PART III
Item
10.
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Board of Directors
On December 12, 2019, at our annual meeting, our shareholders
approved Spencer Richardson, David Newman, Sebastian Giordano, Zvi
Joseph, Solomon Mayer, Joshua Silverman and Greg Schiffman to a
term of one year to serve until the 2020 annual meeting of
stockholders, and until their respective successors have been
elected and qualified. Officers are elected annually and serve at
the discretion of the Board. Brian Harrington served as a director
until February 6, 2019.
Set forth below are the names of the directors and executive
officers, their ages, their offices in the Company:
|
Name
|
Age
|
Position(s)
|
|
Executive Officers
|
|
|
|
Spencer Richardson
|
35
|
Chief Executive Officer; Director
|
|
David Newman
|
59
|
Chief Business Development Officer; Director
|
|
Mark Corrao
|
62
|
Chief Financial Officer
|
|
|
|
|
|
Non-Employee Directors
|
|
|
|
Joshua Silverman
|
50
|
Director; Chairman of the Board of Directors
|
|
Sebastian Giordano
|
62
|
Director
|
|
Zvi Joseph
|
53
|
Director
|
|
Solomon Mayer
|
66
|
Director
|
|
Greg Schiffman
|
62
|
Director
|
Employee Directors
Spencer Richardson
Mr. Richardson has served as our Chief Executive Officer and a
member of the Board of Directors since the closing of the business
combination with DropCar, Inc. (“Private DropCar”) in
accordance with the terms of the Agreement and Plan of Merger and
Reorganization, dated as of September 6, 2017, as subsequently
amended, by and among us, DC Acquisition Corporation (“WPCS
Merger Sub”), and Private DropCar (as amended, the
“WPCS Merger Agreement”), pursuant to which WPCS Merger
Sub merged with and into Private DropCar, with Private DropCar
surviving as our wholly owned subsidiary (the “WPCS
Merger”), and prior to that time, served as a member of the
board of directors of Private DropCar since September 2014. Mr.
Richardson served as Co-Founder and Chief Executive Officer of
Private DropCar since its inception in September 2014 through the
closing of the WPCS Merger. Mr. Richardson also served as the
Chairman of our Board of Directors from January 2018 to May 2018.
Prior to his service with DropCar, from March 2009 through February
2016, Mr. Richardson served as Co-Founder and Chief Executive
Officer of FanBridge, Inc., a platform that enables clients, such
as musicians, comedians, influencers, and anyone with a fan base,
to manage fan acquisition, retention, and engagement. In 2012,
Forbes Magazine selected Mr. Richardson as a “30 Under
30” innovator. Mr. Richardson currently serves on the boards
of directors of numerous private companies. Mr. Richardson holds a
B.S. in Finance and Marketing from New York University Stern School
of Business.
David Newman
Mr. Newman has served as our Chief Business Development Officer and
a member of the Board of Directors since the closing of the WPCS
Merger, and prior to that time, served as a member of the board of
directors of Private DropCar since its inception in September 2014.
Mr. Newman served as Co-Founder and Secretary of Private DropCar
since its inception and as Chief Business Development Officer since
April 2017. Mr. Newman also served as Treasurer and Chairman of the
Board of Directors of Private DropCar from its inception until
January 2018. Mr. Newman has served as President of David B. Newman
Consultants, Inc., a New York-based consulting corporation, as
President of Rockland Westchester Legal Services, PC, a New
York-based legal services company, and as a Senior Managing
Director of Brock Securities LLC, a broker-dealer that provides
investment banking and advisory services, in each instance since
February 2014. He previously served as a director of United Realty
Trust Inc., a public real estate investment trust, from August 2012
through September 2015. Mr. Newman holds a B.B.A. in Business
Management from Hofstra University and a J.D. from Fordham
University School of Law.
Non-Employee Directors
Sebastian Giordano
Mr. Giordano served as a consultant to the Company and has served
as a member of the Board of Directors since the closing of the WPCS
Merger, and prior to that time, served as a director of WPCS since
February 2013. Mr. Giordano served as the Interim Chief Executive
Officer of WPCS from August 2013 until April 25, 2016, when the
interim label was removed from his title. He served as the Chief
Executive Officer of WPCS since such time through the closing of
the WPCS Merger. Since 2002, Mr. Giordano has been Chief Executive
Officer of Ascentaur, LLC, a business consulting firm providing
comprehensive strategic, financial and business development
services to start-up, turnaround and emerging growth companies.
From 1998 to 2002, Mr. Giordano was Chief Executive Officer of
Drive One, Inc., a safety training and education business. From
1992 to 1998, Mr. Giordano was Chief Financial Officer of Sterling
Vision, Inc., a retail optical chain. Mr. Giordano received B.B.A.
and M.B.A. degrees from Iona College.
Mr. Giordano’s qualifications to sit on the Board of
Directors include his broad management experience, including having
served as Chief Executive Officer of WPCS.
Greg Schiffman
Mr. Schiffman has served as a member of the Board of Directors
since the closing of the WPCS Merger. Mr. Schiffman served as the
Chief Financial Officer of Vineti, Inc. from October 2017 through
April 2018. He previously served as the Chief Financial Officer of
each of Iovance Biotherapeutics (formerly Lion Biotechnologies),
from October 2016 through June 2017, Stem Cells, Inc., from January
2014 through September 2016, and Dendreon Corporation, from
December 2006 through December 2013. He currently serves on the
boards of directors of several private companies. Mr. Schiffman
holds a B.S. in Accounting from DePaul University and an MM (MBA)
from Northwestern University Kellogg Graduate School of
Management.
Mr. Schiffman’s qualifications to sit on the Board of
Directors include his financial background, business experience and
education.
Zvi Joseph
Mr. Joseph has served as a member of the Board of Directors since
the closing of the WPCS Merger. He has served as Deputy General
Counsel of Amdocs Limited, a publicly traded corporation that
provides software and services to communications and media
companies, since October 2005. He received his A.A.S. in Business
Administration from Rockland Community College, his B.A. in
Literature from New York University and his J.D. from Fordham
University School of Law. He also holds a Certificate in Business
Excellence from Columbia University School of
Business.
Mr. Joseph’s qualifications to sit on the Board of Directors
include his legal experience and education.
Solomon Mayer
Mr. Mayer has served as a member of the Board of Directors since
the closing of the WPCS Merger and, prior to that time, served as a
member of the Board of Directors of Private DropCar. He has served
as President and Chief Executive Officer of Mooney Aviation
Company, a private company that manufactures four-place,
single-engine and piston-powered aircraft, since 1999. Prior to
that time, he held the position of Chief Executive Officer of, and
consultant to, Overseas Trading, a department store wholesaler. Mr.
Mayer serves as a director of Laniado Hospital, a voluntary,
not-for-profit hospital in Kiryat Sanz, Netanya, Israel, as well as
a director of several private companies. He previously served as a
consultant to and director of each of Innovative Food Holdings, a
provider of sourcing, preparation and delivery of specialty/fresh
food for both professional chefs and consumers, and BlastGard
International Inc., which manufactures and markets proprietary
blast mitigation materials, in each case, from 2002 until
2016.
Mr. Mayer’s qualifications to sit on the Board of Directors
include his and extensive management experience as an executive and
director of a variety of companies.
Joshua Silverman
Mr. Silverman has served as a member of the Board of Directors
since the closing of the WPCS Merger, and prior to that time,
served as a director of WPCS since August 2016. Mr. Silverman has
served as the Chairman of our Board of Directors since May 2018.
Mr. Silverman currently serves as the Managing Member of Parkfield
Funding LLC. Mr. Silverman was the co-founder, and a Principal and
Managing Partner of Iroquois Capital Management, LLC, an investment
advisory firm. Since its inception in 2003 until July 2016, Mr.
Silverman served as Co-Chief Investment Officer of Iroquois. While
at Iroquois, he designed and executed complex transactions,
structuring and negotiating investments in both public and private
companies and has often been called upon by the companies solve
inefficiencies as they relate to corporate structure, cash flow,
and management. From 2000 to 2003, Mr. Silverman served as Co-Chief
Investment Officer of Vertical Ventures, LLC, a merchant bank.
Prior to forming Iroquois, Mr. Silverman was a Director of Joele
Frank, a boutique consulting firm specializing in mergers and
acquisitions. Previously, Mr. Silverman served as Assistant Press
Secretary to The President of the United States. Mr. Silverman
currently serves as a director of WPCS, Protagenic Therapeutics,
Neurotrope, Inc., and TapImmune Inc., all of which are public
companies. He previously served as a Director of National Holdings
Corporation from July 2014 through August 2016, MGT Capital
Investments, Inc. from December 2014 to May 2016, and Alanco
Technologies Inc. from March 2016 through August 2016. Mr.
Silverman received his B.A. from Lehigh University in
1992.
Mr. Silverman’s qualifications to sit on the Board of
Directors include his experience as an investment banker,
management consultant and as a director of numerous public
companies.
Officers
Mark Corrao
Mr. Corrao has served as our Chief Financial Officer since
February 28, 2019. He has served as Chief Financial Officer of
KannaLife Sciences, Inc. since 2012. Prior to that time, Mr. Corrao
served as Chief Financial Officer of each of Business Efficiency
Experts, Inc., from 2010 through 2012, StrikeForce Technologies,
Inc., from 2001 through 2010, and Advanced Communication Sciences,
Inc. from 1997 through 2000. Mr. Corrao also has experience in
accounting, having previously served as a partner at Frank T.
LaFauci, CPAs, as controller at Design Production Management, Inc.,
as assistant controller at Greenfield Arbitrage Partners, as
internal auditor at Spear, Leeds & Kellogg and as an accountant
at A.L. Wellen & Co., CPAs. He holds a B.S. in Public
Accounting from the City University of New York – Brooklyn
College.
Director Independence
Our Board of Directors has reviewed the materiality of any
relationship that each of our directors has with DropCar,
Inc. either directly or indirectly. Based upon this
review, our Board of Directors has determined that the following
members of the Board of Directors are “independent
directors” as defined by The Nasdaq Stock Market: Zvi Joseph,
Solomon Mayer, Joshua Silverman and Greg
Schiffman.
Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 2019, the Board held 21
meetings and approved certain actions by unanimous written consent.
We expect our directors to attend all board and committee meetings
and to spend the time needed and meet as frequently as necessary to
properly discharge their responsibilities. Each director attended,
either in person or telephonically, at least 75% of the aggregate
Board meetings and meetings of committees on which he served during
his tenure as a director or committee member, except Brian
Harrington who resigned on February 6, 2019.
Audit Committee
During the fiscal year ended December 31, 2019, the Audit Committee
held 4 meetings. The Audit Committee of the Board (the “Audit
Committee”) consists of Greg Schiffman, Zvi Joseph and
Solomon Mayer, with Mr. Schiffman appointed as Chairman of the
Committee. The Board has determined that all of the members are
“independent” as that term is defined under applicable
SEC rules and under the current listing standards of The Nasdaq
Stock Market and that Mr. Schiffman qualifies as an “audit
committee financial expert” pursuant to Item 407(d)(5) of
Regulation S-K.
The Audit Committee is responsible for overseeing the
Company’s corporate accounting, financial reporting
practices, audits of financial statements, and the quality and
integrity of the Company’s financial statements and reports.
In addition, the Audit Committee oversees the qualifications,
independence and performance of the Company’s independent
auditors. In furtherance of these responsibilities, the Audit
Committee’s duties include the following: evaluating the
performance and assessing the qualifications of the independent
auditors; determining and approving the engagement of the
independent auditors to perform audit, reviewing and attesting to
services and performing any proposed permissible non-audit
services; evaluating employment by the Company of individuals
formerly employed by the independent auditors and engaged on the
Company’s account and any conflicts or disagreements between
the independent auditors and management regarding financial
reporting, accounting practices or policies; discussing with
management and the independent auditors the results of the annual
audit; reviewing the financial statements proposed to be included
in the Company’s annual or transition report on Form 10-K;
discussing with management and the independent auditors the results
of the auditors’ review of the Company’s quarterly
financial statements; conferring with management and the
independent auditors regarding the scope, adequacy and
effectiveness of internal auditing and financial reporting controls
and procedures; and establishing procedures for the receipt,
retention and treatment of complaints regarding accounting,
internal accounting control and auditing matters and the
confidential and anonymous submission by employees of concerns
regarding questionable accounting or auditing matters. The Audit
Committee is governed by a written charter approved by the Board,
which complies with the applicable provisions of the Sarbanes-Oxley
Act and related rules of the SEC and the Nasdaq Stock
Market.
Compensation Committee
During the fiscal year ended December 31, 2019, the Compensation
Committee of the Board (the “Executive Committee”) held
7 meetings. The Compensation Committee consists of Zvi Joseph and
Solomon Mayer with Mr. Joseph appointed as Chairman of the
Committee. The Board has determined that all of the members are
“independent” as that term is defined under applicable
SEC rules and under the current listing standards of The Nasdaq
Stock Market. The Board has adopted a written charter setting forth
the authority and responsibilities of the Compensation
Committee.
The Compensation Committee has responsibility for assisting the
Board in, among other things, evaluating and making recommendations
regarding the compensation of our executive officers and directors,
assuring that the executive officers are compensated effectively in
a manner consistent with our stated compensation strategy,
producing an annual report on executive compensation in accordance
with the rules and regulations promulgated by the SEC, periodically
evaluating the terms and administration of our incentive plans and
benefit programs and monitoring of compliance with the legal
prohibition on loans to our directors and executive officers. The
Compensation Committee is governed by a written charter approved by
the Board.
Nominating Committee
During the fiscal year ended December 31, 2019, the Nominating
Committee of the Board (“Nominating Committee”) held 2
meetings. The Nominating Committee consists of Zvi Joseph and
Solomon Mayer with Mr. Mayer appointed as Chairman of the
Committee. The Board has determined that all of the members are
“independent” as that term is defined under applicable
SEC rules and under the current listing standards of The Nasdaq
Stock Market.
The Nominating Committee is responsible for assisting the Board in
identifying individuals qualified to become members of the Board
and executive officers of the Company; selecting, or recommending
that the Board select, director nominees for election as directors
by the stockholders of the Company; developing and recommending to
the Board a set of effective governance policies and procedures
applicable to the company; leading the Board in its annual review
of the Board’s performance; recommending to the Board
director nominees for each committee; making recommendations
regarding committee purpose, structure and operations; and
overseeing and approving a managing continuity planning process.
During the fiscal year ended December 31, 2019, there were no
changes to the procedures by which holders of our common stock may
recommend nominees to the Board. The Nominating Committee is
governed by a written charter approved by the Board.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s
officers and directors, and persons who own more than ten percent
of a registered class of the Company’s equity securities, to
file reports of securities ownership and changes in such ownership
with the SEC.
Officers, directors and greater than ten percent stockholders also
are required by SEC rules to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to
the Company, the Company believes that all Section 16(a) filing
requirements applicable to the Company’s directors and
officers were timely met during the fiscal year ended December 31,
2019, except that one Form 4 for each of the following directors
was not timely filed, in each case with respect to a single
transaction: Gregory Schiffman, Sebastian Giordano, Zvi Joseph,
Solomon Mayer and Joshua Silverman, and one additional Form 4 with
respect to four transactions was not timely filed for Joshua
Silverman.
Code of Ethics
The Company adopted a Code of Ethics that applies to all employees,
including the Company’s principal executive officer,
principal financial officer, and principal accounting officer, as
well as to the Board. A copy of the Code of Ethics is posted on the
Company’s website, www.dropcar.com.
Item
11.
EXECUTIVE
COMPENSATION
Summary Compensation Table
The following table sets forth all compensation earned, in all
capacities, during the fiscal years ended December 31, 2019 and
2018 by the Company’s (i) Chief Executive Officer and (ii)
most highly compensated executive officer other than the Chief
Executive Officer who was serving as an executive officer at the
end of the 2019 fiscal year and whose salary as determined by
Regulation S-K, Item 402, exceeded $100,000 (the individuals
falling within categories (i) and (ii) are collectively referred to
as the “named executive officers”).
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)
|
Option
Awards ($) (1)
|
All
Other Compensation ($)
|
Total
($)
|
|
Spencer
Richardson
Chief
Executive Officer (2)
|
2019
|
299,010
|
75,000
|
-
|
106,722
|
3,600
|
484,332
|
|
2018
|
273,471
|
387,500
|
1,621,983
|
100,000
|
26,957
|
2,409,911
|
|
David
Newman
Chief
Business Development Officer (3)
|
2019
|
299,010
|
75,000
|
-
|
106,722
|
3,600
|
484,332
|
|
2018
|
273,471
|
395,972
|
1,621,983
|
100,000
|
27,233
|
2,418,659
|
|
Paul
Commons
Chief
Financial Officer
(4)
|
2019
|
45,692
|
5,000
|
-
|
-
|
180,000
|
230,692
|
|
2018
|
208,152
|
15,000
|
-
|
234,139
|
-
|
457,291
|
(1)
The
dollar amounts in this column represent the aggregate grant date
fair value computed in accordance with FASB ASC Topic 718. The
assumptions underlying the determination of fair value of the
awards are set forth in Note 9 the financial statements included in
the Original Filing.
(2)
Mr.
Richardson served as Chief Executive Officer of Private DropCar
until taking over as Chief Executive Officer of the Company upon
the WPCS Merger.
(3)
Mr.
Newman served as Chief Business Development Officer of Private
DropCar until taking over as Chief Business Development Officer of
the Company upon the WPCS Merger.
(4)
Mr.
Commons served as Chief Financial Officer of the Company upon the
WPCS Merger. His employment terminated effective February 28,
2019.
Employment Contracts and Termination of Employment and
Change-In-Control Arrangements
Employment Agreement with Spencer Richardson
In connection with the WPCS Merger, the Company entered into an
employment agreement with Mr. Richardson pursuant to which he
serves as the Company’s Chief Executive Officer. The
employment agreement provides for an initial term of three (3)
years with automatic one (1) year renewals. The employment
agreement provides for the following cash-based compensation: (a)
an annual base salary equal to $275,000, subject to a 10% increase
per year; (b) a bonus payment of $250,000 in connection with
the closing of the WPCS Merger; (c) quarterly bonuses of at least
$12,500; (d) milestone bonus payments based on the Company’s
achievement of certain specified milestones; and (e) allowances for
automobile, medical and dental.
Mr. Richardson is also entitled to annual option grants equivalent
to 1% of the outstanding shares of the Company. Subject to
continued employment through each vesting date, these annual grants
will vest and become exercisable with respect to 1/8th of the
shares on each 90th day following the date of grant; provided that
all options will vest on a change of control of the Company. In
addition to annual option grants, Mr. Richardson is eligible to
receive additional option grants based on the Company’s
achievement of certain specified milestones.
In the event that Mr. Richardson’s employment with the
Company is terminated (a) by the Company without
“cause” (including as a result of death or disability)
following the end of the initial term, (b) by Mr. Richardson for
“good reason”, or (c) due to non-renewal of the initial
term by the Company, then the Company shall pay or provide (x) 24
months’ of salary continuation, (y) $100,000 (such amount
representing the guaranteed quarterly bonus for 24 months), and (z)
to the extent unvested, full acceleration of the vesting of any
outstanding options.
In addition, Mr. Richardson has entered into a non-solicitation and
non-competition agreement that applies during the term of
employment and for 12 months thereafter.
Employment Agreement with David Newman
In connection with the WPCS Merger, the Company entered into an
employment agreement with Mr. Newman pursuant to which he serves as
the Company’s Chief Business Development Officer. The
employment agreement provides for an initial term of three (3)
years with automatic one (1) year renewals. The employment
agreement provides for the following cash-based compensation: (a)
an annual base salary equal to $275,000, subject to a 10% increase
per year; (b) a bonus payment of $250,000 in connection with
the closing of the WPCS Merger; (c) quarterly bonuses of at least
$12,500; (d) milestone bonus payments based on the Company’s
achievement of certain specified milestones; and (e) allowances for
automobile, medical and dental.
Mr. Newman is also entitled to annual option grants equivalent to
1% of the outstanding shares of the Company. Subject to continued
employment through each vesting date, these annual grants will vest
and become exercisable with respect to 1/8th of the shares on each
90th day following the date of grant; provided that all options
will vest on a change of control of the Company. In addition to
annual option grants, Mr. Newman is eligible to receive additional
option grants based on the Company’s achievement of certain
specified milestones.
In the event that Mr. Newman’s employment with the Company is
terminated (a) by the Company without “cause”
(including as a result of death or disability) following the end of
the initial term, (b) by Mr. Newman for “good reason”,
or (c) due to non-renewal of the initial term by the Company, then
the Company shall pay or provide (x) 24 months’ of salary
continuation, (y) $100,000 (such amount representing the guaranteed
quarterly bonus for 24 months), and (z) to the extent unvested,
full acceleration of the vesting of any outstanding
options.
In addition, Newman has entered into a non-solicitation and
non-competition agreement that applies during the term of
employment and for 12 months thereafter.
Employment Agreement with Paul Commons
On January 22, 2018, the Company entered into an employment
agreement with Mr. Commons pursuant to which Mr. Commons agreed to
serve as the Company’s Chief Financial Officer. The
employment agreement provided for an initial term of three (3)
years with automatic one (1) year renewals. The employment
agreement for Mr. Commons provided for an annual base salary equal
to $220,000 and quarterly bonuses equal to $5,000. Mr. Commons was
also entitled to annual option grants equivalent to 1% of the
outstanding shares of the Company. Subject to continued employment
through each vesting date, these annual grants would vest and
become exercisable with respect to 1/3 of the shares on the first
anniversary of the effective date of the employment agreement, with
the remaining 2/3 vesting in equal installments on a quarterly
basis beginning on the last day of the next calendar quarter after
the date on which the initial 1/3 of the shares
vested.
In the event that Mr. Commons’s employment with the Company
was terminated (a) by the Company without “cause” or
(b) by Mr. Commons for “good reason” at any time during
the 90 days following the effective date of the employment
agreement, then for the nine month period following the termination
date, the Company agreed to continue to pay to Mr. Commons (i)
one-twelfth of his annual base salary each month and (ii) his
quarterly bonus payments.
In addition, Mr. Commons entered into a non-solicitation and
non-competition agreement that applies during the term of
employment and for 12 months thereafter.
Mr. Commons’s employment as the Company’s Chief
Financial Officer terminated on February 28, 2019. Upon such
termination, Mr. Commons was entitled to receive $180,000 in
severance payments, which is equal to nine months of his salary and
three quarterly bonus payments equal to $5,000 each.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table includes certain information with respect to
all unexercised stock options and unvested shares of common stock
outstanding owned by the named executive officers as of December
31, 2019.
|
Name
|
Number of Securities underlying Unexercised Options (#)
Exercisable
|
Number of Securities underlying Unexercised Options (#)
Unexercisable
|
Option Exercise Price ($/Share)
|
Option Expiration Date
|
Number of Shares or Units of Stock that have not vested
(#)
|
Market Value of Shares or units of Stock that have not vested
($)
|
|
Spencer Richardson
|
66,342
|
-
|
1.62
|
12/23/2028
|
-
|
-
|
|
18,576
|
30,960
|
2.32
|
01/30/2029
|
-
|
-
|
|
David Newman
|
66,342
|
-
|
1.62
|
12/23/2028
|
-
|
-
|
|
18,576
|
30,960
|
2.32
|
1/30/2029
|
-
|
-
|
|
Paul Commons
|
-
|
-
|
-
|
-
|
-
|
-
|
Director Compensation
The following table sets forth summary information concerning the
total compensation earned by the non-employee directors during the
year ended December 31, 2019 for services to the
Company.
|
Name
|
Fees Earned or Paid in Cash ($)
|
Stock Awards ($) (1)
|
All other compensation
|
Total ($)
|
|
Brian Harrington (2)
|
3,036
|
-
|
-
|
3,036
|
|
Greg Schiffman
|
50,741
|
25,000
|
|
75,741
|
|
Joshua Silverman
|
147,391
|
-
|
-
|
147,391
|
|
Sebastian Giordano (3)
|
76,261
|
-
|
33,774
|
100,035
|
|
Solomon Mayer
|
75,741
|
-
|
-
|
75,741
|
|
Zvi Joseph
|
75,741
|
-
|
-
|
75,741
|
(1) The dollar amounts in this column represent the aggregate grant
date fair value computed in accordance with FASB ASC Topic 718. The
assumptions underlying the determination of fair value of the
awards are set forth in Note 3 of the financial statements included
in the Original Filing.
(2) Mr. Harrington served as director until February 6,
2019.
(3) Mr. Giordano earned $147,754 through the consulting agreement
between the Company and Ascentaur, LLC. $90,000 of these earnings
was tied to the successful sale of WPCS Suisun City International
Inc. in December 2018. Mr. Giordano earned $33,333 through the
consulting agreement between the Company and Ascentaur, LLC in 2019
and received an additional $441 for reimbursed expenses.
From January 31, 2018 through May 14, 2018, the Board earned cash
compensation at the rate of $2,000 per month. Effective on May 15,
2018, the Company’s directors’ received annual
compensation of $30,000 and the Chairperson receives annual
compensation of $120,000 per year for their service on the Board,
with the exception that Mr. Giordano’s compensation was
addressed through the consulting arrangement between Ascentaur LLC
and the Company through March 10, 2019. Additionally, in May of
2018, option grants were awarded based upon the value of $30,000
for the Chairperson and $20,000 for the other non-employee
directors.
On July 30, 2019, the Board approved of certain modifications to
director compensation. As consideration for services to the Board,
the Chairman of the Board receives (i) an annual cash retainer
equal to $90,000 and, as compensation for the period from February
1, 2019 through January 31, 2020, a grant of shares of restricted
stock in an amount equal to $60,000 and (ii) each non-Chairman
member of the Board receives an annual cash retainer equal to
$30,000 and, as compensation for the period from February 1, 2019
through January 31, 2020, a grant of shares of restricted stock in
an amount equal to $50,000, each to be paid as determined by the
Compensation Committee.
Due to the limited number of shares available for grant pursuant to
the DropCar, Inc. Amended and Restated 2014 Equity Incentive Plan,
the restricted stock grants referred to in the foregoing paragraph
could not be granted in full in fiscal 2019. Mr. Schiffman received
a grant of 31,646 shares of restricted stock, which represented
half of the shares of common stock Mr. Schiffman was entitled to
receive. The shares vested on the date of grant. None of the other
non-employee directors received a grant of restricted
stock.
In January 2020, the Board entered into letter agreements with each
non-executive member of the Board to address the restricted stock
grants. In lieu of such grants, the Company and each non-employee
director agreed that upon (i) a merger or consolidation with
another entity where the Company retains more than 50% of the
outstanding voting securities of the Company or (ii) the
consummation of a change of control prior to November 14, 2020,
each non-employee director will receive a transaction payment,
payable in cash, shares of the Company’s common stock or
shares of a successor company’s common stock, at the
discretion of the Company (each, a “Transaction
Payment”). Mr. Silverman will receive a Transaction Payment
equal to $60,000, Mr. Schiffman will receive a Transaction Payment
equal to $25,000 (which reflects that the other half of his $50,000
compensation has already been paid in the form of a restricted
stock grant) and all other non-employee directors will receive a
Transaction Payment equal to $50,000. The Company anticipates that
the AYRO Merger will constitute a change of control and will
trigger the obligation to pay the Transaction Payments. The form of
change of control letter agreement is attached as Exhibit 10.21 to
the Original Filing.
Item
12.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The following table shows certain information as of April 1, 2020,
with respect to the beneficial ownership of common stock by: (i)
each person the Company believes beneficially holds more than 5% of
the outstanding shares of common stock based on the Company’s
review of filings with the SEC; (ii) each director; (iii) each
named executive officer; and (iv) all current directors and
executive officers as a group. Unless otherwise noted below, the
address of each beneficial owner listed in the table is c/o
DropCar, Inc., 1412 Broadway, Suite 2105, New York, New York 10018.
All beneficial ownership information reflects the Company’s
1-for-6 reverse stock split that was effected on March 8,
2019.
We have determined beneficial ownership in accordance with the
rules of the SEC. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the persons
and entities named in the table below have sole voting and
investment power with respect to all shares of common stock that
they beneficially own, subject to applicable community property
laws.
Applicable percentage ownership is based on 4,551,882 shares
of common stock outstanding at April 1, 2020. In computing the
number of shares of common stock beneficially owned by a person and
the percentage ownership of that person, we deemed outstanding
shares of common stock underlying preferred stock, stock options,
restricted stock units and warrants held by that person that are
currently exercisable or convertible or will be exercisable or
convertible within sixty days of April 1, 2020. We did not deem
these shares outstanding, however, for the purpose of computing the
percentage ownership of any other person.
|
Name
and Address of Beneficial Owner
|
|
|
|
Named
Executive Officers and Director
|
|
|
|
Spencer
Richardson(1)
|
278,731
|
6.00%
|
|
Mark
Corrao
|
—
|
*
|
|
David
Newman(2)
|
282,262
|
6.07%
|
|
Sebastian
Giordano(3)
|
50,428
|
1.10%
|
|
Zvi
Joseph(4)
|
2,033
|
*
|
|
Solomon
Mayer(5)
|
2,033
|
*
|
|
Joshua
Silverman(6)
|
14,761
|
*
|
|
Greg
Schiffman(7)
|
21,202
|
*
|
|
Paul
Commons
|
-
|
*
|
|
All Current
Executive Officers and Directors as a Group(8)
|
651,448
|
13.54%
|
|
Greater
than 5% Shareholders
|
|
|
|
Alpha Capital
Anstalt(9)
|
4,528,864
|
9.99%
|
|
Iroquois Capital
Management LLC(10)
|
2,394,932
|
9.99%
|
|
Brio Capital Master
Fund Ltd.(11)
|
344,743
|
7.06%
|
|
Palladium Capital
Advisors, LLC(12)
|
282,738
|
5.86%
|
1.
Mr.
Richardson’s total includes 181,429 shares of common stock
and options to purchase 97,302 shares of common stock that are
exercisable within 60 days of April 1, 2020.
2.
Mr.
Newman’s total includes 184,960 shares of common stock and
options to purchase 97,302 shares of common stock that are
exercisable within 60 days of April 1, 2020.
3.
Mr.
Giordano’s total includes options to purchase 50,428 shares
of common stock that are exercisable within 60 days of April 1,
2020.
4.
Mr.
Joseph’s total includes options to purchase 2,033 shares of
common stock that are exercisable within 60 days of April 1,
2020.
5.
Mr.
Mayer’s total includes options to purchase 2,033 shares of
common stock that are exercisable within 60 days of April 1,
2020.
6.
Mr.
Silverman’s total includes 5,852 shares of common stock,
options to purchase 5,130 shares of common stock that are
exercisable within 60 days of April 1, 2020 and warrants to
purchase 3,779 shares of common stock that are exercisable within
60 days of April 1, 2020.
7.
Mr.
Schiffman’s total includes 19,169 shares of common stock and
options to purchase 2,033 shares of common stock that are
exercisable within 60 days of April 1, 2020
8.
Includes
all equity beneficially owned by current executive officers and
directors (8 individuals).
9.
Based on a Schedule 13G filed on May 24, 2018 and
on information provided to the Company from the beneficial owner.
The principal business address of the beneficial owner is
Lettstrasse 32, FL-9490 Vaduz, Furstentums, Liechtenstein. Konrad
Ackerman is the Director of Alpha Capital Anstalt. Beneficial
ownership includes 68,944 shares of common stock, Series H-3
Preferred Stock convertible into 5,142 shares of common stock,
Series H-4 Preferred Stock convertible
into 235,631 shares of common stock, Series H-6 Preferred Stock
convertible into 1,933,300 shares of common stock, Series H-4
warrants to purchase 46,997 shares of common stock, Series I
warrants to purchase 17,663 shares of common stock, Series J
warrants to purchase 137,887 shares of common stock and Series H-5
warrants to purchase 2,083,300 shares of common
stock.
The
shares included in the table report the number of shares that would
be issuable without giving effect to the 9.99% beneficial ownership
blocker included in the preferred stock and warrants. The
percentage included in the table gives effect to the 9.99%
beneficial ownership blocker included in the preferred stock and
warrants.
10.
Based
on a Schedule 13G/A filed on February 14, 2020, which reported
ownership as of December 31, 2019, and on information provided to
the Company from the beneficial owner. The principal business
address of the beneficial owner is 205 East 42nd Street, 20th
Floor, New York, New York 10017. Iroquois Master Fund
(“IMF”) is a private investment fund. Iroquois Capital
Management LLC (“Iroquois Capital”) is an investment
adviser that provides investment advisory services to IMF. Iroquois
Capital Investment Group LLC (“ICIG”) is a private
investment fund. Richard Abbe shares authority and responsibility
for the investments made on behalf of IMF with Kimberly Page, each
of whom is a director of IMF. Mr. Abbe is the President of
Iroquois Capital and has sole authority and responsibility for
investments made on behalf of ICIG. Mr. Abbe is also managing
member of Kensington Investment Partners LLC.
Beneficial
ownership for IMF includes 37,559 shares of common stock, preferred
stock convertible into an aggregate of 513,300 shares of common
stock and warrants to purchase 810,364 shares of common stock.
Beneficial ownership for ICIG includes preferred stock convertible
into 25,022 shares of common stock, preferred stock convertible
into an aggregate of 411,700 shares of common stock and warrants to
purchase 596,987 shares of common stock.
The
shares included in the table report the number of shares that would
be issuable without giving effect to the 9.99% beneficial ownership
blocker included in the preferred stock and warrants. The
percentage included in the table gives effect to the 9.99%
beneficial ownership blocker included in the preferred stock and
warrants.
11.
Based on a Schedule
13G/A filed on February 4, 2020 and on information provided to the
Company from the beneficial owner. The principal business address
of Brio Capital Master Fund Ltd. is 100 Merrick Road, Suite 401 W.
Rockville Centre, New York, 11570. Shaye Hirsch is the Director of
Brio Capital Master Fund Ltd. Beneficial ownership includes 12,900
shares of common stock, Series H-3 Preferred Stock convertible into
3,980 shares of common stock, Series H-4 Preferred Stock
convertible into 23,746 shares of
common stock, Series H-5 Preferred Stock convertible into 123,899
shares of common stock and warrants to purchase 180,218 shares of
common stock.
12.
Based on
information provided to the Company from the beneficial owner.
Joel Padowitz, CEO, is the natural
person with voting and dispositive power over the shares held by
Palladium Capital Advisors, LLC. Beneficial ownership includes
10,000 shares of common stock, Series H-3 warrants to purchase
2,047 shares of common stock, Series H-4 warrants to purchase
22,850 shares of common stock, Series I warrants to purchase 4,787
shares of common stock and Series H-5 warrants to purchase 243,054
shares of common stock.
Securities Authorized for Issuance Under Equity Compensation
Plans
The following table sets forth information about the
Company’s Amended and Restated 2014 Equity Incentive Plan (as
amended, the “2014 Plan”):
|
Plan
Category
|
(a) Number
of securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
Number
of securities available for future issuance under equity
compensation plans excluding securities reflected in column
(a)
|
|
Equity compensation
plan approved by security holders
|
380,396
|
$14.43
|
49,944
|
|
Total
|
380,396
|
$14.43
|
49,944
|
Item
13.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Our Board of Directors must approve in advance of all future
transactions between us and any director, executive officer, holder
of 5% or more of any class of our capital stock or any member of
the immediate family of, or entities affiliated with, any of them,
or any other related persons, as defined in Item 404 of Regulation
S-K, or their affiliates, in which the amount involved is equal to
or greater than $120,000. Any request for such a transaction must
first be presented to our Board of Directors for review,
consideration and approval. In approving or rejecting any such
proposal, our Board of Directors is to consider all available
information deemed relevant by the Board of Directors, including,
but not limited to, the extent of the related person’s
interest in the transaction, and whether the transaction is on
terms no less favorable to us than terms we could have generally
obtained from an unaffiliated third party under the same or similar
circumstances.
Indemnification Agreements
We have entered into indemnification agreements with each of our
directors and executive officers. These agreements, among other
things, require us to indemnify each director and executive officer
to the fullest extent permitted by Delaware law, including
indemnification of expenses such as attorneys’ fees,
judgments, penalties fines and settlement amounts incurred by the
director or executive officer in any action or proceeding,
including any action or proceeding by or in right of the Company,
arising out of the person’s services as a director or
executive officer.
Ascentaur LLC Agreement
On July 11, 2018, we entered into a consulting agreement (the
“Consulting Agreement”) with Ascentaur, LLC
(“Ascentaur”). Sebastian Giordano is the Chief
Executive Officer of Ascentaur, LLC. Pursuant to the terms of the
Consulting Agreement, Ascentaur has agreed to provide advisory
services with respect to the strategic development and growth of
the Company, including advising the Company on market strategy and
overall Company strategy, advising the Company on the sale of the
Company’s WPCS International business segment, providing
assistance to the Company in identifying and recruiting prospective
employees, customers, business partners, investors and advisors
that offer desirable administrative, financing, investment,
technical, marketing and/or strategic expertise, and performing
such other services pertaining to the Company’s business as
the Company and Ascentaur may from time to time mutually agree. As
consideration for its services under the Consulting Agreement,
Ascentaur shall be entitled to receive (i) a fee of $10,000 per
month for a period of nine months from the effective date of the
Consulting Agreement, (ii) a lump sum fee of $90,000 upon the
closing of the sale of the Company’s WPCS International
business segment and (iii) reimbursement for reasonable and
customary business expenses incurred in connection with
Ascentaur’s performance under the Consulting
Agreement.
AYRO Merger and Asset Sale
On December 19, 2019, we entered into an Agreement and Plan of
Merger and Reorganization with ABC Merger Sub, Inc., a
Delaware corporation and a wholly owned subsidiary of ours
(“Merger Sub”), and AYRO, Inc., a Delaware
corporation (“AYRO”) (the “AYRO Merger
Agreement”), pursuant to which, among other matters, and
subject to the satisfaction or waiver of the conditions set forth
in the AYRO Merger Agreement, Merger Sub will merge with and into
AYRO, with AYRO continuing as our wholly owned subsidiary and the
surviving corporation of the merger (the “AYRO
Merger”). We will issue shares of our common stock to
the AYRO equity holders in connection with the AYRO Merger as
merger consideration.
Also on December 19, 2019, we entered into an asset purchase
agreement (the “Asset Purchase Agreement”) by and among
us, DropCar Operating Company, Inc., a Delaware corporation and
wholly owned subsidiary of DropCar (“DropCar
Operating”), DC Partners Acquisition, LLC (“DC
Partners”), 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 to an entity controlled by Messrs. Richardson
and Newman, our current Chief Executive Officer and Chief Business
Development Officer, respectively (the “Asset Sale
Transaction”). 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 Messrs. Richardson and 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 Asset Purchase Agreement.
Following the AYRO Merger and the Asset Sale Transaction, it is
anticipated that the combined company will focus its resources on
executing AYRO’s current business plan.