Business Context and Reporting Period
This Form 8-K was filed by Volcon, Inc. on September 15, 2023, reporting events occurring September 14, 2023. The request metadata identifies Empery Digital Inc., but the filing’s registrant is Volcon, Inc. (NASDAQ: VLCN), an emerging growth company.
Material Financing Developments
- Volcon entered into a Waiver and Modification Agreement with Empery Asset Master, LTD, Empery Tax Efficient, LP, and Empery Debt Opportunity Fund, LP.
- The investors waived a restriction that otherwise prevented additional equity offerings before September 25, 2023, allowing Volcon to proceed with a planned underwritten public offering.
- For the Notes, the offering price will generally be deemed the greater of the offering price and $0.55. If the offering price is below $0.55, the Notes’ conversion price would decrease from $0.75 to $0.55 per share, and the shares underlying the Notes would increase from 42,811,595 to 58,379,448.
- The exercise price of the Warrants would be reduced to the offering price, subject to the applicable contractual terms.
Debt, Liquidity, and Covenants
- The maturity date of the senior convertible Notes was agreed to be extended from February 24, 2024 to January 31, 2025, subject to effectiveness conditions.
- The required unrestricted and unencumbered cash balance was reduced from $10 million as of December 31, 2023 to $5 million as of June 30, 2024.
- Volcon must sell at least 250 Volcon Stag off-road vehicles to customers before December 31, 2023, with sales recognized as revenue under GAAP.
- Volcon may incur up to $10 million of indebtedness through a factoring arrangement, provided the factoring lender enters into acceptable subordination and intercreditor agreements.
Effectiveness, Outlook, and Risks
The Note Amendment would become effective only if Volcon executes a valid security agreement with the collateral agent and obtains valid subsidiary guaranties by September 22, 2023. The filing states that Volcon commenced an underwritten public offering, but it does not provide the offering size, final price, closing date, or proceeds.
Investors face potential dilution from conversion of the Notes and exercise of the Warrants. The Notes and Warrants contain price-adjustment provisions, generally subject to a $0.22 floor, and the offering could increase the number of shares issuable upon conversion or exercise. The filing provides no revenue, profit, cash-flow, margin, or current liquidity figures.
Key Facts to Verify
- Whether the security agreement and subsidiary guaranties were executed by September 22, 2023, making the Note Amendment effective.
- The final terms, pricing, size, and completion status of the underwritten offering.
- Whether Volcon achieved the 250-vehicle Stag sales covenant by December 31, 2023.
- Whether Volcon maintained at least $5 million of unrestricted and unencumbered cash by June 30, 2024.
- The ultimate conversion and exercise prices, share counts, and dilution resulting from the offering and contractual price adjustments.