PRELIMINARY COPY SUBJECT TO COMPLETION
DATED JANUARY 17, 2018

MECHANICAL TECHNOLOGY, INCORPORATED

SOLUNA HOLDINGS, INC.

325 WASHINGTON AVENUE EXTENSION

ALBANY, NEW YORK 12205

NOTICE OF SPECIALANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of Mechanical Technology, Incorporated:Soluna Holdings, Inc.:

Notice is hereby givenNOTICE IS HEREBY GIVEN that a Specialthe 2024 Annual Meeting of Stockholders (the “Annual Meeting”) of Soluna Holdings, Inc., a Nevada corporation formerly known as Mechanical Technology, Incorporated a New York corporation (the “Company”“Company”), will be held on Thursday May 30, 2024, at [10:00 a.m.] The Annual Meeting will be held completely virtually. You will be able to participate in the offices of Olshan Frome Wolosky LLP, 1325 AvenueAnnual Meeting as well as vote and submit your questions and examine our stockholder list during the live webcast of the Americas, New York, New York 10019,Annual Meeting by visiting www.virtualshareholdermeeting.com/SLNH2024 and entering the 16-digit control number included on [_____], at [____] A.M. Eastern Timeyour proxy card (the “Special“Proxy Card”). At the Annual Meeting,”), for stockholders will be asked to consider and act upon the following purposes:matters:

The Board of Directors has fixed the close of business on April 19, 2024 as the record date for determining stockholders entitled to notice of, and entitled to vote at, the Annual Meeting and any adjournments or postponements thereof. Only holders of record of the Company unanimously approved and recommends that you vote “FOR” the proposal to amend the Company’s Certificate of Incorporation to effect the Reverse Stock Split.

The primary effect of the Reverse Stock Split will be to reduce the total number of record holders of the Common Stock to below 300 persons by cashing out any stockholders of record with fewer than 15 shares. This will allow the Company to terminate the registration of its Common Stock under the Securities Exchange Act of 1934, as amended, and cease filing reports thereunder. The Company anticipates that the Reverse Stock Split will result in material cost savings to the Company beginning in 2018, while also allowing management to focus on operating the business and growing stockholder value.

Please promptly complete, sign, date and return the enclosed proxy card in the accompanying reply envelope to assure that your shares are represented at the Special Meeting. If you attend the Special Meeting, you may vote in person, if you wish to do so, even if you have returned a proxy. Only stockholders of recordcommon stock at the close of business on [_____] arethat date will be entitled to notice of, and to vote at, the SpecialAnnual Meeting and at any adjournments or postponements thereof. A list of stockholders entitled to vote at the Special Meeting will be available for inspection at our offices.

The enclosed proxy is being solicited on behalf of the Board of Directors recommends that you vote in favor of the Company. If you have any further questions concerningproposal for the Special Meeting or anyelection of the itemsnominees as directors of businessthe Company, the adjustments to be presented, please contact Frederick W. Jones at (518) 218-2550.the conversion and exercise prices of certain convertible notes and warrants, as required by Nasdaq listing rules, for the amendments to the Company’s stock incentive plans and the ratification of UHY LLP as our independent registered public accounting firm, the reverse stock split proposal and the non-binding advisory proposal on executive compensation.

Your vote

Albany, New York

April ___, 2024

It is important.important that your shares are represented and voted at the Annual Meeting. Whether or not you intend to be present (virtually) at the meeting, please mark, sign, and date the enclosed proxy and return it in the enclosed envelope to assure thatvote your shares are representedaccording to the instructions on the accompanying Proxy Card. The proxy is revocable and will not be used if you attend and vote at the Special Meeting. If you attendAnnual Meeting and vote “in person” at the Special Meeting, you may vote in person if you wish to do so, even if you have previously submittedmeeting or otherwise provide notice of your proxy.revocation.

Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Stockholders to Be Held on [________]: The proxy statement is available at

SOLUNA HOLDINGS, INC.

http://www.astproxyportal.com/ast/[____]

PRELIMINARY COPY SUBJECT TO COMPLETION
DATED JANUARY 17, 2018

MECHANICAL TECHNOLOGY, INCORPORATED

325 WASHINGTON AVENUE EXTENSION

ALBANY, NEW YORK 12205

PROXY STATEMENT

This proxy statement (“Proxy Statement”) is furnished to stockholders of Mechanical Technology, Incorporated, a New York corporation (the “Company”), in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Soluna Holdings, Inc., a Nevada corporation formerly known as Mechanical Technology, Incorporated (referred to in this Proxy Statement as the “Company,” “we,” or “us”), to be voted at the 2024 Annual Meeting of Stockholders of the Company (the “Board”“Annual Meeting”) of proxies for use at the Special Meeting of Stockholders (the “Special Meeting”) scheduled to be held virtually on [_____]Thursday May 30, 2024 at [___] A.M. Eastern Time, at[10:00 a.m.], local time. This Proxy Statement and the officesform of Olshan Frome Wolosky LLP, 1325 Avenue of the Americas, New York, New York 10019, and at any and all adjournments or postponements thereof. References to “we,” “our” or “us” in this proxy statement referrelating to the Company.Annual Meeting are first being made available to stockholders on or about April ___, 2024.

Stockholders of the Company are being asked to considerRecord Date and vote upon the following proposal at the Special Meeting:

To approve an amendment to the Company’s Certificate of Incorporation (the “Certificate of Incorporation”), whereby the Company will effect a 1-for-15 reverse stock split (the “Reverse Stock Split”) of the issued and outstanding shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), which would result in (i) holdings prior to such split of fewer than 15 shares being converted into a fractional share for which the holder would be entitled to receive the Cash Consideration (as hereinafter defined) and (ii) each stockholder holding 15 or more shares being entitled to receive one share for each 15 shares held and the Cash Consideration for any fractional shares.Voting Securities

The proposed amendment to the Certificate of Incorporation to effect the Reverse Stock Split is attached to this proxy statement asAnnex A.

The accompanying Notice of SpecialAnnual Meeting, of Stockholders, proxy cardProxy Statement and this proxy statementProxy Card are first being mailed to stockholders of the Company stockholders on or about [_____].

The Board has decided that the costs of being a Securities and Exchange Commission (“SEC”) reporting company outweigh the benefits and, thus, that it is no longerApril ___. 2024 in the best interests of the Company or our stockholders, including our unaffiliated stockholders, for us to remain an SEC reporting company. The Reverse Stock Split will enable us to terminate the registration of our Common Stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), if, after the Reverse Stock Split, there are fewer than 300 record holders of our Common Stock and we make the necessary filingsconnection with the SEC.

solicitation of proxies for the Annual Meeting. The Board has fixed [_____]the close of business on April 19, 2024 as the date of record date(the “Record Date”) for the Special Meeting (the “Record Date”). Stockholdersdetermination of record asstockholders entitled to notice of, the Record Date areand entitled to vote at, the Special Meeting and any postponements or adjournments thereof. We cannot complete the Reverse Stock Split unless the holders of at least a majority of the outstanding shares of Common Stock on the Record Date approve the amendment to the Certificate of Incorporation to effect the Reverse Stock Split at the SpecialAnnual Meeting. On the Record Date, there were [9,369,177]____________ shares of common stock outstanding. Each holder of Common Stock outstanding. Our executive officers and directors and Brookstone Partners Acquisition XXIV, LLC, a Delaware limited liability company (“Brookstone XXIV”), the Company’s largest stockholder, who together own or vote approximately [43.2]% of the shares outstanding on the Record Date, have indicated they will vote in favor of the proposed amendment to the Certificate of Incorporation with respect to all shares for which they hold or share voting power.

We urge you to read this proxy statement carefully and in its entirety, including the attached Annex.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED HEREIN, PASSED UPON THE MERITS OR FAIRNESS OF THE PROPOSED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL AND A CRIMINAL OFFENSE. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS DOCUMENT OR THE RELATED SCHEDULE 13E-3, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US.

SUMMARY TERM SHEET

The following summary term sheet, together with the Questions and Answers section that follows, highlights certain information about the proposed Reverse Stock Split, but may not contain all of the information that is important to you. For a more complete description of the Reverse Stock Split, we urge you to carefully read this entire proxy statement andAnnex A hereto before you vote. For your convenience, we have directed your attention to the location in this proxy statement where you can find a more complete discussion of the items listed below.

Information About the Reverse Stock Split

See “Special Factors – Purposes of and Reasons for the Reverse Stock Split” beginning on page 17 and “Special Factors – Effects of the Reverse Stock Split” on page 28.

Purposes of and Reasons for the Reverse Stock Split

See “Special Factors – Purposes of and Reasons for the Reverse Stock Split” beginning on page 17.

Additional Effects of the Reverse Stock Split

See “Special Factors – Effects of the Reverse Stock Split” beginning on page 28, “Special Factors – Alternatives Considered” beginning on page 27, “Special Factors – Fairness of the Reverse Stock Split” beginning on page 23 and “Special Factors – Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons” beginning on page 42.

Fairness of the Reverse Stock Split

See “Special Factors – Fairness of the Reverse Stock Split” beginning on page 23.

Disadvantages of the Reverse Stock Split

If the Reverse Stock Split occurs, there will be certain disadvantages to stockholders, including the following:

See “Special Factors – Fairness of the Reverse Stock Split – Disadvantages of the Reverse Stock Split” beginning on page 25.

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

Termination of the Reverse Stock Split

QUESTIONS AND ANSWERS ABOUT THE REVERSE STOCK SPLIT AND THE SPECIAL MEETING

The following questions and answers are intended to briefly address potential questions that you, as a Company stockholder, may have regarding the Reverse Stock Split and the Special Meeting that are not addressed in the Summary Term Sheet above. These questions and answers may not address all questions that may be important to you as a stockholder. Please refer to the more detailed information contained elsewhere in this proxy statement, the Annex to this proxy statement and any information and documents referred to or incorporated by reference in this proxy statement.

Where and when is the Special Meeting?

The Special Meeting will be held at the offices of Olshan Frome Wolosky LLP, 1325 Avenue of the Americas, New York, New York 10019 on [__________], at [___] A.M. Eastern Time.

What am I being asked to vote on at the Special Meeting?

Our stockholders will consider and vote upon the proposal to amend the Company’s Certificate of Incorporation to effect the Reverse Stock Split.

What is the Reverse Stock Split?

The Reverse Stock Split is a reduction of the number of our authorized and issued and outstanding Common Stock at a ratio of 15 shares prior to the Reverse Stock Split to one share following the Reverse Stock Split. Stockholders that own less than 15 shares prior to the Reverse Stock Split will cease to own any shares of our Common Stock and instead will receive the Cash Consideration for their shares. Stockholders that own 15 shares or more prior to the Reverse Stock Split will remain stockholders of the Company and will receive the Cash Consideration for any fractional shares of Common Stock they would otherwise be entitled to as a result of the Reverse Stock Split. The number of authorized shares of Common Stock will not be reduced as a result of the Reverse Stock Split. Consequently, the number of authorized but unissued shares of Common Stock will increase as a result of the Reverse Stock Split.

How does the Board recommend that I vote on the proposal?

The Board unanimously recommends that you vote “FOR” the proposal to amend the Company’s Certificate of Incorporation to effect the Reverse Stock Split.

How will the Reverse Stock Split affect the day to day operations of the Company?

Though the Reverse Stock Split will have very little effect on the Company’s business and operations, it will reduce management time spent on compliance and disclosure matters attributable to our Exchange Act filings, and may therefore enable management to increase its focus on managing our business and growing stockholder value.

What potential conflicts of interest are posed by the Reverse Stock Split?

Our directors and executive officers and Brookstone XXIV may have interests in the Reverse Stock Split that are different from your interests as a stockholder, and have relationships that may present conflicts of interest.

Upon the effectiveness of the Reverse Stock Split, the aggregate number of shares of our Common Stock owned by our current directors and executive officers and by Brookstone XXIV will be reduced proportionately by the Reverse Stock Split ratio of 1-for-15 and the aggregate beneficial ownership percentage of the shares of our Common Stock (including shares underlying stock options exercisable within 60 days) held by our current directors and executive officers and Brookstone XXIV will increase from approximately [45.4]% to [45.5]% as a result of the reduction of the number of shares of our Common Stock outstanding. Each of our directors and executive officers will continue to own our Common Stock and will continue to serve as a director or executive officer after the Reverse Stock Split. Directors, executive officers and Brookstone XXIV will experience certain advantages after the Reverse Stock Split in that they will be relieved of certain SEC reporting requirements and will no longer be subject to the “short-swing profit” trading recovery provisions under Section 16 of the Exchange Act. Information regarding our officers’ and directors’ compensation and stock ownership will no longer be publicly available, and persons acquiring more than 5% of our Common Stock will no longer be required to report their beneficial ownership under the Exchange Act. In addition, by deregistering our Common Stock under the Exchange Act subsequent to the consummation of the Reverse Stock Split, we will no longer be prohibited, pursuant to Section 402 of the Sarbanes-Oxley Act of 2002, from making personal loans to our directors or executive officers, although no such loans currently are contemplated.

What if I hold fewer than 15 shares of Common Stock and hold all of my shares in street name?

If you hold fewer than 15 shares of our Common Stock in street name, your broker, bank or other nominee is considered the stockholder of record with respect to those shares and not you. It is possible that the bank, broker or other nominee also holds shares for other beneficial owners of our Common Stock and that it may hold 15 or more total shares. Therefore, depending upon their procedures, they may not be obligated to treat the Reverse Stock Split as affecting beneficial owners’ shares. It is our desire to treat stockholders holding fewer than 15 shares of our Common Stock in street name through a nominee (such as a bank or broker) in the same manner as stockholders whose shares are registered in their name. However, we or our transfer agent, American Stock Transfer & Trust Company, LLC, may not have the necessary information to compare your record holdings with any shares that you may hold in street name in a brokerage account and these banks, brokers and other nominees may have different procedures for processing the Reverse Stock Split. Accordingly, if you hold your shares of our Common Stock in street name, we encourage you to contact your bank, broker or other nominee.

What happens if I own a total of 15 or more shares of Common Stock beneficially through multiple brokerage firms in street name, or through a combination of record ownership in my name and one or more brokerage firms in street name?

We may not have the information to compare your record holdings and your ownership through a brokerage firm or to compare your holdings in two or more different brokerage firms. As a result, even if you hold a total of 15 or more shares, you may nevertheless have your shares cashed out if you hold them in a combination of record and street name or through accounts in several brokerage firms. If you are in this situation and desire to remain a stockholder of the Company after the Reverse Stock Split, we recommend that you combine your holdings in one brokerage account or transfer any shares held through a brokerage firm into record name prior to the effective date of the Reverse Stock Split. You should be able to determine whether your shares will be cashed out by examining your brokerage account statements to see if you hold more than the minimum number of shares in any one account. To determine the Reverse Stock Split’s effect on any shares you hold in street name (and possible payment of the Cash Consideration), you should contact your broker, bank or other nominee.

If I own fewer than 15 shares of Common Stock, is there any way I can continue to be a stockholder of the Company after the Reverse Stock Split?

If you own fewer than 15 shares of our Common Stock before the Reverse Stock Split, the only way you can continue to be a stockholder of the Company immediately after the Reverse Stock Split is to acquire, prior to the effective date, sufficient additional shares to cause you to own a minimum of 15 shares on the effective date. We cannot assure you, however, that any shares will be available for purchase and thus there can be no assurance that you will be able to acquire sufficient shares to meet or exceed the required 15 shares. In such an instance, you would not remain a stockholder of the Company after the effective date of the Reverse Stock Split, unless you purchased shares of Common Stock after the effective date.

Is there anything I can do if I own 15 or more shares of Common Stock, but would like to take advantage of the opportunity to receive cash for all my shares as a result of the Reverse Stock Split?

If you own 15 or more shares of our Common Stock before the Reverse Stock Split, you can only receive cash for all of your shares if, prior to the effective date, you reduce your stock ownership to fewer than 15 shares by selling or otherwise transferring shares. There can be no assurance, however, that any purchaser for your shares will be available.

Who is entitled to vote at the Special Meeting?

Only holders of record of our Common Stock as of the close of business on the Record Date arewill be entitled to noticeone vote for each share held as of andthe Record date with respect to voteeach matter submitted to the stockholders at the SpecialAnnual Meeting.

How manyIMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 30, 2024.

The Notice of 2024 Annual Meeting, Proxy Statement and Annual Report to Stockholders for the fiscal year ended December 31, 2023 are available at www.proxyvote.com.

Proxies; Voting of Proxies

The Board is soliciting proxies for use at the Annual Meeting, and such proxy will not be voted at any other meeting. Michael Toporek is the person selected by the Board to serve as proxy with respect to the Annual Meeting. Mr. Toporek is the Executive Committee Chairman of the Company.

Your vote is important. If you are a stockholder of record, whether or not you plan to attend the Annual Meeting via the live webcast, we urge you to submit your proxy to ensure that your vote is counted. You may still view the live webcast of the Annual Meeting and vote in person even if you have already voted by proxy. You may vote in one of the following ways:

The shares were outstandingrepresented by each proxy will be voted in accordance with the directions specified thereby. If you return a properly executed proxy card but do not fill out the voting instructions on the Record Date?proxy card or if you indicate when voting on the Internet or over the telephone that you wish to vote as recommended by the Board, the shares represented by your proxy, assuming it is not properly revoked pursuant to the instructions below, will be voted by the person named as proxy in accordance with the recommendations of the Board contained in this Proxy Statement.

The Board knows of no matters to be presented at the Annual Meeting other than those described in this Proxy Statement. In the event that other business properly comes before the meeting, the person named as proxy will have discretionary authority to vote the shares represented by any properly provided proxy in accordance with his own judgment.

AtRevocation of Proxies

Each stockholder giving a proxy has the closepower to revoke it at any time before the shares represented by that proxy are voted. A proxy may be revoked, prior to its exercise, by (i) executing and delivering a later-dated proxy via the Internet, via telephone, or by mail; (ii) delivering written notice of businessrevocations of the proxy to our Secretary prior to the Annual Meeting; or (iii) logging on to the live webcast of the Annual Meeting and voting as directed at the Annual Meeting. Please note that a stockholder’s attendance at the live webcast of the Annual Meeting will not, by itself, revoke such stockholder’s proxy.

Subject to the terms and conditions set forth herein, all proxies received by us will be effective, notwithstanding any transfer of the shares to which such proxies relate, unless at or prior to the Annual Meeting we receive a written notice of revocation signed by the person who, as of the Record Date, there were [9,369,177]was the registered holder of such shares. The notice of revocation must indicate the certificate number(s) and number of shares to which such revocation relates and the aggregate number of shares represented by such certificate(s).

If your shares are held in “street name,” as discussed below under the heading “Beneficial Owner: Shares Registered in the Name of Broker, Bank, or other Nominee,” you must contact your broker, bank, or other nominee to revoke any prior voting instructions.

Beneficial Owner: Shares Registered in the Name of Broker, Bank, or other Nominee

Many shares of Common Stock outstanding. Atare held in “street name,” meaning that a depository, broker-dealer, or other financial institution holds the Special Meeting, each share of Common Stock outstanding on the Record Date entitles the holder thereof to one vote.

What is a “quorum” for purposes of the Special Meeting?

In order to conduct business at the Special Meeting, a quorum of stockholders is necessary. A quorum will be present if stockholders holding at least 33 1/3% of theshares in its name, but such shares are beneficially owned by another person. If your shares of Common Stock entitling the holder to vote are present at the Special Meetingheld in person or by proxy. On the closestreet name as of business on the Record Date, there were [9,369,177]you should receive instructions from the holder of record that you must follow in order for you to specify how your shares will be voted at the Annual meeting; alternatively, you can use the voting information form provided by Broadridge to instruct your record owner on how to vote your shares. Generally, a street name holder that is a broker must receive direction from the beneficial owner of the shares to vote on issues other than certain limited routine, uncontested matters, such as the ratification of auditors. In the case of non-routine or contested items, the brokerage institution holding street name shares cannot vote the shares if it has not received voting instructions from the beneficial holder thereof. A broker “non-vote” occurs when a proxy is received from a broker but the shares represented by such proxy are not voted on a particular matter because the broker has not received instructions from the beneficial owner or other persons entitled to vote shares on a particular matter with respect to which the broker does not have discretionary power to vote the shares.

If your shares are held of record by a person or institution other than a broker, whether such nominee can exercise discretionary authority to vote your shares on any matter at the Annual Meeting in the absence of instructions from you will depend on your individual arrangement with that nominee record holder, in particular, whether you have granted such record holder discretionary authority to vote your shares. In the absence of an arrangement with your record holder granting such discretionary authority, your record holder nominee will not have discretionary authority to vote your shares on any matter at the Annual Meeting in the absence of specific voting instructions from you.

If, as of the Record Date, your shares of Common Stock outstandingwere held in an account at a broker, bank, or other nominee, then you are the beneficial owner of shares held in “street name” and accordingly, the proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record. As a beneficial owner, you may direct your broker, bank, or nominee how to vote the shares in your account or “vote” (provide instructions) online at the Annual Meeting using the 16-digit control number included on your voting instruction form or otherwise provided by the organization that is the record holder of your shares.

Quorum and Method of Tabulation

The presence, in person or by proxy, of holders of at least [3,123,059] shares is necessary to meet the quorum requirement.

What vote is required to approve the proposal?

Once a quorum has been established, approval33 1/3% of the proposal to amend the Certificatetotal number of Incorporation to effect the Reverse Stock Split requires the affirmative vote of the holders of a majority of all of the shares outstanding and entitled to vote on this matter. Because our directors and executive officers and Brookstone XXIV collectively own [43.2]% of our outstanding shares of Common Stock entitled to be voted at the Special Meeting, and have indicated their intentionvote is necessary to vote in favor of the Reverse Stock Split, the Reverse Stock Split will be approved if holders of just an additional [6.9]% of the outstanding shares of Common Stock vote in favor of the proposal.

How are abstentions and broker non-votes counted? What if I don’t vote at all?

Broker non-votes and abstentions are included for purposes of determining whether a quorum is present at a meeting.  A broker “non-vote” occurs when a nominee holding shares of Common Stock for the beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.  As the Reverse Stock Split proposal requires the affirmative vote of holders of a majority of the outstanding shares of Common Stock, an abstention, a failure to vote and a broker non-vote will each have the effect of a voteagainst this proposal.

What will happen if the Reverse Stock Split is approved by our stockholders?

Assuming that we have fewer than 300 record holders of our Common Stock after the Reverse Stock Split, we will, subject to final approval of the Board, file applicable forms with the SEC to deregister our shares of Common Stock under the Exchange Act. Upon the effectiveness of those filings, we would no longer be subject to the reporting and related requirements under the Exchange Act that are applicable to public companies.

What will happen if the Reverse Stock Split is not approved?

If the Reverse Stock Split is not approved by our stockholders, we will continue to operate our business, and we will continue to incur the costs involved with being an SEC reporting company. We also may decide to evaluate and explore available alternatives, although the Board has not yet made a determination that any of those alternatives are feasible or advisable.

If the Reverse Stock Split is approved by the stockholders, can the Board determine not to proceed with the Reverse Stock Split?

Even if the Reverse Stock Split is approved by the stockholders, the Board may determine not to proceed with the Reverse Stock Split if it believes that proceeding with the Reverse Stock Split is not in our best interests or in the best interests of our stockholders, including all unaffiliated stockholders.

Will the deregistration of our Common Stock have any impact on our Section 382 Rights Agreement?

On October 6, 2016, the Board adopted a Section 382 rights agreement (the “Rights Agreement”) in an effort to protect against a possible limitation on the Company’s ability to use its net operating loss carryforwards (“NOLs”). The Company may utilize these NOLs in certain circumstances to offset future U.S. taxable income and reduce its U.S. federal income tax liability, which may arise even in periods when the Company incurs an accounting loss for reporting purposes. The Company’s ability to use its NOLs, however, could be substantially limited if an “ownership change,” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), occurred. In general, an ownership change would occur if and when the percentage of ownership of Company stock by one or more “5-percent shareholders” (as defined under IRC Section 382) has increased by more than 50% at any time during the prior three years (calculated on a rolling basis). These provisions can be triggered not only by merger and acquisition activity but by normal market trading as well. The Rights Agreement is designed to deter trading that would result in an ownership change that could lead to the loss of the NOLs and a resulting reduction in the Company’s value. The Rights Agreement is intended to act as a deterrent to any person (together with all affiliates and associates of such person) acquiring “beneficial ownership” (as defined in the Rights Agreement) of 4.99% or more of the outstanding shares of Common Stock without the approval of the Board.The Company’s status as an SEC reporting company has no bearing on the Company’s ability to utilize its NOLs and the Board will continue to take all measures to protect against a possible limitation on the Company’s ability to utilize its NOLs notwithstanding the deregistration of our Common Stock. Accordingly, stockholders are cautioned that the Rights Agreement will remain in effect and continue to be strictly enforced by the Board following the deregistration of our Common Stock.

Should I send in my stock certificates now?

No. After the Reverse Stock Split is completed, we will send instructions for sending in your certificates representing shares of Common Stock in order to receive any Cash Consideration to which you may be entitled as well as new stock certificates representing the new number of shares you own, if any.

What is the total cost of the Reverse Stock Split to the Company?

Since the per share Cash Consideration will not be known until the effective date of the Reverse Stock Split and we will not know exactly how many record and beneficial holders of our Common Stock will receive the Cash Consideration in connection with the Reverse Stock Split, we do not currently know the exact cost of the Reverse Stock Split. Based, however, on information that we have received as of [__________] from our transfer agent, American Stock Transfer & Trust Company, LLC, with regard to the size of holdings of those of you who may hold shares in street name, as well as our estimates of other Reverse Stock Split expenses, we believe that the total cash requirement to effect the Reverse Stock Split (including professional fees and other expenses) will be approximately $[_____].

Am I entitled to appraisal rights in connection with the Reverse Stock Split?

No. Under New York law, our Certificate of Incorporation and our Bylaws, no appraisal or dissenters’ rights are available to our stockholders who dissent from the Reverse Stock Split.

How do I vote?

Sign and date each proxy card you receive and return it in the enclosed envelope prior to the Special Meeting or attend the Special Meeting and vote in person.

Can I change my vote?

Yes. You may change your proxy instructions at any time before the final vote at the Special Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:

If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

What does it mean if I receive more than one proxy card?

If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.

SPECIAL FACTORS

Purposes of and Reasons for the Reverse Stock Split

The Board has decided that the costs of being an SEC reporting company outweigh the benefits and, thus, that it is no longer in our best interests or the best interests of our stockholders, including our unaffiliated stockholders, for us to remain an SEC reporting company. Therefore, the Board has unanimously authorized, subject to stockholder approval, a 1-for-15 reverse stock split of our Common Stock. At the Special Meeting, stockholders are being asked to consider and vote upon a proposal to amend our Certificate of Incorporation to effect the Reverse Stock Split. A copy of the proposed amendment to our Certificate of Incorporation to effect the Reverse Stock Split is attached asAnnex A.

The Reverse Stock Split will enable us to terminate the registration of our Common Stock under the Exchange Act if, as intended, after the Reverse Stock Split there are fewer than 300 record holders of our Common Stock, and we make the necessary filings with the SEC. Management believes that we will be able to realize significant cost savings by the elimination of most of the expenses related to the disclosure, reporting and compliance requirements of the Exchange Act. The costs associated with these obligations constitute a significant overhead expense. These costs include increased professional fees for our auditors and corporate counsel, costs related to our Director and Officer insurance policy, printing and mailing costs, and internal compliance costs. These Exchange Act registration-related costs, as a proportion of our revenues, have been increasing over the years, and while we have worked to decrease these costs as much as possible, we do not believe that further reductions in these costs are possible.

As a result of the Reverse Stock Split, each holder of record immediately before the effective time who would otherwise be entitled to a fraction of a share on account of the Reverse Stock Split will receive, in lieu of such fractional share, an amount in cash equal to the product of such fraction multiplied by the average of the closing prices of the Common Stock (as adjusted to reflect the Reverse Stock Split) for the 60 trading days ending on the trading day immediately before the effective date of the Reverse Stock Split (or, in the event the Common Stock is not traded on such date, such closing price on the next preceding day on which the Common Stock is traded), subject to any applicable U.S. federal, state and local withholding tax, without interest (referred to herein as the Cash Consideration). Accordingly, (i) holdings prior to the Reverse Stock Split of fewer than 15 shares will be converted into a fractional share for which the holder will be entitled to receive the Cash Consideration and (ii) each stockholder holding 15 or more shares will be entitled to receive one share for each 15 shares held and the Cash Consideration for any fractional shares. The shares of Common Stock acquired by the Company as a result of the Reverse Stock Split will be restored to the status of authorized but unissued shares.

In determining whether the number of our stockholders of record falls below 300 as a result of the Reverse Stock Split, we must count stockholders of record in accordance with Rule 12g5-1 under the Exchange Act. Rule 12g5-1 provides, with certain exceptions, that in determining whether issuers, including the Company, are subject to the registration provisions of the Exchange Act, securities are considered to be “held of record” by each person who is identified as the owner of such securities on the respective records of security holders maintained by or on behalf of the issuers. Institutional custodians such as the Depository Trust & Clearing Company (“DTC”) and other commercial depositories, however, are not considered a single holder of record for purposes of these provisions. Rather, each depository’s accounts are treated as the record holder of shares.

As a result of the Reverse Stock Split and the repurchase of fractional shares in connection therewith, we expect to have approximately [210] record holders of our shares of Common Stock upon effectiveness of the Reverse Stock Split, which would enable us to terminate the registration of the Common Stock under the Exchange Act. If the Reverse Stock Split is consummated, we intend, subject to the final approval of the Board, to file with the SEC a Form 15 to deregister our shares. Upon the filing of the Form 15, our obligation to file periodic and current reports under the Exchange Act will be immediately suspended. Deregistration of our shares will be effective 90 days after filing of the Form 15. Upon deregistration of our shares, our obligation to comply with the requirements of the proxy rules and to file proxy statements under Section 14 of the Exchange Act will also be terminated. We will not be required to file periodic and current reports with the SEC in the future unless we subsequently file another registration statement under the Securities Act of 1933, as amended, or again have record holders of our Common Stock in excess of 300.

Our reasons for proposing the Reverse Stock Split include the following:

Significant Cost and Time Savings. We expect to realize annual cost savings as a result of the termination of the registration of the Common Stock under the Exchange Act, including the accounting, legal, printing and miscellaneous costs associated with being an SEC reporting company, of approximately $[201,000] as follows:

The Board considered the cost to the Company of continuing to file periodic reports with the SEC and complying with the proxy and annual report requirements under the Exchange Act compared to the benefits to the Company and its stockholders, including its unaffiliated stockholders, of continuing to operate as an SEC reporting company. These external costs, as well as other external costs relating to SEC reporting company status, comprise a significant part of our operating expense. In addition, as a non-SEC reporting company, our management and employees will no longer be required to spend time preparing the periodic and other reports required of SEC reporting companies under the Exchange Act. We believe that this time could more effectively be devoted to other purposes, such as operating our business and undertaking new initiatives that may result in greater long-term growth.

Under the circumstances, the Board determined that the benefits that the Company and its stockholders would typically expect to derive from the Company’s status as an SEC reporting company are not being realized and are not likely to be realized in the foreseeable future. As a result, the Board concluded that the elimination of the costs of complying with the Company’s registration and periodic reporting obligations outweighed the benefits of continuing to incur such costs. The Company is, therefore, undertaking the Reverse Stock Split at this time to save the Company the substantial costs and resources required to comply with the registration and periodic reporting obligations and other obligations associated with operating as an SEC reporting company. The actual savings to be realized from terminating the Company’s registration and periodic reporting obligations, however, may be higher or lower than such estimates.

Absence of Benefit to the Company and Its Stockholders of Being an SEC Reporting Company. We enjoy little benefit from being an SEC reporting company. The benefits of public reporting under the Exchange Act, and the reasons we believe they are currently not significant to our Company and stockholders, include:

Liquidity for Small Stockholdings. The Reverse Stock Split will permit our small stockholders (those holding fewer than 15 shares) to liquidate their shares, at a price that we believe is fair, without incurring brokerage commissions.

Substantial Number of Very Small Holders. The Company has over [310] holders of record and a substantial number of stockholders that hold their shares in street name. A large number of these stockholders own less than 15 shares, which is less, and in many cases substantially less, than $[__] in value at current market prices. The Company believes that it is uneconomical for the Company to continue to maintain share positions of such a small size. These small positions will be cashed out as a result of the Reverse Stock Split.

Competitive Disadvantage. As an SEC reporting company with periodic reporting obligations, the Company must publicly report and disclose material information about the Company. Such public disclosures can place the Company at a competitive disadvantage by providing the Company’s competitors with strategic information about the Company’s business, operations and operating results while not having access to similar information about these competitors.

For each of the reasons set forth above, the Board does not believe the costs associated with maintaining the Company’s registration and periodic reporting obligations and maintaining the Company’s stockholder accounts with less than 15 shares are justified. The Board believes that it is in the Company’s best interest and the best interest of the Company’s stockholders as a whole to eliminate the administrative burden and costs associated with maintaining the Company’s registration and periodic reporting obligations and maintaining stockholder accounts of fewer than 15 shares.

Background of the Reverse Stock Split

The Company, a New York corporation, was incorporated in 1961. The Company’s core business is conducted through MTI Instruments, Inc., a wholly-owned subsidiary incorporated in New York on March 8, 2000 (“MTI Instruments”). The Company’s operations are headquartered in Albany, New York where it designs, manufactures, and markets its products globally.

MTI Instruments is a supplier of precision linear displacement solutions, vibration measurement and system balancing solutions, and wafer inspection tools. These tools and solutions are developed for markets that require the precise measurements and control of products processes for the development and implementation of automated manufacturing, assembly, and consistent operation of complex machinery. MTI Instruments conducts research and develops technology to support its existing products and develop new products. We expect to continue to invest in research and development in the future at MTI Instruments as part of our growth strategy.

The primary competitive considerations in MTI Instruments’ markets are product quality, performance, price, timely delivery, responsiveness and the ability to identify, pursue and obtain new customers. MTI Instruments believes that its employees, product development skills, sales and marketing systems and reputation are competitive advantages.

As of September 30, 2017, MTI Instruments’ largest customer is the U.S. Air Force. We also have strong relationships with companies in the electronics, aircraft, aerospace, automotive, semiconductor and research industries.

The Company has incurred significant operating and net losses since our inception. While we had net income for the nine months ended September 30, 2017, we incurred a net loss of $359,000 during the year ended December 31, 2016 and had an accumulated deficit of approximately $120,700,000 as of September 30, 2017. In order to achieve and maintain profitability and improve liquidity, we must successfully achieve all or some combination of the following initiatives: increasing sales, developing new products, controlling operating expenses, managing our cash flows, successfully obtaining new credit facilities, improving operational efficiency and estimating and projecting accurately our liquidity and capital resources.

The Board has from time to time considered the advisability of deregistering the Common Stock under the Exchange Act to avoid the outsized costs, as a percentage of revenues and in relation to the benefits of Exchange Act registration and reporting, of compliance with the requirements of the Exchange Act. As part of its deliberations on this issue, the Board considered the benefits to the Company and its stockholders of the continued registration of the Common Stock and the near term prospects for upsizing the Company, either through internal growth or strategic business combination activity, that might justify the continuing public company costs being incurred by the Company.

At a meeting of the Board on June 11, 2015, the Board members discussed the information provided during the Company’s presentation at its annual meeting of stockholders, held earlier that day, regarding the Common Stock’s undervalued market price and low trading volumes. Following this discussion, in order to provide additional liquidity for stockholders, the Board approved a share repurchase program whereby the Company was authorized to repurchase up to 525,000 shares of Common Stock; this amount represented nearly 10% of the outstanding shares of Common Stock at the time. Due to third quarter 2015 results falling short of expectations, the commencement of the repurchase program was delayed until sufficient resources were available to properly deploy the program (December 2015). Throughout the first quarter of 2016, the share repurchase program yielded less than desired results due to limited availability of shares and volume constraints. After being able to only acquire 10,401 outstanding shares of Common Stock over three months, the Board terminated the share repurchase program at the end of March 2016.

At a meeting of the Board on June 8, 2016, the Board members discussed several opportunities to enhance stockholder value, including potential acquisitions and divestitures, potential cash infusion from lenders, private equity sales and sales of Common Stock to Board members, and other long-range opportunities involving the Company’s assets. On July 26, 2016, the Board convened a special meeting to review a proposed term sheet for an equity investment by Brookstone Partners Acquisition, LLC (“Brookstone Partners”), an affiliate of Brookstone XXIV and an unrelated third party at that time. The Board determined that the term sheet was not in the Company’s best interest and was not accepted. On August 12, 2016, the Board convened another special meeting to discuss a revised term sheet from Brookstone Partners. The Board members also discussed the historical challenges to generating meaningful growth in the Company’s business and share price. At the time, the Company was employing extraordinary measures to conserve cash including furloughs, accelerating receivables, extending payables, and delaying further investments in employees and product development. Meanwhile, the Company was struggling to establish sustainable commercial revenue and its share price languished. The Board discussed the Company’s going concern risk, the lack of capital availability and the need to pursue strategic alternatives more aggressively. In examining strategic alternatives, the Board discussed the Company’s potential value, including its most valuable asset, its NOLs, and the various strategic alternatives available to the Company. Of the opportunities available to the Company, the Board considered the proposed investment by Brookstone Partners as superior due to its extensive experience unlocking the value of tax loss carryforwards, its willingness to invest on attractive terms, and its access to capital and other resources necessary for the Company’s success. As such, the Board agreed to conditionally accept the proposed term sheet from Brookstone Partners, subject to review by counsel. On October 20, 2016, the Company and Brookstone XXIV entered into a stock purchase agreement pursuant to which Brookstone XXIV acquired 3,750,000 shares of Common Stock for $2,737,500. This was done to provide the Company with the resources it needed to generate and execute on new strategic activities, including potential acquisitions, and drive towards its continued goal of increasing stockholder value.

At a meeting of the Board on January 16, 2017, the Board members reviewed and approved an operational reorganization plan to reduce costs and focus near-term initiatives on the Company’s long-standing instrumentation business. On March 15, 2017, the Board met again and discussed the progress towards this reorganization plan and other strategic initiatives available to enhance stockholder value. At a meeting of the Board on June 7, 2017, the Board members discussed the specific costs associated with being an SEC reporting company and reviewed a memorandum from counsel summarizing the advantages and disadvantages of deregistering the Common Stock, potential actions to reduce the number of stockholders, including stockholders of record, the procedure and best practices for deregistration and the estimated costs to deregister. Included in this discussion was management’s estimate of potential cost savings and the impact on acquisitions of deregistering the Common Stock. At a meeting of the Board on September 20, 2017, the Board members again discussed the potential cost savings from deregistering its Common Stock. In addition, legal counsel attended the Board meeting to review their memoranda to the Board on this matter and discussed reasons for potentially deregistering the Common Stock as well as the advantages, risks, disadvantages, potential cost savings and, ultimately, factors for the Board to consider in determining whether such a decision to deregister the Common Stock would be in the best interests of the Company and its stockholders. Management again presented an estimate of cost savings as well as a timetable for possible implementation. After thorough discussion, the Board agreed to continue to evaluate the matter and to discuss at the Board’s next regularly scheduled meeting. At a meeting of the Board on December 13, 2017, the Board members once again discussed the rationale for deregistering the Common Stock, including reduction of SEC reporting and auditing costs, as well as better allocation of management resources to focus on strategic initiatives and operational execution and less time on regulatory reporting. Although the number of our stockholders of record was close to the number that would allow us to deregister the Common Stock (less than 300), various options were analyzed as ways to further reduce the number of stockholders of record to a point that would ensure not only that we could deregister the Common Stock but that future increases in the number of holders of record would be unlikely to increase to an amount that would lift the suspension of our Exchange Act reporting requirements. Management recommended a ratio of 1-to-15, which management believed would reduce the number of stockholders of record to a level sufficiently below 300 and provide an adequate cushion for any increase in the number of stockholders that might occur prior to or after the effectiveness of a reverse stock split. After discussion, including a review of projected costs and potential risks, the Board unanimously agreed to pursue a 1-to-15 reverse stock split and directed that a timetable and draft documentation be prepared.

At a meeting of the Board held on January 11, 2018, the Board members once again discussed the proposed reverse stock split, including the proposed Certificate of Amendment to the Company’s Certificate of Incorporation to effect the reverse stock split, its purposes and reasons, additional effects of a split, advantages and disadvantages, contemplated and attempted alternatives, fairness considerations and the handling of fractional shares after such a split. The Board members again also discussed the anticipated cost savings from deregistration, including reduction of SEC reporting and auditing costs and a more effective allocation of management resources to focus on strategic initiatives and operational execution with less time on regulatory reporting, and reviewed a current timetable for implementation. After such discussions, the Board unanimously determined that the Reverse Stock Split is procedurally and substantively fair and in the best interests of the Company and its stockholders, including the unaffiliated stockholders, and unanimously approved the Certificate of Amendment to effect the Reverse Stock Split.

For a further discussion of the fairness of the Reverse Stock Split, see “Special Factors – Fairness of the Reverse Stock Split” immediately below.

Fairness of the Reverse Stock Split

The Board believes that the Reverse Stock Split is fair to the unaffiliated stockholders of the Company, including the unaffiliated Cashed Out Stockholders and the unaffiliated Continuing Stockholders. After consideration of all aspects of the Reverse Stock Split, as described below, the Board unanimously approved the Reverse Stock Split. Except for such approval, we are not aware that any of our affiliates has made a recommendation, in their individual capacities, either in support of or opposed to the Reverse Stock Split.

Substantive Fairness Discussion

The Board considered, among other things, the factors listed below, in reaching its conclusion as to the substantive fairness of the Reverse Stock Split to our unaffiliated stockholders, including both unaffiliated Cashed Out Stockholders and unaffiliated Continuing Stockholders. The Board did not assign specific weight to any factors it considered, nor did it apply them in a formulaic fashion, although the Board particularly noted the opportunity in the Reverse Stock Split for stockholders to cash out their holdings at a fair price, as well as the significant cost and time savings for us resulting from the Reverse Stock Split, which will benefit our Continuing Stockholders. The discussion below is not meant to be exhaustive, but we believe includes all material factors considered by the Board in reaching its determinations.

Fairness of the Cash Consideration.  In determining the substantive fairness of the Reverse Stock Split, the Board also considered whether the Cash Consideration constitutes fair market value in relation to current and historical price levels of the Common Stock, the Company’s net book value and Brookstone XXIV’s purchase of Common Stock from the Company in 2016. Assuming the Reverse Stock Split became effective on the Record Date, the Cash Consideration would be $[__] (calculated based on the average of the daily closing prices of the Common Stock for the 60 trading days ending on the trading day immediately preceding the Record Date). The assumed Cash Consideration is greater than the Company’s net book value per share as of September 30, 2017 of $0.49. The assumed Cash Consideration is also within the range of short term historical closing prices of the Common Stock, which has traded at price levels as high as $[1.84] per share and as low as $[0.80] per share since January 1, 2017.  The assumed Cash Consideration is also greater than the $0.73 per share purchase price Brookstone XXIV paid for its current ownership interest in the Company on October 26, 2016, as discussed in further detail in “Information About Brookstone XXIV and its Affiliates – Past Contacts, Transactions, Negotiations and Agreements” beginning on page 55.  Except for this transaction and as otherwise disclosed in this proxy statement, neither the Company nor its affiliates repurchased (excluding open market purchases by officers and directors) any shares of Common Stock and the Company is not aware of any firm offers during the past two years for the merger or consolidation with or into the Company, sale or transfer of a substantial part of the assets of the Company, or a purchase of the Company’s securities that would enable the holder to control the Company.  Although the actual Cash Consideration will be based on the share price performance of the Common Stock during the 60 trading days ending on the trading day immediately prior to the effective date of the Reverse Stock Split and, therefore, is not currently known, the Company does not believe the current stock price will materially appreciate or decrease at any time during the foreseeable future.  For these reasons, the Company believes the Cash Consideration will constitute fair market value.

Equal Treatment of Affiliated and Unaffiliated Holders of Our Shares. The Reverse Stock Split will not be applied to holders of our shares differently on the basis of affiliate status. The sole determining factor in whether a stockholder will be a cashed out holder or a continuing holder of our Common Stock as a result of the Reverse Stock Split is the number of shares of Common Stock held by the stockholder immediately prior to the Reverse Stock Split. Based on the number of shares of Common Stock held by each of our affiliates, however, as a practical matter no affiliated stockholders will be entirely cashed out in the Reverse Stock Split and they will all remain stockholders of the Company.

Potential Ability to Remain a Holder of or Liquidate Our Shares. Current stockholders who own fewer than 15 shares of Common Stock can remain stockholders of the Company by acquiring additional shares so that they own at least 15 shares immediately before the Reverse Stock Split. Conversely, stockholders that own 15 or more shares and desire to liquidate all of their shares in connection with the Reverse Stock Split (at the price offered by us) can reduce their holdings to less than 15 shares by selling shares prior to the Reverse Stock Split. There can be no assurance that a stockholder will be able to acquire or sell sufficient shares to control whether such stockholder remains a stockholder following the effective date of the Reverse Stock Split. Due to these concerns, the Board did not place undue influence on this factor.

Procedural Fairness Discussion

The Board understands that our directors and executive officers and Brookstone XXIV have indicated that they intend to vote the shares of Common Stock over which they have voting power in favor of the Reverse Stock Split and that, if they do so, the Reverse Stock Split will be approved if holders of just an additional [6.9]% of the outstanding shares of Common Stock vote in favor of the proposal. The Board determined, however, not to condition the approval of the Reverse Stock Split on approval by a majority of unaffiliated stockholders. The Board noted that affiliated and unaffiliated stockholders will be treated equally in the Reverse Stock Split. If separate approval of unaffiliated stockholders were required, our affiliated stockholders would receive lesser voting rights than unaffiliated stockholders solely on the basis of their affiliate status even though they will receive no additional benefits or different treatment in the Reverse Stock Split. Furthermore, a vote of the majority of unaffiliated stockholders is not required under New York law. Finally, the Board did not believe that it was practicable to structure the transaction to require approval of a majority of our unaffiliated stockholders given the historically low rate of stockholder participation and return of proxy cards with respect to prior stockholder meetings.

We did not retain an unaffiliated representative to act solely on behalf of our unaffiliated stockholders for the purpose of negotiating the terms of the Reverse Stock Split or preparing a report covering the fairness of the Reverse Stock Split. The Board did not appoint a special committee of independent directors or obtain a fairness report, opinion, appraisal, or other independent assessment of the fairness of the terms of the Reverse Stock Split or the value of the Company’s Common Stock.

The Board noted that this proxy statement, along with our other filings with the SEC, provide a great deal of information for unaffiliated stockholders to make an informed decision as to the Reverse Stock Split. Therefore, the Board made no specific provision to grant unaffiliated stockholders access to the Company’s corporate files, except as may be required by the New York Business Corporation Law, or to obtain counsel or appraisal services at the Company’s expense.

Disadvantages of the Reverse Stock Split

The Board also considered the disadvantages of the Reverse Stock Split, including those set forth below.

No Participation in Future Growth by Cashed Out Stockholders. After the Reverse Stock Split, holders of less than 15 shares of Common Stock will no longer have any ownership interest in the Company and will not participate in any future earnings and growth of the Company.

Reduction in Information about the Company. After completion of the Reverse Stock Split, we will cease to file annual, quarterly, current, and other reports and documents with the SEC. While we intend to continue to prepare audited annual financial statements and unaudited quarterly financial statements and to make certain of those financial statements available to stockholders through our website, we will not be under any continuing obligation to do so. We will not be providing periodic reports in the format currently required of us under the provisions of the Exchange Act and, as a result, Continuing Stockholders will have access to less information about us and our business, operations, and financial performance.

Limited Liquidity. While we anticipate that our Common Stock will continue to be quoted on OTC Markets following the effectiveness of the Reverse Stock Split, such continued quotation will depend upon whether any broker-dealers commit to make a market for the Common Stock, and therefore we cannot guarantee that the Common Stock will continue to be quoted on OTC Markets. In addition, because of the possible decrease in the already limited liquidity of the Common Stock, the suspension of our obligation to publicly disclose financial and other information following the Reverse Stock Split, and the deregistration of the Common Stock under the Exchange Act, Continuing Stockholders may potentially experience a significant decrease in the value of their Common Stock.

Continuing Stockholders Including Affiliated Stockholders Will Increase Their Percentage Ownership Interest in the Company. After giving effect to the Reverse Stock Split and based on information and estimates of ownership of shares of Common Stock as of the Record Date and the net book value of the Company for the period ended September 30, 2017, Brookstone XXIV’s interest in the net book value of the Company as of September 30, 2017 would have increased by approximately $7,000, or 0.36%. After giving effect to the Reverse Stock Split and based on information and estimates of ownership of shares of Common Stock as of the Record Date and net earnings of the Company for the period ended September 30, 2017, Brookstone XXIV’s interest in the net earnings of the Company for the period ended September 30, 2017 would have increased by approximately $400, or 0.36%.

Reporting Obligations of Certain Insiders. Our executive officers, directors and 10% stockholders (currently, Brookstone XXIV is our only 10% stockholder) will no longer be required to file reports relating to their transactions in our Common Stock with the SEC. In addition, our executive officers, directors and 10% stockholders will no longer be subject to the short-swing profits recovery provisions of the Exchange Act, and persons acquiring more than 5% of our Common Stock will no longer be required to report their beneficial ownership under the Exchange Act.

Reduced Cash on Hand. We estimate that the cost of payment to stockholders receiving Cash Consideration, professional fees, transfer agent costs and other expenses of the Reverse Stock Split will total approximately $[_____] based on various assumptions discussed in further detail in this proxy statement. As a result, immediately after the Reverse Stock Split, our cash balances on hand will be reduced by the costs incurred in the Reverse Stock Split.

Filing Requirements Reinstated. The filing of the Form 15 will result in the suspension, not the termination, of our filing obligations under the Exchange Act. This suspension remains in effect so long as we have fewer than 300 stockholders of record. Thus, subsequent to the time the Form 15 is filed, if on the first day of any fiscal year we have more than 300 stockholders of record, then we must resume reporting pursuant to Section 15(d) of the Exchange Act.

No Appraisal Rights. Under New York law, our Certificate of Incorporation and our Bylaws, no appraisal or dissenters’ rights are available to our stockholders who object to the Reverse Stock Split.

Reduced Management Incentive. The lack of liquidity typically associated with stock of a non-reporting issuer may result in fewer opportunities to utilize equity-based incentive compensation tools to recruit and retain executive talent. Stock options and other equity-based incentives are typically less attractive if they cannot be turned into cash quickly and easily once earned. The Board did not view this as a significant factor because of the current limited liquidity of the Common Stock.

Less Attractive Acquisition Currency. Stock that is registered with the SEC is generally a more attractive acquisition currency than unregistered stock, since the acquirer of the publicly traded security has constant access to important information about the SEC reporting company. The Board recognized that this may not be a significant disadvantage, however, because we have not historically utilized our stock as currency in acquisitions.

Reduced Equity Capital Raising Opportunities. One of the primary reasons many companies “go public” is to be able to more easily and efficiently access the public capital markets to raise cash. Similar opportunities are generally less available (without significant expense) to non-SEC reporting companies. Following the Reverse Stock Split, since we will no longer file periodic and other reports under the Exchange Act, it will likely be more costly and time consuming for us to raise equity capital from public or private sources. The Board has concluded that this may be of little significance to us since this has not been, and is not expected to be, an action that we would wish to pursue for the foreseeable future.

Loss of Prestige. SEC reporting companies are often viewed by stockholders, employees, investors, customers, vendors and others as more established, reliable and prestigious than privately held companies. In addition, SEC reporting companies are often followed by analysts who publish reports on their operations and prospects. Companies that lose status as an SEC reporting company may risk losing prestige in the eyes of the public, the investment community and key constituencies. The Board believed, however, that this was not a significant factor in considering whether to undertake the Reverse Stock Split due to the fact that we do not currently enjoy research analyst coverage or similar media attention.

Alternatives Considered

The Board considered other methods of effecting a transaction that would allow us to deregister our Common Stock, but ultimately rejected each of these alternatives and determined that the Reverse Stock Split was preferable to the other alternatives.

When considering the various alternatives to the Reverse Stock Split, the primary focus was the level of assurance that the selected alternative would result in us having fewer than 300 record owners of our Common Stock, thus allowing us to achieve our objective of terminating registration of our Common Stock under the Exchange Act, the time frame within which such alternative could reasonably be expected to be achieved, again relative to the other alternatives under consideration, as well as the potential costs of the alternative transactions.

For the reasons discussed above, the Board unanimously agreed that the Reverse Stock Split was the most expeditious and economical way of effecting a transaction that would allow us to deregister our Common Stock.

Recommendation of the Board

At a meeting held on January 11, 2018, based on the foregoing analyses, including a consideration of the disadvantages of the Reverse Stock Split, the Board unanimously determined that the Reverse Stock Split is procedurally and substantively fair to and in the best interests of the Company and its unaffiliated stockholders and unanimously approved the Reverse Stock Split, and recommends that you vote “FOR” approval of the Reverse Stock Split.

Fairness Determination by Brookstone XXIV

Brookstone XXIV, the largest stockholder of the Company, may be deemed to be subject to Rule 13e-3 promulgated by the SEC under the Exchange Act with respect to “going private” transactions and is a “filing person” for purposes of Schedule 13E-3, along with the Company. Brookstone XXIV has adopted the analyses and conclusions of the Board and has concluded that the Reverse Stock Split is substantively and procedurally fair to the Company’s affiliated and unaffiliated stockholders, including Cashed Out Stockholders and Continuing Stockholders. Brookstone XXIV relied on the factors analyzed by the Board as described in the above section of the proxy statement entitled “Special Factors – Fairness of the Reverse Stock Split” beginning on page 23. To Brookstone XXIV’s knowledge, none of the Company’s affiliates has made a recommendation, in their individual capacities, either in support of or opposed to the Reverse Stock Split.

Effects of the Reverse Stock Split

Generally

The Board is soliciting stockholder approval for the Reverse Stock Split. If approved by the stockholders and implemented by the Board, we anticipate that the Reverse Stock Split will be effected as soon as possible after the date of the Special Meeting, on the date the Company files a Certificate of Amendment to our Certificate of Incorporation with the Department of State of the State of New York, or on any later date that the Company may specify in such Certificate of Amendment.

At the Special Meeting, stockholders are being asked to consider and vote upon a proposal to amend our Certificate of Incorporation to effect the Reverse Stock Split. A copy of the proposed Certificate of Amendment to our Certificate of Incorporation for the Reverse Stock Split is attached asAnnex A.

If the Reverse Stock Split is completed, the following will occur:

Effects on the Company

Upon completion of the Reverse Stock Split, we anticipate that we will have fewer than 300 stockholders of record of our Common Stock and will therefore be eligible to terminate the registration of our Common Stock with the SEC and become a non-SEC reporting company. In determining whether the number of our stockholders of record falls below 300 as a result of the Reverse Stock Split, we will count stockholders of record in accordance with Rule 12g5-1 under the Exchange Act, as discussed above. Based on information available to us as of the Record Date, we expect that as a result of the Reverse Stock Split the number of our stockholders of record would be reduced to approximately [210].

We may terminate the registration of our Common Stock upon application to the SEC if there are fewer than 300 stockholders of record of our Common Stock. If the Reverse Stock Split is consummated and, as expected, we will have fewer than 300 stockholders of record, we intend to promptly file with the SEC a Form 15 making a certification to that effect. Our obligation to file periodic and current reports as a result of our Common Stock’s registration under the applicable provisions of the Exchange Act will be suspended immediately upon the filing of the Form 15. After the 90-day waiting period following the filing of the Form 15:

Following the filing of the Form 15 with the SEC, however, if on the first day of any fiscal year we have more than 300 stockholders of record we once again will become subject to the reporting requirements of the Exchange Act. Also, we will continue to be subject to the general anti-fraud provisions of applicable federal and state securities laws.

We anticipate that following the Reverse Stock Split we will continue to operate as we have done prior to the Reverse Stock Split.

We estimate that the Reverse Stock Split will result in the retirement of approximately [40,000] shares of Common Stock at a cost of approximately $[____] per share, which is an assumed price calculated based on the average of the daily closing prices of the Common Stock for the 60 trading days ending on the trading day immediately before the Record Date. Including expenses for the Reverse Stock Split, the Company estimates that the total cost of the Reverse Stock Split to us, including fees and expenses for the various legal and other advisers, will be approximately $[_____]. This total amount could be larger or smaller depending on, among other things, the actual price levels of our Common Stock during the 60 trading days ending on the trading day prior to the effective date of the Reverse Stock Split and the number of fractional shares that stockholders would actually otherwise be entitled to upon effectiveness of the Reverse Stock Split as a result of purchases, sales and other transfers of our shares of Common Stock by our stockholders prior to the effective date of the Reverse Stock Split. Our cash balances will be reduced accordingly. The cash to be paid to stockholders receiving the Cash Consideration and the other costs of the Reverse Stock Split will be paid from cash on hand. See “Special Factors – Source of Funds and Expenses” on page 44.

We expect that our Common Stock will continue to be quoted on the OTCQB tier of OTC Markets following consummation of the Reverse Stock Split. No assurance can be given, however, that the Common Stock will be eligible for quotation on the OTCQB tier, in which case we anticipate that the Common Stock would be quoted on the lower OTC Pink tier of OTC Markets. Further, although we anticipate that the Common Stock will continue to be quoted on OTC Markets following the Reverse Stock Split, there can be no assurance that any broker-dealer will be willing to continue to act as a market maker for the Common Stock after the Reverse Stock Split and, therefore, that the Common Stock will continue to be so quoted.

OTC Markets is a quotation service that collects and publishes market maker quotes for over-the-counter securities. OTC Markets is not a stock exchange or a regulated entity. Price quotations are provided by over-the-counter market makers and company information is provided by the over-the-counter companies. There is no assurance that there will be any quotations of our Common Stock on OTC Markets after the Reverse Stock Split or that they will continue for any length of time.

Effects on the Cashed Out Stockholders

Stockholders holding fewer than 15 shares of Common Stock immediately prior to the effective date of the Reverse Stock Split will cease to be stockholders of the Company. They will lose all rights associated with being a stockholder, such as the right to attend and vote at stockholder meetings and receive dividends and distributions. The shares of Common Stock held by these stockholders will be converted into a fractional share for which the holder will be entitled to receive, in lieu of such fractional share, an amount in cash equal to the product of such fraction multiplied by the average of the closing prices of the Common Stock (as adjusted to reflect the Reverse Stock Split) for the 60 trading days ending on the trading day immediately before the effective date of the Reverse Stock Split (or, in the event the Common Stock is not traded on such date, such closing price on the next preceding day on which the Common Stock is traded), subject to any applicable U.S. federal, state and local withholding tax, without interest. These stockholders will be liable for any applicable taxes, but will not be required to pay brokerage fees or service charges. Promptly after the effective date of the Reverse Stock Split, we will send a transmittal letter explaining to such stockholders how they can surrender their stock certificates in exchange for the Cash Consideration. The length of time between the effective date of the Reverse Stock Split and the date on which a Cashed Out Stockholder will receive the Cash Consideration they are entitled to will depend, in part, on the amount of time taken by such stockholder to return his or her stock certificate(s) with a properly completed letter of transmittal. No cash payment will be made to any such stockholder until he, she or it has surrendered his, her or its outstanding stock certificate(s), together with the letter of transmittal, in accordance with the terms of the letter of transmittal. Following the surrender of stock certificates in accordance with the terms of the letter of transmittal, stockholders should receive the Cash Consideration they are entitled to promptly. No interest will be paid on the Cash Consideration at any time.

The number of shares of Common Stock held by a stockholder of record in two or more separate accounts will be combined to determine the number of shares of our Common Stock owned by such stockholder and, accordingly, whether the stockholder will be a Cashed Out Stockholder or a Continuing Stockholder. Shares held by stockholders in joint accounts, such as by a husband and wife, and shares held in similar capacities will be treated separately, and will not be combined with individual accounts in determining whether a stockholder will be a Cashed Out Stockholder or a Continuing Stockholder. We intend to treat stockholders holding our Common Stock in street name in the same manner as record holders. Prior to the effective date of the Reverse Stock Split, we will conduct an inquiry of all brokers, banks and other nominees that hold shares of our Common Stock in “street name,” ask them to provide us with information on how many fractional shares will be cashed out, and request that they effect the Reverse Stock Split for their beneficial holders. These banks, brokers and other nominees may, however, have different procedures than registered stockholders for processing the Reverse Stock Split. Also, a stockholder owning 15 or more shares of Common Stock may nevertheless have those shares cashed out if the stockholder holds shares in a combination of street name accounts and record holder accounts, or holds shares in separate accounts in several brokerage firms. If you are in this situation and desire to remain one of our stockholders after the Reverse Stock Split, you may consolidate your holdings into one brokerage account or record holder account prior to the effective date of the Reverse Stock Split. Conversely, if you hold an account with less than 15 shares in street name and want to ensure that your shares are cashed out, you may want to change the manner in which your shares are held from street name into a record holder account in your own name so that you will be a record owner of the shares.

Effects on the Continuing Stockholders

Stockholders holding 15 or more shares of Common Stock immediately prior to the effective date of the Reverse Stock Split will continue to be stockholders of the Company, will continue to own one whole share of Common Stock for each 15 shares they previously owned and will receive the Cash Consideration for any fractional shares of Common Stock they would otherwise be entitled to as a result of the Reverse Stock Split.

Continuing Stockholders may experience reduced liquidity of their shares of Common Stock. While we anticipate that our Common Stock will continue to be quoted on the OTCQB tier of OTC Markets, however, no assurance can be given that the Common Stock will be eligible for quotation on the OTCQB tier, in which case we anticipate that the Common Stock would be quoted on the lower OTC Pink tier of OTC Markets.

Continuing Stockholders will not receive or have access to the same financial and other business information about us that they would if we continued to make public disclosures pursuant to the Exchange Act. While we intend to continue to prepare audited annual financial statements and unaudited quarterly financial statements and to make certain of those financial statements available to our stockholders through our website, we will not be under any continuing obligation to do so. Continuing Stockholders will continue to have the right, upon written request, to receive certain information in appropriate circumstances, to the extent provided by New York law, including, for example, the right to view and copy our stock ledger, a list of our stockholders and other books and records, provided that the requesting party is a stockholder, makes the request in the form required by statute, and does so for a proper purpose.

In addition, the Board believes that, following the Reverse Stock Split, the Continuing Stockholders will benefit from the savings in direct and indirect operating costs to the Company resulting from us no longer being required to maintain our SEC reporting company status, as described above. Our Continuing Stockholders will be the beneficiaries of these savings. See “Special Factors – Purposes of and Reasons for the Reverse Stock Split” beginning on page 17. Continuing Stockholders will have the opportunity to participate in our future growth and earnings, if any, as we go forward as a more streamlined entity without the costs of compliance with SEC reporting requirements.

Additional Effects on the Affiliated Continuing Stockholders

Our affiliates, consisting of our directors, our executive officers and Brookstone XXIV, will participate in the Reverse Stock Split to the same extent as non-affiliates. Based on the number of shares of Common Stock held by each of our affiliates, however, as a practical matter no affiliated stockholders will be entirely cashed out in the Reverse Stock Split and they will all remain stockholders of the Company.

Upon the effectiveness of the Reverse Stock Split, the aggregate number of shares of our Common Stock owned by our current directors and executive officers and Brookstone XXIV will be reduced proportionately by the Reverse Stock Split ratio of 1-for-15 (subject to the cashing out of fractional shares) and the beneficial ownership percentage of the shares of our Common Stock held by our directors and executive officers and by Brookstone XXIV will increase by approximately [___]% from [___]% to [___]% as a result of the reduction of the number of shares of our Common Stock outstanding (subject to the cashing out of fractional shares). The number of shares to be cashed out in the Reverse Stock Split may vary from the estimate above, and the beneficial ownership percentage of our shares of Common Stock held by our current directors and executive officers and Brookstone XXIV and the beneficial ownership percentage of the Continuing Stockholders after the Reverse Stock Split will proportionally increase or decrease as a result of purchases, sales and other transfers of our shares of Common Stock by our stockholders prior to the effective date of the Reverse Stock Split, and depending on the number of shares held in street name that are actually cashed out in the Reverse Stock Split.

Effects on Option Holders

Upon effectiveness of the Reverse Stock Split, any options under the Company’s Amended and Restated 2006 Equity Incentive Plan, the Company’s 2012 Equity Incentive Plan and the Company’s 2014 Equity Incentive Plan will have their number of shares and exercise prices adjusted proportionately to give effect to the 1-for-15 Reverse Stock Split, with any fractional shares resulting from such adjustment rounded to the nearest whole number. The vesting schedule for the options will remain unchanged.

Conduct of Our Business after the Reverse Stock Split

Except as described in this proxy statement neither we nor our management have any current plans or proposals to effect any extraordinary corporate transaction, such as a merger, reorganization or liquidation, a sale or transfer of any material amount of our assets, a change in management, a material change in our indebtedness or capitalization, or any other material change in our corporate structure or business. We expect to conduct our business and operations after the effective date of the Reverse Stock Split in substantially the same manner as currently conducted.

Except as described in this proxy statement with respect to the use of funds to finance the Reverse Stock Split and related costs and our plans to deregister our Common Stock under the Exchange Act, the Reverse Stock Split is not anticipated to have a material effect upon the conduct of our business. We intend, however, to continue to evaluate and review our businesses, properties, management and other personnel, corporate structure, capitalization and other aspects of our operations in the same manner as we historically have from time to time, and to make such changes as we consider appropriate.

By way of example, we may determine to propose additional reverse stock split transactions in the future, depending on whether the Board determines that the transaction would be cost-effective to us. Factors that the Board would consider at the time include the number of our stockholders, the trading price of our Common Stock, the cost of cashing out fractional shares and of the reverse stock split generally, cost savings to the Company anticipated from the reverse stock split and strategic alternatives at the time available to the Company. We have no present intention of proposing any additional reverse stock splits. We also intend to continue to explore from time to time acquisitions and other business opportunities to expand or strengthen our businesses. In that regard, we may review proposals or may propose the acquisition or disposition of assets or other changes in our business, corporate structure, capitalization, management or other changes that we then consider to be in our best interests and in the best interests of Continuing Stockholders after the Reverse Stock Split. We may also explore opportunities for business combinations in which the Company may be acquired or our stockholders would not constitute a majority of the stockholders of the surviving corporation. There are currently no plans to enter into any such transactions or any other transactions that would require stockholder approval. In addition, our executive officers and directors are expected to retain their respective positions with us following the Reverse Stock Split.

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

General

The following discussion summarizes the material U.S. federal income tax consequences of the Reverse Stock Split to the Company and its stockholders. This discussion is based on the Code, the U.S. Treasury Regulations promulgated thereunder and judicial and administrative rulings, all in effect as of the date hereof and all of which are subject to change, possibly with retroactive effect, or differing interpretations, which could result in U.S. federal income tax consequences different from those described below. This discussion does not address any aspects of state, local, or non-U.S. laws or federal laws other than those relating to U.S. federal income taxation and is not a complete analysis or description of all of the possible tax consequences of the Reverse Stock Split or of the ownership or disposition of Common Stock. In addition, this discussion does not address the tax consequences of transactions effectuated before, after or at the same time as the Reverse Stock Split, whether or not they are in connection with the Reverse Stock Split, including, without limitation, the exercise or cancellation of options to purchase Common Stock.

This discussion addresses only holders that own their Common Stock, and will own their Common Stock, as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment purposes). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder in light of such holder’s particular circumstances, including, for example, the following holders:

No ruling has been requested from the Internal Revenue Service (the “IRS”) in connection with the Reverse Stock Split or any related transactions. Accordingly, the discussion below is not binding on the IRS or any court, and there can be no assurance that the IRS will not take a contrary position or that any contrary position taken by the IRS will not be sustained by a court. Furthermore, no opinion of counsel has been or will be rendered with respect to the tax consequences of the Reverse Stock Split or any related transactions.

For purposes of this discussion, a “U.S. Holder” is any beneficial owner of Common Stock that, for U.S. federal income tax purposes, is:

A “Non-U.S. Holder” is any beneficial owner of Common Stock that is not a U.S. Holder (Non-U.S. Holders together with U.S. Holders, collectively, the “Holders”).

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Common Stock, the tax treatment of a partner in that partnership generally will depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership that holds Common Stock, you are urged to consult your tax advisor regarding the U.S. federal income tax consequences to you on the Reverse Stock Split.

ALL HOLDERS OF COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. TAX CONSEQUENCES TO THEM OF THE TRANSACTION.

Tax Consequences of the Reverse Stock Split to U.S. Holders

In General

In general, except to the extent of any Cash Consideration received in the Reverse Stock Split, no U.S. Holder should recognize any gain or loss with respect to the Reverse Stock Split for U.S. federal income tax purposes, and a U.S. Holder should have the same adjusted tax basis and holding period in its Common Stock as such holder had immediately prior to the Reverse Stock Split.

U.S. Holders Receiving Cash Consideration in Exchange for Common Stock in the Reverse Stock Split.

A U.S. Holder’s receipt of Cash Consideration in exchange for Common Stock in the Reverse Stock Split generally will be a taxable transaction to such holder for U.S. federal income tax purposes. The U.S. federal income tax consequences to a U.S. Holder may vary depending upon the U.S. Holder’s particular facts and circumstances. Under Section 302 of the Code, a U.S. Holder’s exchange of Common Stock for Cash Consideration in the Reverse Stock Split is treated as a “sale or exchange” of such stock for U.S. federal income tax purposes if the exchange (i) results in a “complete termination” of the U.S. Holder’s equity interest in the Company under Section 302(b)(3) of the Code, (ii) is a “substantially disproportionate” redemption with respect to the U.S. Holder under Section 302(b)(2) of the Code, or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. Holder under Section 302(b)(1) of the Code, each as described below (collectively, the “Section 302 Tests”). A U.S. Holder’s contemporaneous dispositions or acquisitions of Common Stock (or individuals or entities related to such U.S. Holder) may be deemed to be part of a single integrated transaction and may be taken into account in determining whether a Section 302 Test has been satisfied.

A U.S. Holder’s exchange of Common Stock for Cash Consideration in the Reverse Stock Split is a “complete termination” of the U.S. Holder’s equity interest in the Company under Section 302(b)(3) of the Code if, in connection with the Reverse Stock Split, either (i) the U.S. Holder, either actually or constructively, owns no Common Stock immediately after the exchange, or (ii) the U.S. Holder actually owns no Common Stock immediately after the exchange and, with respect to Common Stock constructively owned by the U.S. Holder immediately after such exchange, the U.S. Holder is eligible to waive, and effectively waives, constructive ownership of all such Common Stock under the procedures described in Section 302(c) of the Code.

A U.S. Holder’s exchange of Common Stock for Cash Consideration in the Reverse Stock Split is a “substantially disproportionate” redemption with respect to the U.S. Holder under Section 302(b)(2) of the Code if (i) immediately following the exchange, the U.S. Holder actually and constructively owns less than 50% of the total combined voting power of all classes of the Company’s stock entitled to vote, and (ii) the percentage of voting shares actually and constructively owned by the U.S. Holder immediately following the exchange is less than 80% of the percentage of voting shares actually and constructively owned by such U.S. Holder immediately prior to such exchange.

Even if a U.S. Holder’s exchange of Common Stock for Cash Consideration in the Reverse Stock Split fails to qualify as a “complete termination” or a “substantially disproportionate” redemption, as described above, a U.S. Holder’s exchange may nevertheless be treated as “not essentially equivalent to a dividend” with respect to the U.S. Holder under Section 302(b)(1) of the Code if the U.S. Holder’s exchange results in a “meaningful reduction” in the U.S. Holder’s interest in the Company. Whether a U.S. Holder’s exchange is treated as “not essentially equivalent to a dividend” depends upon the U.S. Holder’s particular facts and circumstances. The IRS has indicated in published rulings that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute a “meaningful reduction” for this purpose.

As indicated above, special “constructive ownership” rules apply in determining whether any of the Section 302 Tests has been satisfied. Under these rules, a U.S. Holder is treated as owning not only the Common Stock actually owned by such U.S. Holder, but also the Common Stock that is “constructively” owned (within the meaning of Section 318 of the Code) by such U.S. Holder. In very general terms, a U.S. Holder may “constructively” own Common Stock actually owned, and in some cases constructively owned, by certain members of such U.S. Holder’s family (except that, in the case of a “complete termination,” a U.S. Holder may waive, under certain circumstances, attribution from family members) and by certain entities (such as corporations, partnerships, trusts and estates) in which the U.S. Holder has an equity interest, as well as any Common Stock the U.S. Holder has an option to purchase.

Sale or Exchange Treatment. If any one of the three Section 302 Tests described above is satisfied (i.e., the U.S. Holder’s exchange of Common Stock for Cash Consideration in the Reverse Stock Split is treated as a “sale or exchange” for U.S. federal income tax purposes), a U.S. Holder recognizes gain or loss in an amount equal to the difference, if any, between the amount of any Cash Consideration received by such U.S. Holder and the U.S. Holder’s adjusted tax basis in the Common Stock exchanged in the Reverse Stock Split. In general, a U.S. Holder’s adjusted tax basis in its Common Stock will be equal to the U.S. Holder’s cost of acquiring the Common Stock. Any gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder’s holding period for the Common Stock exchanged in the Reverse Stock Split exceeds one year as of the date of the exchange. Certain non-corporate U.S. Holders (including individuals) are currently subject to reduced rates of U.S. federal income tax in respect of long-term capital gain. A U.S. Holder’s ability to deduct capital losses is subject to limitations under the Code. A U.S. Holder must calculate gain or loss separately for each block of Common Stock (generally, Common Stock acquired at the same cost in a single transaction) exchanged in the Reverse Stock Split.

Distribution Treatment. If none of the Section 302 Tests described above are satisfied, a U.S. Holder is treated as receiving a distribution with respect to such U.S. Holder’s Common Stock in an amount equal to the Cash Consideration received by such U.S. Holder in the Reverse Stock Split. The distribution is treated as a dividend to the extent of the Company’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Provided that certain holding period requirements are satisfied, any portion of a distribution that is treated as a dividend generally will constitute “qualified dividend income.” Non-corporate U.S. Holders (including individuals) are currently subject to reduced rates of U.S. federal income tax in respect of “qualified dividend income.” The amount of any distribution in excess of the Company’s current or accumulated earnings and profits would be treated as a tax-free return of the U.S. Holder’s adjusted tax basis in its Common Stock, and thereafter as gain from the sale or exchange of the Common Stock.

If a corporate U.S. Holder’s exchange of Common Stock for Cash Consideration in the Reverse Stock Split is treated as a dividend, the corporate U.S. Holder may be eligible for a dividends received deduction (subject to applicable exceptions and limitations). Corporate U.S. Holders should consult their tax advisors regarding whether a dividend-received deduction is available to them.

If a U.S. Holder’s exchange of Common Stock for Cash Consideration in the Reverse Stock Split is treated as a dividend, the IRS may take the position that another U.S. Holder, including a U.S. Holder that does not participate in such exchange, receives a constructive distribution under Section 305(c) of the Code if such other U.S. Holder’s interest in the earnings or assets of the Company increases as a result of the exchange. Such a constructive distribution would be treated as a dividend to the extent of the Company’s current or accumulated earnings and profits. All U.S. Holders are urged to consult their own tax advisors regarding the possibility of constructive distributions resulting from the exchange of Common Stock for Cash Consideration in the Reverse Stock Split.

The determination of whether a corporation has current or accumulated earnings or profits is complex and the legal standards to be applied are subject to uncertainties and ambiguities. Additionally, whether a corporation has current earnings and profits cannot be determined until the end of the taxable year. Accordingly, if an exchange of Common Stock for Cash Consideration in the Reverse Stock Split is treated as a distribution rather than a sale or exchange under Section 302 of the Code, the extent to which a distribution is treated as a dividend is unclear.

Net Investment Income Tax. Certain non-corporate U.S. Holders (including individuals, estates and trusts) may be subject to a 3.8% tax on all or some portion of such holder’s “net investment income” to the extent it exceeds certain thresholds. For this purpose, “net investment income” generally will include any capital gain recognized on an exchange of Common Stock for Cash Consideration in the Reverse Stock Split (including any income treated as a dividend). U.S. Holders should consult their tax advisors as to the application of the net investment income tax to them.

Tax Consequences of the Reverse Stock Split to Non-U.S. Holders

The U.S. federal income tax rules governing Non-U.S. Holders are complex, and the following is a limited summary of some general rules applicable to certain Non-U.S. Holders with respect to the Reverse Stock Split. Each Non-U.S. Holder is urged to consult its own tax advisor regarding the U.S. federal, state, local and foreign tax consequences to such holder of the Reverse Stock Split.

In general, except to the extent of any Cash Consideration received in the Reverse Stock Split, no Non-U.S. Holder should recognize any gain or loss with respect to the Reverse Stock Split for U.S. federal income tax purposes, and a Non-U.S. Holder should have the same adjusted tax basis and holding period in its Common Stock as such holder had immediately prior to the Reverse Stock Split.

Withholding for Non-U.S. Holders. See the discussion below under “– Distribution Treatment” with respect to the application of U.S. federal income tax withholding to payments made to Non-U.S. Holders pursuant to the exchange.

Sale or Exchange Treatment. If any one of the three Section 302 Tests described above is satisfied (i.e., the Non-U.S. Holder’s exchange of Common Stock for Cash Consideration in the Reverse Stock Split is treated as a “sale or exchange” for U.S. federal income tax purposes), any gain realized by a Non-U.S. Holder generally is not subject to U.S. federal income tax unless:

If the Non-U.S. Holder’s gain is described in the first bullet above, such Non-U.S. Holder generally is subject to U.S. federal income tax under the rules described above as if it were a U.S. Holder of Common Stock and, in the case of a foreign corporation, may be subject to an additional “branch profits tax” at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty).

If the Non-U.S. Holder is described in the second bullet above, such Non-U.S. Holder generally is subject to U.S. federal income tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on any gain, which may be offset by certain U.S. source capital losses of the Non-U.S. Holder.

If the Company meets the criteria described in the third bullet above, a Non-U.S. Holder (other than a Non-U.S. Holder owning more than 5% of the outstanding Common Stock) generally is not subject to U.S. federal withholding tax as a result of the Company’s meeting such criteria but is subject to U.S. federal income tax under the rules described above as if it were a U.S. Holder of Common Stock. Although there can be no assurances in this regard, the Company does not believe that it is or was a USRPHC for U.S. federal income tax purposes during the applicable five-year period.

Distribution Treatment. If none of the Section 302 Tests described above are satisfied, a Non-U.S. Holder is treated as receiving a distribution by the Company with respect to such Non-U.S. Holder’s Common Stock in an amount equal to the Cash Consideration received in exchange for Common Stock in the Reverse Stock Split. The characterization of such distribution for U.S. federal income tax purposes as a dividend, tax-free return of capital or as gain from the sale or exchange of the Common Stock is determined in the same manner as is described above under “- Tax Consequences of the Reverse Stock Split to U.S. Holders – Distribution Treatment.”

Except as described below, a dividend paid to a Non-U.S. Holder generally is subject to U.S. federal withholding tax at a 30% rate or at a lower rate if the Non-U.S. Holder is eligible for the benefits of an income tax treaty that provides for a lower rate. Even if the Non-U.S. Holder is eligible for a lower income tax treaty rate, the Company (or its paying agent) generally is required to withhold at a 30% rate (rather than the lower income tax treaty rate) on a dividend payment to a Non-U.S. Holder unless the Non-U.S. Holder has furnished to the Company (or its paying agent) a properly executed IRS Form W-8BEN or W-8BEN-E (or other appropriate Form W-8 or any successor forms) certifying that such Non-U.S. Holder is entitled to benefits under the income tax treaty. Additional certification requirements apply if a Non-U.S. Holder holds its Common Stock through a foreign partnership or a foreign intermediary. If a Non-U.S. Holder is eligible for a reduced rate of withholding tax under an income tax treaty, the Non-U.S. Holder may obtain a refund of any amounts withheld in excess of that rate by timely filing a refund claim with the IRS.

A dividend paid to a Non-U.S. Holder that is “effectively connected” with its conduct of a trade or business within the United States, and, if required by an income tax treaty, attributable to a permanent establishment that the Non-U.S. Holder maintains in the United States, is not subject to the withholding tax described above, provided that the Non-U.S. Holder furnishes to the Company (or its paying agent) a properly executed IRS Form W-8ECI (or acceptable substitute form) upon which the Non-U.S. Holder represents, under penalties of perjury, that (i) the Non-U.S. Holder is a non-U.S. person, and (ii) the dividend is effectively connected with such Non-U.S. Holder’s conduct of a trade or business within the United States and is includable in its gross income. Any such dividend generally is subject to U.S. federal income tax as if the Non-U.S. Holder were a U.S. Holder. In addition, any such dividend received by a corporate Non-U.S. Holder may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate, or at a lower rate if the Non-U.S. Holder is eligible for the benefits of an income tax treaty that provides for a lower rate.

FATCA Withholding. Under the Foreign Account Tax Compliance Act (“FATCA”), a Non-U.S. Holder of Common Stock generally is subject to a 30% withholding tax on (i) dividends paid on Common Stock and (ii) beginning after December 31, 2019, gross proceeds from the sale or other disposition of Common Stock, unless (1) if the Non-U.S. Holder is a “non-financial foreign entity”, it provides the Company (or its paying agent) or its financial institution with certain documentation relating to its substantial U.S. owners or otherwise certifies that it does not have any substantial U.S. owners, (2) if the Non-U.S. Holder is a “foreign financial institution”, it enters into an agreement with the Department of Treasury to, among other things, report certain information regarding its accounts with or interests held by certain United States persons and by certain non-U.S. entities that are wholly or partially owned by United States persons, and it establishes its compliance with these rules by providing to the Company (or its paying agent) or financial institution with an applicable IRS Form W-8 or (3) the Non-U.S. Holder otherwise qualifies for an exemption from these rules and establishes such exemption by providing to AC (or its paying agent) or financial institution with an applicable IRS Form W-8. The rules relating to FATCA described above may be modified by an applicable intergovernmental agreement between the United States and the jurisdiction in which the Non-U.S. Holder is resident. Non-U.S. Holders are urged to consult their tax advisers regarding how FATCA may apply to their ownership and disposition of Common Stock.

Information Reporting and Backup Withholding

Holders generally are subject to information reporting requirements and backup withholding with respect to any amounts received pursuant to an exchange of Common Stock for Cash Consideration in the Reverse Stock Split. If a Holder receives a Form 1099-DIV from the Company in connection with the exchange, such a Holder is not precluded from taking the position that any amounts received pursuant to the exchange qualify for sale or exchange treatment under one of the Section 302 Tests described above. In addition, Holders may be subject to backup withholding unless such holder provides proof of an applicable exemption or furnishes its taxpayer identification number and otherwise complies with all applicable requirements under the backup withholding rules. Any amounts withheld under the backup withholding rules are not additional tax and will be allowed as a credit against the Holder’s U.S. federal income tax liability and may entitle such Holder to a refund, provided that certain required information is timely furnished to the IRS.

Tax Consequences of the Reverse Stock Split to the Company

The Reverse Stock Split generally should be treated as a tax-free “recapitalization” for U.S. federal income tax purposes, in which case the Company should not recognize any gain or loss for such purposes. As of December 31, 2016, the Company had federal NOLs remaining of approximately $51,900,000, which may be available to reduce taxable income, if any. Code Section 382 rules limit the utilization of NOLs upon an ownership change of the Company. Management believes that there has not been an ownership change under Section 382 and that the Reverse Stock Split should not result in an ownership change under Section 382. However, the Reverse Stock Split may have to be taken into account in determining whether an ownership change occurs in the future. If it is determined that an ownership change has taken place, either historically or in the future, utilization of the Company’s NOLs will be subject to limitations, which could eliminate a substantial portion of the future income tax benefits of the NOLs.

THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION. IT IS NOT A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS THAT MAY BE IMPORTANT TO A PARTICULAR HOLDER. ALL HOLDERS OF COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE TRANSACTION TO THEM, INCLUDING TAX REPORTING REQUIREMENTS, AND THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL AND NON-U.S. TAX LAWS.

Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons

Our current directors and executive officers, as well as Brookstone XXIV, may have interests in the Reverse Stock Split that are different from your interests as a stockholder, and have relationships that may present conflicts of interest. While the Board recommends a vote “FOR” the Reverse Stock Split, to the Company’s knowledge, none of the Company’s affiliates has made a recommendation, in their individual capacities, either in support of or opposed to the Reverse Stock Split. Our current directors and executive officers and Brookstone XXIV have indicated that they intend to vote shares of our Common Stock over which they have voting control ([4,044,240] shares, or approximately [43.2]% of our issued and outstanding shares eligible to vote at the Special Meeting) “FOR” the Reverse Stock Split. Because our directors and executive officers and Brookstone XXIV collectively own [43.2]% of our outstanding shares of Common Stock entitled to be voted at the Special Meeting, and have indicated their intention to vote in favor of the Reverse Stock Split, the Reverse Stock Split will be approved if holders of just an additional [6.9]% of the outstanding shares of Common Stock vote in favor of the proposal.

Upon the effectiveness of the Reverse Stock Split, the aggregate number of shares of our Common Stock owned by our current directors and executive officers and Brookstone XXIV will be reduced proportionately by the Reverse Stock Split ratio of 1-for-15 (subject to the cashing out of fractional shares), and the beneficial ownership percentage of the shares of our Common Stock held by our current directors and executive officers and Brookstone XXIV will increase by approximately [___]% from [___]% to [___]% as a result of the reduction of the number of shares of our Common Stock outstanding (subject to the cashing out of fractional shares). The number of shares to be cashed out in the Reverse Stock Split may vary from the estimate above, and the beneficial ownership percentage of our shares of Common Stock held by our directors and executive officers and Brookstone XXIV and the beneficial ownership percentage of the Continuing Stockholders after the Reverse Stock Split will proportionally increase or decrease as a result of purchases, sales and other transfers of our shares of Common Stock by our stockholders prior to the effective date of the Reverse Stock Split, and depending on the number of street name shares that are actually cashed out in the Reverse Stock Split.

See “Special Factors – Effects of the Reverse Stock Split – Additional Effects on the Affiliated Continuing Stockholders” beginning on page 33 and “Security Ownership of Certain Beneficial Owners and Management” beginning on page 58.

Directors, executive officers and any stockholders who own more than 10% of our outstanding Common Stock will experience certain advantages after the Reverse Stock Split in that they will be relieved of certain SEC reporting requirements and “short-swing profit” recapture provisions under Section 16 of the Exchange Act, and information regarding their compensation and stock ownership will no longer be publicly available. In addition, by deregistering the Common Stock under the Exchange Act subsequent to the consummation of the Reverse Stock Split, we will no longer be prohibited, pursuant to Section 402 of the Sarbanes-Oxley Act of 2002, from making personal loans to our directors or executive officers. We do not, however, have a present intention of making personal loans to our directors or executive officers, and the ability to make such loans was not a reason considered by the Board in evaluating the benefits of the Reverse Stock Split.

In addition, certain of our directors and executive officers hold options to acquire shares of our Common Stock. These stock options will remain outstanding after the Reverse Stock Split, but the number of shares issuable upon exercise of each option will be reduced in the ratio of the Reverse Stock Split, 1-for-15, and the exercise per share of Common Stock will be correspondingly increased in the ratio of 1-for-15. As of the Record Date, such current directors and executive officers held the following options to acquire Common Stock:

Except as described above in this section, none of our affiliates has any interest, direct or indirect, in the Reverse Stock Split other than interests arising from the ownership of securities where those affiliates receive no extra or special benefit not shared on a pro rata basis by all other holders of our Common Stock. In particular, there are no agreements with affiliates to purchase Common Stock upon consummation of or subsequent to the Reverse Stock Split or otherwise with respect to the Reverse Stock Split.

Source of Funds and Expenses

Because the per share Cash Consideration will not be known until the effective date of the Reverse Stock Split and we will not know exactly how many record and beneficial holders of our Common Stock will receive the Cash Consideration for their shares in the Reverse Stock Split, we do not currently know the exact cost of the Reverse Stock Split. Based, however, on information that we have received as of [_____] from our transfer agent, American Stock Transfer & Trust Company, LLC, with regard to the size of holdings of those stockholders who may hold shares in street name, as well as our estimates of other Reverse Stock Split expenses, we believe that the total cash amount required to effect the Reverse Stock Split to us will be approximately $[_____] though, as discussed above, the actual cost may be larger or smaller. This amount includes approximately $[_____] needed to cash out fractional shares (based on an assumed price per share of $[_____] calculated based on the average of the daily closing prices of the Common Stock for the 60 trading days ending on the trading day immediately before the Record Date), approximately $[_____] of legal, accounting and other advisory fees, approximately $[_____] for transfer agent costs and approximately $[_____] of other costs, including costs of printing and mailing, to effect the Reverse Stock Split.

The cash to be paid to stockholders receiving the Cash Consideration in the Reverse Stock Split and the other costs of the Reverse Stock Split will be paid from the Company’s cash on hand. There are no conditions to the availability of the funds for the Reverse Stock Split, and we do not have any alternative financing arrangements or alternative financing plans with respect to the Reverse Stock Split. We do not expect to borrow any part of the funds required to effect the Reverse Stock Split.

Provision for Unaffiliated Stockholders

Each of the Board and Brookstone XXIV believes that this proxy statement, along with the Company’s other filings with the SEC, provide a great deal of information for unaffiliated stockholders to make an informed decision as to the Reverse Stock Split. Therefore, neither the Company nor Brookstone XXIV has made any special provision in connection with the Reverse Stock Split to grant unaffiliated stockholders access to the corporate files of the Company or Brookstone XXIV or to obtain counsel or appraisal services at either the Company’s or Brookstone XXIV’s expense.

Stockholder Approval

A quorum will be present if stockholders holding at least 33 1/3% of the shares entitled to vote are present at the Special Meeting in person or by proxy. Assuming the presence of a quorum, the affirmative vote of the holders of a majority of outstanding shares of our Common Stock entitled to vote at the Special Meeting is required to approve the Reverse Stock Split. Our current directors and executive officers and Brookstone XXIV have indicated that they intend to vote the shares of our Common Stock over which they have voting control ([4,044,240] shares, or approximately [43.2]% of our issued and outstanding shares eligible to vote at the Special Meeting) “FOR” the Reverse Stock Split. Because our directors and executive officers and Brookstone XXIV collectively own [43.2]% of our outstanding shares of Common Stock entitled to be voted at the Special Meeting, and have indicated their intention to vote in favor of the Reverse Stock Split, the Reverse Stock Split will be approved if holders of just an additional [6.9]% of the outstanding shares of Common Stock vote in favor of the proposal.

Effective Date

The Reverse Stock Split will become effective as of the date that we amend our Certificate of Incorporation through the filing of a Certificate of Amendment to the Certificate of Incorporation with the Department of State of the State of New York to effect the Reverse Stock Split. We intend to effect the Reverse Stock Split as soon as possible after the Reverse Stock Split is approved by our stockholders, subject to final authorization by the Board. The suspension of our obligation to file periodic reports and other documents under the Exchange Act will become effective upon the filing with the SEC of a certification and notice of termination of registration on Form 15. The deregistration of our Common Stock under Section 12(g) of the Exchange Act will take effect 90 days after the filing of the Form 15. See “Special Factors – Effects of the Reverse Stock Split” beginning on page 28.

Termination of the Reverse Stock Split

Under applicable New York Law, the Board has a duty to act in the best interests of our stockholders. Accordingly, the Board reserves the right to abandon the Reverse Stock Split if for any reason the Board determines that, in the best interests of our stockholders, it is not advisable to proceed with the Reverse Stock Split, even assuming the stockholders approve the Reverse Stock Split by vote. Although the Board presently believes that the Reverse Stock Split is in our best interests and has recommended a vote “FOR” the Reverse Stock Split, the Board nonetheless believes that it is prudent to recognize that circumstances could possibly change such that it might not be appropriate or desirable to effect the Reverse Stock Split at that time. Such reasons include, but are not limited to:

If the Board decides not to consummate the Reverse Stock Split, whether before or after the time the Special Meeting is held, we will promptly notify our stockholders of the decision by public announcement.

Process for Payment for Fractional Shares; Issuance of New Stock Certificates

Stockholders who own of record fewer than 15 shares of Common Stock before the Reverse Stock Split will receive the Cash Consideration in exchange for all their shares of Common Stock. Stockholders who own of record 15 or more shares of Common Stock before the Reverse Stock Split will continue to own one whole share of Common Stock for each 15 shares they previously owned and will receive the Cash Consideration for any fractional shares of Common Stock they would otherwise be entitled to as a result of the Reverse Stock Split.

For purposes of determining ownership of shares of our Common Stock on the effective date of the Reverse Stock Split, such shares will be considered held by the person in whose name such shares are registered on our transfer agent’s records. We intend to treat stockholders holding shares of our Common Stock in street name in the same manner as registered stockholders whose shares are registered in their names. Prior to the effective date of the Reverse Stock Split, we will conduct an inquiry of all brokers, banks and other nominees that hold shares of our Common Stock in street name. We will ask them to effect the Reverse Stock Split for their beneficial holders holding shares of our Common Stock in street name. We will rely on these brokers, banks and other nominees to provide us with information on how many fractional shares will be cashed out. These brokers, banks and other nominees, however, may have different procedures than those applicable to registered stockholders for processing the Reverse Stock Split. If you hold your shares in street name with a bank, broker or other nominee, and if you have any questions in this regard, we encourage you to contact your bank, broker or nominee.

Within five business days after the effective date of the Reverse Stock Split, the Company expects that its transfer agent, American Stock Transfer & Trust Company, LLC, acting in the capacity of paying agent, will send to each stockholder and to brokers, banks and other nominees, based on information we receive from them in response to our inquiries, for each stockholder whose shares are held in street name, instructions, including letters of transmittal, asking them to surrender their shares of Common Stock in exchange for the Cash Consideration and, if applicable, new stock certificates representing the number of shares of Common Stock owned upon effectiveness of the Reverse Stock Split. Upon proper completion, execution and return of the letter of transmittal and accompanying stock certificate(s) to the transfer agent, along with such other documents as we or our transfer agent may require, the transfer agent will send the Cash Consideration, as well as stock certificate(s) representing the number of shares of Common Stock owned by such stockholder after the Reverse Stock Split, if any, to these stockholders within five business days of receipt. Therefore, the timing of receipt of payment of the Cash Consideration and new stock certificates, if any, is dependent upon proper surrender of your stock certificates and your delivery of properly prepared and executed letters of transmittal. Payment of the Cash Consideration due to stockholders who hold their shares in street name through DTC will be made in accordance with the practices and procedures of DTC.

American Stock Transfer & Trust Company, LLC will act as our agent for purposes of paying for fractional shares in connection with the Reverse Stock Split.

No service charge, brokerage commission, or transfer tax will be payable by a stockholder receiving the Cash Consideration in the Reverse Stock Split.

If any certificate evidencing shares of our Common Stock has been lost or destroyed, we may in our sole discretion accept in lieu thereof a duly executed affidavit and indemnity agreement in a form satisfactory to us. The holder of any shares of our Common Stock evidenced by any certificate that has been lost or destroyed must submit:

Additional instructions with respect to lost or destroyed certificates will be included with the letter of transmittal that our transfer agent will send to stockholders after the effective date of the Reverse Stock Split. In the event that the Company is unable to locate certain stockholders or if a stockholder fails to properly complete, execute, and return the letter of transmittal and accompanying stock certificate(s) to the transfer agent, any funds payable to such holders pursuant to the Reverse Stock Split will be held in escrow until a proper claim is made, subject to applicable unclaimed property and escheat laws.

DO NOT SEND STOCK CERTIFICATES TO US OR THE TRANSFER AGENT UNTIL AFTER YOU HAVE RECEIVED A LETTER OF TRANSMITTAL AND ANY ACCOMPANYING INSTRUCTIONS.

No Appraisal or Dissenters’ Rights

Under New York law, our Certificate of Incorporation and our Bylaws, no appraisal or dissenters’ rights are available to stockholders of the Company who dissent from the Reverse Stock Split.

Potential Anti-Takeover Effects of Amendment

Release No. 34-15230 of the staff of the SEC requires disclosure and discussion of the effects of any action, including the proposed amendment to our Certificate of Incorporation to effectuate the Reverse Stock Split, that may be used as an anti-takeover mechanism. Because the proposed amendment to our Certificate of Incorporation will result in a relative increase in the number of authorized but unissued shares of our Common Stock vis-à-vis the number of outstanding shares of our Common Stock after the Reverse Stock Split, the Reverse Stock Split could, under certain circumstances, have an anti-takeover effect, although this is not the purpose or intent of the Board. A relative increase in the number of our authorized shares could enable the Board to render more difficult or discourage an attempt by a party attempting to obtain control of the Company by tender offer or other means.

As stated above, in the event of the Reverse Stock Split, we have no present intent to use the relative increase in the number of authorized but unissued shares of our Common Stock for anti-takeover purposes, and the proposed amendments are not part of a plan by the Board to adopt a series of anti-takeover provisions. We are not aware of any pending or threatened efforts to obtain control of the Company, and the Board has no present intent to authorize the issuance of additional shares of Common Stock to discourage these efforts if they were to arise.

Escheat Laws

Stockholders should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where we are domiciled and where the funds will be deposited, sums due for fractional shares resulting from the Reverse Stock Split that are not timely claimed after the effective date of the Reverse Stock Split in accordance with applicable law may be required to be paid to the designated agent for each such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds may have to seek to obtain them directly from the state to which they were paid.

Regulatory Approvals

The Company is not aware of any material governmental or regulatory approval required for completion of the Reverse Stock Split, other than compliance with the relevant federal securities laws and the New York Business Corporation Law.

Litigation

There is no ongoing litigation related to the Reverse Stock Split.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains certain forward-looking statements concerning, among other things, our anticipated results, and future plans and objectives that are or may be considered to be “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “should,” “could” and other expressions that indicate future events and trends identify forward-looking statements. These expectations are based upon many assumptions that we believe to be reasonable, but such assumptions ultimately may prove to be materially inaccurate or incomplete, in whole or in part and, therefore, undue reliance should not be placed on them. Several factors which could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to: the reactions of our customers, suppliers and other persons with whom we do business with respect to the Reverse Stock Split; the effects of the Reverse Stock Split on the market for our Common Stock; general global and economic conditions; and other factors recited from time to time in our filings with the SEC. In light of the uncertainty inherent in our forward-looking statements, you should not consider their inclusion to be a representation that the forward-looking statements will be achieved. In evaluating forward-looking statements, you should consider all these risks and uncertainties, together with any other risks described in our other reports and documents furnished or filed with the SEC, and you should not place undue reliance on those statements. We assume no obligation for updating any forward-looking statements, whether as a result of new information, future events, or otherwise. To the extent that there are any material changes in the information contained in this proxy statement, however, the Company will promptly disclose the changes as and to the extent required by applicable law and the rules and regulations of the SEC.

PROPOSAL NO. 1

APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT

The Board has recommended that the Company pursue a deregistration transaction by means of a 1-for-15 Reverse Stock Split of the Common Stock, which will be accomplished by amending the Certificate of Incorporation.

Annex Relating to Proposal No. 1

The form of the proposed amendment to the Certificate of Incorporation to effect the Reverse Stock Split is attached to this proxy statement asAnnex A.

Vote Required for Approval of Proposal No. 1

The affirmative vote of the holders of a majority of all of the shares entitled to vote on this matter will be required for approval. A properly executed proxy marked “ABSTAIN” with respect to this proposal will be counted for purposes of determining whether there is a quorum for the transaction of business at the Special Meeting but will haveAnnual Meeting. A quorum being present, the effectaffirmative vote of a vote against this proposal.

Recommendation of our Board of Directors

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT.

INFORMATION ABOUT THE COMPANY

Name and Address

The nameplurality of the Companyvotes cast is Mechanical Technology, Incorporated, a New York corporation. Our principal executive offices are located at 325 Washington Avenue Extension, Albany, New York 12205, and our telephone number is (518) 218-2550.

Market Price of Common Stock; Dividends

Our Common Stock is quoted onnecessary to elect the OTCQB tier of OTC Markets under the symbol “MKTY.” OTC Markets is not a stock exchange or a regulated entity. The following table sets forth the high and low bid prices per share of our Common Stock for our two most recent fiscal yearsnominees as reported on the OTCQB marketplace. The quotations below do not reflect the retail mark-up, markdown or commissions and may not represent actual transactions.

We have not paid cash dividends on our Common Stock in the past two years and currently plan to retain earnings, if any, to fund the expansion of our business and for general corporate purposes.

Shares Outstanding; Stockholders

Asdirectors of the Record Date, we had [9,369,177] shares of Common Stock outstanding and there were approximately [310] holders of record of our Common Stock.

Prior Public Offerings

We have not made an underwritten public offering of our Common Stock for cash during the three years preceding the date of this proxy statement.

Stock Purchases

During the first quarter of fiscal 2016, the Company, repurchased 10,401 shares of Common Stock at a price range between $0.85 per share and $1.10 per share and at an average price of $0.9654 per share pursuant to a Rule 10b5-1 Stock Repurchase Program. The Company has not otherwise repurchased any shares of its Common Stock during the past two years.

Certain Information Concerning the Company and the Company’s Directors and Executive Officers

The Company is a “filing person” for purposes of Schedule 13E-3. The business address of each of the Company’s executive officers and directors is c/o Mechanical Technology, Incorporated, 325 Washington Avenue Extension, Albany, New York 12205 and the business telephone number is (518) 218-2550. Neither the Company nor any of the Company’s directors or executive officers has been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors) or has been a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Each of the Company’s directors and executive officers is a citizen of the United States.

The following sets forth certain information with respect to the Company’s directors and executive officers:

Frederick W. Jones was appointed our President and Chief Executive Officer on January 18, 2017, and has also served as our Chief Financial Officer since September 2011. In addition, Mr. Jones was appointed our Secretary in June 2009. He was promoted to Vice President of Finance and Operations of MTI Instruments in April 2010, from the Senior Director of Finance and Operations at MTI Instruments, which position he had held since May 2007.

David C. Michaelshas served as our Chairman of the Board since January 18, 2017, and as a director since August 2013. Mr. Michaels is the Chief Financial Officer of the American Institute for Economic Research, Inc., an internationally recognized economics research and education organization, and has served in this position since October 2008. Mr. Michaels is a member of the Board of Directors of Iverson Genetic Diagnostics, Inc., whichoffers advanced genetic testing to health care providers to promote early disease detection and help physicians achieve optimal dosing of critical medications.

Thomas J. Marusakhas served as a director since December 2004. Since 1986, Mr. Marusak has served as President of Comfortex Corporation, a manufacturer of window blinds and specialty shades. In 2011, Mr. Marusak was elected to the Board of Directors of the Capital District Physician’s Health Plan, Inc., the dominant non-profit health insurance provider in upstate New York covering over 300,000 member lives and generating over $2.2 billion in annual revenues, of which he is also a member of the Finance Committee of the Board.

Michael Toporekhas served as a director since October 21, 2016. Since 2003, Mr. Toporek has served as the Managing General Partner of Brookstone Partners, a lower middle market private equity firm based in New York, New York and an affiliate of Brookstone XXIV. Mr. Toporek currently serves on the Board of Trustees of Harlem Academy, a private school for gifted children from underserved communities.

Matthew E. Lipmanhas served as a director since October 21, 2016. Since 2004, Mr. Lipman has served as Managing Director of Brookstone Partners, a lower middle market private equity firm based in New York, New York and an affiliate of Brookstone XXIV. Mr. Lipman currently serves on the Board of Directors of Instone, LLC, a distributor of building product materials and Denison Pharmaceuticals, LLC, a contract manufacturer of cosmetic and over the counter pharmaceutical products.

Edward R. Hirshfieldhas served as a director since October 21, 2016. Since 2015, Mr. Hirshfield has served as a partner at Steppingstone Group, LLC, a special situations private equity fund located in New York, New York. Mr. Hirshfield worked as a Senior Analyst at CRG, LLC, a family office that invests in distressed securities with a concentration on trade claims and other distressed securities, from 2012 through 2014.

William P. Phelan has served as a director since December 2004. Mr. Phelan is the co-founder and Chief Executive Officer of Bright Hub, Inc., a software company founded in 2005, which focuses on the development of online software for commerce. Mr. Phelan serves on the Board of Trustees and is a Finance Committee member and an Investment Committee Chair for Capital District Physician’s Health Plan, Inc., the dominant non-profit health insurance provider in upstate New York covering over 300,000 member lives and generating over $2.2 billion in annual revenues. Mr. Phelan also serves on the Board of Trustees and Chairman of the Audit Committee of the Paradigm Mutual Fund Family, which serves institutional as well as individual investors with a value focused stock selection strategy.

Past Contacts, Transactions, Negotiations and Agreements

There are no agreements between the Company or the Company’s executive officers and directors and any other person with respect to any securities of the Company, except for: (i) the Securities Purchase Agreement (as defined herein); (ii) the Registration Rights Agreement (as defined herein); and (iii) outstanding stock options under the Company’s Amended and Restated 2006 Equity Incentive Plan, the Company’s 2012 Equity Incentive Plan and the Company’s 2014 Equity Incentive Plan. These stock options held by or in accounts for the benefit of our executive officers and directors will be affected by the Reverse Stock Split in the same manner as the outstanding shares of Common Stock in all material respects.

Except as set forth in Proposal No. 1. In other words, the preceding paragraph, there have been no (and there are no currently proposed) transactions in whichnominees to receive the amount involved exceeded $60,000greatest number of votes cast, up to which the Company was (or is to be) a party and in which any executive officer or director had (ornumber of nominees up for election, will have) a direct or indirect material interest.

INFORMATION ABOUT BROOKSTONE XXIV AND ITS AFFILIATESbe elected.

Brookstone XXIVAssuming a quorum is the largest stockholder of the Company and may be deemed to be subject to Rule 13e-3 promulgated by the SEC under the Exchange Act with respect to “going private” transactions and is a “filing person” for purposes of Schedule 13E-3.

Identity and Background

Brookstone XXIV is a Delaware limited liability company controlled by its Managing Member, Brookstone XXIV Flow, LLC, a Delaware limited liability company (“Brookstone Flow”), which in turn is controlled by its Managing Member, Brookstone XXIV Meter, LLC, a Delaware limited liability company (“Brookstone Meter” and together with Brookstone XXIV and Brookstone Flow, the “Brookstone Entities”), which in turn is controlled by its Managing Member, Edward R. Hirshfield, a director of the Company. The business address ofpresent, each of the Brookstone Entities is 122 East 42nd Street, Suite 4305, New York, New York 10168. The business telephoneother proposals will be approved by our stockholders if the number of Brookstone XXIV is (212) 302-0066. The principal businessvotes cast in favor of Brookstone XXIV is investing in securities. The principal businessthe proposal exceeds the number of Brookstone Flow is serving asvotes cast against the Managing Member of Brookstone XXIV. The principal business of Brookstone Meter is serving as the Managing Member of Brookstone Flow.proposal.

None of the Brookstone Entities has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the Brookstone Entities has been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors) or has been a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

Past Contacts, Transactions, Negotiations and Agreements

Securities Purchase Agreement. On October 21, 2016, the Company and Brookstone XXIV entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) pursuant to which on such date the Company issued and sold 3,750,000 shares of Common Stock (the “Brookstone XXIV Shares”) to Brookstone XXIV for an aggregate of $2,737,500, or $0.73 per share. The Company also agreed to (i) appoint Messrs. Hirshfield, Lipman and Toporek, each a designee of Brookstone XXIV, to the Board, (ii) appoint Mr. Hirshfield to the Compensation Committee of the Board and Mr. Lipman to the Audit Committee and Governance and Nominating Committee of the Board, (iii) maintain such committee appointments, (iv) appoint one of such designated directors (or a successor named by Brookstone XXIV) to each Board committee created after October 21, 2016 and maintain such appointments, and (v) include certain numbers of such designated directors (or successors named by Brookstone XXIV) as nominees recommended by the Board for election as directors, as long as Brookstone XXIV and its affiliates beneficially own outstanding shares of Common Stock. At any time Brookstone XXIV and its affiliates beneficially own at least 25% of the outstanding Common Stock, the Company must include three such Brookstone XXIV-designated directors on its Board and as Board-recommended director nominees. At any time Brookstone XXIV and its affiliates beneficially own at least 10% but less than 25% of the outstanding Common Stock, the Company must include two such Brookstone XXIV-designated directors on its Board and as Board-recommended director nominees. At any time Brookstone XXIV and its affiliates beneficially own any Common Stock but less than 10% of the outstanding Common Stock, the Company must include one such Brookstone XXIV-designated director on its Board and as a Board-recommended director nominee.

The Company further agreed pursuant to the Securities Purchase Agreement that it would not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for its equity securities, other than pursuant to a Demand Registration (as defined below) during the 90-day period beginning on the effective date of any registration statement in connection with a Demand Registration, except pursuant to a registration statement covering (i) sales or distributions of the Company’s equity securities or any securities convertible into or exchangeable or exercisable for its equity securities pursuant to a registration statement on Form S-4 or Form S-8 or any successor form, (ii) the issuance Common Stock upon the conversion, exercise or exchange, by the holder thereof, of options, warrants or other securities convertible into or exercisable or exchangeable for Common Stock pursuant to their terms, or (iii) the issuance of Common Stock in connection with transfers to dividend reinvestment plans or to employee benefit plans in order to enable any such employee benefit plan to fulfill its funding obligations in the ordinary course.

In connection with the Securities Purchase Agreement, the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agent”), entered into an amendment (the “Rights Agreement Amendment”) to the Rights Agreement.  The Rights Agreement is intended to act as a deterrent to any person (together with all affiliates and associates of such person) acquiring “beneficial ownership” (as defined in the Rights Agreement) of 4.99%One or more inspectors of the outstanding Common Stock without the approval of the Board (an “Acquiring Person”), in an effort to protect against a possible limitation on the Company’s ability to use its NOLs.  The Rights Agreement Amendment exempts Brookstone XXIV and its affiliates and associates from the definition of “Acquiring Person” under the Rights Agreement.  The Company and the Board also took action in order to render inapplicable all restrictions on Brookstone XXIV as an “interested shareholder” under Section 912 of the New York Business Corporation Law.

The Company’s status as an SEC reporting company has no bearing on the Company’s ability to utilize its NOLs and the Board will continue to take all measures to protect against a possible limitation on the Company’s ability to utilize its NOLs notwithstanding the deregistration of our Common Stock.  Accordingly, stockholders are cautioned that the Rights Agreement will remain in effect and continue to be strictly enforced by the Board following the deregistration of our Common Stock.

Registration Rights Agreement. On October 21, 2016, the Company and Brookstone XXIV entered into a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed to, at any time after December 20, 2016 and upon the request of holders of at least 25% of the outstanding Brookstone XXIV Shares, to file a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), to register the resale of the Brookstone XXIV Shares (a “Demand Registration”).  The Company also agreed, subject to certain conditions and exclusions, to include the resale of the Brookstone XXIV Shares in any registration statement that the Company files under the Securities Act (other than a registration statement on Form S-4 or Form S-8) upon the request of any holder of Brookstone XXIV Shares.  The Registration Rights Agreement terminates on the earlier of October 21, 2021 or the date that Brookstone XXIV or any permitted assignee or successor of Brookstone XXIV owns less than 10% of the outstanding shares of the Common Stock.

Joint Filing Agreement. On October 27, 2016, the Brookstone Entities and Messrs. Hirshfield, Lipman and Toporek (collectively, the “Brookstone Parties”) entered into a Joint Filing Agreement in which the Brookstone Parties agreed to the joint filing on behalf of each of them of statements on Schedule 13D with respect to the securities of the Company.

Other than as described in this proxy statement, there are no contracts, arrangements, understandings or relationships among the Company and any of the Brookstone Parties, or between the Company or any of the Brookstone Parties and any other person, with respect to the securities of the Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of shares of voting stock of the Company, as of January 10, 2018, of (i) each person known by the Company to beneficially own more than 5% of the shares of outstanding Common Stock, based solely on filings with the SEC, (ii) each of the Company’s executive officers and directors and (iii) all of the Company’s executive officers and directors as a group. The address of each of the directors and executive officers of the Company is c/o Mechanical Technology, Incorporated, 325 Washington Avenue Extension, Albany, New York 12205.

* Less than 1%

Footnotes

SPECIAL MEETING AND VOTING INFORMATION

Outstanding Voting Securities and Voting Rights

The subject class of securities to which this proxy statement relates is our Common Stock, $0.01 par value per share. Each share of Common Stock entitles the holder thereof to one vote.

Record Date

Only stockholders of record at the close of business on the Record Date are entitled to receive notice of and to vote at the Special Meeting or any adjournments or postponements thereof. As of the close of business on the Record Date, [9,369,177] shares of Common Stock were outstanding and entitled to vote at the Special Meeting.

Information Concerning Proxies; Revocation of Proxies

Sending in a signed proxy will not affect your right to attend the Special Meeting and vote in person. All proxies that are properly completed, signed and returned to us prior to the Special Meeting, and that have not been revoked, unless otherwise directed by you, will be voted in accordance with the recommendations of the Board set forth in this proxy statement. You may revoke your proxy at any time before it is voted either by (i) filing with the Secretary of the Company, at its principal executive offices, 325 Washington Avenue Extension, Albany, New York 12205, a written notice of revocation or a duly executed proxy bearing a later date, or (ii) by attending the Special Meeting, delivering written notice of revocation of your proxy and voting your shares in person.

Solicitation of Proxies

The expenses of this solicitation will be paid by the Company. To the extent necessary to ensure sufficient representation at the Special Meeting, proxies may be solicited by any appropriate means, including by telephone, facsimile or email, by officers, directors and regular employees of the Company, who will receive no additional compensation therefor. The Company does not anticipate utilizing the services of any outside firmelection appointed for the solicitation of proxies formeeting will tabulate the Special Meeting. The Company will pay persons holding Common Stock in their names or in the names of their nominees, but not owning such stock beneficially (such as brokerage firms, banks and other fiduciaries), for the reasonable expense of forwarding soliciting material to their principals.

Quorum and Certain Voting Matters

A quorum will be present if stockholders holding at least 33 1/3% of the shares entitled to vote are present at the Special Meetingvotes cast in person or by proxy. Abstentionsproxy at the Annual Meeting and will be treateddetermine whether or not a quorum is present. The inspectors of election will treat abstentions as Common Stockshares that are present and entitled to vote for purposes of determining the presence of a quorum. quorum, but as not cast for purposes of determining the vote on any matter submitted to stockholders. As abstentions are not included in calculating votes cast with respect to any proposal, abstentions will have no effect on the outcome of the election of directors or any other proposal submitted to stockholders at the Annual Meeting.

If a broker indicates onsubmits a proxy indicating that it does not have the discretionary authority as to certain Common Stock, referredshares to asvote on a broker non-vote,particular matter, those shares will be consideredtreated as shares that are present and entitled to vote for purposes of determining quorum, but as not cast for purposes of determining the existence ofvote on such matter submitted to the stockholders for a quorum butvote. As a result, broker non-votes will not be entitled to vote athave no effect on the Special Meeting. In general, under the rulesoutcome of the various nationalelection of directors or any of the other proposals.

Format of and regional securities exchanges, holdersAdmission to the Annual Meeting

This year we will hold the Annual Meeting in a virtual-only format, which will be conducted over the internet via live webcast. In addition, we may continue to hold our annual meetings using a virtual-only format in future years, as we believe that a virtual format is more environmentally-friendly, allows greater stockholder participation, and decreases the costs of recordholding the annual meeting. We intend to hold our virtual annual meetings in a manner that affords stockholders the same general rights and opportunities to participate, to the greatest extent possible, as they would have at an in-person meeting.

The Annual Meeting will be held live via the authority to vote shares for which their customers do not provide voting instructionsInternet on certain routine, uncontested items, but not on non-routine proposals. In the case of non-routine items for which specific voting instructions have not been provided, the institution holding street name shares cannot vote those shares. These are considered to be “broker non-votes.” Since there are no routine items to be voted onThursday, May 30, 2024 at the Special Meeting, nominee record holders of our Common Stock that do not receive voting instructions from the beneficial owners of such shares[10:00 a.m.] Eastern Time, at www.virtualshareholdermeeting.com/SLNH2024. You will not be able to return aattend the meeting in person. Participation in and attendance at the Annual Meeting is limited to our stockholders of record as of the close of business on April 19, 2024, and other persons holding valid proxies for the Annual Meeting. Online access will begin at [9:45] a.m. Eastern Time, on May 30, 2024, and we encourage you to access the Annual Meeting prior to the start time. To be admitted to the Annual Meeting at www.virtualshareholdermeeting.com/SLNH2024, you must enter the 16-digit control number included on your proxy card with respector, for beneficial owners of shares held in “street name” as discussed above the heading “Beneficial Owner: Shares Registered in the Name of Broker, Bank, or other Nominee,” on your voter information form. If you encounter difficulties accessing the virtual meeting, please call the technical support number that will be posted at www.virtualshareholdermeeting.com/SLNH2024.

Stockholders will be able to such shares (and therefore, we dosubmit questions via the online platform during a portion of the Annual Meeting. You may submit questions by signing into the virtual meeting platform at www.virtualshareholdermeeting.com/ SLNH2024, typing a question into the “Ask a Question” field, and clicking “submit.” Only questions that are pertinent to meeting matters will be answered during the Annual Meeting, subject to time constraints. Questions regarding personal matters or matters not expect any broker non-votes with respectrelevant to the proposal to be voted on at the Special Meeting); as a result, these sharesAnnual Meeting will not be considered presentanswered. If we receive substantially similar questions, we will group them together to avoid repetition. If there are questions pertinent to meeting matters that cannot be answered during the meeting due to time constraints, we will post answers to a representative set of such questions at the Special Meetinghttps://www.solunacomputing.com/investors/. The questions and will not count towards the satisfaction of a quorum.

The affirmative vote of the holders of a majority of all shares of Common Stock issued and outstanding and entitled to vote at the Special Meetinganswers will be required to approveavailable as soon as practicable after the proposed amendment to the CertificateAnnual Meeting.

Householding of Incorporation to effect the Reverse Stock Split. Because the Company’s executive officers and directors and Brookstone XXIV together own approximately [43.2]% of the outstanding shares of Common Stock entitled to be voted at the SpecialAnnual Meeting have indicated their intention to vote in favor of the Reverse Stock Split, the Reverse Stock Split will be approved if just an additional [6.9]% of the outstanding shares of Common Stock vote in favor of the proposal.

In determining whether the proposed amendment to the Certificate of Incorporation to effect the Reverse Stock Split has received the requisite number of affirmative votes, abstentions and broker non-votes, as well as the failure to vote, will have the effect of a voteagainst the proposed amendment to the Certificate of Incorporation to effect the Reverse Stock Split.

Voting of Proxies

Shares represented by properly executed proxies will be voted at the Special Meeting in accordance with the instructions specified thereon. If no instructions are specified, the shares represented by any properly executed proxy will be voted “FOR” the proposed amendment to the Certificate of Incorporation to effect the Reverse Stock Split.

FINANCIAL INFORMATION

Historical Financial Information

The Company’s audited financial statements for the fiscal years ended December 31, 2016 and December 31, 2015, and the notes thereto, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, are incorporated by reference in this proxy statement.

The Company’s unaudited financial statements for the period ended September 30, 2017, and the notes thereto, contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, are incorporated by reference in this proxy statement.

As of September 30, 2017, the book value per share of Common Stock was $0.49.

See “Where You Can Find More Information – Incorporation by Reference” beginning on page 63.

WHERE YOU CAN FIND MORE INFORMATION

The Reverse Stock Split is a “going private” transaction subject to Rule 13e-3 of the Exchange Act. The Company and Brookstone XXIV have filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 under the Exchange Act with respect to the Reverse Stock Split. The Schedule 13E-3 contains additional information about the Company and Brookstone XXIV. Copies of the Schedule 13E-3 are available for inspection and copying at the principal executive offices of the Company during regular business hours by any interested stockholder of the Company, or a representative who has been so designated in writing, and may be inspected and copied, or obtained by mail, by written request directed to Frederick W. Jones, Chief Executive Officer, Chief Financial Officer and Secretary, Mechanical Technology, Incorporated, 325 Washington Avenue Extension, Albany, New York 12205.

The Company is currently subject to the information requirements of the Exchange Act and files periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters.

You may read and copy any document we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public electronically on the SEC’s website at http://www.sec.gov.

Incorporation by Reference

In the Company’s filings with the SEC, information is sometimes incorporated by reference. This means that the Company is referring you to information that it has filed separately with the SEC. The information incorporated by reference should be considered part of this proxy statement, except for any information superseded by information contained directly in this proxy statement.

This proxy statement incorporates by reference the following documents that the Company has previously filed with the SEC. They contain important information about the Company and its financial condition.

The Company also incorporates by reference any additional documents that the Company may file with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this proxy statement and the date of the Special Meeting.

The Company will provide, without charge, to each person to whom this proxy statement is delivered, upon written or oral request of such person and by first class mail or other equally prompt means within one business day of receipt of such request, a copy of any and all information that has been incorporated by reference, without exhibits unless such exhibits are also incorporated by reference in this proxy statement. You may obtain a copy of these documents and any amendments thereto by written request directed to Frederick W. Jones, Chief Executive Officer, Chief Financial Officer and Secretary, at Mechanical Technology, Incorporated, 325 Washington Avenue Extension, Albany, New York 12205, or by calling Frederick W. Jones at (518) 218-2550.

These documents are also included in the Company’s filings with the SEC, which you can access electronically at the SEC’s website at http://www.sec.gov.

This proxy statement is sent to you as part of the proxy materials for the Special Meeting. You may not consider this proxy statement as material for soliciting the purchase or sale of the Common Stock.

PROXY MATERIALS DELIVERED TO A SHARED ADDRESSMaterials

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statementProxy Statement or annual report to stockholders may have been sent to multiple stockholders who share an address unless we have received instructions to the contrary. We will promptly deliver our proxy statementa separate copy of either document to any stockholder upon written or oral request. Requests may be made by mail to: Mechanical Technology, Incorporated,Soluna Holdings, Inc, ATTN: Investor Relations Department, 325 Washington Avenue Extension, Albany, New York 12205; by e-mail: contact@mechtech.com;hello@soluna.io; or by telephone: (518) 218-2550.(516) 216-9257. Any stockholder who would like to receive separate copies of our proxy statement or our annual proxy statement and/or annual report to stockholders in the future, or any stockholder who is receiving multiple copies and would like to receive only one copy per household in the future, should contact their bank, broker, or other nominee record holder, or us directly at the address, e-mail address or phone number listed above.

STOCKHOLDER Proxy Solicitation Expense

We do not anticipate engaging a paid proxy solicitor to assist with the solicitation of proxies for the Annual Meeting. Our directors, officers, and employees, without receiving any additional compensation, may solicit proxies personally or by telephone, facsimile, or email. The Company will pay all costs and expenses incurred in the solicitation of proxies for the Annual Meeting. We will also reimburse banks, brokers, and other nominees for reasonable expenses incurred in forwarding proxy materials to their customers or principals who are the beneficial owners of shares of Common Stock held in street name.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

We currently have nine directors on the Board.

Upon the recommendation of our Nominating and Corporate Governance Committee, the Board has nominated Edward R. Hirshfield, William P. Phelan, John Bottomley, and John Belizaire for election as directors at the Annual Meeting. Edward R. Hirshfield, William P. Phelan, John Bottomley, and John Belizaire each currently serve on the Board with terms expiring at the Annual Meeting. If elected at the Annual Meeting, they will each be elected to hold office until our 2027 annual meeting of stockholders and until their successors are elected and qualified or until their earlier death, retirement, disqualification, resignation or removal.

All of our directors bring to the Board significant leadership experience derived from their professional experience and service as executives or board members of other corporations. The process undertaken by the Nominating and Corporate Governance Committee in recommending qualified director candidates is described below under “Board of Directors Meetings and Committees – Nominating and Corporate Governance Committee.” Certain individual qualifications and skills of our directors that contribute to the Board’s effectiveness as a whole are described under “Information about Our Directors.”

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR ALL” OF THE NOMINEES LISTED ABOVE AS DIRECTORS OF THE COMPANY.

Information about Our Directors

Set forth below is certain information regarding the directors of the Company, including the nominees for election at the Annual Meeting.

The Board has determined that Messrs. Bottomley, Hazelip, Hirshfield, Marusak, and Phelan are “independent directors,” as defined by the rules and listing standards of The Nasdaq Stock Market LLC (“Nasdaq”). In making this determination, the Board considered the transactions and relationships disclosed under “Certain Relationships and Related Transactions” below. In April 2023 Mr. Michaels was appointed interim chief financial officer and accordingly was no longer an “independent director” until his resignation on April 8, 2024

Edward R. Hirshfield has served as a member of the Board since October 2016. He served as a director of our former subsidiary, MTI Instruments, Inc. (“MTI Instruments”), from October 2016 until its sale in April 2022 and of our subsidiary, Soluna Computing, Inc., formerly known as EcoChain, Inc. (“SCI”), since its incorporation in January 2020. Mr. Hirshfield is currently Managing Member of Apple Ridge Capital Advisors, a special situations and debt advisory firm that focuses on raising debt for lower middle market companies. From 2018 to 2023, Mr. Hirshfield served as Managing Director in the restructuring group at B. Riley FBR, Inc., a leading financial services provider, where he advised stressed and distressed companies and their constituencies. From 2015 until 2018, Mr. Hirshfield served as a partner at Steppingstone Group, LLC, a special situations private equity fund located in New York. Mr. Hirshfield’s responsibilities in this role included business development activities, conducting extensive credit analysis on target companies, as well as portfolio management. Mr. Hirshfield began his career as a loan officer at CIT Group Inc. and then became a restructuring advisor at a boutique investment bank, CDG Group. In 2003, Mr. Hirshfield moved over to the buy side and joined Longacre Fund Management, LLC, a $2.5 billion distressed debt fund. Mr. Hirshfield continued as a distressed investor at Del Mar Asset Management, LP, Ramius LLC, and most recently Apple Ridge Advisors LLC from 2010 through 2015. Mr. Hirshfield has a B.S. in Applied Mathematics from Union College and an M.B.A. from Fordham University Graduate School of Business. Mr. Hirshfield brings over 20 years of experience understanding and analyzing public and private companies. He has an expertise in providing operational and investment recommendations as well as providing extensive valuation and credit analysis, which the Board believes qualifies him to serve as a director.

William P. Phelan has been a member of the Board since December, 2004, has served as Lead Independent Director since April 2023, and had served as our Chairman of the Board from January 2022 through April 30, 2023.. He also served as interim Chief Executive Officer and President of SCI from March 2020 to November 2020, and as interim Vice President of SCI from November 2020 to March 2021. Mr. Phelan is the co-founder and Chief Executive Officer of Bright Hub, Inc., a software company founded in 2005 that focuses on the development of online software for commerce. In May 1999, Mr. Phelan founded OneMade, Inc., an electronic commerce marketplace technology systems and tools provider. Mr. Phelan served as Chief Executive Officer of OneMade, Inc. from May 1999 to May 2004, including for a year after it was sold to, and remained a subsidiary of, America Online. Mr. Phelan serves on the Board of Trustees and is a Finance Committee member, an Executive Committee Member, an Investment Committee Chair and a Compensation Committee Chair for MVP Healthcare, Inc. Mr. Phelan also serves on the Board of Trustees and Chairman of the Audit Committee of the Paradigm Mutual Fund Family. He has also held numerous executive positions at Fleet Equity Partners, Cowen & Company, First Albany Corporation, and UHY Advisors, Inc., formerly Urbach Kahn & Werlin, PC. Mr. Phelan has a B.A. in Accounting and Finance from Siena College and an M.S. in Taxation from City College of New York, and is a Certified Public Accountant. Mr. Phelan contributes leadership, capital markets experience, and strategic insight as well as innovation in technology to the Board, which the Board believes qualifies him to serve as a director.

John Bottomley has served as a member of the Board since October 2021. Mr. Bottomley served on the Executive Committee of SCI since January 2021 prior to our acquisition of Soluna Callisto Holdings Inc., formerly known as Soluna Computing, Inc. (“Soluna Callisto”). Mr. Bottomley is currently an employee of Greenvolt France, and Member of the Board of Directors, for Greenvolt USA. Mr. Bottomley was the co-founder, Partner and has been Chief Development Officer of v-ridium Europe, from June 2020 to July 2021. Mr. Bottomley has also served as a Deputy Strategy Director at Blockchain Climate Institute, a London-based think tank, since July 2021. From August 2017 to March 2020, Mr. Bottomley served as the SVP, Global Development at Vestas Wind Systems, a market leader in the wind industry. Mr. Bottomley served various leadership roles at GE Capital EFS, from September 2014 to May 2017. He also held numerous executive positions at The AES Corporation, Verde Ventures Ltd and Enron Europe Ltd. Additionally, Mr. Bottomley served various international joint venture boards, including the boards of directors of Vestas-WEB development JV (Italy, Germany and France) from 2018 to 2020, Vestas-WKN joint venture (Poland) from 2018 to 2019, Vestas-GEO joint venture (Poland) from 2018 to 2020 Vestas EMP Holdings (Ireland, Iceland, Uganda and Ghana) from 2018 to 2020, Sowitech, a German based international renewable energy development from 2019 and 2020, GE-Advanced Power JV (U.S.) from 2015 to 2016, GE-Maintream JV (Vietnam) from 2015 to 2016, AES-Innovent (France) from 2009 to 2012, AES-WEL (UK) from 2008 to 2012, and Enron-OPET (Turkey) from 2000 to 2001. Mr. Bottomley has a B.S. in Computer Engineering from Clemson University and an MBA in Finance and International Business from NYU Stern School of Business, and is a Chartered Financial Analyst.

John Belizaire has served as a member of the Board and as Chief Executive Officer of SCI since October 2021 and began service as the Chief Executive Officer of the Company on May 1, 2023. Additionally, Mr. Belizaire served as the Chief Executive Officer of Soluna Callisto from June 2018 until our acquisition of Soluna Callisto in October 2021. He also serves as an Operating Advisor of Pilot Growth Equity, a technology growth equity firm, since October 2020. In addition, Mr. Belizaire serves on the Board of Directors of Center for American Entrepreneurship, since May 2020, and the Board of Directors at BanQu Inc, since June 2018. Mr. Belizaire served as the Managing Partner of NextStage LLC, a venture capital firm, from 2002 to 2016. Since June 2006, Mr. Belizaire was the Co-Founder and Chief Executive Officer of FirstBest Systems, which was acquired by Guidewire Software in September 2016, where he served as a Senior Industry Advisor until May 2017. Since January 1997, Mr. Belizaire was the Co-Founder, President and Chief Executive Officer of TheoryCenter, Inc., which was acquired by BEA Systems, Inc. in November 1999, where he served as a Senior Director, Business Development and Strategic Planning until April 2002. Mr. Belizaire has a B.S. in Computer Science and a Master of Engineering in Computer Science from Cornell University. Mr. Belizaire also attended the Executive Development Program at The Wharton School from 2001 to 2002.

William Hazelip has served as a member of the Board since February 2021. From 2015 to March 2022, he has served as Vice President of National Grid PLC, and from April 2022 through present as Senior Vice President, a multinational electricity and gas utility company headquartered in London, England. He has also served as National Grid PLC’s President, Global Transmission (US) from 2017 to 2019 and President of Strategic Growth for National Grid Ventures since August 2019, developing new business opportunities in electric transmission, energy storage, and renewable energy. Prior to joining National Grid, PLC, he was the Managing Director, Business Development at Duke Energy Corporation and the President of Path 15 Transmission, LLC, an independent electric transmission company in California, where he led the acquisition for Duke Energy Corporation. Mr. Hazelip also has extensive experience serving on the board of directors of companies. He currently serves as member of the board of directors of Millennium Pipeline Corporation, a multi-billion dollar natural gas pipeline company, the Vice-Chairman of the board of directors of New York Transco, a growing electric transmission company, and a member of the board of directors representative of Community Offshore Wind, a clean energy joint venture of RWE AG and National Grid plc. Mr. Hazelip began his career as an Area Director for CWL Investments, LLC, a Michigan investor group that owns and operates restaurant franchises including Jimmy John’s Gourmet Sandwich Shops. Mr. Hazelip earned a Bachelor of Arts from Emory University, Atlanta, GA, and an International Master of Business Administration (IMBA) from the Darla Moore School of Business at the University of South Carolina. Mr. Hazelip is an accomplished leader in the energy industry, with deep experience in utility project development, financing, regulation, and operations, which the Board believes, particularly in light of the Company’s involvement with the renewable energy sector as it relates to their cryptocurrency mining subsidiary, qualifies him to serve as a director.

Thomas J. Marusak has served as a member of the Board since December 2004. Additionally, Mr. Marusak served as a member of the Board of Directors of our former subsidiary, MTI Instruments, since April 2011 and has served as a member of the Board of Directors of our subsidiary, SCI, since January 2020. Since 1986 through his retirement in 2023, Mr. Marusak had served as President of Comfortex Corporation, a manufacturer of window blinds and specialty shades. Mr. Marusak was a member of the Advisory Board of Directors for Key Bank of New York from 1996 through 2004 and served on the Board of Directors of the New York Energy Research and Development Authority from 1998 through 2006. In 2019, Mr. Marusak retired from the Board of Directors of the Capital District Physician’s Health Plan, Inc., in Albany, where he had served for the prior eight years and had participated as a member of the board’s Finance, Compensation, Audit, Investment, and Executive Committees. Additionally, Mr. Marusak has served as a Board member for the following entities in the course of his professional career: Center for Economic Growth (past Chair), Dynabil Corp. (Advisory Board), and the Albany Chamber of Commerce (Executive Board). Mr. Marusak received a B.S. in Engineering from Pennsylvania State University and an M.S. in Engineering from Stanford University. Mr. Marusak brings technical development, manufacturing experience, product development and introduction, financial accounting, and human resources expertise to the Board, as well as relevant experience in committee and board service, which the Board believes qualifies him to serve as a director.

Michael Toporek served as our Chief Executive Officer from November 2020 until May 1, 2023 when he stepped down from that position and was selected as Executive Chairman of the Board as of that date. Mr. Toporek has served as a member of the Board since October 2016. Since 2003, Mr. Toporek has served as the Managing General Partner of Brookstone Partners, a lower middle market private equity firm based in New York and an affiliate of Brookstone XXIV. Prior to founding Brookstone Partners in 2003, Mr. Toporek was both an active principal investor and an investment banker. Mr. Toporek began his career in Chemical Bank’s Investment Banking Group, later joining Dillon, Read and Co., which became UBS Warburg Securities Ltd. during his tenure, and SG Cowen and Company. Mr. Toporek currently serves on the Board of Directors of Capstone Therapeutics Corp. Mr. Toporek has a B.A. in Economics and an M.B.A. from the University of Chicago in Finance/Accounting. Mr. Toporek brings strategic and financial expertise to the Board as a result of his experience with Brookstone Partners, which the Board believes qualifies him to serve as a director. As part of our sale of 3,750,000 shares of Common Stock to Brookstone XXIV in October 2016, Brookstone XXIV has two designated directors that sit on the Board; Mr. Toporek is one such director.

Matthew E. Lipman has served as a member of the Board since October 2016. Since 2004, Mr. Lipman has served as Managing Director of Brookstone Partners, a lower middle market private equity firm based in New York and an affiliate of Brookstone Partners Acquisition XXIV, LLC (“Brookstone XXIV”). Mr. Lipman’s responsibilities at Brookstone Partners include identifying and evaluating investment opportunities, performing transaction due diligence, managing the capital structure of portfolio companies, and working with management teams to implement operational and growth strategies. In addition, Mr. Lipman is responsible for executing add-on acquisitions and other portfolio company-related strategic projects. From July 2001 through June 2004, Mr. Lipman was an analyst in the mergers and acquisitions group at UBS Financial Services Inc., responsible for formulating and executing on complex merger, acquisition, and financing strategies for Fortune 500 companies in the industrial, consumer products, and healthcare sectors. Mr. Lipman currently serves on the Board of Directors of Denison Pharmaceuticals, LLC, Advanced Disaster Recovery Inc., Totalstone, LLC, Harmattan Energy Limited and Capstone Therapeutics Corp. Mr. Lipman has a B.S. in Business Administration from Babson College. Mr. Lipman brings 20 years of experience working with companies to establish growth strategies and execute acquisitions, is proficient in reading and understanding financial statements, generally accepted accounting principles, and internal controls as a direct result of his investment experience evaluating companies for potential investments and the management of financial reporting and capital structure for three portfolio companies, as well as relevant experience in serving on other boards of directors, which the Board believes qualifies him to serve as a director. As part of our sale of 3,750,000 shares of Common Stock to Brookstone XXIV in October 2016, Brookstone XXIV has two designated directors that sit on the Board; Mr. Lipman is one such director.

David C. Michaels has served as a member of the Board since August 2013, served as our Lead Independent Director from June 2016 until April 2023 and as our Chairman of the Board from January 2017 to January 2022. Mr. Michaels was selected as Interim Chief Financial Officer on April 24, 2023, and resigned from the position on April 8, 2024, upon the appointment of John Tunison. Mr. Michaels served as the Chief Financial Officer of the American Institute for Economic Research, Inc., an internationally-recognized economics research and education organization, from October 2008 until his retirement in May 2018. Prior to that, Mr. Michaels served as Chief Financial Officer at Starfire Systems, Inc. from December 2006 to September 2008. Mr. Michaels worked at Albany International Corp. from March 1987 to December 2006 as Vice President, Treasury and Tax, and Chief Risk Officer. Mr. Michaels also worked at Veeco Instruments from May 1979 to March 1987 in various roles including Controller and Tax Manager. Mr. Michaels is the Chairman of the Board of Directors and Chair of the Audit Committee of Iverson Genetic Diagnostics, Inc. Mr. Michaels also serves as a member of the Board of Governors and Treasurer of the Country Club of Troy. Mr. Michaels has a Bachelor of Science degree with dual majors in Accounting and Finance and a minor in Economics from the University at Albany and completed graduate-level coursework at the C.W. Post campus of Long Island University. Mr. Michaels also completed the Leadership Institute Program at the Lally School of Management & Technology at Rensselaer Polytechnic Institute. Mr. Michaels contributes more than 30 years of international financial and operating experience in a wide variety of roles in both public and private organizations to the Board, which the Board believes qualifies him to serve as a director. Effective April 21, 2023, Mr. Michaels served as Chief Financial Officer of the Company through April 8, 2024, upon the appointment of Michael Tunison to that office.

There are no family relationships among any of our directors or executive officers.

Board Diversity

BOARD OF DIRECTORS MEETINGS AND COMMITTEES

The Board held six official meetings during 2023. All directors attended at least 80% of all meetings of the Board and any Committee of which they were a member during 2023. The Board has no formal policy regarding attendance at our annual meeting of stockholders; directors are, however, encouraged, but not required, to attend any meetings of our stockholders. All directors, at the time of the meeting, virtually attended the 2023 annual meeting of stockholders. Also, during 2023, the Board of Directors were holding bi-weekly update calls for the entire fiscal year 2023, and are continuing to hold bi-weekly calls through the present day.

The Board has an Audit Committee, a Nominating and Corporate Governance Committee, a Compensation Committee, and an Executive Committee.

Audit Committee

The Audit Committee meets on a regular basis, at least quarterly and more frequently as necessary. The Audit Committee’s primary function is to assist the Board in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, the system of internal controls which management has established and the audit and financial reporting process. The Audit Committee as of the date of this report consists of Messrs. Marusak (Chair), Hirshfield, Phelan, and Bottomley. The Board has determined that each member of the Audit Committee is independent, as defined under the applicable rules and listing standards of Nasdaq and SEC rules and regulations. In addition, the Board has determined that Mr. Marusak qualifies as an “audit committee financial expert” as defined in the rules and regulations of the SEC. Mr. Marusak’s designation by the Board as an “audit committee financial expert” is not intended to be a representation that he is an expert for any purpose as a result of such designation, nor is it intended to impose on him any duties, obligations, or liability greater than the duties, obligations, or liability imposed on him as a member of the Audit Committee and the Board in the absence of such designation.

The Audit Committee met four times during 2023. The responsibilities of the Audit Committee are set forth in the charter of the Audit Committee, which was adopted by the Board and is published on our website at https://www. solunacomputing.com/investors/governance/. The Committee, among other matters, is responsible for the annual appointment of, and for compensating, retaining, overseeing and, where appropriate, replacing, the independent registered public accounting firm as the Company’s auditors, reviews the arrangements for and the results of the auditors’ examination of our books and records, and assists the Board in its oversight of the reliability and integrity of the Company’s accounting policies, financial statements and financial reporting, and disclosure practices, including its system of internal controls, and the establishment and maintenance of processes to assure compliance with all relevant laws, regulations, and company policies. The Audit Committee also reviews the adequacy of charter of the Audit Committee and recommends changes to the Board that it considers necessary or appropriate.

Nominating and Corporate Governance Committee

The Board has adopted a Nominating and Corporate Governance Committee charter, which is published on our website at https://www.solunacomputing.com/investors/governance/. The Nominating and Corporate Governance Committee consists of Messrs.. Hirshfield (Chairman), Hazelip and Marusak. The Board has determined that each member of the Nominating and Corporate Governance Committee is independent, as defined under the applicable rules and listing standards of Nasdaq.

The Nominating and Corporate Governance Committee met once during 2023. The role of the Nominating and Corporate Governance Committee is to assist the Board by: 1) reviewing, identifying, evaluating, and recommending the nomination of Board members; 2) selecting and recommending director candidates to the Board; 3) developing and recommending governance policies of the Company to the Board; 4) addressing governance matters; 5) making recommendations to the Board regarding Board size, composition, and criteria; 6) making recommendations to the Board regarding existing Committees and report on the performance and effectiveness of the Committees to the Board; 7) periodically evaluating the performance of the Board; and 8) assisting the Board with other assigned tasks as needed.

In appraising potential director candidates, the Nominating and Corporate Governance Committee focuses on desired characteristics and qualifications of candidates, and although there are no stated minimum requirements or qualifications, preferred characteristics include business savvy and experience, concern for the best interests of our stockholders, proven success in the application of skills relating to our areas of business activities, adequate availability to participate actively in the Board’s affairs, high levels of integrity, and sensitivity to current business and corporate governance trends and legal requirements, and that candidates, when warranted, meet applicable director independence standards. The Nominating and Corporate Governance Committee has adopted a formal policy for the consideration of director candidates recommended by stockholders. Individuals recommended by stockholders are evaluated in the same manner as other potential candidates. A stockholder wishing to submit such a recommendation should forward it in writing to our Secretary at 325 Washington Avenue Extension, Albany, New York 12205. The mailing envelope should include a clear notation that the enclosure is a “Director Nominee Recommendation.” The recommending party should be identified as a stockholder and should provide a brief summary of the recommended candidate’s qualifications, taking into account the desired characteristics and qualifications considered for potential Board members mentioned above.

Compensation Committee

The Board has adopted a Compensation Committee charter, which is published on our website at https://www. solunacomputing.com/investors/governance/. The Compensation Committee as of the date of this report consists of Messrs. Phelan (Chairman), Hazelip, and Bottomley. The Board has determined that each member of the Compensation Committee is independent, as defined under the applicable rules and listing standards of Nasdaq and SEC rules and regulations.

The Compensation Committee met nine times during 2023. The Compensation Committee is charged with ensuring that the Company’s compensation programs are aligned with Company goals and are adequately designed to attract, motivate, and retain executives and key employees. The role of the Compensation Committee is to assist the Board by:

1) regarding the overall compensation programs, philosophy, and practices of the Company, particularly as it relates to its executive officers, key employees, and directors; 2) reviewing and evaluating Company objectives and goals regarding our Chief Executive Officer’s compensation; 3) determining the compensation program for members of the Board; 4) developing and overseeing the Chief Executive Officer’s process for evaluating the performance objectives and compensation of executive officers; 5) administering the Company’s equity compensation plans; 6) determining succession planning and management development for the Chief Executive Officer and other executive officers; and 7) assisting the Board with other assigned tasks as needed.

In fulfilling its responsibilities, the Compensation Committee may delegate any or all of its responsibilities to a subcommittee of the Compensation Committee and, to the extent not expressly reserved to the Compensation Committee by the Board or by applicable law, rule, or regulation, to any other committee of directors appointed by it.

The Compensation Committee has the sole authority to retain and terminate any compensation consultant, outside counsel, or other advisers as it deems appropriate to perform its duties and responsibilities, including the authority to approve the fees payable to such counsel or advisers and any other terms of retention. The Compensation Committee did not engage any such consultants, counsel, or advisers during 2023.

The Compensation Committee administers our executive compensation programs. This Committee is responsible for establishing the policies that govern base salaries, as well as short- and long-term incentives, for executives and senior management. The Committee considers recommendations made by our Chief Executive Officer and certain other executives when reaching its compensation decisions, including with respect to executive and director compensation. The Committee has approval authority regarding the compensation of the Company’s Chief Executive Officer, as well as the Company’s other executive officers after the review of the Chief Executive Officer’s recommendation and the results of such officer’s performance review.

Executive Committee

The Board formed an Executive Committee in January 2022 and adopted an Executive Committee charter, which is published on our website at https://www.solunacomputing.com/investors/governance/. The Executive Committee as of the date of this report consists of Messrs. Phelan (Chairman), Bottomley, Lipman, and Toporek. The Board has determined that each of Mr. Phelan and Mr. Bottomley are independent, as defined under the applicable rules and listing standards of Nasdaq.

The Executive Committee met every other week for a total 22 meetings in fiscal year 2023. The purpose of the Executive Committee is to represent and assist the Board in its review and approval of certain transactions and other matters requiring Board consideration, and to take action, where necessary, appropriate and authorized by the Board during intervals between regular and special meetings of the Board. The Executive Committee has authority to: 1) monitor the management’s performance against the approved budget of record; 2) authorize mining equipment purchase transactions; 3) authorize the price at which equity securities of the Company are sold; 4) authorize the payment of dividends to holders of preferred stock of the Company; and 5) identify and assess business risks and develop and propose recommendations to management and the Board to minimize such risks. Notwithstanding anything in the foregoing, the Executive Committee is not authorized to 1) take any action that requires an adoption by an independent majority of the Board; 2) complete any transaction that would have a material effect on the Company’s financial statements; or 3) complete any transaction that qualifies as a related party transaction.

The Board’s Role in Risk Oversight

The Board executes its oversight responsibility for risk management directly and through its Committees, as follows:

We do not believe that the Board’s role in risk oversight has any impact on its leadership structure, as discussed below.

Executive Sessions of Directors

Executive sessions, or meetings of outside (non-management) directors without management present, are held periodically throughout the year. At these executive sessions, the outside directors review, among other things, the criteria upon which the performance of the Chief Executive Officer and other executive officers is based, the performance of the Chief Executive Officer against such criteria, and the compensation of the Chief Executive Officer and other executive officers. Meetings are held from time to time with the Chief Executive Officer to discuss relevant subjects.

Board Leadership Structure

The Board recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board understands that there is no single, generally accepted approach to providing Board leadership and that given the dynamic and competitive environment in which we operate, the right Board leadership structure may vary as circumstances warrant. As of the date of this report, Michael Toporek will serve as Executive Chairman of the Board and William Phelan will serve as our Lead Independent Director. The Board recognizes that it is important to determine an optimal board leadership structure to ensure the independent oversight of management as the Company continues to grow. Michael Toporek had served as our Chief Executive Officer since October 2020, and effective May 1, 2023, John Belizaire began service as Chief Executive Officer and Michael Toporek serves as Executive Chairman. The Chief Executive Officer is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while the Chairman of the Board provides guidance to the Chief Executive Officer and presides over meetings of the full Board and the Lead Independent Director coordinates the activities of the other independent directors and performs such other duties and responsibilities as the Board may determine. We believe that this separation of responsibilities also provides a balanced approach to managing the Board and overseeing the Company.

In considering its leadership structure, the Board has taken a number of factors into account. The Board, which consists of directors who are highly qualified and experienced, eight of whom are independent directors, exercises a strong, independent oversight function. This oversight function is enhanced by the fact that the Board’s three of the four standing committees – the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee – are comprised solely of independent directors and the Executive Committee, is comprised of a majority of independent directors.

Board Membership

To fulfill its responsibility to recruit and recommend to the full Board nominees for election as directors, the Nominating and Corporate Governance Committee reviews the size and composition of the Board to determine the qualifications and areas of expertise needed to further enhance the composition of the Board and works with management in attracting candidates with those qualifications. The goal of the Nominating and Corporate Governance Committee, and the Board as a whole, is to achieve a Board that, as a whole, provides effective oversight of the management and business of the Company, through the appropriate diversity of experience, expertise, skills, specialized knowledge, and other qualifications and attributes of the individual directors. Important criteria for Board membership include the following:

The satisfaction of these criteria is implemented and assessed through ongoing consideration of directors and nominees by the Nominating and Corporate Governance Committee and the Board. Based upon these activities and its review of the current composition of the Board, the Committee and the Board believe that most of these criteria have been satisfied, and are actively pursuing the addition of at least one additional director that would help the Board in meeting the diversity goals noted above.

In addition, in accordance with the Nominating and Corporate Governance Committee Charter, the Committee considers the number of boards of directors of other public companies on which a candidate serves. Moreover, directors are expected to act ethically at all times and adhere to the Company’s Code of Conduct and Ethics.

The Nominating and Corporate Governance Committee and the Board believe that each of the nominees for election at the Annual Meeting brings a strong and unique set of attributes, experiences, and skills and provides the Board as a whole with an optimal balance of experience, leadership, competencies, qualifications, and skills in areas of importance to the Company. Under “Proposal 1—Election of Directors” above, we provide an overview of the nominees’ principal occupation, business experience, and other directorships, together with the key attributes, experience, and skills viewed as particularly meaningful in providing value to the Board, the Company, and our stockholders.

REPORT OF THE AUDIT COMMITTEE

In accordance with the Committee’s charter, as published on the Company’s website at https://www. solunacomputing.com/investors/governance, management has the primary responsibility for the Company’s financial statements and the financial reporting process, including maintaining an adequate system of internal control over financial reporting. The Company’s independent registered public accounting firm reports directly to the Audit Committee and is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board. The Audit Committee, among other matters, is responsible for appointing the Company’s independent registered public accounting firm, evaluating such independent registered public accounting firm’s qualifications, independence, and performance, determining the compensation for such independent registered public accounting firm, and pre-approval of all audit and non-audit services provided to the Company. Additionally, the Audit Committee is responsible for oversight of the Company’s accounting and financial reporting processes and audits of the Company’s financial statements, including the work of the independent registered public accounting firm. The Audit Committee reports to the Board with regard to:

The Audit Committee reviewed and discussed with Company management and UHY LLP (“UHY”), the Company’s independent registered accounting firm during 2023, the Company’s 2023 annual consolidated financial statements, including management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Company’s management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.

The Audit Committee has discussed with UHY the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC, which includes, among other items, matters related to the conduct of the audit of the annual consolidated financial statements. The Audit Committee has also discussed the critical accounting policies used in the preparation of the Company’s annual consolidated financial statements, alternative treatments of financial information within generally accepted accounting principles that UHY discussed with management, the ramifications of using such alternative treatments, and other written communications between UHY and management.

The Audit Committee has received from UHY the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with UHY their independence. The Audit Committee has also concluded that UHY’s performance of non-audit services is compatible with UHY’s independence.

The Audit Committee also discussed with UHY the overall scope and plans for its audit and has met with UHY, with and without management present, to discuss the results of its audit and the overall quality of the Company’s financial reporting. The Audit Committee also discussed with UHY whether there were any audit problems or difficulties, and management’s response.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for filing with the SEC. This report is provided by the following directors, who constitute the Committee.

Audit Committee:

Mr. Edward R. Hirshfield

Mr. William P. Phelan

Mr. Thomas Marusak (Chairman)

Mr. John Bottomley

PROPOSAL NO. 2

APPROVAL OF NOTE CONVERSION PRICE AND

WARRANT EXERCISE PRICE ADJUSTMENTS

Overview

At the Annual Meeting, holders of our Voting Capital Stock will be asked to approve a reduction of the conversion price of the Notes (as defined below), a reduction of the exercise price of the Noteholder Warrants (as defined below), the issuance of shares of our Common Stock upon conversion of the Notes at the reduced conversion price, and the issuance of shares of our Common Stock upon the exercise of the Noteholder Warrants under the amended terms, in each case as required by the terms of the Fourth Amendment Agreement and for purposes of compliance with Nasdaq Listing Rule 5635(d).

As a material condition of the Fourth Amendment Agreement, we agreed to submit and recommend this proposal to our stockholders. Our Board believes that this proposal is in the best interests of the Company and its stockholders in order to fulfill and meet our contractual commitments made in the Fourth Amendment Agreement and accompanying agreements. Under the Fourth Amendment Agreement, we agreed to use commercially reasonable efforts to obtain stockholder approval for a reduction of the conversion price of the Notes and a reduction of the exercise price of the Noteholder Warrants, with the recommendation of our Board that such proposal be approved. We are also seeking to obtain stockholder approval of the issuance of shares of our Common Stock upon conversion of the Notes and exercise of the Noteholder Warrants. If we do not obtain stockholder approval of this Proposal No. 2 at this Annual Meeting, we will adjourn this Annual Meeting and hold a special meeting of stockholders every 90 days thereafter to seek stockholder approval until stockholder approval is obtained.

Background

On October 20, 2021, we entered into a securities purchase agreement (the “SPA”) with certain accredited investors (the “Noteholders”), and issued to the Noteholders, upon closing of the offering on October 25, 2021, convertible secured notes (the “Notes”) in the aggregate principal amount of $16,304,348, for an aggregate purchase price of $15,000,000.

On February 28, 2024 the Company and the Noteholders entered into a Fourth Amendment Agreement (the “Fourth Amendment Agreement”) to amend the Notes, SPA and related agreements (collectively, the “Transaction Documents”) to facilitate future financings by the Company by amending the Transaction Documents as follows:

The Company shall be permitted undertake at-the-market transactions (“ATMs”) in the future provided:

In addition, the Company will be permitted to unilaterally extend the maturity date of the Notes for two 3-Month extensions if prior to the then in effect maturity date the Company gives notice to the Purchasers and increases the principal amount of the Notes on the date of each such extension by two percent (2%) the principal amount of the Notes outstanding on the date of this Agreement per each extension.

In consideration of the foregoing, the Company will:

Pursuant to additional agreements with holders of another 51,618 outstanding warrants, similar adjustments with those warrants, resulting in a total adjustment to 530,569 warrants.

We are holding the Annual meeting of our stockholders for the additional purpose of obtaining stockholder approval of reductions in the conversion prices of the Notes, the reduction of the exercise prices of the $3.78 Warrants and Repriced Warrants, and the issuance of the Penny Warrants and the Bonus Warrants.,

Effect of Issuance of Additional Securities

Based on the March 31, 2024 outstanding shares, if the Noteholders were to convert the Notes in full into an aggregate of 2,024,596 shares of our Common Stock and to exercise the Penny Warrants, the $3.78 Warrants, the Repriced Warrants and the Bonus Warrants (collectively, the “Noteholder Warrants”) in full for an aggregate of 3,788,032 shares of our Common Stock, the Noteholders would hold an aggregate of 5,812,628 shares of our Common Stock, equal to 67% of our issued and outstanding Common Stock on such date, assuming the Noteholders waive the provisions in the Notes and the Noteholder Warrants limiting their beneficial ownership of shares of our Common Stock to 4.99%.

As such, for so long as the Noteholders beneficially own a substantial number of shares of our Common Stock, they could significantly influence future decisions by our company. Our stockholders will incur dilution of their percentage ownership to the extent that the Noteholders fully convert the Notes or exercise the Noteholder Warrants. In addition, because the conversion price of the Notes and the Noteholder Warrants may be further adjusted to a lower amount, our stockholders may experience an even greater dilutive effect. If we and the Noteholders agree to decrease the conversion price of the Notes or the exercise price of the Noteholder Warrants, in each case, in the future, we could issue more shares of our Common Stock to the Noteholders upon the conversion of the Notes or the exercise of the Noteholder Warrants than the amounts set forth above. Stockholder approval of Proposal No. 2 will apply to all issuances of our Common Stock pursuant to the conversion of the Notes and the exercise of the Noteholder Warrants, including such potential issuance of additional shares.

Nasdaq Marketplace Requirements and the Necessity of Stockholder Approval

Our Common Stock is currently listed on the Nasdaq Capital Market and, as such, we are subject to the Nasdaq Listing Rules. Nasdaq Listing Rule 5635(d) requires us to obtain stockholder approval prior to the issuance of our Common Stock in connection with certain non-public offerings involving the sale, issuance or potential issuance by us of shares of our Common Stock (and/or securities convertible into or exercisable for shares of our Common Stock) equal to 20% or more of the shares of our Common Stock outstanding prior to such issuance where the price of our Common Stock to be issued is below the “Minimum Price.” “Minimum Price” means a price that is the lower of: (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average Nasdaq Official Closing Price of the Common Stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement. Shares of our Common Stock issuable upon the exercise or conversion of warrants, options, debt instruments, preferred stock or other equity securities issued or granted in such non-public offerings will be considered shares issued in such a transaction in determining whether the 20% limit has been reached, except in certain circumstances such as issuing warrants that are not exercisable for a minimum of six months and have an exercise price that exceeds market value. Accordingly, we believe that the adjustments to the conversion prices of the Notes, the adjustments to the exercise prices of the Repriced Warrants and the $3.78 Warrants, the issuance of the Penny Warrants and the Bonus Warrants, the issuance of shares of our Common Stock upon the conversion in full of the Notes, and the issuance of shares of our Common Stock upon the exercise in full of the Noteholder Warrants may require stockholder approval.

If our stockholders do not approve this Proposal No. 2, the conversion prices of the Notes cannot be adjusted, the exercise prices of the Noteholder Warrants cannot be adjusted, the Notes will not be fully convertible, and the $3.78 Warrants and the Repriced Warrants will not be fully exercisable, and the Penny Warrants and the Bonus Warrants will not be exercisable, in each case, in a manner that complies with Nasdaq Listing Rule 5635(d). In addition, our failure to obtain approval of this Proposal No. 2 would prohibit us from satisfying our obligations under the terms of the Fourth Amendment.

Additional Information

This summary is intended to provide you with basic information concerning the Notes and the Noteholder Warrants. The forms of the Notes and the Noteholder Warrants have been filed as exhibits to our reports to the SEC..

Required Vote

The affirmative vote of a majority of the shares of our Voting Capital Stock present in person or represented by proxy at the Annual Meeting and casting votes affirmatively or negatively thereon is required for approval of Proposal No. 2. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on this proposal. Abstentions and broker non-votes will not affect the outcome of voting on this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF PROPOSAL NO. 2.

PROPOSALS FOR 2018 ANNUAL MEETINGNO. 3 AND NO. 4

AMENDMENTS OF THE 2021 AND 2023 STOCK INCENTIVE PLANS

We currently maintain the 2021 Stock Incentive Plan (the “2021 Plan”) and the 2023 Stock Incentive Plan (the “2023 Plan, and together the “Plans”). We believe that the Plans are an important part of attracting, retaining and incentivizing highly qualified employees (“Eligible Participants”) and provide incentives that align the economic interests of plan participants with those of our stockholders. The 2021 Plan was adopted on February 12, 2021 and has been amended and restated on October 29, 2021, May 27, 2022 and on March 10, 2023, and the 2023 Plan was adopted on February 28, 2023 and amended and restated on June 29, 2023.

The Board is requesting that you approve amendments to the Plans. Under the Plans, the number of shares of common stock available for awards is limited to, 18.75% for the 2021 Plan and 23.75% for the 2023 Plan of the number of Common Shares outstanding as of the first trading day of each quarter. The amendments to each Plan would change the calculation of this limitation to reflect the applicable percentage to 18.75% and 23.75% respectively, after giving effect to the increase in the number of shares subject to awards after giving effect to the amount to the increase as of the date of the calculation.

The following table reflects the number of shares available for awards under each Plan under the current calculation and also under the amended Plans, based upon the outstanding shares of 3,796,309 on April 15, 2024:

The Board and management are of the opinion that this number will not be sufficient in the short to medium term to attract, retain and incentivize talented and highly qualified employees. Our calculations suggest that it is prudent to replenish the share reserve at this time. Without the additional shares, we would need to make larger cash payments to Eligible Participants. Cash rewards are unlikely to align them and stockholders in the same way that equity grants will. To enable us to continue offering meaningful equity-based incentives to Eligible Participants, the Board believes that it is both necessary and appropriate to increase the number of shares of Common Stock available for these purposes.

Accordingly, we are asking our stockholders to approve the proposed amendments of the Plans as described above. Each of the Plans’ provisions regarding the limitation on the number of shares available for awards is identical and revised as follows:

Stockholders will have the opportunity to vote of each Plan amendment separately.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 3 AND A VOTE “FOR” PROPOSAL 4.

PROPOSAL NO .5

RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has selected UHY as the Company’s independent registered public accounting firm for fiscal year 2024, and the Board is asking stockholders to ratify that selection. UHY had previously served as the Company’s independent registered public accounting firm from 2012 through 2017 and also served as the Company’s independent registered public accounting firm in 2021 through 2023.

Although current law, rules, and regulations, as well as the charter of the Audit Committee, require the Audit Committee to engage, retain, and supervise the Company’s independent registered public accounting firm, the Board considers the selection of the independent registered public accounting firm to be an important matter of stockholder concern and is submitting the selection of UHY for ratification by stockholders as a matter of good corporate practice.

The affirmative vote of holders of a majority of the shares of Common Stock cast in person or by proxy at the meeting is required to approve the ratification of the selection of UHY as the Company’s independent registered public accounting firm for the current fiscal year.

If the stockholders fail to ratify this appointment, the Audit Committee will reconsider whether to retain UHY and may retain that firm or another firm without resubmitting the matter to the Company’s stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of different independent public accountants at any time during the year if it determines that such change would be in the best interests of the Company and our stockholders.

A representative from UHY is expected to be present at the Annual Meeting and will have the opportunity to make a statement and answer appropriate questions from stockholders.

Accounting Fees

The following sets forth the aggregate fees billed to us for professional services rendered by UHY for the year ended December 31, 2023⁽¹⁾:

The following sets forth the aggregate fees billed to us for professional services rendered by UHY for the year ended December 31, 2022⁽¹⁾:

Audit Fees

Audit fees for the fiscal years ended December 31, 2023 and 2022, were for professional services rendered for the annual financial statements audit and related audit procedures, the audit of internal control over financial reporting, work performed in connection with any registration statements, including comfort letters, and any applicable Current Reports on Form 8-K and the review of any of our Quarterly Reports on Form 10-Q.

Tax Fees

Tax fees during the fiscal year ended December 31, 2022 were for services related to tax compliance, including the preparation of tax returns and claims for refunds, and tax planning and tax advice, including advice related to proposed transactions.

The Audit Committee has considered whether the provision of the non-audit services above is compatible with maintaining the auditors’ independence, and has concluded that it is.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has adopted the following policies and procedures under which frequently-utilized audit and non-audit services are pre-approved by the Audit Committee and the authority to authorize the independent registered public accountants to perform such services is delegated to a single committee member or executive officer.

All of the 2023 and 2022 services described under the caption “Audit Fees” and “Tax Fees” were approved by the Audit Committee.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM IN PROPOSAL 5.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Review and Approval or Ratification of Transactions with Related Persons

We have adopted a written policy requiring that all related person transactions be reported to our executive management and/or the Board and approved or ratified by the Audit Committee. In completing its review of proposed related person transactions, the Audit Committee considers the aggregate value of the transaction, whether the transaction was undertaken in the ordinary course of business, the nature of the relationships involved, and whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party.

We believe the terms of any transactions with related persons are as fair to us as those obtainable from unaffiliated third parties.

The following is a summary of transactions between the Company and certain related persons, as required to be disclosed under applicable SEC rules, that occurred since January 1, 2022, and any ongoing related relationships with related persons:

MeOH Power, Inc.

On December 18, 2013, MeOH Power, Inc. and the Company executed a Senior Demand Promissory Note (the Note) in the amount of $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 December 31, 2023 and December 31, 2022, $363 thousand and $342 thousand, respectively, of principal and interest are available to convert into shares of common stock of MeOH Power, Inc. Any adjustments to the allowance are recorded as miscellaneous expense during the period incurred.

Legal Services

During the years ended December 31, 2023 and December 31, 2022, the Company incurred $2 thousand and $22 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 Directors.

HEL Transactions

As discussed above, on October 29, 2021, the Company completed the Soluna Callisto acquisition pursuant to the Merger Agreement. The purpose of the transaction was for SCI to acquire substantially all of the assets (other than those assets physically located in Morocco) formerly held by HEL, which assets consisted of SCI’s existing pipeline of certain cryptocurrency mining projects that HEL previously transferred to SCI, which was formed expressly for this purpose, and to provide SCI with the opportunity to directly employ or retain the services of four individuals whose services it had retained through HEL prior to the merger. As a result of the merger, each share of common stock of Soluna Callisto issued and outstanding immediately prior to the effective time of the merger, other than shares owned by the Company or any of our subsidiaries, was canceled and converted into the right to receive a proportionate share of the Merger Consideration.

In connection with the Soluna Callisto acquisition, effective as of October 29, 2021, upon and subject to the terms and conditions of the Termination Agreement, on November 5, 2021: (1) the existing Operating and Management Agreements between HEL and SCI were terminated in all respects; and (2)(A) SCI paid HEL $725,000, (B) SHI issued to HEL the Termination Shares, and (C) 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. SHI filed a registration statement with the SEC to register the resale of the Termination Shares on February 14, 2022.

Due to conditions being met within the Merger Agreement in relation to energization and retention of employees, the Company has advised SCI US Holdings LLC, a Delaware limited liability company, who is the sole Effective Time Holder (as defined in the Merger Agreement) of the right to receive the Merger Shares and that 19,800 Merger Shares were issued on April 19, 2024 and 39,600 Merger Shares were issued on October 10, 2023. SCI US Holdings LLC has consented to the issuance of such Merger Shares as required under the Merger Agreement and has directed the Company to issue such Merger Shares to its affiliate, HEL. Following the issuance of the 59,400 Merger Shares, a total of 59,400 Merger Shares remain available for possible issuance pursuant to the terms of the Merger Agreement.

Please see Note 5 for additional information regarding the Soluna Callisto acquisition and related transactions.

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

Four of the Company’s directors have various affiliations with HEL.

Michael Toporek, the former Chief Executive Officer, and current Executive Director of the Company, 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 beingthe 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 currently acting as President 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 for the year ended December 31, 2023 was $0 and $0.

John Belizaire, the Company’s Chief Executive Officer, and John Bottomley, who were elected to the Board upon the effective time of SCI’s acquisition of Soluna Callisto, serve as directors of HEL. In addition, Mr. Belizaire is the beneficial owner of 1,317,567 shares of common stock of HEL and 102,380 Class Seed Preferred shares, which are convertible into 86,763 shares of common stock of HEL. These interests give Mr. Belizaire an ownership of 10.54% in HEL. Mr. Belizaire also owns an interest in HEL indirectly through his 5.0139% interest of Tera Joule, LLC’s 965,945 Class Seed Preferred shares, which are convertible into 818,596 shares of common stock of HEL. Mr. Bottomley is the beneficial owner of 96,189, or approximately 0.72%, of the outstanding shares of common stock of HEL.

The Company’s investment in HEL was initially carried at the cost of investment and was $750 thousand. Based on evaluation of projections for the Company’s investment in HEL, the Company fully impaired the equity investment of $750 thousand as of December 31, 2022, writing it down to $0.

The Company owned approximately 1.79% of HEL, calculated on a converted fully diluted basis, as of December 31, 2023 and December 31, 2022. The Company may enter into additional transactions with HEL in the future

DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act, requires our directors, our executive officers, and persons who beneficially own of more than 10% of the Common Stock to file with the SEC initial reports of ownership of the Common Stock and other equity securities on a Form 3 and report of changes in such ownership on a Form 4 or Form 5. Officers, directors, and 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of all Forms 3, 4, and 5 and amendments thereto furnished to us during the most recent fiscal year and written representations by the persons required to file such reports, all filing requirements of Section 16(a) were satisfied with respect to our most recent fiscal year.

STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

Stockholders who wish to communicate with the Board, or a particular director, may send a letter to our Secretary at 325 Washington Avenue Extension, Albany, New York 12205. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Stockholder-Board Communication.” All such letters must identify the author as a stockholder and clearly state whether the intended recipients are all members of the Board or certain specified individual directors. The Secretary will make copies of all such letters and circulate them to the appropriate director or directors.

CODE OF CONDUCT AND ETHICS

We have adopted a Code of Conduct and Ethics for employees, officers and directors. A copy of the Code of Conduct and Ethics is available on our website at https://www.solunacomputing.com/investors/governance.

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

John Tunison, age 49, was appointed to serve as our Chief Financial Officer and Treasurer of the Company, effective April 8, 2024, with employment commencing on March 29, 2024. Mr. Tunison is an experienced finance professional, previously serving as CFO of Verdant Specialty Solutions from May 2023 to March 2024 and CFO of Trussway Manufacturing from November 2018 to December 2022. Prior to this, Mr. Tunison held CFO and senior finance roles at several companies, including Shell Oil, Univar, Ascend Performance Materials and Velocys plc. His CFO roles have included public, venture backed and private equity owned capital structures in the Renewable Fuels, Chemicals, Software and Manufacturing industries. Prior to his finance career, Mr. Tunison was a Nuclear Submarine Officer in the U.S. Navy. Mr. Tunison received an M.B.A. in Finance from the University of Rhode Island and a Bachelor of Science Degree in Political Science from the U.S. Naval Academy.

Jessica L. Thomas, age 50, joined the Company as our Chief Financial Officer in July 2020 through July 2022 and currently serves as the Company’s Chief Accounting Officer beginning in August 2022. Ms. Thomas supervises the Company’s financial reporting, treasury, , and risk management. Prior to her employment with the Company, Ms. Thomas served as Director of Optimization for Pregis, LLC, a provider of protective packaging materials, from 2014 through July 2020, where she was responsible for operations, system, and financial optimization. From 2009 through 2014, Ms. Thomas worked at Plasan NA as Manager of Budget & Control and Financial Planning & Analysis and was also responsible for compliance with government contracting, including monitoring compliance with Defense Contract Audit Agency and Federal Acquisition Regulations. From 2007 to 2009, Ms. Thomas was a Senior Staff Auditor at Cruden & Company, CPA’s PLLC. Ms. Thomas has also held positions in the banking industry as an officer at Key Bank and a Bank Branch Manager at M&T Bank. Ms. Thomas received a bachelor’s degree in Business Administration and Accounting from Siena College and an M.B.A. in Finance & International Finance from Northeastern University. Ms. Thomas obtained her Certified Public Accountant license in May 2009, has been a member of the American Institute of Certified Public Accountants (AICPA) since 2005, and holds the Chartered Global Management Accountant (CGMA) designation.

Mary O’Reilly, age 47, joined the Company as our Chief People Officer in September 2021. Ms. O’Reilly oversees the operations and initiatives that affect employee experience and company culture. Ms. O’Reilly has a long tenure as a Human Resource executive in various tech startups and large public organizations such as Viacom, Inc., CBS Corp., Alloy Media & Marketing. She has experience in organization design, employment law, risk management, benefits and payroll management, conflict resolution and employee relations. Over the past several years, Ms. O’Reilly worked as VP of Human Resources for Viacom, Inc. from June 2017 to December 2020, Farm Sanctuary as Chief Operating Officer from January 2020 to December 2020, and Founder of SHINE People from 2008 through 2021.

Our executive officers are elected or appointed by the Board and hold their respective offices until their respective successors are elected and qualified or until their earlier resignation or removal.

EXECUTIVE COMPENSATION

Compensation Philosophy

The primary objectives of our compensation policies are to attract, retain, motivate, develop, and reward our management team for executing our strategic business plan, thereby enhancing stockholder value, while recognizing and rewarding individual and Company performance. These compensation policies include: (i) an overall management compensation program that is competitive with companies of similar size or within our industries and (ii) long-term incentive compensation in the form of stock-based compensation that is aimed towards encouraging management to continue to focus on stockholder returns. Our executive compensation program ties a substantial portion of our executives’ overall compensation to key strategic, financial, and operational goals, including: establishing and maintaining customer relationships; meeting revenue targets and profit and expense targets; growing our assets under management; evolving our Artificial Intelligence (“AI”) business; and improving operational efficiency.

We believe that potential equity ownership in the Company is important to provide executive officers with incentives to build value for our stockholders. We believe that equity awards provide executives with a strong link to our short-term and long-term performance while creating an ownership culture to maintain the alignment of interests between our executives and our stockholders. When implemented responsibly, we also believe these equity incentives can function as a powerful executive retention tool.

The Compensation Committee of the Board, consisting entirely of independent directors, administers our compensation plans and policies, including the establishment of policies that govern base salary as well as short-term and long-term incentives for our executive management team.

Summary of Cash and Other Compensation

The following table sets forth the total compensation awarded to, earned by, or paid to, for services rendered in all capacities to the Company during the fiscal years ended December 31, 2023 and December 31, 2022, our “named executive officers,” as defined in SEC rules .

SUMMARY COMPENSATION TABLE

Base Salary and Cash Incentives of our Chief Executive Officer and Chief Financial Officer

Overview

During 2023, there were changes in the positions of Chief Executive Officer and Chief Financial Officer of the Company. Mr. Toporek began the year as Chief Executive Officer and transitioned to the position of Executive Chairman upon the appointment of Mr. Belizaire as Chief Executive Officer on May 1, 2023. Mr. Belizaire had served as CEO of the Company’s subsidiary, SCI, and subsequently assumed the responsibilities of CEO of the entire Company on May 1, 2023. Mr. Patman began the year as Chief Financial Officer and served in that capacity until April 7, 2023. Upon his resignation, Mr. Michaels, who had served (and continues to serve) as a director of the Company, agreed to accept the position of interim Chief Financial Officer until his successor was appointed. Mr. Tunison accepted the position of Chief Financial Officer on April 8, 2024. The presentation below for Messrs. Toporek and Belizaire reflect their compensation for all positions held by them during 2023.

Michael Toporek

In connection with the employment of Michael Toporek as our Chief Executive Officer, effective as of January 14, 2022, the Company entered into an employment agreement with him (the “Toporek Employment Agreement”), which was approved by the Compensation Committee.

Pursuant to the Toporek Employment Agreement, Mr. Toporek agreed to continue to serve as our Chief Executive Officer for an initial term of three years, to be extended automatically for successive one-year periods, in consideration for an annual cash salary of $300,000, which is subject to annual review by the Board or the Compensation Committee and may be increased from time to time by the Board or the Compensation Committee (“Toporek Base Salary”). The Toporek Employment Agreement provides for (i) annual performance bonuses based on attainment of one or more individual or business performance goals proposed by Mr. Toporek and approved by the Compensation Committee in its sole discretion (the “Annual Performance Bonus” and such target Annual Performance Bonus for a given calendar year, the “Target Performance Bonus”); (ii) a one-time option previously granted by the Compensation Committee on May 13, 2021, to purchase 500,000 shares of the Common Stock at a per -share exercise price equal to $6.84 per share, subject to vesting over a three-year period after the grant date and all of the other terms and conditions of the 2021 Plan and an individual award agreement entered into between the Company and Mr. Toporek; (iii) future outperformance awards upon attainment of each Market Capitalization Growth Target (as defined in the Toporek Employment Agreement) which will be fully vested upon grant and delivered subject to certain conditions as set forth in the Toporek Employment Agreement; and (iv) eligibility for employee benefit plans in effect until Mr. Toporek’s employment with the Company is terminated.

In May 2021, the Compensation Committee approved a cash bonus in an aggregate amount of up to $100,000 based on the satisfaction of certain financial goals to be proposed by Mr. Toporek and approved by the Compensation Committee. Further, the Compensation Committee approved a one-time grant of stock options to purchase 500,000 shares of Common Stock. The stock options vest in equal installments on the first, second and third anniversaries of May 13, 2021, so long as Mr. Toporek remains in the service of the Company on each anniversary. The stock options expire five years after each applicable vesting date.

Pursuant to the Toporek Employment Agreement, if Mr. Toporek is terminated for any reason other than termination without cause or resignation for good reason, he is entitled to receive (i) a lump sum payment in the amount equal to the sum of Mr. Toporek’s earned but unpaid Toporek Base Salary through the date of termination, (ii) his earned but unpaid Annual Performance Bonus for the calendar year preceding the date of termination, (iii) his accrued but unused vacation days as of the date of termination, (iv) reimbursement for any unreimbursed business expenses incurred through the date of termination, and (v) any other benefits or rights Mr. Toporek will have accrued or earned through his date of termination under the terms of any employee benefit plan. Additionally, if Mr. Toporek is terminated without cause or he resigns for good reason, subject to satisfaction of certain release conditions, he will also be entitled to coverage under any health insurance plan covering Mr. Toporek for 12 months after the termination of his employment, one year of his then-current Toporek Base Salary and the Target Performance Bonus for the calendar year containing the date of termination, both paid in a single lump sum in cash on the first regular Company payroll date next following the 60^th calendar day following the date of termination.

Effective May 1, 2023, Mr. Toporek stepped down from the role of Chief Executive Officer and assumed the role of Executive Chairman of the Board. Mr. Toporek’s Employment Agreement was amended to provide that subsequent to May 1, 2023, he will serve as Executive Chairman, to provide an expiration of the agreement on May 1, 2028, to remove the provisions regarding Long-Term Incentive Awards and Future Performance Awards from the Employment Agreement and to increase the payment for termination without cause or resignation for good reason from one year to three years.

John Belizaire

Pursuant to the Merger with Soluna Callisto, Soluna Computing, Inc. and John Belizaire entered into an employment agreement, dated as of October 29, 2021, pursuant to which Mr. Belizaire serves as President and Chief Executive Officer of Soluna Computing Inc. The employment agreement provided for an initial term beginning on October 29, 2021, the effective date of the Merger, and ending 36 months thereafter and, unless either party provides written notice that the agreement will not be renewed, will be automatically renewed for an additional 12-month period on the third and each subsequent anniversary date of the effective date of the Merger.

The agreement provided for an annual base salary of $350,000, an annual cash performance bonus of up to $175,000, an annual grant of restricted stock units (“RSUs”) with an aggregate grant date fair value of up to $175,000, and a one-time “sign-on” grant of RSUs with a value equal to $811,410. The amount of the annual performance bonus Mr. Belizaire would actually receive will be based on his attainment of company and/or personal performance objectives (“key performance objectives”) approved by the Company’s Board of Directors with respect to Mr. Belizaire for each calendar year, with the performance bonus prorated on a proportionate basis if he achieves at least 75%, but less than 100%, of the applicable key performance objectives.

Each annual RSU award will vest on a proportionate basis if Mr. Belizaire achieves at least 75% of his applicable key performance objectives, with the RSUs becoming fully vested if he achieves 100% of such key performance objectives.

The agreement provided that the Company will issue the RSUs constituting the one-time sign-on grant within 60 days following the effective date of the Merger, or December 28, 2021, subject to Mr. Belizaire’s continued employment on the date of issuance, and they were issued on October 29, 2021, the effective date of the Merger. One-third of such RSUs will vest on the 12-month anniversary of the date of grant, or October 29, 2022, with one-twenty-fourth of the remaining two-thirds vesting upon the last day of each complete month after October 29, 2022, in each case assuming that Mr. Belizaire is still providing services to Soluna Computing, Inc. in the capacity of an employee, officer, director, consultant, or advisor on the applicable vesting date.

Any unvested RSUs will become fully vested upon the termination of Mr. Belizaire’s employment by Soluna Computing, Inc. without Cause or by Mr. Belizaire for Good Reason, or upon a Change of Control, each as defined in the agreement.

The agreement also provides that it will terminate immediately upon Mr. Belizaire’s death or the determination that he is Disabled, as defined in the agreement. In addition, Soluna Computing, Inc. may terminate Mr. Belizaire’s employment for or other than for Cause and Mr. Belizaire may terminate his employment for or other than for Good Reason. If SCI terminates Mr. Belizaire’s employment other than for Cause or Mr. Belizaire terminates his employment for Good Reason, then in addition to any accrued salary and other payments and benefits earned to date, assuming Mr. Belizaire has executed and delivered to Soluna Computing, Inc. a general release of claims and does not revoke or breach any provision thereof, he will receive: (i) a severance payment equal to his then-current base salary for a period of six-months; (ii) any amount of his performance bonus earned for the most recently-completed calendar year based on attainment of the applicable key performance objectives for such year, to the extent unpaid as of his termination date; (iii) any amount of his performance bonus earned for the current calendar year based on attainment of the applicable key performance objectives for such year, prorated based on the number of days Mr. Belizaire was employed during such year; and (iv) if he is eligible for and elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), continued copayment by Soluna Computing, Inc. for Mr. Belizaire’s coverage under Soluna Computing, Inc.’s group health plan during the 18-month period following the termination of his employment to the same extent that it was paying for such coverage immediately prior to his termination.

Pursuant to the employment agreement, Soluna Computing, Inc. and Mr. Belizaire entered into a proprietary rights and restrictive covenants agreement that contains provisions with respect to safeguarding Soluna Computing, Inc.’s proprietary and confidential information, as well as non-solicitation and non-compete provisions.

Effective May 1, 2023, Mr. Belizaire was appointed as Chief Executive Officer of Soluna Holdings, Inc. In conjunction with the appointment. Pursuant to the Amended and Restated Employment Agreement dated November 20, 2023 (the “Belizaire Amended Agreement”), Mr. Belizaire agreed to continue to serve as Soluna Holdings, Inc. Chief Executive Officer for an initial term beginning as of May 1, 2023, and continuing through December 31, 2027, to be extended automatically for successive one-year periods, in consideration for a retroactive (to May 1, 2023) cash adjustment of his prior base salary through to the date of the Amended Agreement and a base salary thereafter of $450,000, which will be subject to annual cost of living adjustments and annual review by the Board or the Compensation Committee and may be increased from time to time by the Board or the Compensation Committee (“Belizaire Base Salary”). The Belizaire Amended Agreement provides for annual performance bonuses under the Executive Bonus Plan based on achievement of Key Performance Objectives; and eligibility for employee benefit plans in effect until Mr. Belizaire’s employment with the Company is terminated.

Pursuant to the Belizaire Amended Agreement, if Mr. Belizaire is terminated for any reason other than termination without cause or resignation for good reason, he is entitled to receive (i) a lump sum payment in the amount equal to the sum of Mr. Belizaire’s earned but unpaid Belizaire Base Salary through the date of termination, (ii) his earned but unpaid Annual Performance Bonus for the calendar year preceding the date of termination, (iii) his earned but unpaid Annual Performance Bonus for the current calendar year as though the key performance objectives were achieved, (iv) his accrued but unused vacation days as of the date of termination, (v) reimbursement for any unreimbursed business expenses incurred through the date of termination, and (vi) any other benefits or rights Mr. Belizaire will have accrued or earned through his date of termination under the terms of any employee benefit plan. Additionally, if Mr. Belizaire is terminated without cause or he resigns for good reason, subject to satisfaction of certain release conditions, he will also be entitled to coverage under any health insurance plan covering Mr. Belizaire for 18 months after the termination of his employment, six months of his then-current Belizaire Base Salary, both paid in a single lump sum in cash on the first regular Company payroll date next following the 60^th calendar day following the date of termination.

Consulting Agreement- David Michaels

Effective as of April 24, 2023, the Company entered into a consulting agreement with David Michaels, a director of the Company, to serve as interim chief financial officer. The agreement provides for at least a four-month term providing for consulting fees of $25,000 per month. Mr. Michaels, resigned as Interim Chief Financial Officer on April 8, 2024 with the appointment of John Tunison. On April 15, 2024, Mr. Michaels was granted a one-time restricted stock award of 25,309 for his performance and service as interim Chief Financial Officer, which were to immediately vest of date of grant.

John Tunison

The Company has appointed John Tunison to serve as the Chief Financial Officer and Treasurer of the Company, effective April 8, 2024, with employment commencing on March 29, 2024. In connection with the Board of Directors’ appointment of Mr. Tunison as Chief Financial Officer, the Company and Mr. Tunison have entered into a three-year employment agreement (the “Employment Agreement”). The Employment Agreement provides for an initial annual base salary of $350,000 and a potential performance bonus of up to 50% of the base salary as well as severance and other standard employment benefits. As an inducement for Mr. Tunison to join the Company and as additional compensation, the Board of Directors granted (a) an equity award in the form of restricted common stock under incentive equity plans maintained by the Company on the Company’s standard form award agreements with a reference percentage of 2% and (b) an equity award in the form of restricted preferred stock under incentive equity plans maintained by the Company on the Company’s standard form award agreements for 25,000 shares.

Long-Term Equity Incentive Compensation

Equity awards typically take the form of stock options, restricted stock grants, or restricted stock units under our equity compensation plans. Authority to make equity awards to executive officers rests with the Compensation Committee. In determining the size of awards for new or current executives, the Compensation Committee consider the competitive market, strategic plan performance, contribution to future initiatives, benchmarking of comparative equity ownership for executives in comparable positions at similar companies, individual option history, and recommendations of our Chief Executive Officer and Chairman.

The timing of all equity awards for our named executive officers have coincided with either employment anniversary dates or our annual meeting dates, or such equity awards are granted at the next scheduled meeting of the Compensation Committee following the completion or assignment of the applicable objectives. We do not time equity grants to our executives in coordination with the release of material non-public information, nor do we impose any equity ownership guidelines on our executives.

Outstanding Equity Awards at Fiscal Year End

The following table provides information as to equity awards granted by the Company and held by Michael Toporek, John Belizaire, Jessica Thomas, David Michaels, Philip Patman, Jr., and Mary O’Reilly outstanding as of December 31, 2023.

Director Compensation for Fiscal Year 2023

On May 15, 2023, the Board’s Compensation Committee authorized non-employee directors to receive cash compensation of a total cash compensation of $205,000, of which $35,000 for Mr. Lipman was deferred, as follows: (i) $20,000 per annum to each non-employee director of the Board, an additional (ii) $15,000 per annum to each director then serving as a chairperson of the Audit Committee or the Compensation Committee of the Board, an additional (iii) $10,000 per annum for the Lead Independent Director of the Board, and an additional (iv) $15,000 per annum to each member of the Executive Committee. Future director compensation will be determined by the Compensation Committee. Directors who are also our employees, in particular Mr. Toporek, Mr. Belizaire, and Mr. Michaels, are not compensated for serving on the Board.

The following table details the total compensation of the directors for the fiscal year ended December 31, 2023 for service as a director.

Summary of the Company’s Equity Incentive Plans

General Plan Information

As of December 31, 2023, the Company had four equity compensation plans pursuant to which equity awards could be granted or under which equity awards were outstanding – the Company’s 2012 Equity Incentive Plan (the 2012 Plan), which was amended and restated as of October 20, 2016, the 2014 Equity Incentive Plan (the 2014 Plan), the 2021 Stock Incentive Plan (the 2021 Plan), which was amended and restated effective as of October 29, 2021, May 27, 2022, and March 10, 2023, respectively, and the 2023 Stock Incentive Plan (the 2023 Plan), which was amended and restated effective as of May 30, 2024, (collectively, the Plans). Awards under the Plans have generally included at-the-money options and restricted stock grants.

2023 Plan

The 2023 Plan was adopted by the Board on February 10, 2023 and approved by the stockholders on March 10, 2023. The 2023 Plan sets the number of shares of our Common Stock reserved for issuance thereunder, on a quarterly basis, to 9.75% of the shares of our Common Stock outstanding on the measurement date. Subject to certain adjustments as provided in the 2023 Plan, the maximum aggregate number of shares of our Common Stock that may be issued under the 2023 Plan (excluding the number of shares of our Common Stock subject to Specified Awards (as defined below)) (i) pursuant to the exercise of stock options, (ii) as unrestricted or restricted Common Stock, and (iii) in settlement of RSUs shall be limited to, beginning with the first quarter of our fiscal year ending December 31, 2023 (or January 1, 2023), 9.75% of the number of shares of our Common Stock outstanding as of the first trading day of each quarter . Subject to certain adjustments as provided in the 2023 Plan, (i) shares of our Common Stock subject to the 2023 Plan shall include shares of our Common Stock which revert back to the 2023 Plan in a prior quarter pursuant to the paragraph below, and (ii) the number of shares of our Common Stock that may be issued under the 2023 Plan may never be less than the number of shares of our Common Stock that are then outstanding under (or available to settle existing) 2023 Plan Award grants.

On June 29, 2023, at the Annual Shareholder Meeting, the Amended and Restated 2023 Stock Incentive Plan was approved. The Amended and Restated 2023 Plan will, among other things, increase the number of shares of our Common Stock reserved for issuance thereunder, on a quarterly basis, to 23.75% of the shares of our Common Stock outstanding on the measurement date. Subject to certain adjustments as provided herein, the maximum aggregate number of Common Shares that may be issued hereunder (excluding the number of Common Shares subject to Specified Awards (as hereinafter defined)) (i) pursuant to the exercise of Options, (ii) as unrestricted Common Shares or Restricted Stock, and (iii) in settlement of RSUs shall be limited to, beginning with the third quarter of our fiscal year ending December 31, 2023 (or July 1, 2023), 23.75% of the number of Common Shares outstanding as of the first trading day of each quarter. Subject to certain adjustments as provided herein, (A) Common Shares subject to this Plan shall include Common Shares which reverted back to this Plan in a prior quarter, and (B) the number of Common Shares that may be issued under this Plan may never be less than the number of Common Shares that are then outstanding under (or available to settle existing) Awards. For purposes of determining the number of Common Shares available under this Plan, Common Shares withheld by the Company to satisfy applicable tax withholding or exercise price obligations pursuant to Section 10(e) of this Plan shall be deemed issued under this Plan. In the event that, prior to the date this Plan shall terminate, any Award granted under this Plan expires unexercised or unvested or is terminated, surrendered or cancelled without the delivery of Common Shares, or any shares of Restricted Stock are forfeited back to the Company, then the Common Shares subject to such Award may be made available for subsequent Awards under the terms of this Plan. As used in this Plan, “Specified Awards” shall mean (i) Awards to Eligible Persons who are not employed or engaged by the Company or any of its subsidiaries as of the last day of any fiscal quarter of the Company, commencing with the fiscal quarter ending March 31, 2023 and (ii) Awards that have a grant date at least three (3) years prior to the last day of any fiscal quarter of the Company, commencing with the fiscal quarter ending March 31, 2023.

2021 Plan

The Company’s 2021 Plan was adopted by the Board on February 12, 2021 and approved by the stockholders on March 25, 2021. The 2021 Plan was amended and restated effective as of October 29, 2021, and May 27, 2022, respectively. 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 options, (ii) as shares or restricted stock and (iii) in settlement of RSUs shall be limited to (A) during the Company’s fiscal year ending December 31, 2021 (the “2021 Fiscal Year”), 1,460,191 Shares, (B) for the period from January 1, 2022 to June 30, 2022, fifteen percent (15%) of the number of Shares outstanding on January 3, 2022, which was the first trading day of 2022, and (C) beginning with the third quarter of the Company’s fiscal year ending December 31, 2022 (the “2022 Fiscal Year”), fifteen percent (15%) of the number of Shares outstanding as of the first trading day of each quarter, net of any Shares awarded in the previous quarter(s). Subject to certain adjustments as provided in the 2021 Plan, (i) shares subject to the 2021 Plan shall include shares reverted back to the Company pursuant the 2021 Plan in a prior year or quarter, as applicable, as provided herein and (ii) the number of shares that may be issued under the 2021 Plan may never be less than the number of shares that are then outstanding under (or available to settle existing) Awards. For purposes of determining the number of shares available under the 2021 Plan, shares withheld by the Company to satisfy applicable tax withholding or exercise price obligations pursuant to the 2021 Plan shall be deemed issued under this Plan. In the event that, prior to the date on which the 2021 Plan shall terminate, any Award granted under the 2021 Plan expires unexercised or unvested or is terminated, surrendered, or cancelled without the delivery of shares of common stock, or any Awards are forfeited back to the Company, then the shares of common stock subject to such Award may be made available for subsequent Awards under the terms of the 2021 Plan.

On March 10, 2023, at the Special Shareholder Meeting, the Third Amended and Restated 2021 Stock Incentive Plan was approved. The Third Amended and Restated 2021 Plan will, among other things, (a) increase the number of shares of our Common Stock reserved for issuance thereunder, on a quarterly basis, to 18.75% of the shares of our Common Stock outstanding on the measurement date and (b) allow us to grant awards of shares of our 9.0% Series A Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) (with and without restrictions). Subject to certain adjustments as provided in the Third Amended and Restated 2021 Plan, the maximum aggregate number of shares of our Common Stock that may be issued under the Third Amended and Restated 2021 Plan (excluding the number of shares of our Common Stock subject to Specified Awards (as defined below)) (i) pursuant to the exercise of stock options, (ii) as unrestricted or restricted Common Stock, and (iii) in settlement of RSUs shall be limited to, beginning with the first quarter of our fiscal year ending December 31, 2023 (or January 1, 2023), 18.75% of the number of shares of our Common Stock outstanding as of the first trading day of each quarter. Subject to certain adjustments as provided in the Third Amended and Restated 2021 Plan, the maximum aggregate number of shares of our Series A Preferred Stock that may be issued under the Third Amended and Restated 2021 Plan as unrestricted or restricted Series A Preferred Stock shall equal $3,600,000 valued as of the effective date of the Third Amended and Restated 2021 Plan as determined at the lower of the closing price of our Series A Preferred Stock on Nasdaq on such date or the average of the daily volume weighted average price of our Series A Preferred Stock on Nasdaq as reported by Bloomberg L.P. for a period of five (5) consecutive trading days ending on such date. Subject to certain adjustments as provided in the Third Amended and Restated 2021 Plan, (i) shares of our Common Stock and Series A Preferred Stock, as applicable, subject to the Third Amended and Restated 2021 Plan shall include shares of our Common Stock and Series A Preferred Stock, as applicable, which revert back to the Third Amended and Restated 2021 Plan in a prior quarter or fiscal year, as applicable, pursuant to the paragraph below, and (ii) the number of shares of our Common Stock and Series A Preferred Stock, as applicable, that may be issued under the Third Amended and Restated 2021 Plan may never be less than the number of shares of our Common Stock and Series A Preferred Stock, as applicable, that are then outstanding under (or available to settle existing) 2021 Plan Award grants. For purposes of the Third Amended and Restated 2021 Plan, “Specified Awards” means (i) 2021 Plan Awards issued to Eligible Persons who are not employed or engaged by us or any of our subsidiaries as of the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 2023, and (ii) 2021 Plan Awards that have a grant date at least three (3) years prior to the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 2023. The exclusion of Specified Awards from the determination of the maximum aggregate number of shares of our Common Stock available for issuance under the Third Amended and Restated 2021 Plan could have material effect on the number of shares of our Common Stock available for issuance thereunder and could have a material dilutive effect on our stockholders.

2014 Plan

The 2014 Plan was adopted by the Company’s Board of Directors on March 12, 2014, and approved by its stockholders on June 11, 2014. The 2014 Plan provides an initial aggregate number of 500,000 shares of common stock that may be awarded or issued. The number of shares that may be awarded under the 2014 Plan and awards outstanding may be subject to adjustment on account of any stock dividend, spin-off, stock split, reverse stock split, split-up, recapitalization, reclassification, reorganization, combination or exchange of shares, merger, consolidation, liquidation, business combination, exchange of shares or the like. Under the 2014 Plan, the Board-appointed administrator of the 2014 Plan is authorized to issue stock options (incentive and nonqualified), stock appreciation rights, restricted stock, restricted stock units, phantom stock, performance awards and other stock-based awards to employees, officers and directors of, and other individuals providing bona fide services to or for, the Company or any affiliate of the Company. Incentive stock options may only be granted to employees of the Company and its subsidiaries.

2012 Plan

The 2012 Plan was adopted by the Company’s Board of Directors on April 14, 2012, and approved by its stockholders on June 14, 2012. The 2012 Plan was amended and restated by the Board of Directors effective October 20, 2016. The October 2016 amendment allowed for the award agreement, or another agreement entered into between the Company and the award grantee to vary the method of exercise of options issued under the 2012 Plan and an agreement entered into between the Company and the award grantee to vary the provisions governing expiration of options or other awards under the 2012 Plan following termination of the award recipient. The 2012 Plan provides an initial aggregate number of 600,000 shares of common stock that may be awarded or issued. The number of shares that may be awarded under the 2012 Plan and awards outstanding may be subject to adjustment on account of any recapitalization, reclassification, stock split, reverse stock split and other dilutive changes in our common stock. Under the 2012 Plan, the Board of Directors is authorized to issue stock options (incentive and nonqualified), stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, officers, directors, consultants and advisors of the Company and its subsidiaries. Incentive stock options may only be granted to employees of the Company and its subsidiaries.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table presents certain information as of December 31, 2023, with respect to compensation plans under which equity securities of the Company are authorized for issuance:

Prerequisites and Other Benefits

Our executive officers are eligible to participate in similar benefit plans available to all our other employees including medical, dental, vision, group life, disability, accidental death and dismemberment, paid time off, and 401(k) plan benefits.

We also maintain a standard directors and officers liability insurance policy with coverage similar to the coverage typically provided by other small publicly-held technology companies.

PAY VERSUS PERFORMANCE

In August 2022, pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission adopted a rule requiring companies to disclose the relationship between executive compensation actually paid and the Company’s financial performance.

The following table sets forth specified executive compensation and financial performance measures over a three-year lookback period.