SCHEDULE 13D/A: Material Impact Entities Boost Nauticus Robotics Stake to 18.6% Through Strategic Debt-to-Equity Conversions and New Financing

Material Impact Partners II and Material Impact Fund II, along with their managing members, have significantly increased their beneficial ownership in Nauticus Robotics, Inc. to 18.6% through a series of convertible debt, warrant, and preferred stock transactions.

Summary

• The Reporting Persons, comprising Material Impact Partners II, Material Impact Fund II, Adam Sharkawy, and Carmichael Roberts, collectively hold a beneficial ownership of 18.6% in Nauticus Robotics, Inc.'s Common Stock, representing 6,864,520 shares (or 6,866,659 shares for Adam Sharkawy including individual holdings).
• This ownership percentage is calculated based on 30,185,791 shares of Common Stock outstanding as of February 3, 2025, and reflects the 1-for-36 reverse stock split effected by the Issuer on July 22, 2024.
• The beneficial ownership includes 69,829 shares held directly by MIF II, 106,194 shares issuable upon exercise of Private Warrants, 1,466,090 shares issuable upon conversion of January 2024 Term Loans, 10,701 shares issuable upon conversion of September 2023 Term Loans, and 5,211,706 shares underlying Series A Preferred Stock.
• On June 22, 2023, Nauticus Robotics issued 7,333 shares of Common Stock to MIF II to settle and release all claims for liquidated damages under the original Registration Rights Agreement, which had not met its registration requirements.
• On September 18, 2023, MIF II provided a $2,000,000 convertible senior secured term loan (September 2023 Term Loans) to the Issuer, bearing an interest rate of 12.50% per annum and an initial conversion price of $6.00 per share (pre-Reverse Stock Split).
• On January 30, 2024, MIF II provided another $2,000,000 senior secured term loan (January 2024 Term Loans) to the Issuer, with a 15% annual interest rate and an initial conversion price of $0.4582 per share (pre-Reverse Stock Split). This conversion price was voluntarily reduced to $1.59 per share on January 3, 2025, based on the closing price of January 2, 2025.
• As part of a restructuring on January 30, 2024, MIF II exchanged its existing debentures for New Debentures, which feature a 5% annual interest rate and a conversion price of $0.4582 (pre-Reverse Stock Split), with an alternate conversion price subject to a floor of $0.0878 (pre-Reverse Stock Split).
• Also on January 31, 2024, the exercise price of Private Warrants held by MIF II was voluntarily adjusted to $0.0001, making 106,194 shares of Common Stock issuable upon exercise.
• On November 4, 2024, MIF II exchanged the remaining outstanding principal and interest under the New Debentures for 5,342 shares of Series A Preferred Stock.
• The Series A Preferred Stock, designated on December 26, 2024, has a stated value of $1,000 per share, entitles holders to 5% annual dividends (as-if converted), and is convertible into Common Stock at a fixed conversion price of $1.23 or an alternate conversion price. It generally carries no voting power, and the Issuer has a right to redeem it at a 25% premium.

Sentiment

Score: 4

Explanation: The document is a factual disclosure of ownership and financing activities. While it shows the company is securing capital, the high interest rates on loans and significant potential for dilution from convertible instruments suggest financial strain or a high cost of capital, which is a negative signal. The resolution of liquidated damages is a minor positive.

Positives

• The Issuer successfully resolved past claims for liquidated damages under a Registration Rights Agreement by issuing shares to MIF II.
• Nauticus Robotics secured significant additional capital through multiple term loans and debt restructurings from an existing major investor (MIF II), indicating continued investor support.

Negatives

• The issuance of shares to settle liquidated damages indicates a past failure by the Issuer to meet its registration requirements.
• The term loans carry high interest rates (12.50% and 15% per annum), suggesting a high cost of capital for Nauticus Robotics.
• There is significant potential for dilution for existing common stockholders due to the conversion features of various instruments, notably the voluntary reduction of the January 2024 Term Loan conversion price from an implied post-split $16.4952 to $1.59, and the low alternate conversion prices for debentures and warrants.
• The Series A Preferred Stock includes a 25% redemption premium, which could be a substantial cost for the Issuer if it chooses to redeem the shares.

Risks

• Substantial dilution of common stock is a significant risk due to the conversion of term loans, debentures, and Series A Preferred Stock at potentially low or significantly reduced conversion prices.
• The company faces high ongoing financing costs due to the elevated interest rates on its secured term loans (12.50% and 15%).
• Reliance on a single investor group (Material Impact entities) for multiple rounds of financing and restructuring may indicate limited access to broader capital markets or ongoing financial challenges for the Issuer.

Future Outlook

The Reporting Persons hold their securities in Nauticus Robotics for general investment purposes and may, depending on prevailing market, economic, and other conditions, acquire or dispose of additional securities, or engage in discussions with the Issuer regarding further investments.

Industry Context

This filing primarily details specific financing and ownership changes for Nauticus Robotics, Inc., reflecting the company's efforts to secure capital and manage its debt obligations through existing investors. It does not provide broader industry trends or competitive analysis.

Corporate Governance

Legal Proceedings

• MIF II released all past and future claims for liquidated damages under the Registration Rights Agreement in exchange for 7,333 shares of Common Stock, resolving a past issue related to unmet registration requirements.

Related Party Transactions

• All detailed financing activities (September 2023 Term Loan, January 2024 Term Loan, January Warrant & Debenture Agreement Restructuring, Exchange Agreement for Series A Preferred Stock) involve Material Impact Fund II, L.P. (MIF II), which is a reporting person and controlled by the managing members who are also reporting persons.

Stakeholder Impact

• Shareholders: Potential for significant dilution due to the conversion of term loans, debentures, and Series A Preferred Stock into common shares at potentially low prices. The 1-for-36 reverse stock split also impacts per-share metrics.
• Creditors/Lenders (MIF II): MIF II has increased its exposure and control through various debt and equity instruments, securing its position with senior secured loans and preferred stock. The high interest rates and conversion features provide significant upside potential if the company performs, but also reflect the risk taken.
• Company (Nauticus Robotics): Has secured necessary capital to continue operations, but at a high cost of capital and with significant potential for future dilution of common equity.

Next Steps

• The Issuer is obligated to hold one or more stockholder meetings in respect of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock.

Key Dates

Keywords

Nauticus Robotics, SEC Filing, Schedule 13D, Beneficial Ownership, Material Impact Partners II, Material Impact Fund II, Convertible Debt, Term Loan, Preferred Stock, Warrants, Reverse Stock Split, Dilution, Corporate Finance, Investment, SEC Disclosure