Current Report — Form 8-K — Sect. 13 / 15(d) – SEA’34 Filing Table of Contents
Document/ExhibitDescriptionPagesSize 1: 8-K Current Report HTML 47K
2: EX-2.1 Plan of Purchase, Sale, Reorganization, HTML 432K
Arrangement, Liquidation or Succession
3: EX-2.2 Plan of Purchase, Sale, Reorganization, HTML 53K
Arrangement, Liquidation or Succession
4: EX-2.3 Plan of Purchase, Sale, Reorganization, HTML 54K
Arrangement, Liquidation or Succession
5: EX-2.4 Form of Lock-Up Agreement HTML 24K
6: EX-2.5 Asset Purchase Agreement HTML 141K
7: EX-3.1 Amendment to Certificate of Designations, Rights HTML 18K
and Preferences of Series H-4 Convertible
Preferred Stock
8: EX-3.2 Bylaws of Dropcar HTML 96K
9: EX-99.1 Joint Press Release Dated December 20, 2019, HTML 25K
Issued by Dropcar and Ayro.
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code:
(646) 342-1595
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))
Title
of each class
Trading
Symbol(s)
Name of
each exchange on which registered
Common
stock, par value $0.0001 per share
DCAR
The
Nasdaq Stock Market
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Item 1.01 Entry into a Material Definitive Agreement
Merger Agreement
On
December 19, 2019, DropCar, Inc., a Delaware corporation
(“DropCar”), ABC
Merger Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of DropCar (“Merger Sub”),
and Ayro, Inc., a Delaware corporation (“Ayro”),
entered into an Agreement and Plan of Merger and Reorganization
(the “Merger
Agreement”), pursuant to which, among other matters,
and subject to the satisfaction or waiver of the conditions set
forth in the Merger Agreement, Merger Sub will merge with and into
Ayro, with Ayro continuing as a wholly owned subsidiary of DropCar
and the surviving corporation of the merger (the
“Merger”).
The Merger is intended to qualify for federal income tax purposes
as a tax-free reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as
amended.
Subject
to the terms and conditions of the Merger Agreement, at the closing
of the Merger, (a) each outstanding share of Ayro common stock
and Ayro preferred stock will be converted into the right to
receive shares of DropCar common stock (the “DropCar Common
Stock”) (after giving effect to a reverse stock split
of DropCar Common Stock, as described below) equal to the
Exchange Ratio described below; and (b) each outstanding Ayro
stock option and Ayro warrant that has not previously been
exercised prior to the closing of the Merger will be assumed by
DropCar.
Under
the exchange ratio formula in the Merger Agreement (the
“Exchange
Ratio”), upon the closing of the Merger, on a pro
forma basis and based upon the number of shares of DropCar common
stock to be issued in the Merger, current DropCar shareholders
(along with DropCar’s financial advisor) will own
approximately 20% of the combined company and current Ayro
investors will own approximately 80% of the combined company
(including the additional financing transaction referenced below).
For purposes of calculating the Exchange Ratio, the number of
outstanding shares of DropCar common stock immediately prior to the
Merger does not take into effect the dilutive effect of shares of
DropCar common stock underlying options, warrants or certain
classes of preferred stock outstanding as of the date of the Merger
Agreement.
In
connection with the Merger, DropCar will seek the approval of its
stockholders to amend its certificate of incorporation to:
(i) effect a reverse split of DropCar Common Stock at a ratio
to be determined by DropCar, which is intended to ensure that the
listing requirements of the Nasdaq Capital Market, or such other
stock market on which the DropCar Common Stock is trading, are
satisfied and (ii) change the name of DropCar to
Ayro, Inc., subject to the consummation of the
Merger.
Prior
to the execution and delivery of the Merger Agreement, and as a
condition of the willingness of the parties to enter into the
Merger Agreement, certain stockholders have entered into agreements
with Ayro pursuant to which such stockholders have agreed, subject
to the terms and conditions of such agreements, to purchase, prior
to the consummation of the Merger, shares of Ayro’s common
stock (or common stock equivalents) and warrants to purchase Ayro's
common stock for an aggregate purchase price of $2.0 million (the
“Ayro
Pre-Closing Financing”). The consummation of the
transactions contemplated by such agreements is conditioned upon
the satisfaction or waiver of the conditions set forth in the
Merger Agreement. After consummation
of the Merger, Ayro has agreed to cause DropCar to register the
resale of the DropCar Common Stock issued and issuable pursuant to
the warrants issued to the investors in the Ayro Pre-Closing
Financing.
Consummation of the
Merger is subject to certain closing conditions, including, among
other things, approval by the stockholders of DropCar and Ayro, the
continued listing of DropCar’s common stock on the Nasdaq
Stock Market after the Merger and satisfaction of minimum net cash
thresholds by DropCar and Ayro. In accordance with the terms
of the Merger Agreement, (i) certain executive officers,
directors and stockholders of Ayro (solely in their respective
capacities as Ayro stockholders) holding approximately 10% of the
outstanding Ayro capital stock have entered into voting agreements
with DropCar to vote all of their shares of Ayro capital stock in
favor of adoption of the Merger Agreement (the “Ayro Voting
Agreements”) and (ii) certain executive officers,
directors and stockholders of DropCar (solely in their respective
capacities as DropCar stockholders) holding approximately 57% of
the outstanding DropCar common stock have entered into voting
agreements with Ayro to vote all of their shares of DropCar common
stock in favor of approval of the Merger Agreement (the
“DropCar
Voting Agreements”, and together with the Ayro Voting
Agreements, the “Voting
Agreements”). The Voting Agreements include
covenants with respect to the voting of such shares in favor of
approving the transactions contemplated by the Merger Agreement and
against any competing acquisition proposals. In addition,
concurrently with the execution of the Merger Agreement,
(i) certain executive officers, directors and stockholders of
Ayro and (ii) certain directors of DropCar have entered into
lock-up agreements (the “Lock-Up
Agreements”) pursuant to which they accepted certain
restrictions on transfers of shares of DropCar common stock for the
one-year period following the closing of the Merger.
The
Merger Agreement contains certain termination rights for both
DropCar and Ayro, and further provides that, upon termination of
the Merger Agreement under specified circumstances, either party
may be required to pay the other party a termination fee of
$1,000,000, or in some circumstances reimburse the other
party’s reasonable expenses.
At the
effective time of the Merger, the Board of Directors of DropCar is
expected to consist of seven members, three of whom will be
designated by Ayro, three of whom will be designated by DropCar and
one of whom will be designated by the lead investor in the Ayro
Pre-Closing Financing. The Merger Agreement contains certain
provisions providing for the ability of Ayro to designate
additional members upon the achievement of certain business
milestones. As a condition to the consummation of the Merger,
DropCar will immediately prior to the Merger enter into
an
executive employment agreement with Rodney Keller, the current
chief executive officer of Ayro.
Simultaneously with
the execution of the Merger Agreement, Ayro entered into a Loan and
Security Agreement, dated December 19, 2019 (the “Loan
Agreement”), by and among Ayro and the financial institutions
and individuals signatories thereto, pursuant to which, on December19, 2019, Ayro received aggregate gross proceeds of $1,000,000.
Pursuant to the Loan Agreement, the aggregate obligations of Ayro
under the Loan Agreement are to automatically, immediately prior to
the consummation of the Merger, convert into shares of Ayro common
stock, subject to the terms and provisions of the Loan Agreement.
Pursuant to the Loan Agreement, upon conversion of the term loans
made by the investors subject to the terms of the Loan Agreement,
Ayro is required to cause DropCar to issue each bridge investor
warrants to purchase DropCar Common Stock. Upon consummation of the
Merger, Ayro has agreed to cause DropCar to register the resale of
the warrant shares.
In connection with the Merger, Ayro entered into the Stock
Subscription Agreement with an accredited investor, pursuant to
which, immediately prior to the Merger, Ayro will issue up to an
aggregate of 1,750,000 shares of Ayro common stock for the nominal
per share purchase price of $0.001 per share, or, if applicable,
pre-funded warrants to purchase Ayro common stock, in lieu of Ayro
common stock. The consummation of the transactions contemplated by
the Stock Subscription Agreement is conditioned upon the
satisfaction or waiver of the conditions set forth in the Merger
Agreement.
The
preceding summary does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, the form of
Ayro Voting Agreement, the form of DropCar Voting Agreement and the
form of Lock-Up Agreement, which are filed as Exhibits 2.1, 2.2,
2.3, and 2.4, respectively, to this Form 8-K and which are
incorporated herein by reference. The Merger Agreement has
been attached as an exhibit to this Current Report on Form 8-K
to provide investors and securityholders with information regarding
its terms. It is not intended to provide any other factual
information about Ayro or DropCar or to modify or supplement any
factual disclosures about DropCar in its public reports filed with
the Securities and Exchange Commission (“SEC”). The
Merger Agreement includes representations, warranties and covenants
of Ayro and DropCar made solely for the purpose of the Merger
Agreement and solely for the benefit of the parties thereto in
connection with the negotiated terms of the Merger Agreement.
Investors should not rely on the representations, warranties and
covenants in the Merger Agreement or any descriptions thereof as
characterizations of the actual state of facts or conditions of
Ayro, DropCar or any of their respective affiliates. Moreover,
certain of those representations and warranties may not be accurate
or complete as of any specified date, may be subject to a
contractual standard of materiality different from those generally
applicable to SEC filings or may have been used for purposes of
allocating risk among the parties to the Merger Agreement, rather
than establishing matters of fact.
Asset Purchase Agreement
In
addition, on December 19, 2019, DropCar entered into an asset
purchase agreement (the “APA”) by and
among DropCar, DropCar Operating Company, Inc., a Delaware
corporation and wholly owned subsidiary of DropCar
(“DropCar
Operating”), DC Partners Acquisition, LLC (the
“Purchaser”),
Spencer Richardson and David Newman, pursuant to which DropCar
Operating agreed to sell substantially all of the assets associated
with its business of providing vehicle support, fleet logistics and
concierge services for both consumers and the automotive industry.
The aggregate purchase price for the purchased assets consists of
the cancellation of certain liabilities pursuant to those certain
employment agreements by and between DropCar Operating and each of
Mr. Richardson and Mr. Newman, plus the assumption of certain
liabilities relating to or arising out of workers’
compensation claims that occurred prior to the closing date of the
APA.
The APA
contains representations, warranties and covenants by DropCar
Operating and the Purchaser that are typical for this type of
transaction. Completion of the APA is subject to certain
conditions, including customary closing conditions relating to the
(i) the accuracy of each party’s representations
and warranties (subject to certain qualifications),
(ii) material compliance by the parties with their respective
covenants and agreements contained in the APA, (iii) the
consummation of a Change in Control (as defined in the APA),
including the Merger and (iv) the receipt by DropCar of the
affirmative vote of the holders of the majority of the shares of
DropCar common stock entitled to vote on such matters with respect
to the matters contemplated by the APA.
The APA
contains certain termination rights for both DropCar and
Purchaser.
The
preceding summary does not purport to be complete and is qualified
in its entirety by reference to the APA, which is filed as Exhibit
2.5 to this Form 8-K and which is incorporated herein by
reference.
Forward-Looking Statements
This communication contains forward-looking
statements (including within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended) concerning DropCar,
Ayro, the proposed transaction and other matters. These
statements may discuss goals, intentions and expectations as to
future plans, trends, events, results of operations or financial
condition, or otherwise, based on current beliefs of the management
of DropCar, as well as assumptions made by, and information
currently available to, management. Forward-looking
statements generally include statements that are predictive in
nature and depend upon or refer to future events or conditions, and
include words such as “may,”“will,”“should,”“would,”“expect,”“anticipate,”“plan,”“likely,”“believe,”“estimate,”“project,”“intend,” and other similar
expressions. Statements that are not historical facts are
forward-looking statements. Forward-looking statements are based on
current beliefs and assumptions that are subject to risks and
uncertainties and are not guarantees of future performance. Actual
results could differ materially from those contained in any
forward-looking statement as a result of various factors,
including, without limitation: the risk that the conditions to the
closing of the transaction are not satisfied, including the failure
to obtain stockholder approval for the transaction in a timely
manner or at all; uncertainties as to the timing of the
consummation of the transaction and the ability of each of DropCar
and Ayro to consummate the transaction; risks related to
DropCar’s continued listing on the Nasdaq Capital Market
until closing of the proposed transaction; risks related to
DropCar’s ability to correctly estimate its operating
expenses and its expenses associated with the transaction; the
ability of DropCar or Ayro to protect their respective intellectual
property rights; competitive responses to the transaction;
unexpected costs, charges or expenses resulting from the transaction; potential adverse
reactions or changes to business relationships resulting from the
announcement or completion of the transaction; and legislative,
regulatory, political and economic developments. The foregoing
review of important factors that could cause actual events to
differ from expectations should not be construed as exhaustive and
should be read in conjunction with statements that are included
herein and elsewhere, including the risk factors included in
DropCar’s most recent Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K filed with the SEC. DropCar can give no assurance
that the conditions to the transaction will be satisfied. Except as
required by applicable law, DropCar undertakes no obligation to
revise or update any forward-looking statement, or to make any
other forward-looking statements, whether as a result of new
information, future events or otherwise.
No Offer or Solicitation
This
communication is not intended to and does not constitute an offer
to sell or the solicitation of an offer to subscribe for or buy or
an invitation to purchase or subscribe for any securities or the
solicitation of any vote in any jurisdiction pursuant to the
proposed transaction or otherwise, nor shall there be any sale,
issuance or transfer of securities in any jurisdiction in
contravention of applicable law. No offer of securities shall
be made except by means of a prospectus meeting the requirements of
the Securities Act of 1933, as amended. Subject to certain
exceptions to be approved by the relevant regulators or certain
facts to be ascertained, the public offer will not be made directly
or indirectly, in or into any jurisdiction where to do so would
constitute a violation of the laws of such jurisdiction, or by use
of the mails or by any means or instrumentality (including without
limitation, facsimile transmission, telephone and the internet) of
interstate or foreign commerce, or any facility of a national
securities exchange, of any such jurisdiction.
Important Additional Information Will be Filed with the
SEC
In
connection with the proposed transaction between DropCar and Ayro,
DropCar intends to file relevant materials with the SEC, including
a registration statement that will contain a proxy statement and
prospectus. DROPCAR URGES
INVESTORS AND STOCKHOLDERS TO READ THESE MATERIALS CAREFULLY AND IN
THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT DROPCAR, THE PROPOSED TRANSACTION AND
RELATED MATTERS. Investors and shareholders will be
able to obtain free copies of the proxy statement, prospectus and
other documents filed by DropCar with the SEC (when they become
available) through the website maintained by the SEC at
www.sec.gov. In addition, investors and shareholders will be
able to obtain free copies of the proxy statement, prospectus and
other documents filed by DropCar with the SEC by contacting
Investor Relations by mail at DropCar, Inc., Attn: Investor
Relations, 1412 Broadway, Suite 2105, New York, New York10018. Investors and stockholders are urged to read the proxy
statement, prospectus and the other relevant materials when they
become available before making any voting or investment decision
with respect to the proposed transaction.
Participants in the Solicitation
DropCar
and Ayro, and each of their respective directors and executive
officers and certain of their other members of management and
employees, may be deemed to be participants in the solicitation of
proxies in connection with the proposed transaction. Information
about DropCar’s directors and executive officers is included
in DropCar’s Annual Report on Form 10-K for the year
ended December 31, 2018, filed with the SEC on April 3, 2019,
as amended on April 12, 2019, and the proxy statement for
DropCar’s 2019 annual meeting of stockholders, filed with the
SEC on November 6, 2019. Additional information regarding
these persons and their interests in the transaction will be
included in the proxy statement relating to the transaction when it
is filed with the SEC. These documents can be obtained free of
charge from the sources indicated above.
On December 20, 2019, DropCar filed with the State
of Delaware a certificate of amendment to the Certificate of
Designations, Preferences and Rights of Series H-4 Convertible
Preferred Stock (the “Series H-4
COD”) to reduce the
conversion price to $0.50 per share and provide for the automatic
conversion of the Series H-4 Convertible Preferred Stock into
shares of Common Stock, subject to the approval of DropCar’s
stockholders in accordance with applicable law and the rules
and regulations of the Nasdaq Stock Market
(“Shareholder
Approval”). The amendment
to the Series H-4 COD was approved by DropCar’s Board of
Directors. DropCar intends to seek Shareholder Approval of the
amendment to the Series H-4 COD.
The
foregoing description of the amendment to the Series H-4 COD does
not purport to be complete and is subject to and qualified in its
entirety by reference to the full text of such document, which is
attached as Exhibit 3.1 to this Current Report on Form 8-K and
incorporated by reference herein.
Effective December18, 2019, the Board of Directors of DropCar adopted an amendment to
the bylaws of DropCar. The amendment provides that certain
specifically enumerated stockholder actions related to the internal
affairs of the Company should be brought exclusively in the Court
of Chancery of the State of Delaware (the “Chancery
Court”), or, if the Chancery Court does not have
jurisdiction, the United States District Court for the District of
Delaware or other state courts of the State of
Delaware.
The
foregoing description of the amendment to the bylaws adopted by the
Board of Directors of DropCar is qualified in its entirety by
reference to the DropCar bylaws, as amended on December 18, 2019,
which are filed, marked to show the amendments, as Exhibit 3.2
to this Current Report on Form 8-K.
Asset
Purchase Agreement, dated as of December 19, 2019, by and between
DropCar, DropCar Operating, DC Partners Acquisition LLC, Spencer
Richardson and David Newman.
*Certain schedules
and exhibits to the Merger Agreement have been omitted pursuant to
Item 601(b)(2) of Regulation S-K. A copy of any omitted
schedule and/or exhibit will be furnished to the Securities and
Exchange Commission upon request.
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.
