Digital Power Corporation (DPW) Shares Dive as Spooked Investors Run for Cover


Digital Power Corporation (NYSE:DPW) investors are heading for the hills after the company disclosed the following financial transactions:

  • On December 4, 2017, Digital Power entered into a Securities Purchase Agreement with an investor, pursuant to which the Company has agreed, to issue and sell to the investor 150,000 shares of restricted common stock and a 10% Original Issue Discount Convertible Debenture for a purchase price of $500,000, with a principal face amount of $550,000. The transaction is expected to close as promptly as possible after listing approval from the NYSE American is obtained. The Company and the investor entered into the Agreement based on an understanding reached on November 22, 2017.The Debenture has a term of eight months, bears interest at 5% per year and the principal of the Debenture and interest earned thereon may be converted into shares of common stock at $0.60 per share, subject to anti-dilution.  In the event that the Company consummates any debt or equity financing with gross proceeds to the Company equal to or greater than $7,500,000, then the Company shall prepay to the investor in cash 110% of the outstanding principal amount of the Debenture and any accrued and unpaid interest if the closing of such transaction occurs within ninety days from the original issue date of the Debenture, and the Company shall prepay to the holder in cash 115% of the outstanding principal amount of the Debenture and any accrued and unpaid interest if the Closing of such transaction occurs between 91 days from the original issue date and the maturity date of the Debenture.  The Company has the option to prepay all amounts owed under the Debenture in cash at a rate of 110% within 90 days from the original issue date and 115% from 91 days from the original issue date through the maturity date.
  • On December 5, 2017, Digital Power entered into an exchange agreement with several accredited investors pursuant to which the Company agreed to issue to the investors an aggregate of (a) 1,523,852 shares of common stock, and (b) warrants to purchase 380,963 additional shares of common stock for a term of three years at an exercise price of $1.10 per share, in exchange for cancellation of outstanding debt owed to the Investors by Microphase Corporation, an indirect majority owned subsidiary of the Company, in the principal amount of $690,000. The debt accrued 10% interest annually payable until August 31, 2017, and an additional premium of 25%, resulting in an aggregate amount of debt of $896,939.  The number of Conversion Shares issuable to each Investor was derived by dividing the individual’s portion of the $896,939 owed by the 10-day trailing volume-weighted average price ending on August 4, 2017, resulting in the issuance of an aggregate of 1,523,852 Conversion Shares.  Each Investor was entitled to receive a Warrant to purchase that number of Warrant Shares equal to 25% of the Conversion Shares the Investor was issued.  Each Warrant is exercisable for $1.10 per share, carries a term of three years, is exercisable on a cashless basis and contains standard anti-dilution provisions. The Agreement provides for customary registration rights under the Securities Act of 1933. The transaction is expected to close as promptly as possible after listing approval from the NYSE American is obtained. The Company and the Investors entered into the Agreement pursuant to an understanding reached on August 31, 2017.
  • On December 5, 2017, Digital Power entered into a subscription agreement with one investor for the sale of 640,000 shares of common stock at $1.25 per share for the aggregate purchase price of $800,000. The Company expects to close the offering on or about December 8, 2017.  The offering is being made pursuant to a prospectus filed with the Company’s existing shelf registration statement on Form S-3 (File No. 333-215834).
  • On December 5, 2017, Digital Power entered into an exchange agreement with WT Johnson & Sons (Huddersfield) Limited, pursuant to which the Company issued to the holder, (a) a convertible promissory note in the principal amount of $600,000, and (b) a convertible promissory note in the principal amount of $1,667,766, in exchange for cancellation of (i) an outstanding loan made by the holder to MTIX Ltd., an indirect wholly owned subsidiary of the Company, in the amount of $265,666; and (ii) cancellation of an aggregate of $2,002,500 owed by the Company to the holder pursuant to an Agreement for the Sale and Purchase of the Textile Multi-Laser Enhancement Technology Machine dated July 21, 2017 by and between MTIX and the holder.  The $600,000 note is convertible into common stock at a conversion price of $1.00 per share, does not bear interest, and matures two years from issuance. The $1,667,766 note is convertible into common stock at a conversion price of $0.85 per share, does not bear interest, and matures two year from issuance.  The transaction is expected to close as promptly as possible after listing approval from the NYSE American is obtained. The Company and the Holder entered into the Purchase Agreement pursuant to an understanding reached on November 20, 2017.

Shares of Digital Power are falling nearly 7% to $3.17 in Friday’s trading session. DPW has a 1-year high of $5.10 and a 1-year low of $0.40. The stock’s 50-day moving average is $1.08 and its 200-day moving average is $0.69.

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