Item 1.01. Entry into a Material Definitive Agreement.
On November 16, 2016, MagneGas Corporation,
a Delaware corporation (the “Company”), entered into a Securities Purchase Agreement (the “Purchase Agreement”)
with an institutional investor (the “Investor”) providing for the issuance and sale by the Company of: (i) “Pre-Paid”
Common Stock Purchase Warrants to purchase up to 5,102,041 shares of common stock of the Company (the “Pre-Paid Warrants”),
and (ii) 1,020,408 shares of common stock of the Company at a price per share equal to the Per Share Purchase Price (as defined
in the Securities Purchase Agreement) (the “Shares,” and together with the Pre-Paid Warrant, the “Registered
Securities”). The sale of the Registered Securities equals a total purchase price of $3,000,000 minus $51,020.
Each Pre-Paid Warrant will be pre-paid
at a price per share of $0.49 (a 25% discount to the last reported sale price of the Company’s common stock on the Nasdaq
Capital Market on November 15, 2016) minus $0.01. The Pre-Paid Warrants will be exercisable immediately, subject to certain limitations,
and have an infinite term of exercise with an exercise price of $0.01 for each Pre-Paid Warrant.
The Company shall not effect any exercise
of the Pre-Paid Warrants, and the Investor shall not have the right to exercise any portion of the Pre-Paid Warrants, to the extent
that after giving effect to such issuance after exercise, the Investor together with the Investors’ affiliates, would beneficially
own in excess of 5% of the number of shares of the common stock of the Company outstanding immediately after giving effect to the
issuance of shares of common stock upon exercise of the Pre-Paid Warrant (the “Beneficial Ownership Limitation”). The
Investor, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation, provided that the Beneficial
Ownership Limitation in no event exceeds 9.99%.
The closing of the sale of the Registered
Securities is expected to take place prior to the close of business on November 21, 2016 (the “Closing”), subject to
customary closing conditions.
Total proceeds to the Company, before expenses,
will be $2,948,980 ($3,000,000 minus the $0.01 exercise price of each Pre-Paid Warrant share). The Company estimates that the net
proceeds from the transactions will be approximately $2,800,000 after deducting the Company’s estimated transaction expenses.
The net proceeds received by the Company will be used for working capital and general corporate purposes. General corporate purposes
may include providing working capital, funding capital expenditures, or paying for acquisitions.
Pursuant to the Purchase Agreement, the
Company and the Investor agreed to amend three common stock purchase warrants issued in June 2016: (i) the E-4 common stock purchase
warrant is now exercisable six months from the Closing with a term of 7 years for the Investor to purchase up to 7,017,544 shares
of common stock at a price of $0.66 per share ($0.01 above the closing market price on November 15, 2016), (ii) the E-5 common
stock purchase warrant to purchase up to 3,508,772 shares of common stock is now exercisable at $0.90 (approximately 38% premium
to the closing market price on November 15, 2016), (iii) and the E-6 common stock purchase warrant to purchase up to 1,754,386
shares of common stock is also now exercisable at $0.90. The Series E-5 and E-6 common stock purchase warrants vest ratably only
upon the exercise of the E-4 common stock purchase warrant.
The Registered Securities are being offered
by the Company and the E-4 warrants are being amended pursuant to an effective shelf registration statement on Form S-3, which
was initially filed with the Securities and Exchange Commission (the “SEC”) on November 10, 2015 and declared effective
on June 15, 2016 (File No. 333- 207928) (the “Registration Statement”). We filed a prospectus supplement with the SEC
in connection with the sale of the Registered Securities.
The E-5 and E-6 warrants are being amended
pursuant to an effective resale registration statement on Form S-3, which was initially filed with the SEC on August 3, 2016 and
declared effective August 12, 2016 (File No. 333- 212879). We expect to file a prospectus supplement with the SEC in connection
with the amendments to the E-5 and E-6 warrants.
There was no placement agent for this transaction.
The form of the Purchase Agreement and
the form of the Pre-Paid Warrant are filed hereto as Exhibits 10.1 and 4.1, respectively, to this Current Report on Form 8-K. The
foregoing summaries of the terms of these documents are subject to, and qualified in their entirety by, such documents attached
hereto, which are incorporated herein by reference.