Shares of Distributed Energy Systems Corp. (Nasdaq: DESC) were very active today after announcing the closing of a $15 million financing. DESC closed up 13 cents (18 percent) at 87 cents per share on volume of more than 550,000 shares.
DESC announced that it has completed a $15 million financing with an investment fund managed by Perseus LLC, a merchant bank and private equity fund management company. The company also named two Perseus representatives to serve as directors in place of two senior company executives.
The company received $15 million in cash at closing, and repaid all principal and accrued interest under the $12.5 million note issued by the company to Perseus in June. In consideration of Perseus’ $15 million investment, the company issued Perseus a 12.5 percent senior secured convertible promissory note, which matures on November 30, 2008. The new note, which is secured by all of assets of DESC and its material subsidiaries, is convertible into shares common stock at 57 cents per share.
The company also issued to Perseus a five-year warrant to purchase 34,989,629 shares of its common stock at exercise prices ranging from 80 cents to $3.00 per share. In June, the company issued Perseus a five-year warrant to purchase 7,954,536 shares of common stock at an exercise price of 80 cents per share. This warrant remains outstanding.
At the closing of the second financing, Perseus and the company agreed to reduce the size of the board of directors to seven members, and Perseus named two directors. Perseus retains the right to require DESC to reduce the size of the board to five members at any time in the future, and to name additional members of the board based on its percentage interest in the company.
As a result of the agreement on the new composition of the Board of Directors, John C. Fox, a senior managing director of Perseus, and Michael L. Miller, a Perseus managing director, have become directors of DESC, effective immediately, taking the places of two company executives — Ambrose L. Schwallie, CEO; and Walter W. (Chip) Schroeder, president.
“This funding is the next key step in the financial part of our turnaround strategy, and we welcome this latest proof of the support and guidance Perseus is providing. We are extremely pleased to have access to their capital and their expertise, and we welcome John Fox and Michael Miller to our revitalization team. We expect their contributions to make a difference for us right away and for the longer term,” said Schwallie in a statement.
DESC designs, builds and installs stand-alone and grid-connected electric power systems for industrial, commercial and governmental customers. Its generating systems convert energy derived from wind, sunlight, oil, natural gas, diesel and bio-fuels into electricity, using power generation technologies integrated with custom controls and power electronics.
