MULLEN AUTOMOTIVE INC. : Entry into a Material Definitive Agreement, Change in Directors or Principal Officers, Financial Statements and Exhibits (form 8-K)

Published: 2022-06-10 22:16:03 ET MULN

Item 1.01 Entry into a Material Definitive Agreement

On June 7, 2022, Mullen Automotive Inc. (the "Company") entered into a securities purchase (the "Securities Purchase Agreement") with certain investors, subject to stockholder approval, pursuant to which upon the terms and subject to the conditions contained therein and solely upon the request of the Company, the investors will be required to purchase an aggregate of $275 million (the "Commitment Amount") of the Company's Series D Preferred Stock, par value $0.001 per share (the "Series D Preferred Stock"), and five-year warrants exercisable for shares of Common Stock (the "Warrants"). The number of Warrants that may be issued will equal 110% of the shares of Series D Preferred Stock purchased by the investors. The purchase price per share of Series D Preferred Stock will be the lower of (i) $1.27, the closing price of the Company's stock on the date the Securities Purchase Agreement was executed, or (ii) the closing price of the Common Stock on the trading day immediately preceding the Purchase Date (as defined below), subject to a floor price of $0.10 per share.

The date on which the Company may require the investors to purchase the Series D Preferred Stock and Warrants is the 90th day (the "Purchase Date") following the date on which a registration statement covering the registration for resale of securities issued during May 2022 pursuant to additional investment rights provided in the Exchange Agreement dated May 7, 2021 and a $20 million securities purchase agreement. If the Company elects to issue the securities pursuant to the Securities Purchase Agreement, the Company plans to use the proceeds to support the development of The Mullen class one, class two, class three, and Mullen five and Mullen five RS vehicle lineups.

The Company agreed that as long as any of the Series D Preferred Stock and Warrants remain outstanding, it will have authorized and reserved for the purpose of issuance, no less than 250% of the shares of Common Stock issuable upon conversion or exercise of the Series D Preferred Stock and Warrants. The Company also agreed that, without the prior written consent of the investors, it will not, for a period of 90 days after the purchase of the Series D Preferred Stock and Warrants offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company, excluding shares issued upon conversion and exercise of the Series D Preferred Stock and Warrants and the issuance by the Company of Common Stock upon the exercise of an outstanding options or warrants or the conversion of a security outstanding.

Prior to any sale and purchase may occur pursuant to the Securities Purchase Agreement, the Company is required to satisfy certain conditions including, obtaining stockholder approval and that a registration statement for the issuance of such securities has been declared effective; provided, that for the 10 trading days prior to effectiveness of the registration statement, the average daily trading volume of the Common Stock is greater than $27.5 million.

If the Company does not deliver a notice of purchase on the Purchase Date for the entire Commitment Amount then the Company is required to pay to the investors $27.5 million in cash or the investors may choose to receive 28.5 million shares of Common Stock that will be registered on a registration statement; provided that, if the failure is due solely to the Company's inability to have the registration statement declared effective by the Purchase Date, the Company may extend the Purchase Date to no later than 180 days. The Company agreed that if it is unable to have a registration statement declared effective, that it will not file any registration statement (excluding any registration statement on Form S-8) for another investor for a period of 90 days from the extended deadline date. Furthermore, if the Company fails to deliver a notice of purchase on the Purchase Date, then during the period ending 180 days after the termination date, the investors will have the right of first refusal to participate in any offering of debt or equity securities of the Company (other than bank debt or similar financing).

Description of Series D Preferred Stock

If the Company receives the requisite approval from the stockholders for the issuance of the Series D Preferred Stock, Warrants and underlying shares of Common Stock, the Company intends to designate shares of Preferred Stock as Series D Preferred Stock.

Voting Rights. Except as otherwise expressly provided by the amended and restated certificate of incorporation or as provided by law, the holders of shares of Common Stock and Preferred Stock, including the Series D Preferred, will at all times vote together as a single class on all matters (including the election of directors) submitted to a vote of the stockholders; provided, however, that, any proposal which adversely affects the rights, preferences and privileges of the Series D Preferred Stock must be approved by a majority in interest of the Series D Preferred Stock. Each holder of Series D Preferred Stock will have the right to one vote per share (on a fully converted basis) held of record by such holder.

Conversion. The Series D Preferred Stock will automatically be converted into shares of Common Stock at the applicable Conversion Rate at the time in effect immediately upon (A) the issuance of shares of Common Stock underlying the Series D Preferred Stock being registered pursuant to the Securities Act and such registration remaining effective, (B) the trading price for the Company's Common Stock being more than two times the Series D Conversion Price for 20 trading days in any period of 30 consecutive trading days on the Nasdaq Capital Market, and (C) the average daily trading dollar volume of Common Stock during such 20 trading days is equal to or greater than $27.5 million. The Series D Preferred Stock is convertible at the option of each holder at any time into the number of shares of Common Stock determined by dividing the Series D Original Issue Price (plus all unpaid accrued and accumulated dividends thereon, as applicable, whether or not declared), by the Series D Conversion Price (the "Conversion Rate"), in effect on the date the certificate is surrendered for conversion. The initial "Series D Conversion Price" is the Series D Original Issue Price, subject to adjustment as set forth in the amended and restated certificate of incorporation. The Series D Preferred Stock will not be convertible by a holder to the extent that the holder or any of its affiliates would beneficially own in excess of 9.99% of the Common Stock, subject to certain protections as provided in the amended and restated certificate of incorporation.

Dividends. The Series D Preferred Stock will bear a cumulative 15.0% per annum fixed dividend payable no later than the 5th day after the end of each month on the Series D Original Issue Price plus unpaid accrued and accumulated dividends. "Series D Original Issue Price" means for each share of the Series D Preferred Stock the lower of (i) $1.27 or (ii) the closing price of the Common Stock on the trading day immediately preceding the Purchase Date (as adjusted for any stock splits, stock dividends, combinations, recapitalizations or the like with respect to the Series D Preferred Stock). Dividends on the Series D Preferred Stock will be prior to any dividends on any other series of Preferred Stock or the Common Stock. The Company may elect to pay dividends for any month with a paid-in-kind election ("PIK") if (i) the shares issuable further to the PIK are subject to an effective registration statement, (ii) the Company is then in compliance with all listing requirements of Nasdaq and (iii) the average daily trading dollar volume of the Company's common stock for ten trading days in any period of twenty consecutive trading days on the NASDAQ is equal to or greater than $27.5 million.

Redemption Rights. There will be no mandatory redemption date, but, subject to the conditions set forth below, all, but not less than all, of the shares will be redeemable by the Company at any time, provided that if the Company issues notice to redeem, investors shall have 15 days to convert such shares to Common Stock prior to the date of redemption. The redemption price will be equal to the Series D Original Issue Price, plus accrued and accumulated dividends, (whether or not declared (the "Series D Redemption Price"). The conditions to the redemption will be follows: (i) the shares have been issued and outstanding for at least one year, (ii) the issuance of the shares of Common Stock underlying the shares has been registered pursuant to the Securities Act and the registration statement is effective, and (iii) the trading price for the Common Stock is less than the Series D Conversion Price (as such term is defined in the amended and restated certificate of incorporation) for 20 trading days in any period of 30 consecutive trading days on the Nasdaq CM. In addition to the above, the shares will also be redeemable in accordance with the following schedule provided the issuance of shares of Common Stock underlying the shares has been registered and the registration statement remains effective:

• Year 2: Redemption at 120% of the Series D Redemption Price

• Year 3: Redemption at 115% of the Series D Redemption Price . . .

Item 5.02 Departure of Directors or Certain Officers; Election of Directors;

On June 7, 2022, Jerry Alban notified the Company that he will retiring effective June 30, 2022 ("Effective Date"). Accordingly, he will no longer be Chief Operating Officer or a member of the board of directors of the Company as of the Effective Date. Mr. Alban's decision to retire was not the result of any dispute or disagreement with the Company on any matter relating to the Company's operation, policies (including accounting or financial policies) or practices.

On June 9, 2022, the board of directors of the Company appointed Ignacio Novoa as a director effective as of the Effective Date. Mr. Novoa will receive the compensation for non-employee directors as described in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2021. There are no arrangements or understandings between Mr. Novoa and any other person pursuant to which he was appointed to serve on the Board.

The Company and Mr. Novoa entered into a one year Consulting Agreement, dated January 12, 2022, whereby Mr. Novoa provides electric vehicle market research, analysis of market trends in the electric vehicle industry and other research and services. Mr. Novoa was issued an aggregate of 255,500 shares of Common Stock pursuant to the terms of the Consulting Agreement. Other than as described above, Mr. Novoa does not have a direct or indirect material interest in any "related party" transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. There are no family relationships between Mr. Novoa and any director or executive officer of the Company.

Item 9.01. Financial Statements and Exhibits