Welcome to another installment of Soluna’s AMA (Ask Me Anything) series, where you — our readers and our followers on Twitter and LinkedIn — can get your questions answered.

In this Q&A, John Belizaire, CEO of Soluna Holdings, Inc., answers shareholders’ and potential investors’ most asked questions about dilution, Soluna’s current stock price, and plans for becoming cash flow positive. 

Learn how to submit your questions, if you haven’t already, at the end of this AMA. 

What are you going to do about the Noteholders and the potential dilution? What is the interest on the debt?

There is no current cash interest expense on the debt. There is, instead, an Original Issue Discount of 8% per annum.  One way to mitigate the dilution impact of the conversion is to pay-off the notes with cash. We plan to generate cash from operations and we are exploring other, non-dilutive, sources of cash.

When and will you restore dividends on your preferred stock (SLNHP)? 

As Soluna’s earnings power and free cash flow improve, management and the board of directors will decide on the best use of the Company’s cash. Possible uses of cash include paying down the convertible notes, funding capital expenditures, or paying the preferred dividend. 

What are we going to do about the Nasdaq delisting notice? (due to the $0.20 share price)

We submitted a plan to Nasdaq to cure the deficiency and received a 180-day extension of time to cure. Our primary plan focuses on continuing our success in identifying and pursuing opportunities to grow shareholder value with the expectation that the increase in value will positively impact our share price by an amount sufficient to bring our stock value back into compliance with Nasdaq’s listing requirements. Our secondary plan is to execute a reverse stock split with an exchange ratio that we expect to achieve and sustain the $1.00 minimum trading price required by Nasdaq.

There’s no secret that the stock price of Soluna is currently valued for bankruptcy, what are the plans going forward to create value for the shareholders on top of reaching profitability?

Our strategy is presented in our 2023 earnings power presentation.  We are focused on commercializing our flagship Project Dorothy.  And, we plan to continue to develop new projects (such as Kati and Dorothy 2) that can attract project-level capital. 

We believe the increased earnings and cash flow potential of the company is what drives value for our shareholders.

I recently got an email about the reverse split. This is going to be major dilution to us shareholders. What is the game plan to get us back up to the value that the company had one year ago in June of 2022? 

Reverse splits do not cause dilution.  

Also…

We submitted a plan to Nasdaq to cure the deficiency and received a 180-day extension of time to cure. Our primary plan focuses on continuing our success in identifying and pursuing opportunities to grow shareholder value with the expectation that the increase in value will positively impact our share price by an amount sufficient to bring our stock value back into compliance with Nasdaq’s listing requirements. Our secondary plan is to execute a reverse stock split with an exchange ratio that we expect to achieve and sustain the $1.00 minimum trading price required by Nasdaq.

What are the Board’s plans or policies related to diversity, equity, and inclusion (DEI)?  Does the company intend to expand its disclosures on human capital?

The Board of Directors and management remain committed to diversity throughout the organization.  This starts with tone and actions at the top.  We currently have an opportunity to enhance our diversity, specifically at the board level, and are actively seeking the right individual that will add to and complement our board.

Are you aware of your stock being manipulated by bad actors? If you are not aware, are you willing to look into it?

I understand your concern, but it’s very difficult to prove.  We believe improving our cash flow is the best way to create long-term value for our investors. 

A comment had been made that the company should be cash flow positive at some point this year. Is it expected to remain that way? What are the plans for the positive cash flow? Reduce debt? Continued expansion? What are the plans?

As Soluna’s earnings power and free cash flow improve, management and the board of directors will decide on the best use of the Company’s cash. Possible uses of cash include paying down the convertible notes, funding capital expenditures, or paying the preferred dividend. 

Why do a reverse split when revenue later this year will be multiples higher which will lead to a higher stock price?

We are requesting the authority to do a reverse split to assure our continued listing on the NASDAQ exchange. However, we have not set a date to effectuate the split and sincerely hope that one is not necessary.

What is the plan to make preferred holders whole?

The company’s board of directors is constantly assessing the current and future cash flows of the company and depending on its point of view on the cash flows will make a determination of when and if to resume paying dividends or to take any other actions that may affect the value of the preferred shares.

Can you sketch us the path to positive free cash flow positive?

See our recent 2023 earnings power presentation published on our investor center on our website. 

With current operations, what is the EBITDA generated on a quarterly basis? What is the incremental EBITDA with each additional megawatt generated?

See our recent 2023 earnings power presentation published on our investor center on our website. 

Are you currently accruing for the cumulative dividend on the outstanding preferred shares (SLNHP)?

Cumulative dividends are disclosed in our 10Q footnotes as dividends in arrears (e.g., in our Q1- it was noted Footnote 9), but they are not accrued as a liability for accounting purposes until they are declared. 

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