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Item
1.01
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Entry
into a Material Definitive Agreement
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On
May 31, 2018, American Power Group Corporation (“APGC” or the “Company”) entered into a Common Stock Purchase
Agreement (the “Purchase Agreement”) with Dual Fuel, LLC, an Arizona limited liability company (“DF”),
whereby DF agreed to purchase, subject to certain conditions, 400,000,000 shares of APGC’s common stock at a purchase price
of $.005 per share (the “Transaction”). DF will make an initial investment of five hundred thousand dollars ($500,000)
for the purchase of one hundred million (100,000,000) shares of APGC’s common stock and commit to purchase three (3) additional
separate blocks of one hundred million (100,000,000) shares within eighteen (18) months from closing of the Transaction. Advanced
Green Innovations, LLC, an entity affiliated with DF has agreed to guaranty all payments due by DF with respect to the additional
300,000,000 shares to be purchased.
Due
to the fact the per share purchase price is below the stated $.01 par value of the Company’s Common Stock, the Company must
amend its Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to decrease the par value
to $.005 per share prior to the issuance of any share associated with the Transaction. All advances made by DF pursuant to the
Purchase Agreement will be treated as deposits pending the filing of the certificate of amendment. The Company has agreed to take
all action reasonably necessary to obtain the appropriate stockholder consent for the purpose of approving the certificate of
amendment.
Amended
and Restated Voting Agreement
In
connection with the Transaction, the Company’s Amended and Restated Voting Agreement dated as of January 27, 2017, among
the Company and certain investors, was amended and restated to provide that DF will have the rights for a period of 36 months
from the closing of the Transaction to designate three of the five members of the Board of Directors. The Company’s CEO
and Matt Van Steenwyk shall be the other designated directors.
Conversion
of Series A, C, D, D2 and D3 Convertible Preferred Stock and Termination of Related Common Stock Purchase Warrants
In
connection with the Transaction, holders of 100% of the Company’s Series C, D, D2 and D3 Convertible Preferred Stock and
approximately 97% of Series A Convertible Preferred Stock converted their respective shares of Convertible Preferred Stock into
approximately 61.8 million shares of the Company’s Common Stock pursuant to the terms each respective series of Preferred
Stock. In addition, the holders agreed to terminate warrants to purchase approximately 81.8 million shares of the Company’s
Common Stock issued in conjunction with the Preferred Stock and forgo payment of approximately $2 million of accrued but unpaid
Preferred Stock dividends.
Termination
of Common Stock Purchase Warrants and Stock Options
In
connection with the Transaction, previously issued warrants and stock options to purchase approximately 28.8 million shares of
the Company’s Common Stock were terminated with the holder’s consent.
Debt
Settlement Agreement
In
connection with the Transaction, the Company and its American Power Group, Inc. subsidiary (“APGI”) entered into a
Confidential Settlement Agreement with WPU Leasing, LLC (“WPU”) whereby WPU agreed to forgo payment of approximately
$2.37 million representing all outstanding principal and accrued but unpaid interest due under certain promissory notes issued
by WPU through such date in return for APGI relinquishing ownership interest in all existing equipment owned by APGI but subject
to a first security lien by WPU. In addition, WPU agreed to terminate warrants to purchase approximately 5.4 million shares of
the Company’s Common Stock issued in conjunction with the promissory notes.
Amendment
to Notes Payable
In
conjunction with the Transaction, holders of the Company’s $3 million of Subordinated Contingent Convertible Promissory
Notes (the “Notes”) agreed to extend the maturity of the Notes from June 30, 2018 until June 30, 2021. In addition,
the holders have the option to convert the Notes into shares of the Company’s Common Stock at $.25 per share anytime with
the balance automatically converting at the end of thirty-six (36) months into common shares at $.25 per share if not converted
earlier.
Iowa
State Bank Working Capital Line of Credit Extension
On
June 7, 2018, APGI and Iowa State Bank, entered into a Change of Terms Agreement, pursuant to which the maturity of APGI’s
$500,000 Revolving Line of Credit was extended to December 31, 2018.