Item
1.01 Entry into a Material Definitive Agreement.
Waiver
Agreement
On
January 31, 2020, Taronis Technologies, Inc. (the “Company”) entered into Waiver Agreements (“Waiver Agreements”)
with the holders of its Series G-1 Convertible Preferred Shares (“Series G-1 Investors”). The purpose of the Waiver
Agreements is to delay the “2020 Redemption” (as defined in Section 2 of the Series G-1 Certificate of Designations)
of 2,000 Series G-1 Convertible Preferred Shares from January 31, 2020 to not later than March 31, 2020. The Waiver Agreement
also requires the Company to redeem outstanding Series G-1 Preferred Shares on a pro-rata basis from the Series G-1 Investors
as follows: (a) in the case of any financing entered into after the effective date of the Waiver Agreement, 100% of such net proceeds
raised from the financing must be applied to the redemption of any outstanding Series G-1 Preferred Shares, and/or (b) in the
case of any at-the-market offering conducted by the Company after the effective date of the Waiver Agreement, 50% of such net
proceeds raised must be applied to the redemption of any outstanding Series G-1 Preferred Shares. The pro-rata redemption amounts
paid to the Series G-1 Investors will be calculated based on each Series G-1 Holder’s pro rata portion of the net financing
proceeds raised based on the number of Series G-1 Preferred Shares originally issued pursuant to the Exchange Agreement entered
into by and between the Company and the Series G-1 Investors on December 23, 2019 (“Exchange Agreement”), rounded
down to the nearest $1,000, by paying to the Series G-1 Holder such cash amount by wire transfer of immediately available funds.
Once the Company has redeemed a number of Series G-1 Preferred Shares from the Series G-1 Investors equal to each holder’s
pro-rata portion of 2,000 Series G-1 Preferred Shares (based on the number of Series G-1 Preferred Shares originally issued
pursuant to the Exchange Agreement), the Company’s obligation to redeem with financing proceeds will be deemed satisfied.
The Waiver Agreement also amends Section 4(c) of each of those certain warrants to purchase shares of common stock issued by the
Company to the Series G-1 Investor on November 15, 2019, December 13, 2019 and December 23, 2019.
Additionally,
the Series G-1 Investors covenant and agree that from the effective date of the Waiver Agreement through and including March 31,
2020 that neither the Series G-1 Investors nor any of its Trading Affiliates (as defined in the Waiver Agreement) will engaged
in or effect, in any manner whatsoever, directly or indirectly, any (i) “short sale” (as such term is defined in Rule
200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging transaction, which establishes a net short position
with respect to the Common Stock.
The
above description of the Waiver Agreements does not purport to be complete and is qualified in its entirety by the full text of
such Form of Waiver Agreement, which is incorporated herein and attached hereto as Exhibit 10.1.
Warrants
Pursuant
to the terms of the Waiver Agreement, the Company granted the Series G-1 Investors warrants to purchase up to 2,000,000 shares
of Common Stock (“Warrants”). The Warrants will be exercisable, in whole or in part, which at any time or times on
or after the six (6) month anniversary of the Issuance Date (the “the Initial Exercisability Date”), at an exercise
price of $1.00 per share (the “Exercise Price”). The Warrants will be exercisable for 60 months following the Initial
Exercisability Date.
If
on or after the Initial Exercisability Date, a registration statement under the 1933 Act registering the resale of the shares
of Common Stock underlying the Warrants (“Warrant Shares”) is not available (“Unavailable Warrant Shares”)
for the resale of such Unavailable Warrant Shares, the Series G-1 Investors may exercise the Warrants by means of a “cashless
exercise”. Subject to limited exceptions, a holder of Warrants will not have the right to exercise any portion of its Warrants
if such holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, 9.99%)
of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership
Limitation”); provided, however, that each holder may increase or decrease the Beneficial Ownership Limitation by giving
notice to the Company; provided, however, that any increase of the Beneficial Ownership Limitation will only take effect upon
61 days’ prior notice to the Company, but not to any percentage in excess of 9.99%.
The
Exercise Price and number of Warrant Shares issuable upon the exercise of the Warrants will be subject to adjustment in the event
of any stock dividends, forward or reverse stock split, recapitalization, reorganization or similar transaction, as described
in the Warrants. Additionally, on April 1, 2020, the then applicable Exercise Price shall be reset to equal to the lesser of (i)
the then current Exercise Price and (ii) the lowest Weighted Average Price of the Common Stock during the period beginning on
February 1, 2020, inclusive, and ending on March 31, 2020, inclusive.
Total
gross proceeds to the Company, assuming full exercise of the Warrants by payment of the exercise price in cash will be $2,000,000.
The
Company has relied upon the exemption from registration provided by Rule 506(b) of Regulation D under the Securities Act of 1933,
in connection with the issuance of the Warrants.
The
above description of the Waiver Warrants does not purport to be complete and is qualified in its entirety by the full text of
such Form of Waiver Warrant, which is incorporated herein and attached hereto as Exhibit 10.2.