Item
1.01 Entry into a Material Definitive Agreement.
Registered
Direct Offering
On
December 5, 2022, Soluna Holdings, Inc., a Nevada corporation (the “Company”), entered into a securities purchase
agreement (the “Purchase Agreement”) with certain investors named therein of 1,125,000 shares (the “Shares”)
of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and associated warrants
(the “Warrants”) to purchase up to 2,250,000 shares of Common Stock at an exercise price of $0.76 per share,
for a combined purchase price of $0.76 per Share and associated Warrants, for an aggregate gross proceeds of $855,000 (the “Offering”).
The Warrants have an exercise price of $0.76 per share, will be exercisable immediately upon issuance and will expire five years following
the date of issuance. The Company expects to receive net proceeds from the sale of the Shares and Warrants, after deducting fees and
other estimated offering expenses payable by the Company, of approximately $730,000. The Company intends to use the net proceeds from
the offering primarily for the acquisition, development and growth of data centers, including cryptocurrency mining processors, other
computer processing equipment, data storage, electrical infrastructure, software and real property (i.e., land and buildings)
and business, and for working capital and general corporate purposes, which include, but are not limited to, operating expenses. The
Offering is expected to close on or about December 5, 2022, subject to the satisfaction of customary closing conditions.
In
addition, the Company granted to the investors in the Offering the right to purchase (the “Options”) additional
shares of Common Stock (the “Option Shares”) and related warrants (the “Option Warrants”).
Pursuant to the Options, the investors (a) within 120 days following the closing of the Offering, may acquire up to $855,000 of Option
Shares and Option Warrants to purchase up to $1,710,000 of shares of Common Stock, at the purchase price per Option Share and accompanying
Option Warrants which will be the lesser of (i) $0.76; or (ii) five percent discount to the lowest bid price as reported for the principal
trading market for the five trading days prior to such Options closing, provided, however, that such price shall not be lower than $0.50
per Option Share and accompanying Option Warrants, and (b) within 120 days following the first closing of the Options, may acquire up
to $855,000 of Option Shares and Option Warrants to purchase up to $1,710,000 of shares of Common Stock, at the purchase price per Option
Share and accompanying Option Warrants which will be the lowest of (i) $0.76; (ii) the purchase price for the first Options closing,
or (iii) five percent discount to the lowest bid price as reported for the principal trading market for the five trading days prior to
the second Options closing, provided, however, that such price shall not be lower than $0.50 per Option Share and accompanying Option
Warrants. The Option Warrants, if any, will have an exercise price equal to the purchase price per Option Share and related Option Warrants
sold in the respective Options closing, will be immediately exercisable and will expire on the five (5) year anniversary of the respective
original issuance date. Notwithstanding the forgoing, prior to obtaining stockholders approval (the “Shareholder Approval”)
required by the applicable rules and regulations of the Nasdaq Stock Market LLC (“Nasdaq”), the Company may
not issue the Option Shares pursuant to the Options, if the issuance of the Option Shares, together with the Shares and Option Shares
issued, if any, and any shares of Common Stock issued upon exercise of the Warrants or the Option Warrants prior to the applicable Options
closing, if any, exceed 19.9% of the issued and outstanding shares of the Company’s Common Stock prior to this Offering (the “Share
Issuance Limitation”).
Holders
of the Warrants and Option Warrants will not have the right to exercise any portion of such warrants if the holder (together with its
affiliates) would beneficially own in excess of 4.99% (or 9.99% upon the request of the holder) of the number shares of Common Stock
outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms
of the Warrants or the Options Warrants, as applicable. However, any holder may increase or decrease such percentage, provided that any
increase will not be effective until the 61st day after such election. In addition to these beneficial ownership limitations, prior to
obtaining the Shareholder Approval, the sum of the number of shares of Common Stock that may be issued under the Warrants and the Option
Warrants shall be limited to the Share Issuance Limitation, less the Shares issued in this Offering, the Option Shares, if any, and any
shares of Common Stock previously issued upon the exercise of the Warrants or the Option Shares.
On
December 2, 2022, the Company entered into a placement agency agreement (the “Placement Agency Agreement”)
with Univest Securities, LLC (“Univest”), pursuant to which Univest agreed to serve as the exclusive placement
agent for the Company on a reasonable best-efforts basis in connection with the Offering. Pursuant to the Placement Agency Agreement,
the Company agreed to pay to Univest (i) a fee in shares of Common Stock equal to 7% of the Shares issued and sold in the Offering (excluding
any securities that may be issued pursuant to the Options or upon exercise of the Warrants) (the “Placement Agent Shares”),
(ii) 431,014 restricted shares of Common Stock in relation to Univest’s role in the underwritten offering that closed on October
26, 2022 (the “October Shares”), and (iii) an additional fee of warrants to purchase the number of shares of
Common Stock equal to 7% of the number of Shares issued and sold in the Offering (excluding any securities that may be issued pursuant
to the Options or upon exercise of the Warrants) in the form substantially similar as the Warrants (the “Placement Agent
Warrants”, and together with the Placement Agent Shares and the October Shares, the “Placement Agent Securities”),
each such issuance to Univest (and/or its designees) subject to and upon obtaining the appropriate approval by stockholders required
by the applicable rules and regulations of the Nasdaq.
The
securities other than the October Shares are being offered by the Company pursuant to a “shelf” registration statement on
Form S-3 (File No. 333-261427) (the “Registration Statement”) previously filed with the Securities and Exchange
Commission (the “SEC”) and declared effective by the SEC on December 16, 2021. The offering of the securities
will be made only by means of a prospectus, including a prospectus supplement, forming a part of the effective registration statement.
The prospectus supplement dated December 5, 2022, and the accompanying base prospectus relating to the Offering, will be filed with the
SEC. Copies of the prospectus supplement and the accompanying base prospectus may be obtained, when available, from the SEC’s website
or from Univest Securities, LLC, 75 Rockefeller Plaza, Suite 18C, New York, NY, 10019, by phone (212) 343-8888 or e-mail at info@univest.us.
The
Purchase Agreement contains customary representations, warranties and agreements of the Company and customary indemnification rights
and obligations of the parties thereto. The foregoing descriptions of the Purchase Agreement and the Warrants are qualified in their
entirety by reference to the full texts of the Purchase Agreement and the form of Warrant, copies of which are filed as Exhibit 10.1
and Exhibit 4.1, respectively, to this Current Report on Form 8-K (this “Form 8-K”) and incorporated in this
Item 1.01 by reference and into the Registration Statement.
Note
Conversion Price and Warrant Exercise Price Reduction
On
October 20, 2021, the Company entered into a securities purchase agreement (as amended and supplemented by the addendums, the “October
2021 Purchase Agreement”) with certain accredited investors (the “Noteholders”), and issued,
upon closing of the offering on October 25, 2021, convertible secured notes (the “October Secured Notes”) in
the aggregate principal amount of $16,304,348 for an aggregate purchase price of $15 million to the Noteholders. The October 2021 Purchase
Agreement, contains, among others, a “most favored nation” provision (the “MFN Provision”) which
provides that as long as any Noteholder holds any of the October Secured Notes with a principal amount in excess of $1,500,000, in the
event that the Company issues or sells any Common Stock or Common Stock equivalents, if the Noteholder holding outstanding securities
issued pursuant to the October 2021 Purchase Agreement reasonably believe that any of the terms and conditions of such issuance or sales
are more favorable than the terms and conditions granted to the Noteholder pursuant to the October 2021 Purchase Agreement, upon notice
to the Company within five trading days after disclosure of such issuance or sale, the Company will amend the terms of the October 2021
Purchaser Agreement as to such Noteholder, only so as to give such Noteholder the benefit of such more favorable terms or conditions.
As of November 30, 2022, October Secured Notes with an aggregate principal amount of $13,006,022 are outstanding.
Pursuant
to the MFN Provision, the conversion price of the October Secured Notes that are not converted or redeemed pursuant to the October 2021
Purchase Agreement has been reduced to $1.79, and pursuant to the MFN Provision, the conversion price of the October Secured Notes will
be reduced to $0.76 per share as a result of the issuance of the Shares and Warrants sold in the Offering, and may be further reduced
if the Options are exercised and the Option Shares and related Option Warrants are issued and sold at a price lower than $0.76 per Option
Share and related Option Warrants, provided, however, such additional issuances shall be subject to us obtaining the appropriate stockholder
approval as required by the applicable rules and regulations of Nasdaq for such issuance and for any potential additional issuances upon
further reduction of the conversion price. In connection with this Offering, the Company agreed to hold a meeting of stockholders for
the purpose of obtaining such stockholder approval for further reductions in the conversion price of the October Secured Notes to as
low as $0.50. As of November 30, 2022, October Secured Notes with an aggregate principal amount of $13,006,022 are outstanding.
The
Company also has agreed that certain existing warrants to purchase up to an aggregate of (i) 592,024 shares of Common Stock at an exercise
price of $9.50 per share and an expiration date of October 25, 2026; (ii) 1,000,000 shares of Common Stock at an exercise price of $3.50
per share and with an expiration date of September 13, 2027, (iii) 1,000,000 shares of Common Stock at an exercise price of $4.50 per
share and with an expiration date of September 13, 2027; (iv) 1,000,000 shares of Common Stock at an exercise price of $5.50 per share
and with an expiration date of September 13, 2027, (v) 1,000,000 shares of Common Stock at an exercise price of $7.50 per share and an
expiration date of September 13, 2027, and (vi): 85,000 shares of Common Stock at an exercise price of $9.50 and an expiration date of
January 14, 2025, held by the Noteholders will be amended so that the amended warrants will have a reduced exercise price of $0.76 per
share, subject to and upon obtaining stockholders approval as required by the applicable rules and regulations of Nasdaq for such issuance,
and effective as of the closing of this Offering, will include a provision providing for us the ability to reduce the exercise price
of such warrants in the Company’s sole discretion.
