SecProbe.io

CORRESP
1
filename1.htm

    Daniel L. Forman

    Partner

    1251 Avenue of the Americas

    New York, New York 10020

    T: (212) 419-5904

    E:dforman@lowenstein.com

December
16, 2024

VIA
EDGAR

Securities
and Exchange Commission

Division
of Corporation Finance

100
F. Street, N.E.

Washington,
D.C. 20549

Attention:
Jessica Livingston, David Lin

    Re:
    Soluna
    Holdings, Inc.

    Amendment
    No. 1 to the Registration Statement on Form S-1

    Filed
    November 12, 2024

    File
    No. 333-282559

Ladies
and Gentlemen:

On
behalf of Soluna Holdings, Inc. (the “Company”), we are submitting this letter to the Securities and Exchange Commission
(the “SEC”) via EDGAR in response to the comment letter from the staff of the SEC (the “Staff”),
dated December 5, 2024 (the “Comment Letter”), pertaining to the Company’s above-referenced Amendment No. 1
to the Registration Statement on Form S-1 filed on November 12, 2024. In connection with such responses, the Company is concurrently
filing an Amendment No. 2 to the Registration Statement (the “Amended Registration Statement”). Capitalized terms
used but not defined in this letter have the meaning given in the Amended Registration Statement.

To
assist your review, we have reproduced the text of the Staff’s comments in italics below, followed by responses on behalf of the
Company.

Amendment
No. 1 to Registration Statement on Form S-1 filed November 12, 2024

General

 1. We
                                            note your response to prior comment 1 and revised offering size. As we continue to evaluate
                                            your response, please provide us with a more detailed legal and factual analysis of your
                                            basis for determining that it is appropriate to characterize the transaction as a secondary
                                            offering under Securities Act Rule 415(a)(1)(i), including an analysis of each of the factors
                                            material to this determination. In responding, please consider the guidance provided in Compliance
                                            Disclosure Interpretations, Securities Act Rules, Question 612.09.

Response
to Comment 1:

The
Company respectfully acknowledges the Staff’s comment and for the reasons discussed below, the Company submits that the offering
contemplated by the Amended Registration Statement is a valid secondary offering by or on behalf of the selling stockholders that may
be registered for sale on a continuous basis pursuant to Rule 415(a)(1)(i) under the Securities Act of 1933, as amended (the “Securities
Act”). The offering is not the type of transaction about which the Staff has historically raised concerns under Rule 415, and
a careful consideration of all of the factors articulated in Question 612.09 (the “Interpretation”) of the Staff’s
Compliance & Disclosure Interpretations (the “CDIs”) for Securities Act Rules supports a conclusion that the offering
does not amount to a distribution by the selling stockholders on behalf of the Company.

  A.
  Background

On
August 12, 2024, the Company entered into (i) a Standby Equity Purchase Agreement (the “SEPA”) and (ii) a Registration
Rights Agreement (the “Registration Rights Agreement”) with YA II PN, LTD., a Cayman Islands exempt limited company
(the “Investor”). Upon the terms and subject to the conditions and limitations set forth in the SEPA, the Investor
has committed to purchase up to an aggregate of $25.0 million of shares (the “Shares”) of common stock of the Company,
par value $0.001 per share (the “Common Stock”), at the Company’s request from time to time during
a 24-month period commencing on August 12, 2024. Pursuant to the Registration Rights Agreement, the Company agreed to register the Shares
for resale by the Investor. The Company is filing the Amended Registration Statement pursuant to the Registration Rights Agreement.

On
November 15, 2024, at a Special Meeting of Stockholders and pursuant to the rules of the Nasdaq Capital Market, the Company obtained
stockholder approval to issue to the Investor, pursuant to the SEPA, shares of Common Stock that exceed 19.99% of the shares of Common
Stock outstanding immediately prior to the execution of the SEPA.

The
Investor is an institutional investor that invests in a wide range of companies and industries. Prior to entering into the SEPA, the
Investor did not own any securities of the Company and was not affiliated with the Company or any of its officers, directors or any other
greater than 5% holder of the Company’s outstanding shares of Common Stock. The Shares will be issued by the Company pursuant to
the exemption from registration provided by Section 4(a)(2) of the Securities Act. In the SEPA, the Investor represented to the Company
that it is an “Accredited Investor” as defined in Rule 501(a)(3) of Regulation D. In addition, the Investor made representations
and warranties in the SEPA regarding its investment intent, including representations that it is purchasing the Shares for its own account,
for investment purposes and not for the purpose of effecting any distribution of the Shares in violation of the Securities Act.

  B.
  Rule 415 Analysis

In
1983, the SEC adopted Rule 415 under the Securities Act to permit the registration of offerings to be made on a delayed or continuous
basis. Rule 415 specifies certain conditions that must be met by an issuer in order to avail itself of the Rule. In relevant part, Rule
415 provides:

“(a)
Securities may be registered for an offering to be made on a continuous or delayed basis in the future, Provided, That:

(1)
The registration statement pertains only to:

(i)
Securities which are to be offered or sold solely by or on behalf of a person or persons other than the registrant, a subsidiary of the
registrant or a person of which the registrant is a subsidiary;…[or]

(x)
Securities registered (or qualified to be registered) on Form S-3 or Form F-3 (§ 239.13 or § 239.33 of this chapter), or on
Form N-2 (§§ 239.14 and 274.11a-1 of this chapter) pursuant to General Instruction A.2 of that form, which are to be offered
and sold on an immediate, continuous or delayed basis by or on behalf of the registrant, a majority-owned subsidiary of the registrant
or a person of which the registrant is a majority-owned subsidiary ….”

Under
Rule 415(a)(1)(i), an issuer may register shares to be sold on a delayed or continuous basis by selling stockholders in a bona fide secondary
offering without restriction.

In
the event that an offering registered in reliance on Rule 415(a)(1)(i) is deemed to be an offering that is “by or on behalf of
the registrant” as specified in Rule 415(a)(1)(x), Rule 415 contains additional limitations. Rule 415(a)(4) provides that:

“In
the case of a registration statement pertaining to an at the market offering of equity securities by or on behalf of the registrant,
the offering must come within paragraph (a)(1)(x) of this section. As used in this paragraph, the term ‘at the market offering’
means an offering of equity securities into an existing trading market for outstanding shares of the same class at other than a fixed
price.”

As
a result, if an offering which purports to be a secondary offering is characterized as an offering “by or on behalf of the registrant,”
Rule 415 is only available to register an “at the market offering” if the registrant is eligible to use Form S-3 or Form
F-3 to register a primary offering.

The
Staff has previously recognized the delicacy with which the analysis of a particular transaction must be undertaken. In the Interpretation,
the Staff has set forth a detailed analysis of the relevant factors that should be examined. The Interpretation provides that:

“It
is important to identify whether a purported secondary offering is really a primary offering, i.e., the selling shareholders are actually
underwriters selling on behalf of an issuer. Underwriter status may involve additional disclosure, including an acknowledgment of the
seller’s prospectus delivery requirements. In an offering involving Rule 415 or Form S-3, if the offering is deemed to be on behalf
of the issuer, the Rule and Form in some cases will be unavailable (e.g., because of the Form S-3 ‘public float’ test for
a primary offering, or because Rule 415 (a)(l)(i) is available for secondary offerings, but primary offerings must meet the requirements
of one of the other subsections of Rule 415). The question of whether an offering styled a secondary one is really on behalf of the issuer
is a difficult factual one, not merely a question of who receives the proceeds. Consideration should be given to how long the
selling shareholders have held the shares, the circumstances under which they received them, their relationship to the issuer, the amount
of shares involved, whether the sellers are in the business of underwriting securities, and finally, whether under all the circumstances
it appears that the seller is acting as a conduit for the issuer” (emphasis added).

Each
of the relevant factors listed in the Interpretation is discussed below in the context of the Amended Registration Statement. In the
Company’s view, based on a proper consideration of all of those factors, the Staff should conclude that the Amended Registration
Statement relates to a valid secondary offering.

 1. The length of time that the Investor will hold the Shares.

The
Shares may be sold by the Company to the Investor at the Company’s request from time to time during the 24-month period that began
in August of 2024 when the SEPA was executed. In this regard, CDI Question 139.13 of the CDIs for Securities Act Sections provides that
no minimum holding period is required, and the SEC will permit a company to register the resale of the underlying securities prior to
exercise of a put right, where the Company has “completed the private transaction of all of the securities it is registering”
through an equity line transaction and the investor is at market risk at the time of filing of the resale registration statement. As
in all equity line transactions, the Investor has accepted the market risk of its investment from the date of entering into the SEPA,
including market risk related to the shares of Common Stock that the Company may choose, in its sole discretion, to put to the Investor
pursuant to the terms of the SEPA.

2.
The circumstances under which the Investor will receive the Shares.

The
Investor will receive the Shares offered in the Amended Registration Statement pursuant to the privately negotiated transaction between
the Company and Investor completed at arm’s length prior to the initial filing of the Registration Statement. Although the Investor
is required by the Staff to include disclosure that it is an “underwriter” with regard to its resales under the Amended Registration
Statement, the Company respectfully notes that the transaction has characteristics more closely associated with a traditional investment
transaction than with an underwritten offering. Specifically, in a typical underwriting, the underwriter and the issuer agree on a price
at which the securities will be sold to the public and the underwriter receives a portion of the proceeds of such sale as compensation
for its selling efforts and for bearing market risk. Pursuant to the SEPA, however, the Investor will purchase any shares of Common Stock
put to it by the Company at a slight discount to the market price for the Common Stock. The Investor is required to take the Shares put
to it by the Company under the SEPA (subject to a 9.99% beneficial ownership blocker), and there is no agreement or arrangement regarding
the price at which the Investor will resell such Shares to the public pursuant to the Amended Registration Statement. In addition, the
Investor will purchase the Shares for investment purposes and specifically represented that it is not acquiring the Shares for the purpose
or with the intent of effecting a distribution in violation of the Securities Act. There is no evidence to suggest that those representations
were false.

Also,
there is no evidence that a distribution would occur if the Amended Registration Statement were to be declared effective. Rule 100(b)
of Regulation M defines the term “distribution” as:

“[A]n
offering of securities, whether or not subject to registration under the Securities Act, that is distinguished from ordinary trading
transactions by the magnitude of the offering and the presence of special selling efforts and selling methods (emphasis added).”

Special
selling efforts and selling methods must be employed before an offering can constitute a distribution. Here, there is no evidence that
any special selling efforts or selling methods have taken or would take place if all of the Shares covered by the Amended Registration
Statement were registered. The Company has no reason to believe that the Investor will conduct any road shows or take any other actions
to condition the market for its shares of Common Stock.

Further,
the existence of the Registration Rights Agreement does not alter the conclusion that the Investor will purchase the Shares for investment
and not with the intent to effect a distribution in violation of the Securities Act. Although the Investor bargained for registration
rights, registration rights, in and of themselves, do not evidence an intention on the part of the Investor to effect a distribution
in violation of the Securities Act.

3.
The relationship of the Investor to the Company.

The
Investor is not an affiliate of the Company, a broker-dealer or an affiliate of a broker-dealer. The only relationship between the Investor
and the Company is the relationship established through the SEPA and the transactions contemplated thereby. The Investor has agreed to
acquire the Company’s securities for investment purposes, and is at market risk for all Shares purchased as part of its investment.
The Investor will receive all proceeds from the sale of Shares pursuant to the Amended Registration Statement and, in contrast to the
economic terms of an underwritten offering, the proceeds of the sale by the Company to the Investor are not dependent on the price at
which the Investor ultimately sells the Shares pursuant to the Amended Registration Statement. In addition, the Investor will not receive
a commission or any other remuneration from the Company if and when the Shares are sold to the Investor under the SEPA. The Investor
will retain all proceeds from the resale of Shares pursuant to the Amended Registration Statement, and the Company will not obtain any
direct or indirect benefit from any amounts received from those sales.

The
Company also notes that even if the Investor was an affiliate of the Company, pursuant to Question 212.15 of the CDIs for Securities
Act Rules, the Staff has acknowledged that “aside from parents and subsidiaries, affiliates of issuers are not necessarily treated
as being the alter egos of the issuers. Under appropriate circumstances, affiliates may make offerings which are deemed to be genuine
secondaries.”

For
the reasons set forth above, the Company submits that the Investor’s relationship to the Company as an investor that assumes market
risk with respect to the Shares it acquires under the SEPA does not support a conclusion that it is acting on behalf of the Company.

4.
The number of shares involved.

Pursuant
to the Amended Registration Statement, the Company is seeking to register an aggregate of 3,000,000 shares of Common Stock that may be
issued pursuant to SEPA (not including the 59,382 shares of Common Stock issued to the Investor as consideration for its irrevocable
commitment to purchase shares of Common Stock pursuant to the SEPA)1. The number of Shares involved in the offering does
not support a conclusion that the Investor is acting on behalf of the