Item
1.01 Entry into a Material Definitive Agreement.
Securities
Purchase Agreement
On
December 12, 2019, Taronis Technologies, Inc. (the “Company”) entered into a Securities Purchase Agreement (“SPA”)
with institutional investors (“Investors”) pursuant to which the Company agreed to issue and sell to each Investor,
and each Investor severally, but not jointly, agreed to purchase from the Company an aggregate of 2,000 shares of Series H-1 Preferred
Stock (“Preferred Shares”), and 2,000,000 Common Stock Purchase Warrants (“Warrants”) with an aggregated
stated value of $2,000,000 at a price of $850 per share (collectively, the “Transaction Securities”) for net
proceeds of $1,700,000 to the Company (the “Offering”). The Preferred Shares are not convertible into shares
of Common Stock. The Warrants will be exercisable at a price of $1.00 per share for an aggregate of 2,000,000 shares of Common
Stock. The closing of the Offering is contemplated to occur on December 13, 2019.
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, the
form of which is incorporated herein and attached hereto as Exhibit 10.1.
Series
H-1 Preferred Stock
The
Company shall designate a new class of preferred stock as “Series H-1 Preferred Stock” in the aggregate amount of
2,000 shares with each Preferred Share having a stated value of $1,000. At the Closing of the Offering, the Company will issue
an aggregate of 2,000 Preferred Shares. The “Maturity Date” for the Preferred Shares shall be the earlier to occur
of (i) the date that the Company obtains the approval of its stockholders to issue all shares of Common Stock issuable (A) pursuant
to the terms of the Certificate of Designations, Preferences and Rights (the “Series H CoD”) of the Company’s
Series H Preferred Stock, par value $0.001 per share (the “Series H Preferred Shares”) and (B) upon exercise of the
warrants to purchase Common Stock to be issued in connection with the Series H Preferred Shares , in each case, without giving
effect to any limitation on the issuance of shares of Common Stock pursuant to the terms of the Series H CoD or upon exercise
of such warrants to purchase Common Stock set forth therein, in accordance with the rules and regulations of the Principal Market
and (ii) January 31, 2020, as may be extended pursuant to the terms of the Certificate of Designations, Preferences and Rights
of the Preferred Shares.
If
any Series H-1 Preferred Shares remain outstanding on the Maturity Date, the Company shall redeem such Series H-1 Preferred Shares
in cash in an amount equal to the Redemption Amount for each such Series H-1 Preferred Share.
The
Company also has the right to redeem all, but not less than all, of the Series H-1 Preferred Stock, in cash, at any time.
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 designation 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.
Upon
the occurrence of a Triggering Event, the holder may require the Company to redeem all or any of the Preferred Shares. Each Series
H-1 Preferred Share subject to redemption by the Company shall be redeemed by the Company in cash by wire transfer of immediately
available funds at a price equal to 118% of the Redemption Amount being redeemed.
The
above description of the “Series H-1 Preferred Stock” does not purport to be complete and is qualified in its entirety
by the full text of the Certificate of Designations, Preferences and Rights of such Series H-1 Preferred Stock, the form of which
is incorporated herein and attached hereto as Exhibit 4.1.
Warrants
Additionally,
pursuant to the terms of the SPA, the Company granted the Investors Warrants to purchase up to 2,000,000 shares of Common Stock.
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 issuance of the Unavailable
Warrant Shares is not available for the issuance of such Unavailable Warrant Shares, the 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.
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
above description of the Warrants does not purport to be complete and is qualified in its entirety by the full text of the “form
of” Warrant which is attached hereto as Exhibit 10.2, and incorporated herein by reference.