Item 1.01
Entry into a Material Definitive Agreement.
As
previously disclosed in the Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission (the “SEC”)
on November 1, 2016, Surna Inc. (the “Company”) has been privately negotiating with certain holders of certain 10%
convertible promissory notes (the “Original Notes”) and warrants (the “Original Warrants” and together
with the Original Notes, the “Original Securities”) with a view to amending and converting the Original Notes and
amending the terms of the Original Warrants.
The
Original Securities were issued as part of a unit (each unit consisted of 250,000 shares of Common Stock, an Original Warrant
to purchase 50,000 shares of Common Stock and an Original Note in the principal amount of $50,000) to investors participating
in the Company’s private placement financing that completed closings between October 31, 2014 and February 27, 2015. The
Original Notes mature and become payable two years from issuance.
As
of December 6, 2016, the Company has entered into Note Conversion and Warrant Amendment Agreements (each, an “Agreement”
and together, the “Agreements”) with each of 33 holders, to: (i) amend the Original Note (each an “Amended Note”)
to reduce the conversion price of such holder’s Original Note and simultaneously cause the conversion of the outstanding
amount under such Original Note into shares of Common Stock of the Company (“Conversion Shares”); and (ii) reduce
the exercise price of the Original Warrant (each, an “Amended Warrant” and together with an Amended Note, the “Amendments”).
Each Agreement has been privately negotiated so the terms may vary. Pursuant to the Agreements, the Original Notes have been amended
to reflect a reduced conversion price per share between $0.12 and $0.16. Additionally, pursuant to the Agreements
,
certain
Original Warrants have been amended to reflect a reduced exercise price per share of $0.35, with the exception of the first
Agreement signed which amended certain Original Warrants to reflect a reduced exercise price of $0.15
per share.
Pursuant
to the Agreements, the Company has (i) converted Original Notes with an aggregate outstanding principal amount of approximately
$1,475,000, or approximately 60% of the total principal amount under the Original Notes, (ii) issued 12,220,604 Conversion Shares
in connection with the conversion of such Original Notes and (iii) amended 1,425,000 Original Warrants. All of the holders party
to the Note Conversion and Warrant Amendment Agreements were “accredited investors” as such term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
In
connection with the Amendments, the Company has also negotiated with some of the holders a restriction that limits the number
of Conversion Shares a holder may sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any of such shares issuable in connection with the Amendments without the prior written consent of the Company for a period
of ninety (90) days after the date of such holder’s Agreement.
The Company intends to negotiate with
the remaining holders of the Original Notes to convert the remaining $1,061,000 of principal; however, it cannot make any assurance
that it will be successful in converting any more Original Notes.
The
foregoing summary of the Agreements is qualified in its entirety by reference to the full text of the Agreements, a copy of which
will be filed as an exhibit to the Company’s next periodic report.