Item 1.01
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Entry into a Material Definitive Agreement.
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Securities Purchase Agreement
On July 21, 2017, MagneGas Corporation (the
“Company”) entered into a Securities Purchase Agreement (“SPA”) with one or more investors identified on
the signature pages thereto (“Investors”) attached hereto as Exhibit 10.1. Under the terms of the SPA, the Company
shall issue and sell to each Investor, and each Investor severally, but not jointly, agrees to purchase from the Company shares
of Common Stock (“Common Stock”), and Series D Convertible Preferred Warrants (“Preferred Warrants”) (collectively,
the “Transaction Securities”) as set forth on the Schedule of Buyers attached to the SPA for a total gross purchase
price of up to $844,422 (the “Offering”). At the initial closing under the SPA, the Company will issue to the Investors
a total of 150,000 shares of Common Stock at a purchase price of $1.00 per share. The Preferred Warrants will be exercisable for
a total of 694,422 Preferred Shares at an exercise price of $1.00 per share. The Preferred Shares have an initial conversion price
of $1.00 and will be initially convertible into an aggregate of 694,422 shares of Common Stock.
The Company obtained the written consent of
the holders of a majority of its outstanding voting securities approving the terms of the Offering and the issuance of the Transaction
Securities, including the potential issuance of more than 20% of the Company’s issued and outstanding common stock in connection
with the Offering, in accordance with Nasdaq Listing Rule 5635. The Company is also required to file with the Securities and Exchange
Commission, and mail to its stockholders, a definitive information statement in compliance with Rule 14c-2 promulgated under the
Securities Exchange Act of 1934, as amended.
The Offering is being made pursuant to a prospectus
supplement and accompanying base prospectus relating to the Company’s effective shelf registration statement on Form S-3
(File No. 333-207928).
The above description of the SPA does not purport
to be complete and is qualified in its entirety by the full text of such SPA, which is incorporated herein and attached hereto
as Exhibit 10.1.
A copy of the opinion of Goodwin Procter LLP
relating to the legality of the issuance and sale of the Transaction Securities in the Offering is attached as Exhibit 5.1 hereto.
Series D Convertible Preferred Stock
The Company shall designate a new class of
preferred stock as “Series D Convertible Preferred Stock” in the aggregate amount of 694,422 shares. The Preferred
Shares will have a stated value of $1.00, with an aggregate value of $694,422. No Preferred Shares will be issued at the Closing
of the Offering.
The holders of Preferred Shares shall be entitled
to receive dividends, when and as declared by the Board, from time to time, in its sole discretion. From and after the occurrence
of a Triggering Event (as defined in the certificate of designations for the Preferred Shares) until such time as all Triggering
Events then outstanding are cured, the holders shall be entitled to receive Dividends at a rate of eighteen percent (18.0%) per
annum, which dividends shall be computed on the basis of a 360-day year and twelve 30-day months and shall compound each calendar
month.
The initial conversion price of the Preferred
Shares is $1.00.
At any time after the occurrence of a Triggering Event the holder
may, at its option, convert any Preferred Shares at an Alternate Conversion Price. The “Alternate Conversion Price”
means with respect to any Alternate Conversion that price which shall be the lowest of (A) the applicable Conversion Price as in
effect on the applicable Conversion Date of the applicable Alternate Conversion and (B) the greater of (x) the Floor Price and
(y) the lowest of (i) 75% of the Closing Bid Price of the Common Stock as of the Trading Day immediately preceding the delivery
or deemed delivery of the applicable Conversion Notice, (ii) 75% of the VWAP of the Common Stock as of the Trading Day of the delivery
or deemed delivery of the applicable Conversion Notice, (iii) the sum of the VWAP of the Common Stock for each Trading Day during
the ten (10) consecutive Trading Day period ending and including the Trading Day immediately preceding the delivery or deemed delivery
of the applicable Conversion Notice, divided by (II) ten (10), (iv) 75% of the price computed as the quotient of (I) the sum of
the VWAP of the Common Stock for each Trading Day during the twenty (20) consecutive Trading Day period ending and including the
Trading Day immediately preceding the delivery or deemed delivery of the applicable Conversion Notice, divided by (II) twenty (20)
and (v) as applicable (I) if a Forced Preferred Share, the Adjusted Alternate Conversion Price or (II) if such Preferred Share
is not a Forced Preferred Share, 75% of the lowest VWAP of the Common Stock for each of the three consecutive Trading Days immediately
prior to the delivery or deemed delivery of the applicable Conversion Notice.
In lieu of conversion, upon a Triggering Event,
the holder may require the Company to redeem all or any of the Preferred Shares at a price equal to the greater of (i) the product
of (A) the Conversion Amount of the Preferred Shares to be redeemed multiplied by (B) the 115% and (ii) the product of (X) the
Conversion Rate with respect to the Conversion Amount of such Preferred Shares in effect at such time as such Holder delivers a
Triggering Event Redemption Notice multiplied by (Y) the product of (1) the 115% multiplied by (2) the greatest Closing Sale Price
of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Triggering Event and
ending on the date the Company makes the entire payment required to be made.
Series D Convertible Preferred Warrant
The Preferred Warrants will be exercisable
for a total of 694,422 shares of Series D Convertible Preferred Stock at an exercise price of $1.00 per share. Under the terms
of the Preferred Warrants, so long as (I) no Equity Conditions Failure (as defined in the Preferred Warrants) then exists (unless
waived in writing by the Holder), (II) no more than 100,000 Preferred Shares are then outstanding and (III) no Forced Exercise
(as defined below) has occurred in the Seven (7) Trading Day period immediately prior to the applicable date of determination,
the Company shall have the right to require the Holder to exercise the Warrant into up to such aggregate number of fully paid,
validly issued and non-assessable Warrant Preferred Shares equal to the lesser of (x) 500,000 and (y) 30% of the aggregate dollar
trading volume of the Common Stock (as reported by Bloomberg) during the three (3) consecutive Trading Day period immediately prior
to the applicable Forced Exercise Notice Date (as defined in the Preferred Warrant)(such lesser number of Warrant Preferred Shares,
the “Maximum Forced Exercise Share Amount”), as designated in the applicable Forced Exercise Notice, to be issued and
delivered in accordance with the Preferred Warrant (each, a “Forced Exercise”).
The above description of the Preferred Warrants
does not purport to be complete and is qualified in its entirety by the full text of such the Preferred Warrants, which is incorporated
herein attached hereto as Exhibit 10.2.