Item 1.01
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Entry Into a Material Definitive Agreement
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On December 28, 2016
(the “Initial Closing Date”), Guided Therapeutics, Inc. (the “Company”) entered into a securities purchase
agreement (the “Purchase Agreement”) with RedDiamond Partners LLC (“RedDiamond”) for the issuance and sale
to RedDiamond of up to $330,000 in aggregate principal amount of 10% original issuance discount convertible promissory notes (the
“Notes” and each a “Note”) for an aggregate purchase price of $300,000. On the Initial Closing Date, the
Company issued to RedDiamond a Note in the principal amount of $222,000, for a purchase price of $200,000. At the Company’s
option, at any time within sixty (60) days of the Initial Closing Date, the Company may issue another Note in the principal amount
of $110,000, for a purchase price of $100,000 subject to customary conditions contained in the Purchase Agreement.
Pursuant to the Purchase
Agreement, RedDiamond may not engage in any “short sale” transactions of the Company’s common stock.
The Purchase Agreement
contains customary representations, warranties and covenants by, among and for the benefit of the parties. The Purchase Agreement
also provides for customary indemnification of RedDiamond by the Company.
The Notes mature six
(6) months from their date of issuance and, in addition to the 10% original issue discount, accrues interest at a rate of 10% per
year. The Company may prepay the note, in whole or in part, for 115% of outstanding principal and interest until thirty (30) days
from issuance, for 125% of outstanding principal and interest at any time from thirty-one (31) to sixty (60) days from issuance,
and for 130% of outstanding principal and interest at any time from sixty-one (61) days from issuance until the maturity date.
After six (6) months
from the date of issuance (
i.e.
, if the Company fails to repay all principal and interest due under the Notes at the maturity
date), RedDiamond may convert the Notes, at any time, in whole or in part, into shares of the Company’s common stock, at
a conversion price equal to sixty percent (60%) of the lowest VWAP during the twenty (20) trading days prior to the conversion,
subject to certain customary adjustments and anti-dilution provisions contained in the Notes.
The Notes include
customary events of default provisions and a default interest rate of the lessor of 24% per year or the maximum amount permitted
by law. Upon the occurrence of an event of default, RedDiamond may require the Company to redeem the Notes (or convert it into
shares of common stock) at 150% of the outstanding principal balance of the Notes plus accrued and unpaid interest due thereunder.
The Company used a
placement agent in connection with the transaction. For its services, the placement agent received a cash placement fee equal to
10% of the gross proceeds from the first tranche of transaction.
The issuance of the
note under the purchase agreement was exempt from the registration requirements of the Securities Act, pursuant to the exemption
for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”). In making this determination, the Company relied on the representations of RedDiamond in the
purchase agreement that it is an “accredited investor” and had access to information about its investment and about
the Company. Should the Notes be converted into shares of common stock, the issuance of the shares of common stock would be exempt
from the registration requirements of the Securities Act pursuant to the exemption for exchange transactions under Section 3(a)(9)
of the Securities Act.
The descriptions of
the of the Purchase Agreement and the Note do not purport to be complete and are qualified in their entirety by the full text of
each, attached as Exhibits 10.1 and 4.1, respectively, and incorporated herein by reference.
This Current Report
on Form 8-K is neither an offer to sell nor the solicitation of an offer to buy any securities. The securities described above
have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an
exemption from registration under the Securities Act.