Taronis Technologies Inc (fka TRNX)

[brawnycha]

Stockholders' Equity
http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=9612451 Stockholders' Equity
Preferred stock: $0.001 par; 10,000,000 authorized; 1,000,000 issued and outstanding 1,000
Common stock: $0.001 par; 900,000,000 authorized; 23,109,109 and 20,042,614issued and outstanding,
respectively

Common Stock Issuances
The use of an initial small production refinery had been contributed by Dr. Ruggero Santilli, the former Chairman of the Board and former Chief
Executive Officer of the Company. The computed rental values were based on the cost basis of the unit, which is approximately $210,500; the
month-to-month rental agreement is $1,870 per month and had been charged to equipment rental expense in the operating expenses. To reflect
the contributed value, the corresponding entry has been charged to additional paid in capital, and is included in the statement of stockholders’
equity. Total contributed value was $22,440 on an annual basis. Due to production demand, on December 28, 2011, the Company and Dr.
Santilli entered into an agreement to transfer the title of the unit to the Company in exchange for a demand note in the amount of $210,500 at an
interest rate of 3%. As of September 30, 2012 the amount has been paid in full.
The Company issued 998,000 shares of preferred stock to the controlling members in January 2012, valued at $998.
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On June 1, 2011, the Company executed agreements for two private offerings of its common stock (each an “Offering”). In connection with the
Offerings, the Company entered into two securities purchase agreements (each a “Securities Purchase Agreement”) with DDI Industry
International (Beijing) Co., Ltd (the “Investor”). Pursuant to the first Securities Purchase Agreement, the Company issued an aggregate of
384,625 shares of its common stock (the “Shares”) to the Investor for a purchase price of $500,000, at $1.30 per share. Pursuant to the second
Securities Purchase Agreement, the Company issued an aggregate of 333,333 Shares to the Investor for a purchase price of $561,248, at $1.68
per share. The Company has received the proceeds from both offerings. The second offering, in the amount of $561,248 was received in August
2011.
Prior to this Offering, the Company and the Investor did have a material relationship. In June 2010, the Company entered into an agreement
with the Investor to form a Chinese joint venture (“MagneGas China”). Pursuant to the agreement, the Investor acquired exclusive MagneGas™
Technology and manufacturing rights for the Greater China Market. The Investor also acquired 1,481,482 shares of the Company’s common
stock at a purchase price of $2 million and purchased a 300Kw Plasma Arc Refinery at a purchase price of $1.855 million. The Company owns
20% of the equity in MagneGas China and the Company’s former Chief Executive Officer, Dr. Ruggero Santilli, is a member of the board of
directors. The Company is working with MagneGas China to replace Dr. Ruggero Santilli with Ermanno Santilli in this position. Pursuant to the
agreement, the Company appointed Allen Feng, the Chief Executive Officer of the Investor, to its board of directors.
In October and November 2011, the Company entered into a definitive agreement with investors to sell in a private placement 1,966,250 shares
of its common stock at a purchase price of $1.60 per unit, including warrants to purchase 1,966,250 shares of its common stock at an exercise
price of $3.00, resulting in gross proceeds to the Company of $3.2 million, before deducting placement agent fees and other offering expenses.
The warrants are exercisable at a price of $3.00 per share and expire five years from the initial closing date. During the quarter ended September
30, 2012, 84,125 options were exercised at the option price of $3.00, for proceeds of $252,375, included in proceeds from sale of stock in
financing activities of the statement of cash flows.
In the quarter ended March 31, 2012 the Company entered into a definitive agreement with investors to sell in a private placement an aggregate
1,941,250 shares of its common stock and warrants to purchase 970,625 shares of its common stock at a purchase price of $2.00 per unit,
resulting in gross proceeds to the Company of $3,882,500, before deducting placement agent fees and other offering expenses. The warrants are
exercisable at an exercise price of $4.00 per share and expire five years from the initial closing date. Pursuant to the terms of the definitive
agreement, the Company conducted two closings with parties to the definitive agreement. The initial closing occurred on March 29, 2012, for
gross proceeds of $3,117,500 in exchange for 1,558,750 shares of common stock and warrants to purchase an additional 779,375 shares of
common stock. The second closing was completed on April 3, 2012 for gross proceeds of $765,000 in exchange for 382,500 shares of common
stock and warrants for an additional 191,250 shares of common stock. No warrants have been exercised during the nine month period ending
September 30, 2013.
On August 16, 2012 the Company completed a public offering of 2,850,000 shares of common stock at a price to the public of $3.00 per share.
Of the 2,850,000 shares of common stock, an aggregate 652,173 shares were offered by three stockholders of the Company. In addition, the
Company and the selling stockholders granted the underwriters a 45-day option to purchase up to an additional 427,500 shares of common stock
solely to cover over-allotments, if any. The Company used the net proceeds from the offering to further develop its products and operations, for
working capital, and general corporate purposes. The Company did not receive any of the proceeds from the sale of shares by the selling
stockholders. The offering resulted in the net issuance of 2,197,827 shares of common stock (2,850,000, less 652,173 common shares of the
selling shareholders) for gross proceeds of $6,593,481 less offering and closing costs of $758,477, resulting in net proceeds of $5,835,004.
On June 5, 2013, the Company closed its previously-announced underwritten public offering of 2,728,139 shares of common stock, par value
$0.001 per share, and 2,728,139 warrants to purchase 682,035 shares of common stock with an exercise price of $1.35 per share, which includes
the full exercise of the over-allotment option by the underwriter to purchase an additional 355,844 shares of common stock and warrants to
purchase 88,961 shares of common stock with an exercise price of $1.35, at a combined price to the public of $0.90, for gross proceeds to the
company of $2,455,325. The Company intends to use the proceeds from the offering for working capital and general corporate purposes.
Northland Securities, Inc. acted as underwriter for the offering.
On September 27, 2013, the company settled a dispute with GreenPlanet Aid C.V. of Mexico (GreenPlanet) to which GreenPlanet was
requesting a refund of a non-refundable deposit and as settlement of this dispute the Company offered 93,750 shares of common stock. This
resulted in a $43,750 gain which is recognized as Other Income. This is an unrelated entity to Clear Sky Energy S.A. de C.V. of Mexico, who
have a current active contract with the Company.
On September 27, 2013, the company issued 31,250 shares of Common Stock to Benewatt Holdings, Inc. as payment for consulting services
rendered.
Options and Warrants
In the period ending March 31, 2011, the Company issued 50,000 warrants to a consultant with an exercise term of 5 years and a strike price of
$1.50. The Company calculated the value of these shares at $68,500, based on using Black Sholes model. Assumptions used in the calculation
were volatility of 151.7%, estimated life of 2.5 years, 0% forfeiture and risk free interest rate of 1.8%. On June 28, 2012, these warrants were
exercised on a cashless basis, resulting in the issuance of 37,500 common shares.
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During 2011, the Company also issued options attached to the purchase of shares at a 1:1 ratio, resulting in the issuance of 2,079,563
options. Value for these attached options was included in the original capitalized transactions. These options are exercisable within 3 years at a
price of $3.00 per share. During the quarter ended September 30, 2012, 84,125 options were exercised for proceeds of $252,375.
In the period ending March 31, 2012, the Company issued 60,000 options to a consultant with an exercise term of 5 years, vesting over a one
year period, and a strike price of $1.50. The Company calculated the value of these shares at $19,300, based on using Black Sholes
model. Assumptions used in the calculation were volatility of 31.6%, estimated life of 1.5 years, 0% forfeiture and risk free interest rate of
1.8%. On June 28, 2012 these warrants were exercised on a cashless basis, resulting in the issuance of 37,500 common shares.
On March 31, 2012 the Company issued 2,910,000 options to executives, in connection with employment agreements, at an exercise price of
$1.50, vesting over a 3 year period. The Company calculated the value of these shares at $3,921,900, based on using Black-Sholes
model. Assumptions used in the calculation were: volatility of 31.6%; estimated life of 2.5 years; 0% forfeiture; and risk free interest rate
of .39%. The Company recognized stock-based compensation, on a straight-line basis over the ratable vesting period, in the amount of
$1,135,294 for the nine months ending September 30, 2013.
During the nine month period ended September 30, 2012, in association with the private placement stated above, there were 1,067,687 warrants
issued with the $3,882,500 raise. These warrants are for a five year period with an exercise price of $4.00 per share.
**During the nine month period ended September 30, 2013, in association with the public offering stated above, there were 770,996 warrants
issued with the $2,455,325 raise. These warrants are for a 5 year period with an exercise price of $1.35 per share.
The following is a summary of outstanding options and warrants:
10. Related Party Transactions
At various times we received advances from Dr. Santilli and Carla Santilli for unsecured promissory notes. All funds are at the same terms of the
original stockholder note. These promissory notes have no repayment date; however they are payable within 30 days of written demand.
Payment is to include accrued simple interest at 4%. Since 2007, the Company received promissory notes in the aggregate amount of $257,200.
All note principal has been paid in full.
Weighted
Party Transactions
At various times we received advances from Dr. Santilli and Carla Santilli for unsecured promissory notes. All funds are at the same terms of the
original stockholder note. These promissory notes have no repayment date; however they are payable within 30 days of written demand.
Payment is to include accrued simple interest at 4%. Since 2007, the Company received promissory notes in the aggregate amount of $257,200.
All note principal has been paid in full.
Weighted Average
Options Options Intrinsic Exercise Remaining
Outstanding Vested Value Price Term
Options, December 31, 2011 2,215,039 2,215,039
Granted 3,977,687 1,320,187 $ 3.43 $ 2.17 4.8 years
Exercised (88,887 ) (88,887 )
Forfeited (130,714 ) (130,714 ) 2.3 years
December 31, 2012 5,973,125 3,315,625
Granted 1,485,996
Exercised -
Forfeited 450,000
September