulations.

 In
addition, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty for our business
because the cryptocurrency mining industry, with its high energy demand, may become a target for future environmental and energy regulation.
New legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs
related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such
regulations. Further, any future climate change regulations could also negatively impact our ability to compete with companies situated
in areas not subject to such limitations.

 For
example, in September 2022, the White House issued a report regarding the Climate and Energy Implications of Crypto-Assets in the United
States. The report states that the Department of Energy and Environmental Protection Agency should initiate a process to solicit data
and develop environmental performance and energy conservation standards for crypto-asset technologies, including mining equipment. Should
such measures prove ineffective at achieving the Administration's environmental goals, the report calls for the Administration
to explore executive actions and legislation to limit or eliminate the use of high energy intensity consensus mechanisms for crypto-asset
mining in the United States.

 We
may be affected by price fluctuations in the wholesale and retail power markets.

 While
the majority of our power and hosting arrangements contain fixed power prices, some also contain certain price adjustment mechanisms
in case of certain events. Furthermore, a portion of our power and hosting arrangements includes merchant power prices, or power prices
reflecting market movements. Market prices for power, generation capacity and ancillary services, are unpredictable. Over the past year,
the market prices for power have generally been increasing, driven in part by the price increases in various commodities, including natural
gas. Depending upon the effectiveness of any price risk management activity undertaken by us, an increase in market prices for power,
generation capacity, and ancillary services may adversely affect our business, prospects, financial condition, and operating results.
Long- and short-term power prices may fluctuate substantially due to a variety of factors outside of our control, including, but not
limited to:

 increases
 and decreases in generation capacity;

 changes
 in power transmission or fuel transportation capacity constraints or inefficiencies;

 volatile
 weather conditions, particularly unusually hot or mild summers or unusually cold or warm winters;

 technological
 shifts resulting in changes in the demand for power or in patterns of power usage, including the potential development of demand-side
 management tools, expansion and technological advancements in power storage capability and the development of new fuels or new technologies
 for the production or storage of power;

 federal
 and state power, market and environmental regulation and legislation; and

 changes
 in capacity prices and capacity markets.

 If
we are unable to secure power supply at prices or on terms acceptable to us, it would have a material adverse effect on our business,
prospects, financial condition, and operating results.

 If
federal or state legislatures or agencies initiate or release tax determinations that change the classification of cryptocurrencies as
property for tax purposes (in the context of when such cryptocurrencies are held as an investment), such determination could have a negative
tax consequence on us.

 Current
Internal Revenue Service guidance indicates that digital assets such as Bitcoin should be treated and taxed as property, and that transactions
involving the payment of Bitcoin for goods and services should be treated as barter transactions. While this treatment creates a potential
tax reporting requirement for any circumstance where the ownership of a cryptocurrency passes from one person to another, it preserves
the right to apply capital gains treatment to those transactions which may adversely affect our results of operations.

 Risks
Related to our Company Generally

 Our
confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary
information, which could limit our ability to compete.

 While
we are currently in the process of applying for patents with respect to our business, presently we rely on trade secrets to protect our
proprietary technology and processes. Despite such protection, however, it is possible that a third party may copy or otherwise obtain
and use our U.S. Patent and Trademark Office-registered or other proprietary information without our authorization, and trade secrets
can be difficult to protect. Policing unauthorized use of our intellectual property and trade secrets is difficult, particularly in light
of the global nature of the Internet and because the laws of other countries may afford us little or no effective protection of our intellectual
property. Potentially expensive litigation may be necessary in the future to enforce our intellectual property rights, to protect our
trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or
invalidity. Additionally, we enter into confidentiality and intellectual property assignment agreements with our employees, consultants
and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties'
confidential information developed by the party under such agreements or made known to the party by us during the course of the party's
relationship with us. Our employees, consultants and other advisors, however, may not honor these agreements and enforcing a claim that
a party illegally obtained and is using our trade secrets is difficult, expensive and time-consuming and the outcome is unpredictable.
Our failure to obtain and maintain trade secret protection could adversely affect our competitive position.

 We
rely on highly skilled personnel and the continuing efforts of our executive officers and, if we are unable to retain, motivate or hire
qualified personnel, our business may be severely disrupted. In addition, increased labor costs and the unavailability of skilled workers
could hurt our business, financial condition and results of operations.

 Our
performance largely depends on the talents, knowledge, skills, know-how and efforts of highly skilled individuals and in particular,
the expertise held by our Chief Executive Officer, John Belizaire. His absence, were it to occur, would materially and adversely impact
development and implementation of our projects and businesses. Our future success depends on our continuing ability to identify, hire,
develop, motivate and retain highly skilled personnel for all areas of our organization. Our continued ability to compete effectively
depends on our ability to attract, among others, new technology developers and to retain and motivate our existing contractors. If one
or more of our executive officers or other key personnel are unable or unwilling to continue in their present positions, we may not be
able to replace them readily, if at all. In such case, our business may be severely disrupted, and we may incur additional expenses to
recruit and retain new officers or other key personnel. In addition, if any of our executives or key personnel joins a competitor or
forms a competing company, we may lose customers.

 In
addition, we compete with other businesses in our industries and other similar employers to attract and retain qualified personnel with
the technical skills and experience required to successfully operate our businesses. The demand for skilled workers is high and the supply
is limited, and a shortage in the labor pool of skilled workers or other general inflationary pressures or changes in applicable laws
and regulations could make it more difficult for us to attract and retain personnel and could require us to enhance our wage and benefits
packages, which could increase our operating costs.

 Brookstone
XXIV currently has a controlling interest in the Company due to the number of shares of common stock that it beneficially owns and its
designation of two of our directors.

 As
of March 19, 2024, Brookstone XXIV owned approximately 5.35% of the Company's outstanding shares of Common Stock
and has designated two directors that sit on our nine-member Board. Accordingly, Brookstone XXIV has the ability to exert a significant
degree of influence or actual control over our management and affairs and, as a practical matter, will control corporate actions requiring
stockholder approval, irrespective of how our other stockholders may vote, including the election of directors, amendments to our articles
of incorporation, as amended ("Articles of Incorporation") and our bylaws ("Bylaws"), and the approval of mergers
and other significant corporate transactions, including a sale of substantially all of our assets, and Brookstone XXIV may vote its shares
in a manner that is adverse to the interests of our minority stockholders. This concentration of voting control could deprive holders
of our Common Stock of an opportunity to receive a premium for their shares of our Common Stock as part of a sale of the Company. Further,
Brookstone XXIV's control position might adversely affect the market prices of our securities to the extent investors perceive
disadvantages in owning shares of a company with a controlling stockholder.

 Brookstone
XXIV and its director designees may acquire interests and positions that could present potential conflicts with our and our stockholders'
interests.

 Brookstone
XXIV and its director designees may make investments in companies and may, from time to time, acquire and hold interests in businesses
that compete directly or indirectly with us. Brookstone XXIV and its director designees may also pursue, for their own accounts, acquisition
opportunities that may be complementary to our business, and as a result, those acquisition opportunities might not be available to us.
As part of our sale of 150,000 shares of our Common Stock to Brookstone XXIV in October 2016 and as required by Brookstone XXIV as a
condition to purchasing the shares, our Board renounced, to the extent permitted by applicable law, the Company's expectancy with
respect to being offered an opportunity to participate in any business opportunity that is discovered by or presented to a director designee
(a "Business Opportunity"), whether in such director designee's capacity as a director of the Company or otherwise.
Accordingly, the interests of Brookstone XXIV and the designated directors with respect to a Business Opportunity may supersede ours,
and Brookstone XXIV or its affiliates or the Brookstone XXIV-designated directors may be involved with businesses that compete with us
and may pursue opportunities for the sole benefit of Brookstone XXIV and its affiliates without our involvement, for which we have limited
recourse. Such actions on the part of Brookstone XXIV or its director designees could have a material adverse effect on our business,
financial condition, results of operations and cash flows.

 In
addition, Michael Toporek, the Company's Executive Chairman, serves as the Managing General Partner of Brookstone XXIV. As a result
of the potential conflicts inherent in his serving in both roles, it is possible that Mr. Toporek could make decisions that benefit Brookstone
XXIV at the expense of the Company.

 Insiders
continue to have substantial control over the Company.

 As
of March 19, 2024, the Company's directors and executive officers held the current right to vote approximately 6.8% of the
Company's outstanding voting stock. Of this total, 5.35% was owned or controlled by Brookstone XXIV, for which Michael
Toporek, the Company's Executive Chairman, also serves as Managing General Partner. In addition, the Company's directors
and executive officers have the right to acquire additional shares of our Common Stock by exercising their equity awards under our equity
compensation plans, which could increase their voting percentage significantly. As a result, Mr. Toporek acting alone, and/or many of
the Company's officers and directors acting together, may have the ability to exert significant control over the Company's
decisions and control the management and affairs of the Company, and also to determine the outcome of matters submitted to stockholders
for approval, including the election or removal of a director, and any merger, consolidation or sale of all or substantially all of the
Company's assets. Accordingly, this concentration of ownership may harm the future market prices of our securities by:

 delaying,
 deferring or preventing a change in control of the Company;

 impeding
 a merger, consolidation, takeover or other business combination involving the Company; or

 discouraging
 a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.

 We
are subject to complex environmental, health and safety laws and regulations that may expose us to significant liabilities for penalties,
damages or costs of remediation or compliance.

 We
are subject to various federal, state, local and foreign environmental, health and safety laws and regulations. These laws and regulations
govern matters such as: the emission and discharge of hazardous materials into the ground, air or water; the generation, use, storage,
handling, treatment, packaging, transportation, exposure to, and disposal of hazardous and biological materials, including recordkeeping,
reporting and registration requirements; and the health and safety of our employees. We may incur significant additional costs beyond
those currently contemplated to comply with these regulatory requirements. Further, if we fail to comply with these requirements we may
be exposed to fines, penalties and/or interruptions in our operations that could have a material adverse effect on our business, operating
results and financial condition. Certain environmental laws may impose strict, joint and several liability for costs required to clean
up and restore sites where hazardous substances have been disposed or otherwise released into the environment, even under circumstances
where the hazardous substances were released by prior owners or operators, or the activities conducted and from which a release emanated
complied with applicable law.

 Further,
existing regulations, particularly in the environmental area, could be revised or reinterpreted, or new laws and regulations could be
adopted or become applicable to us or our facilities and future changes in environmental laws and regulations could occur, including
potential regulatory and enforcement developments related to air emissions, any of which could result in significant additional costs.
Any of the foregoing could have a material adverse effect on our results of operations and financial condition.

 General
Risk Factors

 We
are heavily dependent on our senior management, and a loss of a member of our senior management team could cause the market prices of
our securities to suffer.

 If
we lose the services of John Belizaire, our Chief Executive Officer and member of our board of directors, David Michaels., our Chief
Financial Officer, and/or certain key employees, we may not be able to find appropriate replacements on a timely basis, and our business
could be adversely affected. We do not currently maintain key life insurance policies on these officers or key employees. Our existing
operations and continued future development depend to a significant extent upon the performance and active participation of these individuals
and certain key employees. We may not be successful in retaining the services of these individuals, and if we were to lose any of these
individuals, we may not be able to find appropriate replacements on a timely basis and our financial condition and results of operations
could be materially adversely affected.

 We
may incur losses and liabilities in the course of business that could prove costly to defend or resolve.

 Companies
that operate in one or more of the businesses that we operate face significant legal risks. There is a risk that we could become involved
in litigation wherein an adverse result could have a material adverse effect on our business and our financial condition. There is a
risk of litigation generally in conducting a commercial business, and we are, at times, involved in commercial disputes with third parties,
such as customers, distributors and vendors. These risks often may be difficult to assess or quantify and their existence and magnitude
often remain unknown for substantial periods of time. We may incur significant legal expenses in defending against litigation.

 We
may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit
us from selling our products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject
us to substantial monetary damages and injunctive relief.

 We
may receive notices from third parties that the manufacture, use or sale of any products we develop infringes upon one or more claims
of their patents. Moreover, because patent applications can take many years to issue, there may be currently pending applications, unknown
to us, that may later result in issued patents that materially and adversely affect our business. Third parties could also assert infringement
or misappropriation claims against us with respect to our future product offerings, if any. We cannot be certain that we have not infringed
the intellectual property rights of any third parties. Any infringement or misappropriation claim could result in significant costs,
substantial damages and our inability to manufacture, market or sell any of our product offerings that are found to infringe another
person's patent. Even if we were to prevail in any such action, the litigation could result in substantial cost and diversion of
resources that could materially and adversely affect our business. If a court determined, or if we independently discovered, that our
product offerings violated third-party proprietary rights, there can be no assurance that we would be able to re-engineer our product
offerings to avoid those rights or obtain a license under those rights on commercially reasonable terms, if at all. As a result, we could
be prohibited from selling products that are found to infringe upon the rights of others. Even if obtaining a license were feasible,
it may be costly and time-consuming. A court could also enter orders that temporarily, preliminarily, or permanently enjoin us from making,
using, selling, offering to sell or importing our products that are found to infringe on third parties' intellectual property rights,
or could enter orders mandating that we undertake certain remedial actions. Further, a court could order us to pay compensatory damages
for any such infringement, plus prejudgment interest, and could in addition treble the compensatory damages and award attorneys'
fees. Any such payments could materially and adversely affect our business and financial condition.

 If
we are unable to protect our information systems against service interruption or failure, misappropriation of data or breaches of security,
our operations could be disrupted, we could be subject to costly government enforcement actions and private litigation and our reputation
may be damaged.

 Our
business involves the collection, storage and transmission of personal, financial or other information that is entrusted to us by our
customers and employees. Our information systems also contain the Company's proprietary and other confidential information related
to our business. Our efforts to protect such information may be unsuccessful due to the actions of third parties, computer viruses, physical
or electronic break-ins, catastrophic events, employee error or malfeasance or other attempts to harm our systems. As the techniques
used to obtain unauthorized access, disable or degrade service or sabotage systems, change frequently and often are not recognized until
launched against a target, we may be unable to anticipate these techniques or timely implement adequate preventative measures. We could
also experience a loss of critical data and delays or interruptions in our ability to manage inventories or process transactions. Some
of our commercial partners, such as those that help us maintain our website, may receive or store information provided by us or our users
through our website. If these third parties fail to adopt or adhere to adequate information security practices or fail to comply with
our policies in this regard, or in the event of a breach of their networks, our customers' or employees' information may
be improperly accessed, used or disclosed.

 If
our systems are harmed or fail to function properly, we may need to expend significant financial resources to repair or replace systems
or to otherwise protect against security breaches or to address problems caused by breaches. If we experience a significant security
breach or fail to detect and appropriately respond to a significant security breach, we could be exposed to costly legal actions against
us in connection with such incidents, which could result in orders or judgments forcing us to pay damages or fines or to take certain
actions with respect to our information systems. Any incidents involving unauthorized access to or improper use of user information,
or incidents that are a violation of our online privacy policies, could harm our brand reputation and diminish our competitive position.
Any of these events could have a material and adverse effect on our business, reputation or financial results. Our insurance policies
carry coverage limits, which may not be adequate to reimburse us for losses caused by security breaches.

 Our
risk management process may not identify all risks that we are subject to and will not eliminate all risk.

 Our
Enterprise Risk Management ("ERM") process seeks to identify and address significant risks. Our ERM process uses the most
recent integrated risk framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission to assess, manage and monitor risks. We believe that risk-taking is an inherent aspect of the
pursuit of our growth and performance strategy. Our goals are to proactively manage risks in a structured approach in conjunction with
strategic planning, with the intent to preserve and enhance shareowner value, and to manage prudently, rather than wholly avoiding, risks.
We can mitigate risks and their impact on the Company, however, only to a limited extent, and no ERM process can identify all risks that
we may face. Therefore, there may be risks that we are currently unaware of, that may develop in the future or that we currently consider
immaterial. Further, our management of risks may prove inadequate. The emergence of risks of which we were unaware or are unable to manage
could have a material adverse effect on our business, prospects, financial condition and results of operations.

 The
Company's officers and directors are indemnified against certain conduct that may prove costly to defend.

 Our
Articles of Incorporation and Bylaws generally provide broad indemnification to our officers and directors against judgments, fines,
amounts paid in settlement and expenses, including attorneys' fees actually incurred in connection with most actions or proceedings
to which they are or are threatened to be made a party that relates to their service as an officer or director, except as limited as
set forth therein. We are also obligated to advance expenses as they are incurred by a director or officer in defending an action or
proceeding prior to final disposition upon receipt of an undertaking by the applicable person to repay such advanced amount if the advancement
is ultimately found to not be permitted by law or otherwise.

 In
addition, the Nevada Revised Statutes (the "NRS") provides that no director or officer is individually liable for damages
as a result of an act or failure to act in his or her capacity as a director or officer except if (i) the presumption that such director
or officer acted in good faith, on an informed basis and with a view to the interests of the Company is rebutted, and (ii) it is proven
that such director's or officer's act or failure to act constituted a breach of his or her fiduciary duties as a director
or officer, and such breach involved intentional misconduct, fraud or a knowing violation of law. Consequently, subject to the applicable
provisions of the NRS and to certain limited exceptions in the Articles of Incorporation and Bylaws, the Company's officers and
directors will not be liable to the Company or to its stockholders for monetary damages resulting from their conduct as an officer or
director. As a result, we may have to spend significant resources indemnifying our officers and directors or paying for damages caused
by their conduct.

 The
requirements of being a public company may strain our resources and divert management's attention.

 As
a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley
Act), the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations. The Exchange
Act requires, among other things, that we file annual and current reports with the SEC with respect to our business and operating results.
Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult,
time-consuming, or costly, and increases demand on our systems and resources. As a result of disclosure of information in this Report
and in filings required of a public company, our business and financial condition is more visible, which we believe may result in threatened
or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results
could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources
necessary to resolve them, could divert resources of our management and harm our business and operating results.

 Risks
Related to our Securities

 The
market price of our securities are likely be volatile, which may cause investment losses for our shareholders.

 The
market price of our securities has been and is likely to continue to be volatile, and investors in our securities may experience a decrease,
which could be substantial, in the value of their securities or the loss of their entire investment in the Company for a number of reasons,
including reasons unrelated to our operating performance or prospects. The market price of our securities could be subject to wide fluctuations
in response to a broad and diverse range of factors, including those described elsewhere in this "Risk Factors" section as
well as the following:

 announcements
 by us regarding liquidity, significant acquisitions, equity investments and divestitures, addition or loss of significant customers
 and contracts, capital expenditure commitments and litigation;

 our
 issuance of securities or debt, particularly if in connection with acquisition activities;

 the
 sale of a significant number of shares of our common stock by shareholders;

 recent
 changes in financial condition or results of operations, such as in earnings, revenues or other measure of company value;

 general
 market and economic conditions; and

 announcements
 of technological innovations or new product introductions by us or our competitors.

 Further,
broad market and industry factors may have a material adverse effect on the market price of our securities regardless of our actual operating
performance.

 In
addition, stock markets have experienced in the past and may in the future experience a high level of price and volume volatility, and
the market prices of equity securities of many companies have experienced in the past and may in the future experience wide price fluctuations
not necessarily related to the operating performance of such companies. These broad market fluctuations may adversely affect the market
price of our securities.

 Finally,
our relatively small public float and daily trading volume have in the past caused, and may in the future result in, significant volatility
in the price of our securities. As of December 31, 2023, we had approximately 2,318,989 shares of our common stock outstanding held by
non-affiliates and 3,049,521 shares of our Series A Preferred Stock outstanding held by non-affiliates. Our daily trading volume for
the year ended December 31, 2023, averaged approximately 62,652 shares of common stock and 4,149 shares of Series A Preferred Stock.

there has been limited precedent set for financial accounting of Bitcoin and other cryptocurrency assets, the determination that we have
made for how to account for cryptocurrency assets transactions may be subject to change.

there has been limited precedent set for the financial accounting of cryptocurrencies and related revenue recognition and no official
guidance has yet been provided by the FASB or the SEC, it is unclear how companies may in the future be required to account for cryptocurrency
transactions and assets and related revenue recognition. A change in regulatory or financial accounting standards could result in the
necessity to change our accounting methods and restate our financial statements. Such a restatement could adversely affect the accounting
for our newly mined cryptocurrency rewards and more generally negatively impact our business, prospects, financial condition and results
of operations. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue our
new strategy at all, which would have a material adverse effect on our business, prospects or operations as well as and potentially the
value of any cryptocurrencies we hold or expect to acquire for our own account and harm our investors.

 If
we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our common stock
or Series A Preferred Stock or broker-dealers may be discouraged from effecting transactions in shares of our securities.

 Our
common stock became listed and commenced trading on Nasdaq on March 23, 2020, and our Series A Preferred Stock commenced trading on Nasdaq
on August 19, 2021. In order to maintain such listings, we must satisfy minimum financial and other continued listing requirements and
standards, including those regarding director independence and independent committee requirements, minimum stockholders' equity,
minimum share price and certain corporate governance requirements. While we are currently in compliance, our share price has in the past
dropped below the minimum share price and there can be no assurances that we will be able to comply with such applicable listing standards.
If we fail to do so, Nasdaq may delist our common stock and Series A Preferred Stock, which would likely have an adverse impact on the
market price and liquidity of such securities.

 If
our securities are not listed on, or become delisted from, NASDAQ for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer
automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities
may be more limited than if it were quoted or listed on NASDAQ or another national securities exchange. You may be unable to sell your
securities unless a market can be established or sustained.

 If
an active, liquid public trading market for the Common Stock does not develop or is not maintained, we may be limited in our ability
to raise capital by selling shares of Common Stock and our ability to acquire other companies or assets by using shares of Common Stock
or other SHI securities as consideration.

 In
addition, our shares of common stock have in the past constituted, and may again in the future constitute, "penny stock"
within the meaning of Section 3(a)(51) of the Exchange Act and Rule 3a-51-1 thereunder, and so will be subject to the "penny stock"
rules adopted under Section 15(g) (now 15(h)) of the Exchange Act. The penny stock rules generally apply to companies whose common stock
is not listed on a national securities exchange and trades at less than $5.00 per share, other than companies that have had average revenue
of at least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has
been operating for three or more years). These rules require, among other things, that brokers who trade penny stocks to persons other
than "established customers" complete certain documentation, make suitability inquiries of investors, and provide investors
with certain information concerning trading in the security, including a risk disclosure document and quote information under certain
circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result,
the number of broker-dealers willing to act as market makers in such securities is limited. If our common stock is subject to the penny
stock rules for any significant period, it could have an adverse effect on the market, if any, for our common stock. If the common stock
is subject to the penny stock rules, investors will find it more difficult to dispose of their shares of our common stock.

 Raising
additional funds through debt or equity financing could be dilutive and may cause the market price of our securities to decline. We still
may need to raise additional funding which may not be available on acceptable terms, or at all. Failure to obtain additional capital
may force us to delay, limit or terminate our product development efforts or other operations.

 To
the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be
diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder.
Furthermore, any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect
our ability to develop and commercialize our products and services. In addition, the sale of a significant number of our shares of common
stock, either by us or by our shareholders (in particular Brookstone, our largest shareholder) could depress the price of our securities.

 We
may continue to seek funds through equity or debt financings, collaborative or other arrangements with corporate sources, or through
other sources of financing. Additional funding may not be available to us on acceptable terms, or at all. Any failure to raise capital
as and when needed, as a result of insufficient authorized shares or otherwise, could have a negative impact on our financial condition
and on our ability to pursue our business plans and strategies.

 Item
1B: Unresolved Staff Comments

 Not

 Item
1C: Cybersecurity

 We
proactively approach cybersecurity through a systemized thorough process established by our internal Management and IT teams as well
as external IT providers.

 These
processes are specifically designed to adapt to the evolving cybersecurity environment, enabling us to respond swiftly and effectively
to new and emerging threats. Our cybersecurity initiative incorporates elements from multiple industry benchmarks, including frameworks
from the National Institute of Standards and Technology (NIST) and the Center for Internet Security.

 We
regularly assess the threat landscape and take a holistic view of cybersecurity risks with a layered cybersecurity strategy based on
prevention, detection, and mitigation. Our internal IT team works closely with our external IT management provider to comprehensively
evaluate cybersecurity risks. They focus on monitoring, identifying, and addressing significant cybersecurity issues in real-time by
employing advanced software monitoring platforms for effective mitigation and management. In addition, we have several avenues to gather
risk intelligence and potential threats identified by various services and capabilities to adjust our security strategy.

 We
also have Company-wide policies and procedures concerning cybersecurity and technology standards, including a Resource and Data Recovery
policy. In addition, we have other policies related to endpoint and network protection, encryption standards, malware/ransomware protection,
multi-factor authentication, operational security, and confidential information. These policies go through an internal review process
and are approved by appropriate members of management.

 Our
board of directors has ultimate oversight of our strategic and business risk management and, as such, has oversight responsibilities
for risks and incidents relating to cybersecurity threats, including compliance with disclosure requirements, cooperation with law enforcement,
and related effects on financial and other risks. Management is responsible for identifying, assessing, and managing material cybersecurity
risks on an ongoing basis, establishing and updating processes to ensure such potential risks are monitored, putting in place appropriate
mitigation measures, and will be providing regular reports on cybersecurity trends and risks, and should they arise, any material incidents
with our board of directors.

 The
Company's Chief Technology Officer ("CTO") and Director of Information Technology (IT) are responsible for developing
and implementing our information security program. Our CTO is an Executive Sponsor of the Cyber Security Program and has over a decade
of experience in the Defense sector working directly with technology-driven Operational Security.

 We
have invested in IT security, encompassing various strategies such as enhanced end-user training, implementing layered defense systems,
identifying and safeguarding critical assets, bolstering monitoring and alert capabilities, and consulting with expert advisors. On the
management front, our IT security team diligently oversees alert systems and routinely convenes to evaluate current threat levels, analyze
trends, and strategize effective remediation methods.

 In
addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with the use of
third-party vendors and service providers. The internal business owners of the hosted applications are required to review user access
at least annually and provide a System and Organization Controls ("SOC") 1 or SOC 2 report from the vendor. If a third-party
vendor is unable to provide a SOC 1 or SOC 2 report, we take additional steps to assess their cybersecurity preparedness and assess our
relationship on that basis.

 The
Director of IT regularly oversees the Company's cybersecurity program. This comprehensive review includes examining management's
initiatives to identify and detect potential threats, outlining planned responses and recovery strategies for potential incidents, evaluating
recent improvements made to the Company's security detection and response capabilities, and assessing management's advancement
along the cybersecurity strategic roadmap. The internal IT team also subscribes to various threat intelligence services to evaluate our
security strategy or defense mechanism against such threats.

 Upon
detection of a cybersecurity incident and initial intake and validation by our CTO and IT Director, our response team evaluates the cybersecurity
incident, and, depending on the severity, escalates the incident to management and a cross-functional working group. Any incident assessed
as potentially being or potentially becoming material is immediately escalated for further assessment and reported to executive management.
Determination of what resources are needed to address the incident, prioritizing of response activities, forming of action plans, and
notification of external parties as needed are then undertaken by executive management and the cross-functional working group, led by
our CTO and IT Director. We consult with outside counsel as appropriate, including on materiality analysis and disclosure matters, and
our executive management makes the final materiality and disclosure determinations, among other compliance decisions.

 Notwithstanding these measures, we face a number of cybersecurity risks
in connection with our business, and no cybersecurity process, however thorough, can alleviate all of these risks, which if an event to
occur, could have a material adverse effect on our business, financial condition and results of operations. For fiscal years 2023 and 2022, we have not suffered a material
breach or a reportable incident, and cybersecurity risks (including breach of third parties with whom we work) have not materially affected
us, including our business strategy, results of operations or financial condition.

 Item
2: Properties

 We
lease approximately 3,478 square feet of office, in Albany, New York, which houses the corporate offices of SHI. The current lease agreement
expires on December 31, 2024.

 SCI
leases approximately 19,000 square feet of space in four buildings in East Wenatchee, Washington. The space is currently used for hosted
operations. The current lease agreements expire for one building on June 30, 2025, another on November 30, 2025, and for the remaining
two buildings on January 31, 2025.

 On
March 4, 2021, SSW acquired a 3.2-acre tract of real property located in Murray, Kentucky on which it has built an energy-efficient cryptocurrency
mining facility, Project Sophie, that includes 22 buildings for data facility hosting or mining.

 On
February 24, 2023, DVSV entered into a lease agreement for a 33.19-acre tract of land in Silverton, Texas. The Agreement is for an Initial
Term that expires on the date five years from the Service Date with the right to extend the term of the Agreement for five additional
one-year terms.

 We
believe these facilities are generally well-maintained and adequate for the Company's current needs and for expansion, if required.
Our business growth, however, is dependent on developing additional properties, and we believe our project pipeline is strong enough
to support our current business plan. See Part I, Item 1A. "Risk Factors" of this Annual Report.

 Item
3: Legal Proceedings

 At
any point in time, we may be involved in various lawsuits or other legal proceedings. Such lawsuits could arise from the sale of products
or services or from other matters relating to our regular business activities, compliance with various governmental regulations and requirements,
or other transactions or circumstances.

 EPA

 We
have been named as a party in the December 19, 2019 United States Environmental Protection Agency ("EPA") Demand Letter regarding
the Malta Rocket Fuel Area Superfund Site ("Site") located in Malta and Stillwater, New York, in connection with an alleged
release of hazardous materials into the environment. The EPA is seeking reimbursement of response costs from all named parties in the
amount of approximately $358 thousand plus interest in connection with the investigation and disposal activities associated with the
various drum caches discovered at the Site, issuance of the Explanation of Significant Differences ("ESD") of the Site, and
implementation of the work contemplated by the ESD. We consider the likelihood of a material adverse outcome with respect to this matter
to be remote and do not currently anticipate that any expense or liability that we may incur as a result of this matter in the future
will be material to the Company's business or financial condition.

 NYDIG

 NYDIG
ABL LLC, ("NYDIG") filed a
complaint against SMCB1("Borrower") and SMC ("Guarantor", and together with Borrower, "NYDIG Defendants")
in Marshall Circuit Court of the Commonwealth of Kentucky on December 29, 2022 regarding a series of loans made by NYDIG to Borrower
pursuant to a master equipment finance agreement that were secured by certain assets of Borrower and guaranteed by Guarantor pursuant
to a written guaranty agreement executed by Guarantor. The Court issued on February 15, 2023, an agreed order granting NYDIG's
motion for writ of possession which, among other things, ordered parties to provide NYDIG access to the collateral described therein
and preserved the rights of NYDIG to pursue a deficiency judgment against the NYDIG Defendants. Also on February 15, 2023, the NYDIG
Defendants filed their answer and affirmative defenses in this proceeding. The NYDIG Defendants believe that NYDIG has liquidated some
of the collateral securing the loans and anticipate that NYDIG will complete the liquidation of collateral and continue to prosecute
the complaint to obtain a judgment against the NYDIG Defendants. Additionally, NYDIG has stated its intention to pursue SCI, the parent
company of Guarantor, under a piercing of the corporate veil claim relating to NYDIG Defendants' debts and liabilities under the
loan documents. SCI denies any such liability and has filed a complaint for a declaratory judgment against NYDIG in the Eighth Judicial
District Court in Clark County, Nevada on March 16, 2023, seeking a declaratory judgment as to such matter. NYDIG filed a motion to dismiss
in response to SCI's declaratory judgment complaint on April 13, 2023. SCI filed a response in opposition to NYDIG's motion
to dismiss on April 27, 2023. The court heard oral arguments on May 16, 2023. On June 22, 2023, the court issued an order granting NYDIG's
motion to dismiss, on the basis that the case was not ripe for decision, without prejudice. SCI intends to continue to vigorously defend
any allegations regarding liability on account of NYDIG Defendants' debts and liabilities to NYDIG under their loan documents and
intends to refile a declaratory judgment complaint against NYDIG.

 On
February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA, and repossessed the collateralized assets
that totaled approximately $3.4 million, in which approximately $560 thousand was first used to pay off accrued interest and penalty
to date. On September 5, 2023, NYDIG provided a letter finalizing the accounting for the repossessed collateralized assets totaling proceeds
of approximately $3.4 million. This included legal and other expenses associated with the sale of the assets net a modest gain on the
estimated net book value of the assets totaling $251 thousand that was expensed as a loss on disposition of assets for the year ended
December 31, 2023. On December 7, 2023, NYDIG filed its Motion for Summary Judgment seeking entry of a judgment against Soluna in the
approximate amount of $10.3 million for principal and interest and penalties. On January 12, 2024, Soluna filed its objection to NYDIG's
motion for summary judgment on the grounds that NYDIG failed to explain what collateral of which loan was sold and how the sale proceeds
were allocated to each loan. A summary judgment motion was performed on February 13, 2024, and was agreed upon by both NYDIG and the
Borrower, that the total outstanding loan principal balance would be approximately $9.2 million. This settlement did not result in the
admission of any liability on the part of SHI, whose declaratory judgment remains the subject of litigation. On March 13, 2024, NYDIG
served the Company with a post-judgment discovery seeking information regarding the Company's assets and liabilities. The deadline
for response to the discovery is April 12, 2024. The Company intends to vigorously defend itself from NYDIG's parent company claims.

 Atlas

 In
September 2023, Atlas Technology Group LLC ("Atlas") filed a complaint against SMC (formerly EcoChain Block LLC) ("Soluna
MC"), SCI, and SHI (collectively, the "Atlas Defendants") in the Supreme Court of the State of New York, County of
New York regarding a co-location services agreement between Soluna MC and Atlas. Atlas alleges that the termination of such agreement
by SMC was a breach and asserts various claims, including breach of contract and the return of pre-paid fees. The claim requests a judgement
against the Atlas Defendants for the return of pre-paid fees of approximately $464 thousand and additional damages to be determined at
trial of not less than $7.9 million, and reimbursement of costs including legal fees and other costs. The complaint also contains references
to alter ego liability and piercing the corporate veil. The Atlas Defendants believes they have substantial factual and legal defenses
to these claims and intend to defend the claims vigorously.

 The
referenced to pre-paid fees of approximately $464 thousand have been reported in previous filings on SMC's balance sheet. No reserves
have been established for any other claims asserted in such complaint.

 Item
4: Mine Safety Disclosures

 Not

 PART
II

 Item
5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Market
Information

 Our
common stock is listed on the Nasdaq Capital Market under the trading symbol "SLNH." The Company's preferred stock
is listed on Nasdaq Capital Market under the trading symbol "SLNHP."

 Holders

 We
have one class of common stock, par value $.001, and are authorized to issue 75,000,000 shares of common stock. Each share of the Company's
common stock is entitled to one vote on all matters submitted to shareholders. As of December 31, 2023, there were 2,505,620 shares of
common stock issued and outstanding. As of March 19, 2024, there were approximately 100 shareholders of record of the Company's
common stock. The number of shareholders of record does not reflect the number of persons whose shares are held in nominee or "street"
name accounts through brokers.

 Dividends

 As
of December 31, 2023, we had 3,061,245 shares of our of 9.0% Series A Cumulative Perpetual Preferred Stock outstanding, which pursuant
to the Certificate of Designations, Preferences and Rights of 9.0% Series A Cumulative Perpetual Preferred Stock ("Series A Preferred
Stock"), of the Company entitle such holders to monthly dividends, when, as and if declared by the Company's Board of Directors.
During the year ended December 31, 2022, the Board of Directors declared, and the Company paid aggregate dividends on the shares of Series
A Preferred Stock of approximately $3.9 million, respectively. The Board of Directors had not declared any Series A Preferred Stock dividends
beginning October 2022 through the date of this report, as such the Company has accumulated approximately $8.6 million of dividends in
arrears on the Series A Preferred Stock through December 31, 2023.

 The
Company's Series B Preferred Stock included a 10% accruing dividend and could be paid in cash or stock before the shares are converted
or a set date comes around. On August 11, 2023, SHI paid a mandatory dividend on its outstanding Series B Convertible Preferred Stock
in the amount of approximately $656 thousand through the issuance of common stock and warrants. These warrants are fully paid except
for a tiny fraction of a cent and can be used to buy SHI common stock unless doing so results in the holder owning more than 4.99% of
the outstanding shares of the Company.

 The
Company does not intend to pay dividends on our common stock and do not anticipate or contemplate paying cash dividends on our common
stock in the foreseeable future. We currently intend to use all available funds to develop our business. We can give no assurance that
we will ever have excess funds available to pay dividends. Any future determination as to the payment of dividends will depend upon critical
requirements and limitations imposed by our credit agreements, if any, and such other factors as our Board of Directors may consider.

 Item
6: Selected Financial Data

 Not

 Item
7: Management's Discussion and Analysis of Financial Condition and Results of Operations

 The
following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial
Statements and the related notes included elsewhere in this Annual Report. This discussion contains
forward-looking statements, which involve risk and uncertainties. Our actual results could differ materially from those anticipated in
the forward-looking statements as a result of certain factors, including those discussed in Item 1A: "Risk Factors" and elsewhere
in this Annual Report.

 Recent
Developments and Trends

 2023

 In
2023, we executed on the following four-pronged strategy: (1) Energize Project Dorothy; (2) Cash Flow, Site and Process Optimization;
(3) Flagship Expansion; (4) Pipeline growth. A summary of our developments in these areas follows below.

 Energize
Project Dorothy

 We
transitioned our flagship data center Project Dorothy from construction to operations. ERCOT approved the energizing of the first 50
MW of our new data center on April 20, 2023. We completed the construction and ramping of the facility starting in the spring of fiscal
year 2023, and completed the full ramp by the end of October 2023. The data center is colocated with Briscoe Wind Farm ("Briscoe"),
a 150 MW wind power generation facility in Silverton, Texas. The project is comprised of two elements, Project Dorothy 1A ("D1A"),
and Project Dorothy 1B ("D1B"), each 25 MW facilities.

 D1A
is focused on Bitcoin Hosting. On April 26, 2023 we signed a 5 MW 2-year hosting deal with Compass Mining at D1A. On April 24, 2023 we
signed a 20 MW 2-year hosting agreement with another strategic hosting partner at Dorothy 1A. In the summer of 2023, we completed the
construction of D1A and the installation of approximately 7,700 Bitcoin miners between the two customers, resulting in an installed hashrate
of approximately 950 PH/s. As of December 31, 2023, D1A has consumed over 11,900 MWh of Curtailed Energy from the co-located power plant
and achieved a power usage effectiveness ("PUE") of 1.03.

 The
construction of D1A was made possible by a partnership with Spring Lane Capital ("SLC"), a leading venture capital firm focused
on sustainability solutions. On April 22, 2022, we finalized agreements with SLC for a $35 million capital pool to finance Soluna projects
alongside renewable energy power plants. Approximately $12.5 million of this was designated for the Dorothy Project. In July 2022, Soluna
began tapping into the SLC managed funds to finance Dorothy construction and repay prior funding provided by the Company. In return,
SLC received approximately 32% of Class B Membership Interests of D1A. On March 10, 2023, we completed a new series of project-level
agreements for $7.5 million from SLC-managed funds. Due to limited liquidity, and access to the capital markets, we sold a portion of
our ownership to SLC in 2023. The funds raised aided in the completion of the substation interconnection, and the final stages of project
Dorothy. It also provided capital to fund Soluna's corporate operations. SLC, increased its stake in D1A from approximately 32%
to 85%, reducing Soluna's ownership from 68% to 15%. After SLC achieves an 18% Internal Rate of Return hurdle, Soluna retains 50%
of the profits on D1A.

 D1B
is focused on Bitcoin Mining through a strategic partnership with Navitas Global ("Navitas"). On May 9, 2023, we consummated
a project-level financing with Navitas, which included a $2 million loan to D1B to complete the construction and a $12.1 million equity
investment in the project. After consummating the financing, Navitas owns 49% of D1B and Soluna owns 51%. In June 2023, D1B purchased
8,378 Bitmain Antminer S19s, S19j Pro and S19j Pro+ machines for the partnership. The purchase resulted in an estimated 868 PH/s of hashrate
with an average efficiency of 29.9 J/TH and at a cost of $10.59 $/TH. As of December 31, 2023, over 7,900 of the miners had been deployed.
D1B was fully energized and began ramping in late October 2023. D1B now has an installed hashrate of 817 PH/s. As of December 31, 2023,
D1B has consumed over 10,600 MWh of Curtailed Energy from the co-located power plant and achieved a power usage effectiveness ("PUE")
of 1.03.

 The
Company consolidated the accounts of D1A, Variable Interest Entities ("VIE") as of December 31, 2023 and December 31, 2022
respectively, and for D1B as of December 31, 2023.

Response Services at Dorothy

 In
November 2023, we completed our registration of Project Dorothy for one of ERCOT's demand response programs establishing the project
as key contributor to intelligent and flexible energy solutions, promoting environmental and economic advantages for the state of Texas.
It also allowed us to diversify our revenue. Under the program, we have a single promise to stand ready, on a monthly basis, to deliver
a set amount of curtailment (committed capacity) per month when and if called upon by ERCOT. Soluna will be able to make additional revenue
for Project Dorothy by providing this grid resilience support and potentially reduce its power costs, making it among the lowest cost
players in the industry.

 Cash
Flow, Site and Process Optimization

 In
the second quarter of 2023, we shifted our business from primarily proprietary Bitcoin Mining to Bitcoin Hosting. We signed 50 MW of
hosting agreements at Dorothy 1A and Sophie.

Sophie is a 25 MW data center, based in Murray, Kentucky connected to the grid, ("Sophie"). The project has a Power Purchase
Agreement ("PPA") that requires the curtailment of the site during certain hours of the day to help balance the Kentucky
grid.

 The
Company owns 100% of the facility and completed its construction in 2021. In the second quarter of fiscal year 2023, we shifted Project
Sophie to Data Hosting, signing contracts with leading Bitcoin miners. We sold older, less efficient Bitcoin mining equipment and used
the cash to make operational improvements to the site and to fund corporate operations. Throughout 2023, Sophie progressively secured
new more profitable hosting contracts. We have deployed over 8,000 mining machines for hosting in 2023 at the site. The Data Hosting
agreements are a combination of a fixed services fee and a profit share component. The cost of power is passed through to customers.
Customers at the site now include leading public Bitcoin Miners such as Bit Digital, Compass Mining, and other leading sustainability
focused customers.

 Marie

 In
February 2023, Project Marie, our 20 MW data center in Kentucky was decommissioned. The decision was sparked by following events:

 NYDIG
 our asset-backed-lender on mining and infrastructure equipment, accelerated their loan and
 repossessed their collateral.

 Our
 Bitcoin Hosting customer, Atlas Technology Group, LLC ("Atlas"), at the site
 failed to upgrade and invest in their mining equipment, decreasing the profitability of the
 site.

 Our
 landlord, CC Metals and Alloys, LLC, ("CCMA") terminated our lease.

 As
a result, we disposed of all remaining assets at the site, terminated the Atlas hosting agreement, and decommissioned the site.

 Edith

Edith was a project permitted to consume up to 3.3 MWs located in Wenatchee, Washington. In September 2022, we sold the mining assets
and other mining equipment at the site for $790 thousand. Soluna has committed to providing certain facilities contracts at cost plus
a markup to facilitate the continued operations for the mining assets for the new ownership.

 Cost
Cutting and Process Optimization

 In
2023, we implemented a number of cost cutting measures including staff reductions, renegotiations or termination of key advisory
agreements. We ramped up a new Financial Planning and Analysis ("FP&A") function to provide our management and
operations teams better insight into the financial performance of our data centers. This helped us find opportunities to improve
profitability and proactively address critical issues with infrastructure equipment at all sites. Our MaestroOS software platform
managed the efficient operations of projects Dorothy and Sophie through record setting temperatures (hot and cold) in both Texas and
Kentucky in 2023.

 Expand
Flagship, Dorothy 2

 In
2023, we began the planning process for building out the second 50 MW phase of Project Dorothy – Dorothy 2. We completed the design,
established new procurement partners, and submitted an updated approval to ERCOT for approval.

 Grow
Pipeline

 We
signed a term sheet for a new 166 MW data center called Kati that will be integrated with a 300 MW wind farm that has surplus energy
due to increasing curtailment by the grid. We worked throughout 2023 to advance the project through grid operator's, ERCOT planning
process.

 Data
Center Locations and Ownership

 Below
is a table showing our operating sites, business models, the Company's ownership percentages and power source to guide the influence
on our financials. We currently operate 75 MW of facilities across two locations.

 Corporate
 Entity

 State

 MW

 Ownership

 Business
 Model

 Power
 Source

 SW, LLC

 KY

 %

 Grid
 / Hydro

 1A

 DVSL ComputeCo, LLC

 TX

 %

 Wind

 1B

 DV ComputeCo, LLC

 TX

 %

 Mining

 Wind

 Convertible
Noteholders

 In
2023, the Company negotiated three amendments to the October Convertible Notes. In early 2024, a fourth amendment was negotiated. These
amendments were focused on extending the maturity date of the notes, lowering the conversion price of the notes, adding features to the
notes to allow early payoff with predetermined cost, and the repricing of certain warrants to assist the company in raising capital for
operations.

 2022

 The
second half of 2022 was a tumultuous period for the company. Bitcoin declined from a high of $50 thousand to nearly $16 thousand.
The decline in price was triggered by a collapse of key players in the cryptocurrency ecosystem including 3AC and FTX. The war in
Ukraine had a profound impact on power costs, due to rising gas prices. And, ERCOT instituted a new interim protocol for Crypto
related power consumers called Large Flexible Load ("LFL"), which significantly slowed progress at our flagship site,
Project Dorothy. Our June 2022 financing plan was put on hold due to market volatility and reduced appetite for new issuances. By
the end of 2022, we began to plan a transition away from proprietary mining to Bitcoin hosting.

 Industry
Trends

 Soluna's
business is influenced by several industry trends, including: (1) challenges in the Bitcoin ecosystem, (2) the Bitcoin Halving, (3) the
Inflation Reduction Act, (4) the global Supply Chain, (5) the growth of AI.

Ecosystem

 Fiscal
years 2022 and 2023 proved challenging for the Bitcoin Mining industry. In 2022, several companies in the ecosystem initiated
bankruptcy proceedings due to the severe decline in the price of Bitcoin and, the impact on energy prices of the war in Ukraine. This turmoil continued into most of 2023 with many companies working their way through chapter 11 and
flooding the market with equipment sales. The trial of Sam Backman Fried, founder and CEO of FTX, the industry's largest digital asset
exchange, dominated the news and continued to compress the value of Bitcoin. Later in the year Changpeng Zhao, the founder of
Binance, the largest cryptocurrency exchange in the world, pleaded guilty to money laundering violations. By the end of 2023, tides
began to turn for Bitcoin as major asset managers like Black Rock, Greyscale, and Bitwise filed for Bitcoin Spot ETFs. This caused a
surge in Bitcoin price beginning in the tail end of 2023 that has benefited revenues in the ecosystem.

 In
April 2024, Bitcoin will undergo its fourth halving event, occurring approximately every four years or after every 210,000 blocks
are mined. During a halving, miners' rewards for validating transactions and creating new blocks on the Bitcoin blockchain are
cut in half, reducing the rate of new Bitcoin generation. This event typically triggers anticipation and speculation within the
Bitcoin community and among investors, leading to increased market activity. Price volatility tends to rise before and after a
halving as the market reacts to perceived supply scarcity. Mining profitability decreases post-halving, potentially prompting some
miners to shut down operations. This often sparks consolidations in the space reducing the number of mining companies. However, the
network automatically adjusts mining difficulty to ensure consistent block production. The halving also causes a supply shock,
reducing Bitcoin's inflation rate and potentially driving long-term price appreciation, although past performance does not
guarantee future outcomes. The 2024 halving will be the first to happen during a high interest rate environment, and in the
presence of strong institutional demand for Bitcoin driven by ETFs.

 Inflation
Rate Act

 The
Inflation Reduction Act of 2022 ("IRA"), signed into law by President Biden, is a significant investment in climate and energy
in the U.S. At the time of its passage, legislators estimated that the bill would allocate $370 billion, primarily in the form of tax
credits, to a wide array of decarbonization efforts. Recent private estimates are much higher. In March, the Brookings Institute released
a study estimating the spending at $1.2 trillion, which is three times the Congressional estimate. The Act aims to tackle the climate
crisis, advance environmental justice, secure America's position as a world leader in clean energy manufacturing, and work towards
achieving a net-zero economy by 2050. Since its enactment, the Inflation Reduction Act has driven substantial investment in clean energy
projects, with over $110 billion announced in new clean-energy manufacturing investments. This includes investments in electric vehicle
supply chains and solar manufacturing. Overall, the IRA stimulates economic growth through renewable energy development and infrastructure
reinvestment in the United States.

 Supply
Chain

 The
global supply chain is facing challenges, particularly in the electric power sector, due to the scarcity of power infrastructure components
like transformers. The electric grid component market is experiencing a supply and demand mismatch, leading to an ongoing shortage of
transformers and other grid components. Over 70% of transmission and power transformers in the U.S. are over 25 years old, and there
is insufficient manufacturing capacity to meet the demand for grid transformers and component parts. Factors contributing to the scarcity
include aging infrastructure, increasing demand for electricity, extreme weather events threatening reliability, insufficient domestic
manufacturing capacity, and reliance on foreign suppliers. President Biden authorized the use of the Defense Production Act Title III
to accelerate domestic production of electric grid transformers and components to address the shortage. Companies are using emergency
stocks of components, reviewing scheduled work, substituting materials when possible, improving communication with suppliers, and digitalizing
processes to enhance efficiency. The scarcity of power infrastructure components like transformers is a critical issue and efforts are
being made to address these challenges through various strategies and actions.

 AI

 Since
the inception of ChatGPT by OpenAI, AI has experienced remarkable growth, transforming the field. Large language models ("LLM"s)
have revolutionized AI, fueling interest in generative AI technologies. The introduction of ChatGPT alone has increased AI-related job
listings significantly, indicating its impact beyond tech. In 2023, global venture capital investments in AI soared to $50 billion, reflecting
confidence in AI's future potential. Funding focus has shifted to mature companies with proven technologies, signaling market maturation.
This growth has driven demand for computing resources and attracted enterprise interest. The generative AI market is projected to reach
$1.3 trillion by 2032, with significant energy implications. By 2030, AI could comprise 3-4% of global power demand, with Google already
attributing 10-15% of its power use to AI technologies. The widespread adoption of generative AI like ChatGPT may substantially increase
energy consumption across various applications and services.

 Tailwinds
and Headwinds

 To
understand the impact of the unprecedented combinations of these industry trends our business, we have prepared the following table.

 Trend

 Tailwind
 or Headwind?

 Why

 Ecosystem

 Both.

 Consolidation
 in the space will likely decrease competition on the Bitcoin network, increasing our pro rata share of profits. Our industry leading
 power prices will allow us to stay on the network longer. Increased regulation of the industry could increase our costs.

 Both.

 Reduction
 in block-reward will represent a short-term reduction in revenue. But, the supply-shock effect and the growth of ETF may lessen the
 volatility. A projected rise in Bitcoin price after the halving would increase revenues and increase demand for our low-cost data
 centers.

 Inflation
 Reduction Act

 Tailwind.

 The
 IRA is accelerating the development of new renewable power plants across the country and extending the tax incentives. This growth
 is likely to exacerbate the wasted energy problem as grid transmission will not keep pace. This would help to increase the company's
 long-term project pipeline.

 Supply
 Chain

 Headwind.

 Difficult
 to source equipment could affect our growth. We have developed strategic relationships with key equipment providers with manufacturing
 facilities in the US and Abroad.

 AI

 Tailwind.

 The
 energy demands of AI will increase focus on the sustainability of the industry. We expect increasing demand for specialized AI data
 centers with access to renewable energy. This will likely open opportunities for Soluna to provide AI Cloud and Co-location services
 to new companies and enterprises investing in AI initiatives.

 See
Part I, Item 1A. "Risk Factors" of this Annual Report for additional discussion regarding potential impacts our competitive
and evolving industry trends may have on our business.

Results of Operations

 Results
of Operations for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022.

 The
following table summarizes changes in the various components of our net loss during the year ended December 31, 2023 compared to the
year ended December 31, 2022.

 Year
 Ended
 2023

 Year
 Ended
 2022

 $

 %

 Cryptocurrency mining revenue

 $
 10,602

 24,409

 (13,807
)

 (57
)%

 Data hosting revenue

 10,196

 4,138

 6,058

 %

 Demand response service revenue

 -

 %

 Operating costs and expenses:

 6,365

 14,226

 (7,861
)

 (55
)%

 Cost of data hosting revenue, exclusive of depreciation

 5,601

 3,572

 2,029

 %

 Costs of revenue- depreciation

 3,863

 18,708

 (14,845
)

 (79
)%

 General and administrative expenses, exclusive of depreciation and amortization

 15,390

 19,203

 (3,813
)

 (20
)%

 Depreciation and amortization associated with general and administrative expenses

 9,513

 9,506

 -
 %

 Impairment on equity investment

 -

 (750
)

 (100
)%

 (46,797
)

 (99
)%

 Operating loss

 (20,241
)

 (84,790
)

 64,549

 (76
)%

 Other (expense) income, net

 (1,479
)

 (1,501
)

 (6,823
)%

 (2,748
)

 (8,375
)

 5,627

 (67
)%

 (398
)

 (4,089
)

 3,691

 (90
)%

 (3,904
)

 (11,130
)

 7,226

 (65
)%

 Loss before income taxes from continuing operations

 (28,770
)

 (108,362
)

 79,592

 (73
)%

 Income tax benefit (expense) from continuing operations

 1,067

 1,346

 (279
)

 (21
)%

)

 (107,016
)

 79,313

 (74
)%

 -

 7,921

 (7,921
)

 (100
)%

 Net loss

)

 (99,095
)

 71,392

 (72
)%

 Net income (loss) attributable to non-controlling interest

 1,498

 (380
)

 1,878

 (494
)%

 Net loss attributable to Soluna Holdings, Inc.

 $
 (29,201
)

 (98,715
)

 69,514

 (70
)%

 The
following table summarizes the balances for the Project sites for cryptocurrency mining revenue, data hosting revenue, cost of cryptocurrency
mining revenue, exclusive of depreciation, cost of data hosting revenue, exclusive of depreciation, and cost of depreciation during the
year ended December 31, 2023:

 Dorothy 1B

 Dorothy 1A

 Marie

 Other

 Total

 mining revenue

 $
 6,849

 $
 -

 $
 2,984

 $

 $
 -

 $
 10,602

 Data
 hosting revenue

 -

 6,876

 3,021

 10,196

 response services

 -

 -

 Total
 revenue

 $
 6,849

 $
 6,876

 $
 6,005

 $
 1,045

 $

 $
 21,066

 Cost
 of cryptocurrency mining, exclusive of depreciation

 $
 3,358

 $
 -

 2,206

 -

 6,365

 Cost
 of data hosting revenue, exclusive of depreciation

 -

 4,366

 1,030

 -

 5,601

 Cost
 of revenue- depreciation

 1,816

 1,154

 3,863

 Total
 cost of revenue

 $
 5,174

 $
 5,121

 $
 4,390

 $
 1,142

 $

 $
 15,829

 The
following table summarizes the balances for the Project sites for cryptocurrency mining revenue, data hosting revenue, cost of cryptocurrency
mining revenue, exclusive of depreciation, cost of data hosting revenue, exclusive of depreciation, and cost of depreciation during the
year ended December 31, 2022:

 Dorothy 1B

 Dorothy 1A

 Marie

 Other

 Total

 mining revenue

 $
 -

 $
 -

 $
 13,221

 $
 10,028

 $
 1,160

 $
 24,409

 Data
 hosting revenue

 -

 -

 -

 4,131

 4,138

 response services

 -

 -

 -

 -

 -

 -

 Total
 revenue

 $
 -

 $
 -

 $
 13,221

 $
 14,159

 $
 1,167

 $
 28,547

 Cost
 of cryptocurrency mining, exclusive of depreciation

 $

 $
 -

 7,471

 6,048

 14,226

 Cost
 of data hosting revenue, exclusive of depreciation

 -

 -

 3,518

 -

 3,572

 Cost
 of revenue- depreciation

 -

 -

 10,597

 7,813

 18,708

 Total
 cost of revenue

 $

 $

 $
 18,068

 $
 17,379

 $

 $
 36,506

Mining Revenue: Cryptocurrency revenue consists of revenue recognized from Soluna's cryptocurrency mining operations. Cryptocurrency
mining revenue was approximately $10.6 million for the year ended December 31, 2023, respectively, compared to $24.4 million for the
year ended December 31, 2022, respectively, a $13.8 million decrease. We noted the significant decrease mainly related to volume variances
due to Project Marie operations being decommissioned in February 2023 creating a decrease of approximately $9.3 million. In addition,
the Company switched from a proprietary mining business model at Project Sophie to data hosting in the middle of April 2023 with a complete
conversion to hosting by the third quarter of fiscal year 2023, which created a decrease of approximately $10.2 million. Offsetting the
decline in cryptocurrency mining revenue was the deployment and ramping up of proprietary mining at Dorothy 1B for the year ended December
31, 2023, which created an increase of approximately $6.8 million.

 Data
Hosting Revenue: In August 2021, the Company began cryptocurrency hosting services in which we provide energized space and operating
services to third-party mining companies who locate their mining hardware at one of our mining locations, in which they may receive a
fee per miner installed, revenue share and if additional services are rendered, an additional service fee is charged to the hosted parties.
Data hosting revenue was approximately $10.2 million for the year ended December 31, 2023 compared to $4.1 million for year ended December
31, 2022, an increase of approximately $6.1 million. The significant increase was primarily related to energization and the deployment
of hosting customers at Project Dorothy 1A in the second quarter of 2023 creating approximately $6.9 million in data hosting revenue.
In addition, Project Sophie switched their business model from proprietary mining to data hosting in the second quarter of 2023, which
created an additional increase of approximately $3.0 million. Offsetting the increase for the year was the decommission of Project Marie
operations in February 2023 causing a decline of approximately $3.9 million.

 Demand Response Service: In November
2023, we completed our registration of Project Dorothy for one of ERCOT's demand response programs, in which we began services
in December 2023. On a monthly basis we stand ready to deliver a set amount of committed capacity per month when and if called upon by
ERCOT. No such services were performed for the year ended December 31, 2022.

 Cost
of Cryptocurrency Revenue, exclusive of depreciation: Cost of cryptocurrency mining revenue includes direct utility costs,
site overhead expenses, and overhead costs that relate to the operations of our cryptocurrency mining facilities in Washington, Kentucky,
and Texas. Going forward, cost of cryptocurrency revenue will include any additional cryptocurrency mining facilities that are part of
the Company's future pipeline.

 Cost
of cryptocurrency mining revenue, exclusive of depreciation costs, was approximately $6.4 million for the year ended December 31, 2023,
respectively, compared to approximately $14.2 million for the year ended December 31, 2022, respectively. As noted above, the major reasons
for the significant declines were due to a production volume decline from the ceasing of operations at Project Marie causing a decrease
of approximately $5.3 million, and switching to a data hosting model from a proprietary mining model at Project Sophie causing a decline
of approximately $5.2 million. These declines at Project Marie and Project Sophie were offset with increases at Project Dorothy 1B due
to energization in the third quarter of 2023, creating an increase in costs of approximately $3.3 million.

 Cost
of Data Hosting Revenue, exclusive of depreciation: Cost of data hosting revenue includes utility charges, site overhead
expenses, and other charges.

 Cost
of data hosting revenue was approximately $5.6 million for the year ended December 31, 2023, compared to $3.5 million for the year ended
December 31, 2022. This increase was due to Project Dorothy 1A which began operations and hosting services in May 2023, creating costs
of approximately $4.4 million and had minimal costs in fiscal year 2022. The increase was offset as a direct result by Project Marie's
operations ceasing in February 2023, where the main hosting contract was also simultaneously terminated, creating a decline in costs
of approximately $3.3 million. While the Company began data hosting operations at Project Sophie in mid April 2023, which created an
increase in costs of approximately $1.0 million, the energy costs associated with the hosting contract arrangements contained pass-through
costs for electricity charges. In contrast, a large portion of the fiscal year 2022, the electricity costs were not pass-through
costs, thus reducing the cost of revenue recorded for fiscal year 2023 for Project Sophie and Marie.

 Cost
of revenue- depreciation: Depreciation costs associated with cryptocurrency and data hosting revenue was approximately $3.9 million
for the year ended December 31, 2023 compared to $18.7 million for the year ended December 31, 2022. The significant decline related
to a higher net book value in property, plant, and equipment, ("PPE") between the two periods. During the fiscal year 2022,
the Company's PPE net book value was as at $90.8 million in August 2022 compared to the net book value in 2023 of $46.5 million
in August 2023. In fiscal year 2022, the Company impaired approximately $47.4 million of PPE of which $28.1 million was in the third
quarter of fiscal year 2022 and $18.6 million was in the fourth quarter of fiscal year 2022, which resulted in lower net book value PPE
for the beginning of fiscal year 2023, and a decline in depreciation costs for the year ended December 31, 2023. Beginning in the third
quarter of fiscal year 2023, the Company has begun to invest more in capital expenditures in which has more than tripled purchases compared
to the first six months of fiscal year 2023, as such the Company expects to see depreciation costs to significantly increase over the
next several months.

 General
and Administrative Expenses:

 General
and administrative expenses include cash and non-cash compensation, benefits and related costs in support of our general corporate operations,
including general management, finance and accounting, human resources, marketing, information technology, corporate development, and
legal services.

 General
and administrative expenses for the year ended December 31, 2023 was approximately $15.4 million compared to $19.2 million for the year
ended December 31, 2022, a decrease of approximately $3.8 million or 20%. This decrease was mainly related to decreased salaries, benefits,
and other employee expenses, consulting and legal fees, other outside charges, and insurance expenses, offset with an increase in investor
relation expenses.

 Salaries,
benefits, and other employee expenses decreased by approximately $1.4 million due to employee recruitment fees decreased by approximately
$329 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022 as the Company was actively recruiting
for new employees for the Company in fiscal year 2022. Wages and salaries, including fringe benefits decreased by approximately $1.0
million due to differences in headcount and personnel costs between the comparable periods. In addition, employee related expenses decreased
approximately $288 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022 as employees performed
more traveling for events and site visits in the prior year compared to current year. This was offset with a higher bonus expense of
approximately $200 thousand for year ended December 31, 2023 compared to the year ended December 31, 2022.

 Legal
fees decreased by approximately $1.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The Company
had higher legal fees for the year ended December 31, 2022 compared to the year ended December 31, 2023, due to Dorothy project development
agreements including SLC financing, power purchase agreements, Navitas financing, and ERCOT that were incurred for the year ended December
31, 2022 which were approximately $675 thousand higher than the year ended December 31, 2023. In addition, the Company incurred approximately
$524 thousand more in legal fees for the year ended December 31, 2022 due to potential capital raising activities that did not occur
and other corporate related legal matters, in which were not incurred or material for the year ended December 31, 2023.

 The
decrease in consulting fees, professional, and other outside services was approximately $1.6 million mainly due to higher consulting
fees for various complex accounting transactions for the year ended December 31, 2022. These higher fees were due to the
accounting activities related to the convertible debt addendums in July and September 2022, the sale of MTII Instruments and the accounting
for the asset acquisition transaction and other valuations by approximately $620 thousand compared to the year ended December 31, 2023.
In addition, there were additional nonrecurring consultant fees incurred for the year ended December 31, 2022 of approximately $220 thousand
for management, general and other market consulting fees that was not incurred for the year ended December 31, 2023. In addition, the
Company incurred approximately $62 thousand more in temporary help related fees for the year ended December 31, 2022 compared to the
year ended December 31, 2023. Other outside services decreased by approximately $519 thousand for the year ended December 31, 2023 compared
to the year ended December 31, 2022, due to reduced non-recurring expenses incurred including property tax advisors, website developers,
and ERCOT market advisory fees that were one-time costs in 2022, as well as the Company cancelling services with two vendors that contributed
$285 thousand of services in 2022, and expenses related to internal controls consultants used for the year ended December 31, 2022 compared
to the year ended December 31, 2023.

 Investor
relations increased by approximately $980 thousand due to the Company implementing a series of investor acquisition and influencer marketing
programs to attract new investors to Soluna Holdings.

 Depreciation
and Amortization associated with general and administrative expenses: Depreciation and amortization expense for the year ended
December 31, 2023 totaled approximately $9.5 million, consistent with year ended December 31, 2022. The amortization expense related
to the strategic pipeline contract that was acquired in October 2021.

on Equity Investment: During the year ended December 31, 2022, the Company fully impaired the equity method investment of $750
thousand due to current projections with the equity investment in HEL.

on Fixed Assets: During the year ended December 31, 2023, the Company's impairment charges of approximately $575 thousand
related to impairment of approximately $165 thousand for power supply units (PSUs) at the Project Sophie location, and $410 thousand
for revaluing S19, M30, M31, and M32 miners to market conditions and sales prices of related miners made during and subsequent to year-end.

the year ended, December 31, 2022, the Company had impairment charges of approximately $47.4 million, relating to a multiple of factors
including, S-9 and L3 miners in storage in which the carrying balance exceeded its fair value by approximately $1.9 million. In addition,
the Company assessed the active miners in operations and determined there had been a decline in the market value of the active miners
in the Company's operations for fiscal year 2022. As a result, a quantitative impairment analysis was required as of December 31,
2022. As a result, the Company reassessed its estimates and forecasts as of December 31, 2022, to determine the undiscounted cash flows
and whether the miners would be recoverable. It was determined based on the analysis, that the undiscounted cash flow with residual value
was less than the net book value as of December 31, 2022, confirming the existence of a triggering event, and therefore required an impairment
to be recognized. Based on a comparison of the fair value of the active miners to the net book value, the Company recorded an impairment
charge of approximately $39.4 million to be recognized on the consolidated statements of operations for the year ended December 31, 2022.
As of December 31, 2022, the Company had M20 miners and M21 miners in service at the Sophie location. Of these miners a portion were
planned to be sold in the near future in fiscal year 2023. As a result of the fair value analysis as of December 31, 2022, the Company
concluded the carrying amount of the property, plant and equipment associated with the M20 and M21 miners of approximately $2.1 million
exceeded its fair value of $295 thousand, which resulted in impairment charges of approximately $1.8 million on the consolidated statements
of operations for the year ended December 31, 2022.

 As
of December 31, 2022, the Company had equipment held at vendors including switchgears, transformers, busways and bus plugs. The Company
had discussions with a potential buyer and our board of directors regarding the approval for sale of the switchgears held at vendor.
The company had a purchase order received for the switchgear, subject to inspection of the equipment and final sale. The sale of the
equipment held at one of our vendors would mean the equipment was not being used for its intended purpose. As such, the Company reassessed
its estimates and forecasts as of December 31, 2022, to determine the fair values of the equipment held at vendor. As a result of the
fair value analysis as of December 31, 2022, the Company concluded the carrying amount of the equipment held at vendor of approximately
$2.8 million exceeded its fair value of $916 thousand, which resulted in an impairment charge of $1.9 million on the consolidated statements
of operations for the year ended December 31, 2022.

 Due
to the decommissioning of Project Marie in February 2023, the Company disposed of approximately $1.7 million worth of leasehold improvements
and general electrical upgrades and equipment which were attached to the facility which could not be salvaged for any value, and therefore
the Company impaired those assets for the full amount as of December 31, 2022. As such, the Company had equipment held for sale due to
the closure in the first quarter of 2023. Based on a fair value analysis compared to the Company's net book value of the equipment
still held resulted in an impairment of approximately $700 thousand was recorded on the consolidated statements of operations for the
year ended December 31, 2022. As a result, the total impairment for the Marie assets not attached to the NYDIG collateralized assets
 (see legal proceedings) was approximately $2.4 million for the year-ended December 31, 2022.

Expense: Interest expense for the year ended December 31, 2023 was approximately $2.7 million and related to default and continuing
interest expense of the NYDIG loan of approximately $1.4 million (see legal proceedings), a financing loan with Navitas of approximately
$228 thousand, interest and other charges of approximately $212 thousand for the promissory notes issued in January and February of 2023
to certain investors, and interest on amortization of warrants for the convertible debt of approximately $475 thousand, as well as default
interest charged through March 10, 2023 for the convertible holders of approximately $420 thousand. Interest expense for the year ended
December 31, 2022 was $8.4 million primarily related to $6.7 million of interest expense in relation to the October Secured Notes issued
on October 25, 2021 ("Convertible Note agreement") and certain promissory notes issued in each of February, March, and April
2022 and repaid as part of the offering of Series A preferred stock in June 2022. The amortization of warrants and debt discounts was
at a higher value in the year ended December 31, 2022 by approximately $6.2 million, due to the value associated with the warrants from
when the Company entered into the October Secured Note agreement in 2021, in which was subsequently amended in July and September of
2022, in which the Company needed to extinguish the original debt and establish a new fair value of debt, in which less amortization
was associated. Interest expense of $1.7 million for the year ended December 31, 2022, respectively was also incurred under the NYDIG
facility and due to its December 2022 default.

 Loss
on Debt Extinguishment and Revaluation, net: During the fiscal year ended December 31, 2022, the Company entered into the Convertible
Debt Addendum and Convertible Debt Addendum Amendment, in which per guidance in ASC 470, the Convertible Notes were treated as a debt
extinguishment in our consolidated financial statements. The Company incurred a loss on the fair value valuation of approximately of
approximately $12.9 million for the debt extinguishment and revaluation of debt through September 31, 2022. The Company did a fair value
assessment of the Convertible Notes as of December 31, 2022 and recognized a gain from previous valuation of $1.8 million; therefore,
the net loss for extinguishment and revaluation for the year ended December 31, 2022 was approximately $11.1 million. The Company incurred
a loss on debt extinguishment and revaluation of approximately $3.9 million for the year ended December 31, 2023. On May 11, 2023, the
Company entered into a new debt amendment agreement ("Second Amendment") with the convertible noteholders and issued new
warrants, creating a debt extinguishment and loss of $1.8 million. The main factor for the loss was the valuation of the new warrants.
On November 20, 2023, the Company completed another new amendment (the "Third Amendment") of the convertible notes and incurred
an additional loss on extinguishment and revaluation of approximately $911 thousand. With quarterly fair value assessments and conversions
of debt throughout the year ending December 31, 2023, Company incurred an additional loss on revaluation of approximately $1.2 million
with changes in annual volatility of the debt at each quarter end, in addition to note conversions that occurred throughout the year.
See Note 9 for further details.

 Loss
on Sale of Fixed Assets: The Company incurred a $398 thousand loss on sale of fixed assets for the year ended December 31, 2023
in connection with the disposal and sale of miners (M20, M21, M30, and M31 models) and equipment which included Switchgear and Tesseracks
(mobile, Bitcoin mobile equipment) for approximately $147 thousand at the Project Sophie and Project Marie sites. For the sale of miners
and equipment, the Company received proceeds of approximately $2.5 million which had a net book value of approximately $2.65 million.
In addition to the sale of fixed assets, the Company incurred a $251 thousand loss on sale of assets in relation to NYDIG collateral
repossession, in which the Company had to pay for expenses and legal fees in related to the disposition. The Company incurred a $4.1
million loss for the year ended December 31, 2022, in connection with the disposal of miners and equipment with a net book value of approximately
$6.9 million for the year ended December 31, 2022 in which the Company received proceeds of $2.8 million for year ended December 31,
2022.

 Other
expense, net: For the year ended December 31, 2023, there was approximately $1.5 million other expense, net. The main reason
for the balance was due to an approximately $1.0 million penalty charge in relation to moving further in the settlement litigation with
NYDIG. In addition, there was a $250 thousand expense in relation to an extension fee for the noteholders of the convertible debt when
the 2nd Amendment was signed on May 11, 2023, in addition to the prepayment penalty for the notes payable in the third quarter of fiscal
2023. There were no material other expenses for the year ended December 31, 2022.

 Income
Tax Benefit from Continuing Operations: Income tax benefit from continuing operations for the year ended December 31, 2023 was
$1.1 million compared to an income tax benefit of $1.3 million for the year ended December 31, 2022. The income tax benefit for the fiscal
year ended December 31, 2023 and 2022 related to deferred tax amortization impact of acquiring an asset in a transaction that is not
a business combination when the amount paid exceeds the tax basis on the acquisition date. As such, the Company is required to adjust
the value of the strategic contract pipeline by approximately $10.9 million at inception date (October 29, 2021), in which was recorded
as a deferred tax liability and this amount will be amortized over the life of the asset. For the years ended December 31, 2023 and 2022
the Company amortized approximately $2.2 million. For the year ended December 31, 2023, these amounts were offset with a timing difference
due to significant increase for in-service capital assets at the Dorothy entities which created an offset of approximately $1.1 million
in deferred income tax expense. Income tax benefit from continuing operations for the year ended December 31, 2022 was $1.3 million,
which mainly related to the amortization of deferred tax liability for the strategic pipeline discussed above, offset by a $295 thousand
deferred tax expense incurred in the second quarter of 2022 related to increasing the Company's valuation allowance associated
with the deferred tax asset, as well as a $503 thousand deferred tax state adjustment.

 Net
Income from Discontinued Operations: As of December 31, 2022, the Company's MTI Instruments business was reported as discontinued
operations up to the date of the sale on April 11, 2022. For the year ended December 31, 2022, the Company's net income from discontinued
operations was $7.9 million. This was primarily due to the $7.7 million gain on the sale of MTI Instruments and only having approximately
three months of operations prior to the sale on April 11, 2022. The Company did not incur any gains or costs for the year ended December
31, 2023.

 Net
Income (loss) attributable to non-controlling interest: Net income attributable to non-controlling interest for the year ended
December 31, 2023 was approximately $1.5 million compared to a net loss attributable to non-controlling interest for the year ended December
31, 2022 of approximately $380 thousand. This amount relates to Springlane's 85% noncontrolling interest of the net profit in Soluna
DVSL and Navitas 49% noncontrolling interest of the net profit in Soluna DV ComputeCo for the year ended December 31, 2023, compared
to the Springlane's 32.2% noncontrolling interest of Net loss in Soluna DVSL for the year ended December 31, 2022. Note, there
was no noncontrolling interest of DV ComputeCo for the year ended December 31, 2022. The change in non-controlling interest relates to
continued profitability at Dorothy 1A and Dorothy 1B, creating a total net profit which started to grow in the third quarter of fiscal
year 2023. There was no minority interest for Dorothy 1B (DV ComputeCo), until the 2nd quarter of 2023, when Navitas obtained interest
in DV ComputeCo. Dorothy 1A had a net profit of approximately $896 thousand for year ended December 31, 2023 compared to a $1.2 million
net loss in year-ended 2022. It should also be noted that the non-controlling interest for DVSL with Springlane was 32.2% for fiscal
year 2022, compared to 85% beginning January 1, 2023. As such, DVSL (Dorothy 1A) had a net profit for minority interest of $765 thousand
for the year ended December 31, 2023 compared to $380 thousand net loss in minority interest for year ended December 31, 2022, a $1.1
million increase. In addition, the increase also related to Dorothy 1B, which had a zero balance in year-ended December 31, 2022 for
non-controlling interest to a non-controlling interest profit of $733 thousand beginning in May 2023 through the year ended December
31, 2023. As the Company was generating revenue from energization at Project Dorothy, the Company began to see a shift from a net loss
to profit within non-controlling interest.

 Non-GAAP
Measures

 In
addition to financial measures calculated in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"),
we also use "Adjusted EBITDA." Adjusted EBITDA is a non-GAAP financial measure defined as net income (loss) from continuing
operations before interest, taxes, depreciation and amortization ("EBITDA") adjusted to eliminate the effects of certain
non-cash, non-recurring items, that we believe do not reflect our ongoing strategic business operations. Management believes that Adjusted
EBITDA results in a performance measurement that represents a key indicator of the Company's business operations of cryptocurrency
mining and hosting customers engaged in cryptocurrency mining.

 We
believe Adjusted EBITDA can be an important financial measure because it allows management, investors, and the Board to evaluate and
compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments.
Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements
prepared in accordance with U.S. GAAP. For example, we expect that stock-based compensation costs, which is excluded from the non-GAAP
financial measures, will continue to be a significant recurring expense over the coming years and is an important part of the compensation
provided to certain employees, officers, and directors. Similarly, we expect that depreciation and amortization of fixed assets will
continue to be a recurring expense over the term of the useful life of the assets.

 Adjusted
EBITDA is provided in addition to and should not be considered to be a substitute for, or superior to net income, the comparable measure
calculated in accordance with U.S. GAAP. Further, Adjusted EBITDA should not be considered as an alternative to revenue growth, net income,
diluted earnings per share or any other performance measure calculated in accordance with U.S. GAAP, or as an alternative to cash flow
from operating activities as a measure of our liquidity. Adjusted EBITDA has limitations as an analytical tool, and you should not consider
such measures either in isolation or as substitutes for analyzing our results as reported under U.S. GAAP.

 Reconciliations
of Adjusted EBITDA to net income from continuing operations, the most comparable U.S. GAAP financial metric, for historical periods are
presented in the table below:

 Years Ended

 2023

 2022

 $
)

 $
 (107,016
)

 2,748

 8,375

 Income tax (benefit) expense

 (1,067
)

 (1,346
)

 13,376

 28,214

 EBITDA

 (12,646
)

 (71,773
)

 Adjustments: Non-cash items

 Stock-based compensation costs

 4,312

 3,852

 4,089

 3,904

 11,130

 Impairment of equity investment

 -

 Adjusted EBITDA

 $
 (3,457
)

 $
 (4,580
)

 Stock
based compensation costs represented approximately $3.4 million non-cash restricted stock units and $908 thousand non-cash stock options
for the year ended December 31, 2023 to members of our Board of Directors and certain Company employees compared to non-cash restricted
stock units of approximately $2.6 million to members of our Board of Directors and certain Company employees for the year ended December
31, 2022 and non-cash stock options of approximately $1.2 million for the year ended December 31, 2022.

 The
following table represents the Adjusted EBITDA activity between each three-month period for the year ended December 31, 2023.

 March 31,

 2023

 June 30,

 2023

 September 30,

 2023

 2023

 Year ended

 2023

 $
 (7,432
)

 $
 (9,257
)

 $
 (6,016
)

 $
 (4,998
)

 $
)

 Interest expense, net

 1,374

 2,748

 Income tax (benefit) expense from continuing operations

 (547
)

 (547
)

 (542
)

 (1,067
)

 3,002

 2,918

 3,579

 3,877

 13,376

 EBITDA

 (3,603
)

 (6,400
)

 (1,373
)

 (1,270
)

 (12,646
)

 Adjustments: Non-cash items

 Stock-based compensation costs

 2,232

 4,312

 Loss (gain) on sale of fixed assets

 (48
)

 (5
)

 (473
)

 2,054

 1,554

 3,904

 Adjusted EBITDA

 $
 (2,910
)

 $
 (1,993
)

 $

 $
 1,041

 $
 (3,457
)

 The
following table represents the Adjusted EBITDA activity between each three-month period for the year ended December 31, 2022.

 March 31,

 2022

 June 30,

 2022

 September 30,

 2022

 2022

 Year ended

 2022

 $
 (9,132
)

 $
 (14,104
)

 $
 (56,143
)

 $
 (27,637
)

 $
 (107,016
)

 Interest expense, net

 2,880

 3,305

 1,671

 8,375

 Income tax benefit from continuing operations

 (547
)

 (251
)

 (547
)

 (1
)

 (1,346
)

 6,697

 7,914

 8,388

 5,215

 28,214

 EBITDA

 (102
)

 (3,136
)

 (46,631
)

 (21,904
)

 (71,773
)

 Adjustments: Non-cash items

 Stock-based compensation costs

 1,064

 3,852

 -

 1,618

 1,483

 4,089

 -

 28,086

 18,536

 Loss (gain) on debt extinguishment and revaluation, net

 -

 -

 12,317

 (1,187
)

 11,130

 Impairment on equity investment

 -

 -

 -

 Adjusted EBITDA

 $

 $

 $
 (3,600
)

 $
 (2,129
)

 $
 (4,580
)

 Liquidity
and Capital Resources

 Several
key indicators of our liquidity are summarized in the following table:

 Years
 Ended December 31,

 2023

 2022

 Cash

 $
 6,368

 $
 1,136

 Restricted
 cash

 3,999

 Working
 capital (deficit)

 (13,891
)

 (26,049
)

 Net
 loss from continuing operations

)

 (107,016
)

 Net
 income from discontinued operations

 -

 7,921

 Net
 cash used in operating activities

 (2,987
)

 (6,118
)

 Net
 cash provided by operating activities for discontinued operations

 -

 Purchase
 of property, plant and equipment

 (12,705
)

 (63,684
)

 Cash
 dividends paid on preferred stock

 -

 (3,852
)

 The
Company had a consolidated accumulated deficit of approximately $251 million as of December 31, 2023. As of December 31, 2023, the Company
had negative working capital of approximately $13.9 million, $8.7 million outstanding principal in notes payable that may be converted
to common stock, a subsidiary of the Company that defaulted on equipment financing and has a current outstanding loan of $9.2 million,
and a 2-year $2.05 million principal loan commitment to Navitas, in which as of December 31, 2023 has an outstanding principal balance
of approximately $1.7 million. The Company had outstanding commitments as of December 31, 2023, related to SCI for $100 thousand in capital
expenditures, and approximately $6.4 million of cash available to fund its operations.

 Based
on business developments, including changes in production levels, staffing requirements, and network infrastructure improvements, we
will require additional capital equipment in the foreseeable future. With the Company's shift in focus of the business, and the
sale of the MTI Instruments business that occurred in April 2022, the Company has now exited the instrumentation business and is focused
on developing and monetizing green, zero-carbon computing and cryptocurrency mining facilities, as well as facilities capable of hosting
customers engaged in cryptocurrency mining.

 We
plan to continue funding operations from our current cash position and our projected 2024 cash flows pursuant to management's plans.
If necessary, we may also seek to supplement our resources by increasing credit facilities to fund operational working capital and capital
expenditure requirements. We expect to fund growth, including additional development and build-outs of data centers through project-level
capital raising and equity sale activities, to the extent that we can successfully raise capital through sales of additional debt or
equity securities, as well as a variety of project specific funding options. Any additional financing, if required, may not be available
to us on acceptable terms or not at all.

 As
shown in the accompanying financial statements, the Company did not generate sufficient revenue to generate net income, a negative working
capital, and has a cash used in operations position as of December 31, 2023. These factors, among others indicate that there is substantial
doubt about the Company's ability to continue as a going concern within one year after issuance of these financial statements as
of December 31, 2023, or April 1, 2024.

 Further,
v arious macroeconomic factors could adversely affect our business and the results of our operations
and financial condition, including changes in inflation, interest rates and overall economic conditions. For instance, inflation could
negatively impact the Company by increasing our labor costs, through higher wages and higher interest rates. If inflation or other factors
were to significantly increase our business costs, our ability to develop our current projects may be negatively affected. Interest rates,
the liquidity of the credit markets and the volatility of the capital markets could also affect the operation of our business and our
ability to raise capital in order to fund our operations. If our revenue estimates are off either in timing or amount, or if cash
generated from operations is insufficient to satisfy the operational working capital and capital expenditure requirements, the Company
plans to implement additional steps to ensure liquidity including, but not limited to, the deferral of planned capital spending and/or
delaying existing or pending product development initiatives; alternatively, the Company may be required to obtain credit facilities
or other loans, if available, to fund these initiatives. However, the Company is actively monitoring
this situation and the possible effects on our financial condition, liquidity, operations, suppliers, and the industry.

 Net
cash used in operating activities from continuing operations was approximately $3.0 million for the year ended December 31, 2023.
The Company had a net loss of approximately $27.7 million, in which was offset by non-cash items of approximately $22.5 million. The
non-cash items consisted primarily of approximately $13.4 million of amortization and depreciation expenses for the intangible
assets acquired in 2021 and the fixed assets still in service and capital additions in 2023. There was also approximately $4.3
million in stock-based compensation expenses, $3.9 million on loss on debt extinguishment and revaluation, and additional $1.2
million in relation to fixed asset impairments, loss on sale of fixed assets, and amortization of operating lease assets. The
non-cash items were offset with a $1.1 million deferred income tax benefit. The change in assets and liabilities of approximately
$2.4 million related to increases in accrued expenses of $3.9 million in which related to interest for the NYDIG loan, sales and
real estate tax accruals, and bonus accrual, as well as increase in customer deposits of $2.8 million with data hosting customers
for the facility sites, offset with an increase in accounts receivable related to performing further hosting services and demand
response services as of December 31, 2023.

 Net
cash used in operating activities from continuing operations was approximately $6.1 million for the year ended December 31, 2022. Cash
was used in operations by a net loss from continuing operations of $107.0 million, less non-cash items of $97.7 million, consisting primarily
of $28.2 million of amortization and depreciation expense for the year for the intangible asset acquired in 2021 and significant additions
in fixed assets, approximately $3.9 million in stock-based compensation expense, $4.1 million in loss on sale of fixed assets, $47.4
million in impairment of fixed assets, $750 thousand for impairment on equity investment, $11.1 million on loss on debt extinguishment
and revaluation, and $6.5 million for amortization of deferred financing costs and discount on notes payables issued during the year,
offset with $1.4 million in deferred income tax benefits.

 Net
cash provided by operating activities from discontinued operations was $369 thousand for the year ended December 31, 2022. There were
no discontinued operations for the year ended December 31, 2023.

 Investing

 Net
cash used in investing activities during the year ended December 31, 2023 was approximately $10.3 million consisting mainly of capital
expenditures of $12.7 million, less cash proceeds from sale of equipment of $2.3 million.

 Net
cash used in investing activities from continuing operations during the year ended December 31, 2022 was approximately $54.7 million.
For the year ended December 31, 2022, we had $63.7 million worth of capital expenditures, less a net change in deposits on equipment
of $6.4 million, and $2.6 million in proceeds from the sale of equipment.

 Net
cash provided by investing activities from discontinued operations during the year ended December 31, 2022 was approximately $9.1 million
which mainly represented the net cash proceeds from the sale of MTI Instruments of $9.4 million for the year ended December 31, 2022.
There was no cash provided by investing activities from discontinued operations for the year ended December 31, 2023.

 Financing

 Net
cash provided by financing activities was approximately $21.8 million during the year ended December 31, 2023, which consisted of cash
contributions for noncontrolling interest of approximately $20.4 million, offset with distributions for non-controlling interest of $1.0
million. The Company also received net proceeds of approximately $817 thousand from the subsequent SPA offerings, in addition to proceeds
from debt issuances of $3.1 million less debt payment costs of $1.1 million on promissory notes and the Navitas loan, and $350 thousand
for payment on the Company's line of credit.

 Net
cash provided by financing activities was approximately $42.9 million during year ended December 31, 2022, which consisted primarily
of $14.7 million in net proceeds from the sale of Series A and Series B Preferred Stock, $23.9 million in net proceeds from notes and
short-term debt issuances, and $2.3 million in net proceeds from a common offering and securities purchase offering. Proceeds of $779
thousand were also received in relation to common stock warrant exercises. During the year ended December 31, 2022, the Company made
cash dividend payments of approximately $3.8 million to holders of its Series A Preferred Stock. Also, in the year ended December 31,
2022, the Company had a contribution of $4.8 million from its non-controlling interest in DVSL.

 Debt

 On
September 15, 2021, the Company entered into a $1.0 million unsecured line of credit with KeyBank National Association ("KeyBank"),
that will, among other things, allow the Company to request loans and to use the proceeds of such loans for working capital and other
general corporate purposes (the "KeyBank facility"). The line of credit bears interest at a rate of Prime + 0.75% per annum.
Accrued interest is due monthly and principal is due in full following KeyBank's demand. As of January 1, 2022, the entire line
of credit of $1.0 million was drawn and outstanding. As of December 31, 2023, the entire original $1.0 million outstanding balance has
been paid down, and the Company did not have an outstanding balance as of December 31, 2023. The Company does not plan to draw down on
the line of credit in the foreseeable future. In addition, future drawdowns may require pre-approval by KeyBank.

 On
October 25, 2021, the Company issued to certain institutional investors secured convertible notes in the aggregate principal amount of
approximately $16.3 million for an aggregate purchase price of $15.0 million. The notes are convertible, subject to certain conditions,
at any time at the option of the investors, into an aggregate of 71,043 shares of the Company's common stock. On July 19, 2022,
the Company entered into the Addendum with the Noteholders to amend the terms the October Secured Notes. Pursuant to the Addendum, a
portion of the October Secured Notes would be converted and may be redeemed in three tranches, with each tranche of $1,100,000 required
to be converted into common stock in each case at the then in effect conversion price of the October Secured Notes, with such price,
prior to each conversion, to be reduced (but not increased) to a 20% discount to the 5-day VWAP of the Company's common stock.
In addition, the Noteholders may require the Company to redeem up to $2,200,000 worth of October Secured Notes in connection with each
tranche at a rate of $1.20 for every $1.00 owed, less the amount of October Secured Notes converted during such tranche, not including
the required conversion amount if the Noteholders are unable to convert out of such amount of the October Secured Notes in each tranche.
The Company is also required to deposit up to $1,950,000 in an escrow account in connection with each tranche to satisfy any redemptions,
except with respect to the first tranche as provided in the Addendum Amendment. The Addendum also provides the right for the Company
to pause the commencement of the conversion of the second and third tranches each for 45 days in the event the Company pursues an equity
financing. Since inception, the Company has converted down approximately $3.8 million on the convertible debt. On September 13, 2022,
the Company entered into the Addendum Amendment with the Noteholders to amend the terms to extend the maturity date to April 25, 2023,
and increase the principal amount of the October Secured Notes by approximately $520 thousand for a total outstanding principal amount
of approximately $13 million. The events of default stated in the Notice of Acceleration and Repossession
defined below with NYDIG constituted a cross-default under the terms of secured convertible notes issued to the Noteholders. In addition
to such cross-default, the failure of the Company pursuant to the Addendum dated as of July 19, 2022, to escrow an aggregate amount of
$950,000 for the benefit of the Noteholders by December 21, 2022, constitutes an event of default under the Notes. Due to the
defaults noted, the Company did not enter into the second and third tranche of conversions. As
such, beginning on November 30, 2022, the Company had been accruing interest of 18% per annum on the outstanding principal amount due
to the default. On March 10, 2023, the Company entered into a Second Addendum Amendment with the Noteholders, in which the Company paid
approximately $617 thousand through the Company's restricted escrow accounts and contemporaneously with the payment, the Noteholders
waived all existing events of default arising under the convertible notes. On May 11, 2023, the Company entered into the Second Amendment
with the Noteholders in which increased the principal outstanding balance to approximately $13.3 million and extending the maturity date
to July 2024. On November 20, 2023 the Company and the Noteholders entered into a Third Amendment Agreement to amend the Notes, the October
SPA and related agreements to facilitate future financings by the Company that may include funds for prepayment of the Notes by permitting
the Company to force conversion of up to $1.5 million of the Notes under certain circumstances and reduce the prepayment penalty in return
for reducing the conversion price of the $4.7 million of the Notes to $3.78 and reducing the exercise price of 150 thousand of the Warrants
to $0.01.The Noteholders have converted approximately $4.6 million between May 11, 2023 to December 31, 2023, reducing the principal
balance to approximately $8.7 million as of December 31, 2023.

 On
January 14, 2022, the Company effected an initial drawdown under the Master Equipment Finance Agreement
with NYDIG in the aggregate principal amount of approximately $4.6 million that bore interest
at 14%. On January 26, 2022, the Company had a subsequent drawdown of $9.6 million. On December 20, 2022, Soluna MC Borrowing
2021-1 LLC ("Borrower") received a Notice of Acceleration and Repossession (the "NYDIG Notice") from NYDIG with
respect to the Master Agreement, by and between Borrower and NYDIG. The obligations of Borrower under the Master Agreement and reflected
in the NYDIG Notice are ring-fenced to Borrower and its direct parent company, Soluna MC LLC. The Company is not a party to any guaranty,
collateral agreement or other support agreement with or for the benefit of NYDIG. As such, the principal balance of $10.5 million as
of December 31, 2022 became due immediately and the Borrower shall bear interest, at a rate per annum equal to 2.0% plus the rate per
annum otherwise applicable to such obligations set forth in the Master Agreement. On February 23, 2023, NYDIG proceeded to foreclose
on all of the collateral securing the MEFA, and repossessed the collateralized assets that totaled approximately $3.4 million, in which
approximately $560 thousand was first used to pay off accrued interest and penalty to date. On September 5, 2023, NYDIG provided a letter
finalizing the accounting for the repossessed collateralized assets totaling proceeds of approximately $3.4 million. This included legal
and other expenses associated with the sale of the assets net a modest gain on the estimated net book value of the assets totaling $251
thousand that was expensed as a loss on disposition of assets for the year ended December 31, 2023. On December 7, 2023, NYDIG filed
its Motion for Summary Judgment seeking entry of a judgment against Soluna in the approximate amount of $10.3 million for principal and
interest and penalties. On January 12, 2024, Soluna filed its objection to NYDIG's motion for summary judgment on the grounds that
NYDIG failed to explain what collateral of which loan was sold and how the sale proceeds were allocated to each loan. A summary judgment
motion was performed on February 13, 2024, and was agreed upon by both NYDIG and the Borrower, that the total outstanding loan principal
balance would be approximately $9.2 million, in which a penalty fee was applied of approximately $1.0 million to the repossessed collateralized
assets, and outstanding interest and penalty balance would be approximately $936 thousand as of December 31, 2023.

 On
May 9, 2023, Soluna DV ComputeCo, LLC and Navitas West Texas Investments SPV, LLC entered into a 2-year Loan Agreement for $2,050,000.
The unpaid principal balance of the Term Loan shall bear interest at per annum rate equal to 15%. As of December 31, 2023, the Company
has an outstanding principal balance of approximately $1.7 million and incurred approximately $204 thousand in interest expense and $25
thousand in deferred amortization expense.

 Critical
Accounting Policies and Significant Judgments and Estimates

 The
prior discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements,
which have been prepared in accordance with GAAP. Note 2 of the Consolidated Financial Statements included in this Annual Report on Form
10-K includes a summary of our most significant accounting policies. The preparation of these consolidated financial statements requires
management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure
of assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition,
income taxes and share-based compensation. We base our estimates on historical experience and on various other factors that we believe
are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions
or conditions. Periodically, our management reviews our critical accounting estimates with the Audit Committee of our Board of Directors.

 The
significant accounting policies that we believe are most critical to aid in fully understanding and evaluating our consolidated financial
statements include the following:

 Revenue
Recognition

revenue consists of revenue recognized from the Company's cryptocurrency mining facilities. Revenue is recognized at the
cryptocurrency's realized cash value based upon the rates at cryptocurrency exchanges where we are registered.
Cryptocurrencies are earned when the miners solve complex computations and cryptocurrency is issued as a result. The mined
cryptocurrency is immediately paid to the Coinbase wallet. Cryptocurrency is converted to U.S. dollars on a daily basis. Also, the Company
has entered into customer hosting contracts whereby the Company provides electrical power to cryptocurrency mining customers, and
the customers pay a stated amount per megawatt-hour ("MWh") ("Contract Capacity") as well as a percentage of
the profit share of the daily net income from the customer's mining operations. The actual monthly amounts are
calculated after the close of each month and billed to the customers.

 Fair
Value Measurement.

 The
estimated fair value of certain financial instruments, including cash, accounts receivable and short-term debt approximates their carrying
value due to their short maturities and varying interest rates. "Fair value" is the price that would be received to sell
an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes
valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability
of the inputs used in the valuation methods, the Company is required to provide the following information according to the fair value
accounting standards. These standards established a fair value hierarchy as specified that ranks the quality and reliability of the information
used to determine fair values. Financial assets and liabilities are classified and disclosed in one of the following three categories:

 Level
 1:

 Quoted
 market prices in active markets for identical assets or liabilities, which includes listed equities.

 Level
 2:

 Observable
 market-based inputs 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.

 The
Company had Warrants included within the SPA agreement as noted in Note 9. The Warrants are considered freestanding equity-classified
instruments due to their detachable and separately exercisable features and meet the indexation criteria within derivative accounting.
Accordingly, the Warrants are presented as a component of Stockholders' Equity in accordance with derivative accounting.

 Following
the debt extinguishment on July 19, 2022 as noted further in Note 9, the Convertible Notes will be recorded at fair value upon issuance
(e.g., upon execution of the Addendum) per guidance within ASC 480, and at each subsequent reporting period, with changes in fair value
reported in earnings.

 Consistent
with the guidance in purchase accounting, the value of the Strategic Pipeline Contract as of the acquisition date was estimated using
an expected value approach, which probability-weights various future outcomes and uses certain Level 3 inputs.

 The
Company's equipment miners are classified in Level 2 of the fair value hierarchy due to the quoted market prices for similar assets.

 As
of December 31, 2023, and 2022, the fair values of cash and cash equivalents, accounts receivable, prepaid expenses and other current
assets, accounts payable, and accrued expenses approximated their carrying values because of the short-term nature of these instruments.

 Share-Based
Payments.

 We
grant options to purchase our common stock and award restricted stock to our employees and directors under our equity incentive plans.
The benefits provided under these plans are share-based payments and we account for stock-based awards exchanged for employee service
in accordance with the appropriate share-based payment accounting guidance. Stock-based compensation represents the cost related to stock-based
awards granted to employees and directors. We measure stock-based compensation cost at grant date based on the estimated fair value of
the award and recognize the cost as expense on a straight-line basis in accordance with the vesting of the options (net of estimated
forfeitures) over the option's requisite service period. We estimate the fair value of stock-based awards on the grant date using
a Black-Scholes valuation model. We use the fair value method of accounting with the modified prospective application, which provides
for certain changes to the method for valuing share-based compensation. The valuation provisions apply to new awards and to awards that
are outstanding on the effective date and subsequently modified.

 The
determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock
price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price
volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate, and expected
dividends.

 Theoretical
valuation models and market-based methods are evolving and may result in lower or higher fair value estimates for share-based compensation.
The timing, readiness, adoption, general acceptance, reliability, and testing of these methods is uncertain. Sophisticated mathematical
models may require voluminous historical information, modeling expertise, financial analyses, correlation analyses, integrated software
and databases, consulting fees, customization, and testing for adequacy of internal controls.

 For
purposes of estimating the fair value of stock options granted using the Black-Scholes model, we use the historical volatility of our
stock for the expected volatility assumption input to the Black-Scholes model, consistent with the accounting guidance. The risk-free
interest rate is based on the risk-free zero-coupon rate for a period consistent with the expected option term at the time of grant.
The expected option term is calculated based on our historical forfeitures and cancellation rates.

 Income
Taxes.

 We
are subject to income taxes in the U.S. (federal and state). As part of the process of preparing our consolidated financial statements,
we calculate income taxes for each of the jurisdictions in which we operate. This involves estimating actual current taxes due together
with assessing temporary differences resulting from differing treatment for tax and accounting purposes that are recorded as deferred
tax assets and liabilities, loss carryforwards, and tax credit carryforwards, for which income tax benefits are expected to be realized
in future years. Deferred tax assets are reported net of a valuation allowance when it is more likely than not that a tax benefit will
not be realized. The effect on deferred taxes of a change in tax rates is recognized in the period that includes the enactment date.

 Significant
management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation
allowance recorded against our net deferred tax assets. We considered all available evidence, both positive and negative, such as historical
levels of income and future forecasts of taxable income amongst other items in determining our valuation allowance. In addition, our
assessment requires us to schedule future taxable income in accordance with accounting standards that address income taxes to assess
the appropriateness of a valuation allowance, which further requires the exercise of significant management judgment.

 We
account for taxes in accordance with the asset and liability method of accounting for income taxes. Under this method, we must recognize
the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from
such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
The impact of our reassessment of our tax positions for these standards did not have a material impact on its results of operations,
financial condition, or liquidity.

 We
are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income tax liabilities against
us. Developments in an audit, litigation, or in applicable laws, regulations, administrative practices, principles, and interpretations
could have a material effect on our operating results or cash flows in the period or periods in which such developments occur, as well
as for prior and in subsequent periods.

 Tax
laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice,
due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and
accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination
is uncertain. Our effective tax rates could be affected by numerous factors, such as intercompany transactions, earnings being lower
than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher
statutory rates, the applicability of special tax regimes, losses incurred in jurisdictions for which we are not able to realize the
related tax benefit, changes in foreign currency exchange rates, entry into new businesses and geographies, changes to our existing businesses
and operations, acquisitions and investments and how they are financed, changes in our stock price, changes in our deferred tax assets
and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices,
principles, and interpretations.

of long-lived assets.

 Management
reviews long-lived assets, including finite lived intangible assets, property, plant and equipment, and other assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset, asset group, or investment may not be recoverable.

 Recoverability
of assets to be held and used are measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected
to be generated by the asset. Because the impairment test for long-lived assets held in use is based on estimated undiscounted cash flows,
there may be instances where an asset or asset group is not considered impaired, even when its fair value may be less than its carrying
value, because the asset or asset group is recoverable based on the cash flows to be generated over the estimated life of the asset or
asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.

 Recent
Accounting Pronouncements

 A
discussion of recently adopted and new accounting pronouncements is included in Note 2 of the Consolidated Financial Statements in Part
II, Item 8 of this Annual Report on Form 10-K.

 Item
7A. Quantitative and Qualitative Disclosures About Market Risk

 Not

 Item
8: Financial Statements and Supplementary Data

 The
Company's Consolidated Financial Statements begin on page F-1 and are incorporated in this Item 8 by reference.

 Item
9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Not

 Item
9A: Controls and Procedures

 (a)
Evaluation of Disclosure Controls and Procedures

 Our
management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of SHI's
disclosure controls and procedures as of December 31, 2023. The term "disclosure controls and procedures," as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal
executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. We recognize that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives
and we necessarily apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation
of our disclosure controls and procedures as of December 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded
that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

 (b)
Management's Report on Internal Control Over Financial Reporting

 Management
of our Company is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined
in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.

 Under
the supervision and with the participation of our management, including the principal executive officer and principal financial officer,
we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth in Internal
Control—Integrated Framework (2013 version) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on our evaluation using the criteria set forth in Internal Control—Integrated Framework, Management has concluded
that our internal control over financial reporting was effective as of December 31, 2023.

 This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial
reporting. Our report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC
that permit us to provide only Management's Report in this annual report.

 /s/
 John Belizaire

 Chief
 Executive Officer

 Executive Officer) (Principal Executive Officer)

 /s/
 David Michaels

 Chief
 Financial Officer

 Financial Officer)

 (c)
Changes in Internal Control over Financial Reporting

 There
have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act, during our fiscal quarter ended December 31, 2023 that have materially affected, or are reasonable likely to materially
affect, our internal control over financial reporting.

 Item
9B: Other Information

 Not
applicable

 Item
9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Not
applicable

 PART
III

 Item
10: Directors, Executive Officers and Corporate Governance

 Code
of Conduct and Ethics: We have adopted a Code of Conduct and Ethics for employees, officers and directors. A copy of the Code
of Conduct and Ethics is available on our website at  under Investors, Governance Documents.

 The
remaining information required by this Item 10 is incorporated herein by reference to the information appearing under the captions "Information
about our Directors," "Executive Officers," "Board of Director Meetings and Committees – Audit Committee"
and "Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive Proxy Statement for our 2024 Annual Meeting
of Shareholders to be filed with the SEC on or before April 29, 2024.

 Item
11: Executive Compensation

 The
information required by this Item 11 is incorporated herein by reference to the information appearing under the caption "Executive
Compensation" in the Company's definitive Proxy Statement for our 2024 Annual Meeting of Shareholders to be filed with the
SEC on or before April 29, 2024.

 Item
12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 The
information required by this Item 12 is incorporated herein by reference to information appearing under the caption "Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder Matters" in our definitive Proxy Statement for our 2024 Annual
Meeting of Shareholders to be filed with the SEC on or before April 29, 2024.

 Item
13: Certain Relationships and Related Transactions, and Director Independence

 The
information required by this Item 13 is incorporated herein by reference to the information appearing under the captions "Certain
Relationships and Related Transactions" and "Information about our Directors" in our definitive Proxy Statement for
the 2024 Annual Meeting of Shareholders to be filed with the SEC on or before April 29, 2024.

 Item
14: Principal Accounting Fees and Services

 The
information required by this Item 14 is incorporated herein by reference to the information appearing under the caption "Independent
Registered Public Accounting Firm" in our definitive Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with
the SEC on or before April 29, 2024.

 PART
IV

 Item
15: Exhibits, Financial Statement Schedules

 15(a)
(1) Financial Statements: The financial statements filed herewith are set forth on the Index to Consolidated Financial Statements
on page F-1 of the separate financial section which accompanies this Report, which is incorporated herein by reference.

 15(a)
(2) Financial Statement Schedules: Financial statement schedules not listed have been omitted because they are either not required,
not applicable, or the information has been included elsewhere in the consolidated financial statements or notes thereto.

 15(a)
(3)

 Exhibit

 2.1

 Agreement
 and Plan of Merger dated August 11, 2021, by and among Soluna Holdings, Inc., formerly known
 as Mechanical Technology, Incorporated, SCI Merger Sub, Inc., and Soluna Callisto Holdings
 Inc., formerly known as Soluna Computing, Inc. (incorporated by reference from Exhibit 2.1
 of the Company's Form 8-K Report filed August 12, 2021).

 3.1

 Articles of Incorporation of Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated (incorporated by reference from Exhibit 3.1 of the Company's Form 10-K Report for the year ended December 31, 2020 (the "2020 Form 10-K")).

 3.2

 Articles of Merger filed with the Secretary of State of Nevada (incorporated by reference from Exhibit 3.3 of the 2020 Form 10-K).

 3.3

 Certificate of Merger filed with the Department of State of New York (incorporated by reference from Exhibit 3.4 of the 2020 Form 10-K).

 3.4

 of Amendment filed with the Secretary of State of Nevada dated June 9, 2021 (incorporated
 by reference from Exhibit 3.1 of the Company's Form 8-K Report filed June 15, 2021).

 3.5

 of Amendment to Articles of Incorporation filed with the Secretary of State of Nevada on
 November 2, 2021 (incorporated by reference from Exhibit 3.1 of the Company's Form
 8-K Report filed November 4, 2021).

 3.6

 Bylaws of the Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated, (incorporated by reference from Exhibit 3.2 of the 2020 Form 10-K).

 3.7

 of Designations, Preferences and Rights of 9.0% Series A Cumulative Perpetual Preferred Stock filed with the Secretary of State of
 the State of Nevada on August 18, 2021 (Incorporated by reference to the Company's Form 8-A, filed with the SEC on August 19,
 2021).

 3.8

 of Amendment to Certificate of Designations, Preferences and Rights of 9.0% Series A Cumulative Perpetual Preferred Stock, filed
 with the Secretary of State of the State of Nevada on December 22, 2021 (Incorporated by reference to the Company's Form 8-K
 Report filed with the SEC on December 29, 2021).

 3.9

 of Amendment to Certificate of Designations, Preferences and Rights of 9.0% Series A Cumulative Perpetual Preferred Stock, filed
 with the Secretary of State of the State of Nevada on April 21, 2022 (Incorporated by reference to the Company's Form 8-K Report
 filed with the SEC on April 27, 2022).

 3.10

 of Designation of Series B Convertible Preferred Stock, filed with the Nevada Secretary of State on July 20, 2022.

 3.11

 of Change dated October 11, 2023 (incorporated by reference to Exhibit 3.1 of the Company's Form 8-K Report filed October 17,
 2023)

 4.1

 Form
 of Common Purchase Warrant (incorporated by reference from Exhibit 4.3 of the Company's
 Registration Statement on Form S-1/A filed April 12, 2021).

 4.2

 Form
 of Underwriters' Warrant (incorporated by reference from Exhibit 4.4 of the Company's
 Registration Statement on Form S-1/A filed April 12, 2021).

 4.3

 Form
 of Warrant Agent Agreement between Soluna Holdings, Inc., formerly known as Mechanical Technology,
 Incorporated, and American Stock Transfer & Trust Company, LLC (incorporated by reference
 from Exhibit 4.1 of the Company's Form 8-K Report filed April 29, 2021).

 4.4

 of Designations, Preferences and Rights of 9.0% Series A Cumulative Perpetual Preferred Stock
 filed with the Secretary of State of the State of Nevada on August 18, 2021 (incorporated
 by reference from Exhibit 4.1 of the Company's Form 8-A filed August 19, 2021).

 4.5

 of Amendment to Certificate of Designations, Preferences and Rights of 9.0% Series A Cumulative
 Perpetual Preferred Stock, filed with the Secretary of State of the State of Nevada on December
 22, 2021 (incorporated by reference from Exhibit 4.1 of the Company's Form 8-K Report
 filed December 29, 2021).

 4.6

 Form
 of 9.0% Series A Cumulative Perpetual Preferred Stock Certificate (incorporated by reference
 from Exhibit 4.2 of the Company's Form 8-K Report filed August 23, 2021).

 4.7

 Form
 of Secured Convertible Note issued by the Company pursuant to and in accordance with the
 Securities Purchase Agreement dated as of October 20, 2021 (incorporated by reference from
 Exhibit 4.1 of the Company's Form 8-K Report filed October 25, 2021).

 4.8

 Form
 of Class A Common Stock Purchase Warrant issued by the Company pursuant to and in accordance
 with the Securities Purchase Agreement dated as of October 20, 2021 (incorporated by reference
 from Exhibit 4.2 of the Company's Form 8-K Report filed October 25, 2021).

 4.9

 Form
 of Class B Common Stock Purchase Warrant issued by the Company pursuant to and in accordance
 with the Securities Purchase Agreement dated as of October 20, 2021 (incorporated by reference
 from Exhibit 4.3 of the Company's Form 8-K Report filed October 25, 2021).

 4.10

 Form
 of Class C Common Stock Purchase Warrant issued by the Company pursuant to and in accordance
 with the Securities Purchase Agreement dated as of October 20, 2021 (incorporated by reference
 from Exhibit 4.4 of the Company's Form 8-K Report filed October 25, 2021).

 4.11

 Form
 of Representative's Warrant (incorporated by reference from Exhibit 4.2 of the Company's
 Form 8-K Report filed December 29, 2021).

 4.12

 Form
 of Class D Common Stock Purchase Warrant (Incorporated by reference to the Company's Current Report on Form 8-K filed with
 the SEC on September 14, 2022).

 4.13

 Form
 of Class E Common Stock Purchase Warrant (Incorporated by reference to the Company's Current Report on Form 8-K filed with
 the SEC on September 14, 2022).

 4.14

 Form
 of Class F Common Stock Purchase Warrant (Incorporated by reference to the Company's Current Report on Form 8-K filed with
 the SEC on September 14, 2022).

 4.15

 Form
 of Class G Common Stock Purchase Warrant (Incorporated by reference to the Company's Current Report on Form 8-K filed with
 the SEC on September 14, 2022).

 4.16

 Description of Securities (incorporated by reference from Exhibit 4.13 of the Company's Form 10-K as of December 31, 2021 filed March 31, 2022), (the "2021 Form 10-K").

 4.17

 Form
 of A Warrant dated May 11, 2023 (incorporated by reference to Exhibit 4.17 to the Quarterly Report on Form 10-Q filed on May 15,
 2023 (the "First Quarter 2023 Form 10-Q"))

 4.18

 Form of B Warrant dated May 11, 2023 (incorporated by reference to Exhibit 4.18 to the First Quarter 2023 Form 10-Q)

 4.19

 Form of Pre-Funded Warrant issued to the holder of the Series B Convertible Preferred Stock (incorporated by reference to Exhibit 4.19 to the Quarterly Report on Form 10-Q filed on August 14, 2023 (the "Second Quarter 2023 Form 10-Q"))

 10.1+

 Holdings, Inc., formerly known as Mechanical Technology, Incorporated, Amended and Restated
 2012 Equity Incentive Plan (incorporated by reference from Exhibit 10.3 of the Company's
 Form 10-K Report for the year ended December 31, 2016).

 10.6+

 Form
 of Restricted Stock Award Agreement under the Soluna Holdings, Inc., formerly known as Mechanical
 Technology, Incorporated, Amended and Restated 2012 Equity Incentive Plan (incorporated by
 reference from Exhibit 10.8 of the Company's Registration Statement on Form 10 filed
 March 4, 2020).

 10.7+

 Holdings, Inc., formerly known as Mechanical Technology, Incorporated, 2014 Equity Incentive
 Plan (incorporated by reference to Exhibit A to the Registrant's Proxy Statement on
 Schedule 14A filed with the Commission on April 25, 2014).

 10.8+

 Form
 of Restricted Stock Grant Agreement under the Soluna Holdings, Inc., formerly known as Mechanical
 Technology, Incorporated, 2014 Equity Incentive Plan (incorporated by reference from Exhibit
 10.10 of the Company's Registration Statement on Form 10 filed March 4, 2020).

 10.9+

 Form
 of Nonstatutory Stock Option Grant Agreement under the Soluna Holdings, Inc., formerly known
 as Mechanical Technology, Incorporated, 2014 Equity Incentive Plan (incorporated by reference
 from Exhibit 4.3 of the Company's Registration Statement on Form S-8 (File No. 333-196989)
 filed with the Commission on June 24, 2014).

 10.10+

 Form
 of Incentive Stock Option Grant Agreement under the Soluna Holdings, Inc., formerly known
 as Mechanical Technology, Incorporated, 2014 Equity Incentive Plan (incorporated by reference
 from Exhibit 4.4 of the Company's Registration Statement on Form S-8 (File No. 333-196989)
 filed with the Commission on June 24, 2014).

 10.11+

 Amended
 and Restated Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated,
 2021 Stock Incentive Plan (incorporated by reference to Exhibit A to the Registrant's
 Proxy Statement on Schedule 14A filed with the Commission on October 7, 2021)

 10.12+

 Form of Stock Option Agreement under the Amended and Restated Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated, 2021 Stock Incentive Plan (incorporated by reference from Exhibit 10.11 of the 2021 Form 10-K.)

 10.13+

 Form of Restricted Stock Agreement under the Amended and Restated Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated, 2021 Stock Incentive Plan (incorporated by reference from Exhibit 10.13 of the 2021 Form 10-K.)

 10.14+

 Form of Restricted Stock Unit Agreement under the Amended and Restated Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated, 2021 Stock Incentive Plan (incorporated by reference from Exhibit 10.14 of the 2021 Form 10-K.)

 10.15+

 Second
 Amended And Restated 2021 Stock Incentive Plan (Incorporated by reference to the Company's Current Report on Form 8-K filed
 with the SEC on June 1, 2022).

 10.16+

 Form
 of Option Agreement for the Second Amended And Restated 2021 Stock Incentive Plan (Incorporated by reference as Exhibit 10.7 to the
 Company's Current Report on Form 10-Q filed with the SEC on August 15, 2022).

 10.17+

 Form
 of Restricted Stock Agreement for the Second Amended And Restated 2021 Stock Incentive Plan (Incorporated by reference
 as Exhibit 10.8 to the Company's Current Report on Form 10-Q filed with the SEC on August 15, 2022).

 10.18+

 Form
 of Restricted Stock Unit Agreement for the Second Amended And Restated 2021 Stock Incentive
 Plan (Incorporated by reference as Exhibit 10.9 to the Company's Current Report on
 Form 10-Q filed with the SEC on August 15, 2022).

 10.19

 Securities
 Purchase Agreement dated as of October 21, 2016, by and between Soluna Holdings, Inc., formerly
 known as Mechanical Technology, Incorporated, and Brookstone Partners Acquisition XXIV, LLC
 (incorporated by reference from Exhibit 10.22 of the Company's Form 8-K Report filed
 October 21, 2016).

 10.20

 Registration
 Rights Agreement dated as of October 21, 2016, by and between Soluna Holdings, Inc., formerly
 known as Mechanical Technology, Incorporated, and Brookstone Partners Acquisition XXIV, LLC
 (incorporated by reference from Exhibit 10.23 of the Company's Form 8-K Report filed
 October 21, 2016).

 10. 21

 Form
 of Option Exercise and Stock Transfer Restriction Agreement between Soluna Holdings, Inc.
 and its Chief Executive Officer, Chief Financial Officer and Non-Employee Directors (incorporated
 by reference from Exhibit 10.24 of the Company's Form 8-K Report filed October 21,
 2016).

 10.22

 Class
 A Preferred Share Purchase Agreement dated January 13, 2020, among Harmattan Energy, Ltd.,
 formerly known as Soluna Technologies, Ltd., Soluna Holdings, Inc., formerly known as Mechanical
 Technology, Incorporated, and the other investors set forth on Exhibit A thereto (incorporated
 by reference from Exhibit 10.21 of the Company's Registration Statement on Form 10
 filed March 4, 2020).

 10.23

 Amended and Restated Contingent Rights Agreement dated November 5, 2021, by and between Harmattan Energy, Ltd. and Soluna Holdings, Inc. (incorporated by reference from Exhibit 10.26 of the 2021 Form 10-K)

 10.24

 Side
 Letter Agreement dated January 13, 2020, by and between Harmattan Energy, Ltd., formerly
 known as Soluna Technologies, Ltd., and Soluna Holdings, Inc., formerly known as Mechanical
 Technology, Incorporated (incorporated by reference from Exhibit 10.23 of the Company's
 Registration Statement on Form 10 filed March 4, 2020).

 10.25

 Sale
 Order dated May 18, 2020, by and between GigaWatt, Inc. and the United States Bankruptcy
 Court Eastern District of Washington (incorporated by reference from Exhibit 10.32 of the
 Company's Registration Statement on Form 10 filed September 30, 2020).

 10.26

 Intellectual
 Property Assignment Agreement dated May 20, 2020, by and between Mark D. Waldron, as Chapter
 11 Trustee and Soluna Computing, Inc., formerly known as EcoChain, Inc (incorporated by reference
 from Exhibit 10.35 of the Company's Registration Statement on Form 10 filed September
 30, 2020).

 10.27

 Assignment
 of Lease Agreements dated February 4, 2020, by and between, on the one hand, David M. Carlson,
 Dorrinda M. Carlson, Enterprise Focus, Inc. and, on the other hand, Mark D. Waldron, in his
 capacity as the Chapter 11 Trustee (incorporated by reference from Exhibit 10.37 of the Company's
 Registration Statement on Form 10 filed September 30, 2020).

 10.28

 Commercial
 Lease dated August 1, 2018, by and between TNT Business Complexes, LLC and Enterprise Focus,
 Inc. and Dave Carlson (incorporated by reference from Exhibit 10.38 of the Company's
 Registration Statement on Form 10 filed September 30, 2020).

 10.29

 Commercial
 Lease dated November 14, 2014, by and between TNT Business Complexes, LLC and Dave Carlson
 /Enterprise Focus, Inc. (incorporated by reference from Exhibit 10.39 of the Company's
 Registration Statement on Form 10 filed September 30, 2020).

 10.30

 October
 21, 2019 Certified Letter Regarding Option to Extend Commercial Lease dated November 14,
 2014, by and between TNT Business Complexes, LLC and Dave Carlson /Enterprise Focus, Inc
 (incorporated by reference from Exhibit 10.40 of the Company's Registration Statement
 on Form 10 filed September 30, 2020).

 10.31

 Amendment
 of Commercial Lease Agreement dated January 28, 2020, by and between Mark Waldron, as Chapter 11 Trustee and TNT Business Complexes,
 LLC (incorporated by reference from Exhibit 10.41 of the Company's Registration Statement on Form 10 filed September 30, 2020).

 10.32

 Industrial
 Power Contract dated February 22, 2021, by and between Soluna SW LLC, formerly known as EcoChain Wind, LLC, and a West Kentucky Rural
 Electric Cooperative Collaboration (incorporated by reference from Exhibit 10.1 of the Company's Form 10-Q Report for the quarter
 ended June 30, 2021)

 10.33

 Form
 of Purchase Agreement dated as of April 11, 2021, by and between Soluna MC LLC, formerly known as EcoChain Block, LLC, and Seller
 (incorporated by reference from Exhibit 10.1 of the Company's Form 8-K Report filed April 12, 2021).

 10.34

 Form
 of Power Supply Agreement dated as of May 3, 2021, by and between Soluna MC LLC, formerly known as EcoChain Block, LLC, and a power-providing
 cooperative (incorporated by reference from Exhibit 10.3 of the Company's Form 8-K Report filed May 4, 2021).

 10.35

 Form
 of Transition Services Agreement dated as of May 3, 2021, by and between Soluna MC LLC, formerly known as EcoChain Block, LLC, and
 a power-providing cooperative (incorporated by reference from Exhibit 10.4 of the Company's Form 8-K Report filed May 4, 2021).

 10.36

 Form
 of Guaranty of Rent dated as of May 3, 2021, by and between Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated,
 and a power-providing cooperative (incorporated by reference from Exhibit 10.5 of the Company's Form 8-K Report filed May 4,
 2021).

 10.37

 Termination
 Agreement dated August 11, 2021, by and among Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated, Soluna
 Computing, Inc., formerly known as EcoChain, Inc., and Harmattan Energy, Ltd. (incorporated by reference from Exhibit 10.1 of the
 Company's Form 8-K Report filed August 12, 2021).

 10.38

 Securities
 Purchase Agreement dated October 20, 2021, by and between Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated,
 and accredited investors (incorporated by reference from Exhibit 10.1 of the Company's Form 8-K Report filed October 25, 2021).

 10.39

 Registration
 Rights Agreement dated October 25, 2021, by and between the Company and accredited investors (incorporated by reference from Exhibit
 10.2 of the Company's Form 8-K Report filed October 25, 2021).

 10.40

 Security
 Agreement dated October 25, 2021, by and among the Company, MTI Instruments and Soluna Computing,
 Inc., formerly known as EcoChain, Inc., Soluna MC LLC, formerly known as EcoChain Block LLC,
 and Soluna SW LLC, formerly known as EcoChain Wind LLC, and Collateral Services LLC (incorporated
 by reference from Exhibit 10.3 of the Company's Form 8-K Report filed October 25, 2021).

 10.41

 Master
 Equipment Finance Agreement, dated as of December 30, 2021 by and between Soluna MC Borrowing
 2021-1 LLC and NYDIG ABL LLC (incorporated by reference from Exhibit 10.1 of the Company's
 Form 8-K Report filed January 18, 2022).

 10.42

 Digital
 Asset Account Control Agreement, effective as of December 30, 2021 by and among Soluna MC Borrowing 2021-1 LLC, NYDIG ABL LLC and
 NYDIG Trust Company LLC (incorporated by reference from Exhibit 10.2 of the Company's Form 8-K Report filed January 18, 2022).

 10.43

 Guaranty
 Agreement, dated as of December 30, 2021 by Soluna MC LLC, in favor of NYDIG ABL LLC (incorporated by reference from Exhibit 10.3
 of the Company's Form 8-K Report filed January 18, 2022).

 10.44

 Consent
 and Waiver Agreement, dated January 13, 2022, by and among the Company and the purchasers signatory to the Securities Purchase Agreement,
 dated as of October 20, 2021 (incorporated by reference from Exhibit 10.4 of the Company's Form 8-K Report filed January 18,
 2022).

 10.45+

 Employment
 Agreement, by and between Soluna Holdings, Inc. and Michael Toporek, dated as of January 14, 2022 (incorporated by reference from
 Exhibit 10.1 of the Company's Form 8-K Report filed January 21, 2022).

 10.46

 Stock
 Purchase Agreement, dated as of April 11, 2022, by and between Soluna Holdings, Inc. and
 NKX Acquiror, Inc. (Incorporated by reference to the Company's Current Report on Form
 8-K Report filed with the SEC on April 15, 2022).

 10.47

 Form of Note by and between Soluna Holdings, Inc. and certain institutional lenders (incorporated by reference from Exhibit 10.53 of the 2021 Form 10-K.)

 10.48

 Commercial Security Agreement, by and between Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated, and KeyBank National Association, dated September 15, 2021 (incorporated by reference from Exhibit 10.54 of the 2021 Form 10-K).

 10.49

 Promissory Note, by and between Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated, and KeyBank National Association, dated September 15, 2021 (incorporated by reference from Exhibit 10.55 of the 2021 Form 10-K).

 10.50

 Underwriting
 Agreement, by and between the Company and Univest Securities, LLC, dated October 24, 2022 (Incorporated by reference to the Company's
 Current Report on Form 8-K filed with the SEC on October 26, 2022).

 10.51

 Form
 of Underwriter's Warrant (Incorporated by reference to the Company's Current
 Report on Form 8-K filed with the SEC on October 26, 2022).

 10.52+

 Employment
 Agreement, by and between Soluna Holdings, Inc. and Philip F. Patman, Jr, dated as of July 29, 2022 (Incorporated by reference to
 the Company's Current Report on Form 8-K Report filed with the SEC on August 3, 2022).

 10.53

 Form
 of Addendum by and between the Company, Collateral Agent, and each purchaser identified on Schedule A hereto (Incorporated by reference
 to the Company's Current Report on Form 8-K filed with the SEC on July 20, 2022).

 10.54

 Form
 of Securities Purchase Agreement by and among the Company and the purchasers signatory thereto (Incorporated by reference to the
 Company's Current Report on Form 8-K filed with the SEC on July 20, 2022).

 10.55

 Form
 of Leak-Out Agreement by and between the Company and the signatory thereto (Incorporated
 by reference to the Company's Current Report on Form 8-K filed with the SEC on July
 20, 2022).

 10.56

 At-the-Market
 Issuance Sales Agreement, dated June 9, 2022, by and between the Company and the Univest
 Securities, LLC (Incorporated by reference to the Company's Current Report on Form
 8-K filed with the SEC on June 9, 2022).

 10.57

 Contribution
 Agreement by and between Soluna Holdings, Inc., Soluna SLC Fund I Projects Holdco, LLC, Soluna DV Devco, LLC, and Soluna DVSL ComputeCo,
 LLC, dated as of August 5, 2022 (Incorporated by reference to the Company's Current Report on Form 8-K filed with the SEC on
 August 11, 2022).

 10.58

 Form
 of Addendum Amendment by and Between the Company and the signatories thereof, dated September 13, 2022 (Incorporated by reference
 to the Company's Current Report on Form 8-K filed with the SEC on September 14, 2022).

 10.59

 Form
 of Series B Consent by and between the Company and the signatory thereof, dated September 13, 2022 (Incorporated by reference to
 the Company's Current Report on Form 8-K filed with the SEC on September 14, 2022).

 10.60

 Form
 of Securities Purchase Agreement by and between the Company and the purchasers named therein, dated December 5, 2022 (Incorporated
 by reference to the Company's Current Report on Form 8-K filed with the SEC on December 5, 2022).

 10.61

 Form
 of Warrant (Incorporated by reference to the Company's Current Report on Form 8-K filed with the SEC on December 5, 2022).

 10.62+

 Holdings, Inc. Third Amended and Restated 2021 Stock Incentive Plan (incorporated by reference to the Company's Current Report
 on Form 8-K filed with the SEC on March 13, 2023)

 10.63+

 Holdings, Inc. 2023 Stock Incentive Plan (incorporated by reference to the Company's Current Report on Form 8-K filed with
 the SEC on March 13, 2023)

 10.64

 Purchase of Membership Interests of Soluna DVSL Computeco LLC dated March 10, 2023 (incorporated by reference from Exhibit 10.64 of the Company's Form 10-K Report for the year ended December 31, 2022 filed on March 31, 2023 (the "2022 Form 10-K"))

 10.65

 Fourth Amended and Restated LLC Agreement Soluna DVSL Computeco LLC (incorporated by reference from Exhibit 10.65 of the 2022 Form 10-K)

 10.66

 Data Facility Lease (incorporated by reference from Exhibit 10.66 of the 2022 Form 10-K)

 10.67

 Amended and Restated Contribution Agreement dated March 10, 2023 (incorporated by reference from Exhibit 10.67 of the 2022 Form 10-K)

 10.68

 Power Purchase Agreement with Lighthouse Electric Cooperative, Inc. dated February 24, 2023 (incorporated by reference from Exhibit 10.68 of the 2022 Form 10-K)

 10.69

 Second Addendum Amendment dated as of March 3, 2023 with Convertible Noteholders (incorporated by reference from Exhibit 10.69 of the 2022 Form 10-K)

 10.70

 Second Amended Agreement dated May 11, 2023 (incorporated by reference to Exhibit 10.70 to the 2023 First Quarter Form 10-Q)

 10.71

 Contribution Agreement by and among Navitas West Texas Investments, SPV, LLC, Soluna Computing, Inc., and Soluna DV ComputeCo, LLC dated as May 9, 2023 (incorporated by reference to Exhibit 10.71 to the 2023 First Quarter Form 10-Q)

 10.72

 Amended and Restated Limited Liability Company Agreement of Soluna DV ComputeCo, LLC dated as May 9, 2023 (incorporated by reference to Exhibit 10.72 to the 2023 First Quarter Form 10-Q)

 10.73

 Loan and Security Agreement Soluna DV ComputeCo, LLC and Navitas West Texas Investments, SPV, LLC dated as of May 9, 2023 (incorporated by reference to Exhibit 10.73 to the 2023 First Quarter Form 10-Q)

 10.74+

 Amended
 and Restated 2023 Stock Incentive Plan ((incorporated by reference to Appendix B to the definitive proxy statement filed on May 30,
 2023)

 10.75

 Dividend Payment Agreement with the holder of the Series B Preferred Stock (incorporated by reference to Exhibit 10.75 to the 2023 Second Quarter Form 10-Q)

 10.76

 Third
 Amendment Agreement with the holders of the Company's Convertible Notes (incorporated by reference to the Company's Current
 Report on Form 8-K filed with the SEC on November 22, 2023)

 10.77

 Amendment
 to Escrow Agreement (incorporated by reference to the Company's Current Report on Form 8-K filed with the SEC on November 22,
 2023)

 10.78+

 Amended
 and Restated Employment Agreement dated November 20, 2023 with John Belizaire (incorporated by reference to the Company's Current
 Report on Form 8-K filed with the SEC on November 29, 2023)

 10.79+

 Amendment
 No. 1 to Employment Agreement with Michael Toporeck (incorporated by reference to the Company's Current Report on Form 8-K
 filed with the SEC on November 29, 2023)

 10.80

 Fourth
 Amendment Agreement with holders of the Company's Convertible Notes (incorporated by reference to the Company's Current
 Report on Form 8-K filed with the SEC on March 1, 2024)

 Subsidiaries of Soluna Holdings, Inc.

 23.1

 Consent of UHY LLP.

 31.1

 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 31.2

 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 32.1

 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 32.2

 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 97.1

 Soluna 2023 SLNH Clawback Policy

 101.INS

 101.SCH

 101.CAL

 101.DEF

 101.LAB

 101.PRE

 Cover Page Interactive Data File (embedded within the Inline

 #
Certain portions of this exhibit have been omitted based upon a request for confidential treatment. The omitted portions have been filed
with the Securities and Exchange Commission pursuant to our application for confidential treatment. The items are identified in the exhibit
with "**".

 +
Represents management contract or compensation plan or arrangement.

 Item
16: Form 10-K Summary

 None.

 Signatures

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

 SOLUNA
 HOLDINGS, INC.

 Date:

 By:

 /s/
 John Belizaire

 John
 Belizaire

 Chief
 Executive Officer

 Date:

 By:

 /s/
 David Michaels

 David
 Michaels

 Chief
 Financial Officer

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

 Signature

 Title

 Date

 /s/
 John Belizaire

 Chief
 Executive Officer, Director

 John
 Belizaire

 Executive Officer)

 /s/
 David Michaels

 Chief
 Financial Officer, Director

 David
 Michaels

 Financial Officer)

 /s/
 Jessica L. Thomas

 Chief
 Accounting Officer

 Jessica
 L. Thomas

 Accounting Officer)

 /s/
 Michael Toporek

 Executive
 Chairman

 Michael
 Toporek

 /s/
 Edward R. Hirshfield

 Edward
 R. Hirshfield

 /s/
 Matthew E. Lipman

 Matthew
 E. Lipman

 /s/
 Thomas J. Marusak

 Thomas
J. Marusak

 /s/
William Hazelip

 William
Hazelip

 /s/
 William Phelan

 William
 Phelan

 /s/
John Bottomley

 John
Bottomley

 SOLUNA
HOLDINGS, INC. AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

 Page

 Report
 of Independent Registered Public Accounting Firm (PCAOB ID: 1195)

 to F-3

 Financial Statements:

 Balance
 Sheets as of December 31, 2023 and 2022

 Statements
 of Operations for the Years Ended December 31, 2023 and 2022

 Statements
 of Changes in Equity for the Years Ended December 31, 2023 and 2022

 Statements
 of Cash Flows for the Years Ended December 31, 2023 and 2022

 Notes
 to Consolidated Financial Statements

 to F-50

 F- 1

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Board of Directors and

 Stockholders
of Soluna Holdings, Inc. and Subsidiaries

 Opinion
on the Financial Statements

 We have audited the accompanying consolidated balance sheets of Soluna Holdings, Inc. and Subsidiaries (the Company)
as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in equity, and cash flows for each of
the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the financial statements).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31,
2023, in conformity with accounting principles generally accepted in the United States of America.

 Substantial
Doubt about the Company's Ability to Continue as a Going Concern

 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated
deficit and negative working capital that raise substantial doubt about its ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.

 Critical
Audit Matters

 The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication
of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating
the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.

 F- 2

Analysis of Intangible Assets

of the Matter

 As
discussed in Note 6 to the financial statements, the Company has strategic pipeline contracts related to the Company's business.
These contracts relate to the potential renewable energy data centers that the Company is in the process of completing. As of December
31, 2023, the book value of the strategic pipeline contracts totaled $26.6 million, net of accumulated amortization of $20.3 million.

 We
identified the impairment analysis of the strategic pipeline contract intangible assets triggered by the impairment indicators as a critical
audit matter because the analysis includes significant estimates, assumptions and judgments. Specifically, the determination of the fair
value of the strategic pipeline contracts was based on the status of the projects, undiscounted cash flows and the probability of realization
of the benefit. The determination of the intangible fair value required management to make significant judgments, including the appropriateness
of the valuation model and the reasonableness of estimates and assumptions included in the model. Changes in these estimates and assumptions
could have a significant impact on the fair value of the intangible assets. Auditing these elements involved especially challenging auditor
judgment due to the subjectivity and the nature and extent of audit effort required to address the matter, including the extent of specialized
skills or knowledge needed.

 How
We Addressed the Matter in Our Audit

 We
gained an understanding of certain internal controls over the Company's process to analyze the intangible asset for impairment,
including controls related to the Company's valuation. For example, we gained an understanding of controls over the estimation
process supporting the impairment analysis of the strategic pipeline contracts intangible asset, which included controls over management's
review of assumptions used in its impairment analysis.

 To
test the impairment analysis of the strategic pipeline contracts, we performed audit procedures that included, among others, evaluating
the methodology used by the Company's valuation specialist, and evaluating the reasonableness of the key assumptions used to determine
the estimated undiscounted cash flow. We utilized our firm's valuation specialists to assist with the evaluation of the methodology
used by management and significant assumptions included in the impairment analysis, including testing the likelihood of various scenarios.
For example, we compared the Company's budgets and forecasts and reviewed the status of the projects used as part of the determination
of the likelihood of the various scenarios. We performed a sensitivity analysis over key assumptions used in the analysis. We also evaluated
the adequacy of the Company's disclosures included in Note 2 and Note 6 in relation to this valuation.

 Fair
value of the Warrants and Convertible Note

of the Matter

 As
discussed in Note 10 to the financial statements, the Company had a total of approximately 1.1 million common stock purchase warrants
outstanding as of December 31, 2023. In addition, as discussed in Note 9 to the financial statements, the fair value of the convertible
notes payable was $8.5 million as of December 31, 2023. The Company uses option pricing models to estimate the fair value of the warrants
using various market-based inputs. The convertible notes payable is accounted for under the fair value method on a recurring basis in
accordance with ASC 480.

 We
identified the measurement of fair value of the warrants and convertible notes payable as a critical audit matter. Specifically, there
was a high degree of subjectivity and judgment in evaluating the determination of the expected volatility inputs used in the option pricing
models for the warrants. Historical, implied, and peer group volatility levels provide a range of possible expected volatility inputs
and the fair value estimates for the warrants and convertible notes payable are sensitive to the expected volatility inputs.

 How
We Addressed the Matter in Our Audit

 The
primary procedures we performed to address this critical audit matter included gaining an understanding of certain internal controls
over the Company's process to measure the fair value of the warrants and convertible notes payable. This included controls related
to the evaluation of observable market information used in the determination of the expected volatility inputs. We also involved our
firm's valuation professionals with specialized skills and knowledge, who assisted in:

 evaluating
 the expected volatility inputs by comparing them against a volatility range that was independently
 verified in consideration of historical, implied, and peer group volatility information;
 and

 developing
 an estimate of the convertible notes payable and warrants' fair value using the independently
 verified volatility range and comparing it to the value calculated by the Company.

 /s/
 UHY LLP

 We
have served as the Company's auditor since 2021.

 Albany,
New York

 F- 3

Holdings, Inc. and Subsidiaries

Balance Sheets

 As
of December 31, 2023 and December 31, 2022

in thousands, except per share)

 2023

 2022

 Assets

 Current Assets:

 Cash

 $
 6,368

 $
 1,136

 Restricted cash

 2,999

 Accounts receivable

 2,948

 Notes receivable

 Prepaid expenses and other current assets

 1,416

 1,107

 Equipment held for sale

 Total Current Assets

 14,284

 3,762

 Restricted cash, noncurrent

 1,000

 -

 Other assets

 2,954

 1,150

 Deposits and credits on equipment

 1,028

 1,175

 Property, plant and equipment, net

 44,572

 42,209

 Intangible assets, net

 27,007

 36,432

 Operating lease right-of-use assets

 Total Assets

 $
 91,276

 $
 84,961

 Liabilities and Stockholders' Equity

 Current Liabilities:

 Accounts payable

 $
 2,099

 $
 3,548

 Accrued liabilities

 4,906

 2,721

 Line of credit

 -

 Convertible notes payable

 8,474

 11,737

 Current portion of debt

 10,864

 10,546

 Income tax payable

 -

 Deferred revenue

 -

 Customer deposits-current

 1,588

 -

 Operating lease liability

 Total Current Liabilities

 28,175

 29,516

 Other liabilities

 Customer deposits- long-term

 1,248

 -

 Operating lease liability

 Deferred tax liability, net

 7,779

 8,886

 Total Liabilities

 37,917

 38,689

 Commitments and Contingencies (Note 14)

 -

 -

 Stockholders' Equity:

 9.0 % Series A Cumulative Perpetual Preferred Stock, par
 value $ 0.001 per share, $ 25.00 liquidation preference; authorized 6,040,000; 3,061,245 shares issued and outstanding as of December
 31, 2023 and December 31, 2022

 Series B Preferred Stock, par value $ 0.0001 per share, authorized 187,500;
 62,500 shares issued and outstanding as of December 31, 2023 and December 31, 2022

 —

 —

 Preferred stock, value

 —

 —

 Common stock, par value $ 0.001
 per share, authorized 75,000,000;
 2,546,361 shares
 issued and 2,505,620 shares
 outstanding as of December 31, 2023 and 788,578
 shares issued and 747,837
 shares outstanding as of December 31, 2022 (1)

 Additional paid-in capital

 291,276

 277,429

 Accumulated deficit

 ( 250,970
)

 ( 221,769
)

 Common stock in treasury, at cost,
 40,741 shares
 at December 31, 2023 and December 31, 2022 (1)

)

)

 Total Soluna Holdings, Inc. Stockholders'

 26,514

 41,866

 Non-Controlling Interest

 26,845

 4,406

 Total Stockholders'

 53,359

 46,272

 Total Liabilities
 and Stockholders' Equity

 $
 91,276

 $
 84,961

 (1)

 Prior
 period results have been adjusted to reflect the Reverse Stock Split of the Common Stock at a ratio of 1-for-25 that became effective
 October 13, 2023. See Note 2, "Accounting Policies," for details.

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 4

Holdings, Inc. and Subsidiaries

Statements of Operations

 For
the Years Ended December 31, 2023 and 2022

in thousands, except per share)

 2023

 2022

 Year Ended

 31,

 2023

 2022

 Cryptocurrency mining revenue

 $
 10,602

 $
 24,409

 Data hosting revenue

 10,196

 4,138

 Demand response services

 -

 Total revenue

 21,066

 28,547

 Operating costs:

 6,365

 14,226

 Cost of data hosting revenue, exclusive of depreciation

 5,601

 3,572

 Costs of revenue-depreciation

 3,863

 18,708

 Total costs of revenue

 15,829

 36,506

 Operating expenses:

 General and administrative expenses, exclusive of depreciation
 and amortization

 15,390

 19,203

 associated with general and administrative expenses

 9,513

 9,506

 Total general and administrative
 expenses

 24,903

 28,709

 Impairment on equity investment

 -

 Operating loss

 ( 20,241
)

 ( 84,790
)

 ( 2,748
)

 ( 8,375
)

 ( 3,904
)

 ( 11,130
)

 ( 398
)

 ( 4,089
)

 Other (expense) income, net

 ( 1,479
)

 Loss before income taxes from continuing operations

 ( 28,770
)

 ( 108,362
)

 Income tax benefit from continuing operations

 1,067

 1,346

)

 ( 107,016
)

 Income before income taxes from discontinued operations (including gain on
 sale of MTI Instruments of $ 7,751 for year ended December 31, 2022)

 -

 7,851

 Income tax benefit from discontinued operations

 -

 -

 7,921

 Net loss

)

 ( 99,095
)

 (Less) Net income (loss) attributable to non-controlling
 interest

 1,498

 ( 380
)

 Net loss attributable to Soluna Holdings, Inc.

 $
 ( 29,201
)

 $
 ( 98,715
)

 Basic and Diluted (loss) earnings per common share (1):

 Net loss from continuing operations attributable to Soluna Holdings, Inc.
 per share (Basic & Diluted)

 $
 ( 27.79
)

 $
 ( 187.63
)

 Net income from discontinued operations per share (Basic & Diluted)

 $
 -

 $
 13.22

 Basic & Diluted loss per share

 $
 ( 27.79
)

 $
 ( 174.41
)

 Weighted average shares outstanding (Basic and Diluted)

 1,313,718

 599,301

 (1)

 Prior
 period results have been adjusted to reflect the Reverse Stock Split of the Common Stock at a ratio of 1-for-25 that became effective
 October 13, 2023. See Note 2, "Accounting Policies," for details.

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 5

Holdings, Inc. and Subsidiaries

Statements of Changes in Equity

 For
the Years Ended December 31, 2023 and 2022

in thousands, except per share)

 A

 B

 (1)

 (1)

 Additional
 Paid-in
 Capital (1)

 Accumulated
 Deficit

 (1)

 Non-Controlling

 Total
 Stockholders'

 Preferred
 Stock

 Common
 Stock

 Treasury
 Stock

 A

 B

 (1)

 (1)

 Additional
 Paid-in
 Capital (1)

 Accumulated
 Deficit

 (1)

 Non-Controlling

 Total
 Stockholders'

 December 31, 2021

 1,252,299

 $

 —

 $
 —

 590,851

 $

 $

 227,804

 $
 ( 123,054
)

 40,620

 $
 ( 13,764
)

 $
 —

 $
 90,988

 Net loss

 —

 —

 —

 —

 —

 —

 —

 ( 98,715
)

 —

 —

 ( 380
)

 ( 99,095
)

 Preferred dividends distribution-Series A

 —

 —

 —

 —

 —

 —

 ( 3,852
)

 —

 —

 —

 —

 ( 3,852
)

 Preferred dividends-Series B

 —

 —

 —

 —

 —

 —

 ( 236
)

 —

 —

 —

 —

 ( 236
)

 Stock-based compensation

 —

 —

 —

 —

 —

 —

 3,857

 —

 —

 —

 —

 3,857

 Issuance of shares – preferred offering

 666,089

 —

 —

 —

 —

 9,750

 —

 —

 —

 —

 9,751

 Issuance of shares – common offering

 —

 —

 —

 —

 55,556

 —

 1,583

 —

 —

 —

 —

 1,583

 Issuance of shares – Securities Purchase offering

 —

 —

 —

 —

 45,000

 —

 —

 —

 —

 —

 Restricted stock units vested

 —

 —

 —

 —

 1,983

 —

 —

 —

 —

 —

 —

 —

 Issuance of shares – warrant exercises

 —

 —

 —

 —

 3,780

 —

 —

 —

 —

 —

 Issuance of shares- Notes conversion

 —

 —

 —

 —

 41,304

 —

 3,295

 —

 —

 —

 —

 3,295

 Issuance of shares -Series B preferred offering

 —

 —

 —

 —

 —

 4,994

 —

 —

 —

 —

 4,994

 Issuance of shares – option exercises

 —

 —

 —

 —

 7,097

 —

 —

 —

 —

 —

 Issuance of shares-restricted stock

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Promissory note conversion to preferred shares

 1,142,857

 —

 —

 —

 —

 13,894

 —

 —

 —

 —

 13,895

 Treasury Shares conversion

 —

 —

 —

 —

 —

 —

 —

 —

 ( 34
)

 —

 ( 34
)

 Surrender of warrants for common shares

 —

 —

 —

 —

 29,064

 —

 ( 346
)

 —

 —

 —

 —

 ( 346
)

 Warrants and valuation in relation to debt financing

 —

 —

 —

 —

 —

 —

 14,948

 —

 —

 —

 —

 14,948

 Issuance of common shares in relation to preferred &
 common offerings

 —

 —

 —

 —

 13,553

 —

 —

 —

 —

 —

 Contribution from Non-Controlling
 interest

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 4,786

 4,786

 December 31, 2022

 3,061,245

 $

 $
 —

 788,578

 $

 $
 277,429

 $
 ( 221,769
)

 40,741

 $
)

 $
 4,406

 $
 46,272

 Balance

 3,061,245

 $

 $
 —

 788,578

 $

 $
 277,429

 $
 ( 221,769
)

 40,741

 $
)

 $
 4,406

 $
 46,272

 Net (loss) income

 —

 —

 —

 —

 —

 —

 —

 ( 29,201
)

 —

 —

 1,498

)

 Preferred dividends-Series B

 —

 —

 —

 —

 —

 —

 ( 421
)

 —

 —

 —

 —

 ( 421
)

 Stock-based compensation

 —

 —

 —

 —

 —

 —

 4,294

 —

 —

 —

 —

 4,294

 Issuance of shares – securities purchase offering

 —

 —

 —

 —

 264,624

 —

 1,655

 —

 —

 —

 —

 1,655

 Restricted stock units vested

 —

 —

 —

 —

 33,193

 —

 —

 —

 —

 —

 —

 —

 Issuance of shares – warrant exercises

 —

 —

 —

 —

 81,726

 —

 —

 —

 —

 —

 Issuance of shares- Notes conversion

 —

 —

 —

 —

 1,235,678

 6,011

 —

 —

 —

 —

 6,013

 Issuance of shares-restricted stock

 —

 —

 —

 —

 1,400

 —

 —

 —

 —

 —

 True up shares for reverse split

 —

 —

 —

 —

 37,762

 —

 —

 —

 —

 —

 —

 —

 Common Shares and Warrants for Series B dividend payment

 —

 —

 —

 —

 44,000

 —

 —

 —

 —

 —

 Warrants and valuation in relation to debt amendments

 —

 —

 —

 —

 —

 —

 1,637

 —

 —

 —

 —

 1,637

 Issuance of common shares -merger shares

 —

 —

 —

 —

 59,400

 —

 —

 —

 —

 —

 —

 —

 Contribution from Non-Controlling interest

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 22,460

 22,460

 Distribution to Non-Controlling interest

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 ( 1,519
)

 ( 1,519
)

 December 31, 2023

 3,061,245

 $

 $
 —

 2,546,361

 $

 $
 291,276

 $
 ( 250,970
)

 40,741

 $
)

 $
 26,845

 $
 53,359

 Balance

 3,061,245

 $

 $
 —

 2,546,361

 $

 $
 291,276

 $
 ( 250,970
)

 40,741

 $
)

 $
 26,845

 $
 53,359

 (1)

 Prior
 period results have been adjusted to reflect the Reverse Stock Split of the Common Stock at a ratio of 1-for-25 that became effective
 October 13, 2023. See Note 2, "Accounting Policies," for details.

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 6

Holdings, Inc. and Subsidiaries

Statements of Cash Flows

 For
the Year Ended December 31, 2023 and 2022

 2023

 2022

 Year
 Ended December 31,

 2023

 2022

 Net
 loss

 $
)

 $
 ( 99,095
)

 Net
 income from discontinued operations (including gain on sale of MTI Instruments of $ 7,751 for the year ended December 31, 2022)

 -

 ( 7,921
)

 Net loss from
 continuing operations

)

 ( 107,016
)

 Adjustments
 to reconcile net loss to net cash (used in) provided by operating activities:

 Depreciation
 expense

 3,894

 18,731

 expense

 9,483

 9,483

 Stock-based
 compensation

 4,225

 3,673

 Consultant
 stock compensation

 income taxes

 ( 1,107
)

 ( 1,388
)

 on fixed assets

 of operating lease asset

 on equity investment

 -

 Loss
 on debt extinguishment and revaluation, net

 3,904

 11,130

 on deferred financing costs and discount on notes

 6,538

 Loss
 on sale of fixed assets

 4,089

 Changes in operating
 assets and liabilities:

 Accounts
 receivable

 ( 2,620
)

 Prepaid
 expenses and other current assets

 ( 306
)

 Other
 long-term assets

 ( 304
)

 ( 29
)

 Accounts
 payable

 ( 862
)

 revenue

 ( 453
)

 Customer
 deposits

 2,836

 -

 lease liabilities

 ( 234
)

 ( 197
)

 Other
 liabilities

 ( 308
)

 Accrued
 liabilities

 3,889

 ( 374
)

 Net
 cash used in provided by operating activities

 ( 2,987
)

 ( 6,118
)

 Net
 cash provided by operating activities- discontinued operations

 -

 Investing

 Purchases
 of property, plant, and equipment

 ( 12,705
)

 ( 63,684
)

 Purchases
 of intangible assets

 ( 58
)

 ( 76
)

 from disposal on property, plant, and equipment

 2,286

 2,605

 Deposits
 of equipment, net

 6,441

 Net
 cash used in investing activities

 ( 10,330
)

 ( 54,714
)

 Net
 cash provided by investing activities- discontinued operations

 -

 9,084

 Financing

 from preferred offerings

 -

 16,658

 from common stock offering

 2,858

 from notes and debt issuance

 3,100

 30,543

 Costs
 of preferred offering

 -

 ( 1,910
)

 Costs
 of common stock offering

 ( 10
)

 ( 504
)

 Costs
 of notes and short-term debt issuance

 ( 1,057
)

 ( 2,078
)

 Cash
 dividend distribution on preferred stock

 -

 ( 3,852
)

 Payments
 on NYDIG loans and line of credit

 ( 350
)

 ( 4,491
)

 Contributions
 from non-controlling interest

 20,365

 4,786

 Distributions
 for non-controlling interest

 ( 1,002
)

 -

 from stock option exercises

 -

 from common stock warrant exercises

 -

 Net
 cash provided by financing activities

 21,863

 42,942

 Increase (decrease)
 in cash & restricted cash-continuing operations

 8,546

 ( 17,890
)

 Increase
 in cash & restricted cash- discontinued operations

 -

 9,453

 Cash
 & restricted cash – beginning of period

 1,821

 10,258

 Cash
 & restricted cash – end of period

 $
 10,367

 $
 1,821

 Supplemental
 Disclosure of Cash Flow Information

 paid on NYDIG loans and line of credit

 1,311

 paid on Navitas loan

 -

 paid on convertible noteholder default

 -

 investing and financing activities:

 Notes
 converted to common stock

 6,013

 3,295

 disposal of NYDIG collateralized equipment

 3,137

 -

 non-controlling interest contribution

 2,095

 -

 and penalty settled through repossession of collateralized equipment

 1,773

 -

 Warrant
 consideration in relation to convertible notes and debt

 1,637

 14,602

 Non-controlling interest membership distribution accrual

 -

 activity right-of use assets obtained in exchange for lease obligations

 Promissory
 note conversion to common or preferred shares

 15,236

 proceed on sale of equipment

 B preferred dividend prefunded warrant and common stock issuance

 -

 equipment financing

 -

 4,620

 Proceed
 receivable from sale of MTI Instruments

 -

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 7

 Notes
to Consolidated Financial Statements

 1. Nature of Operations

of Business

 Unless
the context requires otherwise in these notes to the consolidated financial statements, the terms "SHI," the "Company,"
"we," "us," and "our" refer to Soluna Holdings, Inc. together with its consolidated subsidiaries,
"SCI" refers to Soluna Computing, Inc, formerly known as EcoChain, Inc., and "MTI Instruments" refers to MTI
Instruments, Inc..

Holdings, Inc., formerly known as Mechanical Technology, Incorporated was incorporated in Nevada on March 24, 2021, and is the successor
to Mechanical Technology, Inc., which was incorporated in the State of New York in 1961, as a result of a merger which became effective
on March 29, 2021, and is headquartered in Albany, New York. Effective November 2, 2021, the Company changed its name from "Mechanical
Technology, Incorporated" to "Soluna Holdings, Inc."

 The
Company is a digital infrastructure company specializing in transforming surplus renewable energy into computing resources. Our modular
data centers can co-locate with wind, solar, or hydroelectric power plants and support compute intensive applications including Bitcoin
Mining, Generative AI, and Scientific Computing. This pioneering approach to data centers helps energize a greener grid while delivering
cost-effective and sustainable computing solutions. SHI conducted its business through its wholly-owned subsidiary, Soluna Computing,
Inc. ("SCI"). The Company formed a wholly owned subsidiary of SHI on December 31, 2023, Soluna Digital, Inc. ("Soluna Digital",
or "SDI"). Effective December 31, 2023, SCI transferred substantially all of its assets to SHI or its subsidiaries, including
SDI.

 In
fiscal year 2021, SCI began mining operations in Murray, Kentucky, ("Project Sophie") and Calvert City, Kentucky, ("Project
Marie"). Project Marie had performed hosting services and proprietary mining in which 10 megawatts were used for hosting services
and 10 megawatts was used for proprietary mining through the end of February 2023, at which time the facility had been decommissioned.
In the second quarter of fiscal year 2023, Project Sophie entered into hosting contracts with Bitcoin miners, which marked a shift in
the Company's business model at the Company's modular data centers at Project Sophie from proprietary mining to hosting Bitcoin
miners for the customers for 25 MegaWatt ("MW"). As of December 31, 2023, all of Project Sophie is performing data hosting.
The Company has sold most of its existing Bitcoin miners at the Project Sophie site and redeploying capital. On September 17, 2022, SCI
sold specified assets consisting mainly of mining equipment and other general equipment items to a buyer at its Wenatchee, Washington
location, ("Project Edith"). Soluna has committed to providing certain facilities contracts at cost plus a markup to facilitate
the continued operations for the sold mining assets, on behalf of the new ownership. Our Texas site ("Project Dorothy") is
located at a wind farm and has a potential for up to 100 MWs, of which the Company obtained approval from the Electric Reliability Council
of Texas ("ERCOT") and energized 25 MW in May 2023 and has energized another 25 MW in October 2023. The Company as of December
31, 2023, has a 14.6 % ownership interest in Soluna DVSL ComputeCo, LLC ("DVSL"), and 51 % ownership interest in Soluna DV
ComputeCo, LLC ("DVCC") in which are included within the Project Dorothy site, as discussed further in Note 18.

 Until
the Sale (as defined below), we also operated though our wholly owned subsidiary, MTI Instruments, an instruments business engaged in
the design, manufacture and sale of vibration measurement and system balancing solutions, precision linear displacement sensors, instruments
and system solutions, and wafer inspection tools. MTI Instruments was incorporated in New York on March 8, 2000. MTI Instruments'
products consisted of engine vibration analysis systems for both military and commercial aircraft and electronic gauging instruments
for position, displacement and vibration application within the industrial manufacturing markets, as well as in the research, design
and process development markets. These systems, tools and solutions were developed for markets and applications that require consistent
operation of complex machinery and the precise measurements and control of products, processes, and the development and implementation
of automated manufacturing and assembly. On December 17, 2021, we announced that we had entered into a non-binding letter of intent with
a potential buyer (the "Buyer") regarding the potential sale of MTI Instruments (the "LOI") to an unrelated third
party. Pursuant to the LOI, the Buyer would acquire 100 % of the issued and outstanding common stock of MTI Instruments. As a result of
the foregoing, the MTI Instruments business was reported as discontinued operations in our consolidated financial statements as of December
31, 2022, and prior periods included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March
31, 2023 (the "Annual Report"). On April 11, 2022, we consummated the Sale, MTI Instruments ceased to be our wholly-owned
subsidiary and, as a result, we have exited the instruments business. See Note 16 for additional information on the Sale.

 On
April 11, 2022, SHI entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with NKX Acquiror, Inc. (the
"Purchaser"), pursuant to which the Company sold on such date all of the issued and outstanding shares of capital stock of
its wholly-owned subsidiary, MTI Instruments, for approximately $ 9.4 million in cash, subject to certain adjustments as set forth in
the Stock Purchase Agreement (the "Sale"). The consideration paid by the Purchaser to the Company was based on an aggregate
enterprise value of approximately $ 10.75 million. The Company recognized a gain on sale of approximately $ 7.8 million.

 F- 8

 Going
Concern and Liquidity

 The
Company's financial statements as of December 31, 2023 have been prepared using generally accepted accounting principles in the
United States of America ("U.S. GAAP") applicable to a going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company did not
generate sufficient revenue to generate net income and has a cash used in operations position during the year ending as of December 31,
2023. In addition, the Company has ceased operations for Project Marie in February 2023 due to the termination of the Management and
Hosting Services agreement with CC Metals and Alloys, LLC ("CCMA") and repossession of collateral for miners as discussed
further below. These factors, among others indicate that there is substantial doubt about the Company's ability to continue as
a going concern within one year after issuance of these financial statements as of December 31, 2023, or April 1, 2024.

MC Borrowing 2021-1 (the "Borrower"), received a Notice of Acceleration and Repossession (the "NYDIG Notice")
from NYDIG ABL LLC ("NYDIG") with respect to the Master Equipment Finance Agreement, dated as of December 30, 2021 (the "MEFA"),
by and between Borrower and NYDIG. The NYDIG Notice states that (a) Borrower failed to observe or perform certain covenants, conditions
or agreements contained in the MEFA and such failure continued unremedied for a period of ten days after Borrower's knowledge of
such breach, which resulted in an event of default under the MEFA, and (b) Borrower defaulted under the guaranty, collateral agreement,
or other support agreement, which resulted in an event of default under the MEFA. In addition, the NYDIG Notice states that Borrower
failed to pay certain payments of principal and interest under the MEFA when due, which failure also constituted an event of default
under the MEFA. As a result of the foregoing events of default, and pursuant to the MEFA, NYDIG (x) declared the principal amount of
all loans due and owing under the MEFA and all accompanying Loan Documents (as defined in the MEFA) to be due and immediately payable,
(y) imposed a default rate of interest on any outstanding principal amount of each loan (together with all then unpaid interest accruing
thereon) and all other obligations under the MEFA and the Loan Documents, and (z) demanded the return of all equipment subject to the
MEFA and the Loan Documents. The obligations of Borrower under the MEFA and reflected in the NYDIG Notice were ring-fenced to Borrower
and its direct parent company, Soluna MC LLC. On February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the
MEFA, which resulted in a reportable disposition of all of the Company's mining assets at the site and certain of the operating
assets of Project Marie. The total net book value of the collateralized assets that were repossessed totaled approximately $ 3.4 million.
Additionally, NYDIG has stated its intention to pursue SCI, the parent company of Soluna MC, LLC ("Guarantor"), under a piercing
of the corporate veil claim relating to the Guarantor together with Borrower, ("NYDIG Defendants") debts and liabilities
under the loan documents. SCI denies any such liability and has filed a complaint for a declaratory judgment against NYDIG in the Eighth
Judicial District Court in Clark County, Nevada on March 16, 2023, seeking a declaratory judgment as to such matter. NYDIG filed a motion
to dismiss in response to SCI's declaratory judgment complaint on April 13, 2023. SCI filed a response in opposition to NYDIG's
motion to dismiss on April 27, 2023. The court heard oral arguments on May 16, 2023. On June 22, 2023, the court issued an order granting
NYDIG's motion to dismiss, on the basis that the case was not ripe for decision, without prejudice. SCI intends to continue to
vigorously defend any allegations regarding liability on account of NYDIG Defendants' debts and liabilities to NYDIG under their
loan documents and intends to refile a declaratory judgment complaint against NYDIG. As of December 31, 2023, the Borrower has an outstanding
principal balance of approximately $ 9.2 million and accrued interest and penalties of approximately $ 936 thousand.

 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.
In the near term, management is evaluating and implementing different strategies to obtain financing to fund the Company's expenses
and growth to achieve a level of revenue adequate to support the Company's current cost structure. Financing strategies may include,
but are not limited to, stock issuances, project level equity, debt borrowings, partnerships and/or collaborations. If the Company is
unable to meet its financial obligations, it could be forced to restructure or refinance, seek additional equity capital or sell its
assets. The Company might then be unable to obtain such financing or capital or sell its assets on satisfactory terms. There can be no
assurance that additional financing will be available to the Company when needed or, if available, that it can be obtained on commercially
reasonable terms. If the Company is not able to obtain the additional financing on a timely basis, if and when it is needed, it will
be forced to delay or scale down some or all of its development activities or perhaps even cease the operation of its business.

 To
further implement management's strategy, in May 2022, SCI entered into a structural understanding with Soluna SLC Fund I Projects
Holdco LLC ("Spring Lane"), a Delaware limited liability company, pursuant to which Spring Lane agreed to provide up to $ 35.0
million in project financing subject to various milestones and conditions precedent and in August 2022, the Company entered into an agreement
with Spring Lane for an initial funding of up to $ 12.5 million from the previously agreed-upon $ 35.0 million commitment from Spring Lane
for Project Dorothy for a 32 % ownership as of year-end. As of December 31, 2022, the Company had received approximately $ 4.8 million
worth of contributions from Spring Lane. In February and concluding on March 10, 2023, the Company entered into a series of Purchase
and Sale Agreements with Spring Lane for a total purchase price of $ 7.5 million for the sale of Series B membership interests owned by
SHI. The capital was funded and used to help complete the substation interconnection and the final stages of Project Dorothy, Soluna's
flagship project in West Texas, and corporate operations and general expenses of Soluna. In this series of transactions, Spring Lane
increased its stake in Soluna DVSL ComputeCo from approximately 32 % to 85.4 % and reduced SHI's ownership from 68 % to 14.6 %.

 F- 9

 In
addition, on May 9, 2023, the Company's indirect subsidiary Soluna DV ComputeCo, LLC ("DVCC") through Soluna DV Devco,
LLC completed a strategic partnership and financing with a special purpose vehicle, Navitas West Texas Investments SPV, LLC, ("Navitas")
organized by Navitas Global, to complete the second phase of the Dorothy Project ("Dorothy 1B"). Under a Contribution Agreement
among the parties, the Company owned a substantially complete 25MW data center under construction, in which the Company had contributed
capital expenditures for the data center. Navitas has approximately $ 12.1 million cash contribution for the primary purpose of purchasing
proprietary cryptocurrency miners and equipment necessary to put the Dorothy 1B Project into service. As a result of the contribution,
the Company owns 51 % of DVCC and Navitas owns 49 % of DVCC.

 Between
January 24, 2023 and April 3, 2023, the Company had the first and partial second subsequent closings under the Securities Purchase Agreement
dated December 5, 2022, among the Company and certain institutional investors. Pursuant to the SPA, the investors purchased approximately
$ 886 thousand, resulting in the issuance of 117,097 shares of Common Stock and associated warrants for 234,195 shares of Common Stock.
On August 1, 2023, the Company had the second subsequent closing under the Securities Purchase Agreement dated December 5, 2022 among
the Company and certain institutional investors. Pursuant to the SPA, the investors purchased approximately $ 774,000 in common stock
and associated common stock purchase warrants, with a purchase price of $ 7.50 per share. Accordingly, at the second subsequent closing
the Company issued to the investors 103,183 shares of Common Stock, together with associated warrants to purchase 206,367 shares of Common
Stock.

 For
the year-ended December 31, 2023, the Company has sold under-utilized miners and equipment, and continues to evaluate opportunities to
sell more miners and equipment for fiscal year 2024. In addition to the proceeds from the foregoing transactions and together with the
Company's available cash on hand for available use of approximately $ 6.4 million as of December 31, 2023, the Company will need
additional capital raising activities, to meet its outstanding commitments relating to capital expenditures as of December 31, 2023 of
approximately $ 112 thousand and other operational needs, as well as additional needs during 2024 and management continues to evaluate
different strategies to obtain financing to fund operations. However, management cannot provide any assurances that the Company will
be successful in accomplishing additional financing or any of its other plans. These financial statements do not include any adjustments
related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.

 2. Accounting Policies

 Principles
of Consolidation

 The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, SCI., as well the Company's variable interest entities disclosed in Note 18. All intercompany balances
and transactions are eliminated in consolidation.

 Reverse
Stock Split

 On
October 11, 2023, the Company filed a Certificate of Change (the "Certificate of Change") effecting a reverse stock split
as of 5:00 p.m. Eastern Standard Time on October 13, 2023 with a ratio of 1-for-25 (the "Reverse Split"). The Company's
common stock began trading on a post-split basis under the Company's existing trading symbol, "SLNH," when the market
opened on October 16, 2023. The reverse stock split was approved by the Board of Directors and by shareholders at the annual meeting
of the stockholders on June 29, 2023. At the effective time, every 25 issued and outstanding shares of the Company common stock was converted
automatically into one share of the Company's common stock without any change in the par value per share. The Reverse Split did
not change the number of shares of common stock authorized for issuance. No fractional shares were outstanding following the Reverse
Split. Any holder who would have received a fractional share of common stock was automatically entitled to receive an additional fraction
of a share of common stock to round up to the next whole share.

 The
primary goal of the Reverse Stock Split was to increase the per share price of the Common Stock in order to meet the minimum per share
price requirement of $ 1.00 for continued listing on the Nasdaq. On October 30, 2023, the Company received a notice of compliance from
NASDAQ.

 In
addition, effective as of the same time as the Reverse Split, proportionate adjustments were made to all then-outstanding equity awards,
warrants and convertible securities with respect to the number of shares of common stock subject to such award or security and the exercise
or conversion price thereof. Furthermore, the number of shares of common stock available for issuance under the Company's equity
incentive plans has been proportionately adjusted for the Reverse Split ratio, such that fewer shares will be subject to such plans.
Furthermore, proportionate adjustments were made to the conversion factor at which the Company's Series B Preferred Stock, par
value $ 0.0001 per share (the "Series B Preferred Stock"), may be converted to Common Stock. The total number of shares of
Series B Preferred Stock of the Company authorized for issuance remained at 187,500.

 The
effects of the Reverse Stock Split have been reflected in these financial statements and the accompanying footnotes for all periods presented,
which includes adjusting the description of any activity that may have been transacted on a pre-Reverse Stock Split basis.

 F- 10

 Reclassification

 Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on
the reported results of operations or net assets.

 Correction
of an Error

 While
preparing the Company's Form 10-K for the year ended December 31, 2023, the Company identified the following errors related to
the presentation of basic and diluted Earnings Per Share ("EPS") in its historical filing for the year ended December 31,
2022, and for the quarters ended March 31, 2023, June 30, 2023, and September 30, 2023:

 Inclusion
 of the net income/loss from noncontrolling interest in the numerator;

 Inclusion
 of the cumulative undeclared preferred dividends in the numerator;

 Exclusion
 of shares issuance for little or no cash consideration (ie: penny warrants) in the denominator.

 In accordance with SEC Staff Accounting Bulletin No. 99, "Materiality," and SEC Staff Accounting Bulletin
No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;"
the Company evaluated the errors and has determined that the related impacts were not material to any prior annual or 10-Q report, but
that correcting the cumulative impact of such errors would be significant to our EPS for the year ended December 31, 2023. Accordingly,
the Company has corrected such immaterial errors by adjusting its December 31, 2022 consolidated statement of operations related to the
calculation of earnings per share. The Company will also correct previously reported interim financial information for such immaterial
errors in future filings, as applicable. The following summarizes the effect of the revision on each financial statement line item.

 The
following analysis provides a comparison amongst the basic and diluted EPS as reported on the Form 10-K for the year ended December 31,
2022, and the final revised basic and diluted EPS calculation to correct all identified errors:

of Error Corrections of Basic and Diluted EPS

 As reported
on Form
10-K for the year ended
 December 31, 2022 (1)

 As revised
on Form 10-K

 Basic and Diluted net loss per share from continuing operations

 $
 ( 185.39
)

 $
 ( 187.63
)

 $
 ( 2.24
)

 Basic and Diluted net income per share from discontinued operations

 13.22

 13.22

 -

 Basic and Diluted net loss per share

 $
 ( 172.17
)

 $
 ( 174.41
)

 $
 ( 2.24
)

 (1)

 Prior period results have been adjusted to reflect the Reverse
Stock Split of the Common Stock at a ratio of 1-for- 25 that became effective October 13, 2023. See Note 2, "Accounting Policies,"
for details.

 The
following analysis provides a comparison amongst the basic and diluted EPS as reported on the Form 10-Q for the quarters ended March
31, 2023, June 30, 2023, and September 30, 2023, and the final revised basic and diluted EPS calculation to correct all identified errors:

 As reported
 for the three months ended March 31, 2023 (1)

 As revised

 Basic and Diluted net loss per share

 $
 ( 8.74
)

 $
 ( 10.30
)

 $
 ( 1.56
)

 For the three months ended June 30, 2023

 For the six months ended June 30, 2023

 (1) As Reported

 As Revised

 (1) As Reported

 As Revised

 Basic and Diluted net loss per share

 $
 ( 8.44
)

 $
 ( 9.54
)

 $
 ( 1.10
)

 $
 ( 17.14
)

 $
 ( 19.74
)

 $
 ( 2.60
)

 (1)
 Prior
 period results have been adjusted to reflect the Reverse Stock Split of the Common Stock
 at a ratio of 1-for- 25 that became effective October 13, 2023. See Note 2, "Accounting
 Policies," for details.

 For the three months ended September 30, 2023

 For the nine months ended September 30, 2023

 As Reported

 As Revised

 As Reported

 As Revised

 Basic and Diluted net loss per share

 $
 ( 4.40
)

 $
 ( 5.96
)

 $
 ( 1.56
)

 $
 ( 20.11
)

 $
 ( 24.16
)

 $
 ( 4.05
)

 Use
of Estimates

 The
consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles
("U.S. GAAP"), which require management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 Property,
Plant, and Equipment

 Property,
plant and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives as follows:

of Property Plant and Equipment Estimated Useful Lives

 Leasehold
 improvements

 Lesser
 of the life of the lease or the useful life of the improvement

 Computers
 and related software

 to 5 years

 miners

 years

 Machinery
 and equipment

 to 15 years

 Office
 furniture, equipment and fixtures

 to 10 years

 Buildings

 30 - 40
 years

 Purchased
 pre-fabricated buildings

 15 - 20
 years

 Significant
additions or improvements extending assets' useful lives are capitalized; normal maintenance and repair costs are expensed as incurred.
The costs of fully depreciated assets remaining in use are included in the respective asset and accumulated depreciation accounts. When
items are sold or retired, related gains or losses are included in net (loss) income.

assets

assets include the Strategic Pipeline Contract with an estimated useful life of 5 years, assembled workforce of individuals included
as part of the asset acquisition with an estimated useful life of 5 years and patents with an estimated useful life of 15 - 25 years. The
Company amortizes the intangible assets over their estimated useful lives on a straight-line basis. The Company does not recognize internally
developed patents as intangible assets, however legal costs associated with defending such patents are capitalized as long-lived assets.

 Income
Taxes

 The
Company is subject to income taxes in the U.S. (federal and state). As part of the process of preparing our consolidated financial statements,
the Company calculates income taxes for each of the jurisdictions in which the Company operates. This involves estimating actual current
taxes due together with assessing temporary differences resulting from differing treatment for tax and accounting purposes that are recorded
as deferred tax assets and liabilities, loss carryforwards and tax credit carryforwards, for which income tax benefits are expected to
be realized in future years. A valuation allowance has been established to reduce deferred tax assets, if it is more likely than not
that all, or some portion, of such deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is
recognized in the period that includes the enactment date.

 Significant
management judgment is required in determining the Company's provision for income taxes, deferred tax assets and liabilities, and
any valuation allowance recorded against the Company's net deferred tax assets. The Company considers all available evidence, both
positive and negative, such as historical levels of income and future forecasts of taxable income amongst other items in determining
the Company's valuation allowance. In addition, the Company's assessment requires the Company to schedule future taxable
income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance, which
further requires the exercise of significant management judgment.

 F- 11

 The
Company accounts for taxes in accordance with the asset and liability method of accounting for income taxes. Under this method, the Company
must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial
statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon
ultimate resolution. The impact of the Company's reassessment of its tax positions for these standards did not have a material
impact on its results of operations, financial condition, or liquidity.

 The
Company is currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income tax liabilities
against us. Developments in an audit, litigation, or in applicable laws, regulations, administrative practices, principles, and interpretations
could have a material effect on the Company's operating results or cash flows in the period or periods in which such developments
occur, as well as for prior and in subsequent periods.

 Tax
laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice,
due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating the Company's
provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate
tax determination is uncertain. The Company's effective tax rates could be affected by numerous factors, such as intercompany transactions,
earnings being lower than anticipated in jurisdictions where the Company has lower statutory rates and higher than anticipated in jurisdictions
where the Company has higher statutory rates, the applicability of special tax regimes, losses incurred in jurisdictions for which the
Company is not able to realize the related tax benefit, changes in foreign currency exchange rates, entry into new businesses and geographies,
changes to its existing businesses and operations, acquisitions and investments and how they are financed, changes in the Company's
stock price, changes in its deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and
other laws, regulations, administrative practices, principles, and interpretations.

Investment – Harmattan Energy Limited

 The
Company owns approximately 1.79 % of HEL's outstanding stock, calculated on a fully-diluted basis, as of December 31, 2023 and 2022.
The equity investment in HEL is carried at the cost of investment and was $ 0 following the impairment of the equity investment as of
December 31, 2022.

Investments without Readily Determinable Fair Values

 Our
equity investment in HEL is accounted for under the measurement alternative. Equity securities measured and recorded using the measurement
alternative are recorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.
Adjustments resulting from impairments and observable price changes are recorded in the income statement. There was an impairment recognized
for the full amount of $ 750 thousand in fiscal year 2022.

Method Investments

 The
Company's consolidated net income or loss will include our proportionate share, if any, of the net income or loss of our equity
method investee. When the Company records its proportionate share of net income, it increases equity income (loss), net in our consolidated
statements of operations and our carrying value in that investment. Conversely, when the Company records its proportionate share of a
net loss, it decreases equity income (loss), net in our consolidated statements of operations and our carrying value in that investment.
When the Company's carrying value in an equity method investee company has been reduced to zero, no further losses are recorded
in the Company's financial statements unless the Company guaranteed obligations of the investee company or has committed additional
funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals
the amount of its share of losses not previously recognized.

 As
of December 31, 2023, the Company owned approximately 47.5 % of MeOH Power, Inc.'s outstanding common stock, or 75,049,937 shares.
The number of shares of MeOH Power, Inc.'s common stock authorized for issuance is 240,000,000 as of December 31, 2023. The Company
records its investment in MeOH Power, Inc. using the equity method of accounting. The fair value of the Company's interest in MeOH
Power, Inc. has been determined to be $ 0 as of December 31, 2023 and December 31, 2022, based on MeOH Power, Inc.'s net position
and expected cash flows.

 Variable
Interest Entities

 Variable
Interest Entities ("VIEs") are entities that, by design, either (i) lack sufficient equity to permit the entity to finance
its activities independently, or (ii) have equity holders that do not have the power to direct the activities of the entity that most
significantly impact its economic performance, the obligation to absorb the entity's expected losses, or the right to receive the
entity's expected residual returns. The Company consolidates a VIE when it is the primary beneficiary, which is the party that
has both (i) the power to direct the activities that most significantly impact the VIE's economic performance and (ii) through
its interests in the VIE, the obligation to absorb expected losses or the right to receive expected benefits from the VIE that could
potentially be significant to the VIE.

 F- 12

 The
Company consolidates the accounts of Soluna DVSL ComputeCo, LLC ("DVSL") and Soluna DV ComputeCo, LLC ("DVCC"),
each a VIE. The Company held a 67.8 % equity interest as of December 31, 2022 and a 14.6 % equity interest as of December 31, 2023 in DVSL,
and a 100 % as of December 31, 2022, and 51 % equity interest as of December 31, 2023 in DVCC. Both DVSL and DVCC were created in order to
construct, own, operate and maintain multi-purpose data centers in order to support the mining of cryptocurrency assets, batch processing
and other non-crypto related activities. DVSL and DVCC were designed by Soluna to create an entity for outside investors to invest in specific
projects. The creation of DVSL and DVCC resulted in Soluna, through its equity interest in DVSL and DVCC, absorbing operational risk that
the entity was created to create and distribute, resulting in Soluna having a variable interest in DVSL and DVCC. Soluna is the primary
beneficiary of DVSL, due to its role as the manager handling the day-to-day activities of DVSL and its majority ownership of Class B
Units of DVSL, and thus has the power to direct the activities of DVSL that most significantly impact the performance of DVSL and has
the obligation to absorb losses or gains of DVSL that could be significant to Soluna. Soluna is the primary beneficiary of DVCC due to
having the power to direct the activities of DVCC that most significantly impact the performance of the Company due to its role as the
manager handling the day-to-day activities of DVCC as well as majority ownership of and has the obligation to absorb losses or gains
of DVCC that could be significant to Soluna. Accordingly, both DVSL and DVCC are a VIE of Soluna as DVSL and DVCC are structured with
non-substantive voting rights.

 Non-Controlling
Interests

 The
ownership interest held by owners other than the Company in less than wholly-owned subsidiaries are classified as non-controlling interests.
The value attributable to the non-controlling interests is presented on the consolidated balance sheets separately from the equity attributable
to the Company. Net income (loss) attributable to non-controlling interests are presented separately on the consolidated statements of
operations and consolidated statements of comprehensive income, respectively.

 Fair
Value Measurement

 The
estimated fair value of certain financial instruments, including cash, accounts receivable and short-term debt approximates their carrying
value due to their short maturities and varying interest rates. "Fair value" is the price that would be received to sell
an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes
valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability
of the inputs used in the valuation methods, the Company is required to provide the following information according to the fair value
accounting standards. These standards established a fair value hierarchy as specified that ranks the quality and reliability of the information
used to determine fair values. Financial assets and liabilities are classified and disclosed in one of the following three categories:

 Level
 1:

 Quoted
 market prices in active markets for identical assets or liabilities, which includes listed equities.

 Level
 2:

 Observable
 market-based inputs 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") to purchase
up to an aggregate of 71,043 shares of common stock (the "Warrant Shares"), at an exercise price $ 312.50, $ 375 and $ 450 per
share, respectively. 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.

 As
noted in Note 9, the Company entered into an Addendum and Addendum Amendment in which the Company surrendered their Class B and Class
C warrants in July and September 2022, in exchange for Class D common stock purchase warrants at an exercise price of $ 87.50 per share,
Class E common stock purchase warrants of common stock at an exercise price of $ 112.50 per share, Class F common stock purchase warrants
of common stock at an exercise price of $ 137.50 per share, and Class G common stock purchase warrants of common stock at an exercise
price of $ 187.50, in which had fair values to be determined at $ 56.00 for Class D, $ 54.50 for Class E, $ 53.25 for Class F, and $ 52.00
for Class G, respectively. In connection with the Second Amendment on May 11, 2023, the Company also issued 240,000 new Class A warrants
exercisable at $ 12.50 and 80,000 new Class B warrants exercisable at $ 20.00. The fair value of the new Class A warrants was $ 4.20 and
for the new Class B warrants was $ 4.03.

 F- 13

 Any
modifications of the warrants were subsequently revalued, including the warrants attached to the Third Amendment on November 20,
2023, see Note 9 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 of its expected stock
volatility which was developed based on the historical volatility of a publicly traded set of peer companies.

 The following table represents the significant fair
value assumptions used for warrants issued or repriced during the years ended December 31, 2023 and 2022:

of Fair Value Assumptions For Warrants Issued

 2023

 2022

 Stock price (1)

 $
 2.93 - 5.00

 $
 14.25 - 259.25

 Exercise price (1)

 $
 0.01 - 20.00

 $
 19.00 – 331.50

 Expected term in years

 1.16 - 5.00

 2.00 – 5.00

 Expected dividend yield

 0.00
 %

 0.00
 %

 Volatility

 108.50 – 140
 %

 125 - 150
 %

 Risk-free interest rate

 3.36 - 5.25
 %

 1.18 – 4.41
 %

 (1)
 Prior period results have been adjusted to reflect the Reverse Stock Split
of the Common Stock at a ratio of 1-for- 25 that became effective October 13, 2023. See Note 2, "Accounting Policies," for
details.

 Following
the debt extinguishment on July 19, 2022 as noted further in Note 9, the Convertible Notes will be accounted for under the fair value
method on a recurring basis upon issuance (e.g., upon execution of the Addendum) per guidance within ASC 480, and at each subsequent
reporting period, with changes in fair value reported in earnings. The Company had a subsequent Addendum Amendment on September 13, 2022,
a Second Amendment on May 11, 2023, and a Third Amendment on November 20, 2023, which each caused a revaluation of the fair value on
the executed Addendum Amendment, Second Amendment, and Third Amendment date. Although the Notes are not being accounted for under 825-10,
the substance of the debt is considered to be the same and is therefore considered outside the scope of ASC 470-60. As such, the Company
performed a fair value analysis of the Convertible Notes. For the year-ended December 31, 2022 and 2023, the Company had Monte Carlo
simulations run-out for the expected conversion dates of the Convertible Notes using risk free rates, annual volatility, daily trading
volumes, likely conversion profiles, and other assumptions based on principal and accrued interest as of the year-end. The Company determined
the fair value of the Convertible Notes uses certain Level 3 inputs.

 The
following table represents the significant and subjective fair value assumptions used for Convertible Notes during the years ended December
31, 2023 and 2022:

 Schedule of Fair Value Assumptions For Convertible Notes

 2023

 2022

 Stock price (1)

 $
 3.60 –
 6.75

 $
 6.5

 Conversion price (1)

 $
 3.78 – 7.99

 $
 7.99

 Volatility

 87.50 – 150
 %

– 105
 %

 Risk-free interest rate

 4.64 - 5.50
 %

 4.12 – 4.76
 %

 (1)
 Prior
 period results have been adjusted to reflect the Reverse Stock Split of the Common Stock
 at a ratio of 1-for- 25 that became effective October 13, 2023. See Note 2, "Accounting
 Policies," for details.

 Changes
in Level 3 Financial Liabilities Carried at Fair Value

of Changes in Level 3 Financial Liabilities Carried at Fair Value

 (in thousands)

 Balance, July 19, 2022 (date of Addendum of convertible notes)

 $
 14,610

 Conversions of debt

 ( 1,100
)

 Total revaluation loss

 Balance, September 13, 2022

 14,107

 Total revaluation gains

 ( 1,853
)

 Balance, December 31, 2022

 $
 12,254

 Conversions of debt (January 2023- May 11 2023)

 ( 1,344
)

 Total revaluation losses

 Balance, May 11, 2023 (date of Second Amendment)

 10,940

 Conversions of Debt (May 11, 2023-November 19, 2023)

 ( 1,550
)

 Total revaluation losses

 1,569

 Balance November 20, 2023 (date of Third Amendment)

 $
 10,959

 Financial liabilities, Beginning balance

 $
 10,959

 Conversions of debt (November 20, 2023- December 31, 2023)

 ( 3,069
)

 Conversions of debt

 ( 3,069
)

 Total revaluation losses

 Total revaluation (gains) losses

 Balance December 31, 2023

 $
 8,474

 Financial liabilities, Ending balance

 $
 8,474

 Consistent
with the guidance in purchase accounting, the value of the pipeline of certain cryptocurrency mining projects previously owned by HEL
acquired in the Soluna Callisto acquisition in October 2021 as of the acquisition date was estimated using an expected value approach,
which probability-weights various future outcomes and uses certain Level 3 inputs. Included in those inputs are the following key assumptions:
expected growth in share price at a risk-free rate in the risk-neutral framework based on U.S. Treasury Rates as of the valuation date,
volatility of share price based on historical equity volatilities of comparable companies over a lookback period, assessments associated
with qualified projects based on assessment on timing of payments and assessment of active megawatt scenarios and the associated probabilities.
The resulting amounts are then discounted to present value through use of a discount rate that considers, among other things, the risk
of the payments, credit risk of the Company, and overall weighted average cost of capital of the acquired business. The resulting calculations
resulted in an estimated fair value of the acquired assets and consideration paid in common stock of approximately $ 33 million, which
was included as part of the consideration paid in the Soluna Callisto acquisition. As noted in Note 5, Accounting Standards Codification
("ASC") 805-50 provides that assets acquired in an asset acquisition are measured based on the costs of the acquisition,
which is the consideration that the acquirer transfers to the seller and includes direct transaction costs related to the acquisition
in which costs were an additional $ 3.5 million including as part of the acquired assets. For assessment on the fair value of the strategic
pipeline for impairment analysis, the Company looks at fair value based on projected construction costs, likely operating margins, timing
of payments, assessment of active megawatts scenarios, and the associated probabilities of completion of future projects, with other
factors noted above.

 F- 14

 Revenue
Recognition

Mining Revenue

 The
Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principles of the revenue standard are that
a company should recognize revenue to depict the transfer of promised good or services to customers in an amount that reflects the consideration
to which the company expects to be entitled for those goods or services. The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the Company satisfies a performance obligation

 In
order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in
the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606's definition of
a "distinct" good or service (or bundle of goods or services) if both of the following criteria are met: The customer can
benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e.,
the good or service is capable of being distinct), and the entity's promise to transfer the good or service to the customer is
separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the
context of the contract).

 If
a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services
is identified that is distinct.

 The
transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods
or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.
When determining the transaction price, an entity must consider the effects of all of the following:

Variable consideration

Constraining estimates of variable consideration

The existence of a significant financing component in the contract

Noncash consideration

Consideration payable to a customer

 Variable
consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price
allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time.

 Providing
computing power to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as "solving
a block") is an output of the Company's ordinary activities. The provision of providing such computing power is the only
performance obligation in the Company's contracts with mining pool operators. The transaction consideration the Company receives,
if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than
the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is all variable.
Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the
mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of
the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

 Fair
value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency where the Company is registered
at the time of receipt. The mined cryptocurrency is immediately paid to the Coinbase and Bittrex wallet. Cryptocurrency is converted
to U.S. dollars nearly everyday, as SCI is not in the business of accumulating material amounts of cryptocurrency on its balance sheet.

 Data
center hosting

 The Company has entered customer
hosting contracts whereby the Company provides electrical power and network connectivity to cryptocurrency mining customers, and the customers
pay a stated amount per megawatt-hour ("MWh") ("Contract Capacity"), a fixed rate, as well as a percentage of
the profit share of net income from the customer's mining operations. The actual monthly amounts are calculated after the close
of each month and billed the customer. If any shortfalls due to outages are experienced, service level credits may be made to customers
to offset outages which prevented them from cryptocurrency mining. Customer contract security deposits are reflected as other liabilities
and are made at the time the contract is signed and held until the conclusion of the contract relationship.

 F- 15

revenue is primarily from advance monthly payments received and revenue is recognized when service is completed.

Response Service

 The
Company provides emergency demand response solutions to ERCOT pursuant to a contractual commitment over defined service delivery periods.
This contract includes a single promise to stand ready, on a monthly basis, to deliver a set amount of curtailment (committed capacity)
per month when and if called upon by ERCOT. The Company has concluded this represents a series of distinct monthly services that are
substantially the same, with the same pattern of transfer to the customer. Accordingly, the monthly promise to stand ready is accounted
for as a single performance obligation. The Company is the principal in these arrangements as it has control over the services prior
to those services being transferred to the customer.

 Capacity
fees are paid to the Company by ERCOT for its stand ready commitment to curtail MWs and are typically based on the Company's ability
to deliver the committed capacity throughout the contractual delivery period. In general, if the Company fails to curtail the contracted
MW during energy or emergency dispatches, the MW shortfall results in a penalty that could require the Company to reduce the fees paid
by the customer during the contract period.

 In
order to determine the transaction price, the Company estimates the amount of variable consideration at the outset of the contract either
utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. These estimates
consider i) the contractual rate per MW, and ii) historical performance. The Company constrains (reduces) the estimates of variable consideration
such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract.
When determining if variable consideration should be constrained, management considers whether there are factors outside the Company's
control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and
magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. In the event of an emergency
dispatch, any earned energy fees are associated and allocated to the specific month of performance, as these fees meet the criteria to
allocate variable consideration to a distinct monthly service within a series of distinct services that comprise the single performance
obligation. Therefore, energy fees are recognized in the month in which the Company is called upon to deliver on its stand-ready obligation
to curtail capacity.

 The
Company believes that an output measure based on the monthly contractual MW stand-ready obligation is the best representation of the
"transfer of value" to the customer. Accordingly, the Company recognizes monthly revenue based on the proportion of committed
stand-ready capacity obligation that has been fulfilled to date.

 Cost
of Cryptocurrency Mining and Data Center Hosting Revenue

 Cost
of cryptocurrency mining and data center hosting revenue includes direct utility costs as well as overhead costs that relate to the operations
of SCI's cryptocurrency mining facility.

 Accounts
Receivable and Allowance

 The
Company's accounts receivable balance consists of amounts due from its data center hosting customers and receivables for demand
response services. The Company records accounts receivable at the invoiced amount less an allowance for any potentially uncollectable
accounts under the current expected credit loss ("CECL") impairment model and presents the net amount of the financial instrument
expected to be collected. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life
of an instrument, that considers forecasts of future economic conditions in addition to information about past events and current conditions.
Based on this model, the Company considers many factors, including the age of the balance, collection history, and current economic trends.
The Company determines the allowance based on historical write-off experience and current exposures identified. The Company reviews its
allowance for potentially uncollectible accounts under CECL monthly. Past due balances over 90 days and over a specified amount are reviewed
individually for collectability. All other balances are reviewed on a pooled basis by type of receivable. Account balances are charged
off against the allowance when the Company believes it is probable the receivable will not be recovered. The Company does not have any
off balance-sheet credit exposure related to its customers. Bad debts are written off after all collection efforts have ceased.

 Allowances
for credit losses are recorded as a direct reduction from an asset's amortized cost basis. Credit losses and recoveries are recorded
in G eneral and administrative expenses in the Consolidated Statements of Operations. Recoveries of financial assets previously
written off are recorded when received. Based on the Company's current and historical collection experience, management did not
record an allowance for expected credits losses or record any recoveries as of December 31, 2023 and December 31, 2022, respectively.

 F- 16

 Notes
Receivable

 The
Company's notes receivable consists of loans made by the Company, who serves as the debt holder, to different entities, serving
as borrowers. The Company accounts for its notes receivable
in accordance with ASC Topic 310, Receivables ("ASC 310").

 In
accordance with ASC 310, notes receivable are reported on the balance sheet at their amortized cost basis. The amortized cost basis is
the amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion,
or amortization of premium, discount, and net deferred fees or costs, or other adjustments. The Company's notes receivable were
all issued at their respective principal amounts. Interest income will be recognized based on the contractual rate in the loan agreement
and any premium/discount will be amortized to interest income using the effective interest rate method. The Company does not currently
maintain a loan loss allowance as it has not experienced any such losses in historical periods and does not anticipate future losses.
The Company evaluates any potential need for loan loss reserves on a periodic basis based on relevant internal and external factors that
affect loan collectability, including the amount of outstanding loans owed to the Company, current collection patterns and current economic
trends. As these conditions change, the Company may need to record allowances in future periods.

 Employee
Receivables

 Certain
employees have a receivable due to the Company based on their stock-based awards, in which $ 110 thousand and $ 120 thousand was outstanding
as of December 31, 2023 and December 31, 2022, respectively. The balance is currently presented as $ 13 thousand and $ 26 thousand within
Notes receivable as of December 31, 2023 and December 31, 2022 and $ 97 thousand and $ 94 thousand, respectively within Other assets on
the financial statements.

 Deposits
and Credits on equipment

 As
of December 31, 2023 and December 31, 2022, the Company had approximately $ 1.0 million and $ 1.2 million, respectively, in deposits and
credits on equipment, that had not yet been received by the Company as of the year end. Once the Company receives such equipment in the
subsequent period, the Company will reclassify such balance into Property, Plant, and Equipment. The credit on equipment of $ 975 thousand
is restricted to be used on future purchases by September 1, 2024 ("expiration date"). The Company notes that if an order
is not executed by the expiration date, the credit would be forfeited. The Company intends to utilize the full credit balance for future
orders prior to the expiration date.

 Long-Lived
Assets

 The
Company accounts for impairment or disposal of long-lived assets, which include property, plant, and equipment and also finite-lived
intangible assets, in accordance with accounting standards that address the financial accounting and reporting for the impairment or
disposal of long-lived assets, specify how impairment will be measured, and how impaired assets will be classified in the consolidated
financial statements. On a quarterly basis, the Company analyzes the status of its long-lived assets at each subsidiary for potential
impairment. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to undiscounted
future cash flows expected to be generated by the asset. Because the impairment test for long-lived assets held in use is based on estimated
undiscounted cash flows, there may be instances where an asset or asset group is not considered impaired, even when its fair value may
be less than its carrying value, because the asset or asset group is recoverable based on the cash flows to be generated over the estimated
life of the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the fair value of the assets. During the year ended December 31, 2023 and 2022, the
Company has impaired approximately $ 575 thousand and $ 47.4 million, respectively, of property, plant, and equipment, and there was no
impairment for the intangible assets for the year ended December 31, 2023 and 2022.

 Cash
and Cash Equivalents

 Cash
and cash equivalents consist of cash and highly liquid short-term investments with original maturities of less than three months.

 Restricted
Cash

 Restricted
cash relates to cash that is legally restricted as to withdrawal and usage or is being held for a specific purpose and thus not available
to the Company for immediate or general business use. As of December 31, 2023, the Company had restricted cash of approximately $ 4.0
million, in which $ 3.0 million was classified as current and $ 1.0 million was classified as non-current. On December 31, 2022, the Company
had restricted cash of approximately $ 685 thousand, in which the entire balance was classified as current. The balance in restricted
cash relates to funds held in escrow accounts due to sales of equipment that were executed, in which the Company can release to the convertible
noteholders only if they request their share of funds. If no funds are distributed to the convertible noteholders from the escrow account
by July 25, 2024, the funds may be used for general purposes for the Company. In addition, there was a restricted deposit held with a
customer that was for less than 12 months. The Company has a long-term restricted cash balance in relation to a collateralized deposit.

 F- 17

 Net
(loss) Income per Share

 The
Company computes basic income per common share by dividing net income by the weighted average number of common shares outstanding during
the reporting period. Diluted income per share reflects the potential dilution, if any, computed by dividing income by the combination
of dilutive common share equivalents, comprised of shares issuable under outstanding investment rights, warrants and the Company's
share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common
share equivalents include the dilutive effect of in-the-money stock options, which are calculated based on the average share price for
each period using the treasury stock method. Under the treasury stock method, the exercise price of a stock option and the amount of
compensation cost, if any, for future service that the Company has not yet recognized are assumed to be used to repurchase shares in
the current period.

 Share-Based
Payments

 The
Company grants options to purchase our common stock and awards restricted stock to our employees and directors under our equity
incentive plans. The benefits provided under these plans are share-based payments and the Company accounts for stock-based awards
exchanged for employee service in accordance with the appropriate share-based payment accounting guidance. Stock-based compensation
represents the cost related to stock-based awards granted to employees and directors. The Company measures stock-based compensation
cost at grant date based on the estimated fair value of the award and recognizes the cost as expense on a straight-line basis in
accordance with the vesting of the options (net of estimated forfeitures) over the option's requisite service period. The
Company estimates the fair value of stock-based awards on the grant date using a Black-Scholes valuation model. The Company uses the
fair value method of accounting with the modified prospective application, which provides for certain changes to the method for
valuing share-based compensation. The valuation provisions apply to new awards and to awards that are outstanding on the effective
date and subsequently modified. Under the modified prospective application, prior periods are not revised for comparative purposes.
Stock-based compensation expense is recorded in the lines titled "Cost of cryptocurrency mining revenue," "Cost of
data hosting revenue," and "Selling, general and administrative expenses" in the Consolidated Statements of Operations based on the
employees' respective functions.

 The
Company records deferred tax assets for awards that potentially can result in deductions on the Company's income tax returns based
on the amount of compensation cost that would be recognized upon issuance of the award and the Company's statutory tax rate. All
income tax effects of awards, including excess tax benefits, recognized on stock-based compensation expense are reflected in the Consolidated
Statements of Operations as a component of the provision for income taxes on a prospective basis.

 The
determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company's
stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the Company's
expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free
interest rate, and expected dividends.

 Theoretical
valuation models and market-based methods are evolving and may result in lower or higher fair value estimates for share-based compensation.
The timing, readiness, adoption, general acceptance, reliability, and testing of these methods is uncertain. Sophisticated mathematical
models may require voluminous historical information, modeling expertise, financial analyses, correlation analyses, integrated software
and databases, consulting fees, customization, and testing for adequacy of internal controls.

 For
purposes of estimating the fair value of stock options granted using the Black-Scholes model, the Company uses the historical volatility
of its stock for the expected volatility assumption input to the Black-Scholes model, consistent with the accounting guidance. The risk-free
interest rate is based on the risk-free zero-coupon rate for a period consistent with the expected option term at the time of grant.
The expected option term is calculated based on our historical forfeitures and cancellation rates.

 The
fair value of restricted stock awards is based on the market close price per share on the grant date. The Company expenses the compensation
cost of these awards as the restriction period lapses, which is typically a one- to three-year service period to the Company. The shares
represented by restricted stock awards are outstanding at the grant date, and the recipients are entitled to voting rights with respect
to such shares upon issuance.

 Notes
payable

 The
Company records notes payable net of any discount or premiums. Discounts and premiums are amortized as interest expense or income over
the life of the note in such a way as to result in a constant rate of interest when applied to the amount outstanding at the beginning
of any given period.

 F- 18

 Concentration
of Credit Risk

 Financial
instruments that subject the Company to concentrations of credit risk principally consist of cash equivalents and trade accounts receivable.
The Company's trade accounts receivable are from data hosting revenue with the Company's customers throughout the year. The
Company does not require collateral and has not historically experienced significant credit losses related to receivables from individual
customers or groups of customers in any particular industry or geographic area. The Company requires that hosting customers make a prepayment
of the next month's estimated expenses or make a security deposit to the Company.

 The
Company has cash deposits in excess of federally insured limits but does not believe them to be at risk.

 Other
Comprehensive Income

 The
Company had no other comprehensive income items for the years ended December 31, 2023 and 2022.

 Leases

 The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU")
assets and operating lease liability on our consolidated balance sheets. The Company did not have any finance leases as of December 31,
2023 or December 31, 2022.

lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over
the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental
borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating
lease ROU assets also include any lease payments made and excludes lease incentives and initial direct costs incurred. The Company's
lease terms may include options to extend or terminate its leases when it is reasonably certain that the Company will exercise those
options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

 The
Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases,
the Company accounts for lease components together with non-lease components (e.g., common-area maintenance).

 Accounting
Updates Effective for fiscal year 2023

 Changes
to U.S. GAAP are established by the Financial Accounting Standards Board (the "FASB") in the form of accounting standard
updates ("ASUs") to the FASB's Accounting Standards Codification ("ASC"). The Company considered the applicability
and impact of all ASUs. ASUs not mentioned below were assessed and determined to be either not applicable or are expected to have minimal
impact on our consolidated financial position or results of operations.

 In
June 2016, the FASB issued ASU 2016-13 (Financial Instruments - Credit Losses (Topic 326)) and its subsequent amendments to the initial
guidance within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11 and ASU 2020-02, respectively (collectively, Topic 326).
Topic 326 changes how entities will measure credit losses for most financial assets and certain other instruments that are not accounted
for at fair value through net income. This standard replaces the existing incurred credit loss model and establishes a single credit
loss framework based on a current expected credit loss model for financial assets carried at amortized cost, including loans and held-to-
maturity debt securities. The current expected loss model requires an entity to estimate credit losses expected over the life of the
credit exposure upon initial recognition of that exposure when the financial asset is originated or acquired, which will generally result
in earlier recognition of credit losses. This standard also requires expanded credit quality disclosures. For available-for-sale debt
securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary
impairment model. This standard also simplifies the accounting model for purchased credit-impaired debt securities and loans. This standard
will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables,
and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2018-19 clarifies that
receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. ASU 2019-04 clarifies
that equity instruments without readily determinable fair values for which an entity has elected the measurement alternative should be
remeasured to fair value as of the date that an observable transaction occurred. ASU 2019-05 provides an option to irrevocably elect
to measure certain individual financial assets at fair value instead of amortized cost. This standard should be applied on either a prospective
transition or modified-retrospective approach depending on the subtopic. This standard will be effective for the Company for annual and
interim reporting periods beginning on or after December 15, 2022, and while early adoption is permitted, the Company does not expect
to elect that option. This standard has been adopted as of January 1, 2023, and did not have any material impact for the Company's
operations. The Company will continue to evaluate if any changes occur subsequently and properly record and disclose in relation to Topic
326.

 F- 19

 Accounting
Updates Not Yet Effective

 Improvements
to Reportable Segment Disclosures

 In
November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07, Segment Reporting
(Topic 280): Improvement to Reportable Segment Disclosures (ASU 2023-07), which requires disclosure of incremental segment information
on an annual and interim basis, primarily through enhanced disclosures of significant segment expenses. ASU 2023-07 is effective for
fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and requires
retrospective application to all periods presented upon adoption. Early adoption is permitted. The Company is currently evaluating the
impact that ASU 2023-07 will have on its consolidated financial statements and disclosures.

 Crypto
Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets

 In
December 2023, the FASB issued ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and
Disclosure of Crypto Assets, which establishes accounting guidance for crypto assets meeting certain criteria. Bitcoin meets this
criteria. The amendments require crypto assets meeting the criteria to be recognized at fair value with changes recognized in net income
each reporting period. Upon adoption, a cumulative-effect adjustment is made to the opening balance of retained earnings as of the beginning
of the annual reporting period of adoption. ASU 2023-08 is effective for fiscal years beginning after December 15, 2024, including interim
periods within those fiscal years. Early adoption is permitted. The guidance is not expected to have an impact on the Company's
consolidated financial statements and disclosures, unless the Company intends to hold crypto assets.

 Improvements
to Income Tax Disclosures

 In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which
requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid,
among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted.
The Company is currently evaluating the impact that ASU 2023-09 will have on its consolidated financial statements and disclosures.

 3. Accounts Receivable

 Accounts
receivables consist of the following at:

 Schedule of Accounts Receivable

 31,
 2023

 31,
 2022

 Data hosting

 $
 2,456

 Related party receivable

 Demand response service receivable

 -

 Proprietary mining Coinbase receivable

 Total

 $
 2,948

 $

 4. Property, Plant and Equipment

 Property,
plant and equipment consist of the following at:

of Plant And Equipment

 31,
 2023

 31,
 2022

 Land and land improvements

 $
 1,538

 $

 Buildings and leasehold improvements

 25,369

 6,410

 Computers and related software

 11,764

 7,248

 Machinery and equipment

 9,054

 3,310

 Office furniture and fixtures

 Construction in progress

 1,111

 26,175

 Property,plant and equipment gross

 48,864

 43,705

 Less: Accumulated depreciation

 ( 4,292
)

 ( 1,496
)

 Property,plant
 and equipment

 $
 44,572

 $
 42,209

 Depreciation
expense was approximately $ 3.9 million and $ 18.7 million for the years ended December 31, 2023 and 2022, respectively. Repairs and maintenance
expense was $ 140 thousand and $ 76 thousand for the years ended December 31, 2023 and 2022, respectively.

 On
February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA, which resulted in a reportable disposition
of all of the Company's mining assets at the site and certain of the operating assets of Project Marie. The total net book value
of the collateralized assets that were repossessed totaled approximately $ 3.4 million in which were written off the Company's books
in the first quarter of 2023, offsetting the outstanding accrued interest and penalty first, then the remaining outstanding loan. On
September 5, 2023, NYDIG provided a letter finalizing the accounting for the repossessed collateralized assets totaling proceeds of approximately
$ 3.4 million. See Note 9 in relation to the outstanding debt and interest associated with the NYDIG financing.

 F- 20

 Loss
on sale of fixed assets

 The
Company incurred a $ 398 thousand loss for the year ended December 31, 2023 in connection with the disposal and sale of miners (M20, M21,
M30, and M31 models) and equipment which included Switchgear and Tesseracks (mobile, Bitcoin mobile equipment) for approximately $ 147
thousand at their Project Sophie and Project Marie sites in which the Company received proceeds of approximately $ 2.5 million in which
had a net book value of approximately $ 2.7 million. In addition, the Company incurred a loss on sale of assets of approximately $ 251 thousand in relation to
NYDIG collateral finalization in which the Company had to pay for expenses and legal fees in related to the disposition. The Company
incurred a $ 4.1 million loss for the year ended December 31, 2022 in connection with the disposal of miners and equipment with a net
book value of approximately $ 6.9 million for the year ended December 31, 2022, in which the Company received proceeds of $ 2.8 million
for the year ended December 31, 2022.

on fixed assets

the year ended December 31, 2023, the Company had impairment charges of approximately $ 575 thousand in which related to impairment of
approximately $ 165 thousand for power supply units (PSUs) at the Sophie location, and $ 410 thousand for revaluing S19, M30, M31, and
M32 miners to market conditions and sales made during and subsequent to year-end in which lowered the net book value to the sales price
of the type of miner sold.

the year ended December 31, 2022, the Company had total impairment charges of approximately $ 47.4 million, relating to S-9 and L3 miners
in storage in which the carrying balance exceeded its fair value by approximately $ 1.9 million. In addition, the Company assessed the
active miners in operations and determined there had been a decline in the market value of the active miners in the Company's operations
for fiscal year 2022. As a result, a quantitative impairment analysis was required as of December 31, 2022. As such, the Company reassessed
its estimates and forecasts as of December 31, 2022, to determine the undiscounted cash flows to determine whether the miners would be
recoverable. It was determined based on the analysis, that the undiscounted cash flow with residual value was less than the net book
value as of December 31, 2022, confirming the existence of a triggering event, and therefore required an impairment to be recognized.
Based on the fair value of the active miners compared to the net book value, the Company recorded an impairment charge of approximately
$ 39.4 million to be recognized on the consolidated statements of operations for the year ended December 31, 2022. As of December 31,
2022, the Company had M20 miners and M21 miners in service at the Sophie location. Of these miners a portion of the miners were planned
to be sold in the near future in fiscal year 2023. As a result of the fair value analysis as of December 31, 2022, the Company concluded
the carrying amount of the property, plant and equipment associated with the M20 and M21 miners exceeded its fair value of $ 295 thousand,
which resulted in impairment charges of approximately $ 1.8 million on the consolidated statements of operations for the year ended December
31, 2022.

 As
of December 31, 2022, the Company had equipment held at vendor including switchgears, transformers, busways and bus plugs. The Company
had discussions with a potential buyer and board of directors approval for sale of the switchgears held at vendor. The Company had a
purchase order received for the switchgear, subject to inspection of the equipment and final sale. The sale of the equipment held at
vendor would mean the equipment was not being used for its intended purpose. As such, the Company reassessed its estimates and forecasts
as of December 31, 2022, to determine the fair values of the equipment held at vendor. As a result of the fair value analysis as of December
31, 2022, the Company concluded the carrying amount of the equipment held at vendor of approximately $ 2.8 million exceeded its fair value
of $ 916 thousand, which resulted in an impairment charge of approximately $ 1.9 million on the consolidated statements of operations for
the year ended December 31, 2022.

 Due
to the closure of operations for Project Marie as discussed above, the Company disposed of approximately $ 1.7 million worth of leasehold
improvements and general electrical upgrades and equipment which were attached to the facility which could not be salvaged for any value
with the operations ceasing, and therefore the Company impaired those assets for the full amount as of December 31, 2022. Also, the Company
had equipment held for sale due to the closure of the Marie facility in the first quarter of 2023, in which based on a fair value analysis
compared to the Company's net book value of the equipment still held had an impairment of approximately $ 700 thousand that was
recorded on the consolidated statements of operations for the year ended December 31, 2022. As a result, the total impairment for the
Marie assets not attached to the collateralized NYDIG assets was approximately $ 2.4 million for the year-ended December 31, 2022.

 Equipment
held for sale

 In
April 2023, Project Sophie entered into a 25 MW hosting contract with a sustainability-focused Bitcoin miner, in which has shifted the
Company's business model at the Company's modular data center at Project Sophie from proprietary mining to hosting Bitcoin
miners for the customer. The Company is currently selling existing Bitcoin miners at the site and redeploying capital. The Company obtained
Board of Director approval to sell all remaining miners at the Sophie location and as of December 31, 2023, approximately $ 107 thousand
to be sold which the Company expects to sell within a year.

 F- 21

 5. Asset Acquisition

 As
discussed above, on October 29, 2021, we completed the Soluna Callisto acquisition pursuant to an Agreement and Plan of Merger dated
as of August 11, 2021, by and among the Company, SCI and Soluna Callisto (the "Merger Agreement"). The purpose of the transaction
was for SCI to acquire substantially all of the assets (other than those assets physically located in Morocco) formerly held by HEL,
which assets consisted of Soluna Callisto's existing pipeline of certain cryptocurrency mining projects that HEL previously transferred
to Soluna Callisto and to provide SCI with the opportunity to directly employ or retain the services of four individuals whose services
it had retained through HEL prior to the merger. As a result of the merger, each share of common stock of Soluna Callisto issued and
outstanding immediately prior to the effective time of the merger, other than shares owned by the Company or any of our subsidiaries,
was cancelled and converted into the right to receive a proportionate share of up to 118,800 shares (the "Merger Shares")
of the Company's common stock payable upon the achievement of certain milestones within five years after the effective date in
the merger, as set forth in the merger agreement and the schedules thereto (the "Merger Consideration"). See Note 15 for
further information regarding our relationship with HEL.

 The
acquisition was accounted for, for purposes of U.S. GAAP, using the asset acquisition method of accounting under the ASC 805-50. We determined
that we acquired in the acquisition a group of similar identifiable assets (primarily, the "strategic pipeline contract"
of certain cryptocurrency mining projects), which it classified as an intangible asset for accounting purposes. As a result, our acquisition
of the set of assets and activities constituted an asset acquisition, as opposed to a business acquisition, under ASC 805. ASC 805-50
provides that assets acquired in an asset acquisition are measured based on the costs of the acquisition, which is the consideration
that the acquirer transfers to the seller and includes direct transaction costs related to the acquisition. We include Soluna Callisto's
results of operations in our results of operations beginning on the effective date of the acquisition.

 Termination
Consideration

 In
connection with the Soluna Callisto acquisition, effective as of October 29, 2021, pursuant to the terms of a termination agreement dated
as of August 11, 2021 by and among the Company, SCI, and HEL, on November 5, 2021, SCI paid HEL $ 725 thousand and SHI issued to HEL 6,000
shares of SHI common stock (the "Termination Shares"). SCI also reimbursed HEL $ 75 thousand for transaction-related fees
and expenses. SHI included the termination costs as part of asset acquisition per ASC 805-50. Based on the closing price of the SHI common
stock on Nasdaq on November 5, 2021, SHI has valued the aggregate termination consideration at approximately $ 1.9 million.

 Merger
Consideration

 The
fair value of the Merger Consideration includes various assumptions, including those related to the allocation of the estimated value
of the maximum number of Merger Shares ( 118,800) issuable as Merger Consideration, which issuance is contingent on the achievement of
certain milestones of generating active Megawatts from Qualified Projects in which the Cost Requirement is satisfied within five years
after the effective date of the merger, as set forth in the Merger Agreement and the schedules thereto, as set forth below. The Merger
Consideration and the timing of the payment thereof is subject to the following qualifications and limitations:

 1a)

 Upon
 the Company achieving each one active MegaWatts ("Active MWs") from the projects in which the cost requirement is satisfied,
 this will cause SHI to issue to HEL 792 shares for each one MW up to a maximum 150 Active MW.

 i.

 If,
 on or before June 30, 2022, SCI or Soluna Callisto directly or indirectly achieves at least 50 active MWs from one or more of three
 current projects as set forth in the Merger Agreement that satisfy the Cost Requirement as defined within the Merger Agreement, then
 the Merger Shares will be issued at an accelerated rate of 1,188 Merger Shares for each of such first 50 Active MW, such that the
 Merger Shares in respect of the remaining 100 Active MWs (if any) will be issued at a reduced rate of 594 Merger Shares per Active
 MW (see below for extension and issuance of a proportion of shares);

 ii.

 If,
 by June 30, 2023, SCI or Soluna Calisto fail to achieve directly or indirectly (other than pursuant to a Portfolio Acquisition) at
 least 50 Active MW from Projects that satisfy the Cost Requirement, then the maximum aggregate number of Merger Shares shall be reduced
 from 118,800 to 59,400 (see below for extension and issuance of a proportion of shares);

 F- 22

 iii.

 No
 Merger Shares will be issued to HEL without our prior written consent;

 iv.

 Issuance
 of the Merger Shares will also be subject to the continued employment with or engagement by SCI or the surviving corporation of (A)
 John Belizaire and (B) at least two of Dipul Patel, Mohammed Larbi Loudiyi, (through ML&K Contractor), and Phillip Ng at the
 time that such Merger Shares are earned. If both (A) and (B) cease to be satisfied on or prior to the date that all Merger Shares
 are earned (such date, a "Trigger Date"), then "Qualified Projects" for purposes of determining Merger Shares
 shall only apply to those Qualified Projects that are in the pipeline as of the Trigger Date. For these purposes, if any such individual's
 employment or service relationship with SCI is terminated without cause, as a result of his death or disability, or with good reason
 (as such terms are defined in the employment and consulting agreements), such individual shall be deemed to continue to be employed
 or engaged by SCI for these purposes;

 v.

 If
 SHI or SCI consummates a Change of Control before the fifth anniversary of the date of the closing of the merger, then we will be
 obligated to issue all of the unissued Merger Shares (subject to (ii) and (iii) above). The Merger Agreement defines "Change
 of Control" as (A) the sale, exchange, transfer, or other disposition of all or substantially all of the assets of us or SCI,
 (B) our failure to continue to own (directly or indirectly) 100 % of the outstanding equity securities of SCI and/or the surviving
 corporation, or (C) a merger, consolidation, or other transaction in which the holders of SHI's, SCI's, or the surviving
 corporation's outstanding voting securities immediately prior to such transaction own, immediately after such transaction,
 securities representing less than 50 % of the voting power of the corporation or other entity surviving such transaction (excluding
 any such transaction principally for bona fide equity financing purposes, so long as, in the case of SHI or SCI (but not the surviving
 corporation) such transactions, individually and in the aggregate, do not result in a change in membership of such entity's
 board of directors so that the persons who were members of the board of directors immediately prior to the first such transaction
 constitute less than 50% of the board membership at any time after such transaction(s) are consummated). Notwithstanding the foregoing,
 a transaction shall not constitute a Change of Control if its sole purpose is to change the state of SHI's or SCI's incorporation
 or to create a holding company that will be owned in the same proportions by the persons who held SHI's or SCI's securities
 immediately prior to such transaction; and

 vi.

 if
 on any of the fifth anniversary of the effective time of the merger, a facility has not become a Qualified Facility and therefore
 is not taken into consideration in the calculation of Active MW because any of the elements set forth in the definition of "Qualified
 Facility" as defined in the Merger Agreement have not been met for reasons beyond the reasonable control of SCI's management
 team, but SCI's management team is then actively engaged in the process of completing and is diligently pursuing the completion
 of the missing elements, then (A) the target dates set forth above shall be extended for an additional 90 days, and (B) additional
 extensions of time may be granted by the Board of Directors in its commercially reasonable discretion, in each case for the purpose
 of enabling SCI's management team to complete the steps needed to qualify the facility as a Qualified Facility.

 On
April 11, 2023, the Board had reviewed and approved the progress of SCI's management team in qualifying facilities as Qualified
Facilities and discussed an extension of the date in Section 2.7(a)(ii)(A) of the Merger Agreement to December 31, 2023 (previously was
June 30, 2022), and an extension of the date in Section 2.7(a)(ii)(B) of the Merger Agreement to June 30, 2024 (previously was June 30,
2023).

 Due
to conditions being met within the Merger Agreement in relation to energization and retention of employees, the Company has advised SCI
US Holdings LLC, a Delaware limited liability company, who is the sole Effective Time Holder (as defined in the Merger Agreement) of
the right to receive the Merger Shares and that 19,800 and 39,600 Merger Shares were issued on May 26, 2023 and October 10, 2023. SCI
US Holdings LLC has consented to the issuance of such Merger Shares as required under the Merger Agreement and has directed the Company
to issue such Merger Shares to its affiliate, HEL. Following the issuance of the 59,400 Merger Shares, a total of 59,400 Merger Shares
remain available for possible issuance pursuant to the terms of the Merger Agreement.

 The
number of Merger Shares is also subject to customary anti-dilution adjustments in the event of any stock split, stock consolidation,
stock dividend, or similar event involving the shares of our common stock. Based on the assessment performed, the fair value of the merger
consideration as of October 29, 2021 was approximately $ 33.0 million.

 Based
on management's evaluation, management concluded that due to the high volatility of its share price, the low probability of not
achieving the MW targets, and the fact the value associated with meeting the performance measures are not intended to drive the number
of shares to be issued, but rather act as a proxy for and driver of share value, the monetary value of the obligation at inception is
predominantly a function of equity shares. As such, the consideration will be treated as equity as ASC 480-10-25-14 is not applicable
since the monetary value of the Merger Shares is not (1) fixed, or (2) dependent on (i) variations in something other than the fair value
of the Company's equity shares, or (ii) variations inversely related to changes in the fair value of the Company's equity
shares and is instead exposed to changes in the fair value of the Company's share price, and as such does not represent a liability
under ASC 480. The economic risks and characteristics of the share consideration are clearly and closely related to a residual equity
interest since the underlying (i.e., the incremental shares of common stock delivered upon achievement of each MW target) will participate
in the increase in value of the common equity of the Company, similar to a call option on common stock. Based on guidance in ASC 815-40-25-7
through 25-35, the share consideration is considered to be indexed to the Company's stock and meets the additional criteria for
equity classification.

 F- 23

 6. Intangible Assets

assets consist of the following as of December 31, 2023:

of Intangible Assets

 Assets

 Accumulated

 Total

 Strategic pipeline contract

 $
 46,885

 $
 20,317

 $
 26,568

 Assembled workforce

 Patents

 Total

 $
 47,550

 $
 20,543

 $
 27,007

assets consist of the following as of December 31, 2022:

 Assets

 Accumulated

 Total

 Strategic pipeline contract

 $
 46,885

 $
 10,940

 $
 35,945

 Assembled workforce

 Patents

 Total

 $
 47,495

 $
 11,063

 $
 36,432

expense for the year ended December 31, 2023 and 2022 was approximately $ 9.5 million and $ 9.5 million.

 The
strategic pipeline contract relates to supply of a critical input to our digital mining business. The Company has analyzed this strategic
pipeline contract similar to a permit for future benefit. The strategic pipeline contract relates to potential renewable energy datacenters
that fit in the alignment of the Company structure to expand operations of the Company's new focus in their business.

 The
Company expects to record amortization expense of intangible assets over the next five years and thereafter as follows:

of Amortization Expense of Intangible Assets

 Year ending December
 31,

 2024

 $
 9,485

 2025

 9,485

 2026

 7,905

 2027

 2028

 Thereafter

 Total

 $
 27,007

 7. Income Taxes

 Income
tax expense (benefit) for each of the years ended December 31 consists of the following:

 Schedule of Income Tax Expense

 2023

 2022

 Federal

 $
 —

 $
 —

 State

 ( 1,107
)

 ( 1,388
)

 Total

 $
 ( 1,067
)

 $
 ( 1,346
)

 F- 24

 The
significant components of deferred income tax expense (benefit) from operations for each of the years ended December 31 consists of the
following:

 Schedule of Deferred Income Tax Expense

 2023

 2022

 Deferred tax expense (benefit)

 $
 2,566

 $
 ( 12,760
)

 Net operating loss carry forward

 ( 9,813
)

 ( 7,359
)

 Valuation allowance

 6,140

 18,731

 tax benefit (expense)

 $
 ( 1,107
)

 $
 ( 1,388
)

 The
Company's effective income tax rate from operations differed from the Federal statutory rate for each of the years ended December
31 as follows:

 Schedule of Effective Income Tax Rate

 2023

 2022

 Federal statutory tax rate

 %

 %

 Change in valuation allowance

 ( 15
)

 ( 17
)

 State taxes, net of federal benefit

 —

 —

 Expiration of stock option

 ( 1
)

 —

 Loss on extinguishment of debt

 ( 1
)

 ( 2
)

 Other deferred Adjustments

 ( 1
)

 ( 1
)

 Tax rate

 %

 %

Tax (Liabilities) Assets:

tax (liabilities) assets are determined based on the temporary differences between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates. Temporary differences, net operating loss carryforwards and tax credit carryforwards
that give rise to deferred tax assets and liabilities are summarized as follows as of December 31:

 Schedule of Deferred Tax Assets

 2023

 2022

 Deferred tax assets:

 Accruals and reserves

 $

 $

 Net operating loss

 28,951

 19,137

 Property, plant and equipment

 5,777

 10,093

 Stock options

 1,562

 Research and development tax credit

 Deferred tax assets

 36,791

 30,651

 Valuation allowance

 ( 36,791
)

 ( 30,651
)

 Deferred tax assets, net of valuation allowance

 —

 —

 Deferred tax liabilities:

 Intangibles

 ( 7,779
)

 ( 8,886
)

 Deferred tax liabilities

 ( 7,779
)

 ( 8,886
)

 Deferred tax liabilities, net

 $
 ( 7,779
)

 $
 ( 8,886
)

 In
connection with the strategic contract pipeline acquired in the Soluna Callisto acquisition as further discussed in Note 6, ASC 740-10-25-51
requires the recognition of a deferred tax impact of acquiring an asset in a transaction that is not a business combination when the
amount paid exceeds the tax basis on the acquisition date. As such, the Company is required to adjust the value of the strategic contract
pipeline by approximately $ 10.9 million and this amount will be amortized over the life of the asset.

 Valuation
Allowance:

 The
Company believes that the accounting estimate for the 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 $ 6.1 million 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 $ 36.8 million and $ 30.7 million, respectively. Activity in the valuation allowance
for deferred tax assets is as follows as of December 31:

 Schedule of Deferred Tax Asset Valuation Allowance

 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

 Research and development credit

 Accrued expenses

 Valuation allowance, end of year

 $
 36,791

 $
 30,651

 Net
operating losses:

 As
of December 31, 2023, the Company has unused Federal net operating loss carryforwards of approximately $ 126.2 million. Of these, none
will expire in 2023, $ 52 million will expire between 2024 and 2035, and the remainder being carried forward indefinitely.

 The
Company's and/or its subsidiaries' ability to utilize their net operating loss carryforwards may be significantly limited
by Section 382 of the IRC of 1986, as amended, if the Company or any of its subsidiaries undergoes an "ownership change"
as a result of changes in the ownership of the Company's or its subsidiaries' outstanding stock pursuant to the exercise
of the warrants or otherwise.

 Unrecognized
tax benefits:

 The
Company has unrecognized tax benefits of $ 0 and $ 0 thousand as of December 31, 2023 and 2022.

the Company does not have uncertain tax positions that it expects will increase or decrease within twelve months of this reporting date.
The Company recognizes interest and penalties related to uncertain tax positions as a component of tax expense. The Company did not recognize
any interest or penalties in 2023 and 2022.

 The
Company files income tax returns, including returns for its subsidiaries, with federal and state jurisdictions. The Company is no longer
subject to IRS or state examinations for any periods prior to 2019, although carryforward attributes that were generated prior to 2021
may still be adjusted upon examination by the IRS if they either have been or will be used in a future period.

 8. Accrued Liabilities

 Accrued
liabilities consist of the following at:

 Schedule of Accrued Liabilities

 2023

 2022

 Salaries, wages and related expenses

 $

 $

 Liability to shareholders for previous acquisition

 Legal, audit, tax and professional fees

 Sales tax accrual

 -

 Real estate taxes accrual

 1,166

 -

 Hosting and utility fees

 Interest payable

 Dividend payable

 Construction fees

 -

 Membership distribution accrual

 -

 Other

 Total

 $
 4,906

 $
 2,721

 F- 26

 9. Debt

 Debt
consists of the following:

 Convertible
Notes Payable

 Schedule of Debt

in thousands):

 Maturity Date

 Rate

 31,
 2023

 31,
 2022

 Convertible Note

 July 25, 2024

 * 18
 %

 $
 8,474

 $
 12,254

 Less: discount from issuance of warrants

 -

 ( 475
)

 Less: debt issuance costs

 -

 ( 42
)

 Total convertible notes, net of discount and issuance
 costs

 $
 8,474

 $
 11,737

 *

 Default
 interest was waived on March 10, 2023, and no further interest applied on the Convertible Note for the remainder of the year.

 On
October 25, 2021, pursuant to a Securities Purchase Agreement (the "October SPA"), the Company issued to certain accredited
investors (the "Noteholders") (i) secured convertible notes in an aggregate principal amount of $ 16.3 million for an aggregate
purchase price of $ 15 million (collectively, the "October Secured Notes"), which were, subject to certain conditions, convertible
at any time by the investors, into an aggregate of 71,043 shares of the Company's common stock, at a price per share of $ 229.50
and (ii) Class A, Class B and Class C common stock purchase warrants (collectively, the "October Warrants") to purchase up
to an aggregate of 71,043 shares of common stock, at an initial exercise price of $ 312.50, $ 375 and $ 450 per share, respectively. The
October Warrants are legally detachable and can be separately exercised immediately for five years upon issuance, subject to applicable
Nasdaq rules.

 The
October Secured Notes, subject to an original issue discount of 8 %, had a maturity date (the "Maturity Date") of October
25, 2022, which was extended to April 25, 2023 pursuant to the Addendum Amendment (as defined below), upon which date the October Secured
Notes shall be payable in full. Commencing on the Maturity Date and also five (5) days after the occurrence of any Event of Default (as
defined in the October Secured Notes), interest on the October Secured Notes will accrue at an interest rate equal to the lesser of 18 %
per annum or the maximum rate permitted under applicable law. If any Event of Default or a Fundamental Transaction (as defined in the
October Secured Notes) or a Change of Control (as defined in the October Secured Notes) occurs, the outstanding principal amount of the
October Secured Notes, liquidated damages and other amounts owing in respect thereof through the date of acceleration, will become, at
the Noteholder's election, immediately due and payable in cash at the Mandatory Default Amount (as defined in the October Secured
Notes). The October Secured Notes may not be prepaid, redeemed or mandatorily converted without the consent of the Noteholders. The obligations
of the Company pursuant to the October Secured Notes are (i) secured to the extent and as provided in the Security Agreement, dated as
of October 25, 2021, by and among the Company, MTI Instruments and SCI, Soluna MC, LLC and Soluna SW, LLC (both of which are wholly owned
subsidiaries of SCI, and together with MTI Instruments and SCI, the "Subsidiary Guarantors"), and Collateral Services LLC
(the "Collateral Agent"), as collateral agent for the Noteholders; and (ii) guaranteed, jointly and severally, by the Subsidiary
Guarantors pursuant to each Subsidiary Guaranty, dated as of October 25, 2021, by and among each Subsidiary Guarantor and the Noteholders
signatory to the October SPA, subject to subsequent modifications pursuant to the Addendum, the Addendum Amendment and the NYDIG Transactions.

 On
July 19, 2022, the Company entered into an addendum to the October SPA (the "Addendum"), pursuant to which a portion of the
October Secured Notes would be converted and may be redeemed in three tranches, with each tranche of $ 1,100,000 required to be converted
into common stock in each case at the then in effect conversion price of the October Secured Notes, with such price, prior to each conversion,
to be reduced (but not increased) to a 20 % discount to the 5-day volume weighted average price ("VWAP") of the Company's
common stock. In addition, the Noteholders may require the Company to redeem up to $ 2,200,000 worth of October Secured Notes in connection
with each tranche at a rate of $ 1.20 for every $ 1.00 owed, less the amount of October Secured Notes converted during such tranche, not
including the required conversion amount if the Noteholders are unable to convert out of such amount of the October Secured Notes in
each tranche. The Company is also required to deposit up to $ 1,950,000 in an escrow account in connection with each tranche to satisfy
any redemptions, except with respect to the first tranche as provided in the Addendum Amendment (as defined below). The Addendum also
provides the right for the Company to pause the commencement of the conversion of the second and third tranches each for 45 days in the
event the Company pursues an equity financing. Pursuant to the Addendum, the exercise price of the Class A Warrants and Class B Warrants
and certain other warrants to purchase up to 3,400 shares of common stock issued to the Noteholders on January 13, 2022, was reduced
from $ 331.50 to $ 237.50 per share. In addition, the Company agreed to exchange the Class C Warrants for 11,841 shares of common stock,
which exchanges were completed between July 25, 2022 and August 1, 2022.

 F- 27

 On
September 13, 2022, the Company and the Noteholders entered into an agreement further amending the Addendum (the "Addendum Amendment"),
which among other matters, extended the Maturity Date of the October Secured Notes by six months to April 25, 2023, and increased the
principal amount of the October Secured Notes by an aggregate of $ 520,241 for a total outstanding principal amount of $ 13,006,022. Also
pursuant to the Addendum Amendment, $ 1.0 million previously deposited by the Company and held in escrow pursuant to the Addendum, was
released back to the Company upon signing of the Addendum Amendment; however, on or before October 17, 2022, the Company (i) must deposit
$1,000,000 into escrow as the Third Deposit, (ii) will not be required to make the second deposit of $1,950,000 pursuant to the Addendum
and the Addendum Agreement, or redeem the first tranche of October Secured Notes. Additionally, the First Reconcile Date was extended
to October 12, 2022. The Company gave notice to the Noteholders on October 10, 2022 that the Company would be conducting an equity financing.
This in turn paused the commencement of (a) the Second Conversion and the Second Reconcile Date, and (b) the Third Conversion and the
Third Reconcile Date, in each case, for forty-five (45) Trading Days, each as defined in the Addendum. This also had the effect of pausing
the Company's requirement to make the Third Deposit of $1,000,000 under the October Purchase Agreement as amended by the Addendum,
for 45 Trading Days. The 45-day trading window opened on December 20, 2022 to allow the Noteholders to apply the 20% discount to the
5-day VWAP of the Company's stock. In addition, pursuant to the Addendum Agreement, the Company issued to the Noteholders (i) 17,223
shares of the common stock ("New Shares") in exchange for the Class B warrants, (ii) Class D common stock purchase warrants
to purchase up to an aggregate of 40,000 shares of common stock at an exercise price of $ 87.50 per share, (iii) Class E common stock
purchase warrants to purchase up to an aggregate of 40,000 shares of common stock at an exercise price of $ 112.50 per share, (iv) Class
F common stock purchase warrants to purchase up to an aggregate of 40,000 shares of common stock at an exercise price of $ 137.50 per
share, and (v) Class G common stock purchase warrants to purchase up to an aggregate of 40,000 shares of common stock at an exercise
price of $ 187.50 per share (together, the "New Warrants"). The New Warrants are exercisable immediately and have exercise
period of 5 years from the issuance date.

to the Addendum, between July 21, 2022 to August 3, 2022, the October Secured Notes with an aggregate principal amount of $ 1,100,000
converted into 11,734 shares of common stock, at the conversion price of $ 93.75. Pursuant to the Addendum and Addendum Amendment, the
Company evaluated whether the new addendums qualified as debt modification or debt extinguishment, and based on ASC 470, Debt, the Company
determined the Addendum and Addendum Amendment to fall under Debt Extinguishment and the Company would be required to fair value the
new debt, and in turn write off the existing debt on the books. Based on the Company's assessment, an extinguishment of debt of
approximately $ 12.8 million was recorded in July and September of 2022 based on the Addendum and Addendum Amendment, the October Secured
Notes had an aggregate principal amount of approximately $ 13.0 million and a fair value of approximately $ 14.1 million outstanding after
the debt extinguishment. The fair value of the New Warrants issued to the Noteholders on September 13, 2022 was approximately $ 8.6 million
and recorded as part of the loss on extinguishment of debt. The residual fair value of the New Warrants issued to non-lenders was $ 892
thousand and was recorded as equity with the offset as debt discount against the residual proceeds, in which the entire $ 892 thousand
has been amortized. All the original debt issuance costs were written off with the extinguishment of the debt, and with the Addendum
Amendment. As of the year ended December 31, 2022, the Company had to fair value the outstanding debt, in which it was determined to
be approximately $ 12.3 million of a principal outstanding balance of approximately $ 13.0 million, in which the change in valuation compared
to September 2022 when the Company had an extinguishment recorded, was recorded as a revaluation gain for the year ended December 31,
2022.

 In
accordance with the most favored nation provision ("MFN Provision"), following the issuance of the December 2022 Shares and
the December 2022 Warrants, the Company reduced the conversion price of the October Secured Notes to $ 19.00 per share. The Company held
a special meeting on March 10, 2023 of our stockholders for the purpose of obtaining stockholder approval for a reduction in the conversion
price of the October Secured Notes, subject to a conversion price floor of $ 7.50 per share, which amount represented the closing price
of our Common Stock on the Nasdaq Stock Market on January 3, 2023, the first trading day of the 2023 fiscal year.

 In
connection with the December 2022 Offering, the Company also agreed to amend certain existing warrants to purchase up to an aggregate
of: (i) 23,681 shares of our Common Stock at an exercise price of $237.50 per share and an expiration date of October 25, 2026; (ii)
40,000 shares of our Common Stock at an exercise price of $87.50 per share and with an expiration date of September 13, 2027; (iii) 40,000
shares of our Common Stock at an exercise price of $112.50 per share and with an expiration date of September 13, 2027; (iv) 40,000 shares
of our Common Stock at an exercise price of $137.50 per share and with an expiration date of September 13, 2027; (v) 40,000 shares of
our Common Stock at an exercise price of $7.50 per share and an expiration date of September 13, 2027; and (vi) 3,400 shares of Common
Stock at an exercise price of $187.50 and an expiration date of January 14, 2025, held by the Noteholders (collectively, the "Noteholder
Warrants") so that the amended Noteholder Warrant would have an exercise price of $19.00 per share. The Company evaluated the warrant
exercise price adjustment from the values noted above to $ 19.00 noting the total dollar value impact in which the Noteholder Warrant's
new fair value, as a result of the exercise price revision, exceeded the previous warrant instrument was approximately $ 370 thousand,
the Company deemed the change in exercise price was in contemplation with the December 2022 offering, as such was recognized as a deferred
cost of the offering against the proceeds.

 The
events of default stated in the Notice of Acceleration and Repossession defined below with NYDIG Financing constituted a cross-default
under the terms of secured convertible notes issued to the Noteholders. In addition to such cross-default, the failure of the Company
pursuant to the Addendum dated as of July 19, 2022, to escrow an aggregate amount of $ 950,000 for the benefit of the Noteholders by December
21, 2022, constituted an event of default under the Notes. Due to the defaults noted, the Company did not enter into the second and third
tranche of conversions. As such, beginning on November 30, 2022, the Company has been accruing interest of 18 % per annum on the outstanding
principal amount due to the default which amounted to $ 617 thousand as of March 10, 2023. On March 10, 2023, the Company entered into
a Second Addendum Amendment with the Noteholders, in which the Company paid the accumulated default accrued interest of $ 617 thousand
through the Company's restricted escrow accounts and contemporaneously with the payment, the Noteholders waived all existing events
of default arising under the convertible notes.

 F- 28

 On
May 11, 2023, the Company entered into a Second Amendment Agreement (the "Second Amendment") with the holders of its October
Secured Notes to extend the maturity date of the October Secured Notes to July 25, 2024. In connection with the Second Amendment, the
Company paid an extension fee of $ 250,000 and increased the principal amount of the outstanding October Secured Notes by 14 %. The Company
also issued 240,000 new Class A warrants exercisable at $ 12.50 and 80,000 new Class B warrants exercisable at $ 20.00.

 Subject
to the Equity Conditions (as defined below), upon each trigger set forth below, the Company is allowed, once per trigger, require the
Note holders to convert up to 20 % percent of the outstanding amount of the October Secured Notes as:

 (i)

 the
 Company's Common Stock trades for 10 consecutive days at or above $ 12.50 per share and at least 40,000 shares trade on each
 day.

 (ii)

 the
 Company's Common Stock trades for 10 consecutive days at or above $ 17.50 per share and at least 40,000 shares trade on each
 day.

 (iii)

 the
 Company's Common Stock trades for 10 consecutive days at or above $ 22.50 per share and at least 40,000 shares trade on each
 day.

 The
Equity Condition is met if all of the following conditions have been met: (i) the shares of Common Stock issuable upon the conversion
are either registered under the Securities Act of 1933 or resellable under Rule 144 thereunder without any volume restrictions, (ii)
the number of shares issuable to each Note holder are below 4.99 % of the outstanding shares, (iii) at least 20 trading days has elapsed
since the previous mandatory conversion, (iv) the Company is current in all the SEC filings, and (v) the Company has obtained all required
approvals from NASDAQ, or any successor trading market, to list the Common Stock to be issued upon such conversion.

 On
November 20, 2023 the Company and the Noteholders entered into a Third Amendment Agreement to amend the Notes, the October SPA and related
agreements (collectively, the "Transaction Documents") to facilitate future financings by the Company that may include funds
for prepayment of the Notes by permitting the Company to force conversion of up to $ 1.5 million of the Notes under certain circumstances
and reduce the prepayment penalty in return for reducing the conversion price of the $ 4.7 million of the Notes and reducing the exercise
price of 150,000 of the Warrants to $ 0.01.

 As
provided in the original terms of the Notes, in the event the Company prepays the amounts owed under Notes, the Company must pay an additional
 20 % prepayment penalty. Under the new Transaction Documents, in the event the prepayment occurs between February 15, 2024 and July 24,
2024, prepayment penalty is reduced to 10%.

 In
addition, under the new Transaction Documents, the Company has the right to force the conversion of up to $ 1.5 million of face value
of the Notes in whole or in part at any time up to the maturity date of the Notes, provided that at the time of such conversion the share
price on the trading market on which the Company's shares is then listed exceeds $ 5.00 and a minimum volume of 50,000 traded each
trading day for the five trading days immediately prior to such forced conversion.

 As
consideration for the reduction in the prepayment penalty and the new forced conversion right, the Company agreed that an aggregate $ 4.7
million of the Notes had the conversion price reduced to $ 3.78 per share and 150,000 of the Warrants had the exercise price reduced to
$ 0.01 (the "Repriced Warrants"), provided that prior to February 1, 2024, for each $ 31.33 in Notes converted by a Noteholder,
such Noteholder may exercise one Repriced Warrant and that on February 1, 2024, all Repriced Warrants became immediately exercisable.

 With
the Second Amendment on May 11, 2023, the principal value was reestablished to approximately $ 13.3 million, and a new fair value was
established at approximately $ 10.94 million. The Second Amendment caused an extinguishment of debt of approximately $ 1.9 million which
includes a loss on revaluation of the debt of $ 554 thousand and warrant valuation of New Class A and Class B warrants of $ 1.3 million.
In addition, there was a $ 250 thousand extension fee cash payment that was included within "Other expense, net" on the consolidated
financial statements for the year ended December 31, 2023. The Company had approximately $ 1.6 million of note conversions between May
11, 2023 and November 20, 2023 (date of the Third Amendment).

 The
Company performed a fair value assessment as of November 20, 2023 due to the trigger of extinguishment of debt, and had a debt revaluation
loss of approximately $ 911 thousand, which included a valuation adjustment for the warrant repricing. The Company had approximately $ 3.1
million of note conversions between November 21, 2023 through December 31, 2023. In addition, a fair value assessment was performed as
of December 31, 2023, and a $ 584 revaluation loss was recorded to adjust the fair value of the convertible debt to approximately $ 8.5
million outstanding as of December 31, 2023. The Company has approximately an $ 8.7 million principle balance outstanding for the convertible
debt as of December 31, 2023.

 F- 29

 Promissory
Notes

 The
Company had issued six promissory notes in fiscal year 2023 to certain holders totaling an aggregate principal balance of $ 900 thousand
in which were issued in $ 300 thousand increments on January 13, 2023, February 3, 2023, and February 10, 2023. Each of the promissory
notes accrued at an interest rate of 15 % per annum, and each note matured within nine months subsequent its issuance. On March 24, 2023,
the Company issued to the holders of the promissory notes on January 13, 2023, 53,517 shares of common stock in satisfaction of the repayment
of $ 300 thousand in principal plus accrued and unpaid interest of $ 9 thousand and other charges thereon of $ 92 thousand in which were
included as part of interest expense, at the same price per share as the agreed upon share price conversion rate noted in relation to
the December 5, 2022 SPA amendment on February 9, 2023, and approved during the Special Shareholders Meeting on March 10, 2023.

 On
April 4, 2023, the Company issued to the holders of the promissory notes on February 3, 2023 and February 10, 2023, 58,673 shares of
common stock in satisfaction of the February 3, 2023 promissory note and partial satisfaction of the February 10, 2023 promissory note
a total repayment of $ 325 thousand in principal plus accrued and unpaid interest of $ 10 thousand and other charges thereon of $ 105 thousand
in which were included as part of interest expense, at the same price per share as the agreed upon share price conversion rate noted
in relation to the December 5, 2022 SPA amendment on February 9, 2023, and approved during the Special Shareholders Meeting on March
10, 2023.

 On
May 5, 2023, June 2, 2023, and July 31, 2023 the Company paid the remaining principal balance of $ 275 thousand plus interest of approximately
$ 13 thousand to fulfill all obligations of the promissory notes that were issued in 2023.

 Notes
payable

 On
July 13, 2023, the Company entered into two note payable agreements for a total principal value of approximately $ 235 thousand. The two
note payable amounts had a 15 % issue discount applied and a maturity date of April 15, 2024. The Company can prepay the notes by paying
the full amount owed plus an additional 20%. On August 2, 2023 and August 25, 2023, the Company paid both outstanding note payable balances
of approximately $ 235 thousand plus a 20 % prepayment fee of approximately $ 47 thousand. With the prepayment of the notes payable, the
Company incurred a $ 33 thousand loss on debt extinguishment. As of the December 31, 2023, the Company has fulfilled the two note payable
agreements.

 NYDIG
Financing

of Financing Debt

 Maturity Dates

 Interest Rate

 2023

 2022

 NYDIG Loans #1-11

 April 25, 2023 thru January 25, 2027 *

 12% thru 15 %

 $
 10,546

 $
 14,387

 Less: principal payments

 —

 ( 3,841
)

 Less: repossession of collateralized assets

 ( 1,363
)

 -

 Total outstanding debt

 $
 9,183

 $
 10,546

 *

 Due
 to event of default- the entire NYDIG Financing became current, see note below.

 On
December 30, 2021, Soluna MC Borrowing 2021-1 LLC (the "Borrower"), an indirect wholly owned subsidiary of the Company entered
into a Master Equipment Finance Agreement (the "Master Agreement") with NYDIG ABL LLC ("NYDIG") as lender, servicer
and collateral agent (the "NYDIG facility"). The Master Agreement outlined the framework for a financing up to approximately
$ 14.4 million in aggregate equipment financing. Subsequently, the parties negotiated the specific terms of each equipment financing transaction
as well as the terms upon which the Noteholders would consent to the transactions contemplated by the Master Agreement.

 On
January 14, 2022, the Borrower effected an initial drawdown under the Master Agreement in the aggregate principal amount of approximately
$ 4.6 million that bore interest at 14 % and was to be repaid over 24 months. On January 26, 2022, the Borrower had a subsequent drawdown
of $ 9.8 million. As part of the transactions contemplated under the Master Agreement, (i) the Company's indirect wholly owned subsidiary,
Soluna MC LLC, formerly EcoChain Block LLC ("Guarantor"), which is the owner of 100 % of the equity interests of Borrower,
executed a Guaranty Agreement in favor of NYDIG, as lender, dated as of December 30, 2021 (the "Guaranty Agreement"), (ii)
Borrower has granted a lien on, and security interest in, all of its assets to NYDIG, as collateral agent, (iii) Guarantor entered into
an equipment financing arrangement on assets purchased with the borrowed funds, (iv) Borrower would borrow from NYDIG the loans as forth
in certain loan schedules (the "Specified Loans"), and (v) Borrower had executed a Digital Asset Account Control Agreement
(the "ACA Wallet Agreement") with NYDIG, as collateral agent and secured party, and NYDIG Trust Company LLC, as custodian,
dated as of December 30, 2021, as well as such other agreements related to the foregoing as mutually agreed (collectively, the "NYDIG
Transactions").

 F- 30

 In
connection with the NYDIG Transactions, on January 13, 2022, the Company entered into a Consent and Waiver Agreement, dated as of January
13, 2022 (the "Consent"), with the Noteholders, in connection with the October SPA, pursuant to which the Noteholders agreed
to waive any lien on, and security interest in, certain assets, provided various contingencies are fulfilled, and each Noteholder who
acquired October Secured Notes having a principal amount of not less than $ 3,000,000 agreed to waive its rights under Section 4.17 of
the October SPA to participate in Subsequent Financings (as defined in the October SPA) with respect to the NYDIG Transactions and any
additional loans under the MEFA that only finance the purchase of equipment from NYDIG, in order to consent to the NYDIG Transactions.
Pursuant to the Consent, the Noteholders also waived the current requirement of the October SPA and the other transaction documents (collectively,
the "SPA Documents") that the Borrower become an Additional Debtor (as defined in the Security Agreement) and execute an
Additional Debtor Joinder (as defined in the Security Agreement) for so long as the Specified Loans were outstanding, and NYDIG would
not have entered into a subordination or intercreditor agreement with respect to the Guaranty. Further, pursuant to the Consent, the
Noteholders waived the right to accelerate the Maturity Date of the October Secured Notes and the right to charge a default rate of interest
on such Notes, in each case, with respect to certain changes in names of, and jurisdiction of incorporation, of the Debtors (as defined
in the SPA Documents), which waiver would not waive any other Event of Default (as defined in any of the SPA Documents), known or unknown,
as of the date of Consent.

 Promptly
after the date of the Consent, the Company issued warrants to purchase up to 3,400 shares of common stock to the Noteholder holding the
largest outstanding principal amount of October Secured Notes as of the date of the Consent. Such warrants were substantially in form
similar to the other warrants held by the Noteholders. Such warrants were exercisable for three years from the date of the Consent at
an exercise price of $ 237.50 per share. On December 5, 2022, the exercise price of the warrants were reduced to an exercise price of
$ 19.00 per share, effective with the closing of the Securities Purchase Agreement Offering on December 5, 2022.

 The
Company, through the Borrower, was required to make average monthly principal and interest payments to NYDIG of approximately $ 730 thousand
on initial drawdown in aggregate principal amount of approximately $ 4.6 million bearing interest at 14 %, and a subsequent drawdown of
$ 9.8 million.

 On
December 20, 2022, the Borrower received a Notice of Acceleration and Repossession (the "NYDIG Notice") from NYDIG with respect
to the Master Agreement, by and between Borrower and NYDIG. The obligations of Borrower under the Master Agreement and reflected in the
NYDIG Notice are ring-fenced to Borrower and its direct parent company, Soluna MC LLC. The Company is not a party to any guaranty, collateral
agreement or other support agreement with or for the benefit of NYDIG.

 The
NYDIG Notice states that (a) Borrower failed to observe or perform certain covenants, conditions or agreements contained in the Master
Agreement and such failure continued unremedied for a period of ten days after Borrower's knowledge of such breach, which resulted
in an event of default under the Master Agreement, and (b) Borrower defaulted under the guaranty, collateral agreement, or other support
agreement, which resulted in an event of default under the Master Agreement. In addition, the NYDIG Notice states that Borrower failed
to pay certain payments of principal and interest under the Master Agreement when due, which failure also constituted an event of default
under the Master Agreement. As a result of the foregoing events of default, and pursuant to the Master Agreement, NYDIG (x) declared
the principal amount of all loans due and owing under the Master Agreement and all accompanying Loan Documents (as defined in the Master
Agreement) to be due and immediately payable, (y) imposed a default rate of interest on any outstanding principal amount of each loan
(together with all then unpaid interest accruing thereon) and all other obligations under the Master Agreement and the Loan Documents,
and (z) demanded the return of all equipment subject to the Master Agreement and the Loan Documents. As such, the principal balance of
$10.5 million became due immediately and the Borrower was to bear interest, at a rate per annum equal to 2.0% plus the rate per annum
otherwise applicable to such obligations set forth in the Master Agreement. Also, as the Company was not able to obtain a waiver, the
outstanding deferred financing costs were written off. As of December 31, 2022, the Borrower had incurred accrued interest and penalty
of approximately $ 274 thousand. On February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA, and repossessed
the collateralized assets that totaled approximately $ 3.4 million, in which approximately $ 560 thousand was first used to pay off accrued
interest and penalty to date. On September 5, 2023, NYDIG provided a letter finalizing the accounting for the repossessed collateralized
assets totaling proceeds of approximately $ 3.4 million. This included legal and other expenses associated with the sale of the assets
net a modest gain on the estimated net book value of the assets totaling $ 251 thousand that was expensed as a loss on disposition of
assets for the year ended December 31, 2023. On December 7, 2023, NYDIG filed its Motion for Summary Judgment seeking entry of a judgment
against Soluna in the approximate amount of $ 10.3 million for principal and interest and penalties. On January 12, 2024, Soluna filed
its objection to NYDIG's motion for summary judgment on the grounds that NYDIG failed to explain what collateral of which loan
was sold and how the sale proceeds were allocated to each loan. A summary judgment motion was performed on February 13, 2024, and was
agreed upon by both NYDIG and the Borrower, that the total outstanding loan principal balance would be approximately $ 9.2 million, in
which a penalty fee was applied of approximately $ 1.0 million to the repossessed collateralized assets, and outstanding interest and
penalty balance would be approximately $ 694 thousand as of October 31, 2023. The Company applied the per diem interest rate agreed upon
for the remaining two months, incurring an additional $ 242 thousand in interest and penalties, for a total outstanding interest and penalties
balance of $ 936 thousand as of December 31, 2023.

 F- 31

NYDIG has stated its intention to pursue SCI, the parent company of Guarantor, under a piercing of the corporate veil claim relating
to NYDIG Defendants' debts and liabilities under the loan documents. SCI denies any such liability and has filed a complaint for
a declaratory judgment against NYDIG in the Eighth Judicial District Court in Clark County, Nevada on March 16, 2023 seeking a declaratory
judgment as to such matter. NYDIG filed a motion to dismiss in response to SCI's declaratory judgment complaint on April 13, 2023.
SCI filed a response in opposition to NYDIG's motion to dismiss on April 27, 2023. The court heard oral arguments on May 16, 2023.
On June 22, 2023, the court issued an order granting NYDIG's motion to dismiss, on the basis that the case was not ripe for decision,
without prejudice. SCI intends to continue to vigorously defend any allegations regarding liability on account of NYDIG Defendants'
debts and liabilities to NYDIG under their loan documents and intends to refile a declaratory judgment complaint against NYDIG.

 Loan
and Security Agreement

 Navitas
Term Loan

of Navitas Term Loan

 Maturity Dates

 Interest Rate

 2023

 Term Loan and capitalized interest

 May 9, 2025

 %

 $
 2,254

 Less: principal and capitalized interest payments

 ( 547
)

 Less: debt issuance costs

 ( 25
)

 Total outstanding debt

 1,682

 On
May 9, 2023, DVCC and Navitas West Texas Investments SPV, LLC entered into a 2-year Loan Agreement ("Term Loan") for $ 2,050,000.
The unpaid principal balance of the Term Loan shall bear interest at per annum rate equal to 15 %. Beginning on the last Business Day
of the month in which the In-Service Date occurs (date Dorothy 1B is put into full operation following the planned ramp-up period), and
continuing on the last Business Day of each month thereafter until the repayment of all Term Loan debt principal and accrued interest
occurs, DVCC shall make debt service payments on the Term Loan through a cash sweep with the Site-level Free Cash Flow (total revenue
of DVCC minus power costs and site level costs listed in Loan and Security agreement), otherwise to be distributed to Soluna Holdings,
Inc., the ultimate parent entity of DVCC (the "SLNH Cash") being applied as a permanent repayment of the Loan in an amount
equal to the greater of: (i) the sum of (A) the amount of accrued and unpaid interest that has not yet been added to the principal
balance of the Term Loan, if any, plus (B) an amount equal to 1/24th of the then outstanding principal balance of the Term Loan;
provided that the aggregate amount payable pursuant to this clause (i) shall not exceed SLNH Cash times 0.60; or (ii) SLNH Cash times
0.33.

 Any
and all monthly debt service amounts so paid to Lender shall be applied first to accrued and unpaid interest that has not yet been added
to the principal balance of the Term Loan, if any, and then to repayment of the then outstanding principal balance of the Term Loan.
On the Term Loan Maturity Date ( May 9, 2025), all remaining principal and accrued and unpaid interest that has not yet been added to
the principal balance of the Term Loan, if any, shall become immediately due and owing in full and shall be paid by wire transfer in
immediately available funds. As of December 31, 2023, approximately $ 1.7 million is included in current portion of debt as the Company's
expectation is that principal and capitalized interest payments will be made to pay off the Term Loan within one year after year-end.
The Company has paid approximately $ 547 thousand in principal and capitalized interest payments for the year ended December 31, 2023.
For the year ended December 31, 2023, the Company has incurred approximately $ 204 thousand in interest expense.

 Line
of Credit

 On
September 15, 2021, the Company entered into a $ 1.0 million unsecured line of credit with KeyBank National Association ("KeyBank"),
that will, among other things, allow the Company to request loans and to use the proceeds of such loans for working capital and other
general corporate purposes (the "KeyBank facility"). The line of credit bears interest at a rate of Prime + 0.75 % per annum.
Accrued interest is due monthly and principal is due in full following KeyBank's demand. As of January 1, 2022, the entire line
of credit of $ 1.0 million was drawn and outstanding. As of December 31, 2022, $ 650 thousand of outstanding balance has been paid down;
therefore $ 350 thousand of the amount drawn under the line of credit remained outstanding. As of December 31, 2023, the remaining $ 350
thousand has been paid down, and the Company does not have any remaining balance outstanding. The Company does not plan to draw down
on the line of credit in the foreseeable future. In addition, future drawdowns may require pre-approval by KeyBank.

 F- 32

 10. Stockholders' Equity

 Preferred
Stock

 The
Company has two series of preferred stock outstanding: the Series A Preferred Stock, with a $ 25.00 liquidation preference; and the Series
B Convertible Preferred Stock, par value $ 0.0001 per share, with a stated value equal to $ 100.00 (the "Series B Preferred Stock").
As of December 31, 2023 and December 31, 2022, there were 3,061,245 shares of Series A Preferred Stock issued and outstanding, respectively,
and as of December 31, 2023 and December 31, 2022 there was 62,500 shares of Series B Preferred Stock issued and outstanding, respectively.

B Preferred Stock

 On
July 19, 2022, the Company entered into a Securities Purchase Agreement (the "Series B SPA") with an accredited investor
(the "Series B Investor") pursuant to which the Company sold to the Series B Investor 62,500 shares of Series B Preferred
Stock, for a purchase price of $ 5,000,000. The shares of Series B Preferred Stock are initially convertible, subject to certain conditions,
into 46,211 shares of common stock, at a price per share of $ 135.25 per share, a 20% premium to the closing price of the common stock
on July 18, 2022, subject to adjustment as set forth in the Certificate of Designations of Preferences, Rights and Limitations for the
Series B Preferred Stock ("Series B Certificate of Designations").

 In
addition, on July 19, 2022, the Company issued to the Series B Investor common stock purchase warrants (the "Series B Warrants")
to purchase up to an aggregate of 40,000 shares of common stock at an initial exercise price of $ 250.00 per share. The Series B Investor
is entitled to exercise the Series B Warrants at any time on or after the date that is 180 days following the issue date and on or prior
to January 19, 2028. On the closing date of the next public offering of the common stock or other securities, the exercise price of the
Series B Warrants is to adjust to a price equal to the lower of (a) the exercise price then in effect, or (b) the price of the warrants
issued in the Company's next public offering, or if no warrants are issued in the Company's next public offering, 110% of
the price per share of the common stock issued in the Company's next public offering. In addition, upon the Series B Closing, the
Series B Investor delivered to the Company for cancellation an outstanding warrant to acquire 40,000 shares of common stock at an exercise
price of $ 287.50 per share previously issued on April 13, 2022, in connection with the Notes.

 Common
Stock

 The
Company has one class of common stock, par value $ 0.001 per share. Each share of the Company's common stock is entitled to one
vote on all matters submitted to stockholders. As of December 31, 2023 and December 31, 2022, there were 2,505,620 and 747,837 shares
of common stock issued and outstanding, respectively.

 Dividends

to the Certificate of Designations, Preferences and Rights of 9.0% Series A Cumulative Perpetual Preferred Stock of the Company, dividends,
when, as and if declared by the Board (or a duly authorized committee of the Board), will be payable monthly in arrears on the final
day of each month, beginning August 31, 2021. During the year ended December 31, 2022, the Board declared and paid the Company aggregate
dividends on the shares of Series A Preferred Stock of approximately $ 3.9 million, respectively. The Board of Directors had not declared
any Series A Preferred Stock dividends beginning October 2022 through December 31, 2023, as such the Company has accumulated approximately
$ 8.6 million of dividends in arrears on the Series A Preferred Stock through December 31, 2023.

 `

 The
Company's Series B Preferred Stock includes a 10 %
accruing dividend compounded daily for 12 months from the original issue date of July 20, 2022 that may be paid in cash or stock at the
Company's option at the earlier of (i) the date the Series B Preferred Stock is converted, or (ii) the Series B Dividend Termination
Date. On August 11, 2023, the Company paid a mandatory dividend on its outstanding Series B Convertible Preferred Stock in the amount
of approximately $ 656
thousand. Pursuant to the Certificate
of Designation for the Series B Stock, the Company had the option to pay the dividend in cash or shares of Common Stock. Pursuant to
a Dividend Payment Agreement, the Company and the holder of the Series B Stock agreed to satisfy the payment of the dividend through
the issuance of 44,000
 shares of its Common Stock and
 70,300
 prefunded warrants (the "Prefunded
Warrants").

 Each
Pre-Funded Warrant has been funded to the amount of $.19999, with $ 0.00001 per share of common stock payable upon exercise, is immediately
exercisable, may be exercised at any time until exercised in full and is subject to customary adjustments. The Pre-Funded Warrants may
not be exercised if the aggregate number of shares of the Company's common stock beneficially owned by the holder (together with
her affiliates) would exceed 4.99 % of the Company's outstanding Common Stock immediately after exercise. However, the holder may
increase (upon 61 days' prior notice from the holder to the Company) or decrease such percentages, provided that in no event such
percentage exceeds 4.99 %.

 F- 33

 Reservation
of Shares

 The
Company had reserved common shares for future issuance as follows as of December 31, 2023:

of Reserved Shares of Common Stock for Future Issuance

 Stock options outstanding ( 1)

 Restricted stock units outstanding ( 1)

 9,612

 Warrants outstanding ( 1)

 1,148,269

 Common stock available for future equity awards or
 issuance of options ( 1)

 523,716

 Number of common shares reserved

 1,733,990

 (1)

 Prior
 period results have been adjusted to reflect the Reverse Stock Split of the Common Stock at a ratio of 1-for-25 that became effective
 October 13, 2023. See Note 2, "Accounting Policies," for details.

 The
Company also notes that as of December 31, 2023, there are 1,907,188 Series A preferred stock available for future equity awards under
the 2021 Plan.

 Placement
Agent Agreements

 On
September 13, 2022, the Company entered into a placement agent agreement with Univest Securities LLC ("Univest") in which
all of the 19,464 outstanding warrants held with Univest which were earned through previous equity offerings would be revised to a new
exercise price value of $ 108.25 per warrant.

on December 2, 2022, the Company entered into an additional placement agency agreement with, pursuant to which Univest agreed to serve
as the exclusive placement agent for the Company on a reasonable best-efforts basis in connection with the December Offering. Pursuant
to the additional Placement Agency Agreement, the Company agreed to pay to Univest (i) a fee in shares of Common Stock equal to 7 % of
the Shares issued and sold in the Offering (excluding any securities that may be issued pursuant to the Options or upon exercise of the
Warrants) (the " Placement Agent Shares "), (ii) 17,241 restricted shares of Common Stock in relation to Univest's
role in the underwritten offering that closed on October 26, 2022 (the " October Shares "), and (iii) an additional
fee of warrants to purchase the number of shares of Common Stock equal to 7 % of the number of Shares issued and sold in the December
Offering (excluding any securities that may be issued pursuant to the Options or upon exercise of the Warrants) in the form substantially
similar as the Warrants (the " Placement Agent Warrants ", and together with the Placement Agent Shares and the
October Shares, the " Placement Agent Securities "), each such issuance to Univest (and/or its designees) subject
to and upon obtaining the appropriate approval by stockholders required by the applicable rules and regulations of the Nasdaq. Approval
by the shareholders took place during a Special Shareholder meeting on March 10, 2023.

 11. Retirement Plan

 The
Company maintains a voluntary savings and retirement plan under IRC Section 401(k) covering substantially all employees. Employees must
complete six months of service and have attained the age of twenty-one prior to becoming eligible for participation in the plan. The
Company plan allows eligible employees to contribute a percentage of their compensation on a pre-tax basis and the Company matches employee
contributions, on a discretionary basis, currently in an amount equal to 100% of the first 3% and 50% of the next 2% of the employee's
salary, subject to annual tax deduction limitations. Effective January 1, 2017, Company matching contributions are vested immediately.
Company matching contributions were $ 176 thousand and $ 177 thousand, which includes $ 0 and $ 19 thousand related to discontinued operations
for 2023 and 2022, respectively. The Company may also make additional discretionary contributions in amounts as determined by management
and the Board of Directors. There were no additional discretionary contributions by the Company for the years 2023 or 2022.

 12. Net (loss) income per Share

 The
following table sets forth the reconciliation of the numerators and denominators of the basic and diluted per share computations for
continuing operations for the years ended December 31:

of Basic and Diluted Per Share Computations for Continuing Operations

 (Dollars in thousands, except shares)

 2023

 2022

 Numerator:

 $
)

 $
 ( 107,016
)

 (Less) Net income (loss) attributable to non-controlling interest

 1,498

 ( 380
)

 -

 7,921

 Net loss attributable to Soluna Holdings, Inc.

 $
 ( 29,201
)

 $
 ( 98,715
)

 Less: Preferred Dividend

 ( 421
)

 ( 4,088
)

 Less: Cumulative Preferred Dividends in arrears

 ( 6,888
)

 ( 1,722
)

 Balance

 $
 ( 36,510
)

 $
 ( 104,525
)

 Denominator:

 Basic and Diluted EPS:

 Common shares outstanding, beginning of period

 747,837

 550,168

 Weighted average common shares issued during the
 period including penny warrants issued and outstanding as of year-end

 565,881

 49,133

 Denominator for basic earnings per common shares —

 Weighted average common shares

 1,313,718

 599,301

 F- 34

 The
Company notes as continuing operations was in a net loss for fiscal year 2023 and 2022, as such basic and diluted EPS is the same balance
as continuing operations acts as the control amount in which would cause antidilution. Not included in the computation of earnings per
share, assuming dilution, for the year ended December 31, 2023, were options to purchase 52,393 shares of the Company's common
stock, 9,612 nonvested restricted stock units, 1,148,269 outstanding warrants not exercised, and shares of common stock issuable upon
the conversion of a portion of the October Secured Notes pursuant to the Addendum, as discussed in Note 9. These potentially dilutive
items were excluded because the calculation of incremental shares resulted in an anti-dilutive effect. Not included in the computation
of earnings per share, assuming dilution, for the year ended December 31, 2022, were options to purchase 52,393 shares of the Company's
common stock, 33,221 nonvested restricted stock units, 396,107 outstanding warrants not exercised, and shares of common stock issuable
upon the conversion of a portion of the October Secured Notes pursuant to the Addendum, as discussed in Note 9. These potentially dilutive
items were excluded because the calculation of incremental shares resulted in an anti-dilutive effect.

 13. Stock Based Compensation

 Stock-based
incentive awards are provided to employees and directors under the terms of the Company's 2012 Equity Incentive Plan (the 2012
Plan), which was amended and restated as of October 20, 2016, the 2014 Equity Incentive Plan (the 2014 Plan), the 2021 Stock Incentive
Plan (the 2021 Plan), which was amended and restated effective as of October 29, 2021, May 27, 2022, and March 10, 2023, respectively,
and the 2023 Stock Incentive Plan (the 2023 Plan), which was amended and restated effective as of June 29, 2023, (collectively, the Plans).
Awards under the Plans have generally included at-the-money options and restricted stock grants.

 2023
Plan

 The
2023 Plan was adopted by the Board on February 10, 2023 and approved by the stockholders on March 10, 2023. The 2023 Plan sets the number
of shares of our Common Stock reserved for issuance thereunder, on a quarterly basis, to 9.75 % of the shares of our Common Stock outstanding
on the measurement date. Subject to certain adjustments as provided in the 2023 Plan, the maximum aggregate number of shares of our Common
Stock that may be issued under the 2023 Plan (excluding the number of shares of our Common Stock subject to Specified Awards (as defined
below)) (i) pursuant to the exercise of stock options, (ii) as unrestricted or restricted Common Stock, and (iii) in settlement of RSUs
shall be limited to, beginning with the first quarter of our fiscal year ending December 31, 2023 (or January 1, 2023), 9.75 % of the
number of shares of our Common Stock outstanding as of the first trading day of each quarter. Subject to certain adjustments as provided
in the 2023 Plan, (i) shares of our Common Stock subject to the 2023 Plan shall include shares of our Common Stock which revert back
to the 2023 Plan in a prior quarter pursuant to the paragraph below, and (ii) the number of shares of our Common Stock that may be issued
under the 2023 Plan may never be less than the number of shares of our Common Stock that are then outstanding under (or available to
settle existing) 2023 Plan Award grants.

 On
June 29, 2023, at the Annual Shareholder Meeting, the Amended and Restated 2023 Stock Incentive Plan was approved. The Amended and Restated
2023 Plan will, among other things, increase the number of shares of our Common Stock reserved for issuance thereunder, on a quarterly
basis, to 23.75 % of the shares of our Common Stock outstanding on the measurement date. Subject to certain adjustments as provided herein,
the maximum aggregate number of Common Shares that may be issued hereunder (excluding the number of Common Shares subject to Specified
Awards (as hereinafter defined)) (i) pursuant to the exercise of Options, (ii) as unrestricted Common Shares or Restricted Stock, and
(iii) in settlement of RSUs shall be limited to, beginning with the third quarter of our fiscal year ending December 31, 2023 (or July
1, 2023), 23.75 % of the number of Common Shares outstanding as of the first trading day of each quarter. Subject to certain adjustments
as provided herein, (A) Common Shares subject to this Plan shall include Common Shares which reverted back to this Plan in a prior quarter,
and (B) the number of Common Shares that may be issued under this Plan may never be less than the number of Common Shares that are then
outstanding under (or available to settle existing) Awards. For purposes of determining the number of Common Shares available under this
Plan, Common Shares withheld by the Company to satisfy applicable tax withholding or exercise price obligations pursuant to Section 10(e)
of this Plan shall be deemed issued under this Plan. In the event that, prior to the date this Plan shall terminate, any Award granted
under this Plan expires unexercised or unvested or is terminated, surrendered or cancelled without the delivery of Common Shares, or
any shares of Restricted Stock are forfeited back to the Company, then the Common Shares subject to such Award may be made available
for subsequent Awards under the terms of this Plan. As used in this Plan, "Specified Awards" shall mean (i) Awards to Eligible
Persons who are not employed or engaged by the Company or any of its subsidiaries as of the last day of any fiscal quarter of the Company,
commencing with the fiscal quarter ending March 31, 2023 and (ii) Awards that have a grant date at least three (3) years prior to the
last day of any fiscal quarter of the Company, commencing with the fiscal quarter ending March 31, 2023.

 F- 35

 2021
Plan

 The
Company's 2021 Plan was adopted by the Board on February 12, 2021 and approved by the stockholders on March 25, 2021. The 2021
Plan was amended and restated effective as of October 29, 2021, and May 27, 2022, respectively. The 2021 Plan authorizes the Company
to issue shares of common stock upon the exercise of stock options, the grant of restricted stock awards, and the conversion of restricted
stock units (collectively, the "Awards"). The Compensation Committee has full authority, subject to the terms of the 2021
Plan, to interpret the 2021 Plan and establish rules and regulations for the proper administration of the 2021 Plan. Subject to certain
adjustments as provided in the 2021 Plan, the maximum aggregate number of shares of the Company's common stock that may be issued
under the 2021 Plan (i) pursuant to the exercise of options, (ii) as shares or restricted stock and (iii) in settlement of RSUs shall
be limited to (A) during the Company's fiscal year ending December 31, 2021 (the "2021 Fiscal Year"), 1,460,191 Shares,
(B) for the period from January 1, 2022 to June 30, 2022, fifteen percent (15%) of the number of Shares outstanding on January 3, 2022,
which was the first trading day of 2022, and (C) beginning with the third quarter of the Company's fiscal year ending December
31, 2022 (the "2022 Fiscal Year"), fifteen percent (15%) of the number of Shares outstanding as of the first trading day
of each quarter, net of any Shares awarded in the previous quarter(s). Subject to certain adjustments as provided in the 2021 Plan, (i)
shares subject to the 2021 Plan shall include shares reverted back to the Company pursuant the 2021 Plan in a prior year or quarter,
as applicable, as provided herein and (ii) the number of shares that may be issued under the 2021 Plan may never be less than the number
of shares that are then outstanding under (or available to settle existing) Awards. For purposes of determining the number of shares
available under the 2021 Plan, shares withheld by the Company to satisfy applicable tax withholding or exercise price obligations pursuant
to the 2021 Plan shall be deemed issued under this Plan. In the event that, prior to the date on which the 2021 Plan shall terminate,
any Award granted under the 2021 Plan expires unexercised or unvested or is terminated, surrendered, or cancelled without the delivery
of shares of common stock, or any Awards are forfeited back to the Company, then the shares of common stock subject to such Award may
be made available for subsequent Awards under the terms of the 2021 Plan.

 On
March 10, 2023, at the Special Shareholder Meeting, the Third Amended and Restated 2021 Stock Incentive Plan was approved. The Third
Amended and Restated 2021 Plan will, among other things, (a) increase the number of shares of our Common Stock reserved for issuance
thereunder, on a quarterly basis, to 18.75% of the shares of our Common Stock outstanding on the measurement date and (b) allow us to
grant awards of shares of our 9.0% Series A Cumulative Perpetual Preferred Stock ("Series A Preferred Stock") (with and without
restrictions). Subject to certain adjustments as provided in the Third Amended and Restated 2021 Plan, the maximum aggregate number of
shares of our Common Stock that may be issued under the Third Amended and Restated 2021 Plan (excluding the number of shares of our Common
Stock subject to Specified Awards (as defined below)) (i) pursuant to the exercise of stock options, (ii) as unrestricted or restricted
Common Stock, and (iii) in settlement of RSUs shall be limited to, beginning with the first quarter of our fiscal year ending December
31, 2023 (or January 1, 2023), 18.75% of the number of shares of our Common Stock outstanding as of the first trading day of each quarter.
Subject to certain adjustments as provided in the Third Amended and Restated 2021 Plan, the maximum aggregate number of shares of our
Series A Preferred Stock that may be issued under the Third Amended and Restated 2021 Plan as unrestricted or restricted Series A Preferred
Stock shall equal $3,600,000 valued as of the effective date of the Third Amended and Restated 2021 Plan as determined at the lower of
the closing price of our Series A Preferred Stock on Nasdaq on such date or the average of the daily volume weighted average price of
our Series A Preferred Stock on Nasdaq as reported by Bloomberg L.P. for a period of five (5) consecutive trading days ending on such
date. Subject to certain adjustments as provided in the Third Amended and Restated 2021 Plan, (i) shares of our Common Stock and Series
A Preferred Stock, as applicable, subject to the Third Amended and Restated 2021 Plan shall include shares of our Common Stock and Series
A Preferred Stock, as applicable, which revert back to the Third Amended and Restated 2021 Plan in a prior quarter or fiscal year, as
applicable, pursuant to the paragraph below, and (ii) the number of shares of our Common Stock and Series A Preferred Stock, as applicable,
that may be issued under the Third Amended and Restated 2021 Plan may never be less than the number of shares of our Common Stock and
Series A Preferred Stock, as applicable, that are then outstanding under (or available to settle existing) 2021 Plan Award grants. For
purposes of the Third Amended and Restated 2021 Plan, "Specified Awards" means (i) 2021 Plan Awards issued to Eligible Persons
who are not employed or engaged by us or any of our subsidiaries as of the last day of any fiscal quarter, commencing with the fiscal
quarter ending March 31, 2023, and (ii) 2021 Plan Awards that have a grant date at least three (3) years prior to the last day of any
fiscal quarter, commencing with the fiscal quarter ending March 31, 2023. The exclusion of Specified Awards from the determination of
the maximum aggregate number of shares of our Common Stock available for issuance under the Third Amended and Restated 2021 Plan could
have material effect on the number of shares of our Common Stock available for issuance thereunder and could have a material dilutive
effect on our stockholders.

 2014
Plan

 The
2014 Plan was adopted by the Company's Board of Directors on March 12, 2014, and approved by its stockholders on June 11, 2014.
The 2014 Plan provides an initial aggregate number of 500,000 shares of common stock that may be awarded or issued. The number of shares
that may be awarded under the 2014 Plan and awards outstanding may be subject to adjustment on account of any stock dividend, spin-off,
stock split, reverse stock split, split-up, recapitalization, reclassification, reorganization, combination or exchange of shares, merger,
consolidation, liquidation, business combination, exchange of shares or the like. Under the 2014 Plan, the Board-appointed administrator
of the 2014 Plan is authorized to issue stock options (incentive and nonqualified), stock appreciation rights, restricted stock, restricted
stock units, phantom stock, performance awards and other stock-based awards to employees, officers and directors of, and other individuals
providing bona fide services to or for, the Company or any affiliate of the Company. Incentive stock options may only be granted to employees
of the Company and its subsidiaries.

 F- 36

 2012
Plan

 The
2012 Plan was adopted by the Company's Board of Directors on April 14, 2012, and approved by its stockholders on June 14, 2012.
The 2012 Plan was amended and restated by the Board of Directors effective October 20, 2016. The October 2016 amendment allowed for the
award agreement, or another agreement entered into between the Company and the award grantee to vary the method of exercise of options
issued under the 2012 Plan and an agreement entered into between the Company and the award grantee to vary the provisions governing expiration
of options or other awards under the 2012 Plan following termination of the award recipient. The 2012 Plan provides an initial aggregate
number of 600,000 shares of common stock that may be awarded or issued. The number of shares that may be awarded under the 2012 Plan
and awards outstanding may be subject to adjustment on account of any recapitalization, reclassification, stock split, reverse stock
split and other dilutive changes in our common stock. Under the 2012 Plan, the Board of Directors is authorized to issue stock options
(incentive and nonqualified), stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees,
officers, directors, consultants and advisors of the Company and its subsidiaries. Incentive stock options may only be granted to employees
of the Company and its subsidiaries.

the fiscal year ended December 31, 2023, the Company did not issue any equity awards under its 2023 Plan.

the fiscal year ended December 31, 2023, the Company awarded 20,000 restricted stock units under the 2021 Plan, valued at $ 7.47 per share
based on the closing market price of the Company's common stock on the date of the grant. The restricted stock units vested during
May 2023.

the fiscal year ended December 31, 2023, the Company did not issue any restricted stock awards or options under the 2021 Plan.

the fiscal year ended December 31, 2022, the Company granted options to purchase 21,563 shares of the Company's common stock under
the 2021 Plan, of which all were vested as of December 31, 2022 with an exercise price of $ 23.75 per share, based on the closing market
price plus 25 % of the Company's common stock on the date of the grant. Using a Black-Scholes Option Pricing Model, the weighted
average fair value of these options was $ 14.75 per share and was estimated at the date of grant.

the fiscal year ended December 31, 2022, the Company did not award shares of restricted common stock under the 2021 Plan.

the fiscal year ended December 31, 2022, the Company awarded 29,017 restricted stock units under the 2021 Plan, valued at $ 28 through
$ 271.25 per share based on the closing market price of the Company's common stock on the date of the grant, with a weighted average
fair value of $ 180.50 per share. 12,260 shares of common stock shall vest as follows: 37% vesting 12 months from the date of the grant,
33% vesting 24 months from the date of the grant, and 30% vesting 36 months from the date of the grant, in each case subject to the reporting
person remaining in the service of the Company on each such vesting date. 7,800 shares of common stock shall vest as follows: 25% of
such restricted stock units shall vest on the first anniversary, and the remaining shares shall vest ratably over the succeeding 36-month
period, with (1/36) of such vesting on the last day of each such calendar month. 7,080 shares of common stock shall vest 50% on December
1, 2023, and 50% on December 1, 2024. 1,860 shares of common stock are performance-based awards that will vest in the following year
in January 2023 based on approval of the Board based on achievement of key performance objectives. The remaining 18 shares of common
stock are performance-based awards that were granted and vested during January 2022 as approved by the Board based on the achievement
of key performance objectives during the prior year.

 Stock-based
compensation expense for the years ended December 31, 2023, and 2022 was generated from stock option and restricted stock awards. Stock
options are awards that allow holders to purchase shares of the Company's common stock at a fixed price. Certain options granted
may be fully or partially exercisable immediately, may vest on other than a four-year schedule or vest upon attainment of specific performance
criteria. Restricted stock awards generally vest one to three years after the date of grant, although certain awards may vest immediately
or vest upon attainment of specific performance criteria. Option exercise prices are generally equivalent to the closing market value
price of the Company's common stock on the date of grant. Unexercised options generally terminate ten years after date of grant.

 The
following table presents the weighted-average assumptions used for options granted under the 2021 Plan:

 Schedule of Weighted Average for Options Granted

 2022

 Option term (years)

 4.95

 Volatility

 110.21
 %

 Unvested forfeiture rate

 0.00
 %

 Risk-free interest rate

 3.93
 %

 Dividend yield

 0.00
 %

 Weighted-average fair value per option granted

 $
 14.75

 No
options were granted under the 2023 Plan, the 2021 Plan, the 2014 Plan and the 2012 Plan for the year ended December 31, 2023.

 No
options were granted under the 2014 Plan and the 2012 Plan for the year ended December 31, 2022.

 F- 37

 Share-based
compensation expense recognized in the Consolidated Statements of Operations is based on awards ultimately expected to vest, therefore,
awards are reduced for estimated forfeitures. The accounting standard requires forfeitures to be estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 Total
share-based compensation expense, related to the Company's share-based awards, recognized for the years ended December 31, was
included within the representative group comprised as follows:

 Schedule of Share Based Compensation Expense

 2023

 2022

 $

 $

 Cost of data hosting revenue, exclusive of depreciation

 -

 General and administrative expenses, exclusive of
 depreciation and amortization

 3,988

 3,785

 Share-based compensation expense

 $
 4,312

 $
 3,852

 Total
unrecognized compensation costs related to non-vested stock options as of December 31, 2023 and December 31, 2022 is approximately $ 266
thousand and $ 1.0 million, respectively, and is expected to be recognized over a weighted-average remaining vesting period of approximately
 0.37 years and 1.36 years, respectively.

 Presented
below is a summary of the Company's stock option activity for the Plans for the years ended December 31:

 Summary of Stock Option Activity

 2023

 2022

 Shares under option, beginning

 39,662

 -

 21,564

 -

 ( 7,097
)

 Forfeited

 -

 ( 430
)

 Expired/canceled

 -

 ( 1,306
)

 Shares under option, ending

 Options exercisable

 45,276

 38,158

 The
weighted average exercise price for the Company's stock option activity for the Plans is as follows for each of the years ended
December 31:

 2023

 2022

 Shares under option, beginning

 $
 102.86

 $
 136.00

 $
 -

 $
 23.75

 $
 -

 $
 21.50

 Forfeited

 $
 -

 $
 259.75

 Expired/canceled

 $
 -

 $
 196.00

 Shares under option, ending

 $
 102.86

 $
 102.86

 Options exercisable, ending

 $
 92.53

 $
 78.25

 The
following table summarizes information for options outstanding and exercisable for the Plans as of December 31, 2023:

 Summary
of Option Outstanding and Exercisable

 Outstanding

 Exercisable

 Weighted Average

 Weighted

 Weighted Average

 Weighted

 Remaining

 Average

 Remaining

 Average

 Exercise
 Price
 Range

 Contractual
 Life

 Exercise
 Price

 Contractual
 Life

 Exercise
 Price

 $ 17.50 -$ 30.00

 25,409

 3.88

 $
 23.72

 25,159

 3.85

 $
 23.78

 $ 30.01 - 188.00

 26,384

 4.64

 $
 175.11

 19,717

 4.39

 $
 176.50

 $ 188.01 - 277.50

 7.23

 $
 277.50

 7.23

 $
 277.50

 4.30

 $
 102.86

 45,276

 4.12

 $
 92.53

 The
aggregate intrinsic value (i.e., the difference between the closing stock price and the price to be paid by the option holder to exercise
the option) is $ 0 for the Company's outstanding options and $ 0 for the exercisable options as of December 31, 2023. The amounts
are based on the Company's closing stock price of $ 4.00 as of December 29, 2023.

 F- 38

 Non-vested
restricted stock activity is as follows for the year ended December 31:

 Summary
of Non Vested Restricted Stock

 2023

 2022

 Non-vested restricted stock balance, beginning January 1

 33,221

 16,213

 Non-vested restricted stock granted

 20,000

 29,017

 Vested restricted stock

 —

 —

 Non-vested restricted stock exercised

 ( 35,336
)

 ( 7,730
)

 Non-vested restricted stock forfeited/expired

 ( 6,382
)

 ( 4,279
)

 Non-vested restricted stock balance, ending December

 11,503

 33,221

 The
weighted average fair value price for the Company's restricted stock activity for the Plans is as follows for each of the years
ended December 31:

 Summary
of Weighted Average Fair Value Price Restricted Stock Activity

 2023

 2022

 Restricted stock, beginning

 $
 208.83

 $
 282.11

 $
 7.47

 $
 180.55

 $
 107.84

 $
 245.22

 Forfeited/ expired

 $
 112.55

 $
 235.54

 Restricted stock, ending

 $
 222.39

 $
 208.83

 As
of December 31, 2023 and 2022, there was approximately $ 1.4 million and $ 4.8 million, respectively of unrecognized compensation cost
related to restricted stock plans. This cost is expected to be recognized over a remaining period of 0.60 years and 2.37 years, respectively.

 Stock
Warrants:

 The
following is a summary of common stock warrant activity during the year ended December 31, 2023.

 Summary
of Common Stock Warrant Activity

 of
 Warrant

 Weighted

 Average
 Exercise Price ($)

 Balance, December 31, 2022

 396,107

 $
 57.25

 834,022

 9.55

 ( 81,726
)

 0.01

 Forfeited/ Expired

 ( 134
)

 0.01

 Balance, December 31, 2023

 1,148,269

 $
 24.21

 As
of December 31, 2023, the outstanding warrants have a weighted average remaining term of 3.88 years.

 The
following is a summary of common stock warrant activity during the year ended December 31, 2022.

 of
 Warrant

 Weighted

 Average
 Exercise Price ($)

 Balance, December 31, 2021

 87,758

 $
 346.25

 359,491

 57.75

 ( 3,780
)

 206.00

 Forfeited/ Expired

 ( 47,362
)

 237.50

 Balance, December 31, 2022

 396,107

 $
 57.25

 As
of December 31, 2022, the outstanding warrants have a weighted average remaining term of 3.99 years.

 F- 39

 14. Commitments and Contingencies

 Commitments:

 Leases

 The
Company determines whether an arrangement is a lease at inception. The Company has operating leases for certain manufacturing, laboratory,
office facilities and certain equipment. The leases have remaining lease terms of less than one year to less than ten years. Our lease
agreements do not contain any material residual value guarantees or material restrictive covenants. As of December 31, 2023 and December
31, 2022, the Company has no assets recorded under finance leases.

 Lease
expense for these leases is recognized on a straight-line basis over the lease term. For the twelve months ended December 31, total lease
costs are comprised of the following:

 Summary of Lease Expense Recognized
on Straight-line Basis Over Lease Term

 2023

 2022

 Operating lease cost

 $

 $

 Short-term lease cost

 —

 —

 Total net lease cost

 $

 $

 Short-term
leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does
not record a related lease asset or liability for such leases.

 Supplemental
cash flows information related to leases for the twelve months ended December 31 was as follows:

 Summary of Cash Flow Information Related to Leases

 2023

 2022

 Cash paid for amounts included in the measurement of lease liabilities:

 Operating cash flows from operating leases

 $

 $

 Non-Cash Activity Right-of-use assets obtained in exchange for lease obligations:

 Operating leases

 $

 $

 Supplemental
balance sheet information for the twelve months ended December 31 was as follows:

 Summary of Balance Sheets Information

 (Dollars in thousands, except lease term and discount rate)

 2023

 2022

 Operating leases:

 Operating lease ROU asset

 $

 $

 Current operating lease liabilities

 $

 $

 Non-current operating lease
 liabilities

 Total operating lease liabilities

 $

 $

 Operating leases:

 ROU assets

 $
 1,058

 $

 Asset lease expense

 ( 627
)

 ( 422
)

 ROU assets, net

 $

 $

 Weighted Average Remaining Lease Term (in years):

 Operating leases

 4.38

 1.5

 Weighted Average Discount Rate:

 Operating leases

 8.04
 %

 3.83
 %

 F- 40

 Maturities
of operating lease liabilities are as follows for the year ending December 31:

 Schedule of Maturity of Operating
Lease Liabilities

 2023

 2024

 $

 2025

 2026

 2027

 2028

 Thereafter

 Total lease payments

 Less: imputed interest

 ( 93
)

 Total lease obligations

 Less: current obligations

 ( 220
)

 Long-term lease obligations

 $

 As
of December 31, 2023, there were no additional operating lease commitments that had not yet commenced.

 Contingencies:

 Spring
Lane Capital Contingency

 The
Company has a potential contingency associated with an agreement with Spring Lane of up to $250 thousand which would be reduced by a
proportion of funding received from Spring Lane up to the $35.0 million aggregate contribution cap. The Company considers the probability
of a payment for the contingency to be remote.

 Legal

 We
are subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. When applicable, we accrue for
losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional
information becomes available or circumstances change. Legal fees are charged to expense as they are incurred.

 The
Company has been named as a party in the December 19, 2019 United States Environmental Protection Agency ("EPA") Demand Letter
regarding the Malta Rocket Fuel Area Superfund Site ("Site") located in Malta and Stillwater, New York in connection with
an alleged release of hazardous materials into the environment. The EPA is seeking reimbursement of response costs from all named parties
in the amount of approximately $ 358 thousand plus interest in connection with the investigation and disposal activities associated with
the various drum caches discovered at the Site, issuance of the Explanation of Significant Differences ("ESD") of the Site,
and implementation of the work contemplated by the ESD. The Company considers the likelihood of a material adverse outcome to be remote
and does not currently anticipate that any expense or liability it may incur as a result of these matters in the future will be material
to the Company's financial condition.

 NYDIG
filed a complaint against a subsidiary of Company, Soluna MC Borrowing 2021-1, LLC ("Borrower") and Soluna MC, LLC, as Guarantor
("Guarantor"), and together with Borrower, ("NYDIG Defendants") in Marshall Circuit Court of the Commonwealth
of Kentucky on December 29, 2022 regarding a series of loans made by NYDIG to Borrower pursuant to a master equipment finance agreement
that were secured by certain assets of Borrower and guaranteed by Guarantor pursuant to a written guaranty agreement executed by Guarantor.
The Court issued on February 15, 2023 an agreed order granting NYDIG's motion for writ of possession which, among other things,
ordered parties to provide NYDIG access to the collateral described therein and preserved the rights of NYDIG to pursue a deficiency
judgment against the NYDIG Defendants. Also on February 15, 2023, the NYDIG Defendants filed their answer and affirmative defenses in
this proceeding. The NYDIG Defendants believe that NYDIG has liquidated some of the collateral securing the loans and anticipate that
NYDIG will complete the liquidation of collateral and continue to prosecute the complaint to obtain a judgment against the NYDIG Defendants.
Additionally, NYDIG has stated its intention to pursue SCI, the parent company of Guarantor, under a piercing of the corporate veil claim
relating to NYDIG Defendants' debts and liabilities under the loan documents. SCI denies any such liability and has filed a complaint
for a declaratory judgment against NYDIG in the Eighth Judicial District Court in Clark County, Nevada on March 16, 2023 seeking a declaratory
judgment as to such matter. NYDIG filed a motion to dismiss in response to SCI's declaratory judgment complaint on April 13, 2023.
SCI filed a response in opposition to NYDIG's motion to dismiss on April 27, 2023. The court heard oral arguments on May 16, 2023.
On June 22, 2023, the court issued an order granting NYDIG's motion to dismiss, on the basis that the case was not ripe for decision,
without prejudice. SCI intends to continue to vigorously defend any allegations regarding liability on account of NYDIG Defendants'
debts and liabilities to NYDIG under their loan documents and intends to refile a declaratory judgment complaint against NYDIG.

 F- 41

 On
February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA, and repossessed the collateralized
assets that totaled approximately $ 3.4 million,
in which approximately $ 560
thousand was first used to pay off accrued interest and penalty to date. On September 5, 2023, NYDIG provided a letter finalizing
the accounting for the repossessed collateralized assets totaling proceeds of approximately $ 3.4
million. This included legal and other expenses associated with the sale of the assets net a modest gain on the estimated net book
value of the assets totaling $ 251
thousand that was expensed as a loss on disposition of assets for the year ended December 31, 2023. On December 7, 2023, NYDIG filed
its Motion for Summary Judgment seeking entry of a judgment against Soluna in the approximate amount of $ 10.3
million for principal and interest and penalties. On January 12, 2024, Soluna filed its objection to NYDIG's motion for
summary judgment on the grounds that NYDIG failed to explain what collateral of which loan was sold and how the sale proceeds were
allocated to each loan. A summary judgment motion was performed on February 13, 2024, and was agreed upon by both NYDIG and the
Borrower, that the total outstanding loan principal balance would be approximately $ 9.2
million, in which a penalty fee was applied of approximately $ 1.0
million to the repossessed collateralized assets, and outstanding interest and penalty balance would be approximately $ 936
thousand as of December 31, 2023. This settlement did not result in the admission of any liability on the part of SHI, whose
declaratory judgment remains the subject of litigation. On March 13, 2024, NYDIG served the Company with a post-judgment discovery
seeking information regarding the Company's assets and liabilities. The deadline for response to the discovery is April 12,
2024. The Company intends to vigorously defend itself from NYDIG's parent company claims.

 In
September 2023, Atlas Technology Group LLC ("Atlas") filed a complaint against Soluna MC LLC (formerly EcoChain Block LLC)
("Soluna MC"), Soluna Computing, Inc., and Soluna Holdings, Inc. (collectively, the "Atlas Defendants") in the
Supreme Court of the State of New York, County of New York regarding a co-location services agreement between Soluna MC and Atlas. Atlas
alleges that the termination of such agreement by Soluna MC was a breach and asserts various claims, including breach of contract and
the return of pre-paid fees. The claim requests a judgement against the Atlas Defendants for the return of pre-paid fees of approximately
$ 464 thousand and additional damages to be determined at trial of not less than $ 7.9 million, and reimbursement of costs including legal
fees and other costs. The complaint also contains references to alter ego liability and piercing the corporate veil. The Atlas Defendants
believes they have substantial factual and legal defenses to these claims and intend to defend the claims vigorously.

 The
referenced pre-paid fees of approximately $ 464 thousand have been reported in previous filings on Soluna MC's balance sheet. No
reserves have been established for any other claims asserted in such complaint.

 15. Related Party Transactions

 MeOH
Power, Inc.

 On
December 18, 2013, MeOH Power, Inc. and the Company executed a Senior Demand Promissory Note (the Note) in the amount of $ 380 thousand
to secure the intercompany amounts due to the Company from MeOH Power, Inc. upon the deconsolidation of MeOH Power, Inc. Interest accrues
on the Note at the Prime Rate in effect on the first business day of the month, as published in the Wall Street Journal. At the Company's
option, all or part of the principal and interest due on this Note may be converted to shares of common stock of MeOH Power, Inc. at
a rate of $ 0.07 per share. Interest began accruing on January 1, 2014. The Company recorded a full allowance against the Note. As of
December 31, 2023 and December 31, 2022, $ 363 thousand and $ 342 thousand, respectively, of principal and interest are available to convert
into shares of common stock of MeOH Power, Inc. Any adjustments to the allowance are recorded as miscellaneous expense during the period
incurred.

 Legal
Services

the years ended December 31, 2023 and December 31, 2022, the Company incurred $ 2 thousand and $ 22 thousand, respectively, to Couch White,
LLP for legal services associated with contract review. A partner at Couch White, LLP is an immediate family member of one of our Directors.

 HEL
Transactions

 As
discussed above, on October 29, 2021, the Company completed the Soluna Callisto acquisition pursuant to the Merger Agreement. The purpose
of the transaction was for SCI to acquire substantially all of the assets (other than those assets physically located in Morocco) formerly
held by HEL, which assets consisted of SCI's existing pipeline of certain cryptocurrency mining projects that HEL previously transferred
to SCI, which was formed expressly for this purpose, and to provide SCI with the opportunity to directly employ or retain the services
of four individuals whose services it had retained through HEL prior to the merger. As a result of the merger, each share of common stock
of Soluna Callisto issued and outstanding immediately prior to the effective time of the merger, other than shares owned by the Company
or any of our subsidiaries, was cancelled and converted into the right to receive a proportionate share of the Merger Consideration.

 In
connection with the Soluna Callisto acquisition, effective as of October 29, 2021, upon and subject to the terms and conditions of the
Termination Agreement, on November 5, 2021: (1) the existing Operating and Management Agreements between HEL and SCI were terminated
in all respects; and (2)(A) SCI paid HEL $ 725 thousand, (B) SHI issued to HEL the Termination Shares, and (C) HEL and SHI entered into
an Amended and Restated Contingent Rights Agreement that, among other things, amended the existing Contingent Rights Agreement by and
between HEL and SHI, dated January 13, 2020, to provide SHI the right to invest directly in certain cryptocurrency mining opportunities
being pursued by HEL. SHI filed a registration statement with the SEC to register the resale of the Termination Shares on February 14,
2022.

 F- 42

 Due
to conditions being met within the Merger Agreement in relation to energization and retention of employees, the Company has advised SCI
US Holdings LLC, a Delaware limited liability company, who is the sole Effective Time Holder (as defined in the Merger Agreement) of
the right to receive the Merger Shares and that 19,800 Merger Shares were issued on May 26, 2023 and 39,600 Merger Shares were issued
on October 10, 2023. SCI US Holdings LLC has consented to the issuance of such Merger Shares as required under the Merger Agreement and
has directed the Company to issue such Merger Shares to its affiliate, HEL. Following the issuance of the 59,400 Merger Shares, a total
of 59,400 Merger Shares remain available for possible issuance pursuant to the terms of the Merger Agreement.

 Please
see Note 5 for additional information regarding the Soluna Callisto acquisition and related transactions.

 Several
of HEL's equity holders are affiliated with Brookstone Partners, the investment firm that holds an equity interest in the Company
through Brookstone Partners Acquisition XXIV, LLC. The Company's two Brookstone-affiliated directors also serve as directors and,
in one case, as an officer, of HEL and also have ownership interest in HEL. In light of these relationships, the various transactions
by and between the Company and SCI, on the one hand, and HEL, on the other hand, were negotiated on behalf of the Company and SCI via
an independent investment committee of the Board and separate legal representation. The transactions were subsequently unanimously approved
by both the independent investment committee and the full Board.

 Four
of the Company's directors have various affiliations with HEL.

 Michael
Toporek, the former Chief Executive Officer, and current Executive Director of the Company, owns (i) 90% of the equity of Soluna Technologies
Investment I, LLC, which owns 57.9% of HEL and (ii) 100% of the equity of MJT Park Investors, Inc., which owns 3.1% of HEL, in each case,
on a fully diluted basis. Mr. Toporek does not own directly, or indirectly, any equity interest in Tera Joule, LLC, which owns 9.2% of
HEL; however, as a result of his 100% ownership of Brookstone IAC, Inc., which is the manager of Tera Joule, LLC, he has dispositive
power over the equity interests that Tera Joule owns in HEL.

 In
addition, one of the Company's directors, Matthew E. Lipman, serves as a director and currently acting as President of HEL. Mr.
Lipman does not directly own any equity interest in Tera Joule, LLC, which owns 9.2% of HEL; however, as a result of his position as
a director and officer of Brookstone IAC, Inc., which is the manager of Tera Joule, LLC, he has dispositive power over the equity interests
that Tera Joule owns in HEL. As a result, the approximate dollar value of the amount of Mr. Toporek's and Mr. Lipman's interest
in the Company's transactions with HEL for the year ended December 31, 2023 was $ 0 and $ 0.

 John
Belizaire, the Company's Chief Executive Officer, and John Bottomley, who were elected to the Board upon the effective time of
SCI's acquisition of Soluna Callisto, serve as directors of HEL. In addition, Mr. Belizaire is the beneficial owner of 1,317,567
shares of common stock of HEL and 102,380 Class Seed Preferred shares, which are convertible into 86,763 shares of common stock of HEL.
These interests give Mr. Belizaire an ownership of 10.54% in HEL. Mr. Belizaire also owns an interest in HEL indirectly through his 5.0139%
interest of Tera Joule, LLC's 965,945 Class Seed Preferred shares, which are convertible into 818,596 shares of common stock of
HEL. Mr. Bottomley is the beneficial owner of 96,189, or approximately 0.72%, of the outstanding shares of common stock of HEL.

 The
Company's investment in HEL was initially carried at the cost of investment and was $ 750 thousand. Based on evaluation of projections
for the Company's investment in HEL, the Company fully impaired the equity investment of $ 750 thousand as of December 31, 2022,
writing it down to $ 0.

 The
Company owned approximately 1.79 % of HEL, calculated on a converted fully diluted basis, as of December 31, 2023 and December 31, 2022.
The Company may enter into additional transactions with HEL in the future

 16. Discontinued Operations

 As
described in Note 1, the Company entered into a Stock Purchase Agreement with Purchaser, pursuant to which the Company sold on April
11, 2022 all of the issued and outstanding shares of capital stock of its wholly-owned subsidiary, MTI Instruments for approximately
$ 9.0 million in cash, net of transaction costs. For fiscal year 2022, our Instrumentation business segment was classified as discontinued
operations in our financial statements for all periods presented. The Company incurred approximately a $ 7.5 million pretax gain on sale
of MTI Instruments for the year ended December 31, 2022, in which they did not receive until the second quarter of fiscal year 2022.
The Company's consolidated balance sheets and consolidated statements of operations report discontinued operations separate from
continuing operations. The Company's consolidated statements of equity and statements of cash flows combine continuing and discontinued
operations.

 F- 43

 Set
forth below are the results of the discontinued operations:

of Discontinued Operations

 2022

 Product revenue

 $
 1,799

 Cost of sales

 Research and development

 Selling, general, and administrative

 Other income, net

 -

 Income from discontinued operations before the gain on disposal and income
 taxes

 Pretax gain on sale of MTI Instruments

 7,751

 Income tax benefit

 $
 7,921

 MTI
Instruments Sale

 As
described in Note 1, the Company entered into a Stock Purchase Agreement with Purchaser, pursuant to which the Company sold on April
11, 2022 all of the issued and outstanding shares of capital stock of our wholly-owned subsidiary, MTI Instruments for an all-cash purchase
price of $ 10.75 million, subject to working capital and certain other adjustments as set forth in the Stock Purchase Agreement. The purchase
price did not include specified debt of MTI Instruments, which is the responsibility of the Company. This debt was transferred to the
Purchaser at the date of Sale and is included in the closing balance sheet as shown below, which resulted in a reduction in the consideration
payable to the Company.

 The
following table presents the gain associated with the Sale that was reported within the 2022 Annual Report.

of Gain on Sale

 As of April 11,

 2022

 Consideration received

 $
 10,750

 Plus: closing cash

 Less: transaction costs

 ( 908
)

 Less: closing indebtedness

 ( 483
)

 Plus: new working capital adjustments

 Adjusted consideration received

 9,379

 Cash

 Accounts receivable, net

 1,119

 Inventories

 Prepaid expense and other current assets

 Operating lease right-of-use assets

 Deferred tax assets

 Property, plant and equipment, net

 Total assets

 2,876

 Accounts payable

 Accrued liabilities

 Operating lease liability

 Total liabilities

 1,248

 Net assets
 transferred

 1,628

 Gain on sale

 $
 7,751

 17.
 PROJECT MARIE

 As
previously disclosed in Footnotes 1 and 9, on December 20, 2022, Soluna MC Borrowing 2021-1 LLC ("Borrower"), an indirect
wholly owned subsidiary of Soluna Holdings, Inc. (the "Company"), received a Notice of Acceleration and Repossession (the
"NYDIG Notice") from NYDIG ABL LLC ("NYDIG") with respect to the Master Equipment Finance Agreement, dated as
of December 30, 2021 (the "MEFA"), by and between Borrower and NYDIG. The NYDIG Notice states that (a) Borrower failed to
observe or perform certain covenants, conditions or agreements contained in the MEFA and such failure continued unremedied for a period
of ten days after Borrower's knowledge of such breach, which resulted in an event of default under the MEFA, and (b) Borrower defaulted
under the guaranty, collateral agreement, or other support agreement, which resulted in an event of default under the MEFA. In addition,
the NYDIG Notice states that Borrower failed to pay certain payments of principal and interest under the MEFA when due, which failure
also constituted an event of default under the MEFA. As a result of the foregoing events of default, and pursuant to the MEFA, NYDIG
(x) declared the principal amount of all loans due and owing under the MEFA and all accompanying Loan Documents (as defined in the MEFA)
to be due and immediately payable, (y) imposed a default rate of interest on any outstanding principal amount of each loan (together
with all then unpaid interest accruing thereon) and all other obligations under the MEFA and the Loan Documents, and (z) demanded the
return of all equipment subject to the MEFA and the Loan Documents.

 F- 44

 The
assets which secure the MEFA represent substantially all of the Company's mining assets at the site and certain of the operating
assets of Project Marie, a 20 MW facility located in Kentucky. The obligations of Borrower under the MEFA and reflected in the NYDIG
Notice are ring-fenced to Borrower and its direct parent company, Soluna MC LLC. The Company is not a party to any guaranty, collateral
agreement or other support agreement with or for the benefit of NYDIG. For the year ended December 31, 2022, the principal balance of
$ 10.5 million became due immediately and the Borrower was to bear interest, at a rate per annum equal to 2.0 % plus the rate per annum
otherwise applicable to such obligations set forth in the Master Agreement. As of December 31, 2023, the Company reduced the outstanding
debt by the repossessed collateralized assets net book value of $ 3.4 million less accrued interest that was paid off first when the collateral
was repossessed of approximately $ 740 thousand, legal fees of approximately $ 251 thousand, and an additional penalty expense of $ 1.0
million, reducing the debt outstanding to approximately $ 9.2 million as of December 31, 2023. Also, as the Company was not able to obtain
a waiver, the outstanding deferred financing costs were written off on September 5, 2023. NYDIG provided a letter finalizing the accounting
for the repossessed collateralized assets totaling proceeds of approximately $ 3.4 million. This included legal and other expenses associated
with the sale of the assets net a modest gain on the estimated net book value of the assets totaling $ 251 thousand that was expensed
as a loss on disposition of assets for the year ended December 31, 2023. On December 7, 2023, NYDIG filed its Motion for Summary Judgment
seeking entry of a judgment against Soluna in the approximate amount of $ 10.3 million for principal and interest and penalties. On January
12, 2024, Soluna filed its objection to NYDIG's motion for summary judgment on the grounds that NYDIG failed to explain what collateral
of which loan was sold and how the sale proceeds were allocated to each loan. A summary judgment motion was performed on February 13,
2024, and was agreed upon by both NYDIG and the Borrower, that the total outstanding loan principal balance would be approximately $ 9.2
million, in which a penalty fee was applied of approximately $ 1.0 million to the repossessed collateralized assets, and outstanding interest
and penalty balance would be approximately $ 936 thousand as of December 31, 2023.

 On
February 23, 2023, NYDIG proceeded to foreclose on all of the collateral securing the MEFA, which resulted in a reportable disposition
of all of the Company's mining assets at the site and certain of the operating assets of Project Marie. The total net book value
of the collateralized assets that were repossessed totaled approximately $ 3.4 million in which were written off the Company's books
for the year ended December 31, 2023, with an offset accrued interest to date when repossessed, a loss on sale of fixed assets, and to
the outstanding loan. Additionally, NYDIG has stated its intention to pursue SCI, the parent company of Guarantor, under a piercing of
the corporate veil claim relating to NYDIG Defendants' debts and liabilities under the loan documents. SCI denies any such liability
and has filed a complaint for a declaratory judgment against NYDIG in the Eighth Judicial District Court in Clark County, Nevada on March
16, 2023 seeking a declaratory judgment as to such matter. In a related development, also on February 23, 2023, the Borrower received
a notice of termination of the Management and Hosting Services Agreement with CC Metals and Alloys, LLC. As a result of this action and
certain other characteristics of the facility, the Company elected to shut down the Marie facility. The Company believes it will maximize
its profits and return on assets by concentrating its personnel and capital on its Dorothy Facility.

 With
the notice of termination of the Management and Hosting Services from CCMA, the Company notes that this event triggered the impairment
of the remaining fixed assets at the Marie facility for the year ended December 31, 2022. Based on the closure of operations on Project
Marie, the Company performed an impairment analysis and determined that approximately $ 2.4 million of equipment and leasehold approvements
associated with Project Marie that were not attached with the repossession of NYDIG collateralized assets were impaired as of the year-ended
December 31, 2022.

 For
the year ended December 31, 2023, the Company assessed whether the abandonment of the Project Marie facility qualified for the classification
of discontinued operations under ASC 205-20-45-1B and 1C. A disposal of a component of an entity or a group of components of an entity
shall be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an
entity's operations and financial results when any of the following occurs:

 a.
The component of an entity or group of components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held
for sale.

 b.
The component of an entity or group of components of an entity is disposed of by sale.

 c.
The component of an entity or group of components of an entity is disposed of other than by sale in accordance with paragraph 360-10-45-15
(for example, by abandonment or in a distribution to owners in a spinoff).

 As
such, the Company deemed that criteria c was applicable as the Project Marie facility was abandoned and ceased further operations beginning
on February 23, 2023. However, to qualify for reporting as discontinued operations, it must represent a strategic shift. Per ASC 205-20-45-1C,
examples of a strategic shift that has (or will have) a major effect on an entity's operations and financial results could include
a disposal of a major geographical area, a major line of business, a major equity method investment, or other major parts of an entity.
A strategic shift implies that the disposal must result from a change in the way management had intended to run the business. Management
does not believe the closure of Project Marie represented a strategic shift as the Company still fully intends to manage operations through
data hosting with customers and proprietary mining arrangements for future pipelines, as such the strategic shift criteria was not met
and will not qualify as discontinued operations.

 F- 45

 However,
per ASC 360-10-50-3A, in addition to the disclosures in paragraph 360-10-50-3, if a long-lived asset (disposal group) includes an individually
significant component of an entity that either has been disposed of or is classified as held for sale and does not qualify for presentation
and disclosure as discontinued operation, a public business entity shall disclose the pretax profit or loss of the individually significant
component of an entity for the period in which it is disposed of or is classified as held for sale and for all prior period that are
presented in the statement where net income is reported in accordance with ASC 205-20-45-6 through 45-9.

 Set
forth below are the results of Project Marie:

 Schedule of Results of Project Marie

 Year
 Ended
 31, 2023

 Year
 Ended
 31, 2022

 Cryptocurrency mining revenue

 $

 $
 10,028

 Data hosting revenue

 4,131

 Total revenue

 1,045

 14,159

 Operating costs:

 6,048

 Cost of revenue-depreciation

 7,813

 Data hosting costs

 3,518

 General and administrative expense

 17,940

 Operating loss

 ( 519
)

 ( 21,721
)

 1,394

 1,702

 1,623

 Other expense, net

 1,041

 -

 Net loss before income taxes

 $
 ( 3,286
)

 $
 ( 25,046
)

 18. VARIABLE INTEREST ENTITY

 On
January 26, 2022, DVSL was created in order to construct, own, operate and maintain variable data centers in order to support the mining
of cryptocurrency assets, batch processing and other non-crypto related activities (collectively, the "Project"). On May
3, 2022, SCI entered into a Bilateral Master Contribution Agreement (the "Bilateral Contribution Agreement") with Spring
Lane Capital, pursuant to which Spring Lane agreed, pursuant to the terms and conditions of such agreement, to make one or more capital
contributions to, and in exchange for equity in, SCI or one of its subsidiaries up to an aggregate amount of $ 35 million to fund certain
projects to develop green data centers co-located with renewable energy assets (the "Spring Lane Commitment"). We anticipate
that these capital contributions, once deployed into the projects, will help develop up to three behind-the-meter (BTM) projects designed
to convert wasted renewable energy into clean computing services such as Bitcoin mining and artificial intelligence. The Bilateral Contribution
Agreement outlines the framework for the Spring Lane Commitment; however, neither we nor Spring Lane are obligated to complete any projects
under such agreement and any actual capital contributions are subject to various conditions precedent, including the receipt of requisite
lender and other consents, acceptance by Spring Lane of specific projects and negotiations of agreements regarding those projects, including
milestones and structure. In partial consideration of the amendment to the October Secured Notes discussed above, the investors agreed
to release certain collateral covered by their security agreement to permit the Company to proceed forward with the initial phase of
Project Dorothy, which we expect to be partially funded by Spring Lane, which the Company expects to complete in the near future.

 On
August 5, 2022, the Company entered into a Contribution Agreement (the "Dorothy Contribution Agreement") with Spring Lane,
Soluna DV Devco, LLC ("Devco"), an indirect wholly-owned subsidiary of SCI, and DVSL an entity formed in order to further
the Company's development for Project Dorothy, (each, a "Party" and, together, the "Parties"). Pursuant
to the Dorothy Contribution Agreement, the Company committed to a capital contribution of up to approximately $ 26.3 million to DVSL (the
"Company Commitment"), and on August 5, 2022, the Company was deemed to have contributed approximately $ 8.1 million, through
payment of capital expenditures and development costs made on behalf of DVSL by the Company prior to August 5, 2022. Further under the
Agreement, Spring Lane committed to a capital contribution of up to $12.5 million to DVSL (the "Spring Lane Dorothy Commitment"),
and as of December 31, 2022, Spring Lane had actually contributed approximately $ 4.8 million. Under the Dorothy Contribution Agreement,
the Company and Spring Lane have committed to make subsequent contributions, up to their respective Company Commitment and Spring Lane
Dorothy Commitment amounts, on a pro rata basis, upon receipt of a contribution request from DVSL, as set forth in the Dorothy Contribution
Agreement and subject to the satisfaction of certain conditions described therein. The proceeds of any subsequent commitments will be
applied to pay project costs in accordance with the project budget.

 F- 46

 In
exchange for their contributions, the Company and Spring Lane were issued 67.8 % and 32.2 % of the Class B Membership Interests in DVSL,
respectively, and were admitted as Class B members of DVSL. Further pursuant to the Agreement, DVSL issued 100 % of its Class A Membership
Interests to Devco. The Dorothy Contribution Agreement contains customary indemnification provisions, liquidation provisions and governance
provisions with respect to DVSL. The Parties also entered into an Amended and Restated Limited Liability Company Agreement of DVSL providing
for the governance of DVSL.

evaluated this legal entity under ASC 810, Consolidations and determined that DVSL is a variable interest entity that should be
consolidated into Soluna, with a non-controlling interest recorded to account for Spring Lane's equity ownership of the Company.
Soluna has a variable interest in DVSL. The entity was designed by Soluna to create an entity for outside investors to invest in specific
projects. The creation of this entity resulted in Soluna, through its equity interest in DVSL, absorbing operational risk that the entity
was created to create and distribute, resulting in Soluna having a variable interest in DVSL.

 On
March 10, 2023, the Company along with Devco, and Soluna DVSL ComputeCo, LLC, a Delaware limited liability company (the " Project
Company ") entered into a Purchase and Sale Agreement (the " Purchase and Sale Agreement ") with Soluna SLC
Fund I Projects Holdco, LLC, a Delaware limited liability company (" Spring Lane ") that is wholly owned indirectly
by Spring Lane Management LLC. The Project Company is constructing a modular data center with a peak demand of 25 megawatts (the " Dorothy
Phase 1A Facility ").

 Under
a series of transactions in February 2023 and March 2023, culminating in the March 10, 2023 Purchase and Sale Agreement, the Company
sold to Spring Lane certain Class B Membership Interests for a purchase price of $ 7,500,000 (the " Sale "). After giving
effect to the Sale, the Company owned 6,790,537 Class B Membership Interests (constituting 14.6 % of the Class B Membership Interests)
and Spring Lane owns 39,791,988 Class B Membership Interests (constituting 85.4 % of the Class B Membership Interests). The cash portion
of the purchase price paid by Spring Lane to the Company was $ 5,770,065, which represented the purchase price of $ 7,500,000 less the
Company's pro rata share of certain contributions funded entirely by Spring Lane in the earlier portion of this series of transactions
occurring during February 2023 and March 2023. As a further part of these transactions, the parties agreed that from January 1, 2023
onwards, Soluna would bear only 14.6 % of the costs relating to the construction and operation of the Dorothy Phase 1A Facility, compared
to its 67.8 % share until that time, including during the calendar year 2022. After Spring Lane Capital realizes an 18% Internal Rate
of Return hurdle on its investments, the Company retains the right to 50% of the profits on Soluna DVSL ComputeCo. In connection with
the Spring Lane transactions and agreements, Soluna DV Services, LLC. will be providing the operations and maintenance services to Soluna
DVSL ComputeCo, LLC. Soluna DV Services, LLC expects to receive a margin of 20% for services rendered.

 Concurrently
with the Sale, the Company, Spring Lane, Devco and the Project Company entered into (a) the Fourth Amended and Restated Limited Liability
Company Agreement of the Project Company, dated as of March 10, 2023 (the " Fourth A&R LLCA "), an amendment and
restatement of the Third Amended and Restated Limited Liability Company Agreement of the Project Company dated as of March 3, 2023, and
(b) the Amended and Restated Contribution Agreement, dated as of March 10, 2023 (the " A&R Contribution Agreement "),
an amendment and restatement of the Contribution Agreement dated as of August 5, 2022. The Fourth A&R LLCA provides for certain updates
in respect of Spring Lane's majority ownership. The A&R Contribution Agreement reflects updated pro rata member funding percentages
as a result of the Sale as well as updated contribution caps for each of the Company and Spring Lane.

 As
of January 1, 2023, there were no changes in the Limited Liability Agreement of the Company other than those related to incorporating
the new investment and the purpose and design of the Company has not changed. The Company evaluated the power and benefits concepts under
ASC 810 to determine whether the change in investment of Class B memberships would change the consolidation of the DVSL, and the Company
concluded that, after the additional investment by Spring Lane, Soluna continues to have a controlling financial interest in DVSL. In
addition, the Company continues to have the power and benefits associated with DVSL and therefore will continue to consolidate.

 The
carrying amount of the VIE's assets and liabilities was as follows:

of Variable Interest Entities of Assets and Liabilities

 31,
 2023

 31,
 2022

 Current assets:

 Cash and restricted cash

 $
 2,275

 $

 Accounts receivable

 1,246

 -

 Related party receivable- intercompany

 Other receivable- current

 -

 Due from- intercompany

 -

 Total current assets

 3,756

 Other assets- long term

 2,172

 -

 Property, plant, and equipment

 13,712

 13,673

 Total assets

 $
 19,640

 $
 13,935

 Current liabilities:

 Due from – intercompany

 $
 -

 $

 Related party payable- intercompany

 Accounts payable

 -

 Accrued expense

 -

 Current portion of debt

 Total current liabilities

 Customer deposits- long term

 1,190

 -

 Other long-term liabilities

 -

 Total liabilities

 $
 2,186

 $

 F- 47

 Effective,
January 1, 2023, the Company's ownership in DVSL was reduced from 67.8 % to 14.6 %; see above for details.

 On
May 9, 2023, the Company's indirect subsidiary DVCC completed a strategic partnership and financing with a special purpose vehicle,
Navitas West Texas Investments SPV, LLC, ("Navitas") organized by Navitas Global, to complete the second phase of
the Dorothy Project ("Dorothy 1B"). Under a Contribution Agreement among the parties, the Company owned a substantially complete
25MW data center under construction, in which the Company had contributed capital expenditures for the data center. Soluna and Navitas
amended and restated the Initial LLCA (the "Existing LLCA") to reflect Navitas' contribution of $4,500,000 and its
receipt of 4,500 Membership Interests, constituting 26.5% of the outstanding Membership Interests of the Company. On June 2, 2023, Soluna
and Navitas amended and restated the Existing LLCA to (a) reflect (i) Navitas's additional capital contribution of $7,596,970 and
receipt of an additional 7,597 Membership Interests, for a total of 12,097 Membership Interests and 49% ownership of the Company, and
(ii) Soluna's additional capital contribution of $1,340,000 and receipt of an additional 1,340 Membership Interests, for a total
of 12,590 Membership Interests and 51% ownership of the Company, and (b) describe the respective rights and obligations of the Members
and the management of the Company.

evaluated this legal entity under ASC 810, Consolidations and determined that DVCC is a variable interest entity that should be
consolidated into Soluna, with a non-controlling interest recorded to account for Navita's equity ownership of the Company. Soluna
has a variable interest in DVCC. The entity was designed by Soluna to create an entity for outside investors to invest in specific projects.
The creation of this entity resulted in Soluna, through its equity interest in DVCC, absorbing operational risk that the entity was created
to create and distribute, resulting in Soluna having a variable interest in DVCC.

 DVCC
is a variable interest entity of Soluna due to DVCC being structured with non-substantive voting rights. This is due to two factors being
met as outlined in ASC 810-10-15-14 that require the Variable Interest Entity model to be followed.

 a.

 The
 voting rights of Soluna are not proportional to their obligation to absorb the expected losses of the legal entity. Soluna gave Navitas
 veto rights over significant decisions, which results in Soluna having fewer voting rights than their obligation to absorb the expected
 losses of the legal entity.

 b.

 Substantially
 all of DVCC's activities are conducted on behalf of Soluna, who has disproportionally fewer voting rights.

 Also,
Soluna is the primary beneficiary due to having the power to direct the activities of DVCC that most significantly impact the performance
of the Company due to its role as the manager handling the day-to-day activities of DVCC as well as majority ownership of and has the
obligation to absorb losses or gains of DVCC that could be significant to Soluna.

 Accordingly,
the accounts of DVCC are consolidated in the accompanying financial statements.

 The
carrying amount of the VIE's assets and liabilities was as follows for DVCC:

of Variable Interest Entities of Assets and Liabilities

 31,
 2023

 31,
 2022

 Current assets:

 Cash and restricted cash

 $
 2,575

 $
 -

 Accounts receivable

 -

 Related party receivable- intercompany

 -

 Total current assets

 3,406

 -

 Other assets- long term

 2,172

 -

 Property, plant, and equipment

 22,188

 -

 Total assets

 $
 27,766

 $
 -

 Current liabilities:

 Accounts payable

 $

 $
 -

 Accrued expense

 2,214

 -

 Due to intercompany

 Related party payable- intercompany

 1,108

 -

 Current portion of debt

 1,681

 -

 Total current liabilities

 5,292

 -

 Total liabilities

 $
 5,292

 $
 -

 F- 48

 19. Segment Information

 The
Company applies ASC 280, Segment Reporting, in determining its reportable segments. As of December 31, 2023, the Company had two
reportable segments in Continuing Operations: Cryptocurrency Mining and Data Center Hosting. The Company notes that previously there
was an additional segment: Test and Measurement Instrumentation, however as discussed in Notes 1 and 16, the Company sold MTI Instruments
in April 2022, and therefore classified this segment as discontinued operations. The guidance requires that segment disclosures present
the measure(s) used by the Chief Operating Decision Maker ("CODM") to decide how to allocate resources and for purposes of
assessing such segments' performance. The Company's CODM is comprised of several members of its executive management team
who use revenue and cost of revenues of both reporting segments to assess the performance of the business of our reportable operating
segments.

 No
operating segments have been aggregated to form the reportable segments. The Company does not allocate all assets to the reporting segments
as these are managed on an entity-wide basis. Therefore, the Company does not separately disclose the total assets of its reportable
operating segments.

 The
Cryptocurrency Mining segment generates revenue from the cryptocurrency the Company earns through its mining activities. The Data Center
Hosting segment generated revenue from contracts for the provision/consumption of electricity and operation of the data center from the
Company's high performance computing facilities previously at Project Marie and currently from Project Sophie and Project Dorothy.

 For
the year December 31, 2023 and 2022, approximately 0 % and 5 % of the Company's cryptocurrency mining revenue was generated from
Project Edith (data center located in Wenatchee, Washington), 7 % and 41 % from Project Marie (former data center located in Calvert City,
Kentucky), 28 % and 54 % from Project Sophie (data center located in Murray, Kentucky), and 65 % and 0 % from Project Dorothy (data center
located in Texas), respectively. For the year ended December 31, 2023 and 2022, approximately 3 % and 100 % of the Company's data
center hosting revenue was generated from Project Marie from hosting with customers, 30 % and 0 % was generated from Project Sophie, and
 67 % and 0 % was generated from Project Dorothy (data center located in Texas).

 The
Company evaluates performance based on profit or loss from operations before income taxes, accounting changes, items management does
not deem relevant to segment performance, and interest income and expense. Inter-segment sales and expenses are not significant. Non-cash
items of depreciation and amortization are included within both costs of sales and selling, general and administrative expenses.

 The
following table details revenue and cost of revenues for the Company's reportable segments for years ended December 31, 2023 and
2022, and reconciles to net loss on the consolidated statements of operations:

of Segment Reporting Information

 2023

 2022

 Years
 Ended December 31,

 2023

 2022

 Reportable segment revenue:

 Cryptocurrency mining revenue

 $
 10,602

 $
 24,409

 Data hosting revenue

 10,196

 4,138

 Demand response service revenue

 -

 Total segment and consolidated revenue

 21,066

 28,547

 Reportable segment cost of revenue:

 6,365

 14,226

 Cost of data hosting, exclusive of depreciation

 5,601

 3,572

 Cost of revenue- depreciation

 3,863

 18,708

 Total segment and consolidated
 cost of revenues

 15,829

 36,506

 Reconciling items:

 General and administrative expenses

 24,903

 28,709

 Impairment on equity investment

 -

 2,748

 8,375

 3,904

 11,130

 4,089

 Other expense (income), net

 1,479

 ( 22
)

 Income tax benefit from continuing operations

 ( 1,067
)

 ( 1,346
)

)

 ( 107,016
)

 Income before income taxes from discontinued operations
 (including gain on sale of MTI Instruments of $ $ 7,751 for the year ended December 31, 2022)

 -

 7,851

 Income tax benefit from discontinued
 operations

 -

 -

 7,921

 Net loss

)

 ( 99,095
)

 (Less) Net income (loss) attributable to non-controlling
 interest

 1,498

 ( 380
)

 Net loss attributable to Soluna Holdings, Inc.

 $
 ( 29,201
)

 $
 ( 98,715
)

 Capital expenditures

 12,705

 63,684

 13,376

 28,214

 F- 49

 20. Subsequent Events

 Convertible Debt Fourth Amendment Agreement

 On
February 28, 2024 the Company and the Purchasers entered into a Fourth Amendment Agreement to amend the Notes, SPA and related agreements
(collectively, the "Transaction Documents") to facilitate future financings by the Company by amending the Transaction Documents
as follows:

 The
Company shall be permitted undertake at-the-market transactions in the future provided:

 No
 Event of Default shall have occurred and be continuing under the Notes; and

 The
 market price of the shares of common stock shall be at least the At-the-Market ("ATM")
 Floor Price. ATM Floor Price means $10 per share initially, which is reduced to $8 per share
 six months after the ATM is effective and $6 per share 12 months after the after the effective
 date of the ATM.

 In
addition, the Company will be permitted to unilaterally extend the maturity date of the Notes for two 3-Month extensions if prior to
the then in effect maturity date the Company gives notice to the Purchasers and increases the principal amount of the Notes on the date
of each such extension by two percent ( 2 %) the principal amount of the Notes outstanding on the date of this Agreement per each extension.

 In
consideration of the foregoing, the Company will:

 Reduce
 the conversion price of the Notes to $ 3.78 per share;

 The
 Purchasers will receive an aggregate of 850,000 three year warrants exercisable at $ 0.01
 per share;

 An
 aggregate of 320,005 warrants held by the Purchasers will have the exercise price reduced
 to $ 3.78 per share (the "$ 3.78 Warrants");

 An
 aggregate of 478,951 warrants held by the Purchasers will have the exercise price reduced
 to $ 6.00 per share (the "Repriced Warrants"). For every one Repriced Warrant
 exercised by a Purchaser, such Purchaser shall receive 1.36 new five year warrants with an
 exercise price of $0.01, 1.6 new five year warrants with an exercise price of $4.20, and
 1.6 new five year warrants with an exercise price of $5.70.

to additional agreements with holders of another 51,618 outstanding warrants, similar adjustments with those warrants, resulting in a
total adjustment to 530,569 warrants.

the foregoing will result in the issuance of more than 20 % of the Company's outstanding shares, the foregoing is subject to stockholder
approval at the Company's annual meeting of shareholders, to be held not later than May 30, 2024. Until such shareholder approval
is obtained, the Company may not prepay any amount of the Notes which would reduce the aggregate principal amount thereof below $ 5 million.

 F- 50