UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT
TO SECTION 14(a)
OF THE SECURITIES EXCHANGE
ACT OF 1934
(Amendment No. )
Filed
by the Registrant
x
Filed
by a Party other than the Registrant
¨
Check the appropriate box:
x
Preliminary
Proxy Statement
¨
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨
Definitive Proxy
Statement
¨
Definitive Additional
Materials
¨
Soliciting Material
Pursuant to § 240.14a-12
MAGNEGAS CORPORATION
(Name of Registrant as
Specified In Its Charter)
(Name of Person(s) Filing
Proxy Statement if other than the Registrant)
Payment of Filing Fee
(Check the appropriate box):
x
No fee required
¨
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1)
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Title of each class of securities to which transaction
applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule: 0-11
(set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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¨
Fee
paid previously with preliminary materials.
¨
Check box if any
part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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11885
44th Street North
Clearwater,
FLORIDA 33762
(727) 934-3448
_____________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY____, 2017
_____________________________
Dear Stockholder:
You are cordially invited
to attend a special meeting of the stockholders (the “Special Meeting”) of MagneGas Corporation (“MagneGas”),
which will be held at MagneGas’s offices located at 11885 44th Street North, Clearwater, Florida 33762 on May_________,
2017, at 11:00 a.m. local time.
At the Special Meeting,
you will be asked to approve the following:
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1.
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An amendment to MagneGas’s Certificate of Incorporation (the “Charter”) to effect
a reverse stock split of all of the outstanding shares of our common stock and treasury stock at a ratio of one-for-ten (the “reverse
stock split”).
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2.
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An Amended and Restated Certificate of Incorporation to increase the total number of authorized
shares of our common stock from 90,000,000 to 190,000,000 and to make such other modifications to the Charter as
adopted by the Board of Directors.
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3.
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To transact such other business as may properly come before the Special Meeting and any adjournment
or postponement thereof, by or at the direction of the Board of Directors.
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If you owned our common
stock or Series A Preferred Stock at the close of business on April 7, 2017, which is the record date for determining the stockholders
entitled to notice of and to vote at the Special Meeting, you may attend and vote at the Special Meeting. A list of stockholders
eligible to vote at the Special Meeting will be available for review during our regular business hours at our headquarters in Clearwater,
Florida for the ten days prior to the date of the Special Meeting for any purpose related to the Special Meeting.
We are pleased to take
advantage of the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders
over the Internet. As a result, on or about April ____, 2017, we are mailing to most of our stockholders a Notice of Special Meeting
and Notice Regarding Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of the proxy statement.
We believe that this process allows us to provide our stockholders with the information they need in a more timely manner, while
reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. The Notice contains
instructions on how to access those documents over the Internet, which are available at
www.fcrvote.com/mnga
. The Notice
also contains instructions on how to request a paper copy of our proxy materials, including the proxy statement and a form of proxy
card or voting instruction card.
Your vote is important.
Whether or not you plan to attend the Special Meeting, we urge you to vote as soon as possible.
You may vote your shares
via a toll-free telephone number or over the Internet. If you received a proxy card or voting instruction card by mail, you may
submit your proxy card or voting instruction card by completing, signing, dating and mailing your proxy card or voting instruction
card in the envelope provided. Any stockholder attending the Special Meeting may vote in person, even if you have already returned
a proxy card or voting instruction card.
On behalf of the Board
of Directors, thank you for your continued interest in MagneGas.
THIS NOTICE IS BEING
MAILED ON APRIL_______, 2017.
By Order of the Board
of Directors,
Ermanno Santilli
Chief Executive Officer
April ___, 2017
Clearwater, Florida
11885
44th Street North
Clearwater,
FLORIDA 33762
(727) 934-3448
_____________________________
PROXY STATEMENT
_____________________________
INFORMATION CONCERNING
SOLICITATION AND VOTING
The Board of Directors
(the “Board”) of MagneGas Corporation (“MagneGas”, the “Company,” “we,” “us”
or “our”) is soliciting proxies for use at the Special Meeting of Stockholders of the Company (the “Special Meeting”)
to be held May_____ , 2017, at 11:00 a.m., local time, at our offices located at 11885 44th Street North, Clearwater, Florida 33762.
On or about April______,
2017, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”).
The Notice contains instructions on how to access this proxy statement over the Internet, which is available at
www.fcrvote.com/mnga
.
The Notice also contains instructions on how to request a paper copy of our proxy materials and a form of proxy card or voting
instruction card. The Notice was sent to stockholders who owned our common stock or Series A Preferred Stock at the close of business
on the Record Date (as defined below). This proxy statement contains important information for you to consider when deciding how
to vote on the matters brought before the Special Meeting. Please read it carefully.
QUESTIONS AND ANSWERS
Although we encourage
you to read this proxy statement in its entirety, we included this Questions and Answers section to provide some background information
and brief answers to questions that you might have about the Special Meeting.
Q.
When
and where is the Special Meeting of Stockholders?
A. The
Special Meeting of Stockholders is being held on May________, 2017 at 11:00 a.m., local time, at our headquarters
located at 11885 44th Street North, Clearwater, Florida 33762.
Q.
What
is the quorum requirement for the meeting?
A. A
quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least a majority of
our outstanding shares of common stock and a majority of our outstanding shares of Series A Preferred Stock are represented
in person at the Special Meeting or by proxy. At the close of business on the Record Date for the Special Meeting, there
were 59,597,531 shares of common stock outstanding. Thus, a total of 59,597,531 shares of common stock are entitled to vote
at the Special Meeting and holders of at least 29,798,767 shares of common stock must be represented at the Special Meeting
in person or by proxy to have a quorum. At the close of business on the Record Date for the Special Meeting, there were
1,000,000 shares of Series A Preferred Stock outstanding. Thus, a total of 1,000,000 shares of Series A Preferred Stock are
entitled to vote at the Special Meeting and holders of Series A Preferred Stock representing at least 500,001 shares of
Series A Preferred Stock must be represented at the Special Meeting in person or by proxy to have a quorum. The inspector of
elections appointed for the meeting by our Board of Directors will count the shares represented in person or by proxy at the
Special Meeting to determine whether or not a quorum is present.
Shares will be counted
as present at the Special Meeting if you:
• are present
and entitled to vote in person at the Special Meeting; or
• have voted
over the Internet or by telephone, or properly submitted a proxy card or voting instruction card.
Both abstentions and
broker non-votes (if any) will be counted as present in the calculation of the number of shares considered to be present at the
meeting for the purpose of determining the presence of a quorum. If, however, you are the record holder of your shares and fail
to vote in person or by proxy at the meeting, your shares will not be counted as present for the purpose of determining the presence
of a quorum. In the event that we are unable to obtain a quorum, the Special Meeting may be adjourned to another date and time
by the affirmative vote of the holders of shares representing a majority of the voting power of the outstanding shares of capital
stock, voting together as a single class, present or represented by proxy at the meeting and entitled to vote on such adjournment.
Q.
Why
am I receiving this proxy statement?
A. This
proxy statement describes the proposals on which we would like you, as a stockholder, to vote. It also gives you information so
that you can make an informed decision.
Q.
What
is the Notice of Internet Availability?
A. Instead
of mailing a printed copy of our proxy materials to all stockholders entitled to vote at the Special Meeting, we are furnishing
the proxy materials to our stockholders over the Internet. If you received a Notice by mail, you will not receive a printed copy
of the proxy materials. Instead, the Notice will instruct you as to how you may access and review the proxy materials and submit
your vote. If you received a Notice by mail and would like to receive a printed copy of the proxy materials, please follow the
instructions included in the Notice for requesting such materials.
Q.
What
proposals am I being asked to consider at the upcoming Special Meeting?
A. The
proposals to be considered and acted upon at the Special Meeting are as follows:
1. An
amendment to MagneGas’s Certificate of Incorporation (the “Charter”) to effect a reverse stock split of all of
the outstanding shares of our common stock and treasury stock at a ratio of one-for-ten (the “reverse stock split”).
2. An
Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of our common stock from 90,000,000
to 190,000,000 and to make such other modifications to the Charter as adopted by the Board of Directors.
We will also consider
any other business that properly comes before the Special Meeting or any adjournment or postponement thereof, by or at the direction
of the Board of Directors. As of the Record Date, we are not aware of any other matters to be submitted for consideration at the
Special Meeting. If any other matters are properly brought before the Special Meeting, the persons named in the enclosed proxy
card or voter instruction card will vote the shares they represent using their best judgment.
Q.
If
the stockholders approve an amendment to the Charter to effect the reverse stock split, when would MagneGas implement the reverse
stock split?
A. We
currently expect that the reverse stock split will be implemented as soon as practicable after the receipt of the requisite stockholder
approval. However, our Board of Directors will have the discretion to abandon the reverse stock split if it does not believe it
to be in the best interests of MagneGas and our stockholders.
Q.
Why
is MagneGas seeking to implement a reverse stock split?
A. The
reverse stock split is being proposed to increase the market price of our common stock to satisfy the $1.00 minimum closing bid
price required to maintain our listing on the NASDAQ Capital Market (“Nasdaq”) and to provide us with resources and
flexibility, with respect to our capital, sufficient to execute our business plans and strategy, and improve the marketability
and liquidity of our common stock.
Q.
What
are the consequences of being delisted from Nasdaq?
A. If
we do not effect the reverse stock split, it is likely that we will not be able to meet the $1.00 minimum closing bid price required
to maintain our listing on Nasdaq and therefore our common stock would be delisted from Nasdaq. If we are delisted from Nasdaq,
we may be forced to seek to be traded on the OTC Bulletin Board or the “pink sheets,” which would require our market
makers to request that our common stock be so listed. There are a number of negative consequences that could result from our delisting
from Nasdaq, including, but not limited to, the following:
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the liquidity and market price of our
common stock may be negatively impacted and the spread between the “bid” and “asked” prices quoted by market
makers may be increased;
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our access to capital may be reduced,
causing us to have less flexibility in responding to our capital requirements;
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our institutional investors may be less interested in or prohibited from investing in our common stock, which may cause the market price of our common stock to decline;
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we will no longer be deemed a “covered
security” under Section 18 of the Securities Act of 1933, as amended, and, as a result, we will lose our exemption from state
securities regulations, making the granting of stock options and other equity incentives to our employees more difficult; and
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if our stock is traded as a “penny
stock,” transactions in our stock would be more difficult and cumbersome.
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Q.
What
would be the principal effects of the reverse stock split?
A. The
reverse stock split will have the following effects:
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the market price of our common stock immediately
upon effect of the reverse stock split will increase substantially over the market price of our common stock immediately prior
to the reverse stock split;
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the number of outstanding shares of common
stock will be reduced to one-tenth of the number of shares currently outstanding (except for the effect of eliminating fractional
shares); and
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the number of shares held by us in treasury
stock will be reduced to one-tenth of the number of shares currently held in treasury stock.
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The reverse stock split will not change the par value of our common stock and will not reduce the number of authorized shares of
common stock.
Q.
Are
my pre-split stock certificates still good after the reverse stock split? Do I need to exchange them for new stock certificates?
A. As
of the effective date of the reverse stock split, each certificate representing pre-split shares of common stock will, until surrendered
and exchanged, be deemed to represent only the relevant number of post-split shares of common stock and the right to receive the
amount of cash for any fractional shares as a result and at the time of the reverse stock split. As soon as practicable after the
effective date of the reverse stock split, our transfer agent, Corporate Stock Transfer, will mail you a letter of transmittal.
Upon receipt of your properly completed and executed letter of transmittal and your stock certificate(s), you will be issued the
appropriate number of shares of common stock either as stock certificates (including legends, if appropriate) or electronically
in book-entry form, as determined by MagneGas.
Q.
What
if I hold some or all of my shares electronically in book-entry form? Do I need to take any action to receive post-split shares?
A. If
you hold shares of our common stock in book-entry form (that is, you do not have stock certificates evidencing your ownership of
our common stock but instead received a statement reflecting the number of shares registered in your account), you do not need
to take any action to receive your post-split shares or, if applicable, your cash payment in lieu of any fractional share interest.
If you are entitled to post-split shares, a transaction statement will be sent automatically to your address of record indicating
the number of shares you hold.
Q.
What
happens to any fractional shares resulting from the reverse stock split?
A. If
you would be entitled to receive fractional shares as a result of the reverse stock split because you hold a number of shares of
common stock before the reverse stock split that is not evenly divisible (in other words, it would result in a fractional interest
following the reverse stock split), you will be entitled, upon surrender of certificate(s) representing your shares, to a cash
payment in lieu of the fractional shares without interest.
Q.
What
happens to equity awards under MagneGas’s Amended and Restated 2014 Equity Incentive Award Plan as a result of the reverse
stock split?
A. All
shares of common stock subject to the outstanding equity awards (including stock options, performance shares and restricted stock)
under MagneGas’s Amended and Restated 2014 Equity Incentive Award Plan (the “Equity Plan”) will be converted
upon the effective date of the reverse stock split into one-tenth of the number of such shares immediately preceding the reverse
stock split (subject to adjustment for fractional interests). In addition, the exercise price of outstanding equity awards (including
stock options and stock appreciation rights) will be adjusted to ten times the exercise price specified before the reverse stock
split. As a result, the approximate aggregate exercise price will remain the same following the reverse stock split. No fractional
shares will be issued pursuant to the Equity Incentive Plan following the reverse stock split. Therefore, if the number of shares
subject to the outstanding equity awards immediately before the reverse stock split is not evenly divisible (in other words, it
would result in a fractional interest following the reverse stock split), the number of shares of common stock issuable pursuant
to such equity awards (including upon exercise of stock options and stock appreciation rights) will be rounded up to the nearest
whole number.
Q. What is the effect
of MagneGas’s increase of its authorized common stock?
A. An increase in the
authorized number of shares of common stock will provide us with the flexibility to engage in future corporate transactions, such
as financings, investment opportunities, acquisitions of other companies, stock dividends, restricted stock and stock option grants
or other corporate purposes determined by the Board of Directors to be advisable. The availability of additional authorized shares
for issuance from time to time in the Board’s discretion is desirable in order to avoid repeated separate amendments to our
Certificate of Incorporation and the delay and expense incurred in holding special meetings of the stockholders to approve such
amendments. A vote to increase the number of authorized shares of common stock will provide us with the flexibility for future
activities required to support our business plan. If the proposal is approved, the shares will only be authorized and not immediately
issued. Any subsequent issuance of common stock would have the effect of diluting existing shareholders.
Q. What is the reason
for Amending and Restating MagneGas’s Charter?
A. Over the past decade
MagneGas has made a number of amendments to its Charter, each of which is currently represented by a separate document. The purpose
of amending and restating the Charter in its entirety is to integrate all of the amendments that have been made by the Company
to the Charter into one unified document. In addition, the Amended and Restated Certificate of Incorporation will contain other
modifications to the Charter such as deleting certain provisions that are no longer applicable. These other modifications do not
modify the stockholders’ rights with respect to the Company or impose any new obligations on the Company.
Q.
Who
can vote at the Special Meeting?
A. Our
Board of Directors has set April 7, 2017, as the record date (the “Record Date”) for the Special
Meeting. All stockholders of record at the close of business on the Record Date may attend and vote at the Special Meeting.
Each holder of common stock is entitled to one vote for each share of common stock held as of the Record Date on all matters
to be voted on. Each holder of Series A Preferred Stock is entitled to 100,000 votes for each share of Series A Preferred
Stock held as of the Record Date on all matters to be voted on. On the Record Date, there were 59,597,531 shares of our
common stock outstanding and 1,000,000 shares of our Series A Preferred Stock outstanding. Shares held as of the Record Date
include shares that are held directly in your name as the stockholder of record and those shares held for you as a beneficial
owner through a broker, bank or other nominee.
Q.
What
is the difference between holding shares as a stockholder of record and as a beneficial owner?
A. Most
stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below,
there are some distinctions between shares held of record and those owned beneficially.
Stockholders of
record
- If your shares are registered directly in your name with MagneGas’s transfer agent, Corporate Stock Transfer,
you are considered the stockholder of record with respect to those shares and the Notice has been sent directly to you. As the
stockholder of record, you have the right to grant your voting proxy directly to the proxyholders identified in MagneGas’s
form of proxy or to vote in person by ballot at the Special Meeting.
Beneficial owners
-
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of
shares held in “street name,” and the Notice has been forwarded to you by your broker, bank or other nominee who is
considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your
broker, bank or other nominee on how to vote and are also invited to attend the Special Meeting. However, since you are not the
stockholder of record, you may not vote these shares in person at the Special Meeting unless you request a “legal proxy”
from the broker, bank or other nominee who holds your shares, giving you the right to vote the shares at the Special Meeting.
Q.
How
can I vote my shares in person at the Special Meeting?
A. Shares
held directly in your name as the stockholder of record may be voted in person by ballot at the Special Meeting. If you choose
to vote in person by ballot, please bring your proxy card or proof of identification to the Special Meeting. Even if you plan to
attend the Special Meeting, MagneGas recommends that you vote your shares in advance as described below so that your vote will
be counted if you later decide not to attend the Special Meeting. If you hold your shares in street name, you must request a “legal
proxy” from your broker, bank or other nominee in order to vote in person by ballot at the Special Meeting.
Q.
How
can I vote my shares without attending the Special Meeting?
A. Whether
you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted
without attending the Special Meeting. If you are a stockholder of record, you may vote by submitting a proxy; please refer to
the voting instructions in the Notice or below. If you hold shares beneficially in street name, you may vote by submitting voting
instructions to your broker, bank or other nominee; please refer to the voting instructions provided to you by your broker,
bank or other nominee.
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Internet
- Stockholders of record
with Internet access may submit proxies by following the “Vote by Internet” instructions on the Notice, or by logging
into the secure website, which will be listed on your Notice and following the instructions provided. Most of our stockholders
who hold shares beneficially in street name may vote by accessing the website specified in the voting instructions provided by
their brokers, banks or other nominees. A large number of banks and brokerage firms are participating in Broadridge Financial Solutions,
Inc.’s online program. This program provides eligible stockholders who hold their shares beneficially the opportunity to
vote over the Internet or by telephone. Voting forms will provide instructions for stockholders who hold their shares beneficially
whose bank or brokerage firm is participating in Broadridge’s program.
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Telephone
- If you are a record
stockholder and have telephone access, you may vote your shares by calling the toll-free number listed on the proxy card and following
the instructions provided. If you hold your shares beneficially, you may vote by telephone by following the instructions provided
by your bank or broker.
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Mail
- If you request a printed
set of the proxy materials, you may submit your proxy by mail by signing your proxy card if your shares are registered in your
name as record holder or, for shares held beneficially in street name, by following the voting instructions included by your broker,
bank or other agent, and mailing it in accordance with the instructions provided. If you provide specific voting instructions,
your shares will be voted as you have instructed.
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Votes submitted via the
Internet or by telephone should be received by 11:59 p.m. Eastern Time on May______, 2017 to ensure that your shares are voted.
Submitting your proxy via the Internet or by telephone will not affect your right to vote in person should you decide to attend
the Special Meeting. Even if you plan to attend the Special Meeting, we encourage you to submit your proxy to vote your shares
in advance of the Special Meeting.
We provide Internet and
telephone proxy voting with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However,
please be aware that you must bear any costs associated with your Internet and telephone access, such as usage charges from Internet
access providers and telephone companies.
Q.
What
happens if I do not cast a vote?
A.
Stockholders
of record
- If you are a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on
any of the items of business at the Special Meeting. Such a failure to vote will have the same effect as a vote “against”
each of the proposals to be submitted at the Special Meeting.
Beneficial owners
-
If you hold your shares in street name and you do not cast your vote, your bank, broker or other nominee will have discretion to
vote any uninstructed shares on each of the proposals at the Special Meeting. Accordingly, and, thus, we do not expect to receive
any broker non-votes on any of these proposals.
Q.
How
can I change or revoke my vote?
A. Subject
to any rules your broker, bank or other nominee may have, you may change your proxy instructions at any time before your proxy
is voted at the Special Meeting.
Stockholders of
record
- If you are a stockholder of record, you may change your vote by (1) filing with our Corporate Secretary, prior
to your shares being voted at the Special Meeting, a written notice of revocation or a duly executed proxy card, in either case
dated later than the prior proxy relating to the same shares; or (2) attending the Special Meeting and voting in person by ballot
(although attendance at the Special Meeting will not, by itself, revoke a proxy). Any written notice of revocation or subsequent
proxy card must be received by our Corporate Secretary prior to the taking of the vote at the Special Meeting. Such written notice
of revocation or subsequent proxy card should be hand delivered to our Corporate Secretary or should be sent so as to be delivered
to our principal executive offices, Attention: Corporate Secretary.
Beneficial owners
-
If you are a beneficial owner of shares held in street name, you may change your vote by (1) submitting new voting instructions
to your broker, bank or other nominee; or (2) attending the Special Meeting and voting in person by ballot if you have obtained
a “legal proxy” giving you the right to vote the shares from the broker, bank or other nominee who holds your shares.
In addition, a stockholder
of record or a beneficial owner who has voted via the Internet or by telephone may also change his, her or its vote by making a
timely and valid later Internet or telephone vote no later than 11:59 p.m., Eastern Time, on May_______, 2017.
Q.
What
is a proxy card?
A. The
proxy card enables you to appoint Ermanno Santilli and Scott Mahoney, with full power of substitution, who we refer to as the proxyholders,
as your representatives at the Special Meeting. By signing, dating and returning the proxy card, you are authorizing the proxyholders
to vote your shares at the Special Meeting. Even if you plan to attend the Special Meeting, it is a good idea to sign, date and
return your proxy card or vote by proxy via the Internet or telephone in advance of the Special Meeting just in case your plans
change. You can vote in person by ballot at the Special Meeting even if you have already sent in your proxy card.
If a proposal comes
up for vote at the Special Meeting that is not on the proxy card, the proxyholders will vote your shares according to their best
judgment.
Q.
What
happens if I do not give specific voting instructions?
A.
Stockholders
of record
- If you are a stockholder of record, and you indicate when voting on the Internet or by telephone that you
wish to vote as recommended by the Board, or sign and return a proxy card without giving specific voting instructions, then the
proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement and
as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Special
Meeting.
Beneficial owners
- If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific
voting instructions, under the rules of Nasdaq, the organization that holds your shares may generally vote at its discretion on
all proposals.
Q.
If
I hold shares through a broker, how do I vote them?
A. Your
broker will forward instructions to you regarding the manner in which you can direct your broker as to how you would like your
shares to be voted. If you have not received these instructions or have questions about them, you should contact your broker directly.
Q.
What
does it mean if I receive more than one Notice?
A.
If you received more than one Notice, each containing a different control number, this means that you have multiple accounts holding
shares of our common stock. These may include accounts with our transfer agent, Corporate Stock Transfer, and accounts with a broker,
bank or other holder of record. Please vote all proxy cards for which you receive a Notice to ensure that all of your shares are
voted.
Q.
How
may I obtain a separate Notice or a separate set of proxy materials?
A. If
you share an address with another stockholder, each stockholder may not receive a separate Notice or a separate copy of the proxy
materials. Stockholders who do not receive a separate Notice or a separate copy of the proxy materials may request to receive a
separate Notice or a separate copy of the proxy materials by contacting D.F. King & Co., Inc. (1) by mail at 48 Wall Street,
New York, NY 10005, or (2) by calling (866) 416-0577. Alternatively, stockholders who share an address and receive multiple
Notices or multiple copies of our proxy materials may request to receive a single copy by following the instructions above. Any
stockholder who fails to object in writing to the Company, within 60 days of having been given written notice of the Special Meeting,
shall be deemed to have consented to receiving such single written notice.
Q.
How
can I get electronic access to the proxy materials?
A. You
can view the proxy materials on the Internet at
www.fcrvote.com/mnga
. Please have your control number available. Your control
number can be found on your Notice.
Q.
How
can I attend the Special Meeting?
A. The
Special Meeting is open to all of our stockholders. The Special Meeting will be held at MagneGas’s headquarters located at
11885 44th Street North, Clearwater, Florida 33762, and directions may be found on our website at www.magnegas.com.
Q.
Why
is my vote important?
A. Your
vote is important because the proposals must receive the affirmative vote of a majority of the outstanding shares of common stock,
voting as a separate class, and the affirmative vote of a majority of the outstanding shares of Series A Preferred Stock, voting
as a separate class, in each case entitled to vote at the Special Meeting in order to pass. Also, unless a majority of the shares
of common stock and a majority of the shares of Series A Preferred Stock outstanding as of the Record Date are voted or present
at the Special Meeting, we will not have a quorum, and we will be unable to transact any business at the Special Meeting. In that
event, we would need to adjourn the Special Meeting until such time as a quorum can be obtained.
Q: Who will pay
the costs of this proxy solicitation?
A: We will bear
the entire cost of solicitation of proxies, including maintenance of the Internet website used to access the proxy materials; maintenance
of the Internet website used to vote; and preparation, assembly, printing and mailing of this proxy statement, the proxy card and
any additional information furnished to our stockholders who request paper copies of such materials. We have retained D.F. King
& Co., Inc. to assist in the solicitation of proxies. We expect to pay D.F. King & Co., Inc. $10,000, plus reimbursement
of reasonable expenses. We and our directors, officers and regular employees may solicit proxies by mail, personally, by telephone
or by other appropriate means. No additional compensation will be paid to directors, officers or other regular employees for such
services. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding shares
of our common stock in their names for others to send proxy materials to and obtain proxies from the beneficial owners of such
shares, and we may reimburse them for their costs in forwarding the solicitation materials to such beneficial owners.
Q.
Where
can I find the voting results of the meeting?
A. The
preliminary voting results will be announced at the Special Meeting. The final voting results will be reported in a current report
on Form 8-K, which will be filed with the Securities and Exchange Commission (the “SEC”) within four business days
after the Special Meeting. If our final voting results are not available within four business days after the Special Meeting, we
will file a current report on Form 8-K reporting the preliminary voting results and subsequently file the final voting results
in an amendment to the current report on Form 8-K within four business days after the final voting results are known to us.
PROPOSAL ONE
APPROVAL OF A PROPOSED
AMENDMENT TO
MAGNEGAS’S CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
Overview
The Board of Directors
has unanimously adopted resolutions approving and recommending to the stockholders for their approval a proposed amendment to the
Charter that would, at the discretion of the Board of Directors, effect a reverse stock split of all of the outstanding shares
of common stock, whereby each ten outstanding shares of common stock would be combined, converted and changed into one
share of common stock.
The par value per share
of common stock would remain unchanged at $0.001 per share after the reverse stock split. In addition, the reverse stock split
will not reduce the number of authorized shares of common stock. Please see the table below under the heading “Principal
Effects of the Reverse Stock Split” for an illustration of the effects of this proposed amendment to the Charter (which is
referred to in this proxy statement as the “reverse stock split”).
The text of the proposed
form of certificate of amendment to the Charter to effect the reverse stock split is attached to this proxy statement as
Appendix
A
. However, such text is subject to amendment to include such changes as may be required by the office of the Secretary of
State of the State of Delaware or as the Board of Directors deems necessary and advisable to effect the reverse stock split (provided
that no changes may be made to the amendments to Article FOURTH of the Charter set forth in Exhibit B). The Board of Directors
shall have the authority to abandon, and not to effect, such amendment.
The Board of Directors
has recommended that the proposed amendment be presented to stockholders for approval. Upon receiving stockholder approval of the
proposed amendment, the Board of Directors will have the sole discretion to elect, as it determines to be in the best interests
of MagneGas and its stockholders, whether to effect (or abandon) the reverse stock split. As described in greater detail below,
the reverse stock split is proposed to be effected to increase the price of the common stock to, among other things, meet the $1.00
minimum closing bid price requirement for continued listing on Nasdaq.
If the Board of Directors
determines to effect the reverse stock split by causing the amendment to the Charter to be filed with the Secretary of State of
the State of Delaware, the Charter would be amended accordingly. Approval of the reverse stock split will authorize the Board of
Directors in its discretion to effectuate the reverse stock split. As noted, the Board of Directors will have the discretion to
abandon the reverse stock split if it no longer believes it to be in the best interests of MagneGas and its stockholders, including
if the Board of Directors determines that the reverse stock split will not impact MagneGas’s ability to meet the continued
listing requirements of Nasdaq or if such objective is no longer necessary or desirable, or for any other reason in the business
judgment and discretion of the Board of Directors. MagneGas currently expects that the Board of Directors will cause MagneGas to
effect the reverse stock split as soon as practicable after the receipt of the requisite stockholder approval.
If the Board of Directors
elects to effect the reverse stock split following stockholder approval, the number of issued and outstanding shares of common
stock would be reduced in accordance with the reverse stock split ratio. Except for adjustments that may result from the treatment
of fractional shares, each stockholder will hold the same percentage of the outstanding common stock immediately following the
reverse stock split as such stockholder held immediately prior to the reverse stock split. As described in greater detail below,
as a result of the reverse stock split, stockholders who hold less than ten shares of common stock will no longer be stockholders
of MagneGas on a post-split basis.
The Board of Directors,
with input from senior management, regularly reviews and evaluates MagneGas’s business, strategic plans and prospects, including
the performance of the common stock, with the goal of maximizing stockholder value. On April 6, 2017, the Board of Directors reviewed
benchmarking data concerning various paths to maximizing stockholder value, including the review and evaluation of a reverse stock
split. After review and discussion with an independent advisor, the Board of Directors determined that the proposed reverse stock
split is necessary for execution of MagneGas’s standalone business plans and strategy, including the continued listing of
the common stock on Nasdaq. In addition, the Board of Directors believes the reverse stock split will provide a number of other
benefits to MagneGas and its stockholders, including improving the marketability and liquidity of our common stock.
The Board of Directors
does not intend for this transaction to be the first step in a series of plans or proposals of a “going private transaction”
within the meaning of Rule 13e-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Certain of our officers
and directors have an interest in the reverse stock split as a result of their ownership of common stock, as set forth in the section
entitled “
Security Ownership of Certain Beneficial Owners and Management
.”
Purposes of the Reverse
Stock Split
Nasdaq Listing.
The
common stock is currently listed on Nasdaq under the symbol “MNGA.” Among other requirements, the listing maintenance
standards established by Nasdaq require the common stock to have a minimum closing bid price of at least $1.00 per share. Pursuant
to the Nasdaq Marketplace Rules, if the closing bid price of the common stock is not equal to or greater than $1.00 for 30 consecutive
business days, Nasdaq will send a deficiency notice to MagneGas. Thereafter, if the common stock does not close at a minimum bid
price of $1.00 or more for 10 consecutive trading days within 180 calendar days of the deficiency notice, Nasdaq may determine
to delist the common stock.
Through the date of
filing this proxy statement, the last date the closing bid price of the common stock satisfied the $1.00 minimum closing bid price
requirement was May 15, 2016. As a result, on June 16, 2016, MagneGas received a notice of deficiency from Nasdaq indicating that
if MagneGas did not comply with the minimum bid price rules by December 13, 2016, Nasdaq may delist the common stock.
At the beginning of
December 2016, the Company determined that it would not be in compliance with the minimum bid price rule by December 13, 2016,
which would subject the Company’s common stock to delisting from Nasdaq. As a result, the Company notified Nasdaq and applied
for an extension of the cure period, as permitted under the original notice of deficiency. In the application, the Company indicated
that it met all other continuing listing requirements for Nasdaq and provided written notice of its intention to cure the deficiency
during the second compliance period of an additional 180 days by effecting a reverse stock split, if necessary.
On December 14, 2016,
MagneGas received notice that its common stock satisfied applicable listing criteria for listing on Nasdaq (other than compliance
with the minimum closing bid price requirement), and therefore, MagneGas was afforded an additional 180 calendar days to comply
with the minimum bid price requirement.
The Board of Directors
has determined that, absent approval by stockholders of the reverse stock split, MagneGas will likely be unable to meet the $1.00
minimum closing bid price requirement for continued listing on Nasdaq. If the stockholders do not approve the reverse stock split
proposal and the closing price of the common stock does not otherwise meet the $1.00 minimum closing bid price requirement, the
Board of Directors expects that the common stock will be delisted from Nasdaq on June 12, 2017.
In the event the common
stock is no longer eligible for continued listing on Nasdaq, MagneGas would be forced to seek to be traded on the OTC Bulletin
Board or in the “pink sheets.” These alternative markets are generally considered to be less efficient than, and not
as broad as, Nasdaq, and therefore less desirable. Accordingly, the Board of Directors believes delisting of the common stock would
likely have a negative impact on the liquidity and market price of the common stock and may increase the spread between the “bid”
and “asked” prices quoted by market makers.
The Board of Directors
has considered the potential harm to MagneGas of a delisting from Nasdaq and believes that delisting could, among other things,
adversely affect (i) the trading price of the common stock and (ii) the liquidity and marketability of shares of the
common stock. This could reduce the ability of holders of the common stock to purchase or sell shares of common stock as quickly
and as inexpensively as they have done historically.
Delisting could also
adversely affect MagneGas’s relationships with vendors and customers who may perceive MagneGas’s business less favorably,
which would have a detrimental effect on MagneGas’s relationships with these entities.
Furthermore, if the
common stock was no longer listed on Nasdaq, it may reduce MagneGas’s access to capital and cause MagneGas to have less flexibility
in responding to MagneGas’s capital requirements. Certain institutional investors may also be less interested or prohibited
from investing in the common stock, which may cause the market price of the common stock to decline.
In addition, MagneGas
would no longer be deemed a “covered security” under Section 18 of the Securities Act of 1933, as amended, and
therefore would lose its exemption from state securities regulations. As a result, MagneGas would need to comply with various state
securities laws with respect to issuances of its securities, including equity award grants to employees. As a public company, MagneGas
would not have the benefit of certain exemptions applicable to privately-held entities, which would make granting equity awards
to MagneGas’s employees more difficult.
Potential Increased
Investor Interest.
The Board of Directors believes that the reverse stock split will provide a number of benefits to MagneGas
and its existing stockholders, which may lead to an increase in investor interest, including:
1.
Reduced
Short-Term Risk of Illiquidity.
The Board of Directors understands that a higher stock price may increase investor confidence
by reducing the short-term risk of illiquidity and lack of marketability of the common stock that may result from the delisting
of the common stock from Nasdaq.
2.
Decreasing
Transaction Costs.
Investors may also be dissuaded from purchasing stocks below certain prices because the brokerage commissions,
as a percentage of the total transaction value, tend to be higher for such low-priced stocks.
3.
Stock
Price Requirements.
The Board of Directors understands that some brokerage houses and institutional investors may have
internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual
brokers from recommending low-priced stocks to their customers or by restricting or limiting the ability to purchase such stocks
on margin. In addition, analysts at brokerage firms may not monitor the trading activity or otherwise provide coverage of lower
priced stocks.
Other Potential
Benefits.
The Board of Directors believes that a higher stock price would help MagneGas attract and retain employees and
other service providers. It is the view of the Board of Directors that some potential employees and service providers are less
likely to work for a company with a low stock price, regardless of the size of the company’s market capitalization. Accordingly,
if the reverse stock split successfully increases the per share price of the common stock, the Board of Directors believes this
increase will enhance MagneGas’s ability to attract and retain employees and service providers.
Risks Associated with
the Reverse Stock Split
The reverse stock
split could result in a significant devaluation of MagneGas’s market capitalization and trading price of the common stock,
and we cannot assure you that the proposed reverse stock split will increase our stock price and have the desired effect of maintaining
compliance with Nasdaq listing rules.
The Board of Directors
expects that a reverse stock split of the outstanding common stock will increase the market price of the common stock. However,
MagneGas cannot be certain whether the reverse stock split would lead to a sustained increase in the trading price or the trading
market for the common stock. The history of similar stock split combinations for companies in like circumstances is varied. There
is no assurance that:
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·
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the market price per share of the common
stock after the reverse stock split will rise in proportion to the reduction in the number of pre-split shares of common stock
outstanding before the reverse stock split;
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the reverse stock split will result in
a per share price that will attract brokers and investors, including institutional investors, who do not trade in lower priced
stocks;
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the reverse stock split will result in
a per share price that will increase MagneGas’s ability to attract and retain employees and other service providers;
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the market price per post-split share
will remain in excess of the $1.00 minimum closing bid price as required by the Nasdaq Marketplace Rules or that MagneGas would
otherwise meet the requirements of Nasdaq for continued inclusion for trading on Nasdaq; and
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the reverse stock split will increase
the trading market for the common stock, particularly if the stock price does not increase as a result of the reduction in the
number of shares of common stock available in the public market.
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The market price of
the common stock will also be based on MagneGas’s performance and other factors, some of which are unrelated to the number
of shares outstanding. If the reverse stock split is consummated and the trading price of the common stock declines, the percentage
decline as an absolute number and as a percentage of MagneGas’s overall market capitalization may be greater than would occur
in the absence of the reverse stock split. Furthermore, the liquidity of the common stock could be adversely affected by the reduced
number of shares that would be outstanding after the reverse stock split and this could have an adverse effect on the price of
the common stock. If the market price of the shares of common stock declines subsequent to the effectiveness of the reverse stock
split, this will detrimentally impact MagneGas’s market capitalization and the market value of MagneGas’s public float.
The reverse stock
split may result in some stockholders owning “odd lots” that may be more difficult to sell or require greater transaction
costs per share to sell.
The reverse stock split
may result in some stockholders owning “odd lots” of less than 100 shares of common stock on a post-split basis. These
odd lots may be more difficult to sell, or require greater transaction costs per share to sell, than shares in “round lots”
of even multiples of 100 shares.
Because of the
reverse stock split ratio, certain stockholders may no longer have any equity interest in MagneGas.
Based on the reverse
stock split ratio of one-for-ten, certain stockholders might be fully cashed out in the reverse stock split and thus, after the
reverse stock split takes effect, such stockholders would no longer have any equity interest in MagneGas and therefore would not
participate in our future earnings or growth, if any. It will not be possible for cashed out stockholders, if any, to re-acquire
an equity interest in MagneGas unless they purchase an interest from a remaining stockholder or in a future equity financing by
MagneGas.
The reverse stock
split may not help generate additional investor interest.
There can be no assurance
that the reverse stock split will result in a per share price that will attract institutional investors or investment funds or
that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading
liquidity of our common stock may not necessarily improve.
Effective Date
Assuming the Board
of Directors exercises its discretion to effect the reverse stock split, the reverse stock split will become effective as of the
date and time (the “Effective Date”) that the certificate of amendment to the Charter to effect the foregoing is filed
with the Secretary of State of the State of Delaware (or such later date and time as is stated in such certificate) in accordance
with the Delaware General Corporation Law (the “DGCL”), without any further action on the part of stockholders and
without regard to the date that any stockholder physically surrenders the stockholder’s certificates representing pre-split
shares of common stock for certificates representing post-split shares. The Board of Directors, in its discretion, may delay or
decide against effecting the reverse stock split and the filing of the certificate of amendment to the Charter to effect the reverse
stock split without re-soliciting stockholder approval. It is currently anticipated that if stockholder approval is obtained for
the reverse stock split described in this proposal, the Board of Directors would cause MagneGas to effect the foregoing as soon
as practicable after obtaining such stockholder approval.
Principal Effects
of the Reverse Stock Split
After the Effective
Date, each stockholder will own a reduced number of shares of the common stock. However, MagneGas expects that the market price
of the common stock immediately after the reverse stock split will increase substantially above the market price of the common
stock immediately prior to the reverse stock split. The proposed reverse stock split will be effected simultaneously for all of
the outstanding shares of common stock, and the ratio for the reverse stock split will be the same for all of the outstanding shares
of common stock. The reverse stock split will affect all stockholders uniformly and will not affect any stockholder’s percentage
ownership interest in MagneGas (except to the extent that the reverse stock split would result in any of the stockholders owning
a fractional share as described below). Likewise, the reverse stock split will affect all holders of outstanding equity awards
under the Equity Plan substantially the same (except to the extent that the reverse stock split would result in a fractional interest
as described below). Proportionate voting rights and other rights and preferences of the holders of common stock will not be affected
by the proposed reverse stock split (except to the extent that the reverse stock split would result in any stockholders owning
a fractional share as described below). For example, a holder of 2% of the voting power of the outstanding shares of common stock
immediately prior to the reverse stock split would continue to hold approximately 2% of the voting power of the outstanding shares
of common stock immediately after the reverse stock split. The number of stockholders of record also will not be affected by the
proposed reverse stock split (except to the extent that the reverse stock split would result in any stockholders owning only a
fractional share as described below).
The par value per share
of the common stock would remain unchanged at $0.001 per share after the reverse stock split. In addition, the reverse stock split
will not reduce the number of authorized shares of common stock.
MagneGas will continue
to have 10,000,000 shares of authorized preferred stock, of which 1,000,000 shares are designated as Series A Preferred Stock and
are outstanding.
After giving effect
to the reverse stock split, a total of approximately 145,439 shares of common stock will be reserved for issuance pursuant to outstanding
convertible notes and a total of 2,500,000 shares of common stock will be reserved for issuance pursuant to outstanding warrants.
Based on the number
of shares of the common stock issued or reserved for issuance under the Equity Incentive Plan as of April 7, 2017, 0 shares
of common stock will be issued or reserved for issuance following the reverse stock split, leaving 3,427 shares unissued and unreserved
for issuance.
The proposed reverse
stock split will reduce the number of shares of common stock available for issuance under the Equity Incentive Plan. All shares
of common stock subject to outstanding equity awards (including stock options, performance shares and stock appreciation rights)
under the Equity Incentive Plan and the number of shares of common stock which have been authorized for issuance under the Equity
Incentive Plan but as to which no equity awards have yet been granted or which have been returned to the Equity Incentive Plan
upon cancellation or expiration of such equity awards will be converted on the Effective Date into one-tenth of the number of such
shares immediately preceding the reverse stock split (subject to adjustment for fractional interests). In addition, the exercise
price of outstanding stock options and stock appreciation rights will be adjusted to ten times the exercise price specified before
the reverse stock split. This will result in approximately the same aggregate price being required to be paid as immediately preceding
the reverse stock split. No fractional shares with respect to the shares subject to the outstanding equity awards (including stock
options, performance shares and stock appreciation rights) under the Equity Incentive Plan will be issued following the reverse
stock split. Therefore, if the number of shares subject to any outstanding equity award under the Equity Incentive Plan immediately
before the reverse stock split is not evenly divisible (in other words, it would result in a fractional interest following the
reverse stock split), the number of shares of common stock subject to such equity award (including upon exercise of stock options
and stock appreciation rights) will be rounded up to the nearest whole number. For additional information on the treatment of any
fractional interest that may arise as a result of the reverse stock split relating to equity awards under the Equity Incentive
Plan, please see the section below under the heading “
Effect of the Reverse Stock Split on Equity Awards
.”
The effects of the
proposed amendment to the Charter are illustrated in the below table as of April 7, 2017, including (1) the approximate percentage
reduction in the outstanding number of shares of common stock, (2) the approximate number of shares of common stock that would
be (i) authorized, (ii) issued and outstanding, (iii) issued but held by MagneGas in treasury stock, (iv) reserved
for issuance pursuant to outstanding convertible notes, (v) reserved for issuance pursuant to outstanding warrants, (vi) authorized
but reserved for issuance upon exercise of outstanding equity awards pursuant to the Equity Plan, (vii) authorized but reserved
for issuance under the Equity Incentive Plan (but not subject to outstanding equity awards), and (viii) authorized but not
issued or outstanding, or reserved for issuance under the Equity Incentive Plan, and (3) the approximate percentage of authorized
shares not issued or outstanding, or reserved for issuance under the Equity Incentive Plan:
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Pre-Reverse Stock Split
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Post-Reverse Stock Split
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Percentage Reduction of Shares Outstanding
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0
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%
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0
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%
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Authorized Shares of Common Stock
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90,000,000
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90,000,000
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Shares Outstanding
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59,597,531
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5,959,754
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Issued But Not Outstanding (Held by MagneGas in Treasury Stock)
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-
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Reserved for Issuance Pursuant to Outstanding Convertible Notes
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-
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Reserved for Issuance Pursuant to Outstanding Warrants
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25,000,000
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2,500,000
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Reserved for Issuance Upon Exercise/Release of Outstanding Equity Awards Under the Equity Incentive Plan
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-
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Reserved for Issuance Under the Equity Incentive Plan (but not Subject to Outstanding Equity Awards)
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34,269
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3,427
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Authorized but not Issued or Outstanding, or Reserved for Issuance Under the Equity Incentive Plan
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34,269
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3,427
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Percentage of Authorized Shares not Issued or Outstanding, or Reserved for Issuance Under Convertible Notes, Warrants and the Equity Incentive Plan
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27.82
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%
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2.78
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%
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If the proposed reverse
stock split is implemented, it may increase the number of stockholders who own “odd lots” of less than 100 shares of
common stock. Brokerage commissions and other costs of transactions in odd lots may be higher than the costs of transactions of
more than 100 shares of common stock.
The common stock is
currently registered under Section 12(b) of the Exchange Act, and MagneGas is subject to the periodic reporting and other
requirements of the Exchange Act. The proposed reverse stock split will not affect the registration of the common stock under the
Exchange Act. If the proposed reverse stock split is implemented, the common stock will continue to be reported on Nasdaq under
the symbol “MNGA” (although Nasdaq will add the letter “D” to the end of the trading symbol for a period
of 20 trading days to indicate that the reverse stock split has occurred). After the end of this period, MagneGas’s ticker
symbol will revert to “MNGA.”
The proposed amendment
to the Charter will not change the terms of the common stock. After the reverse stock split, the shares of the common stock will
have the same voting rights and rights to dividends and distributions and will be identical in all other respects to the common
stock now authorized. Each stockholder’s percentage ownership of the new common stock will not be altered except for the
effect of eliminating fractional shares (which is discussed in more detail below). The common stock issued pursuant to the reverse
stock split will remain fully paid and non-assessable. Following the reverse stock split, MagneGas will continue to be subject
to the periodic reporting requirements of the Exchange Act.
Treatment of Fractional
Shares
No scrip or fractional
shares would be issued if, as a result of the reverse stock split, a registered stockholder would otherwise become entitled to
a fractional share. Instead, MagneGas would pay to the registered stockholder, in cash, the value of any fractional share interest
arising from the reverse stock split. The cash payment would equal the closing sales price of the common stock as reported on Nasdaq
as of the Effective Date multiplied by the number of shares of pre-split common stock held by the stockholder that would otherwise
have been exchanged for such fractional share. No transaction costs would be assessed to stockholders for the cash payment. Stockholders
would not be entitled to receive interest for the period of time between the Effective Date and the date payment is made for their
fractional shares. The ownership of a fractional interest will not give the holder thereof any voting, dividend or other rights
except to receive payment as described herein. This cash payment merely represents a mechanical rounding off of the fractions in
the exchange. For a discussion of the treatment of any fractional interest that may arise as a result of the reverse stock split
relating to equity awards under the Equity Incentive Plan, please see the section below under the heading “Effect of the
Reverse Stock Split on Equity Awards.”
As a result of the
reverse stock split, stockholders who hold less than nine shares of common stock will no longer be stockholders of MagneGas on
a post-split basis. In other words, any holder of ten or fewer shares of common stock prior to the effectiveness of the reverse
stock split would only be entitled to receive cash for the fractional share of common stock such stockholder would hold on a post-split
basis. The actual number of stockholders that will be eliminated will depend on the actual number of stockholders holding less
than ten shares of common stock on the Effective Date. Reducing the number of post-split stockholders, however, is not the purpose
of the reverse stock split.
If you do not hold
sufficient shares of pre-split common stock to receive at least one post-split share of common stock and you want to hold common
stock after the reverse stock split, you may do so by taking either of the following actions far enough in advance so that it is
completed before the reverse stock split is effected:
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purchase a sufficient number of shares
of common stock so that you would hold at least ten shares of common stock in your account prior to the implementation of the reverse
stock split that would entitle you to receive at least one share of common stock on a post-split basis; or
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if applicable, consolidate your accounts
so that you hold at least ten shares of common stock in one account prior to the reverse stock split that would entitle you to
at least one share of common stock on a post-split basis. Common stock held in registered form (that is, shares held by you in
your own name on MagneGas’s share register maintained by its transfer agent) and common stock held in “street name”
(that is, shares held by you through a bank, broker or other nominee) for the same investor would be considered held in separate
accounts and would not be aggregated when implementing the reverse stock split. Also, shares of common stock held in registered
form but in separate accounts by the same investor would not be aggregated when implementing the reverse stock split.
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Stockholders should
be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where MagneGas is domiciled and where
the funds for fractional shares would be deposited, sums due to stockholders in payment for fractional shares that are not timely
claimed after the effective time may be required to be paid to the designated agent for each such jurisdiction. Thereafter, stockholders
otherwise entitled to receive such funds may have to seek to obtain them directly from the state to which they were paid.
Effect of the Reverse
Stock Split on Convertible Notes and Warrants
The reverse stock
split will require that proportionate adjustments be made to the conversion rate, the per share exercise price and the number of
shares issuable upon the exercise or conversion of the following outstanding securities issued by the Company, in accordance with
the reverse stock split ratio (all figures are as of April 7, 2017):
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$829,000 in outstanding principal balance of our convertible notes due in June 2021; and,
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warrants to purchase 25,000,000 shares of common stock.
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The adjustments to
the above securities, as required by the reverse stock split and in accordance with the reverse stock split ratio, would result
in approximately the same aggregate price being required to be paid under such securities upon exercise, and approximately the
same value of shares of common stock being delivered upon such exercise or conversion, immediately following the reverse stock
split as was the case immediately preceding the reverse stock split.
Effect of the Reverse
Stock Split on Equity Awards
On the Effective Date,
the proposed reverse stock split will reduce the number of shares of common stock available for issuance under the Equity Incentive
Plan. All shares of common stock subject to outstanding equity awards (including stock options, performance shares and stock appreciation
rights) under the Equity Incentive Plan and the number of shares of common stock which have been authorized for issuance under
the Equity Incentive Plan but as to which no equity awards have yet been granted or which have been returned to the Equity Incentive
Plan upon cancellation or expiration of such equity awards will be converted on the Effective Date into one-tenth of the number
of such shares immediately preceding the reverse stock split (subject to adjustment for fractional interests). In addition, the
exercise price of outstanding equity awards will be adjusted to ten times the exercise price specified before the reverse stock
split. This will result in approximately the same aggregate price being required to be paid as immediately preceding the reverse
stock split. No fractional shares with respect to the shares subject to the outstanding equity awards under the Equity Incentive
Plan will be issued following the reverse stock split. Therefore, if the number of shares subject to any outstanding equity award
under the Equity Incentive Plan immediately before the reverse stock split is not evenly divisible (in other words, it would result
in a fractional interest following the reverse stock split), the number of shares of common stock subject to such equity award
(including upon exercise of stock options and stock appreciation rights) will be rounded up to the nearest whole number. This will
result in an increase to the proportion of shares reserved for issuance under the Equity Incentive Plan to the number of authorized
shares of common stock following the reverse stock split.
Board Discretion to
Implement the Reverse Stock Split
If the reverse stock
split is approved by stockholders at the Special Meeting, the actual reverse stock split will be effected, if at all, only upon
a subsequent determination by the Board of Directors that the reverse stock split is in the best interests of MagneGas and its
stockholders at the time. Such determination will be based upon certain factors, including existing and expected marketability
and liquidity of the common stock, prevailing market conditions, the likely effect on the market price of the common stock and
the ability and desirability of MagneGas to satisfy the continued listing requirements for Nasdaq and such other considerations
as the Board of Directors, in its discretion, determines. Notwithstanding approval of the reverse stock split by the stockholders,
the Board of Directors may, in its sole discretion, abandon the proposed amendment and determine prior to the effectiveness of
any filing with the Secretary of State of the State of Delaware not to effect the reverse stock split, as permitted under Section 242(c)
of the DGCL.
Exchange of Stock
Certificates
As soon as practicable
after the Effective Date, stockholders will be notified that the reverse stock split has been effected. MagneGas’s transfer
agent will act as “exchange agent” for purposes of implementing the exchange of stock certificates. If any of your
shares are held in certificated form (that is, you do not hold all of your shares electronically in book-entry form), you will
receive a letter of transmittal from MagneGas’s exchange agent as soon as practicable after the Effective Date, which will
contain instructions on how to obtain post-split shares. You must complete, execute and submit to the exchange agent the letter
of transmittal in accordance with its instructions and surrender your stock certificate(s) formerly representing shares of stock
prior to the reverse stock split (or an affidavit of lost stock certificate containing an indemnification of MagneGas for claims
related to such lost stock certificate). Upon receipt of your properly completed and executed letter of transmittal and your stock
certificate(s), you will be issued the appropriate number of shares of common stock either as stock certificates (including legends,
if appropriate) or electronically in book-entry form, as determined by MagneGas. This means that, instead of receiving a new stock
certificate, you may receive a direct registration statement that indicates the number of post-split shares you own in book-entry
form. At any time after receipt of your direct registration statement, you may request a stock certificate representing your post-split
ownership interest. If you are entitled to payment in lieu of any fractional share interest, payment will be made as described
above under the heading “Treatment of Fractional Shares.” No direct registration statements, new stock certificates
or payments in lieu of fractional shares will be issued to a stockholder until such stockholder has properly completed and executed
a letter of transmittal and surrendered such stockholder’s outstanding certificate(s) to the exchange agent. If you hold
any or all of your shares electronically in book-entry form, please see the section below under the heading “Effect on Registered
Book-Entry Holders.”
STOCKHOLDERS SHOULD
NOT DESTROY ANY PRE-SPLIT STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO DO SO.
In connection with
the reverse stock split, the common stock will change its current CUSIP number. This new CUSIP number will appear on any new stock
certificates issued representing shares of the post-split common stock.
Effect on Beneficial
Owners
Stockholders holding
common stock through a bank, broker or other nominee should note that such banks, brokers or other nominees may have different
procedures for processing the reverse stock split than those that would be put in place by MagneGas for registered stockholders
that hold such shares directly, and their procedures may result, for example, in differences in the precise cash amounts being
paid by such nominees in lieu of a fractional share. If you hold your shares with such a bank, broker or other nominee and if you
have questions in this regard, you are encouraged to contact your bank, broker or nominee.
Effect on Registered
Book-Entry Holders
MagneGas’s registered
stockholders may hold some or all of their shares electronically in book-entry form under the direct registration system for securities.
These stockholders will not have stock certificates evidencing their ownership of the common stock. They are, however, provided
with a statement reflecting the number of shares registered in their accounts.
|
·
|
If you hold shares in a book-entry form,
you do not need to take any action to receive your post-split shares or your cash payment in lieu of any fractional share interest,
if applicable. If you are entitled to post-split shares, a transaction statement will automatically be sent to your address of
record indicating the number of shares you hold.
|
|
·
|
If you are entitled to a payment in lieu
of any fractional share interest, a check will be mailed to you at your registered address as soon as practicable after MagneGas’s
transfer agent completes the aggregation and sale described above in “Treatment of Fractional Shares.” By signing and
cashing this check, you will warrant that you owned the shares for which you receive a cash payment.
|
Accounting Consequences
The par value per share
of the common stock would remain unchanged at $0.001 per share after the reverse stock split. As a result, on the Effective Date,
the par value per share on MagneGas’s balance sheet attributable to the common stock will be reduced proportionally from
its present amount, and the additional paid in capital account shall be credited with the amount by which the par value per share
is reduced. The per share common stock net income or loss and net book value will be increased because there will be fewer shares
of common stock outstanding or held by MagneGas in treasury stock. MagneGas does not anticipate that any other accounting consequences
would arise as a result of the reverse stock split.
No Appraisal Rights
Stockholders are not
entitled to appraisal rights under Delaware law with respect to the proposed amendment to the Charter to effect the reverse stock
split.
Material U.S. Federal
Income Tax Consequences of the Reverse Stock Split
The following is a
discussion of certain material U.S. federal income tax consequences of the reverse stock split. This discussion is included for
general information purposes only and does not purport to address all aspects of U.S. federal income tax law that may be relevant
to stockholders in light of their particular circumstances. Further, this discussion does not address any state, local or non-U.S.
tax consequences of the reverse stock split. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”),
and current Treasury Regulations, administrative rulings and court decisions, all of which are subject to change, possibly on a
retroactive basis, and any such change could affect the continuing validity of this discussion.
All stockholders are
urged to consult with their own tax advisors with respect to the tax consequences of the reverse stock split. This discussion does
not address the tax consequences to stockholders who are subject to special tax rules, such as banks, insurance companies, regulated
investment companies, personal holding companies, partnerships (or entities treated as partnerships for U.S. federal income tax
purposes), stockholders who are not U.S. holders (as defined herein), stockholders who hold their shares as “qualified small
business stock” or “Section 1244” stock, broker-dealers and tax-exempt entities. This summary also assumes that
the pre-reverse stock split shares were, and the post-reverse stock split shares will be, held as a “capital asset,”
as defined in Section 1221 of the Code.
As used herein, the
term “U.S. holder” means a holder that is, for U.S. federal income tax purposes:
|
·
|
an individual who is a citizen or resident
of the United States;
|
|
·
|
a corporation or other entity taxed as
a corporation created or organized in or under the laws of the United States or any political subdivision thereof;
|
|
·
|
an estate the income of which is subject
to U.S. federal income tax regardless of its source; or
|
|
·
|
a trust (A) if a U.S. court is able
to exercise primary supervision over the administration of the trust and one or more “U.S. persons” (as defined in
the Code) have the authority to control all substantial decisions of the trust or (B) that has a valid election in effect
to be treated as a U.S. person.
|
Other than the cash
payments for fractional shares of common stock discussed above, no gain or loss should be recognized by a stockholder upon the
exchange of pre-reverse stock split shares for post-reverse stock split shares. The aggregate tax basis of the post-reverse stock
split shares will be the same as the aggregate tax basis of the pre-reverse stock split shares exchanged in the reverse stock split,
reduced by any amount allocable to a fractional share for which cash is received. A stockholder’s holding period in the post-reverse
stock split shares will include the period during which the stockholder held the pre-reverse stock split shares exchanged in the
reverse stock split.
In general, the receipt
of cash by a U.S. holder instead of a fractional share will result in a taxable gain or loss to such holder for U.S. federal income
tax purposes. The amount of the taxable gain or loss to the U.S. holder will be determined based upon the difference between the
amount of cash received by such holder and the portion of the basis of the pre-reverse stock split shares allocable to such fractional
interest. The gain or loss recognized will constitute capital gain or loss and will constitute long-term capital gain or loss if
the holder’s holding period is greater than one year as of the Effective Date.
A U.S. holder may be
subject to information reporting with respect to any cash received in exchange for a fractional share interest in a new share in
the reverse stock split. U.S. holders who are subject to information reporting and who do not provide a correct taxpayer identification
number and other required information (e.g., by submitting a properly completed IRS Form W-9 or applicable IRS Form W-8) may also
be subject to backup withholding, at their applicable rate. Any amount withheld under such rules is not an additional tax and may
be refunded or credited against the U.S. holder’s U.S. federal income tax liability, provided that the required information
is properly furnished in a timely manner to the Internal Revenue Service.
The tax treatment
of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder is urged
to consult with such stockholder’s own tax advisor with respect to the tax consequences of the reverse stock split.
Vote Required and
Recommendation of the Board of Directors
In accordance with
our Charter, Delaware law and the Nasdaq listing rules, approval and adoption of Proposal One requires the affirmative vote of
at least a majority of our issued and outstanding shares of common stock, voting as a separate class, and the affirmative vote
of at least a majority of our issued and outstanding shares of Series A Preferred Stock, voting as a separate class, in each case
entitled to vote either in person or by proxy at the Special Meeting. Abstentions and broker non-votes (if any) will have the same
effect as a vote “AGAINST” this Proposal One.
The
Board of Directors recommends that the stockholders vote “FOR” Proposal One.
PROPOSAL TWO
APPROVAL OF A PROPOSED
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
AND TO MAKE such
other
modifications to the Charter as adopted by the Board of Directors
Overview
The Company’s
Board of Directors has approved an Amended and Restated Certificate of Incorporation in the form of
Appendix B
hereto.
Since the initial filing
of the Company’s Charter in 2005, there have been numerous amendments to the Charter, each of which is currently represented
by a separate document. The Amended and Restated Certificate of Incorporation integrates all of the amendments that have been made
by the Company to the Charter, into one unified document, which eliminates the need to refer to a number of separate documents
in order to find the complete text of the Charter. In addition, the Amended and Restated Certificate of Incorporation includes
the following amendments to the current Charter, as amended:
Increase of Authorized Capital
The Board of Directors
has unanimously adopted resolutions approving and recommending to the stockholders for their approval a proposed amendment to the
Charter to increase our authorized shares of common stock from 90,000,000 to 190,000,000 and to make a corresponding change to
the number of authorized shares of all classes of capital stock.
We currently have a
total of 100,000,000 shares of capital stock authorized under our Charter, consisting of 90,000,000 shares of common stock and
10,000,000 shares of preferred stock. Our Board of Directors is asking our stockholders to approve an amendment that will increase
the number of authorized shares of common stock from 90,000,000 to 190,000,000, and increase the number of authorized shares of
all classes of stock from 100,000,000 to 200,000,000. The number of shares of authorized preferred stock would remain unchanged.
Our Board of Directors
has determined that it would be in our best interests to increase the number of authorized shares of common stock in order to provide
our company with the flexibility to pursue all finance and corporate opportunities involving our common stock, which may include
private or public offerings of our equity securities, or to issue stock dividends, without the need to obtain additional stockholder
approvals. Each additional authorized share of common stock would have the same rights and privileges as each share of currently
authorized common stock.
As of April
7, 2017, 59,597,531 shares (or approximately 5,959,754 shares after giving effect to the reverse stock split) of common
stock were outstanding, leaving 30,402,469 shares (or approximately 84,040,247 shares after giving effect to the reverse
stock split) of common stock available for issuance. As of April 7, 2017, we had not reserved any shares of common stock or
any options pursuant to our equity award plan. Additionally, as of April 7, 2017, we had warrants outstanding to purchase
25,000,000 shares (or approximately 2,500,000 shares after giving effect to the reverse stock split) of common stock and
convertible notes outstanding to purchase 1,454,386 shares (or approximately 145,439 shares after giving effect to the
reverse stock split) of common stock.
We have 1,000,000 shares
of preferred stock outstanding which are designated as Series A Preferred Stock, none of which are convertible into shares of common
stock.
Our Board of Directors
desires to have shares of common stock available to provide additional flexibility to use our common stock for business and financial
purposes in the future as well to have sufficient shares available to provide appropriate equity incentives for our employees.
The issuance of additional shares of common stock in the future will have the effect of diluting earnings per share, voting power
and common shareholdings of stockholders. It could also have the effect of making it more difficult for a third party to acquire
control of our company. The shares will be available for issuance by our Board of Directors for proper corporate purposes, including
but not limited to, stock dividends, acquisitions, financings and equity compensation plans. Our management believes the increase
in authorized share capital is in the best interests of our company and our stockholders and recommends that the stockholders approve
the increase in authorized share capital.
Other Proposed Changes
Article FIFTH of the
Charter, which identifies the mailing address and name of the incorporator of the Company, will be deleted in the Amended and Restated
Certificate of Incorporation since this provision is no longer applicable. In addition, the Amended and Restated Certificate of
Incorporation will contain other modifications to the Company’s Charter (such as conforming defined terms). These modifications
do not modify the stockholders’ rights with respect to the Company or impose any new obligations on the Company.
If this Proposal Two
is approved by the requisite vote of the stockholders, we will file an Amended and Restated Certificate of Incorporation with the
Delaware Secretary of State as soon as reasonably practicable after the Special Meeting and as the Board determines, but in no
event prior to the filing of the charter amendment to effect the reverse stock split if such reverse stock split is approved by
the stockholders. The Amended and Restated Certificate of Incorporation shall become effective upon filing with the Delaware Secretary
of State (or such later date and time as is stated in such certificate).
The text of the proposed
Amended and Restated Certificate of Incorporation is attached to this proxy statement as
Appendix B
. However, such text
is subject to amendment to include such changes as may be required by the office of the Secretary of State of the State of Delaware
or as the Board of Directors deems necessary and advisable to effect the increase in authorized common stock. Notwithstanding approval
of the Amended and Restated Certificate of Incorporation by the stockholders of the Corporation, the Board of Directors may abandon
the Amended and Restated Certificate of Incorporation at any time prior to its effectiveness without further action by the stockholders.
This Proposal Two is
not conditioned on the approval of Proposal One.
Vote Required and
Recommendation of the Board of Directors
In accordance with
our Charter, Delaware law and the Nasdaq listing rules, approval and adoption of Proposal Two requires the affirmative vote of
at least a majority of our issued and outstanding shares of common stock, voting as a separate class, and the affirmative vote
of at least a majority of our issued and outstanding shares of Series A Preferred Stock, voting as a separate class, in each case
entitled to vote either in person or by proxy at the Special Meeting. Abstentions and broker non-votes (if any) will have the same
effect as a vote “AGAINST” this Proposal Two.
The
Board of Directors recommends that the stockholders vote “FOR” Proposal Two.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as noted below,
the following table sets forth information with respect to the beneficial ownership of our common stock as of April 7, 2017 by
each person or entity known by us to beneficially own more than 5 percent of our common stock, by our directors, by our named executive
officers and by all our directors and executive officers as a group. Except as indicated in the footnotes to this table, and subject
to applicable community property laws, the persons listed in the table below have sole voting and investment power with respect
to all shares of our common stock shown as beneficially owned by them. Unless otherwise indicated, the address of each of the beneficial
owners identified is c/o MagneGas Corporation, 11885 44th Street North, Clearwater, Florida 33762. As of the Record Date, there
were 59,597,531 shares of our common stock outstanding.
Name of Beneficial Owner and Address
|
|
Amount and
Nature of
Beneficial
Ownership of
Common
Stock
|
|
|
Percent of
Common
Stock (1)
|
|
|
Amount and
Nature of
Beneficial
Ownership of
Preferred Stock
|
|
|
Percent of
Preferred
Stock (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
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Dr. Ruggero Maria Santilli
90 Eastwinds Ct
Palm Harbor FL 34683
|
|
|
3,293,748
|
(3)
|
|
|
5.53
|
%
|
|
|
1,000,000
|
(5)
|
|
|
100
|
%
|
Directors and
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carla Santilli
90 Eastwinds Ct
Palm Harbor FL 34683
|
|
|
3,293,748
|
(3)
|
|
|
5.53
|
%
|
|
|
1,000,000
|
(4)
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luisa Ingargiola
4826 Blue Jay Circle
Palm Harbor FL 34083
|
|
|
792,878
|
(5)
|
|
|
*
|
|
|
|
1,000,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ermanno Santilli
90 Eastwinds Ct
Palm Harbor FL 34683
|
|
|
1,304,304
|
(6)
|
|
|
2.27
|
%
|
|
|
1,000,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Mahoney
|
|
|
222,222
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Stone
|
|
|
261,857
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Staunton
|
|
|
219,291
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Dingess
|
|
|
974,444
|
|
|
|
1.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Huntington
|
|
|
96,839
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Pollack
|
|
|
234,795
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and officers as a group (9 people)
|
|
|
6,895,580
|
(7)
|
|
|
11.57
|
%
|
|
|
1,000,000
|
|
|
|
100
|
%
|
* Less than 1%.
|
(1)
|
Beneficial ownership is determined under the rules and regulations of the SEC, and generally includes
voting or dispositive power with respect to such shares. Based on 59,597,531 shares of common stock outstanding as of
April 7, 2017. Shares of common stock that a person has the right to acquire within 60 days are deemed to be outstanding and beneficially
owned by that person for the purpose of computing the total number of shares beneficially owned by that person and the percentage
ownership of that person, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other
person or group. Accordingly, the amounts in the table include shares of common stock that such person has the right to acquire
within 60 days of April 7, 2017 by the exercise of stock options.
|
|
(2)
|
Based on 1,000,000 shares of Series A Preferred Stock issued and outstanding as of April 7, 2017.
Each share of Series A Preferred Stock has voting rights of 100,000 votes per share. The total aggregate number of votes for the
Series A Preferred Stock is 100 billion.
|
|
(3)
|
Consists of 2,418,677 restricted shares of Global Alpha; 186,000 restricted shares held by Global
Beta, LLC, a privately owned company whose address is 35246 US 19 #215, Palm Harbor, FL 34684, of which Dr. Ruggero Santilli and
Carla Santilli, the wife of Dr. Santilli, each own 50%; 313,000 restricted shares held by Clean Energies Tech, a privately owned
company of which Dr. Santilli owns 50%; 270,000 restricted shares held by the RM Santilli Foundation, a foundation of which Mrs.
Santilli controls 50%; 10,000 restricted shares held in Dr. Santilli’s (the Company’s previous CEO) own name; ; 76,320
free trading shares held in the name of Mrs. Santilli; 19,751 restricted shares held in the name of Mrs. Santilli. The principal
address of Clean Energies Tech and the RM Santilli Foundation is 90 Eastwinds Ct., Palm Harbor, FL, 34683.
|
|
(4)
|
These shares are held by Global Alpha, a privately owned company of which Dr. Santilli and Mr.
Santilli each own 50%. Ermanno Santilli and Luisa Ingargiola are voting members of Global Alpha but have no equity interest.
|
|
(5)
|
Consists of 241,304 restricted shares held in Ms. Ingargiola’s own name; 96,574 free trading
shares held in a brokerage account; and 455,000 shares of common stock underlying options held by Ms. Ingargiola that are presently
exercisable.
|
|
(6)
|
Consists of 326,804 restricted shares held in Mr. Santilli’s own name; 25,000 restricted
shares held by MagneGas Arc Applied Solutions Europe, a privately owned company whose address is Rue Aux Fleurs 1, Brussels 1000
Belgium, of which Mr. Santilli owns more than 50%; 270,000 restricted shares held by the RM Santilli Foundation, a foundation of
which Mr. Santilli controls 50%; and 682,500 shares of common stock underlying options held by Mr. Santilli that are presently
exercisable.
|
|
(7)
|
The total does not equal the sum of each entry due to some shares being included in more than one
entry.
|
Pursuant to Rule 13d-3(d)(1)(i)
the percentage calculations use different totals of outstanding securities for the purpose of determining ownership. Any securities
not outstanding which are subject to such options, warrants, rights or conversion privileges shall be deemed to be outstanding
for the purpose of computing the percentage of outstanding securities of the class owned by such person but shall not be deemed
to be outstanding for the purpose of computing the percentage of the class by any other person.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8
under the Exchange Act, stockholders may present proper proposals for inclusion in our proxy statement and for consideration at
our next annual meeting of stockholders. To be eligible for inclusion in our proxy statement for the 2017 annual meeting, the Secretary
must receive the written proposal at our principal executive offices no later than the deadline stated below. Such proposals must
comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials.
Proposals should be addressed to:
MagneGas Corporation
Attention: Luisa Ingargiola,
Secretary
11885 44
th
Street North
Clearwater, FL 33762
Tel: (727) 934-3448
Under Rule 14a-8,
to be timely, a stockholder’s notice for a proposal must be received at our principal executive offices not less than 120
calendar days before the date of our proxy statement release to stockholders in connection with the previous year’s annual
meeting. However, if we did not hold an annual meeting in the previous year or if the date of this year’s annual meeting
has been changed by more than 30 days from the date of the previous year’s annual meeting, then the deadline is a reasonable
time before we begin to print and send our proxy materials. Therefore, stockholder proposals intended to be presented at the 2017
annual meeting must be received by us at our principal executive office no later than a reasonable time before we begin to print
and send our proxy material. During 2017, we will announce the date of our annual meeting and the date we plan on printing and
sending our proxy material and the deadline for the submission of stockholder proposals. Stockholders wishing to submit proposals
to be presented directly at our 2017 annual meeting of stockholders instead of by inclusion in the proxy statement for the 2017
annual meeting must follow the submission criteria set forth in our Bylaws, and applicable law concerning stockholder proposals.
Upon receipt of any proposal, we will determine whether to include such proposal in accordance with regulations governing the solicitation
of proxies.
While our Board will
consider proper stockholder proposals that are properly brought before the annual meeting, we reserve the right to omit from our
proxy statement for the 2017 annual meeting stockholder proposals that we are not required to include under the Exchange Act, including
Rule 14a-8 thereunder.
OTHER MATTERS
MagneGas knows of no
other matters to be submitted at the Special Meeting. If any other matters properly come before the Special Meeting, it is the
intention of the proxy holders named in the enclosed form of proxy to vote the shares they represent according to their best judgment.
BY ORDER OF THE BOARD
OF DIRECTORS OF MAGNEGAS CORPORATION,
Ermanno Santilli
Chief Executive Officer
April ___, 2017
Clearwater, Florida
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAGNEGAS CORPORATION
MagneGas Corporation,
a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify
as follows:
|
1.
|
The name of the Corporation is MagneGas Corporation.
|
|
2.
|
This Certificate of Amendment (this “Certificate of Amendment”) amends the provisions of the Corporation’s Certificate of Incorporation filed with the Secretary of State on December 9, 2005 as amended to date (as amended, the “Certificate of Incorporation”).
|
|
3.
|
Article FOURTH of the Certificate of Incorporation is hereby amended by adding the following to the end of the first paragraph of Article FOURTH:
|
“Effective
at 5:00 p.m. Eastern Time on __________, 2017 (the “Effective Time”), each ten (10) shares of the Corporation’s
Common Stock, par value $0.001 per share (“Common Stock”), issued and outstanding or held by the Corporation in treasury
stock immediately prior to the Effective Time shall automatically be combined, reclassified and changed into one (1) validly
issued, fully paid and non-assessable share of Common Stock without any further action by the Corporation or the holder thereof,
subject to the treatment of fractional interests as described below. Notwithstanding the immediately preceding sentence, no fractional
shares will be issued in connection with the combination effected by the preceding sentence. Stockholders of record who otherwise
would be entitled to receive fractional shares in connection with such combination will instead be entitled to receive, in lieu
of such fractional shares, an amount in cash equal to the product of (i) the closing sales price of the Common Stock as reported
on The Nasdaq Capital Market as of the Effective Time, multiplied by (ii) the number of shares of Common Stock held by the stockholder
immediately prior to the Effective Time that would otherwise have been exchanged for such fractional shares. Each certificate that
immediately prior to the Effective Time represented shares of Common Stock (“Old Certificates”) shall thereafter represent
that number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been
combined, subject to the treatment of fractional interests as described above.”
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4.
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The foregoing amendment was duly adopted in accordance with Sections 141 and 242 of the General Corporation Law of the State of Delaware.
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5.
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Thereafter, pursuant to a resolution of the Board of Directors of the Corporation, this Certificate of Amendment was submitted to the stockholders of the Corporation for their approval, and was duly adopted by the stockholders in accordance with the provisions of Sections 222 and 242 of the General Corporation Law of the State of Delaware.
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IN WITNESS WHEREOF,
MagneGas Corporation has caused this Certificate of Amendment to be executed as of ________, 2017.
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MagneGas Corporation
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By:
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Name: Ermanno Santilli
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Title: Chief Executive Officer
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APPENDIX B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MAGNEGAS CORPORATION
MagneGas
Corporation, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
1. The
name of the corporation is MagneGas Corporation (the “Corporation”). The original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on December 9, 2005 under the name “4307 Inc.”
2. This
Amended and Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Corporation’s
Certificate of Incorporation as heretofore amended or supplemented. This Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware.
3. The
stockholders of the Corporation took action at a special meeting of the stockholders of said Corporation which was duly called
and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the
necessary number of shares were voted in favor of this Amended and Restated Certificate of Incorporation.
4. The
Certificate of Incorporation of the Corporation is hereby amended and restated to read in its entirety, as follows:
FIRST: The name of the corporation
is MagneGas Corporation (the “Corporation”).
SECOND: Its registered office in the
State of Delaware is to be located at 2771 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle and its
registered agent at such address is Corporation Service Company.
THIRD: The purpose or purposes of the
Corporation shall be to engage in any lawful act or activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares
of stock which the Corporation has authority to issue is Two Hundred Million (200,000,000) shares, which shall consist of (i) 190,000,000
shares of common stock, $0.001 par value per share and (ii) 10,000,000 shares of preferred stock, $0.001 par value per share (the
“Preferred Stock”). The board of directors is authorized, subject to any limitations prescribed by law, to provide
for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State
of Delaware (such certificate being hereinafter referred to as a “Preferred Stock Designation”), to establish from
time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights
of the shares of each such series and any qualifications, limitations or restrictions thereof. An aggregate of 1,000,000 shares
of Preferred Stock have been designated as “Series A Preferred Stock”, with the rights, preferences, privileges and
restrictions set forth below:
Series A Preferred
Stock
:
1.
Voting
. Holders
of the Series A Preferred Stock shall have One Hundred Thousand (100,000) times that number of votes on all matters submitted to
the shareholders that is equal to the number of shares of common stock (rounded to the nearest whole number), at the record date
for the determination of the shareholders entitled to vote on such matters or, if no such record date is established, at the date
such vote is taken or any written consent of such shareholders is effected.
2.
Dividends
. The
holders of each share of the Series A Preferred Stock then outstanding shall be entitled to receive non-cumulative cash dividends,
at the annual dividend rate, out of any funds and assets of the corporation legally available therefore, prior and in preference
to any declaration or payment of any dividend payable on the common stock. Such non-cumulative dividends shall be payable
only if, as, and when declared by the board; provided, however, that such non-cumulative dividends, only if declared, will be automatically
payable, upon any liquidation event described below.
3.
Liquidation
Preference.
Upon the liquidation, dissolution and winding up of the corporation, whether voluntary or involuntary,
the holders of the Series A Preferred Stock then outstanding shall be entitled to receive out of the assets of the corporation,
whether from capital or from earnings available for distribution to its stockholders, before any amount shall be paid to the holders
of common stock, an amount equal to the liquidation price per share of the Series A Preferred Stock.
4.
Conversion
and Redemption
. The Series A Preferred Stock has no conversion rights or mandatory redemption features.
5.
Vote
to Change the Terms of or Issue Series A Preferred Stock
. The affirmative vote at a meeting duly called for such
purpose, or the written consent without a meeting, of the holders of not less than fifty-one percent (51%) of the then outstanding
shares of Series A Preferred Stock shall be required for (i) any change to the Corporation’s Certificate of Incorporation
that would amend, alter, change or repeal any of the preferences, limitations or relative rights of the Series A Preferred Stock,
(ii) any issuance of additional shares of Series A Preferred Stock or (iii) the creation, issuance, repeal or modification of any
other series of preferred stock.
6.
Notices
. In
case at any time:
(a) the
corporation shall offer for subscription
pro rata
to the holders of its common stock any additional shares of stock of any
class or other rights; or
(b) there
shall be any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the
corporation’s assets to another person or other transaction in each case, which is effected in such a way that holders of
common stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect
to or in exchange for common stock, referred to herein as an “Organic Change”;
then, in any one
or more of such cases, the corporation shall give, by first class mail, postage prepaid, or by facsimile or by recognized overnight
delivery service to non-U.S. residents, addressed to the registered holders of the Series A Preferred Stock at the address of each
such holder as shown on the books of the corporation, (i) at least twenty (20) trading days prior written notice of the date on
which the books of the corporation shall close or a record shall be taken for such subscription rights or for determining rights
to vote in respect of any such Organic Change and (ii) in the case of any such Organic Change, at least twenty (20) trading days’
prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause
(i) shall also specify, in the case of any such subscription rights, the date on which the holders of common stock shall be entitled
thereto, and such notice in accordance with clause (ii) shall also specify the date on which the holders of common stock shall
be entitled to exchange their common stock for securities or other property deliverable upon such Organic Change.
7.
Record
Owner
. The corporation may deem the person in whose name shares of Series A Preferred Stock shall be registered
upon the registry books of the corporation to be, and may treat him as, the absolute owner of the Series A Preferred Stock for
the purposes of conversion and for all other purposes, and the corporation shall not be affected by any notice to the contrary. All
such payments and such conversion shall be valid and effective to satisfy and discharge the liabilities arising hereunder to the
extent of the sum or sums so paid or the conversion so made.
8.
Register
.
The
corporation shall maintain a transfer agent, which may be the transfer agent for the common stock or the corporation itself, for
the registration of the Series A Preferred Stock. Upon any transfer of shares of Series A Preferred Stock in accordance
with the provisions hereof, the corporation shall register or cause the transfer agent to register such transfer on the stock register.
FIFTH: The Board of Directors shall
have the power to adopt, amend or repeal the by-laws.
SIXTH: No director shall be personally
liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director.
Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the General Corporation Law of the State
of Delaware or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal
of this Article SIXTH shall apply to or have any effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to such amendment.
IN WITNESS
WHEREOF, said corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its duly authorized
officer this ___ day of __________, 2017 and the foregoing facts stated herein are true and correct.
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MagneGas Corporation
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By:
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Name:
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Ermanno Santilli
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Title:
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Chief Executive Officer
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