Item 1.01 Entry into a Material Definitive Agreement.
Offering of Convertible Notes
On October 6, 2016, Ascent Solar Technologies, Inc., a Delaware corporation (the “Company”), entered into a securities purchase agreement (the “Note SPA”) with Adar Bays, LLC (“Investor”), for the private placement of $330,000 principal amount of the Company’s 6% Original Issue Discount Convertible Redeemable Promissory Notes (“Notes”).
On October 6, 2016, the Company sold and issued $330,000 principal amount of Notes to Investor in exchange for $300,000 of gross proceeds.
Terms of the Notes
Unless earlier converted or prepaid, (i) $110,000 principal amount of the Notes will mature on December 5, 2016, (ii) $110,000 principal amount of the Notes will mature on January 3, 2017, and (iii) $110,000 principal amount of the Notes will mature on February 3, 2017. The Notes bear interest at a rate of 6% per annum, subject to increase to 24% per annum upon the occurrence and continuance of an event of default (as described below).
All principal and accrued interest on the Notes are convertible at any time, in whole or in part, at the option of the Investor into shares of Common Stock at a variable conversion price equal to 80% of the lowest closing bid price of our Common Stock for the fifteen consecutive trading day period prior to the conversion date. After the six month anniversary of the issuance of any Note, the conversion price for such Note shall thereafter be equal to 50% of the lowest closing bid price of our Common Stock for the fifteen consecutive trading day period prior to the conversion date.
Principal on the Notes is payable on the respective maturity dates. Principal on the Notes is payable in cash. Interest on the Notes is payable from time to time in the form of shares of Common Stock using the conversion price formula described above.
The Notes contain standard and customary events of default including but not limited to: (i) failure to make payments when due under the Notes; and (ii) bankruptcy or insolvency of the Company.
The Notes may not be converted and shares of Common Stock may not be issued pursuant to the Notes if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.9% of the outstanding shares of Common Stock.
There are no registration rights applicable to the Notes.
Exchange of Outstanding Series A Preferred Stock for Convertible Notes
In 2013, the Company completed a private placement to one accredited investor (the “Series A Holder”) of its Series A Convertible Preferred Stock (“Series A Preferred Stock”). The Company currently has 165,541 shares of Series A Preferred Stock that remain outstanding.
On October 6, 2016, the Series A Holder entered into an exchange agreement (the “Exchange Agreement”) with the Investor. Pursuant to the Exchange Agreement, beginning December 5, 2016, the Investor has the option to exchange, from time to time, all or any portion of the Notes for outstanding shares of Series A Preferred Stock from the Series A Holder.
The rate of exchange between the Notes and the Series Preferred Stock shall be calculated on an as-converted to Common Stock basis.
The parties will first calculate the number of shares of Common Stock that the principal and accrued but unpaid interest of the Notes to be exchanged are convertible into using the formula set described below (the “As-Converted Common Share Number”). The parties shall next calculate that number of shares of Series A Preferred Stock to be exchanged that (including accrued and unpaid dividends and make whole amounts) upon conversion in accordance with the terms of the Series A Preferred Stock would result in the issuance, as of the effective date of the exchange, of the As-Converted Common Share Number.
The principal and accrued but unpaid interest on the exchanged portion of the Notes shall be calculated into the As-Converted Common Share Number by using the following formula. The As-Converted Common Share Number shall be equal to 80% of the lowest closing bid price of the Company Common Stock for the fifteen trading days immediately preceding the date on which a notice of exchange is delivered. Subsequent to any exchange, the parties shall have the rights to convert the securities received (Notes or Series A Preferred Stock as applicable) upon the exchange in accordance with the terms of such securities.
The foregoing description of the Note SPA, the Notes and the Exchange Agreement New Notes is a summary and is qualified in its entirety by reference to the documents attached hereto as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, which documents are incorporated herein by reference.