Item 1.01.
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ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
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On November 7, 2019,
Ideal Power Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”)
with certain institutional and accredited investors, including Dr. Lon E. Bell, Chief Executive Officer and Chairman of the Board
of the Company, for a private placement in which the Company agreed to issue shares of the Company’s common stock and warrants
to purchase shares of the Company’s common stock, in each case as described below, for aggregate gross proceeds of $3.5
million (the “Offering”). The Offering closed on November 13, 2019. The Company intends to use the net proceeds from
the Offering for working capital and general corporate purposes. Craig-Hallum Capital Group LLC acted as exclusive placement agent
in connection with the Offering.
In the Offering, the Company issued and
sold (i) an aggregate of 544,950 shares of common stock at a price of $2.4763 per share to the investors (the “Investor Shares”),
and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 868,443 shares of common stock (the “Pre-Funded
Warrant Shares”) issuable upon exercise of Pre-Funded Warrants to certain investors at a price of $ $2.4763 per share minus
a nominal exercise price of $0.001 for each Pre-Funded Warrant Share. The Pre-Funded Warrants were issued to certain investors
whose purchase of shares of common stock would make them the beneficial owners of more than 4.99% (or, at the investor’s
election, 9.99%) of the Company’s outstanding common stock. The Pre-Funded Warrants are immediately exercisable and will
not expire prior to exercise.
In addition,
under the terms of the Purchase Agreement, the Company issued to all investors warrants (the “Purchase Warrants”)
to purchase up to an aggregate of 1,766,751 shares of the Company’s common stock (the “Purchase Warrant
Shares”) with an exercise price of $2.32 per share. The total number of Purchase Warrant Shares represents 125%
warrant coverage to the Investor Shares and Pre-Funded Warrant Shares purchased in the Offering. The Purchase Warrants are
exercisable immediately and expire five years from the date of issuance.
The exercise price of the Pre-Funded Warrants
and the Purchase Warrants is subject to adjustment for stock splits, stock dividends, recapitalizations, and similar transactions
as provided for in the terms of the Pre-Funded Warrants and the Purchase Warrants. The holders may exercise the Pre-Funded Warrants
or the Purchase Warrants in whole or in part.
In connection with the Purchase Agreement,
the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the
Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) relating to
the offer and resale by the holders of the Investor Shares, the Pre-Funded Warrant Shares, and the Purchase Warrant Shares. Pursuant
to the Registration Rights Agreement, the Company is obligated to file the registration statement within 30 days of closing of
the Offering.
The Purchase Agreement, the Registration
Rights Agreement, the Purchase Warrants and the Pre-Funded Warrants contain customary representations and warranties, covenants,
indemnification obligations, and other terms and conditions typical to agreements of these types.
The foregoing descriptions of the Purchase Agreement, the Registration Rights Agreement, the form of Purchase Warrant, and the form of Pre-Funded Warrant
do not purport to be complete and are qualified in their entirety by reference to the full text of such documents, copies of which
are filed as Exhibits 10.1, 10.2, 4.1 and 4.2, respectively, to this Current Report on Form 8-K, and are incorporated by reference
herein.