Soluna Holdings Inc

Part II, Item 1A (Risk Factors) of our most recently filed Annual Report on Form 10-K with the SEC, filed on April 1, 2024, 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. 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.

We have a Limited History in the Cloud Service and Artificial Intelligence Business

We are implementing a strategy to move into the cloud service business to provide green energy to power-intensive artificial intelligence applications. This is a new business for the Company and no history of operations in this industry from which to evaluate our future operating performance in this segment. Our ability to implement this strategy is dependent upon successfully deploy new supercomputers in conjunction with our strategic partner and to attract and retain customers in a very competitive market.

Risks Related to the Standby Equity Purchase Agreement and Market Driven Evaluation

Substantial blocks of our Common Stock may be sold into the market as a result of our being party to the SEPA.

On August 12, 2024, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD (“YA”)., whereas we agreed to issue and sell to YA, from time to time, and YA agreed to purchase from us, up to $25 million of our shares of Common Stock. For more information regarding the terms and potential impacts of the SEPA, please refer to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 9, 2024 (File No. 333-282559).

Pursuant to the SEPA, the price of our Common Stock could decline if there are substantial sales of shares of our Common Stock, if there is a large number of shares of our Common Stock available for sale, or if there is the perception that these sales could occur. Any issuances of shares of our Common Stock in any issuance will dilute the percentage ownership of stockholders and may dilute the per share projected earnings (if any) or book value of our Common Stock. Sales of a substantial number of shares of our Common Stock in the public market or other issuances of shares of our Common Stock to decline and may make it more difficult for you to sell your shares at a time and price that you deem appropriate.

You may experience immediate and substantial dilution (or improvement) in the net tangible book value per share of our Common Stock.

The offering price per share of our Common Stock in connection with the SEPA may or may not exceed the net tangible book value per share of our Common Stock outstanding prior to the SEPA. For example, assuming that an aggregate of between 5,000,000 and 10,000,000 shares of our Common Stock are sold pursuant to the SEPA at an assumed price of between $5.00 and $2.50 per share, respectively, for net proceeds of $25,000,000, you would experience accretion of $0.67/share or dilution of $0.37/share, respectively (calculated based on current share count) per share, representing the difference between our adjusted net tangible book value per share after giving effect to the SEPA and the assumed offering price.

Under the SEPA, we do not have the right to control the timing and amount sales of our shares of Common Stock by YA.

Sales of our Common Stock, if any, to YA under the SEPA will depend upon market conditions and other factors, and the discretion of YA. We may ultimately issue to YA all, some, or none of the shares of our Common Stock.

Because the price for the shares will fluctuate based on the market prices of our Common Stock, it is not possible for us to predict, as of the date of this report and prior to any issuance of shares under the SEPA, the number of shares that we will issue to YA under the SEPA, and it is possible that the number of shares could be higher than the number of shares registered for resale by YA. In addition, unless we obtain stockholder approval, we will not be able to issue shares in excess of the Exchange Cap under the SEPA (or any other transaction that is integrated with the SEPA) in accordance with applicable Nasdaq rules. Further, the resale by YA of a significant amount of shares registered in this offering at any given time, or the perception that these sales may occur, could cause the market price of our Common Stock to decline and to be highly volatile.