INFORMATION
STATEMENT
OF
MAGNEGAS
CORPORATION
11885
44TH STREET NORTH
CLEARWATER,
FL 33762
(727)
934-3448
WE
ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
PURPOSE
OF INFORMATION STATEMENT
This
Information Statement advises stockholders of MagneGas Corporation (the “Company”) of an action taken on December
12, 2017 by written consent of Global Alpha, LLC (the “Majority Stockholder”). The Majority Stockholder is a privately
owned company of which Carla Santilli (a member of our Board of Directors) and Ruggero Santilli each own 50%. Ermanno Santilli
(our Chief Executive Officer and a member of our Board of Directors) and Luisa Ingargiola (our Chief Financial Officer and Secretary
from 2007 through November 30, 2016, and a current member of our Board of Directors) are voting members of the Majority Stockholder,
but have no equity interest. The Majority Stockholder holds a majority of the aggregate voting power of all outstanding shares
of capital stock of the Company entitled to vote on the matters set forth in this Information Statement as of December 12, 2017
(the “Record Date”).
OVERVIEW
OF ACTIONS
The
following action was approved by the written consent of the Majority Stockholder (the “Written Consent”), in lieu
of a special meeting:
a)
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-fifteen (the “reverse stock split”).
The
reverse stock split was approved by the entire Board, subject to the Majority Stockholder’s approval, effective December
12, 2017, and the Majority Stockholder on December 12, 2017. The Majority Stockholder’s approval will become effective twenty
(20) days after a Definitive Information Statement on Form 14C is mailed to the Company’s other stockholders as of the Record
Date.
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 Information Statement, the last date the closing bid price of the common stock satisfied the $1.00 minimum
closing bid price requirement was July 23, 2017. As a result, on September 5, 2017, MagneGas received a notice of deficiency from
Nasdaq indicating that if MagneGas did not comply with the minimum bid price rules by March 3, 2018, Nasdaq may delist the common
stock.
At
the beginning of December 2017, the Company determined that it would not be in compliance with the minimum bid price rule by March
3, 2018, which would subject the Company’s common stock to delisting from Nasdaq. Therefore, the Board of Directors determined
that it was in the best interest of the Company to seek the consent of the Majority Stockholder to approve a reverse split of
the Company’s common stock and treasury stock. The Board of Directors reasonably believes that without receiving the Majority
Stockholder’s approval and without the closing price of the common stock otherwise meeting the $1.00 minimum closing bid
price requirement, the Company’s common stock will be delisted from Nasdaq on March 3, 2018.
In
the event the common stock was 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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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-fifteen, 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.
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 0 shares of common stock will be reserved for issuance pursuant
to outstanding convertible notes and a total of approximately 1,026,400 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 December 12,
2017, 11,765 shares of common stock will be issued or reserved for issuance following the reverse stock split, leaving 784.3 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-fifteenth 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 fifteen 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 December 12, 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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11.98
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%
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0.007
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%
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Authorized Shares of Common Stock
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190,000,000
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190,000,000
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Shares Outstanding
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22,768,979.7
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1,517,931.9
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Issued But Not Outstanding (Held by MagneGas in Treasury Stock)
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2,500,000
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166,666.67
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Reserved for Issuance Pursuant to Outstanding Convertible Notes
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Reserved for Issuance Pursuant to Outstanding Warrants
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15,396,000
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1,026,400
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Reserved for Issuance Upon Exercise/Release of Outstanding Equity Awards Under the Equity Incentive Plan
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Reserved for Issuance Under the Equity Incentive Plan (but not Subject to Outstanding Equity Awards)
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11,765
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784.3
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Authorized but not Issued or Outstanding, or Reserved for Issuance Under the Equity Incentive Plan
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11,765
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784.3
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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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67.66
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%
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67.66
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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”.
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 fourteen shares of common stock will no longer be stockholders
of MagneGas on a post-split basis. In other words, any holder of fifteen 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 fifteen 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 fifteen 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 fifteen 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, Convertible Preferred Shares 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 December 12, 2017):
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Warrants
to purchase 22,239 shares of Series C Convertible Preferred Stock which are initially convertible into 7,314,000 shares of
common stock.
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Warrants
to purchase 2,916,667 shares of common stock.
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Warrants
to purchase 419,177 shares of Series E Convertible Preferred Stock which are initially convertible into 419,177 shares of
common stock.
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Shares
of Series E Convertible Preferred Stock which are initially convertible into 36,765 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-fifteenth 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 fifteen 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
Although
the reverse stock split was approved by the Majority Stockholder, 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 Majority
Stockholder, 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.
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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.
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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.
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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:
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an
individual who is a citizen or resident of the United States;
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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;
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an
estate the income of which is subject to U.S. federal income tax regardless of its source; or
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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.
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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.
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
December 12, 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 approximately 22,768,979.7 shares of our common stock outstanding.
Name of Beneficial Owner and Address
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Amount and Nature of Beneficial Ownership of Common Stock
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Percent of Common
Stock (1)
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Amount
and Nature of Beneficial Ownership of Preferred Stock
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Percent of Preferred Stock (2)
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Dr. Ruggero Maria Santilli
90 Eastwinds Ct
Palm Harbor FL 34683
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306,865
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(3)
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1.34
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%
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1,000,000
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(5)
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100
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%
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Directors and Executive Officers
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Carla Santilli
90 Eastwinds Ct
Palm Harbor FL 34683
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306,865
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(3)
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1.34
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%
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1,000,000
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(4)
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100
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%
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Luisa Ingargiola
4826 Blue Jay Circle
Palm Harbor FL 34083
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79,287
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(5)
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*
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1,000,000
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(5)
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Ermanno Santilli
90 Eastwinds Ct
Palm Harbor FL 34683
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130,430
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(6)
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*
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1,000,000
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(5)
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Scott Mahoney
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22,222
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*
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Joe Stone
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26,185
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*
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William Staunton
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21,929
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*
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Robert Dingess
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97,444
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*
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Christopher Huntington
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683
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*
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Kevin Pollack
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23,479
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*
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All directors and officers as a group (9 people)
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1,015,389
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(7)
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4.45
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%
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1,000,000
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100
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%
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*
Less than 1%.
(1)
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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 22,768,979.7 shares of common stock outstanding as of December 12, 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 December 12, 2017 by the exercise of stock options.
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(2)
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Based
on 1,000,000 shares of Series A Preferred Stock issued and outstanding as of December 12, 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.
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(3)
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Consists
of 241,867 restricted shares of Global Alpha; 18,600 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%; 31,300 restricted shares held by Clean Energies Tech, a privately owned company of which Dr. Santilli
owns 50%; 27,000 restricted shares held by the RM Santilli Foundation, a foundation of which Mrs. Santilli controls 50%; 1,000
restricted shares held in Dr. Santilli’s (the Company’s previous CEO) own name; 7,632 free trading shares held
jointly in the name of Dr. and Mrs. Santilli; 1,975 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.
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(4)
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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.
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(5)
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Consists
of 24,130 restricted shares held in Mrs. Ingargiola’s own name; 9,657 free trading shares; and 45,500 shares of common
stock underlying options held by Mrs. Ingargiola that are presently exercisable.
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(6)
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Consists
of 32,680 restricted shares held in Mr. Santilli’s own name; 2,500 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%; 27,000 restricted shares held by the RM Santilli Foundation, a foundation of which Mr. Santilli controls 50%; and
68,250 shares of common stock underlying options held by Mr. Santilli that are presently exercisable.
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(7)
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The
total does not equal the sum of each entry due to some shares being included in more than one entry.
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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.
OUTSTANDING
SHARES AND VOTING RIGHTS
At
the close of business on the Record Date, there were 22,768,979.7 shares of our common stock outstanding.
At
the close of business on the Record Date, there were 1,000,000 shares of Series A Preferred Stock outstanding. All 1,000,000 shares
of Series A Preferred Stock are held by the Majority Stockholder. Each share of Series A Preferred Stock has voting rights of
100,000 votes per share and votes generally with the shares of Common Stock on all matters except as otherwise required by law.
The total aggregate number of votes for the Series A Preferred Stock is 100 billion. As of the Record Date, the Majority Stockholder’s
holdings represented approximately 99% of the votes entitled to be cast by the outstanding shares of our voting stock, all of
which approved and adopted the matters set forth herein.
The
Board is not soliciting your consent or your proxy in connection with these actions, and no consents or proxies are being requested
from stockholders. The vote that was required to approve the transactions described in this Information Statement was the affirmative
vote of the holders of a majority of the aggregate voting power of all outstanding shares of capital stock of the Company entitled
as of the Record Date to vote on such matters.
Section
228 of the Delaware General Corporation Law and Article II, Section 11 of the Company’s By-Laws, as amended, provide that
stockholders of the Company may act by written consent without a meeting if such stockholders hold the number of shares representing
not less than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all
shares entitled to vote thereon were present and voted.
EFFECTIVENESS
OF CORPORATE ACTIONS
Under
Rule 14c-2 of the Securities Exchange Act of 1934, as amended, the actions taken by the Majority Stockholder will not be effective
until 20 days after this Information Statement is first mailed or otherwise delivered to our stockholders entitled to receive
notice thereof.
DISSENTERS’
RIGHT OF APPRAISAL
No
dissenters’ or appraisal rights under the Delaware General Corporation Law are afforded to the Company’s stockholders
as a result of the approval of the actions taken by the Majority Shareholder.
INTEREST
OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS ACTED UPON
No
officer or director has any substantial interest in the matters acted upon by our Board of Directors and the Majority Stockholder,
other than in their roles as an officer or director or Majority Shareholder.
ADDITIONAL
INFORMATION
The
Company is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements
and other information including annual and quarterly reports on Form 10-K and 10-Q with the Commission. Reports and other information
filed by the Company can be inspected and copied at the public reference facilities maintained at the Commission at Room 1024,
450 Fifth Street, N.W., Washington, DC 20549. Copies of such material can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a web
site on the Internet (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission through the Electronic Data Gathering, Analysis and Retrieval System (also
known as “EDGAR”).
DELIVERY
OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS
We
will send only one Information Statement and other corporate mailings to stockholders who share a single address unless we received
contrary instructions from any stockholder at that address. This practice, known as “householding,” is designed to
reduce our printing and postage costs. However, the Company will deliver promptly upon written or oral request a separate copy
of the Information Statement to a stockholder at a shared address to which a single copy of the Information Statement was delivered.
You may make such a written or oral request by (a) sending a written notification stating (i) your name, (ii) your shared address
and (iii) the address to which the Company should direct the additional copy of Information Statement, to the Company at Corporate
Secretary, 11885 44th Street North, Clearwater, FL 33762, telephone: (727) 934-3448.
If
multiple stockholders sharing an address have received one copy of the Information Statement or any other corporate mailing and
would prefer the Company to mail each stockholder a separate copy of future mailings, you may send notification to or call the
Company’s principal executive offices. Additionally, if current stockholders with a shared address received multiple copies
of the Information Statement or other corporate mailings and would prefer the Company to mail one copy of future mailings to stockholders
at the shared address, notification of such request may also be made by mail or telephone to the Company’s principal executive
offices.