SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): October 15, 2004
KRONOS ADVANCED TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Charter)
NEVADA 000-30191 87-0440410
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
464 COMMON STREET, SUITE 301, BELMONT, MASSACHUSETTS 02478
(Address of principal executive offices) (Zip code)
(617) 993-9965
Registrant's telephone number, including area code
NOT APPLICABLE
(Former Name or Former Address, If Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
/_/ Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
/_/ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
/_/ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
/_/ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On October 15, 2004, the Company entered into a Securities Purchase
Agreement with Cornell Capital Partners. Pursuant to the Securities Purchase
Agreement, the Company sold 5,000,000 shares of the Company's restricted common
stock to Cornell Capital Partners. In connection with the sale of shares of
common stock to Cornell Capital Partners, LP, the Company and Cornell Capital
Partners entered into an Investor Registration Rights Agreement, dated October
15, 2004, whereby the Company is obligated to file a registration statement with
the United States Securities and Exchange Commission no later than thirty days
from October 15, 2004 covering such shares of common stock sold to Cornell
Capital Partners.
On October 15, 2004 Kronos Advanced Technologies, Inc., a Nevada
corporation (the "Company"), entered into a Standby Equity Distribution
Agreement with Cornell Capital Partners, LP. Pursuant to the Standby Equity
Distribution Agreement, the Company may, at its discretion, periodically sell to
Cornell Capital Partners shares of common stock for a total purchase price of up
to $20 million. For each share of common stock purchased under the Standby
Equity Distribution Agreement, Cornell Capital Partners will pay the Company 98%
of, or a 2% discount to, the lowest volume weighted average price of the
Company's common stock on the Over-the-Counter Bulletin Board or other principal
market on which the Company's common stock is traded for the five days
immediately following the notice date. Cornell Capital Partners, LP will also
retain 5% of each advance under the Standby Equity Distribution Agreement.
Cornell Capital Partner's obligation to purchase shares of the Company's common
stock under the Standby Equity Distribution Agreement is subject to certain
conditions, including the Company obtaining an effective registration statement
for shares of common stock sold under the Standby Equity Distribution Agreement
and is limited to $1,500,000 per advance. This must be a minimum of seven (7)
trading days between each requested advance. Cornell Capital Partners, LP
received a one-time commitment fee in the form of 2,941,177 restricted shares of
the Company's common stock under the Standby Equity Distribution Agreement.
The Company engaged Newbridge Securities Corporation, a registered
broker-dealer, to advise it in connection with the Standby Equity Distribution
Agreement. For its services, the Company agreed to issue Newbridge Securities
Corporation shares of our common stock in an amount equal to $10,000 divided by
the volume weighted average price of the Company's common stock, as quoted on
Bloomberg LP, on October 15, 2004.
In addition, the Company and Cornell Capital Partners agreed that Cornell
Capital Partners, shall lend the Company an aggregate of $4,000,000 pursuant to
two (2) Equity-Backed Promissory Notes, each in the principal amount of
$2,000,000. Cornell Capital Partners shall lend $2,000,000 upon the filing by
the Company with the United States Securities and Exchange Commission (the
"SEC") of a registration statement pursuant to the Investor Registration Rights
Agreement. Cornell Capital Partners, LP shall lend the remaining $2,000,000 upon
such registration statement being declared effective by the SEC. The principal
amount of each note is payable in equal weekly installments of $50,000 plus
twelve percent (12%) interest on the outstanding principal balance starting on
the earlier to occur of: (i) the registration statement being declared by the
SEC; or (ii) twelve (12) weeks from the date such note is executed.
On October 25, 2004, the Company, Kronos Air Technologies, Inc., a Nevada
corporation and wholly-owned subsidiary of the Company ("KAT") (the Company and
KAT are collectively referred to as the "Borrowers") entered into a First
Amendment to Master Loan and Investment Agreement with FKA Distributing Co.
d/b/a HoMedics, Inc., a Michigan corporation ("HoMedics"). Pursuant to the First
Amendment to Master Loan and Investment Agreement, HoMedics agreed to lend to
the Borrowers $925,000, which will be funded to the Borrowers upon the Company
obtaining certain milestones with respect to the development, testing and
production of a certain product prototype for HoMedics. The $925,000 to be
loaned to the Borrowers is evidenced by a Secured Promissory Note executed by
the Borrowers. Interest accrues at 6% per annum with a maturity date of five (5)
years from the date of the First Amendment to Master Loan and Investment
Agreement. No payments are required under this note until the earlier to occur
of: (i) the quarter following the production effective date; or (ii) twenty-four
(24) months from the date of the First Amendment to Master Loan and Investment
Agreement.
In connection with the First Amendment to Master Loan and Investment
Agreement, the Company executed an Amended and Restated Secured Promissory Note
payable to HoMedics in the principal amount of $2,400,000. Interest accrues on
the outstanding principal balance of this note at the rate of 6% per annum with
a maturity date of five (5) years from the date of the First Amendment to Master
Loan and Investment Agreement. No payments are required under this note until
the earlier to occur of: (i) the quarter following the production effective
date; or (ii) twenty-four (24) months from the date of the First Amendment to
Master Loan and Investment Agreement.
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In addition, in connection with the First Amendment to Master Loan and
Investment Agreement, the Company issued to HoMedics a warrant to purchase
26,507,658 shares of the Company's common stock. The warrant is exercisable for
a period of ten (10) years from the date of issuance. The exercise price is
$0.10 per share. In consideration for the warrant, HoMedics delivered to the
Company $75,000 by funding the closing fees owed by the Company and HoMedics
agreed to amend two (2) warrants previously issued by the Company by removing
the anti-dilution protection previously granted to HoMedics. The Company agreed
to include new anti-dilution protection in the new warrant. HoMedics is
entitled, under certain circumstances, to anti-dilution protection in order to
maintain beneficial ownership of the Company equal to 30%. In addition, the
Company agreed to grant HoMedics piggy-back registration rights and one (1)
demand registration right with respect to any shares of common stock of the
Company that HoMedics may acquire pursuant to the two (2) previously issued
warrants and the warrant issued on October 25, 2004 in connection with the First
Amendment to Master Loan and Investment Agreement. HoMedics also agreed not to
exercise any warrants until one year after the effective date of the
registration statement to be filed pursuant to the Investor Registration Rights
Agreement.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
See Item 1.01 Above.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
See Item 1.01 Above.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) Exhibit No. Description:
EXHIBIT DESCRIPTION LOCATION
Exhibit 99.1 Standby Equity Distribution Agreement, dated Provided herewith
October 15, 2004, by and between Kronos
Advanced Technologies, Inc. and Cornell
Capital Partners, LP
Exhibit 99.2 Registration Rights Agreement, dated October Provided herewith
15, 2004, by and between Kronos Advanced
Technologies, Inc. and Cornell Capital
Partners, LP
Exhibit 99.3 Escrow Agreement, dated October 15, 2004, by Provided herewith
and between Kronos Advanced Technologies, Inc.
and Cornell Capital Partners, LP
Exhibit 99.4 Placement Agent Agreement, dated October 15, Provided herewith
2004, by and between Kronos Advanced
Technologies, Inc. and Cornell Capital
Partners, LP
Exhibit 99.5 Securities Purchase Agreement, dated October Provided herewith
15, 2004, by and between Kronos Advanced
Technologies, Inc. and Cornell Capital
Partners, LP
Exhibit 99.6 Investor Registration Rights Agreement, dated Provided herewith
October 15, 2004, by and between Kronos
Advanced Technologies, Inc. and Cornell
Capital Partners, LP
Exhibit 99.7 Escrow Agreement, dated October 15, 2004, Provided herewith
by and between Kronos Advanced Technologies,
Inc. and Cornell Capital Partners, LP
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EXHIBIT DESCRIPTION LOCATION
Exhibit 99.8 Form of Equity-Back Promissory Note in the Provided herewith
principal amount of $2,000,000
99.9 First Amendment to Master Loan and Investment Provided herewith
Agreement, dated October 25, 2004, by and
among Kronos Advanced Technologies, Inc.,
f/k/a TSET, Inc., a Nevada corporation, Kronos
Air Technologies, Inc., a Nevada corporation
and FKA Distributing Co. d/b/a HoMedics, Inc.,
a Michigan corporation
99.10 Secured Promissory Note, dated October 25, Provided herewith
2004, payable to FKA Distributing Co., d/b/a
HoMedics, Inc., a Michigan corporation, in the
principal amount of $925,000
99.11 Amended and Restated Warrant No. 1, dated Provided herewith
October 25, 2004, issued to FKA Distributing
Co. d/b/a HoMedics, Inc.
99.12 Amended and Restated Warrant No. 2, dated Provided herewith
October 25, 2004, issued to FKA Distributing
co. d/b/a HoMedics, Inc.
99.13 Warrant No. 3, dated October 25, 2004, Provided herewith
issued to FKA Distributing Co. d/b/a HoMedics,
Inc.
99.14 Amended and Restated Registration Rights Provided herewith
Agreement, dated October 25, 2004, by and
between Kronos Advanced Technologies, Inc., a
Nevada corporation and FKA Distributing Co.
d/b/a HoMedics, a Michigan corporation
99.15 Amended and Restated Secured Promissory Note Provided herewith
in the principal amount of $2,400,000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 12, 2004 KRONOS ADVANCED TECHNOLOGIES, INC.
By: /s/ Daniel R. Dwight
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Name: Daniel R. Dwight
Title: President, Chief Executive
Officer and Director