v3.26.1
Debt
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
Debt Debt
The following table represents total debt outstanding by agreement as of June 30, 2026:
(Dollars in thousands):Current portion of debtLong term debtTotal
Generate loan$23,145 $— $23,145 
Green Cloud Note6,014 — 6,014 
Galaxy loan944 3,016 3,960 
Equipment/Land loan— — — 
Total Debt$30,103 $3,016 $33,119 
The following table represents total debt outstanding by agreement as of December 31, 2025:
(Dollars in thousands):Current portion of debtLong term debtTotal
Generate loan$3,713 $10,213 $13,926 
Green Cloud Note4,361 3,112 7,473 
Galaxy loan784 3,499 4,283 
Equipment/Land loan— 1,075 1,075 
Total Debt$8,858 $17,899 $26,757 
The Company notes as of June 30, 2026, there is approximately $33.1 million in debt outstanding, made up of approximately $37.9 million in principal outstanding less approximately $4.8 million in debt issuance and discounts costs remaining to be amortized over the life of the loans. The following table represents the future minimum principal payments, which excludes potential cash sweeps, due on debt as of June 30, 2026:

(Dollars in thousands)
Year2026
2026 (remainder of the year)$5,170 
20277,678 
20284,840 
20295,197 
203015,036 
Total$37,921 

Amounts reflect contractual maturities. As described above, the entire outstanding balance under the Generate Credit Agreement has been classified as current as of June 30, 2026 notwithstanding its contractual amortization schedule.

Generate Credit Agreement
(Dollars in thousands)Maturity DateInterest Rate January 1, 2026-
June 30, 2026		September 12, 2025
– December 31, 2025
Tranche A-1September 12, 2030*13.65 %$4,776 $5,500 
Tranche A-3September 12, 2030*13.65 %11,414 11,500 
Tranche CSeptember 12, 2030*11.62 %12,500 — 
Total drawn loan28,690 17,000 
Less: principal payments(1,182)(810)
Less: debt discount and issuance costs(4,363)(2,264)
Total outstanding note23,145 13,926 
(Less) Current note outstanding(23,145)(3,713)
Long-term note outstanding$— $10,213 
On September 12, 2025, the Company caused its subsidiaries Soluna DVSL ComputeCo, LLC (“Dorothy 1A Borrower”), Soluna DVSL II ComputeCo, LLC (“Dorothy 2 Borrower”), and Soluna KK I ComputeCo, LLC (“Tranche B Borrower” and collectively with Dorothy 1A Borrower and Dorothy 2 Borrower, the “Borrowers”) to enter into a Credit and Guaranty Agreement (the “Credit Agreement”) with Generate Lending, LLC, as administrative agent and collateral agent (the “Agent”), and Generate Strategic Credit Master Fund I-A, L.P. (the “Lender”). The Credit Agreement provides for senior secured term loan commitments in an aggregate principal amount of up to $35.5 million, comprised of (i) Tranche A-1 ($5.5 million), (ii) Tranche A-3 ($11.5 million), and (iii) Tranche B ($18.5 million). In addition, the Credit Agreement permits the Borrowers to request one or more Additional Tranche Loan Commitments (as defined in the Credit Agreement), in the aggregate amount of up to $64.5 million, subject to the approval of the Lender and the Agent, for project-level financing of eligible projects. On September 12, 2025, the Borrowers borrowed approximately $12.6 million under the Credit Agreement, comprised of Tranche A-1 loans and Tranche A-3 loans, and on December 22, 2025, an additional $4.4 million was borrowed on the Tranche A-3 loan. The Company can draw upon Tranche B from September 12, 2025 until October 31, 2026, subject to the conditions set forth in the Credit Agreement. The maturity date for the Tranche A and Tranche B loans is the earlier of (i) payment of outstanding principal, interest, and fees and (ii) September 12, 2030. Additional Tranche Loan Commitments will have maturity dates as set forth in their respective amendments to
the Credit Agreement. For the three and six months ended June 30, 2026, interest expense in relation to Tranche A-1, A-3, and B was approximately $703 thousand and approximately $1.5 million, respectively.
Proceeds from the Credit Agreement will be used to finance, refinance, develop and construct the Company’s Dorothy 1A, Dorothy 2 and Kati data center projects, fund a debt service reserve account, and pay fees and expenses. The loans bear interest at a variable rate based on either ABR or Term SOFR, as set forth in the Credit Agreement. The applicable interest rate for SOFR loans is equal to Term SOFR plus a margin of 10.0% per annum, and for ABR loans is equal to the ABR plus a margin of 9.0% per annum. The Credit Agreement provides for a SOFR rate floor of 3.50% per annum. The Borrowers are required to pay a commitment fee of 1.00% per annum on undrawn amounts of the Tranche B Loan Commitments and any Additional Tranche Loan Commitments. During the continuance of an event of default, a default rate applies equal to the otherwise applicable rate plus 2.0% per annum.
The loans are subject to scheduled amortization, fees, and prepayment premiums. The Credit Agreement also contains a mandatory prepayment provision, or "cash sweep," requiring a percentage of free cash flow, as defined in the Credit Agreement, to be applied to principal reduction on a periodic basis.
As of June 30, 2026, the entire outstanding principal balance is classified as current as a result of the covenant matters described under "Balance sheet classification" below. In periods in which covenant-related classification does not apply — including as of December 31, 2025 — the outstanding balance is classified between current and noncurrent liabilities based on scheduled amortization and management's estimate of cash sweep prepayments expected to be applied during the following twelve months. That estimate relies on management's internal cash flow forecast, which incorporates assumptions regarding future operating performance, capital expenditures, and working capital needs that are inherently uncertain; actual amounts prepaid under the cash sweep may differ materially from the amounts classified as current.
The obligations are guaranteed by certain Company subsidiaries and secured by first-priority liens on substantially all assets of the Borrowers and guarantors, including pledges of equity interests, security interests in deposit and other collateral accounts (subject to control agreements), and mortgages or deeds of trust on the project sites.
On April 1, 2026, in connection with the Briscoe Project Acquisition as discussed in Note 5, the Company caused the Existing Borrowers and the Tranche C Borrower (collectively, the “Borrowers”) to enter into Consent and Amendment No. 1 to the Credit Agreement and Amendment No. 1 to the Pledge Agreement (the “Amendment”, and the Credit Agreement, as amended by the Amendment, the “Amended Credit Agreement”) with the Agent and the Lender. The Amendment became effective on April 1, 2026 (the “First Amendment Effective Date”).
Under the Amended Credit Agreement: (i) Tranche A-1 and Tranche A-3 loan commitments finance the Dorothy 1A Project and the Dorothy 2 Project, respectively; and (ii) Tranche B loan commitments finance the development and construction of the Kati Project.
Among other changes, the Amendment: (i) adds the Tranche C Borrower as a new borrower and guarantor; (ii) establishes Tranche C loan commitments of $12.5 million to finance the Briscoe Project Acquisition and adjusts the Tranche B loan commitments to be changed from $18.5 million to $6.0 million ; (iii) adds the Briscoe Project Company as a guarantor following the acquisition; and (iv) includes the Briscoe Project as a new project under the Amended Credit Agreement.
The unamortized deferred financing costs of approximately $2.0 million associated with the $12.5 million reduction in the Tranche B Loan Commitment were written off upon execution of the amendment and are reflected as loss on extinguishment of debt in the condensed consolidated statements of operations for the three and six months ended June 30, 2026.
As of June 30, 2026, $6.0 million of the Tranche B commitment under the Credit Agreement remained undrawn and, by its terms, available through October 31, 2026. During the second quarter of 2026, management concluded that the Company does not intend to draw the remaining Tranche B commitment. See discussion in Note 2- Loan Commitment Assets for further details. Accordingly, the Company wrote off the remaining $979 thousand loan commitment asset associated with the undrawn commitment, which is reflected in interest expense for the three and six months ended June 30, 2026.
The Tranche C loans bear interest at a variable rate based on either ABR or Term SOFR, with margins of 8.0% per annum for SOFR loans and 7.0% per annum for ABR loans. They are also subject to scheduled amortization and mandatory cash sweep prepayments. For the three and six months ended June 30, 2026, interest expense in relation to Tranche C was approximately $534 thousand.
Financial covenants

The Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default for financings of this type. Events of default under the Credit Agreement include, among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, breach of covenants, cross-default to certain material indebtedness, bankruptcy and insolvency, and change of control. Upon the occurrence and during the continuance of an event of default, the lenders may declare all outstanding principal and accrued but unpaid interest under the Credit Agreement immediately due and payable and may exercise the other rights and remedies provided under the Credit Agreement and related loan documents. Negative covenants in the Credit Agreement include, among other things, restrictions on the Borrowers and guarantors with respect to incurring additional indebtedness, creating liens on assets, selling assets or making fundamental changes, making restricted payments, entering into affiliate transactions, and using loan proceeds for unauthorized purposes. The Credit Agreement also restricts investments, capital expenditures, and speculative transactions, and requires that all deposit and securities accounts be subject to control agreements. Financial covenants require (i) a minimum trailing Debt Service Coverage Ratio ("DSCR") of 1.60:1.00 and (ii) a minimum Forward Contracted DSCR measured with respect to the applicable projects in the aggregate, of not less than 1.20:1.00. The Forward Contracted DSCR is a forward-looking measure that gives credit only to revenues under executed customer contracts. Revenues that management expects to realize but that are not yet contracted, including merchant revenues, are assumed to be zero for purposes of the calculation. A failure to satisfy the Forward Contracted DSCR that remains unremedied for five days constitutes an event of default under the Credit Agreement, following which the lenders may declare all outstanding principal and accrued interest immediately due and payable. The facility also includes customary mandatory prepayment provisions.
The Credit Agreement permits the Borrowers to cure a financial covenant failure retroactively through a specified equity contribution — a cash equity infusion received within ten business days following delivery of the quarterly compliance certificate, which is then included in the applicable covenant calculations. The Borrowers may make no more than two specified equity contributions in any fiscal year and no more than five over the term of the loans, and no borrowing may be requested or made during the period between a financial covenant event of default and its cure.
Covenant holidays and waivers

On August 7, 2026, the Borrowers and the Administrative Agent, on behalf of the lenders, entered into a Limited Waiver, Consent, and Amendment No. 3 to the Credit Agreement ("Amendment No. 3"). Amendment No. 3 amended the financial covenants in the Credit Agreement to provide that neither the Debt Service Coverage Ratio nor the Forward Contracted DSCR was required to be tested for the June 30, 2026 measurement date. The effectiveness of Amendment No. 3 was conditioned upon the prepayment in full of the Tranche A-1 and Tranche A-3 Loans described below, which occurred on August 10, 2026. Amendment No. 3 also waived certain administrative matters, including the timing of delivery of the April 2026 monthly operating statement, the timing of funding of the maintenance reserve account and the timing of termination of certain legacy bank accounts, and extended the deadline to satisfy certain real estate post-closing obligations relating to the Briscoe Wind Farm to October 15, 2026. As a result of Amendment No. 3 and the prepayment, no default or event of default has occurred or is continuing under the Amended Credit Agreement, and no cross-default or cross-acceleration provision under the Company's other financing arrangements has been triggered.
As amended, the Credit Agreement requires (i) a Debt Service Coverage Ratio of not less than 1.60:1.00, measured quarterly with respect to completed projects in the aggregate, excluding the Dorothy 1A and Dorothy 2 projects following the prepayment, with the Briscoe project first subject to testing on the quarterly measurement date of September 30, 2026; and (ii) a Forward Contracted DSCR of not less than 1.20:1.00, measured quarterly, from which the Briscoe project is excluded and, following the prepayment, the Dorothy 1A and Dorothy 2 projects are also excluded. Notwithstanding the prepayment, the Dorothy 1A Borrower and the Dorothy 2 Borrower remain parties to the Credit Agreement, and the pledges and security interests granted with respect to those borrowers will not be released until the termination of the Credit Agreement.

Prepayment of Tranche A-1 and Tranche A-3 Loans
On August 10, 2026, subsequent to the balance sheet date, Soluna DVSL ComputeCo, LLC and Soluna DVSL II ComputeCo, LLC prepaid in full the Tranche A-1 Loans and Tranche A-3 Loans, respectively, in the aggregate total prepayment amount of approximately $19.1 million, inclusive of accrued and unpaid interest, the applicable prepayment premium of $3.9 million, $15.2 million of the outstanding principal balance and all other amounts then due under the Amended Credit Agreement. Following the prepayment, the Forward Contracted DSCR requirement no longer applies to
these borrowers; the related pledges and security interests will not be released until the Debt Termination Date under the Amended Credit Agreement.
Balance sheet classification

Because the Forward Contracted DSCR gives no credit to uncontracted revenues, the Company has concluded it is probable the Borrowers will not satisfy the covenant at measurement dates within the twelve months following June 30, 2026 absent additional contracted revenues or an amendment to the Amended Credit Agreement, and the Amendment No. 3 does not extend the Company's covenant relief for more than one year from the balance sheet date. Accordingly, the Company classified the entire $27.5 million of gross principal outstanding under the Amended Credit Agreement, net of related unamortized deferred financing costs and debt discount of $4.4 million, within the current portion of debt in the condensed consolidated balance sheet as of June 30, 2026. This includes the Tranche A-1 and Tranche A-3 Loans of $13.5 million, net of deferred financing costs, which were prepaid in full in August 2026 as described above. As of December 31, 2025, $10.2 million of these borrowings were classified as noncurrent.

The reclassification is a matter of balance sheet presentation; it did not change the carrying amount of the borrowings and had no effect on the condensed consolidated statements of operations for the three and six months ended June 30, 2026, and it does not reflect any acceleration of the obligations, demand for repayment, or change in the contractual maturity or repayment terms of the loans. The Lender has not accelerated the obligations and has granted covenant relief with respect to both the March 31, 2026 and June 30, 2026 test dates. Management expects the remaining borrowings to be repaid in accordance with their contractual amortization, cash sweep, and maturity provisions and does not consider acceleration to be probable; deferred financing costs and debt discount continue to be amortized to interest expense over the contractual term of the borrowings using the interest method. The Company may enter into discussions with the Lender regarding a potential amendment to the covenant; there can be no assurance that an amendment will be executed on acceptable terms or at all. The borrowings would be reclassified as noncurrent in a future period upon execution of an amendment or a prospective waiver extending more than one year beyond the applicable balance sheet date and a determination that compliance at measurement dates within the succeeding twelve months is probable.

Private Placement
Pursuant to the Amended Credit Agreement, on April 1, 2026, the Company issued to Generate Strategic Credit Master Fund I-B, L.P., an affiliate of the Lender and the Agent (the “Holder”), in a private placement (the “Private Placement”): (i) a pre-funded warrant (the “Pre-Funded Warrant”) to purchase up to 700,000 shares of common stock; (ii) a common warrant to purchase up to 1,350,000 shares of common stock (the “Common Warrant 1”); and (iii) a common warrant to purchase up to 650,000 shares of common stock (the “Common Warrant 2” and, together with the Common Warrant 1, the “Common Warrants” and, collectively, the “Warrants”).
Pre-Funded Warrant
The Pre-Funded Warrant is exercisable immediately and expires on the five-year anniversary of the date of issuance. The Pre-Funded Warrant is exercisable at an exercise price of $0.0001 per share of Common Stock. As of June 30, 2026, the Pre-Funded Warrant has been fully exercised.
Common Warrants
The Common Warrant 1 and Common Warrant 2 are identical except with regard to their exercise price. The Common Warrant 1 has an exercise price of $0.68 per share of Common Stock and the Common Warrant 2 has an exercise price of $0.75 per share of Common Stock. The Common Warrants are exercisable upon issuance and expire on the five-year anniversary of their date of issuance.
The warrants were initially measured at fair value and are classified as equity instruments; they are not subject to subsequent remeasurement. The Company performed a Black-Scholes valuation on April 1, 2026 of the Pre-Funded and Common Warrants generating a fair value of approximately $1.6 million noting the below assumptions:
April 01, 2026
Stock price$0.67 
Exercise price
$0.0001- 0.75
Expected term in years5.00 
Volatility136 %
Risk-free interest rate3.93 %
Green Cloud Note
(Dollars in thousands)Maturity DateInterest Rate January 1, 2026-
June 30, 2026		January 1, 2025-
December 31, 2025
Term Loan and capitalized interest (excludes debt issuance cost)June 20, 20279 %$7,803 $11,748 
Less: principal and capitalized interest payments(1,628)(3,945)
Less: debt discount(49)(99)
Less: debt issuance costs(112)(231)
Total outstanding note6,014 7,473 
(Less) Current note outstanding(6,014)(4,361)
Long-term note outstanding$— $3,112 
On June 20, 2024, pursuant to the terms and subject to the conditions of a Note Purchase Agreement (the “June SPA”) by and among (i) CloudCo, (ii) Soluna Cloud, a Nevada corporation, indirect wholly owned subsidiary of the Company, and parent of CloudCo, (iii) the Company and (iv) the accredited investor named therein (the “Investor” or "Green Cloud", and collectively the “Note Parties”), CloudCo issued to the Investor a secured promissory note in a principal amount equal to $12.5 million (the “Green Cloud Note”). The Green Cloud Note accrues interest at a rate 9% per annum, subject to adjustment upon an event of default. The Green Cloud Note matures on June 20, 2027. CloudCo’s obligations under the Green Cloud Note were secured by all or substantially all of CloudCo’s assets, including pursuant to a security agreement executed and delivered by CloudCo in favor of the Investor (the “CloudCo Security Agreement”, and together with the June SPA and the Green Cloud Note, the “CloudCo Agreements”).
For the three months ended June 30, 2026 and June 30, 2025, the Company incurred approximately $240 thousand and $354 thousand in interest expense in relation to the Green Cloud Note, respectively, which includes interest paid on the note and amortization of deferred financing costs. For the six months ended June 30, 2026 and June 30, 2025, the Company incurred approximately $498 thousand and $744 thousand in interest expense in relation to the Green Cloud Note, respectively, which includes interest paid on the note and amortization of deferred financing costs.
June SPA Modification
On March 21, 2025, the Note Parties entered into a Modification Agreement (the “Modification Agreement”) to, among other things:
(i)provide for the deposit of 1,000,000 shares (the “Escrow Shares”) of the common stock into an escrow account maintained by Northland Securities, Inc., pursuant to an escrow agreement (as further described below),
(ii)provide for the issuance to the Investor of penny warrants to purchase shares of the Company’s common stock. The number of penny warrants (exercise price at $0.01) shall equal $1.25 million divided by the 5-day VWAP of the Company’s common stock at time of issuance. The warrants will be issued at the time the Investor removes its lien on the property of the Company. As of the date of these condensed financial statements, the lien has not yet been removed and the warrants have not been issued,
(iii)amend the payment schedule of the Green Cloud Note to provide (a) for each of the six scheduled payments occurring after the earlier of the effectiveness of a registration statement for the resale of the Escrow Shares and the Conversion Shares (as defined below) or the date that the Escrow Shares and the
Conversion Shares may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), without any information requirements, the amount of principal and interest payable on such date shall be reduced by 50% (the aggregate amount of the six months of such reductions, the “Specified Amount”) and (b) if the aggregate amount of payments on the Amended Green Cloud Note applied from the proceeds of the sale of the Escrow Shares on or prior to the last six scheduled payments is less than the Specified Amount (such difference, the “Make Whole Amount”), than the amount of each of the remaining scheduled payments shall be increased by an amount equal to the Make Whole Amount divided by the number of remaining scheduled payments,
(iv)modify the Green Cloud Note such that the Green Cloud Note is now convertible into up to 2,500,000 shares of the Company’s common stock based (“Conversion Shares”) on a conversion price of $5.00,
(v)amend the Green Cloud Note to provide that the Company will be a direct co-obligor with CloudCo under the Green Cloud Note; and
(vi)amend the SPA to allow the Company to organize or incorporate any subsidiary, over which the Company shall have voting or beneficial control, which is being formed with the intent to engage in a business or line of business substantially similar to that of Soluna Cloud or the Company, without first paying all of the principal and interest due under the Note and without first obtaining Investor’s prior written consent (collectively, the “June SPA Modification”).
The joint-and-several liability arrangement is between the Company and CloudCo. While no written agreement has been created to establish the amount that each entity agrees to pay under the obligation, the nature of the relationship is such that the Company has taken a significant role in the economics of the Green Cloud Note. The Company expects to make any necessary payments on behalf of CloudCo in order to prevent default on the Green Cloud Note because the Investor has a lien on all property and assets of the Company in connection with the Green Cloud Note. Based on quantitative analysis performed by the Company, it was determined that the terms of the debt instrument before and after the June SPA Modification were not substantially different. Accordingly, the June SPA Modification was accounted for as a debt modification.
Subsequently, the Company and the Investor mutually agreed that the 1,000,000 Escrow Shares would instead be issued directly to the Investor and, on April 29, 2025, the Company issued 1,000,000 shares of common stock to the Investor. When the Investor sells the 1,000,000 shares in the open market (after either SEC registration effectiveness or pursuant to SEC Rule 144), the net cash proceeds from the sale of shares will be applied to the outstanding principal balance of the note up to $4.00 per share, and any excess proceeds over $4.00 per share will be retained by the Investor. The Investor had until March 31, 2026 (the “Sales Period”) to sell the 1,000,000 shares to reduce the outstanding principal balance, or would have to return the shares. Prior to March 31, 2026, the Company's Board of Directors approved an extension of the Sales Period in order to renegotiate the application of the 1,000,000 shares. As of the date of these condensed financial statements, no modification of the agreement has been made.
July 2024 Additional Secured Note
On July 12, 2024, the Company, CloudCo, Soluna Cloud, and the Investor entered into a First Amendment to the Note Purchase Agreement (the “June SPA Amendment”). This amendment allows CloudCo to issue additional secured promissory notes totaling $1.25 million (the “Additional Notes”) to new accredited investors (the “Additional Investors”). These Additional Notes are subject to the same terms and conditions as the June SPA financing.
On October 1, 2024, CloudCo, Soluna Cloud and the Company entered into assignment and assumption agreements (the “Assignment Agreements”) with the Additional Investors with respect to an aggregate of $1.25 million of notes issued by CloudCo. Pursuant to the Assignment Agreements, the Company will be able to purchase such notes for a purchase price of $750 thousand, or 60% of face value. The assignment and assumption will be effective once all conditions of the agreement are met including fulfilling the purchase price. The notes will be paid to the note holders from an escrow that is funded in installments from the 2024 SEPA (as defined below) funding. The transfer is not effective until payment from the escrow is made. On March 14, 2025, the Company fulfilled the purchase obligations, and assumed the Additional Notes through payment of $750 thousand through principal and 50% interest payments and use of 20% 2024 SEPA funds. The Company recorded a gain on extinguishment of the July 2024 Additional Secured Notes of approximately $551 thousand for the six months ended June 30, 2025. For the six months ended June 30, 2025, the Company incurred approximately $33 thousand in interest expense in relation to the July Additional Secured Note.
Galaxy Loan
(Dollars in thousands)Maturity DateInterest Rate January 1, 2026-
June 30, 2026		March 12, 2025 – December 31, 2025
Term LoanMarch 12, 203015 %$4,625 $5,000 
Less: principal payments(387)(375)
Less: debt discount and issuance costs(278)(342)
Total outstanding note3,960 4,283 
(Less) Current note outstanding(944)(784)
Long-term note outstanding$3,016 $3,499 
On March 12, 2025, Soluna SW LLC (the “SW Borrower”), a Delaware limited liability company and subsidiary of Soluna SW Holdings LLC (“SW Holdings”, and together with the SW Borrower, the “SW Loan Parties”), a subsidiary of SDI, a Nevada corporation and wholly owned subsidiary of Company, entered into a Loan Agreement (the “Galaxy Loan Agreement”) with SW Holdings and Galaxy Digital LLC (the “Lender”).
The Galaxy Loan Agreement provides for a term loan facility in the principal amount of $5.0 million (the “Term Loan Facility”). The Term Loan Facility bears interest at a rate of 15.0% per annum, subject to an increase of 5.0% (for a total of 20.0%) in the event an Event of Default as defined within the Galaxy Loan Agreement has occurred and is continuing. The Term Loan Facility matures on March 12, 2030 and includes scheduled payments over a five-year term. For the three months ended June 30, 2026 and June 30, 2025, the Company incurred approximately $197 thousand and $236 thousand in interest expense in relation to the Term Loan Facility, which includes interest paid on the note and amortization of deferred financing costs. For the six months ended June 30, 2026 and June 30, 2025, the Company incurred approximately $406 thousand and $277 thousand in interest expense in relation to the Term Loan Facility, which includes interest paid on the note and amortization of deferred financing costs.
The SW Borrower may voluntarily prepay all or part of the Term Loan Facility at any time together with accrued and unpaid interest on the principal amount to be prepaid up to the date of prepayment. The SW Borrower shall prepay all or part of the Term Loan Facility with 100% of the Net Cash Proceeds (as defined therein) received upon the occurrence of (i) an Asset Sale or Casualty Event (each as defined therein), (ii) an Equity Issuance (as defined therein), (iii) an issuance or incurrence of Indebtedness (as defined therein), or (iv) an Extraordinary Receipt (as defined therein), each subject to certain exceptions. In addition, certain principal payments are subject to the payment of a premium amount equal to 50% of the remaining amount of interest payable on such principal amount through the scheduled maturity date, if paid on or prior to the 30-month anniversary of the closing date, and 25% of the remaining amount of interest payable on such principal amount through the scheduled maturity date, if paid after the 30-month anniversary of the closing date.
The Galaxy Loan Agreement includes certain restrictions (subject to certain exceptions outlined in the Galaxy Loan Agreement) on the ability of the SW Loan Parties and their subsidiaries to undertake certain activities, including to incur indebtedness and liens, enter into sale or lease-back transactions, merge or consolidate with other entities, dispose or transfer their assets, pay dividends or make distributions, make investments, make Restricted Payments (as defined therein), enter into burdensome agreements or transact with affiliates. In addition, the SW Loan Parties are subject to three financial covenants – a minimum debt service coverage ratio, a minimum current ratio, and cash in customer deposit account must equal or be greater than related customer liabilities. As of the date of these condensed consolidated financial statements, the Company is in compliance with all covenants in relation to the Galaxy Loan Agreement.
Yorkville Securities Purchase Agreement and Promissory Note
On April 15, 2026, the Company entered into a Securities Purchase Agreement (the “SPA”) with YA II PN, LTD. (the “Lender”), pursuant to which the Company issued to the Lender a Promissory Note (the “Note”) payable to the Lender, providing for an unsecured loan in the aggregate principal amount of up to $12.0 million (the “Principal Amount”). The outstanding Principal Amount will mature on May 15, 2027 (the “Maturity Date”) and bears interest at a rate per annum of 5%, based on a 365-day year, which interest rate shall increase to a rate per annum of 18% upon the occurrence of an Event of Default (as defined in the Note) for so long as such event remains uncured. Under the Note, the Company is required to
make monthly payments (“Amortization Payments”) of $1.2 million per month, beginning sixty (60) days after closing until the Note is repaid in full. Each Amortization Payment shall include a 5% premium of the principal amount of such payment. In connection with the issuance, the Company incurred $625 thousand of deferred financing costs (legal fees) and issued warrants with an allocated fair value of approximately $1.6 million. Both amounts were recorded as a direct reduction of the carrying amount of the Note.
The Company may, upon at least one Business Day’s prior written notice to the Lender, prepay the outstanding Principal Amount and an additional 5% of such Principal Amount (solely in respect of a redemption in full), and any accrued and unpaid interest, at any time prior to the Maturity Date. If the Company consummates a financing transaction, or series of financing transactions within a thirty (30) day period, with aggregate gross proceeds in excess of $20.0 million (excluding any (i) transaction with the Lender or its affiliates, (ii) sales under the At the Market Offering Agreement entered into between the Company and H.C. Wainwright & Co., LLC on April 29, 2025, (iii) issuance under the Standby Equity Purchase Agreement entered into between the Company and the Lender on August 12, 2024 or the Standby Equity Purchase Agreement entered into between the Company and the Lender on March 24, 2026, or (iv) exercises of options, warrants, or convertible securities outstanding as of April 15, 2026), then, unless waived by the Lender, the Company shall be required to redeem the Note in an amount equal to (a) 20% of the outstanding Principal Amount and (b) all accrued and unpaid interest on the Note.
During the period from May 20, 2026 through June 12, 2026, the Company redeemed the Note in full through three payments: (i) $9.6 million of principal (80% of the original balance) plus approximately $56 thousand of accrued interest on May 20, 2026; (ii) $1.2 million of principal on June 9, 2026; and (iii) a final payment on June 12, 2026 of $1.2 million of principal, a $60 thousand redemption premium (5% of the principal redeemed in full), and approximately $7 thousand of accrued interest. Each partial redemption was accounted for as a partial extinguishment under ASC 470-50-40-2, under which a pro-rata portion of the then-unamortized deferred financing costs and warrant discount was written off to loss on extinguishment of debt. The June 12, 2026 payment fully extinguished the Note; the carrying value of the Note and all related debt discount was $0 as of that date.
The transaction resulted in total charges of approximately $2.4 million, consisting of interest expense of approximately $390 thousand (cash interest of approximately $63 thousand, time-based amortization of deferred financing costs of approximately $92 thousand, and time-based amortization of the warrant discount of approximately $235 thousand) and a loss on extinguishment of debt of approximately $2.0 million (pro-rata write-off of deferred financing costs of approximately $600 thousand, pro-rata write-off of the warrant discount of approximately $1.4 million, and the approximately $60 thousand redemption premium).
Private Placement
Pursuant to the SPA, the Company issued to the Lender in a private placement (the “Private Placement”) a common warrant (the “Warrant”) to purchase up to 2,400,000 shares of common stock. The Warrant has an exercise price of $1.06 per share of common stock, is exercisable upon issuance and expires on the twelve-month anniversary of its date of issuance. The Warrant was initially measured at fair value and is classified as an equity instrument; it is not subject to subsequent remeasurement. The Company performed a Black-Scholes valuation of the Warrant on April 15, 2026, generating a fair value of approximately $1.6 million noting the below assumptions:
April 15, 2026
Stock price$1.05 
Exercise price$1.06 
Expected term in years1.00 
Volatility179 %
Risk-free interest rate3.70 %
The Lender fully exercised the Warrant in May 2026.
Equipment Loan Agreement
On May 16, 2024, SDI SL Borrowing – 1, LLC, an affiliate of the Company (the “SDI Borrower”), entered into a loan agreement (the “Equipment Loan Agreement” or the “Loan”) with Soluna2 SLC Fund II Project Holdco LLC (the “Lender”, and collectively, the “Parties”). As further amended on February 28, 2025, the Equipment Loan Agreement provides for the Company to borrow, from time to time, up to $4.0 million, to be used to purchase necessary equipment for the progression of Project Dorothy 2 and Project Kati. Any loans made under the Equipment Loan Agreement have a maturity date of May 16, 2027 and will bear interest at a rate of 15% per annum. The Equipment Loan Agreement includes customary covenants for loans of this nature including financial reporting, monthly updates, event reporting, as well as conduct of business. In addition, the Equipment Loan Agreement contains a multiple on invested capital (“MOIC”) provision, which requires the Company to pay, in addition to principal and interest, an amount equal to the difference of (i) the greater of (a) the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan, and (b) the principal amount of the Loan being repaid multiplied by three, minus (ii) the sum of the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan.
Land Purchase Loan

On October 1, 2025, Soluna2 Kati Project Holdco LLC ("Kati Lender") provided the SDI Borrower with a loan in the amount of $1.075 million under the Equipment Loan Agreement to fund the purchase of land in support of the Project Kati Phase 2 construction. Pursuant to a letter agreement between SLC and the Company, the land purchase loan bears no interest and is subject to a 1.00x MOIC, together with a right of first refusal granted to SLC. The interest free nature of the loan required the Company to record a discount for approximately $226 thousand at issuance. On June 10, 2026, the SDI Borrower repaid the loan in full of approximately $1.1 million. Due to the extinguishment of debt, the Company recorded a loss on extinguishment of debt in relation to the acceleration of the discount being amortized of approximately $132 thousand. For the three and six months ended June 30, 2026, approximately $26 thousand and $94 thousand had been amortized and recorded within Interest Expense. No further obligations remain on the Equipment Loan Agreement as of June 30, 2026.
Unamortized debt issuance costs associated with the Equipment Loan Agreement were $58 thousand and $64 thousand within Prepaid expenses and other current assets as of June 30, 2026 and December 31, 2025 and $0 and $25 thousand within Other assets on the consolidated balance sheet as of June 30, 2026 and December 31, 2025. Approximately $14 thousand and $30 thousand in relation to the debt issuance costs have been amortized and recorded within Interest Expense for the three and six months ended June 30, 2026.