Polar Power, Inc. 8-K

What Happened

• Polar Power, Inc. filed an 8-K (May 22, 2026) reporting that on May 21, 2026 it issued two 6% convertible redeemable notes totaling $970,600 in principal (CFI: $600,000; Monroe: $370,600). Net cash proceeds received were $500,000 from CFI and $307,100 from Monroe after fees and legal costs. Both notes mature in 12 months and are convertible on or after six months into common stock at a discounted price (typically 80% of the lowest daily VWAP over a lookback period; discount increases to 65% with delisting and an extended lookback).
• The company also signed a Restructuring, Implementation and Management Services Agreement (effective May 19, 2026) with Mammoth Crest Capital, LLC (MCC) to lead operational and capital-structure initiatives, including board changes. Polar Power issued MCC shares equal to 4.5% of outstanding common stock (on the effective date) and agreed to a $500,000 fee ( $100,000 paid as a non‑refundable retainer; $400,000 deferred until the company completes financing(s) of at least $5.0M). A monthly $25,000 retainer begins after MCC delivers agreed milestones.
• The company entered a new lease settlement (May 22, 2026), paid $755,000 to regain access to its headquarters, agreed to a payment schedule to avoid eviction through June 30, 2027 (monthly and two lump sums), and will vacate its warehouse by August 31, 2026 with three months’ rent waived (June–Aug 2026). The company also terminated a previously announced revolving loan agreement with Stone Brothers Capital (notice given May 18, 2026; lender had not advanced funds).

Key Details

• Convertible notes: $600,000 CFI Note (purchase price $546,000; net proceeds $500,000 after $10,000 legal fee and $36,000 broker fee) and $370,600 Monroe Note (purchase price $340,000; net proceeds $307,100 after $12,500 legal fee and $20,400 broker fee). Interest = 6% per year; maturity = 12 months.
• Conversion mechanics and reserve: conversion allowed after six months at 80% of the lowest daily VWAP (10-day lookback); if delisted, 65% discount and 20-day lookback. Transfer agent reserved 1,206,434 shares for CFI and 1,000,000 shares for Monroe. Side Letter caps aggregate share issuance at 19.99% of outstanding stock until shareholder approval is obtained within 60 days.
• MCC agreement: $100,000 retainer paid; $400,000 deferred until ≥ $5.0M financing; monthly $25,000 after milestones. Board to be expanded to seven members; MCC‑designated directors Barrett Evans and Michael Hill to be appointed; Arthur D. Sams remains chair.
• Lease settlement: $755,000 paid May 22, 2026 to regain HQ access. HQ payment schedule to avoid eviction includes $92,388/month (Jul 1, 2026–Apr 1, 2027) and $55,000 on May 1 & June 1, 2027. Warehouse vacate deadline Aug 31, 2026; rents waived for June–Aug 2026 (subject to landlord rights if terms are breached).

Why It Matters

• Cash and near-term obligations: the transactions generated roughly $807,100 in net proceeds from the two notes but also created convertible obligations (interest and potential equity dilution) and immediate cash outflows for the lease settlement ($755,000). Investors should note both the short-term cash relief and new contractual obligations.
• Potential dilution: the notes are convertible at substantial discounts to market VWAP (80%, or 65% if delisted), shares have been reserved, and MCC received 4.5% of outstanding shares—these factors can dilute existing shareholders if conversions or resales occur.
• Governance and turnaround oversight: MCC will drive restructuring and gets board influence, which could affect strategy and execution. The Side Letter requires shareholder approval to permit conversions that would exceed 19.99% of outstanding stock, temporarily limiting aggregate dilution until a vote.
• Financing flexibility: the company terminated a previously announced revolving loan (no draws made), and the deferred $400,000 MCC fee is tied to future financings of at least $5.0M, signaling an emphasis on obtaining larger financing events.

(See filing exhibits for full agreements and legal terms.)