Mullen Automotive Inc. (NASDAQ:MULN), a company in the motor vehicles sector with a market capitalization of approximately $20 million, has entered into an agreement that will resolve its outstanding liabilities totaling $20,623,013.
According to InvestingPro data, the company currently shows weak financial health with a concerning current ratio of 0.53, indicating short-term obligations exceed liquid assets. This settlement pertains to the convertible notes issued on May 14, 2024.
The agreement was approved by a Florida court on Thursday, and involves the issuance of common stock to creditors. InvestingPro analysis reveals the company has been quickly burning through cash, with subscribers having access to 15 additional key insights about Mullen's financial position.
The settlement, which is not a new financing arrangement but a resolution of existing debts, was reached through a court-approved process under Section 3(a)(10) of the Securities Act of 1933. The agreement stipulates that the company will issue shares of common stock or, if necessary to avoid exceeding a 9.9% ownership threshold, prefunded warrants exercisable for common stock.
The price for converting the debt into equity is based on the lower of three values: $549.00, 95% of the closing sale price on the date the initial registration statement becomes effective, or 95% of the lowest daily volume weighted average price in the five days preceding the conversion.
However, the conversion price will not drop below $1.16 per share. The stock has experienced significant volatility, with a dramatic decline of nearly 100% year-to-date, as tracked by InvestingPro's comprehensive metrics.
Once the creditors receive the shares, they will release Mullen Automotive from all claims related to the settled amount. This move is designed to strengthen the company's balance sheet by eliminating debt through the issuance of equity.
The issuance of the settlement shares will be exempt from the registration requirements of the Securities Act, as it is considered an exchange for bona fide outstanding claims approved by a court. This information is based on a press release statement.
In other recent news, Mullen Automotive has secured a significant order for 10 Class 3 EV cab chassis trucks from Associated Coffee, facilitated by Mullen's newest franchise dealer, Papé Group.
The move supports Associated Coffee's sustainability efforts in their delivery services. Concurrently, Mullen's subsidiary, Bollinger Motors, has secured a repeat order for seven B4 all-electric trucks from TEC Equipment, marking a significant boost to Mullen's revenue.
Mullen has also announced collaborations with Emerald Transportation Solutions and the National Auto Fleet Group. The partnership with Emerald aims to develop a refrigerated upfit for the Mullen THREE, a Class 3 all-electric truck, catering to the growing demand for home delivery, frozen food, grocery, and beverage transportation.
The partnership with the National Auto Fleet Group is expected to increase the penetration of electric vehicles in the commercial sector by distributing Bollinger B4 electric commercial trucks to government agencies.
Mullen's Class 1 EV cargo van, the Mullen ONE, is now part of a pilot program in Jacksonville, Florida, and is available for rental on Turo, a car-sharing marketplace. These developments are part of Mullen Automotive's ongoing efforts to expand its presence in the electric commercial vehicle market.
Despite these positive developments, InvestingPro data indicates potential financial challenges for the company, with a concerning current ratio of 0.53 suggesting potential difficulties in meeting short-term obligations.
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