Item 1.01 Entry into a Material Definitive Agreement.
Securities Purchase Agreement
On January 11, 2019, MagneGas Applied Technology Solutions, Inc. (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 will issue an aggregate of
31,000,000 shares of the Company's common stock, par value $0.001 per share (the
"Common Stock") and warrants to purchase up to 31,000,000 shares of Common Stock
("Warrants") (collectively, the "Transaction Securities") as set forth on the
Purchaser Signature Page attached to the SPA, for a total gross purchase price
of $4,340,000 (exclusive of the exercise of the Warrants) (the "Offering"). We
expect to receive aggregate net proceeds of approximately $3,979,600, and the
Company intends to use the net proceeds for working capital and other general
corporate purposes. The Offering is expected to close on or about January 15,
2019, subject to customary closing conditions. The SPA contains customary
representations, warranties and agreements by us and customary conditions to
closing. Under the SPA, we have agreed not to enter into any agreement to issue
or announce the issuance or proposed issuance of any common stock or common
stock equivalents for a period of 30 days following the closing of the offering
and also agreed not to effect a reverse stock split during that period.
Under the SPA, certain investors have agreed to waive their rights to require us
to reserve shares of Common Stock to issue to them in connection with our prior
offering of Series C Preferred Stock in June 2017 and our prior offering of
Common Stock in October 2018. This wavier will be in effect until the earlier of
May 6, 2019 and the date we effect a reverse stock split. In addition, we are
not required to reserve the amount of shares issuable pursuant to the Warrants
until the earlier of May 6, 2019 and the date we effect a reverse stock split.
In addition, pursuant to the SPA, the Investors and the Company agreed to amend
the common stock purchase warrants dated October 15, 2018 (the "October
Warrants") issued pursuant to the securities purchase agreement between the
Investors and the Company dated October 11, 2018 to reduce the exercise price of
the October Warrants from $0.3654 to $0.232.
The sale of the Common Stock at a price of $0.14 per share is being made
pursuant to a prospectus supplement, which will be filed with the Securities and
Exchange Commission (the "SEC") on or about January 11, 2019, and accompanying
base prospectus relating to the Company's shelf registration statement on Form
S-3 (File No. 333-207928), which was declared effective by the SEC on June 15,
Additionally, the sale of the Warrants is being made pursuant to an exemption
from registration under Section 4(a)(2) of the Securities Act of 1933, as
amended (the "Securities Act"). See "Warrant Agreement" below.
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 our Legal Counsel relating to the legality of the
issuance and sale of the Transaction Securities in the Offering is attached as
Exhibit 5.1 hereto.
Placement Agency Agreement
In conjunction with the SPA, the Company entered into a Placement Agency
Agreement with Maxim Group LLC ("Maxim"). Under the terms of the Placement
Agency Agreement, Maxim will act as the exclusive placement agent for the
transaction. The Company has agreed to pay Maxim a cash fee payable upon the
closing of the Offering ("Closing") equal to 6.0% of the gross proceeds received
by the Company from the offering of the Transaction Securities (the "Placement
Fee"), and, subject to certain conditions, to reimburse all travel and other
out-of-pocket expenses of Maxim in connection with this Offering, including but
not limited to legal fees, up to a maximum of $50,000. If we elect to terminate
this Offering for any reason, and, if within six months following December 31,
2018, we complete any financing of equity, equity-linked or debt or other
capital raising activity with Investors introduced to us by Maxim in connection
with the placement of the Transaction Securities, then we will be required to
pay to Maxim upon the closing of the financing the Placement Fee.
The Placement Agency Agreement contains customary representations, warranties
and agreements by us and customary conditions to closing. We have agreed to
indemnify Maxim against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments that Maxim may
be required to make in respect of those liabilities.
The above description of the Placement Agency Agreement does not purport to be
complete and is qualified in its entirety by the full text of such Placement
Agency Agreement, which is incorporated herein and attached hereto as Exhibit
Additionally, pursuant to the terms of the SPA, the Company granted the
Investors Warrants to purchase up to 31,000,000 shares of Common Stock for each
share purchased for cash in this offering. The Warrants are exercisable
beginning on the initial exercise date, which is the earlier of the date the
Company obtains the approval of its stockholders to the issuance of the shares
of Common Stock underlying the Warrants (the "Warrant Shares") or the six-month
anniversary of the date of issuance, at an exercise price of $0.232 per share
("Exercise Price"). The Warrants will be exercisable for 42 months following the
After July 15, 2019, the Investors may exercise the Warrants by means of a
"cashless exercise" in the event there is no effective registration statement
registering, or no current prospectus is available for the resale of, the
Warrant Shares. Also after July 15, 2019, if the daily volume weighted average
price of our common stock fails to exceed the Exercise Price, the aggregate
number of warrant shares issuable in a cashless exercise will be equal to the
product of (i) the aggregate number of Warrant Shares that would be issuable
upon exercise of the Warrants if such exercise were by means of a cash exercise
and (ii) 0.75. Subject to limited exceptions, a holder of Warrants will not have
the right to exercise any portion of its Warrants if the 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 upon 61 days' prior notice to the Company,
the holder may increase the Beneficial Ownership Limitation, provided that in no
event shall the Beneficial Ownership Limitation exceed 9.99%.
The Exercise Price and number of the shares of our common stock issuable upon
the exercise of the Warrants will be subject to adjustment in the event of any
stock dividends and splits, reverse stock split, recapitalization,
reorganization or similar transaction, as described in the Warrants.
. . .
Item 3.02 Unregistered Sales of Equity Securities.
The applicable information set forth in Item 1.01 of this Current Report on Form
8-K is incorporated by reference in this Item 3.02.
The Warrants were offered and sold in reliance upon the exemption from
registration contained in Section 4(a)(2) of the Securities Act.
Item 8.01 Other Events.
On January 11, 2019, the Company announced the Offering. A copy of the press
release that discusses this matter is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
This report contains forward-looking statements. Forward-looking statements
include, but are not limited to, statements that express our intentions,
beliefs, expectations, strategies, predictions or any other statements related
to our future activities, or future events or conditions. These statements are
based on current expectations, estimates and projections about our business
based, in part, on assumptions made by management. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in the
forward-looking statements due to numerous factors, including those risks
discussed in our Annual Report on Form 10-K and in other documents that we file
from time to time with the SEC. Any forward-looking statements speak only as of
the date on which they are made, and we do not undertake any obligation to
update any forward-looking statement to reflect events or circumstances after
the date of this report, except as required by law.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
5.1 Opinion of Legal Counsel
10.1 Securities Purchase Agreement dated January 11, 2019, between the
Company and the Investors identified therein
10.2 Placement Agency Agreement with Maxim Group LLC
10.3 Form of Warrant Agreement
23.1 Consent of General Counsel (contained in Exhibit 5.1)
99.1 Press Release, dated January 11, 2019, issued by MagneGas Applied
Technology Solutions, Inc.
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