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

Soluna Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Equity (Unaudited)

(Dollars in thousands, except per share)
September 30,

December 31,

2017

2016

Assets

Current Assets:

Cash
$
3,360

$
3,381

Accounts receivable

1,397

881

Inventories

658

676

Prepaid expenses and other current assets

68

82

Total Current Assets

5,483

5,020

Property, plant and equipment, net

154

160

Total Assets
$
5,637

$
5,180

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts payable
$
242

$
124

Accrued liabilities

889

906

Total Current Liabilities

1,131

1,030

Commitments and Contingencies (Note 8)

Stockholders’ Equity:

Common stock, par value $0.01 per share, authorized 75,000,000; 10,162,511 issued in
2017 and 10,026,136 issued in 2016

102

100

Additional paid-in capital

138,905

138,794

Accumulated deficit

(120,737
)

(120,980
)
Common stock in treasury, at cost, 1,015,493 shares

(13,764
)

(13,764
)
Total Stockholders’ Equity

4,506

4,150

Total Liabilities and Stockholders’ Equity
$
5,637

$
5,180

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

~~Mechanical Technology, Incorporated~~Soluna Holdings, Inc. and Subsidiaries

For the Three and ~~Nine Months~~Nine-Month Period Ended September 30, ~~2017 and 2016~~2020:

(Dollars in thousands, except per share)
Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Product revenue
$
1,857

$
2,232

$
5,047

$
5,265

Operating costs and expenses:

Cost of product revenue

563

774

1,604

2,018

Research and product development expenses

277

298

887

942

Selling, general and administrative expenses

674

829

2,309

2,445

Operating income (loss)

343

331

247

(140
)
Other income (expense), net

1

(1
)

(4
)

(7
)
Income (loss) before income taxes

344

330

243

(147
)
Income tax expense

—

(1
)

—

(1
)
Net income (loss)
$
344

$
329

$
243

$
(148
)

Income (loss) per share attributable to MTI (Basic)
$
.04

$
.06

$
.03

$
(.03
)
Income (loss) per share attributable to MTI (Diluted)
$
.04

$
.06

$
.03

$
(.03
)

Weighted average shares outstanding (Basic)

9,146,216

5,248,482

9,103,276

5,250,082

Weighted average shares outstanding (Diluted)

9,429,402

5,458,871

9,424,982

5,250,082

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

~~and~~ the Nine Months Ended September 30, ~~2017 (Unaudited)~~2021 and 2020

(Dollars in thousands,
except per share)

Common Stock

Treasury Stock

Shares

Amount

Additional
Paid-in
Capital

Accumulated
Deficit

Shares

Amount
Total
Stockholders’
Equity
(Deficit)

January 1, 2016
6,263,975
$
63

$
135,839

$
(120,621
)
1,005,092
$
(13,754
)
$
1,527

Net loss
-

-

-

(359
)
-

-

(359
)

Stock based compensation
-

-

449

-

-

-

449

Issuance of shares – stock purchase
3,750,000

37

2,700

-

-

-

2,737

Costs of stock purchase
-

-

(201
)

-

-

-

(201
)

Issuance of shares – option exercises
12,161

-

7

-

-

-

7

Purchase of common stock for treasury
-

-

-

-

10,401

(10
)

(10
)

December 31, 2016
10,026,136
$
100

$
138,794

$
(120,980
)
1,015,493
$
(13,764
)
$
4,150

Net income
-

-

-

243

-

-

243

Stock based compensation
-

-

37

-

-

-

37

Costs of stock purchase
-

-

(25
)

-

-

-

(25
)

Issuance of shares – option exercises
136,375

2

99

-

-

-

101

September 30, 2017
10,162,511
$
102

$
138,905

$
(120,737
)
1,015,493
$
(13,764
)
$
4,506

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

~~For the Nine Months Ended September 30, 2017~~Soluna Holdings, Inc. and ~~2016~~

(Dollars in thousands)
Nine Months Ended September 30,

2017

2016

Operating Activities

Net income (loss)
$
243

$
(148
)
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:

Depreciation

60

64

Loss on disposal of equipment

—

6

Bad debt recovery

—

(21
)
Stock based compensation

37

131

Provision for excess and obsolete inventories

(50
)

244

Changes in operating assets and liabilities:

Accounts receivable

(516
)

257

Inventories

68

(130
)
Prepaid expenses and other current assets

14

9

Accounts payable

118

(47
)
Accrued liabilities

(17
)

182

Net cash (used in) provided by operating activities

(43
)

547

Investing Activities

Purchases of equipment

(54
)

(113
)
Net cash used in investing activities

(54
)

(113
)
Financing Activities

Costs of stock purchase

(25
)

—

Purchases of common stock for treasury

—

(10
)
Proceeds from stock option exercises

101

—

Net cash provided by (used in) financing activities

76

(10
)
(Decrease) increase in cash

(21
)

424

Cash – beginning of period

3,381

462

Cash – end of period
$
3,360

$
886

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

Soluna Holdings, Inc., formerly known as Mechanical Technology, Incorporated ~~(MTI~~(“SHI” or ~~the Company)~~“the Company”), ~~a New York corporation,~~ was incorporated in ~~1961.~~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., following the completion of the Merger (as defined and further described below). The ~~Company’s~~Company conducts two core ~~business~~businesses through its wholly-owned subsidiaries EcoChain, Inc. (“EcoChain”), which is ~~conducted through~~engaged in cryptocurrency mining powered by renewable energy, and MTI Instruments, Inc. ~~(MTI Instruments)~~(“MTI Instruments”), which designs, manufactures and markets its products also at the Albany, New York location.

EcoChain was incorporated in Delaware on January 8, 2020. EcoChain has established a new business line focused on cryptocurrency mining and the blockchain ecosystem. In connection with the creation of the new business line, EcoChain has established a cryptocurrency mining facility that integrates with the cryptocurrency blockchain network in Washington State. EcoChain focuses on sites that can be powered by renewable energy sources. In connection with the establishment of the EcoChain business, MTI purchased Class A Preferred Shares of Harmattan Energy, Ltd. (“HEL”) (formerly Soluna Technologies, Ltd.), a ~~wholly-owned subsidiary.~~Canadian corporation incorporated under the laws of the Province of British Colombia that develops vertically-integrated, utility-scale computing facilities focused on cryptocurrency mining and cutting-edge blockchain applications.

MTI Instruments was incorporated in New York on March 8, 2000 and is a supplier of vibration measurement and balancing systems, precision linear displacement ~~sensors, instruments and system~~ solutions, ~~vibration measurement and system balancing solutions, precision tensile measurement systems~~ and wafer inspection ~~tools, serving markets that require 1) the precise measurements and control~~tools. MTI Instruments products consist of ~~products and processes in automated manufacturing, assembly, and consistent operation of complex machinery, 2)~~ engine ~~balancing and~~ vibration analysis systems for both military and commercial aircraft ~~3) metrology~~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 are developed for ~~semiconductor~~markets and ~~solar wafer characterization,~~applications that require consistent operation of complex machinery and ~~4) tensile stage systems~~the precise measurements and control of products, processes, the development and implementation of automated manufacturing and assembly.

On April 29, 2021, the Company closed a public securities offering (the “April Offering”), pursuant to which the Company issued and sold 2,419,355 shares of the Company’s common stock and warrants to purchase up to 604,839 shares of common stock for ~~materials testing~~gross proceeds of approximately $15.0 million, less underwriting discounts of 7.0% ($1.05 million) and ~~precision linear displacement gauges~~other offering expenses of $225 thousand, resulting in aggregate net proceeds to the Company of approximately $13.7 million. In addition, on May 27, 2021, the underwriter, exercised its over-allotment option, in full, in connection with the April Offering, pursuant to which the Company issued and sold an additional 362,903 shares of common stock and warrants to purchase up to an additional 90,726 shares of common stock, on the same terms as the securities sold in the April Offering, resulting in additional aggregate gross proceeds of approximately $2.25 million, less underwriter discounts of 7.0% ($157.5 thousand) and other offering expenses of $62.5 thousand, resulting in net proceeds to the Company of $2.03 million. The Company also incurred additional legal and other filing expenses of $350 thousand, resulting in aggregate net proceeds for the April Offering, including the over-allotment option, of approximately $15.4 million. The warrants have an initial exercise price of $8.24, subject to certain adjustments, per whole share of common stock and expire five years from their date of issuance. In connection with the April Offering, the Company also issued to the underwriter, as a portion of its compensation, warrants to purchase up to 139,113 shares of Common Stock, at an initial exercise price of $6.82 per share, subject to certain adjustments.

On May 4, 2021, EcoChain Block, LLC, a Delaware limited liability company (“ECB”), a wholly-owned subsidiary of EcoChain, executed a 25-year ground lease with a power-providing cooperative with respect to an existing building and certain surrounding land (the “Building Lease”), and a 25-year ground lease with the same landlord with respect to certain vacant land adjacent thereto, both located in the Southeastern United States (the “Vacant Land Lease”, and together with the Building Lease, the “Ground Leases”). In addition, ECB and the landlord entered into a Power Supply Agreement (the “Power Supply Agreement”) whereby the landlord has agreed to supply power to the building leased under the Building Lease (the “Building Lease Premises”) and to the premises leased under the Vacant Land Lease (the “Vacant Land Premises”), some of which power, under certain circumstances, may be terminated by the landlord, on at least 6 months prior notice, any time after 12 months after the Building Commencement Date (as hereafter defined), in which case the landlord is required to reimburse ECB for all of its construction costs, subject to certain exceptions, relating to buildings and other improvements developed by ECB on the Vacant Land Premises. As of November 12, 2021, this lease has not commenced.

ECB has agreed to pay rent to the landlord of $500,000 on the effective date of the Building Lease (such date, the “Building Commencement Date”) and the sum of $4,000,000 in periodic payments (the “Vacancy Payments”). The Company executed a guaranty in favor of the landlord with respect to the Vacancy Payments (the “Guaranty of Rent”). The amount of each Vacancy Payment is determined based on the percentage of the building that has been vacated by existing tenants and available for use by ECB. The final Vacancy Payment is due within 60 days after the building has been completely vacated by the existing tenants, which date is contractually scheduled to be no later than March 31, 2022. ECB has the option of making the Vacancy Payments in ~~academic~~cash or by the Company’s issuance of common stock in an amount that equals the Vacancy Payment then due based on the prior day’s closing price (any such shares, “Vacancy Payment Shares”). If ECB elects to make any payment in Vacancy Payment Shares, then the landlord has an option to accept such Vacancy Payment Shares or require such shares to be converted to cash as more fully provided in the Building Lease. The Building Lease also includes provisions relating to the issuance of additional shares of the Company’s common stock, which may be applied as an advance against future Vacancy Payments, all as fully provided in the Building Lease.

The Company is required to issue to the landlord 100,000 shares of the Company’s common stock, in connection with the Vacant Land Lease, upon the effective date of the Vacant Land Lease, which may not occur prior to the Building Commencement Date. In addition, ECB and ~~industrial research~~the landlord have entered into a memorandum of understanding providing ECB with a six-month exclusivity period to expand the Vacant Land Premises, including obtaining additional power, in connection therewith. ECB and ~~development settings.~~the landlord have not agreed on any of the terms of such expansion other than the exclusivity period previously described. ECB and the landlord have also entered into a transition services agreement (the “Transition Services Agreement”) by which the landlord will provide certain transition services to ECB at a fee to be mutually agreed by the landlord and ECB. The Transition Services Agreement also requires the landlord to pay ECB an amount approximately equal to the landlord’s net profits received from the landlord’s other tenants operating out of the Building Lease Premises.

On June 24, 2021, the Company and American Stock Transfer & Trust Company, LLC entered into Amendment No. 2 to Rights Agreement (the “Amendment”) to a Rights Agreement, dated as of October 6, 2016, which was amended by Amendment No. 1 to Rights Agreement, dated as of October 20, 2016 (collectively, the “Rights Agreement”), pursuant to which, with the approval of the Board, the Final Expiration Date (as such term is defined in the Rights Agreement) was amended and accelerated from October 26, 2026 to June 24, 2021, and, as a result, the Rights Agreement was terminated effective as of June 24, 2021.

As a result of the termination of the Rights Agreement, certain stockholders of the Company, who, pursuant to the terms of the Rights Agreement, held certain rights entitling them, under certain circumstances, to be issued additional shares of the Company’s common stock in the event the Company issued shares of the Company’s common stock to any other person resulting in such person acquiring beneficial ownership of 4.99% or more of the Company’s outstanding shares of common stock, are no longer entitled to such rights. These rights were established in an effort to protect the Company’s ability to use the Company’s net operating loss carryforwards (“NOLs”). The Board, in connection with its authorization and approval of the Amendment, determined that keeping the Rights Agreement in effect was placing undue restrictions on the Company’s ability to raise capital, which it determined outweighed any benefits provided to protect the NOLs.

On August 23, 2021, the Company issued and sold pursuant to a firm commitment public offering (the “Preferred Offering”) 720,000 shares of a new series of the Company’s preferred shares known as the 9.0% Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share, having a $25.00 liquidation preference per share (the “Series A Preferred Stock”), resulting in aggregate gross proceeds of $18.0 million less underwriting discounts of 6.0% ($1.08 million) and other offering fees and expenses of $640 thousand, resulting in aggregate net proceeds to the Company of approximately $16.2 million. In connection with the Preferred Offering, the Company granted the underwriter a 45-day option and right to purchase up to an additional 108,000 shares of Series A Preferred Stock (the “Option Shares”), on the same terms as the securities sold in the Offering, including the public offering price of $25.00 per share (the “Over-Allotment Option”). In connection with the Offering, the Company’s Series A Preferred Stock was approved for listing on the Nasdaq Capital Market under the symbol “MKTYP” and began trading on August 20, 2021. On September 28, 2021, the Company issued and sold to the underwriter 86,585 Option Shares, pursuant to its partial exercise of the Over-Allotment Option, resulting in additional aggregate gross proceeds of approximately $2.16 million, less applicable underwriter discounts and estimated offering expenses of $140 thousand, resulting in aggregate net proceeds to the Company of $2.0 million. Dividends on the Series A Preferred Stock will be payable when, as and if declared by the Board of Directors monthly in arrears on the final day of each month or the next business day at an annual rate of 9.0% of the $25.00 liquidation preference per share.

The Company has historically incurred significant losses primarily due to its past efforts to fund direct methanol fuel cell product development and commercialization programs and had ana consolidated accumulated deficit of approximately ~~$120.7~~$120.4 million as of September 30, ~~2017.~~2021. As of September 30, ~~2017, we~~2021, the Company had working capital of approximately ~~$4.4~~$18.0 million, no debt, ~~$9 thousand in~~outstanding commitments related to EcoChain for $6.2 million for capital expenditures and termination payments in connection with certain operating and management agreements discussed below, and approximately ~~$3.4~~$15.8 million of cash available to fund ~~our~~ operations.

Based on recent business developments, including changes in production levels, staffing requirements, and network infrastructure improvements, the Company will require additional capital equipment in the foreseeable future. With respect to SHI and MTI Instruments, the Company has outstanding commitments of approximately $367 thousand related to purchase orders outstanding for various business needs as of September 30, 2021. As the Company has done historically, the Company expects to continue funding of SHI’s and MTI Instruments’ operations from the Company’s current cash position and the Company’s projected 2021 cash flows. If necessary, the Company may also seek to supplement its resources by increasing credit facilities to fund operational working capital and capital expenditure requirements. With respect to EcoChain, the Company expects to fund growth (additional cryptocurrency mining facilities and miners) through capital raise activities to the extent that the Company can successfully raise capital through additional securities sales. Any additional financing, if required, may not be available to the Company on acceptable terms or at all.

While it cannot be assured, management believes that, due in part to the Company’s current working capital level and projected cash requirements for operations and capital expenditures, its current available cash of approximately ~~$3.4~~$15.8 million, and ~~our~~the Company’s projected ~~2017 and 2018~~2021 cash ~~flows~~flow pursuant to management’s plans, ~~management believes it~~the Company will have adequate resources to fund operations and capital expenditures for ~~the remainder of 2017~~SHI and MTI Instruments for the year ending December 31, ~~2018. If cash generated from operations is insufficient to satisfy~~2021 and through at least the ~~Company’s operational working capital and capital expenditure requirements,~~end of the fourth quarter of 2022. As noted above, the Company ~~may be required to obtain credit facilities, if available,~~expects to fund ~~these initiatives.~~capital expenditures for EcoChain through capital raises, while MTI Instrument’s operations will be funded through its cash flows. The Company has entered into a unsecured line of credit for $1.0 million to assist with possible future financing, which as of September 30, 2021, there was no ~~other formal commitments~~outstanding balance. In addition, on October 20, 2021, the Company entered into the SPA (as defined in Note 14) pursuant to which the Company issued to the certain accredited investors secured convertible notes in the aggregate principal amount of approximately $16.3 million for ~~funding its future needs~~an aggregate purchase price of $15 million. The notes are convertible, subject to certain conditions, at ~~this~~any time ~~and any additional financing during~~at the ~~remainder~~option the investors, into an aggregate of ~~2017~~1,776,073 shares of the Company’s common stock. The Company expects to have adequate resources to fund EcoChain’s operations for the year ending December 31, 2021 and through at least the ~~year ended December 31, 2018, if required, may not be available to us on acceptable terms or at all.~~fourth quarter of 2022.

In the opinion of management, the Company’s condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the periods presented in accordance with United States of ~~America~~America’s Generally Accepted Accounting Principles ~~(U.S. GAAP) and with the instructions to Form 10-Q in Article 10 of the Securities and Exchange Commission’s (SEC) Regulation S-X.~~(“U.S. GAAP”). The results of operations for the interim periods presented are not necessarily indicative of results for the full year.

Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020 (“the Annual Report”).

The information presented in the accompanying condensed consolidated balance sheet as of December 31, ~~2016~~2020 has been derived from the Company’s audited consolidated financial statements. All other information has been derived from the Company’s unaudited condensed consolidated financial statements for the three and nine months ended September 30, ~~2017~~2021 and September 30, ~~2016.~~2020.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned ~~subsidiary,~~subsidiaries, Ecochain and MTI Instruments. All intercompany balances and transactions are eliminated in consolidation.

Unless otherwise noted, all capital values, share and per share amounts in the condensed consolidated financial statements have been retroactively restated for the effects of the Company’s change in par value from $0.01 to $0.001, which became effective after the redomestication to the State of Nevada on March 29, 2021.

For the ~~nine~~three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, the largest commercial customer represented ~~9.5%~~16.4% and ~~9.7%~~18.0%, respectively, and the largest governmental agency represented ~~20.8%~~24.9% and ~~16.2%~~57.7%, respectively, of the Company’s product revenue. For the nine months ended September 30, 2021 and 2020, the largest commercial customer represented 14.2% and 8.4%, respectively, and the largest governmental agency represented 26.3% and 49.4%, respectively, of the Company’s product revenue. As of September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the largest commercial customer receivable represented ~~20.5%~~22.9% and ~~23.0%~~15.9%, respectively, and the largest governmental customer receivable represented ~~3.3%~~0.6% and ~~11.6%~~0.3%, respectively, of the Company’s accounts receivable. As of September 30, 2021 and December 31, 2020, there was one data hosting customer that represented 8.0% and 0.0%, respectively, of the Company’s accounts receivable.

~~4. Inventories~~The Company’s allowance for doubtful accounts was $0 at both September 30, 2021 and December 31, 2020.

Depreciation expense was ~~$60~~$175 thousand and ~~$85~~$44 thousand for the three months ended September 30, 2021 and 2020, respectively. Depreciation expense was $434 thousand and $97 thousand for the nine months ended September 30,~~, 2017~~ 2021 and ~~the year ended December 31, 2016,~~2020, respectively.

We have adopted the provisions of accounting standard update (ASU) 2016-09 as of the beginning of the current fiscal year, which requires recognition through opening retained earnings of any pre-adoption date net operating loss (NOL) carryforwards from nonqualified stock options for excess tax benefits that were not previously recognized because the related tax deduction had not reduced taxes payable and other employee share-based payments, as well as recognition of all income tax effects from share-based payments arising on or after January 1, 2017 (our adoption date) in income tax expense. As a result, we recognized through opening retained earnings $1.3 million of pre-adoption date NOL carryforwards with remaining carryforward periods of more than 10 years (the corresponding deferred tax asset is $457 thousand). We recorded a full valuation allowance for this deferred tax asset. In addition, we realized windfall tax benefits of less than $1 thousand during the three months ended September 30, 2017, shortfall tax expense of $19 thousand during the three months ended June 30, 2017 and windfall tax benefits of $2 thousand during the three months ended March 31, 2017, which we recognized as discrete period income benefits and tax, accordingly, as required by the ASU.

During the three and nine months ended September 30, ~~2017,~~2021, the Company’s effective income tax rate was 0%0.0%. The projected annual effective tax rate is less than the Federal statutory rate of ~~34%~~21%, primarily due to the change in the valuation allowance, as well as changes to estimated taxable income for ~~2017~~2021 and permanent differences. ~~For the three and nine months ended September 30, 2016, the Company’s effective income tax rate was 0%.~~ There was noan income tax expense ~~for the three~~of $0 thousand and ~~nine months ended September 30, 2017. Income tax expense was $1~~$3 thousand for the three and nine months ended September 30, ~~2016~~2021 and ~~related to~~$3 thousand and $0, respectively, for the ~~payment of prior~~three and ~~current year state tax expenses.~~nine months ended September 30, 2020.

The Company provides for recognition of deferred tax assets if the realization of such assets is more likely than not to occur in accordance with accounting standards that address income taxes. Significant management judgment is required in determining the period in which the reversal of a valuation allowance should occur. The Company has 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 its valuation allowance. In addition, the Company’s 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.

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~~the Company’s 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. In the event that actual results differ from these estimates or the Company adjusts these estimates in future periods, the Company may need to adjust the recorded valuation allowance, which could materially impact ~~our~~the Company’s financial position and results of operations. The ~~Company has recorded a full~~ valuation allowance was $10.4 million and $9.7 million at September 30, ~~2017~~2021 and December 31, ~~2016 for its deferred tax assets.~~2020, respectively. The ~~valuation allowance was $19.0 million at September 30, 2017 and $18.6 million at December 31, 2016.~~ WeCompany will continue to evaluate the ability to realize ~~our~~the Company’s deferred tax assets and related valuation allowance on a quarterly basis.

The Company has one series of preferred stock outstanding, the Series A Preferred Stock, par value $0.001 per share, with a $25.00 liquidation preference. As of September 30, 2021 and December 31, 2020, there were 806,585 and 0 shares of preferred stock issued and outstanding, respectively.

The Company has one class of common stock, par value ~~$.01.~~$0.001. Each share of the Company’s common stock is entitled to one vote on all matters submitted to stockholders. As of September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, there were ~~9,147,018~~12,717,220 and ~~9,010,643~~9,734,607 shares of common stock ~~respectively,~~ issued and ~~outstanding.~~outstanding, respectively.

Dividends are recorded when declared by the Company’s Board of Directors. On August 27, 2021, the Company’s Board of Directors declared an initial dividend on its shares of Series A Preferred Stock. The dividend was paid on September 30, 2021, to holders of the Series A Preferred Stock of record as of the close of business on September 7, 2021, for the period from August 23, 2021 through September 30, 2021 for an amount of $175.5 thousand.

Subsequent to September 30, 2021, on October 8, 2021, the Company’s Board of Directors declared the regular monthly dividend on its shares of Series A Preferred Stock. The dividend was paid on October 31, 2021 to holders of the Series A Preferred Stock of record as of the close of business on October 18, 2021, for the month ended October 31, 2021 and, with respect to the Option Shares, for the period from September 28, 2021 through September 30, 2021. On November 5, 2021, the Company’s Board of Directors declared the regular monthly dividend on its shares of Series A Preferred Stock. The dividend will be payable on November 30, 2021, to holders of the Series A Preferred Stock of record as of the close of business on November 15, 2021, for the month ended November 30, 2021.

There were no dividends declared or paid on either the common or preferred stock during 2020.

The Company had reserved shares of common ~~shares~~stock for future issuance as follows as of September 30,~~, 2017:~~ 2021:

The Company computes basic income (loss) per common share by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted income (loss) per share reflects the potential dilution, if any, computed by dividing income (loss) by the combination of dilutive common ~~share~~stock equivalents, comprised of shares issuable under outstanding investment rights, warrants and the Company’s ~~share-based~~stock-based compensation plans, and the weighted average number of shares of common ~~shares~~stock outstanding during the reporting period. Dilutive common ~~share~~stock 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 and the amount of windfall tax benefits that would be recorded in additional paid-in capital for the periods presented prior to the adoption of ASU 2016-09 on January 1, 2017, if any, when the stock option is exercised are assumed to be used to repurchase shares in the current period.

~~Not included in the computation of earnings per share, assuming dilution, for the nine months ended September 30, 2017, were options to purchase 271,589 shares of the Company’s common stock.~~ Not included in the computation of earnings per share, assuming dilution, for the three months ended September 30, 2017, were options to purchase 273,589 shares of the Company’s common stock. These potentially dilutive items were excluded even though the average market price of the common stock exceeded the exercise prices for a portion of the options 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~~and nine months ended September 30, ~~2016,~~2021, were options to purchase ~~1,175,500~~993,550 shares and 15,000restricted stock units of the Company’s common ~~stock.~~stock, as well as 833,628 warrants outstanding. These potentially dilutive items were excluded because the Company incurred a loss during the period and their inclusion would be anti-dilutive.

Not included in the computation of earnings per share, assuming dilution, for the three months ended September 30, ~~2016,~~2020, were options to purchase ~~669,500~~373,180 shares of the Company’s common stock. These potentially dilutive items were excluded ~~even though~~because the average market price of the shares of common stock exceeded the exercise ~~prices for a portion~~price of the options. Not included in the computation of earnings per share, assuming dilution, for the nine months ended September 30, 2020, were options to purchase 401,180 shares of the Company’s common stock. These potentially dilutive items were excluded because the ~~calculation~~average market price of ~~incremental~~the shares ~~resulted in an anti-dilutive effect.~~of common stock exceeded the exercise price of the options.

The Company determines whether an arrangement is a lease at inception. The Company and its ~~subsidiary lease~~subsidiaries have operating leases for certain manufacturing, laboratory, office facilities and ~~office facilities.~~certain equipment. The ~~lease provides for the Company to pay its allocated share of insurance, taxes, maintenance and other costs of the leased property.~~

~~Future minimum rental payments required under non-cancelable operating~~ leases ~~(with initial or~~have remaining lease terms ~~in excess~~ of less than one ~~year) as~~year to less than five years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of September 30, ~~2017 are: $57 thousand remaining~~2021 and December 31, 2020, 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 three and nine months ended September 30, total lease costs are comprised of the following:

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.

Maturities of noncancellable operating lease liabilities are as follows for the quarter ending September 30:

As of September 30, 2021, except for the ground lease entered into as described in ~~2017; $227 thousand in 2018; $212 thousand in 2019 and $3 thousand in 2020.~~Note 1, there were no additional operating lease commitments that had not yet commenced.

Product warranty liabilities are included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets. Below is a reconciliation of changes in product warranty liabilities:

On May 5, 2017, the Company entered into an employment agreement with one employee. The agreement provides for an initial term ending December 31, 2018, and, unless either party provides written notice that the agreement will not be renewed, is renewed for an additional year on December 31, 2018 and each subsequent December 31; such non-renewal may be for any or for no stated reason. The agreement provides for certain payments upon termination of employment under certain circumstances. As of September 30, 2017, the Company’s potential minimum obligation to this employee was approximately $198 thousand.Contingencies:

Our former President and Chief Executive Officer Kevin G. Lynch, who resigned from these positions on January 18, 2017, was not entitled to any post-termination payments or benefits under the terms of his employment arrangement. However, theThe Company entered into a separation agreement with Mr. Lynch, as of February 1, 2017, that entitles him to be paid the compensation he was receiving at his termination ($11,488.47 bi-weekly) from his January 18, 2017 termination date through June 30, 2017, as well as reimbursement for COBRA medical insurance coverage through December 31, 2017. Under the terms of this separation agreement, as of September 30, 2017, Mr. Lynch is entitled to remaining payments aggregating $3 thousand, assuming he complies with the terms of the separation agreement. The separation agreement also includes confidentiality provisions and Mr. Lynch’s release of any claims against the Company and agreement not to bring suit against the Company and its affiliates.

~~We are~~ subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. When applicable, ~~we accrue~~the Company accrues 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.

~~During 2016,~~The Company has been named as a party in the ~~Company granted 261,000 options to purchase~~December 19, 2019 United States Environmental Protection Agency (“EPA”) Demand Letter regarding the ~~Company’s common stock~~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 ~~Mechanical Technology Incorporated 2014 Equity Incentive Plan (2014 Plan), which generally vest 25% on each~~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 ~~first four anniversaries~~Explanation of Significant Differences (“ESD”) of the ~~date~~Site, and implementation of the ~~award.~~work contemplated by the ESD. The ~~exercise price~~Company considers the likelihood of ~~these options is $0.78 per share~~a material adverse outcome to be remote and was based on the closing market price of the Company’s common stock on the date of grant. Using a Black-Scholes Option Pricing Model, the weighted average fair value of these options is $0.74 per share and was estimated at the date of grant. These options became immediately vested in conjunction with the change in control provision (as defined in the 2014 Plan)does not currently anticipate that any expense or liability it may incur as a result of these matters in the ~~Brookstone Partners Acquisition XXIV, LLC purchase of shares of our common stock on October 21, 2016.~~ future will be material to the Company’s financial condition.

During 2016, the Company granted 2,000 options to purchase the Company’s common stock from the Mechanical Technology Incorporated 2012 Equity Incentive Plan, which generally vest 25% on each of the first four anniversaries of the date of the award. The exercise price of these options is $0.78 per share and was based on the closing market price of the Company’s common stock on the date of grant. Using a Black-Scholes Option Pricing Model, the weighted average fair value of these options is $0.74 per share and was estimated at the date of grant.

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 September 30, 2017 and December 31, 2016, based on MeOH Power, Inc.’s net position and expected cash flows. A~~s of~~ ~~September 30, 2017, the Company retained its ownership of 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 September 30, 2017.~~ ~~The Company previously held warrants to purchase 31,904,136 shares of common stock of MeOH Power, Inc., which expired in December 2016.~~

On December 18, 2013, MeOH Power, Inc. and the Company executed a Senior Demand Promissory Note (the ~~Note)~~“Note”) in the amount of ~~$380~~$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 September 30, ~~2017~~2021 and December 31, ~~2016, $283~~2020, $327 thousand and ~~$275~~$321 thousand, respectively, of principal and interest are available to convert into shares of common stock of MeOH Power, ~~Inc~~.Inc. Any adjustments to the allowance are recorded as miscellaneous expense during the period incurred.

During the three and nine months ended September 30, ~~2017,~~2021, the Company incurred $0$3 thousand and $9$18 thousand, respectively, to Couch White, LLP for legal services associated with contract review. During the three and nine months ended September 30, ~~2016,~~2020, the Company ~~paid $9~~incurred $8 thousand and $85 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~~SHI’s Directors.

On January 8, 2020, the Company formed EcoChain as a wholly-owned subsidiary to pursue a new business line focused on cryptocurrency and the blockchain ecosystem. In connection with this new business line, EcoChain established a facility to mine cryptocurrencies and integrate with the blockchain network. Pursuant to an Operating and Management Agreement dated January 13, 2020, by and between EcoChain and HEL, HEL assisted the Company, and later EcoChain, in developing, and is now operating, the cryptocurrency mining facility. The Operating and Management Agreement requires, among other things, that HEL provide developmental and operational services, as directed by EcoChain, with respect to the cryptocurrency mining facility in exchange for EcoChain’s payment to HEL of a one-time management fee of $65 thousand and profit-based success payments in the event EcoChain achieves explicit profitability thresholds. Once aggregate earnings before interest, taxes, depreciation and amortization of the mine exceeds the total amount of funding provided by EcoChain to HEL (whether pursuant to this agreement or otherwise) for the purposes of creating, developing, assembling, and constructing the mine (the “Threshold”), HEL is entitled to ongoing success payments of 20.0% of the earnings before interest, taxes, depreciation and amortization of the mine. As of September 30, 2021, $118 thousand of payments have been made or are due, as certain Thresholds have been achieved. Pursuant to the Operating and Management Agreement, during the developmental phase of the cryptocurrency mining facility, which ended on March 14, 2020, HEL gathered and analyzed information with respect to EcoChain’s cryptocurrency mining efforts and produced budgets, financial models, and technical and operational plans, including a detailed business plan, that it delivered to EcoChain in March 2020 (the “Deliverables”), all of which was designed to assist with the efficient implementation of a cryptocurrency mine. The agreement provided that, following EcoChain’s acceptance of the Deliverables, which occurred on March 23, 2020, HEL, on behalf of EcoChain, would commence operations of the cryptocurrency mine in a manner that would allow EcoChain to mine and sell cryptocurrency. In that regard, on May 21, 2020, EcoChain acquired the intellectual property of GigaWatt, Inc. (“GigaWatt”) and certain other property and rights of GigaWatt associated with GigaWatt’s operation of a crypto-mining operation located in Washington State. The acquired assets formed the cornerstone of EcoChain’s current cryptocurrency mining operation. EcoChain sells for U.S. dollars all cryptocurrency it mines and is not in the business of accumulating cryptocurrency on its balance sheet for speculative gains. On October 22, 2020, EcoChain loaned HEL $112 thousand to acquire additional assets from the bankruptcy trustee for GigaWatt’s assets. On the same day, HEL transferred title of the assets to EcoChain, which under the terms thereof paid off the note.

On November 19, 2020, EcoChain and HEL entered into a second Operating and Management Agreement related to a potential location for a cryptocurrency mine in the Southeast United States. In accordance with the terms of the agreement, which are consistent with the first Operating and Management agreement noted above, HEL is entitled to ongoing success payments of 20.0% of the earnings before interest, taxes, depreciation and amortization of the mine. EcoChain paid HEL $150 thousand in 2020 and $200 thousand in the nine months ended September 30, 2021 related to the one-time fees.

On December 1, 2020, EcoChain and HEL entered into a third Operating and Management Agreement with respect to a potential location for a cryptocurrency mine in the Southwestern United States. In accordance with the terms of the agreement, which are consistent with the first Operating and Management agreement noted above, HEL is entitled to ongoing success payments of 20.0% of the earnings before interest, taxes, depreciation and amortization of the mine. EcoChain paid HEL $38,000 during 2020 in relation to the one-time fees; this target location did not meet the business requirements to continue pursuing the potential acquisition, and as a result EcoChain will not make any further payments to HEL under this agreement.

On February 8, 2021, EcoChain and HEL entered into a fourth Operating and Management Agreement related to a potential location for a cryptocurrency mine in the Southeast United States. In accordance with the terms of the agreement, which are consistent with the first Operating and Management agreement noted above, HEL is entitled to ongoing success payments of 20.0% of the earnings before interest, taxes, depreciation and amortization of the mine. EcoChain paid HEL $544 thousand during the nine months ended September 30, 2021 in relation to the one-time fees.

Each Operating and Management Agreement requires that HEL provide project sourcing services to EcoChain, including acquisition negotiations and establishing an operating model, investments/financing timeline, and project development path.

Simultaneously with entering into the initial Operating and Management Agreement with HEL, the Company, pursuant to a purchase agreement it entered into with HEL, made a strategic investment in HEL by purchasing 158,730 Class A Preferred Shares of HEL for an aggregate purchase price of $500 thousand on January 13, 2020. After acceptance of the Deliverables, as required by the terms of the purchase agreement, on March 23, 2020, the Company purchased an additional 79,365 Class A Preferred Shares of HEL for an aggregate purchase price of $250 thousand. The Company also has the right, but not the obligation, to purchase additional equity securities of HEL and its subsidiaries (including additional Class A Preferred Shares of HEL) if HEL secures certain levels or types of project financing with respect to its own wind power generation facilities. Each preferred share may be converted at any time and without payment of additional consideration, into Common shares. The Company has additionally entered into a Side Letter Agreement, dated January 13, 2020, with HEL Technologies Investment I, LLC, a Delaware limited liability company that owns, on a fully diluted basis, 57.9% of HEL and is controlled by a Brookstone Partners-affiliated director of the Company. The Side Letter Agreement provides for the transfer to the Company, without the payment of any consideration by the Company, of additional Class A Preferred Shares of HEL in the event HEL issues additional equity below agreed-upon valuation thresholds.

On August 11, 2021, the Company entered into (i) an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, SCI Merger Sub, Inc., the Company’s indirect wholly-owned subsidiary (“Merger Sub”), and Soluna Computing, Inc., a Delaware corporation (“SCI”) and (ii) a Termination Agreement by and among the Company, EcoChain and HEL (the transactions contemplated by the Merger Agreement and the Termination Agreement are hereinafter referred to as the “Soluna Transactions”). The purpose of the Soluna Transactions is to effect our acquisition of substantially all of the assets (other than those assets physically located in Morocco) formerly held by HEL; such assets consist solely of SCI’s existing pipeline of certain cryptocurrency mining projects that HEL previously transferred to SCI (the “Projects”), which was formed on May 18, 2021 expressly for this purpose. The Soluna Transactions also provide us, through EcoChain, with the opportunity to directly employ or retain the services of four individuals whose services are currently retained through HEL. Soluna Holdings US, LLC, a Delaware limited liability company, is the sole stockholder of SCI (“Soluna Parent”). Soluna Parent has the same ownership structure as HEL.

Pursuant to the Merger Agreement, subject to the terms and conditions thereof, Merger Sub will be merged with and into SCI, with SCI as the surviving corporation such that SCI becomes a wholly-owned subsidiary of EcoChain and an indirect wholly-owned subsidiary of SHI (the “Merger”). Under the terms of the Merger Agreement, each share of common stock of SCI issued and outstanding immediately prior to the effective time of the Merger, other than shares of SCI common stock owned by SCI, Merger Sub, SHI, or any of their subsidiaries, will be cancelled and converted into the right to receive a proportionate share of the Merger Consideration described immediately below.

The consideration (the “Merger Consideration”) payable to the holders of SCI common stock as of immediately prior to the effective time of the Merger (the “Effective Time Holders”), which we expect will be solely Soluna Parent, is an aggregate of up to 2,970,000 shares of the Company’s common stock (the “Merger Shares”), payable if, within five years after the effective time of the Merger, EcoChain or SCI achieve one or more milestones related to the cryptocurrency projects that are currently in SCI’s pipeline and that may be identified and developed from time to time going forward, with a certain number of Merger Shares payable for each such milestone achieved, all as set forth in the Merger Agreement and/or the schedules thereto. The Merger Consideration and the timing of the payment thereof is subject to certain qualifications and limitations, and adjustments, including customary anti-dilution adjustments.

The Merger Agreement contains customary representations and warranties from both SHI and SCI, and each has agreed to customary covenants, including, among others, to use all commercially reasonable efforts to obtain any consents, waivers, and approvals required to be obtained in connection with the Merger and, with respect to SCI, covenants relating to the conduct of its business during the interim period between the execution of the Merger Agreement and the effective time of the Merger or termination of the Merger Agreement, as well as non-solicitation obligations relating to alternative acquisition proposals.

The obligation of SHI and Merger Sub, on the one hand, and SCI, on the other hand, to consummate the Merger is subject to a number of customary conditions, including (1) the accuracy of the representations and warranties of the other and (2) performance in all material respects by the other of its obligations under the Merger Agreement. In addition, each party’s obligation to consummate the Merger is subject to certain additional conditions, including: (1) SHI and the Effective Time Holders having entered into a mutually acceptable registration rights agreement with respect to the Merger Shares; (2) SHI and Soluna Parent having entered into a conversion agreement with respect to the shares of Soluna Parent’s preferred stock held by SHI; and (3) SHI, Brookstone Partners Acquisition, XXIV, LLC (“Brookstone XXIV”), and Soluna Parent having entered into a voting agreement pursuant to which, at the effective time of the Merger, John Belizaire, Chief Executive Officer of SCI and a director of SCI and HEL, and John Bottomley, a director of HEL and SCI, will be elected to SHI’s Board of Directors, and Brookstone XXIV will agree to vote all of its voting equity securities in SHI for the election of Messrs. Belizaire and Bottomley as directors of SHI. Further, SHI’s and Merger Sub’s obligation to consummate the Merger is also subject to, among other things: (1) the receipt of all required approvals of SHI’s stockholders, including approval of the Merger Agreement and the Merger by holders of at least a majority of the outstanding shares of the Company’s common stock that are not “interested stockholders,” as defined under Nevada law, of SHI, SCI, or an affiliate thereof; (2) the receipt of all required regulatory or third-party approvals and consents; (3) each of John Belizaire, Mohammed Larbi Loudiyi (through ML&K Contractor, a limited liability company organized under the laws of Morocco that is owned by Mr. Loudiyi and his wife), Vice President, Energy of SCI, Phillip Ng, Vice President, Corporate Development of SCI, and Dipul Patel, Chief Technology Officer of SCI, who currently provides developmental and operational services for EcoChain’s cryptocurrency mine located in Washington State and project sourcing services to EcoChain under certain Operating and Management Agreements between HEL and EcoChain, having entered into an employment or service agreement, a related proprietary rights agreement with EcoChain and an equity grant agreement with SHI; and (4) Soluna Parent being the sole record and beneficial owner of 100% of SCI’s outstanding equity interests.

In addition to providing that SHI and SCI can mutually agree to terminate the Merger Agreement, the Merger Agreement contains certain termination rights for both SHI and SCI, as the case may be, including: (1) if the Merger has not been consummated by October 31, 2021 (unless principally caused by a breach of the Merger Agreement by the party seeking to terminate); (2) if a governmental authority shall have issued a final, nonappealable order, decree, or ruling, or taken any other action, having the effect of permanently restraining, enjoining, or otherwise prohibiting the Merger; or (3) upon a breach of any representation, warranty, covenant, or agreement of the other or if any representation or warranty of the other has become untrue, in either case such that the closing conditions related thereto would not be satisfied, subject to a 30-day cure period.

Upon and subject to the terms and conditions of the Termination Agreement, including approval by the stockholders of SHI’s issuance of the Termination Shares (as hereinafter defined) five business days after such stockholder approval (the “Termination Effective Date”): (1) the existing Operating and Management Agreements between HEL and EcoChain will be terminated in all respects; and (2)(A) EcoChain will pay HEL $725,000, (B) SHI will issue to HEL 150,000 shares of the Company’s common stock (the “Termination Shares”), and (C) HEL and SHI will enter into an Amended and Restated Contingent Rights Agreement that, among other things, will amend 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. The Termination Agreement also provides that SHI will file a registration statement with the SEC to register the resale of the Termination Shares within 20 days of the Termination Effective Date.

The Merger closed on October 29, 2021. Please see Note 14 for additional information regarding the Merger and related transactions.

Several of HEL’s equityholders 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 EcoChain, on the one hand, and HEL, on the other hand, were negotiated on behalf of the Company and EcoChain via an independent investment committee of Board and separate legal representation. The transactions were subsequently unanimously approved by both the independent investment committee and the full Board.

Michael Toporek, our Chief Executive Officer and a director, 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 as acting Secretary and Treasurer 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 through September 30, 2021, were $375 thousand and $0, respectively.

Finally, the Company’s director William P. Phelan serves as an observer on HEL’s board of directors on behalf of the Company.

The Company’s investment in HEL is carried at the cost of investment and was $750 thousand as of September 30, 2021. The Company owned approximately 1.79% of HEL, calculated on a converted fully-diluted basis, as of September 30, 2021. The Company may enter into additional transactions with HEL in the future.

The Company’s 2021 Stock Incentive Plan (the “2021 Plan”) was adopted by the Board on February 12, 2021 and approved by the stockholders on March 25, 2021. 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 stock options, (ii) as restricted stock, and (iii) as available pursuant to restricted stock units shall be limited to (A) during the Company’s fiscal year ending December 31, 2021 (the “2021 Fiscal Year”), 1,460,191 shares of common stock, and (B) beginning with the Company’s fiscal year ending December 31, 2022 (the “2022 Fiscal Year”), 15% of the number of shares of common stock outstanding. Subject to certain adjustments as provided in the 2021 Plan, (i) shares of the Company’s common stock subject to the 2021 Plan shall include shares of common stock forfeited in a prior year and (ii) the number of shares of common stock that may be issued under the 2021 Plan may never be less than the number of shares of the Company’s common stock that are then outstanding under outstanding Awards.

During the three months ended September 30, 2021, the Company did not grant any options to purchase shares of the Company’s common stock under the 2021 Plan or award restricted common stock or restricted stock units under the 2021 Plan.

During the nine months ended September 30, 2021, the Company granted options to purchase 716,200 shares of the Company’s common stock under the 2021 Plan, of which 186,200 shares immediately vested with an exercise price of $7.52 per share, based on the closing price plus 10% of the Company’s common stock on the date of the grant. The remaining 530,000 shares will vest in equal installments of 33 1/3% on each of the three anniversaries of the date of the grant. The weighted exercise price of these options is $7.08 per share and was based on the closing market price of the Company’s common stock on the dates of grant. Using a Black-Scholes Option Pricing Model, the weighted average fair value of these options was $5.04 per share and was estimated at the date of grant.

During the nine months ended September 30, 2021, the Company awarded 47,500 shares of restricted common stock under the 2021 Plan, valued at $11.10 per share based on the closing market price of the Company’s common stock on the date of the award. The shares will be restricted for one year, with the entire award vesting on the first anniversary of the award date.

During the nine months ended September 30, 2021, the Company awarded 15,000 restricted stock units under the 2021 Plan, valued at $11.10 per share based on the closing market price of the Company’s common stock on the date of the grant. 33 1/3% of such restricted stock units will vest on each of the first three anniversaries of the date of the grant.

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (the ~~FASB)~~“FASB”) in the form of ~~ASUs~~accounting standard updates (“ASUs”) to the FASB’s Accounting Standards ~~Codification.~~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 ~~May 2014,~~June 2016, the FASB issued ASU ~~2014-09 (Revenue from Contracts with Customers~~2016-13 (Financial Instruments - Credit Losses (Topic ~~606)~~326))and ~~issued~~its subsequent amendments to the initial guidance ~~in August 2015, March 2016, April 2016, May 2016 and December 2016~~ within ASU ~~2015-14,~~2018-19, ASU ~~2016-08,~~2019-04, ASU ~~2016-10,~~2019-05, ASU ~~2016-12~~2019-10, ASU 2019-11 and ASU ~~2016-20,~~2020-02, respectively ~~(ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12~~(collectively, Topic 326). Topic 326 changes how entities will measure credit losses for most financial assets and ~~ASU 2016-20, respectively,~~certain other instruments that are not accounted for at fair value through net income. This standard replaces the existing incurred credit loss model and ~~collectively, Topic 606)~~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~~clarify~~ estimate credit losses expected over the ~~principles for recognizing revenue and to develop a common revenue~~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 for GAAP and International Financial Reporting Standards. Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. Topic 606 is principles-based and provides a five-step model to determine when and how revenue is recognized. It is possible more judgment and estimates mayalso requires expanded credit quality disclosures. For available-for-sale debt securities, entities will be required ~~within~~to record allowances rather than reduce the ~~revenue recognition process than~~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 ~~required under existing GAAP. The core principle is~~accounted for using lease guidance and not as financial instruments. ASU 2019-04 clarifies that ~~a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to~~equity instruments without readily determinable fair values for which ~~the company expects to be entitled in exchange for those goods or services. To achieve that core principle,~~ an entity has elected the measurement alternative should apply the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction pricebe remeasured to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Topic 606 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This standard, as amended, will be effective for the Company for annual and interim reporting periods beginning after December 15, 2017. This standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognizedfair 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 ~~initial application. Early adoption is permitted, but no earlier than calendar 2017.~~amortized cost. This standard ~~could impact~~should be applied on either a prospective transition or modified-retrospective approach depending on the timing and amounts of revenue recognized. The Company is currently evaluating the impact of this standard on its consolidated financial statements. The Company has not yet selected a transition method and in preparation for our adoption of the new standard in our 2018 fiscal year, we are obtaining representative samples of contracts and other forms of agreements with our customers in the U.S. and international locations and are evaluating the provisions contained therein in light of the five-step model specified by this standard. While we do not believe there will be a material impact to our revenues upon adoption, we do expect some level of changes to our current footnote disclosures; we are continuing to evaluate the impact to our revenues and our preliminary assessments are subject to change. We are also continuing to evaluate the provisions of Topic 606 related to costs for obtaining customer contracts.

In January 2016, the FASB issued ASU 2016-01 (Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities) the main objective of which is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.subtopic. This standard will be effective for the Company for annual and interim reporting periods beginning on or after December 15, ~~2017,~~2022, and while early adoption is ~~permitted.~~permitted, the Company does not expect to elect that option. The Company is currently evaluating the impact of ~~this standard but we do not expect~~ the adoption ~~of it to have a material impact on its consolidated financial statements.~~

In February 2016, the FASB issued ASU 2016-02 (Leases (Topic 842)), which requires lessees to recognize a right-of-use asset and a lease liability on their balance sheet for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, this standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). While this standard maintains similar accounting for lessors as under ASC 840, this standard reflects updates to, among other things, align with certain changes to the lessee model. This standard will be effective for the Company for annual and interim reporting periods beginning on or after December 15, 2018, and early adoption is permitted. Although we have not completed our assessment, we believe adoption of this standard may have a significant impact on our consolidated balance sheets. However, we do not expect the adoption to change the recognition, measurement or presentation of lease expense within our consolidated statements of operations or the consolidated statements of cash flows. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon our adoption of the standard, which will increase our total assets and total liabilities that we report relative to such amounts prior to adoption. Information about our undiscounted future lease payments and the timing of those payments is in Note 8, Commitments and Contingencies.

In August 2016, the FASB issued ASU 2016-15 (Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), which clarifies the treatment of several cash flow categories. In addition, ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This standard will be effective for the Company for annual and interim reporting periods beginning after December 15, 2017, and early adoption is permitted. This standard should be applied using a retrospective transition method to each period presented. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 (Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This standard will be effective for the Company for annual and interim reporting periods beginning after December 15, 2017, and early adoption is permitted. This standard should be applied prospectively to an award modified on or after the adoption date. The Company will evaluate the impact of this standard on its consolidated financial statements, including assessing and evaluating assumptions and models to estimate losses. Upon adoption of this standard on January 1, 2023, the Company will be required to record a cumulative effect adjustment to retained earnings for the impact as of the date of adoption. The impact will depend on the Company’s portfolio composition and credit quality at the ~~time~~date of adoption, ~~if applicable.~~as well as forecasts at that time.

On January 1, ~~2017, we~~2021, the Company adopted ASU 2015-11 (Inventory (Topic 330): Simplifying the Measurement of Inventory), which applies to inventory that is measured using first-in, first-out (FIFO) or average cost. As required by ASU 2015-11, we measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement was unchanged for inventory that is measured using last-in, last-out (LIFO). The Company adopted this standard on a prospective basis. The adoption of this standard did not have a material impact on its consolidated financial statements.

~~On January 1, 2017, we adopted ASU 2015-17~~2019-12 (Income Taxes (Topic 740)~~: Balance Sheet Classification of Deferred~~ – Simplifying the Accounting for Income Taxes). ~~The amendments~~This standard removes exceptions to the general principles in ~~this standard require entities that present a classified balance sheet to classify all deferred~~Topic 740 for allocating tax ~~liabilities~~expense between financial statement components, accounting basis differences stemming from an ownership change in foreign investments and assets as a noncurrent amount. The requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount was not affected by the amendments in this standard. Additionally, the amendments in this standard align the deferredinterim period income tax ~~presentation with the requirements in International Accounting Standards (IAS) 1 (Presentation of Financial Statements). The Company adopted this standard on a prospective basis.~~accounting for year-to-date losses that exceed projected losses. The adoption of this standard did not have a material impact on the Company’s consolidated financial ~~statements as its deferred tax assets and liabilities are currently in a full valuation allowance. Prior periods were not retrospectively adjusted.~~

On January 1, 2017, we adopted ASU 2016-09 (Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting). As required by ASU 2016-09, all income tax effects of awards, including excess tax benefits, recognized on stock-based compensation expense are reflected in the condensed consolidated statements of operations as a component of the provision for income taxes on a prospective basis. As required by ASU 2016-09, all tax related cash flows recognized on stock-based compensation expense are classified as an operating activity in our condensed consolidated statements of cash flows on a prospective basis. Accordingly, prior periods have not been adjusted. Additionally, ASU 2016-09 allows companies to make a policy election to account for forfeitures either upon occurrence or by estimating forfeitures. We have elected to continue estimating forfeitures expected to occur in order to determine the amount of compensation cost to be recognized each period. See Note 6 above for additional information.statements.

On January 1, ~~2017, we~~2021, the Company adopted ASU ~~2017-03 (Accounting Changes and Error Corrections~~2020-01 (Investments - Equity Securities (Topic ~~250) and~~321), Investments –- Equity Method and Joint Ventures (Topic 323)~~; Amendments~~, and Derivatives and Hedging (Topic 815)). This standard clarifies certain interactions between the guidance to ~~SEC Paragraphs Pursuant~~account for certain equity securities under Topic 321, the guidance to ~~Staff Announcements at~~account for investments under the ~~September 22, 2016~~equity method of accounting in Topic 323, and ~~November 17, 2016 Emerging Issues Task Force (EITF) Meetings (SEC Update)),~~the guidance in Topic 815, which ~~amends certain topics~~could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the ~~ASC as defined~~forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in ~~this ASU~~accordance with Topic 825, Financial Instruments. This standard improves current GAAP by reducing diversity in practice and ~~also adds an SEC paragraph and amends other topics pursuant to an SEC Staff Announcement made at~~increasing comparability of the ~~September 22, 2016 EITF meeting.~~accounting for these interactions. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

There have been no other significant changes in ~~our~~the Company’s reported financial position or results of operations and cash flows as a result of ~~our~~its adoption of new accounting pronouncements or changes to ~~our~~its significant accounting policies that were disclosed in ~~our Annual Report on Form 10-K~~its consolidated financial statements for the Company’s fiscal year ended December 31, ~~2016.~~2020 (the “2020 Fiscal Year”).

The Company operates in two business segments, Cryptocurrency and Test and Measurement Instrumentation. The Cryptocurrency segment is focused on cryptocurrency and the blockchain ecosystem.. The Test and Measurement Instrumentation segment designs, manufactures, markets and services computer-based balancing systems for aircraft engines, high performance test and measurement instruments and systems, and wafer characterization tools for the semiconductor and solar industries. The Company’s principal operations in both segments are located in North America

The accounting policies of the Cryptocurrency and Test and Measurement Instrumentation segments are similar to those described in the summary of significant accounting policies herein and in the Annual Report. 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.

Summarized financial information concerning the Company’s reportable segments is shown in the following table. The “Other” column includes corporate related items and items such as income taxes or unusual items, which are not allocated to reportable segments. In addition, segments’ non-cash items include any depreciation and amortization in reported profit or loss.

On September 13, 2021, the Company entered into a $1 million unsecured line of credit from KeyBank National Association, 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 line of credit may be drawn at the discretion of the Company, and bears interest at a rate of Prime +.75% per annum. Accrued interest is due monthly and principal is due in full following lender’s demand. MTI Instruments, Inc. previously held a secured line of credit with Pioneer Bank in the amount of $300 thousand. The secured line of credit was closed on September 10, 2021 with no outstanding amounts. As of September 30, 2021 and December 31, 2020, there were 0 amounts outstanding under the line of credit.

Management has evaluated all events and transactions that occurred subsequent to September 30, 2021 through the date of issuance of these condensed consolidated financial statements.

On October 20, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) for an aggregate financing of $15 million with certain accredited investors (the “Investors”). At the closing under the SPA, which occurred on October 25, 2021 (“SPA Closing”), the Company issued to the Investors (i) secured convertible notes in the aggregate principal amount of $16,304,348 for an aggregate purchase price of $15 million (collectively, the “Notes”), which are, subject to certain conditions, convertible at any time by the Investors, into an aggregate of 1,776,073 shares (the “Conversion Shares”) of the Company’s common stock, at a price per share of $9.18 (the “Fixed Conversion Price”); and (ii) Class A, Class B and Class C common stock purchase warrants (collectively, the “Warrants”) to purchase up to an aggregate of 1,776,073 shares of the Company’s common stock (the “Warrant Shares” and collectively with the Notes, the Conversion Shares, and the Warrants, the “Securities”), at an exercise price $12.50, $15 and $18 per share, respectively. The Warrants are immediately exercisable for five years upon issuance, subject to applicable Nasdaq rules.

The Notes, subject to an original issue discount of 8%, have a maturity date of October 25, 2022 (the “Maturity Date”), upon which the 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 Notes), interest on the 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 Notes) or a Change of Control (as defined in the Notes) occurs, the outstanding principal amount of the Notes, liquidated damages and other amounts owing in respect thereof through the date of acceleration, will become, at the Investor’s election, immediately due and payable in cash at the Mandatory Default Amount (as defined in the Notes). The Notes may not be prepaid, redeemed or mandatory converted without the consent of the Investors. The obligations of the Company pursuant to the 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 EcoChain, EcoChain Block LLC and EcoChain Wind LLC (both of which are wholly owned subsidiaries of EcoChain, and together with MTI Instruments and EcoChain, the “Subsidiary Guarantors”), and Collateral Services LLC, as collateral agent for and the holders of the Notes (the “Security Agreement”); 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 purchasers signatory to the SPA (each, a “Subsidiary Guaranty”).

The conversion of the Notes and the exercise of the Warrants are each subject to beneficial ownership limitations such that the Investors may not convert the Notes or exercise the Warrants to the extent that such conversion or exercise would result in each of the Investors being the beneficial owner in excess of 4.99% (or, upon election of such Investor, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon such conversion or exercise, which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to the Company, provided that any increase in such limitation will not be effective until 61 days following notice to the Company.

Pursuant to the SPA, for so long as any amount in excess of $1,500,000 in the aggregate for all Investors remains outstanding on a Note, Investors who have acquired Notes having a principal amount of not less than $3,000,000, have a right to participate in any issuance (a “Subsequent Financing”) by the Company or any of its subsidiaries of Common Stock, Common Stock Equivalents (as defined in the SPA) for cash consideration, Indebtedness (as defined in the SPA) or a combination thereof, other than (i) a rights offering to all holders of Common Stock, or (ii) an Exempt Issuance (as defined in the SPA), up to an amount equal to fifty percent (50%) of the Subsequent Financing, unless the Subsequent Financing is an underwritten public offering, in which case the Company will notify each Investor of such public offering when it is lawful for the Company to do so, but no Investor will be entitled to purchase any particular amount of such public offering without the approval of the lead underwriter of such underwritten public offering.

The Company has agreed to register with the U.S. Securities and Exchange Commission (the “SEC”) the resale of the Warrant Shares and Conversion Shares pursuant to the Registration Rights Agreement, dated as of October 25, 2021, by and among the Company and the purchasers signatory to the SPA (the “Registration Rights Agreement”).

The SPA, Notes and Warrants each contain customary events of default, representations, warranties, agreements of the Company and the Investors and customary indemnification rights and obligations of the parties thereto, as applicable. The Company did not engage in general solicitation or advertising with regard to the issuance and sale of the Securities. Each of the Investors represented that he/she/it is an accredited investor and purchased the Securities for investment and not with a view to distribution. The Notes and the Warrants were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), based on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder.

Univest Securities LLC served as the placement agent (the “Placement Agent”) for the Company in connection with the Offering. In connection with the foregoing, the Company entered into a placement agency agreement with the Placement Agent, dated October 21, 2021 (the “Placement Agency Agreement”), and agreed to pay to the Placement Agent (i) a cash fee equal to 8% of the gross proceeds received by the Company from the sale of Securities at Closing, (ii) a cash fee equal to 7% of the gross proceeds received by the Company from any exercise of the Warrants, and issue the Placement Agent (x) a warrant to purchase up to 8% of the aggregate number of Conversion Shares (the “Placement Agent Warrant #1”), which is exercisable, in whole or in part, on a cashless basis, for a period of five years, commencing on the final Closing Date (as defined in the Placement Agency Agreement), and (y) a warrant to purchase up to 7% of the aggregate number of Warrant Shares that are exercised (the “Placement Agent Warrant #2”, and together with Placement Agent Warrant #1, the “Placement Agent Warrants”), which is exercisable after 6 months upon issuance on a cashless basis for a period of five years. In addition, the Placement Agent Warrant includes a registration rights provision granting the Placement Agent the same registration rights granted to the Investors pursuant to the SPA. The Placement Agency Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, other obligations of the parties thereto, and termination provisions.

On October 29, 2021, the Company consummated the Merger pursuant to the Merger Agreement. As a result of the Merger, each share of common stock of SCI issued and outstanding immediately prior to the effective time of the Merger, other than shares of SCI common stock owned by SCI, Merger Sub, SHI, or any of their subsidiaries, was cancelled and converted into the right to receive a proportionate share of up to 2,970,000 Merger Shares, 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. Based on the closing sales price of the SHI Common Stock on the Nasdaq Capital Market on October 29, 2021, assuming the issuance of all of the Merger Shares, the aggregate Merger Consideration would have a value of approximately $34.8 million.

Also, as a result of the Merger, the employees of SCI became employees of, or in one case a consultant to, EcoChain pursuant to employment agreements EcoChain entered into as of October 29, 2021 with such employees and a consulting agreement EcoChain entered into as of October 29, 2021 with an entity wholly-owned by the consultant and his wife.

In addition, as the result of the approval by the Company’s stockholders of the issuance of the Company’s common stock at its Special Meeting of Stockholders held on October 29, 2021, pursuant to the Termination Agreement the Company issued to HEL the Termination Shares and EcoChain paid HEL the Cash Consideration, and the existing Operating and Management Agreements between HEL and EcoChain terminated in all respects. In addition, pursuant to the terms of the Termination Agreement, on November 5, 2021, 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.

Pursuant to the Voting Agreement by and among Soluna Parent, SHI, and Brookstone Partners, the execution of which was a condition to the closing of the Merger, upon the effectiveness of the Merger on October 29, 2021, the Company’s Board of Directors elected John Belizaire, who served as Chief Executive Officer and a director of SCI until the effective time of the Merger, a director of HEL, and President and Chief Executive Officer of EcoChain, and John Bottomley, a director of HEL and a director of SCI until the effective time of the Merger, to the Board of Directors of SHI. SHI’s Board of Directors has not yet determined on which committees of the Board of Directors these individuals will serve. As directors, Messrs. Belizaire and Bottomley are entitled to compensation in such capacity on the same basis as SHI’s other directors. Currently, each non-employee director of SHI receives cash compensation of $10,000 per year, with additional consideration for the lead independent director of $5,000 per year (as an employee of EcoChain, Mr. Belizaire will not receive these payments). Directors are also eligible for equity grants as may be authorized by the Compensation Committee of SHI’s Board of Directors.

Following the closing of the Merger, the Company changed its name from “Mechanical Technology, Incorporated” to “Soluna Holdings, Inc.”, effective November 2, 2021. The Company also changed its ticker symbol for its common stock from “MKTY” to “SLNH” and for its preferred stock from “MKTYP” to “SLNHP”. The ticker symbol change became effective on November 4, 2021.

At the 2021 Special Meeting of Stockholders of the Company held on October 29, 2021, the Company’s shareholders approved the Soluna Holdings, Inc. Amended and Restated 2021 Stock Incentive Plan (the “2021 Amended and Restated Plan”) which, among other things, eliminates certain limitations on the number of shares of the Company’s common stock that may be issued pursuant to awards under the 2021 Plan and to provide for the validity, construction and effect of the 2021 Amended and Restated Plan in accordance with the laws of the State of Nevada, in lieu of the State of New York as provided by the 2021 Plan, consistent with the Company’s reincorporation as a Nevada corporation on March 24, 2021.

The total number of shares of the Company’s common stock authorized to be issued under the 2021 Amended and Restated Plan (i) pursuant to the exercise of options, (ii) as restricted stock and (iii) as available pursuant to restricted stock units shall be limited to 1,460,191 shares during the 2021 Fiscal Year. On the first trading day of each new fiscal year commencing on January 1, 2022, the number of shares of common stock reserved for issuance under the 2021 Amended and Restated Plan will automatically increase by fifteen percent (15%) of the number of shares of common stock outstanding on such date (the “Evergreen Provision”).

On October 29, 2021, the Company filed a Form S-8 Registration Statement to register 1,460,191 shares of the Company’s common stock to be offered to participants under the 2021 Amended and Restated Plan in the 2021 Fiscal Year and 1,024,000 shares of common stock anticipated to be available for issuance pursuant to future awards under the 2021 Amended and Restated Plan pursuant to the Evergreen Provision.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context requires otherwise, the terms ~~“MTI,~~“SHI,” “the Company”, “we,” “us,” and “our” refer to ~~Mechanical Technology, Incorporated, a New York Corporation,~~Soluna Holdings, Inc., “EcoChain” refers to EcoChain, Inc. and “MTI Instruments” refers to MTI Instruments, ~~Incorporated, a New York corporation and our wholly-owned subsidiary.~~Inc.

The following discussion of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and the related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, ~~2016~~2020 contained in our ~~2016~~ Annual Report on Form ~~10-K.~~10-K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021.

In addition to historical information, the following discussion contains forward-looking statements, which involve risk and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements. Important factors that could cause actual results to differ include those set forth in Part I Item 1A-Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016, as filed on March 2, 2017,~~2020 and elsewhere in this Quarterly Report on Form 10-Q. Readers should not place undue reliance on our forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made and are not guarantees of future performance. Except as may be required by applicable law, we do not undertake or intend to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q. Please see “Statement Concerning Forward-Looking Statements” below.

~~MTI’s~~SHI conducts its business through its wholly-owned subsidiaries, Ecochain and MTI Instruments.

EcoChain, a Delaware corporation incorporated in January 2020, is engaged in cryptocurrency mining powered by renewable energy. Related to this new core business, ~~is conducted~~we made a strategic investment, and hold an equity position, in “HEL, a Canadian company that develops vertically-integrated, utility-scale computing facilities focused on cryptocurrency mining and cutting-edge blockchain applications. Through HEL, we currently operate a mining facility in Wenatchee, Washington, that houses the majority of our cryptocurrency miners, which are the cryptocurrency assets, consisting of hardware and software, that perform the computations needed to mine cryptocurrencies. We purchased additional miners in April and May 2021, and in May 2021 entered into two ground leases for a building located in the Southeast region of the United States that will be EcoChain’s second cryptocurrency mining facility, which includes surrounding land for potential additional capacity. The ground leases will not be effective until certain conditions set forth therein are met, and in the meantime the miners we purchased in April are located in this facility. We are paying the owner of that facility, at a flat fee per miner, for the space, electricity, and anything else needed for the miners to operate, an arrangement known as “hosting”; this arrangement will terminate upon the effective date of the ground leases, at which time HEL will commence operating this facility pursuant to an operations and management agreement between HEL and EcoChain. The primary cryptocurrencies that EcoChain mines are Bitcoin and, to a lesser degree, Ethereum and LiteCoin. EcoChain recognizes revenue when its mined cryptocurrencies are transferred to its account at a cryptocurrency exchange (i.e. a platform that facilitates the exchange of cryptocurrencies for other assets, such as conventional money or other digital currencies). The applicable exchange converts the cryptocurrencies held in our account to U.S. dollars daily. The Company intends to continue to grow EcoChain through acquisitions of existing cryptocurrency mining facilities and properties that can be repurposed to operate cryptocurrency mining facilities, as well as through constructing our own cryptocurrency mining facilities, along with purchases of any real property, equipment, and miners necessary to do so.

MTI Instruments, ~~Inc., a wholly-owned subsidiary.~~ ~~MTI Instruments~~incorporated in New York in 2000, is ~~a supplier~~engaged in the design, manufacture, and sale of vibration measurement and system balancing solutions, precision linear displacement sensors, instruments and system solutions, ~~vibration measurement and system balancing solutions, precision tensile measurement systems~~ and wafer inspection tools, serving markets that require 1) engine balancing and vibration analysis systems for both military and commercial aircraft, 2) the precise measurements and control of products and processes in automated manufacturing, assembly, and consistent operation of complex machinery, ~~2) engine balancing~~ and ~~vibration analysis systems for both military and commercial aircraft,~~ 3) metrology tools for semiconductor and solar wafer characterization, and 4) tensile stage systems for materials testing and precision linear displacement gauges all for use in academic and industrial research and development settings. We are continuously working on ways to increase our sales reach, including expanded worldwide sales coverage and enhanced internet marketing. characterization.

Consolidated Results of Operations for the Three and Nine Months Ended September 30, ~~2017~~2021 Compared to the Three and Nine Months Ended September 30, ~~2016.~~2020.

The following table summarizes changes in the various components of our net ~~income~~loss during the three months ended September 30, ~~2017~~2021 compared to the three months ended September 30, ~~2016.~~2020.

(Dollars in thousands)	Three Months Ended September 30, 2017		Three Months Ended September 30, 2016			$ Change			% Change	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020			$ Change			% Change

Cryptocurrency mining revenue										$	2,018		$	176		$	1,842			1,046.6	%
Data hosting revenue										$	1,106		$	—		$	1,106			100.0	%
Product revenue	$	1,857	$	2,232		$	(375	)	(16.8)%	$	1,949		$	3,511		$	(1,562	)		(44.5	%)
Operating costs and expenses:
Cost of cryptocurrency mining revenue										$	779		$	248		$	531			214.1	%
Cost of data hosting revenue										$	964		$	—		$	964			100.0	%
Cost of product revenue	$	563	$	774		$	(211	)	(27.3)%	$	661		$	631		$	30			4.8	%
Research and product development expenses	$	277	$	298		$	(21	)	(7.0)%	$	404		$	363		$	41			11.3	%
Selling, general and administrative expenses	$	674	$	829		$	(155	)	(18.7)%	$	2,893		$	990		$	1,903			192.2	%
Operating income	$	343	$	331		$	12		3.6%
Other income (expense), net	$	1	$	(1	)	$	2		200.0%
Operating (loss) income										$	(628	)	$	1,455		$	(2,083	)		(143.2	%)
Other income, net										$	18		$	55		$	(37	)		(67.3	%)
(Loss) income before income taxes										$	(610	)	$	1,510		$	(2,120	)		(140.4	%)
Income tax expense	$	—	$	(1	)	$	1		100.0%	$	—		$	(3	)	$	3			100.0	%
Net income	$	344	$	329		$	15		4.6%
Net (loss) income										$	(610	)	$	1,507		$	(2,117	)		(140.5	%)

The following table summarizes changes in the various components of our net ~~income~~loss during the nine months ended September 30, ~~2017~~2021 compared to the nine months ended September 30, ~~2016.~~2020.

(Dollars in thousands)	Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016			$ Change			% Change	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020		$ Change			% Change

Cryptocurrency mining revenue											$	4,670		$	226	$	4,444			1,966.4	%
Data hosting revenue											$	1,106		$	—	$	1,106			100.0	%
Product revenue	$	5,047		$	5,265		$	(218	)	(4.1)%	$	4,933		$	7,484	$	(2,551	)		(34.1	%)
Operating costs and expenses:
Cost of cryptocurrency mining revenue											$	1,652		$	248	$	1,404			566.10	%
Cost of data hosting revenue											$	964		$	—	$	964			100.0	%
Cost of product revenue	$	1,604		$	2,018		$	(414	)	(20.5)%	$	1,616		$	1,790	$	(174	)		(9.7	%)
Research and product development expenses	$	887		$	942		$	(55	)	(5.8)%	$	1,196		$	1,127	$	69			6.1	%
Selling, general and administrative expenses	$	2,309		$	2,445		$	(136	)	(5.6)%	$	7,761		$	2,632	$	5,129			194.9	%
Operating income (loss)	$	247		$	(140	)	$	387		276.4%
Other expense, net	$	(4	)	$	(7	)	$	3		42.9%
Income tax expense	$	—		$	(1	)	$	1		100.0%
Net income (loss)	$	243		$	(148	)	$	391		264.2%
Operating (loss) income											$	(2,480	)	$	1,913	$	(4,393	)		(229.6	%)
Other income, net											$	31		$	59	$	(28	)		(47.5	%)
(Loss) income before income taxes											$	(2,449	)	$	1,972	$	(4,421	)		(224.2	%)
Income tax (expense) benefit											$	(3	)	$	—	$	(3	)		(100.0	%)
Net (loss) income											$	(2,452	)	$	1,972	$	(4,424	)		(224.3	%)

Cryptocurrency Mining Revenue: Cryptocurrency revenue consists of revenue recognized from EcoChain’s cryptocurrency mining operations.

Cryptocurrency revenue was $2.0 million for the three months ended September 30, 2021, compared to $176 thousand for the three months ended September 30, 2020. Cryptocurrency revenue was $4.7 million for the nine months ended September 30, 2021, compared to $226 thousand for the nine months ended September 30, 2020. EcoChain did not commence its cryptocurrency mining operations until the second quarter of 2020, and therefore there was no material cryptocurrency revenue for the nine months ended September 30, 2020. This revenue represents the cash received upon the daily sale of the various cryptocurrencies mined at EcoChain’s mining facility during the nine months ended September 30, 2021. The Company has seen increases in growth in expected hashrate and mining site usage of MegaWatts between these periods.

Data Hosting Revenue: In August 2021, EcoChain began cryptocurrency hosting services in which EcoChain provides energized space and operating services to third-party mining companies who locate their mining hardware at one of EcoChain’s mining locations, in which they receive a fee per miner installed and if additional services are rendered, an additional service fee is charged to the outside parties. The Company’s revenue was $1.1 million for the three and nine months ended September 31, 2021, with no comparable services noted for the 2020 Fiscal Year 2020.

Product Revenue: Product revenue consists of revenue recognized from ~~the~~sales of MTI Instruments’ ~~product lines.~~products and the provision of related maintenance and repair services.

Product revenue for the three months ended September 30, ~~2017~~2021 decreased by ~~$375 thousand,~~$1.6 million, or ~~16.8%~~44.5%, to $1.9 million from ~~$2.2~~$3.5 million ~~during~~for the three months ended September 30, ~~2016.~~ 2020. The primary reason for this decrease was a $1.6 million decline in portable balancing systems (“PBS”) revenue due to lower new PBS sales, of which the majority of the difference was driven by a decrease in the number of units sold to the United States Air Force, in which there were 20 less units sold for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Product revenue for the nine months ended September 30, ~~2017~~2021 decreased by ~~$218 thousand,~~$2.55 million, or ~~4.1%~~34.1%, to ~~$5.0~~$4.9 million from ~~$5.3~~$7.5 million during the nine months ended September 30, ~~2016.~~2020. The ~~quarterly revenue~~primary reason for the decrease was a $2.5 million decline in PBS revenue due to lower new PBS sales, of which $2.4 million was driven ~~primarily~~ by ~~activity under~~ the ~~U.S.~~sale of 35 fewer units to the United States Air Force contract for engine vibration analysis systems, accessories and maintenance, which we entered into on July 1, 2016. Upon execution of this contract in the third quarter of 2016, numerous U.S. Air Force systems that had been overdue for repair were finally sent in and repaired during the three months ended September 30, 2016. This concentrated activity last year drove the current decline in quarterly revenue. However, this decrease was partially offset by increased capacitance salescompared to our two largest commercial customers in Asia and Europe during the third quarter of 2017. The year-to-date decrease in revenue is attributable to fewer engine vibration analysis system sales to commercial customers partially offset by increased capacitance sales to our two largest commercial customers in Asia and Europe.

For the three months ended September 30, 2017, the largest commercial customer was an Asian electronics manufacturer, which accounted for 15.7% of the third quarter 2017 revenue. During the three months ended September 30, 2016, our largest commercial customer was a U.S. turbine engine tooling manufacturer, which accounted for 8.0% of the third quarter 2016 revenue. The U.S. Air Force was the largest government customer for the three months ended September 30, 2017 and September 30, 2016, accounting for 9.3% and 36.4%, respectively, of revenue.

~~For~~ the nine months ended September 30, ~~2017, the largest commercial customer~~2020. The decrease was primarily due to a ~~U.S.-based, Fortune 100 company that manufactures turbine engine tooling equipment~~large order placed in Europe. This customer accounted for 9.5% of the 2017 revenue to date. In 2016, our largest commercial customer was an Asian distributor, which accounted for 9.7% of revenue during the first nine months of 2016. The U.S. Air Force was the largest government customer for the nine months ended September 30, 2017 and September 30, 2016, accounting for 20.8% and 16.2%, respectively, of revenue. 2020.

Information regarding government contracts included in product revenue is as follows:

We are in discussions with the U.S. Air Force regarding renewing their current contract, which expired as of June 30, 2021. We do not anticipate any issues with the renewal of the contract and we expect to enter into a renewed contract with the U.S. Air Force by the end of the year. As a result, we do not expect that there will be any material impact on our results of operations, cash flows, liquidity, or financial condition as a result of the pending expiration of our current contract with the U.S. Air Force.

Cost of ~~contract placement and may not be representative~~Cryptocurrency Revenue: Cost of ~~actual results.~~

~~(2) Date represents expiration~~cryptocurrency revenue includes direct utility costs as well as overhead costs that relate to the operations of ~~contract,~~EcoChain’s cryptocurrency mining facility. Going forward, cost of cryptocurrency revenue will also include any costs related to the hosting of our miners in third-party facilities as well as the costs of operations of any additional EcoChain cryptocurrency mining facilities, including the ~~exercise of~~anticipated Southeast region facility, discussed above, once the ~~option extension.~~ ground leases become effective.

Cost of cryptocurrency revenue was $779 thousand and $248 thousand for the three months ended September 30, 2021 and 2020, respectively, a $531 thousand increase. Cost of cryptocurrency revenue was $1.6 million for the nine months ended September 30, 2021 compared to $248 thousand for the nine months ended September 30, 2020. As noted above, EcoChain did not commence cryptocurrency mining operations until the second quarter of 2020, and therefore there was no material cryptocurrency revenue or associated costs during the nine months ended September 30, 2020. As the Company began increasing their storage capacity, the associated costs began to increase.

Cost of Data Hosting Revenue: As noted above within the Data Hosting Revenue, EcoChain began hosting services in August 2021 in which expenses are allocated based on the cost driving activity. As such, there were no related charges in the 2020 Fiscal Year as this was a new operation in the third quarter of 2021.

Cost of Product Revenue; Gross Margin:Cost of product revenue includes the direct material and labor cost as well as an allocation of overhead costs that relate to the manufacturing of products that we sell. ~~In addition, cost~~Cost of product revenue also includes the labor and material costs incurred for product maintenance, replacement parts, and service under our contractual obligations.

Cost of product revenue for the three months ended September 30, ~~2017 decreased~~2021 increased by ~~$211~~$30 thousand, or ~~27.3%~~4.8%, to ~~$563~~$661 thousand from ~~$774~~$631 thousand for the three months ended September 30, ~~2016. Gross profit, as~~2020. This increase was primarily due to the lower production cost of the new PBS products which contributed to a ~~percentage~~higher gross margin of approximately 80%. The mix of volume for the three months ended September 30, 2021 was unfavorable (lower volume of PBS sales combined with other products being sold with lower gross margin), contributing to an increase in cost of product revenue ~~increased to 69.7% during~~for the ~~third quarter of 2017~~three months ended September 2021 compared to ~~65.3% for the third quarter of 2016.~~2020. Cost of product revenue for the nine months ended September 30, ~~2017~~2021 decreased by ~~$414~~$174 thousand, or ~~20.5%~~9.7%, to $1.6 million from ~~$2.0~~$1.8 million for the nine months ended September 30, ~~2016. Gross profit,~~2020. This decrease was primarily due to the decrease in product sales compared to the nine months ended September 30, 2020, as discussed above in “Product Revenue”, offset by an unfavorable mix of the volume of products sales, with more units being sold that had higher gross margins in the nine months ended September 30, 2020 compared to 2021.

Cost as a percentage of product revenue ~~increased to 68.2% during~~was unfavorable comparable for the nine months ended September 30, ~~2017 compared~~2021 comparable to ~~61.7% during~~ the nine months ended September 30, ~~2016.~~

~~The improvement in gross profit~~2020, decreasing to, as a percentage of product revenue, 33% during the ~~2017 periods was attributable~~year to ~~lower material costs, a change~~date of 2021 compared to 24% in the ~~product~~comparable 2020 period. This was due to a mix ~~and reduced charges for excess inventory stemming~~change (lower volume in sales in the higher margin products) from ~~improved procurement management. The~~the decrease in the ~~cost of product revenue during the 2017 periods was attributable~~PBS sales and lower proportion to ~~the lower material costs and the reduced excess inventory charges that was partly responsible for the improvements in the profit margin.~~total sales.

Research and Product Development Expenses: Research and product development expenses includes the costs of materials to build development and prototype units, cash and non-cash compensation and benefits for the engineering and related staff, expenses for contract engineers, fees paid to outside suppliers for subcontracted components and services, fees paid to consultants for services provided, materials and supplies consumed, ~~facility related~~facility-related costs such as computer and network services, and other general overhead costs associated with our research and development activities, to the extent not reimbursed by our customers.

Research and product development expenses ~~decreased $21 thousand and $55 thousand, respectively, during~~for the ~~three and~~ nine months ended September 30, ~~2017 compared~~2021 increased $69 thousand, or 6.1%, to $1.2 million from $1.1 million for the ~~comparable 2016 periods~~nine months ended September 30, 2020. This increase was primarily due to ~~decreased~~higher material ~~spending on current~~costs associated with the development ~~projects and reduced staffing.~~ of engineering prototypes.

Selling, General and Administrative Expenses:Selling, general and administrative expenses includes cash and non-cash compensation, benefits and related costs in support of our general corporate functions, including general management, finance and accounting, human resources, selling and marketing, information technology, and legal services.

Selling, general and administrative expenses for the three months ended September 30, ~~2017 decreased~~2021 increased by ~~$155 thousand,~~$1.9 million, or ~~18.7%~~192.2%, to ~~$674 thousand~~$2.9 million from ~~$829~~$990 thousand for the three months ended September 30, ~~2016.~~ 2020. This increase was a result of both expenses incurred in 2021 for which there was no comparable expense in 2020 as well as from changes in a number of our traditional selling, general and administrative expenses. Expenses for which there was no comparable outlay in 2020 consisted non-cash stock option grants of $330 thousand to our Chief Executive Officer (“CEO”) and Board of Directors, and $1 million related to other outside related expenses in conjunction with pipeline acquisition diligence and operating and management agreements with HEL.

Investor relations expenses incurred during the three months ended September 30, 2021, and for which there were no comparable expenses during the three months ended September 30, 2020, were $70 thousand, consisting primarily of media and investor advisory relation services of $55 thousand and $15 thousand in connection with SEC filing and Nasdaq registration fees.

Salaries and benefits expenses increased by $165 thousand during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, $75 thousand of which related to the salary of the CEO who was hired full time in November 2020, $40 thousand of which related to the hiring of a Financial Reporting Manager and Compliance Manager in the third quarter of 2021, and $50 thousand of which related to the salary, recruiting fees and benefits of the new President of MTI Instruments, who was originally hired as Director of Marketing in the third quarter of 2019 and promoted to Chief Operating Officer of MTI Instruments in May 2020 and President of MTI Instruments in September 2020, in addition to adding an HR manager. Compensation expense for Board members increased by $20 thousand due to the Company’s change in Board compensation and adding two Directors to the Board in February 2021. Directors and officers insurance premiums increased by $80 thousand during the three months ended September 30, 2021, compared to the three months ended September 30, 2020. This is due to our status as an SEC reporting company and the cryptocurrency business unit. Digital and other marketing expenses increased approximately $110 thousand with the Company continuing to build out its market to the public.

Selling, general and administrative expenses for the nine months ended September 30, ~~2017 decreased~~2021 increased by ~~$136 thousand,~~$5.1 million, or ~~5.6%~~194.9%, to ~~$2.3~~$7.7 million from ~~$2.4~~$2.6 million for the nine months ended September 30, ~~2016. These decreases were~~2020. This increase was a result of ~~staff reductions~~both expenses incurred in 2021 for which there was no comparable expense in 2020 as well as from changes in a number of our traditional selling, general and administrative expenses. Expenses for which there was no comparable outlay in 2020 consisted of non-cash stock option grants of $1.3 million to our CEO and Board of Directors, $1.3 million related to other outside related expenses in conjunction with pipeline acquisition diligence and operating and management agreements with HEL, and $375 thousand in expenses related to investor relations matters. The increase of $560 thousand in legal fees for the nine months ended September 30, 2021 was primarily due to $290 thousand of legal fees related to the transaction to lease the building for EcoChain’s new cryptocurrency mining facility and the surrounding land located in the ~~sales~~Southeast region of the U.S., discussed above, and $270 thousand in corporate legal expenses mainly related to the Company’s reincorporation in Nevada, the preparation and adoption of the Plan, preparation of the Special Meeting of Stockholders we held on March 25, 2021, at which the Company’s stockholders approved (among another matter) the reincorporation and the adoption of the 2012 Plan, the annual meeting held in May 2021 and preparation for the Special Meeting of Stockholders held on October 29, 2021 as well as other due diligence matters. In addition, there was a $300 thousand increase in consultant fees for the year related to CEO and Board compensation consultation and the annual stockholders meeting, the initial listing of our common stock on The Nasdaq Stock Market LLC (“Nasdaq”), due diligence matters of the Company, expenses related to the Company’s EcoChain operations, and assistance in connection with other SEC filings, primarily our Annual Report on Form 10-K for the year ended December 31, 2020 and Form 8-K filings, which we did not have to file during the quarter ended September 30, 2020 as we were not then subject to the filing requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Investor relations expenses incurred during the nine months ended September 30, 2021, and for which there was no comparable expense during the nine months ended September 30, 2020, were $375 thousand, consisting primarily of $88 thousand for Nasdaq registration fees in connection with the initial listing of our common stock, $135 thousand related to our retention of an investor relations consulting firm to assist us with creating a more formal investor relations strategy given our status as an SEC reporting and Nasdaq-listed company, $55 thousand related to the Special Meeting of Stockholders held on March 25, 2021, including the fees and expenses of the proxy solicitor we retained in connection therewith, and $50 thousand in conjunction with the Company’s annual stockholders meeting.

Salaries and benefits expenses increased by $420 thousand during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, $300 thousand of which is related to the salary and benefits of our Chief Financial Officer (hired in July 2020), Chief Executive Officer (hired in November 2020), Compliance Manager (hired in November 2020), and Financial Reporting Manager (hired in July 2021), $120 thousand of which is related to the salary and benefits of the new President of MTI Instruments, who was originally hired as Director of Marketing in the third quarter of 2019 and promoted to Chief Operating Officer of MTI Instruments in May 2020 and President of MTI Instruments in September 2020, in addition to adding an HR manager. In addition, compared to the nine months ended September 30, 2020, we experienced an increase of $108 thousand in audit and tax fees due to having to be conducted in accordance with the auditing standards of the Public Company Accounting Oversight Board (“PCAOB”) in the nine months ended September 30, 2021. During the nine months ended September 30, 2020 we did not file reports with the SEC and therefore the annual audit of our financial statements did not need to comply with PCAOB requirements, which resulted in lower audit fees for the 2020 period. Directors and officers insurance premiums increased by $175 thousand during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. This is due to our status as an SEC reporting company and the cryptocurrency business unit.

The Company also expects selling, general and administrative ~~departments.~~ expenses to continue to increase for the remainder of 2021 and generally going forward as a result of its resumption of filing periodic reports, annual proxy statements, and other filings with the SEC following the effectiveness of its Form 10 registration statement in November 2020.

Operating ~~income~~loss was ~~$343~~$628 thousand for the three months ended September 30, ~~2017~~2021, compared to ~~$331 thousand~~a profit of $1.5 million during the comparable 2020 period. This decrease was the result of the $1.9 million increase in selling, general and administrative expenses, as well as MTI Instruments contribution margin (i.e. the aggregate incremental revenue generated from product revenue after deducting direct costs) of $1.6 million. The increase in loss was partially offset by the EcoChain contribution margin (i.e. the aggregate incremental revenue generated from cryptocurrency revenue after deducting the direct costs) of $1.4 million for the three months ended September 30, ~~2016.This improvement~~2021 compared to almost no margin for the comparative three months of 2020 as EcoChain was a ~~result of the factors noted above, that is, the improvement~~relatively new business in ~~the profit margin, combined with decreased research and development and selling, general and administrative expenses.~~ fiscal year 2020.

Operating ~~income~~loss was ~~$247 thousand~~$2.5 million for the nine months ended September 30, ~~2017~~2021 compared to ~~an operating~~a profit of $2.0 million during the comparable 2020 period. This decrease was the result of the $5.1 million increase in selling, general and administrative expenses, as well as MTI Instruments contribution margin (i.e. the aggregate incremental revenue generated from product revenue after deducting direct costs) of $2.4 million. The increase in loss was partially offset by the EcoChain contribution margin (i.e. the aggregate incremental revenue generated from cryptocurrency revenue after deducting the direct costs) of ~~$140 thousand~~$3.1 million for the nine months ended September 30, ~~2016.This improvement was~~ ~~a result of the factors noted above, that is, the improvement in the profit~~2021 compared to almost no margin ~~combined with decreased research and development expenses and partially offset by $205 thousand of non-recurring severance costs associated with the departure of the prior CEO and another employee.~~

~~Other Income (Expense):~~~~Other income was $1 thousand~~ for the ~~three months ended~~ ~~September 30, 2017 compared to other expense of $1 thousand for the three months ended September 30, 2016. Other expense was $4 thousand for the~~comparative nine months ~~ended September 30, 2017 and primarily related to miscellaneous bank fees. Other expense~~of 2020 as EcoChain was ~~$7 thousand for the nine months ended September 30, 2016, which was~~ ~~primarily related to~~ a ~~$6 thousand loss recorded on the disposal of equipment~~relatively new business in ~~the first quarter of 2016.~~

~~Net Income (Loss):~~Net income was $344 thousand for the three months ended September 30, 2017 compared to $329 thousand for the three months ended September 30, 2016. Net income was $243 thousand for the nine months ended September 30, 2017 compared to net loss of $148 thousand for the nine months ended September 30, 2016. The improvement in net income during the 2017 periods was primarily attributable to ~~the improvements in gross margins, as well as the decreased research and development and selling, general and administrative expenses, as discussed above.~~

The Company has historically incurred significant losses ~~(the majority, until 2012, stemming from the~~primarily due to its past efforts to fund direct methanol fuel cell product development and commercialization programs ~~of its former subsidiary, MeOH Power, Inc.)~~ and had a consolidated accumulated deficit of ~~$120.7~~approximately $120.4 million as of September 30, ~~2017. Management believes that the Company currently has adequate resources to avoid future cost-cutting measures that could adversely affect its business.~~2021. As of September 30, ~~2017, we~~2021, the Company had working capital of approximately $18.0 million, no debt, ~~$9 thousand in~~outstanding commitments related to EcoChain for $6.2 million for capital expenditures and termination of the Company’s operating and management agreements, and approximately ~~$3.4~~$15.8 million of cash available to fund our operations.

Based on business developments, including changes in production levels, staffing requirements, and network infrastructure improvements, we will require additional capital equipment ~~may be required~~ in the foreseeable future. WeWith respect to SHI and MTI Instruments, we have outstanding commitments of $367 thousand related to purchase orders outstanding for various business needs as of September 30, 2021. As we have done historically, we expect to ~~spend approximately $75 thousand on capital equipment and $1.2 million in research and development on MTI Instruments’ products during 2017. We expect to fund any future expenditures and~~ continue funding ~~our~~their operations from our current cash position and our projected ~~2017 and 2018~~2021 cash flows pursuant to management’s plans. WeIf necessary, we may also seek to supplement our resources by ~~obtaining~~increasing credit facilities to fund operational working capital and capital expenditure requirements. With respect to EcoChain, we expect to fund growth (additional cryptocurrency mining facilities and miners) through capital raise activities, to the extent that we can successfully raise capital through additional securities sales. Any additional financing, if required, may not be available to us on acceptable terms or at all.

While it cannot be assured, management believes that, due in part to our current working capital level ~~recent realignment in sales~~ and projected cash requirements for operations and ~~stabilized spending,~~capital expenditures, its current available cash of approximately $15.8 million, and our projected 2021 cash flow pursuant to management’s plans, the Company will have adequate resources to fund operations and capital expenditures for SHI and MTI Instruments for the ~~remainder of 2017~~year ending December 31, 2021 and through at least the end of the fourth quarter of 2022. As noted above, the Company expects to fund capital expenditures for EcoChain through capital raises, while MTI Instrument’s operations will be funded through its cash flows. The Company has entered into a unsecured line of credit for $1.0 million to assist with possible future financing, which as of September 30, 2021, there was no outstanding balance. In addition, on October 20, 2021, the Company entered into the SPA pursuant to which the Company issued to the 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 1,776,073 shares of the Company’s common stock. The Company expects to have adequate resources to fund EcoChain’s operations for the year ~~ended~~ending December 31, ~~2018. However, if~~2021 and through at least the fourth quarter of 2022.

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 may need 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, or the Company may be required to obtain credit facilities or other loans, if available, to fund these initiatives. ~~Such~~The Company has no other formal commitments for funding its future needs at this time and any additional financing we may require during the year ending December 31, 2021, may not be available to us on acceptable terms or at all. Any one or more of such steps, if required, could potentially have a material and adverse effect on our business, results of operations, and financial condition.

On September 13, 2021, the Company entered into a $1 million unsecured line of credit from KeyBank National Association, 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 line of credit may be drawn at the discretion of the Company and bears interest at a rate of Prime +.75% per annum. Accrued interest is due monthly, and principal is due in full following the lender’s demand. MTI Instruments, Inc. previously held a secured line of credit with Pioneer Bank in the amount of $300 thousand. The secured line of credit was closed on September 10, 2021 with no outstanding amounts. As of September 30, 2021, there were no amounts outstanding under the line of credit.

We had no additional credit facilities available or debt outstanding at either September 30, ~~2017~~2021 or ~~September 30, 2016.~~December 31, 2020.

At September 30, ~~2017,~~2021, our order backlog was ~~$846~~$1,203 thousand compared to ~~$349~~$555 thousand at December 31, ~~2016.~~2020. The increase in backlog from December ~~2016~~2020 was due to four large orders ~~for capacitance systems~~placed at the end of 2021 third quarter and ~~new balancing systems that, per the customers’ requests, will not~~one large order expected to be delivered ~~until a later date in 2017/2018.~~ during Fiscal Year 2022.

Our inventory turnover ratios and average accounts receivable days outstanding for the trailing 12 month periods and their changes at September 30, ~~2017~~2021 and ~~2016~~2020 are as follows:

The current twelve-month inventory turns have improved due to a 34% decline in average inventory balances corresponding to write-offs for excess inventory in late 2016 and recently improved procurement management.

The average accounts receivable days’ outstanding increased five days during the last 12 months due to a proportionate increase in sales to our two largest commercial customers, who pay later than the U.S. government.

The above discussion and analysis of our financial condition and results of operations ~~are~~is based upon our ~~condensed~~ consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Note 2, Accounting Policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 includes a summary of our most significant accounting policies. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventories, income taxes and stock-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.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities ~~Act of 1933, as amended~~ and Section 21E of the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”).~~Act. Any statements contained in this Form 10-Q 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. Such forward-looking statements include, but are not limited to, statements regarding:

Forward-looking statements involve risks, uncertainties, estimates and assumptions that may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements. Important factors that could cause these differences include the following:

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

The ~~certification~~certifications of our Chief Executive Officer and Chief Financial ~~Officer~~Officers are attached as ~~Exhibit~~Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q include, in paragraph 4 of such certification, information concerning our disclosure controls and procedures and internal control over financial reporting. Such certification should be read in conjunction with the information contained in this Item 4 for a more complete understanding of the matters covered by such certification.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of ~~MTI’s~~SHI’s disclosure controls and procedures as of September 30, ~~2017.~~2021. 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 ~~U.S. Securities and Exchange Commission’s (the “SEC”)~~SEC 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 September 30, ~~2017,~~2021, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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 September 30, ~~2017~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.

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. Further, we are not presently involved in any other litigation that we believe ~~there are any such proceedings presently pending. See Note 8, Commitments and Contingencies,~~is likely, individually or in the aggregate, to have a material adverse effect on our ~~condensed~~ consolidated financial ~~statements for further information.~~condition, results of operations or cash flows.

Part II, Item 1A (Risk Factors) of our most recently filed Annual Report on Form 10-K with the SEC, filed on March ~~2, 2017,~~31, 2021, sets forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition and operating results. Except as to the risk factors set forth below and to the extent that information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters described in Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations – Statement Concerning Forward Looking Statements)), there have been no material changes to our risk factors disclosed in our most recently filed Annual Report on Form 10-K. ~~However, those~~Those risk factors continue to be relevant to an understanding of our business, financial condition and operating results, however, and, accordingly, you should review and consider such risk factors in making any investment decision with respect to our securities.

* Submitted electronicallyAll other exhibits for which no other filing information is given are filed herewith. Attached as Exhibit 101 are the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in eXtensible Business Reporting Language (XBRL) and tagged as blocks of text and including detailed tags: (i) Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016; (ii) Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and 2016; (iii) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016; and (iv) related notes.

Pursuant to the requirements 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.

☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to _____

~~New York~~Nevada		14-1462255
(State or other jurisdiction		(I.R.S. Employer
of incorporation or ~~organization)~~organization	~~(I.R.S. Employer~~	Identification No.)

~~Large accelerated filer~~ ¨	~~Accelerated filer~~ ¨
~~Non-accelerated filer~~ ¨ ~~(Do not check if a smaller reporting company)~~	~~Smaller reporting company~~ x

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒ Emerging growth company ¨☐

PART I. FINANCIAL INFORMATION	2

*Item 1. Financial Statements*	2

Condensed Consolidated Balance Sheets
As of September 30, ~~2017~~2021 (Unaudited) and December 31, ~~2016~~2020	2


Condensed Consolidated Statements of Operations (Unaudited)
For the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020	3


Condensed Consolidated Statements of Changes in Equity
For the ~~Year Ended December 31, 2016~~Three and ~~the~~ Nine Months Ended September 30, ~~2017~~2021 and 2020 (Unaudited)	4 4-5


Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020	5 6


Notes to Condensed Consolidated Financial Statements (Unaudited)	6 7


*Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations*	13 21

*Item 3. Quantitative and Qualitative Disclosures About Market Risk*	18 28

*Item 4. Controls and Procedures*	18 28

PART II. OTHER INFORMATION		19
30
*~~Item 1.~~* ~~Legal Proceedings~~	19

*~~Item 1A.~~*~~Risk Factors~~	19

Item 1.	*Legal Proceedings*	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19 31

*Item 3.*	Defaults Upon Senior Securities	19 31

Item 4.	Mine Safety Disclosures	31
*~~Item 4.~~*~~Mine Safety Disclosures~~	19
Item 5.	Other Information	31
*~~Item 5.~~* ~~Other Information~~	19
Item 6.	Exhibits	31
*~~Item 6.~~* ~~Exhibits~~		19
SIGNATURES
*~~SIGNATURES~~*33	20

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

(Dollars in thousands, except per share)
	September 30,			December 31,
	2021			2020
Assets
Current Assets:
Cash	$	15,817		$	2,630
Accounts receivable		1,027			975
Inventories		1,158			828
Prepaid expenses and other current assets		6,618			346
Total Current Assets		24,620			4,779
Other assets		1,062			309
Deferred income taxes, net		759			759
Equity investment		750			750
Property, plant and equipment, net		18,290			847
Operating lease right-of-use assets		1,127			1,203
Total Assets	$	46,608		$	8,647

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	3,990		$	300
Accrued liabilities		2,000			1,019
Deferred revenue		237			—
Operating lease liability		378			316
Income taxes payable		2			2
Total Current Liabilities		6,607			1,637

Other liabilities		509			203
Operating lease liability		762			891
Total Liabilities		7,878			2,731

Commitments and Contingencies (Note 8)

Stockholders’ Equity:
9.0% Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share, $25.00 liquidation preference; 806,585 shares issued and outstanding as of September 30, 2021 and 0 shares issued and outstanding as of December 31, 2020		1			—
Common stock, par value $0.001 per share, authorized 75,000,000; 13,732,713 issued and outstanding as of September 30, 2021 and 10,750,100 issued and outstanding as of December 31, 2020		14			11
Additional paid-in capital		172,898			137,462
Accumulated deficit		(120,419	)		(117,793	)
Common stock in treasury, at cost, 1,015,493 shares in both 2021 and 2020		(13,764	)		(13,764	)
Total Stockholders’ Equity		38,730			5,916

Total Liabilities and Stockholders’ Equity	$	46,608		$	8,647

(Dollars in thousands, except per share)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Cryptocurrency mining revenue	$	2,018		$	176		$	4,670		$	226
Data hosting revenue		1,106			0			1,106			0
Product revenue		1,949			3,511			4,933			7,484
Total revenue		5,073			3,687			10,709			7,710
Operating costs and expenses:
Cost of cryptocurrency mining revenue		779			248			1,652			248
Cost of data hosting revenue		964			—			964			—
Cost of product revenue		661			631			1,616			1,790
Research and product development expenses		404			363			1,196			1,127
Selling, general and administrative expenses		2,893			990			7,761			2,632
Operating (loss) income		(628	)		1,455			(2,480	)		1,913
Other income, net		18			55			31			59
(Loss) income before income taxes		(610	)		1,510			(2,449	)		1,972
Income tax (expense) benefit		0			(3	)		(3	)		0
Net (loss) income	$	(610	)	$	1,507		$	(2,452	)	$	1,972

Net loss per share (Basic)	$	(0.06	)	$	.16		$	(0.23	)	$	.21
Net loss per share (Diluted)	$	(0.06	)	$	.16		$	(0.23	)	$	.20

Weighted average shares outstanding (Basic)		12,702,393			9,570,677			11,413,678			9,570,677

Weighted average shares outstanding (Diluted)		12,702,393			9,684,052			11,413,678			9,656,455

(Dollars in thousands, except per share)	September 30,			December 31,
	2017			2016
Assets
Current Assets:
Cash	$	3,360		$	3,381
Accounts receivable		1,397			881
Inventories		658			676
Prepaid expenses and other current assets		68			82
Total Current Assets		5,483			5,020
Property, plant and equipment, net		154			160
Total Assets	$	5,637		$	5,180

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	242		$	124
Accrued liabilities		889			906
Total Current Liabilities		1,131			1,030

Commitments and Contingencies (Note 8)
Stockholders’ Equity:
Common stock, par value $0.01 per share, authorized 75,000,000; 10,162,511 issued in 2017 and 10,026,136 issued in 2016		102			100
Additional paid-in capital		138,905			138,794
Accumulated deficit		(120,737	)		(120,980	)
Common stock in treasury, at cost, 1,015,493 shares		(13,764	)		(13,764	)
Total Stockholders’ Equity		4,506			4,150
Total Liabilities and Stockholders’ Equity	$	5,637		$	5,180


	Preferred Stock				Common Stock									Treasury Stock

	Shares		Amount		Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Shares		Amount			Total Stockholders’ Equity
December 31, 2020		0	$	—		10,750,100	$	11	$	137,462	$	(117,793	)		1,015,493	$	(13,764	)	$	5,916

Net loss		—		—		—		—		—		(666	)		—		—			(666	)

Stock based compensation		—		—		—		—		34		—			—		—			34

Issuance of shares – option exercises		—		—		77,250		—		62		—			—		—			62

Issuance of shares – restricted stock		—		—		57,500		—		49		—			—		—			49

March 31, 2021		0	$	—		10,884,850	$	11	$	137,607	$	(118,459	)		1,015,493	$	(13,764	)	$	5,395

Net loss		—		—		—		—		—		(1,174	)		—		—			(1,174	)

Stock based compensation		—		—		—		—		1,005		—			—		—			1,005

Issuance of shares – stock offering		—		—		2,782,258		3		15,400		—			—		—			15,403

Issuance of shares – option exercises		—		—		27,650		—		21		—			—		—			21

Issuance of shares – restricted stock		—		—		20,405		—		207		—			—		—			207

June 30, 2021		0	$	—		13,715,163	$	14	$	154,240	$	(119,633	)		1,015,493	$	(13,764	)	$	20,857

Net loss		—		—		—		—		—		(610	)		—		—			(610	)

Preferred dividends		—		—		—		—		—		(176)			—		—			(176)

Stock based compensation		—		—		—		—		334		—			—		—			334

Issuance of shares – preferred offering		806,585		1		—		—		18,297		—			—		—			18,298

Issuance of shares – option exercises		—		—		16,500		—		18		—			—		—			18

Issuance of shares – warrant exercises		—		—		1,050		—		9		—			—		—			9

September 30, 2021		806,585	$	1		13,732,713	$	14	$	172,898	$	(120,419	)		1,015,493	$	(13,764	)	$	38,730

(Dollars in thousands, except per share)	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2017		2016			2017			2016

Product revenue	$	1,857	$	2,232		$	5,047		$	5,265
Operating costs and expenses:
Cost of product revenue		563		774			1,604			2,018
Research and product development expenses		277		298			887			942
Selling, general and administrative expenses		674		829			2,309			2,445
Operating income (loss)		343		331			247			(140	)
Other income (expense), net		1		(1	)		(4	)		(7	)
Income (loss) before income taxes		344		330			243			(147	)
Income tax expense		—		(1	)		—			(1	)
Net income (loss)	$	344	$	329		$	243		$	(148	)

Income (loss) per share attributable to MTI (Basic)	$	.04	$	.06		$	.03		$	(.03	)
Income (loss) per share attributable to MTI (Diluted)	$	.04	$	.06		$	.03		$	(.03	)

Weighted average shares outstanding (Basic)		9,146,216		5,248,482			9,103,276			5,250,082
Weighted average shares outstanding (Diluted)		9,429,402		5,458,871			9,424,982			5,250,082


	Common Stock									Treasury Stock
	Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Shares		Amount			Total Stockholders’ Equity

December 31, 2019		10,586,170	$	10	$	137,326	$	(119,739	)		1,015,493	$	(13,764	)	$	3,833

Net loss		—		—		—		(137	)		—		—			(137	)

Stock based compensation		—		—		12		—			—		—			12

March 31, 2020		10,586,170	$	10	$	137,338	$	(119,876	)		1,015,493	$	(13,764	)	$	3,708

Net income		—		—		—		602			—		—			602

Stock based compensation		—		—		12		—			—		—			12

June 30, 2020		10,586,170	$	10	$	137,350	$	(119,274	)		1,015,493	$	(13,764	)	$	4,322

Net income		—		—		—		1,507			—		—			1,507

Stock based compensation		—		—		11		—			—		—			11

September 30, 2020		10,586,170	$	10	$	137,361	$	(117,767	)		1,015,493	$	(13,764	)	$	5,840


(Dollars in thousands)	Nine Month Ended September 30,
	2021			2020
Operating Activities
Net (Loss) income	$	(2,452	)	$	1,972

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		434			97
Stock based compensation		1,373			35
Consultant stock compensation		49			—
Recovery for excess and obsolete inventories		(26	)		(41	)
(Gain) loss on disposal of equipment		(6	)		3

Changes in operating assets and liabilities:
Accounts receivable		(52	)		(296	)
Inventories		(303	)		(161	)
Prepaid expenses and other current assets		(6,273	)		(138	)
Other long-term assets		(753	)		(302	)
Accounts payable		3,698			(51	)
Deferred revenue		237			—
Operating lease, net		9			3
Other liabilities		306			203
Accrued liabilities		981			192
Net cash (used in) provided by operating activities		(2,778	)		1,516

Investing Activities
Purchases of equipment		(17,670	)		(382	)
Purchase of stock in equity investment		—			(750	)
Net cash used in investing activities		(17,670	)		(1,132	)

Financing Activities
Proceeds from equity offering		17,250			—
Proceeds from preferred offering		20,165			—
Costs of equity offering		(1,847	)		—
Costs of preferred offering		(1,867	)		—
Cash dividends on preferred stock		(176	)		—
Proceeds from stock option exercises		101			—
Proceeds from common stock warrant exercises		9			—
Net cash provided by financing activities		33,635			—

Increase in cash		13,187			384
Cash - beginning of period		2,630			2,510
Cash - end of period	$	15,817		$	2,894

Supplemental Disclosure of Cash Flow Information
Purchase of miner equipment using restricted stock		(207	)		—
S-1 fees in accounts payable		(8	)		—

(Dollars in thousands)	Nine Months Ended September 30,
	2017			2016
Operating Activities
Net income (loss)	$	243		$	(148	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation		60			64
Loss on disposal of equipment		—			6
Bad debt recovery		—			(21	)
Stock based compensation		37			131
Provision for excess and obsolete inventories		(50	)		244
Changes in operating assets and liabilities:
Accounts receivable		(516	)		257
Inventories		68			(130	)
Prepaid expenses and other current assets		14			9
Accounts payable		118			(47	)
Accrued liabilities		(17	)		182
Net cash (used in) provided by operating activities		(43	)		547
Investing Activities
Purchases of equipment		(54	)		(113	)
Net cash used in investing activities		(54	)		(113	)
Financing Activities
Costs of stock purchase		(25	)		—
Purchases of common stock for treasury		—			(10	)
Proceeds from stock option exercises		101			—
Net cash provided by (used in) financing activities		76			(10	)
(Decrease) increase in cash		(21	)		424
Cash – beginning of period		3,381			462
Cash – end of period	$	3,360		$	886

(Dollars in thousands)	September 30, 2017		December 31, 2016

U.S. and State Government	$	46	$	103
Commercial		1,351		778
Allowance for doubtful accounts		—		—
Total	$	1,397	$	881

(Dollars in thousands)	September 30, 2021			December 31, 2020
Land	$	52		$	—
Leasehold improvements		356			262
Vehicles		14			—
Computers and related software		2,840			1,603
Machinery and equipment		941			885
Office furniture and fixtures		60			38
Construction in progress		16,402			—
		20,665			2,788
Less: Accumulated depreciation		(2,375	)		(1,941	)
	$	18,290		$	847


Stock options outstanding	~~984,303~~	993,550
Restricted stock units outstanding		15,000
Warrants outstanding		833,628
Common stock available for future equity awards or issuance of options	~~67,161~~	692,616
Number of common shares reserved	~~1,051,464~~	2,534,794


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2021		2020		2021		2020

Operating lease cost	$	100	$	93	$	287	$	215
Short-term lease cost		—		—		—		2
Total net lease cost	$	100	$	93	$	287	$	217

(Dollars in thousands)	Nine Months Ended September 30, 2021
Weighted Average Remaining Lease Term (in years):
Operating leases		3.00

Weighted Average Discount Rate:
Operating leases		3.85	%

(Dollars in thousands)	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Supplemental Cash Flows Information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	277	$	212

Non-Cash Activity Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	169	$	504


							Nine Months Ended September 30,
(Dollars in thousands)	Nine Months Ended September 30,						2021			2020
	2017			2016
Balance, January 1	$	14		$	16		$	22		$	16
Accruals for warranties issued		13			13			12			18
Accruals for pre-existing warranties								—			—
Settlements made (in cash or in kind)		(11	)		(6	)		(5	)		(4	)
Balance, end of period	$	16		$	23		$	29		$	30

(Dollars in thousands)	Cryptocurrency		Test and Measurement Instrumentation		Other			Condensed Consolidated Totals
Three months ended September 30, 2021
Cryptocurrency mining revenue	$	2,018	$	—	$	—		$	2,018
Data hosting revenue		1,106		—		—			1,106
Product revenue		—		1,949		0			1,949
Cost of revenue		1,743		661		—			2,404
Research and product development expenses		—		404		—			404
Selling, general and administrative expenses		1,030		577		1,286			2,893
Segment profit / (loss) from operations before income taxes		(466)		678		(822	)		(610	)
Segment profit / (loss)		(466)		678		(822	)		(610	)
Total assets		7,039		2,697		36,872			46,608
Capital expenditures		16,286		20		28			16,334
Depreciation and amortization		156		19		1			176

Three months ended September 30, 2020
Cryptocurrency mining revenue	$	176	$	—	$	—		$	176
Data hosting revenue		—		—		—			—
Product revenue		—		3,511		—			3,511
Cost of revenue		248		631		—			879
Research and product development expenses		—		363		—			363
Selling, general and administrative expenses		218		411		361			990
Segment profit / (loss) from operations before income taxes		(3)		1,691		(178	)		1,510
Segment profit / (loss)		(3)		1,691		(181	)		1,507
Total assets		1,383		3,016		4,039			8,438
Capital expenditures		32		2		—			34
Depreciation and amortization		26		19		—			45

Nine months ended September 30, 2021
Cryptocurrency mining revenue	$	4,670	$	—	$	—		$	4,670
Data hosting revenue		1,106		—		—			1,106
Product revenue		—		4,933		—			4,933
Cost of revenue		2,616		1,616		—			4,232
Research and product development expenses		—		1,196		—			1,196
Selling, general and administrative expenses		1,887		1,642		4,232			7,761
Segment profit / (loss) from operations before income taxes		304		5		(2,758	)		(2,449	)
Segment profit / (loss)		304		5		(2,761	)		(2,452	)
Total assets		7,039		2,697		36,872			46,608
Capital expenditures		17,812		37		28			17,877
Depreciation and amortization		380		53		1			434

Nine months ended September 30, 2020
Cryptocurrency mining revenue	$	226		$	—	$	—		$	226
Data hosting revenue		—			—		—			—
Product revenue		—			7,484		—			7,484
Cost of revenue		248			1,790		—			2,038
Research and product development expenses		—			1,127		—			1,127
Selling, general and administrative expenses		398			1,264		970			2,632
Segment profit / (loss) from operations before income taxes		(147	)		2,650		(531	)		1,972
Segment profit / (loss)		(147	)		2,650		(531	)		1,972
Total assets		1,383			3,016		4,039			8,438
Capital expenditures		366			16		—			382
Depreciation and amortization		35			62		—			97

(Dollars in thousands)			Revenues for the Three Months Ended
			September 30,
Contract⁽¹⁾	Expiration		2021		2020
$9.35 million U.S. Air Force Systems, Accessories and Maintenance	06/30/2021	⁽²⁾	$	484	$	2,025

(Dollars in thousands)			Revenues for the Nine Months Ended				Contract Revenues to Date		Total Contract Orders Received To Date
			September 30,				Sept. 30,		September 30,
Contract⁽¹⁾	Expiration		2021		2020		2021		2021
$9.35 million U.S. Air Force Systems, Accessories and Maintenance	06/30/2021	⁽²⁾	$	1,299	$	3,695	$	10,492	$	10,808

(Dollars in thousands)		Revenues for the Three Months Ended September 30,				Revenues for the Nine Months Ended September 30,					Contract Revenues to Date September 30,			Total Contract Orders Received to Date September 30,
Contract ⁽¹⁾	Expiration	2017		2016			2017		2016		2017			2017

$9.35 million U.S. Air Force Systems, Accessories and Maintenance	06/30/2021 ⁽²⁾	$	169	$	804		$	874	$	804		$	1,967		$	1,974

(1)	Contract values represent maximum potential values at time of contract placement and may not be representative of actual results.
(2)	Date represents expiration of contract, including the exercise of option extensions.

(Dollars in thousands)	Nine Months Ended or As of			Nine Months Ended or As of			Year Ended or As of			Nine Months Ended or As of September 30, 2021			Nine Months Ended or As of September 31, 2020			Year Ended or As of December 31, 2020
	September 30,			September 30,			December 31,
	2017			2016			2016
Cash	$	3,360		$	886		$	3,381		$	15,817		$	2,894		$	2,630
Working capital		4,352			1,342			3,990			18,013			3,832			3,142
Net income (loss)		243			(148	)		(359	)
Net (loss) income											(2,452	)		1,972			1,946
Net cash (used in) provided by operating activities		(43	)		547			522			(2,778	)		1,516			1,622
Purchase of property, plant and equipment		(54	)		(113	)		(136	)		(11,670	)		(382	)		(835	)

	2017	2016	Change	2021		2020		Change
Inventory turnover	3.0	2.1	0.9		2.1		2.3		(0.2	)
Average accounts receivable days outstanding	45	40	5		42		37		5

Exhibit No.	Description
2.1	Agreement and Plan of Merger dated August 11, 2021, by and among Mechanical Technology, Incorporated, SCI Merger Sub, Inc., and Soluna Computing, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 12, 2021).
3.1	Articles of Incorporation (Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2021).
3.2	Articles of Merger filed with the Secretary of State of Nevada on March 29, 2021 (Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2021).
3.3	Certificate of Merger filed with the Department of State of New York on March 29, 2021 (Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2021).
3.4	Certificate of Amendment filed with the Secretary of State of Nevada dated June 9, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on June 15, 2021).
3.5	Certificate of Amendment to Articles of Incorporation filed with the Secretary of State of Nevada on November 2, 2021 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 4, 2021).
4.1	Rights Agreement, dated as of October 6, 2016, between Mechanical Technology, Incorporated and American Stock Transfer & Trust Company, LLC, as Rights Agent (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2016).
4.2	Amendment No. 1 to Registration Rights Agreement, dated as of October 20, 2016, by and between Mechanical Technology, Incorporated and American Stock Transfer & Trust Company, LLC, as Rights Agent (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 21, 2016).
4.3	Amendment No. 2 to Registration Rights Agreement, dated as of June 24, 2021, by and between Mechanical Technology, Incorporated and American Stock Transfer & Trust Company, LLC (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2021).
4.4	Form of Common Purchase Warrant (Incorporated by reference to the Company’s Registration Statement on Form S-1/A filed with the SEC on April 12, 2021).
4.5	Form of Underwriters’ Warrant (Incorporated by reference to the Company’s Registration Statement on Form S-1/A filed with the SEC on April 12, 2021).
4.6	Form of Pre-Funded Warrant (Incorporated by reference to the Company’s Registration Statement on Form S-1/A filed with the SEC on April 12, 2021).
4.7	Form of Warrant Agent Agreement between Mechanical Technology, Incorporated and American Stock Transfer & Trust Company, LLC (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 29, 2021).
4.8	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 August 18, 2021 (Incorporated by reference to the Company’s Form 8-A, filed with the SEC on August 19, 2021).
4.9	Form of 9.0% Series A Cumulative Perpetual Preferred Stock Certificate (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 23, 2021).
4.10	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 to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2021).
4.11	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 to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2021).

4.12	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 to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2021).
4.13	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 to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2021).
10.1	Termination Agreement dated as of August 11, 2021, by and among Mechanical Technology, Incorporated, EcoChain, Inc., and Harmattan Energy, Ltd. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 12, 2021).
31.1	~~Rule 13a-14(a)/15d-14(a)~~ Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002, of Frederick W. Jones~~2002.
~~32.1~~31.2	Certification of Chief Financial Officer Pursuant to ~~18 U.S.C.~~ Section ~~1350, as Adopted~~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, of Frederick W. Jones~~2002.
101.INS*32.2	~~XBRL Instance Document~~Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH*	~~XBRL Taxonomy Extension Schema Document~~
101.CAL*	~~XBRL Taxonomy Extension Calculation Linkbase Document~~
101.DEF*	~~XBRL Taxonomy Definition Linkbase Document~~
101.LAB*	~~XBRL Taxonomy Extension Label Linkbase Document~~
101.PRE*	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

	~~Mechanical Technology, Incorporated~~ Soluna Holdings, Inc.
Date: November 2, ~~2017~~12, 2021	By:	/s/ ~~Frederick W. Jones~~Michael Toporek
		~~Frederick W. Jones~~ Michael Toporek Chief Executive Officer ~~and~~
	By:	/s/ Jessica L. Thomas
		Jessica L. Thomas Chief Financial Officer