On April 27, 2023 John Belizaire, CEO of Soluna Computing and incoming CEO of Soluna Holdings, participated in the Water Tower Research Fireside Chat. Key topics discussed include the following. Please watch the video for the details. 

• Project Dorothy 1A and 1B hosting, proprietary mining and joint venture discussions in progress with announcements to follow after final contracts are signed.
• The outlook and next steps for Soluna now that Project Dorothy has been energized, including driving to corporate positive cashflow.
• Soluna’s robust project pipeline and use of creative financing to execute on the pipeline. 

We received additional questions that John would like to address, and have done so below.

Soluna Frequently Asked Questions:

When will the company become cash flow positive? 

With Project Dorothy 1A, 1B and Sophie fully-energized and filled with Hosting or Proprietary mining we expect to reach cashflow positive from operations in the second half of  2023. 

How should we think about the economics of Project Dorothy 1A and 1B? In your prior press release you talked about how much revenue the hosting customer could generate – but how should we think about the revenue you can generate? Especially considering Spring Lane ownership split on Project Dorothy 1A?

Once we have executed the agreements that will govern the economics of Project Dorothy 1A and 1B, we will prepare an earnings potential illustration that will demonstrate the profitability and the cash contribution of each facility. In the interim investors can use some information we have already released.

Hosting market conditions will have a significant impact on Project Dorothy’s hosting revenue. Our current read of market conditions is customers are looking to pay between 6.5 and 7.5 cents per kW. The variability depends upon how much of that is fixed and how much is variable, depending on mining profits. 

Our power costs are still best in class and average around 3.0 cents per kW. This excludes ancillary services.

Initially, Project Dorothy 1A will be 100% hosted revenues with Soluna collecting 15% of the profit distributions plus an O&M fee. On Project Dorothy 1B we are close to completing a joint venture agreement. But for modeling purposes at this time, investors can assume economics similar to full ownership of 1B with hosting economics as described above.

What is the roadmap to ramp Project Dorothy 1B? Is this a 2023 event? or is this more likely to be in 2024? 

We expect to ramp Project Dorothy 1B (either via hosting or proprietary mining) in the summer of 2023.  

What are the economics of Project Sophie after you executed the hosting agreement? What will happen to the prop mining equipment you had there?

Through May we expect to ramp our hosting customer and begin to sell our prop mining equipment. The hosting contract at Project Sophie covers our electricity costs and gives us a 35% profit share. Given the older generation mining equipment we had at the site and the latest generation equipment being installed, we viewed the cash contribution and leverage to bitcoin profitability as favorable. In addition we would be able to recover capital invested in the mining equipment. We expect to use the proceeds from miner sales to pay down a portion of our convertible debt and fund the completion and ramp up of Project Dorothy 1B.

In the past, Spring Lane committed to two more 50MW datacenters – has anything changed in that commitment with the recent increased ownership in Project Dorothy 1A?

Nothing has changed.  Spring Lane will continue to invest in future projects with Soluna as part of the project pool. Since Project Dorothy 1A is now a hosting-based business, the capital Spring Lane had allocated to miner purchases was instead used to pay for their increased ownership of 1A.  The remaining capital pool will be used for future projects and operating expense commitments in 1A.

Should we expect continued buildout at Project Dorothy 2 before additional sites with Spring Lane?

We expect to develop Project Dorothy 2 later this year. Once we have Project Dorothy 1A/1B fully ramped and operating to our expectations, we will turn our attention to Project Dorothy 2 construction and development.  Our ERCOT approval supports both Project Dorothy 1 and 2. In addition, certain infrastructure investments we have made at the site will be further leveraged, improving the capital efficiency of a Project Dorothy 2A/2B investment.

Could you talk about financials for this year? What is the progress on the convertible bondholder discussions?

We will publish an earnings potential illustration once all agreements for hosting and/or prop-mining are announced and Project Dorothy ramp is underway.  Every indication is that these projects will generate considerable cash flows and will benefit from the industry-leading low power prices from our behind-the-meter approach, which should help get us to operating cash flow positive in the second half of 2023.  

We are negotiating an extension of the Maturity of the October Convertible Note. 

Was there any monetary commitment on behalf of Compass Mining? Are they shareholders? Did they make any investment into Soluna Holdings?

Compass is not a shareholder of the company and no financial investment was made. Compass is required to post deposits as part of their hosting agreement.

When do you expect to realize real revenue from Project Dorothy?

We will be ramping Project Dorothy over the next few months, starting in May.  With key hosting agreements and/or proprietary-mining partnerships in place, Project Dorothy will be among our most profitable assets, and serve as a blueprint for the growth of our business. We expect to begin recognizing revenue in Project Dorothy 1A beginning in June 2023.  We expect to begin recognizing revenue in Project Dorothy 1B in August 2023.

When will you release Q1 2023 results?

We are required to file our first quarter 10 Q by May 15th 2023. That will be accompanied by a press release that summarizes key points for investors and will highlight our progress to get to operating cash flow positive by the second half of the year.

Safe Harbor Statement

This blog post contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Soluna Holdings, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Soluna’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, further information regarding which is included in the Company’s filings with the Securities and Exchange Commission. All information provided in this press release is as of the date of the press release, and Soluna Holdings, Inc. undertakes no duty to update such information, except as required under applicable law.