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

In this Q&A, John Belizaire, CEO of Soluna, and CFO John Tunison answer shareholders’ and potential investors’ most-asked questions about Soluna’s recent $25M growth capital line announcement.

Learn how to submit your questions at the end of this AMA.

Could you please explain this deal with Yorkville Advisors? It is very complicated.

On its face, it may seem complicated but in reality, it is a straight-forward $25M Standby-Equity Purchase Agreement (SEPA) facility.

The Pre-paid advances you find in the documents were there in case we decided to draw against them, which we didn’t. 

Soluna may request advances at any time against the $25M remaining SEPA until a total of $25M has been received at which point the SEPA terminates.  We can do this as soon as the registration statement (S-1) that we’ve filed becomes effective which should be soon.

Why did you do this deal? Why did you select YA?

This deal delivers flexible capital at a reasonable cost of capital without warrants and other complex features which both simplify and strengthen our capital table and improve our access to capital to grow. Yorkville presented an attractive deal structure relative to other financing partners we considered and has financed companies similar to Soluna with similar deals that have yielded exactly the result we are looking for.

Why was it a priority to repay the Convertible Note?

The Convertible Notes, although a good source of capital several years ago when the company needed it, have proven to have been complex and unpredictably dilutive for the company and its shareholders.  A simpler structure is in the company’s and our shareholders’ best interest.

Why did you restructure the Preferred B?

The Preferred B had significant consent, right of first refusal, and participation rights that are not aligned with our growing company’s financing strategy. To secure waivers of these rights and consent to the Yorkville deal, it made sense to restructure in a way that gives us a mutually beneficial path forward.

Why would you buy debt in your own AI subsidiary? Please explain the series of transactions where you buy debt from Alpha and Fidelis. What does it mean? What is the effect?

 Soluna buying Cloud notes enabled Soluna to deploy cash to Cloud in a secured format that increases future flexibility to convert to a higher equity position or access cash from Cloud sooner/easier and secured consent to the Yorkville deal.

How many shares of stock will you issue to YA? Over what period of time?

The YA transaction will result in a number of shares over time via draws that we initiate against the SEPA.  For example, if we were to raise $5m over a period of time at an average of $5/share purchase price, we would sell 1.0M shares of stock to Yorkville.

Do you think that this much share issuance will depress the share price?

It is difficult to predict share price – but it is important to understand that YA’s returns on its capital come via share price appreciation.  Their goal is for our share price to continue to increase each time that we draw on the SEPA. That aligns with our goals to continue to grow as a company. This is one of the aspects of this deal that we like – the alignment of interests between our lender and the company.

Why do you need to raise “up to” $25 million from equity sales?

We are a growing company and will continue to have accretive and profitable opportunities related to the development of and investment in our data center projects and AI. Access to capital at a reasonable cost that is flexible and available when and if we need it is an advantage of this deal and one of the reasons we selected this structure and Yorkville as a partner. Our projects generate high returns on invested capital that will benefit shareholders. The ability to invest and generate income for our shareholders will drive value creation.

How exactly do you expect to deploy the proceeds?

As we have indicated in our press release here, the proceeds of this deal are being used to accomplish several things, ranging from the acquisition of Cloud notes to strengthening our balance sheet to development funding for data center and AI operations and investment in projects.

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