8-K: Dragonfly Energy Amends Equity Purchase Agreement with Chardan Capital Markets

Dragonfly Energy Holdings Corp. has amended its equity purchase agreement with Chardan Capital Markets to allow for intraday VWAP purchases, updating the mechanics of its $150 million equity facility.

Summary

• Dragonfly Energy Holdings Corp. has entered into an amended and restated purchase agreement with Chardan Capital Markets LLC.
• The agreement modifies the existing $150 million equity facility to include intraday volume-weighted average price (VWAP) purchases.
• This change allows Dragonfly Energy to sell shares of its common stock to Chardan Capital Markets at prices reflecting intraday trading activity.
• The original agreement was established on October 7, 2022, and this amendment restates the agreement in its entirety.
• The company may issue and sell up to $150 million in aggregate gross purchase price of newly issued shares of common stock.
• The sales will be made in reliance upon exemptions from the registration requirements of the Securities Act.
• The company has agreed to file a Current Report on Form 8-K disclosing the execution of the amended agreement.
• The agreement includes provisions for VWAP purchases and intraday VWAP purchases, with specific conditions and limitations.
• The investor is not obligated to purchase shares until a VWAP Purchase Notice or Intraday VWAP Purchase Notice is received and accepted.
• The company can deliver a VWAP Purchase Notice as often as every trading day, and a single Intraday VWAP Purchase Notice in any given day.
• The investor must notify the company of receipt of a VWAP Purchase Notice by 9:30 a.m. New York City time.
• Shares purchased by the investor will be delivered as DWAC Shares not later than 1:00 p.m. New York City time on the trading day immediately following the applicable VWAP Purchase Date.
• The investor will pay the company in cash for the shares purchased not later than 5:00 p.m. New York City time on the trading day immediately following the applicable VWAP Purchase Share Delivery Date.
• The agreement includes an Exchange Cap, limiting the number of shares that can be issued, unless stockholder approval is obtained.
• The Exchange Cap is not applicable if the Average Price equals or exceeds the Base Price.
• The agreement also includes a Beneficial Ownership Limitation, restricting the investor from owning more than 9.9% of the outstanding voting power or shares of common stock.

Sentiment

Score: 7

Explanation: The document is generally positive as it provides Dragonfly Energy with access to capital and more flexibility in selling its shares. However, there are some limitations and risks associated with the agreement, which temper the overall sentiment.

Positives

• The amendment provides Dragonfly Energy with more flexibility in selling its shares.
• The inclusion of intraday VWAP purchases may allow the company to achieve better pricing for its shares.
• The agreement allows the company to access capital as needed, up to $150 million.
• The agreement includes a mechanism for the company to potentially exceed the Exchange Cap with stockholder approval.
• The agreement provides a clear framework for the purchase and sale of shares.

Negatives

• The agreement includes an Exchange Cap, which may limit the company's ability to raise capital.
• The Beneficial Ownership Limitation may restrict the investor's ability to increase its stake in the company.
• The company is obligated to deliver shares as DWAC Shares, which may require additional administrative effort.
• The company is subject to certain restrictions on issuing shares and entering into other transactions.
• The agreement includes a provision for the company to pay cash to the investor if shares are not delivered on time.

Risks

• The company's ability to raise capital under the agreement is subject to market conditions and the investor's willingness to purchase shares.
• The Exchange Cap may limit the company's ability to raise capital if stockholder approval is not obtained.
• The Beneficial Ownership Limitation may restrict the investor's ability to increase its stake in the company, potentially limiting demand for the company's shares.
• The company may be subject to penalties if it fails to deliver shares on time.
• The company is subject to certain restrictions on issuing shares and entering into other transactions, which may limit its strategic flexibility.

Future Outlook

The agreement allows Dragonfly Energy to sell shares of its common stock to Chardan Capital Markets over time, providing a source of capital. The company's ability to utilize this facility will depend on market conditions and the company's needs.

Industry Context

This type of agreement is common for companies seeking to raise capital in the public markets. The inclusion of intraday VWAP purchases is a more recent trend, allowing companies to take advantage of short-term price movements. This agreement is similar to other equity line agreements, but the specific terms and conditions are unique to Dragonfly Energy and Chardan Capital Markets.

Comparison to Industry Standards

• The agreement is similar to other equity line agreements, such as those used by companies like Nikola Corporation and Workhorse Group, which also utilize VWAP mechanisms for share sales.
• The $150 million facility is a significant amount, comparable to other similar agreements in the renewable energy and technology sectors.
• The inclusion of intraday VWAP purchases is a feature that is becoming more common in these types of agreements, reflecting a desire for more dynamic pricing.
• The Exchange Cap and Beneficial Ownership Limitation are standard provisions to protect existing shareholders and comply with regulatory requirements.
• The specific percentages and dollar amounts are unique to this agreement and reflect the specific needs and circumstances of Dragonfly Energy and Chardan Capital Markets.

Stakeholder Impact

• Shareholders may experience dilution as new shares are issued under the agreement.
• The company's access to capital may improve its financial stability and ability to execute its business plan.
• The agreement may impact the company's share price, depending on market conditions and the company's performance.
• Employees may benefit from the company's improved financial position.
• Customers and suppliers may benefit from the company's ability to invest in its business.

Next Steps

• Dragonfly Energy will file a Current Report on Form 8-K disclosing the execution of the amended agreement.
• The company will need to comply with the terms and conditions of the agreement, including the delivery of shares and the payment of fees.
• The company may need to seek stockholder approval to exceed the Exchange Cap.
• The company will need to monitor market conditions and its capital needs to determine when to utilize the equity facility.

Key Dates

Keywords

equity facility, VWAP purchase, intraday VWAP, Chardan Capital Markets, common stock, capital raise, DWAC shares, Exchange Cap, Beneficial Ownership Limitation, securities, investment