UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. 2)
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DropCar, Inc.
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DROPCAR, INC.
1412 Broadway, Suite 2105
New York, New York 10018
Annual Meeting of Stockholders
Thursday, November 15, 2018
Amendment No. 2 to
Proxy Statement
EXPLANATORY NOTE
This Amendment No. 2 to Schedule 14A (“Amendment
No. 2”) is being filed to amend DropCar, Inc.’s
(the “Company”) definitive proxy statement
for its 2018 Annual Meeting of Stockholders, as revised
(“Original Proxy Statement”), which was filed with the
Securities and Exchange Commission on October 9, 2018, as revised
on October 16, 2018, in order to amend and restate the section
entitled “Executive Officer and Director Compensation”
in its entirety as set forth below. All other items in the Original
Proxy Statement remain unchanged.
IF YOU HAVE ALREADY SUBMITTED YOUR PROXY, YOU DO NOT NEED TO TAKE
ANY ACTION UNLESS YOU WISH TO CHANGE YOUR VOTE.
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Summary Compensation Table
The following table shows the total compensation paid or accrued
during the last two fiscal years ended December 31, 2017 and
December 31, 2016 to our Chief Executive Officer, our former Chief
Executive Officer, our former Chief Financial Officer and our next
most highly compensated executive officers who earned more than
$100,000 during the fiscal year ended December 31, 2017.
The
information for 2017 for Spencer Richardson, our Chief Executive
Officer, and David Newman, our Chief Business Development Officer,
was for service to Private DropCar.
|
Name and
Principal Position
|
|
|
|
|
|
Non-Equity
Incentive Plan Compensation
($)
|
Change in
Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All Other
Compensation ($)
|
|
|
(a)
|
(b)
|
|
|
|
|
|
|
|
|
|
Spencer Richardson, Chief Executive
Officer(3)
|
2017
|
17,308
|
250,000
|
273,050
|
0
|
0
|
0
|
176,365
|
716,723
|
|
|
2016
|
0
|
0
|
0
|
0
|
50,000
|
0
|
142,750
|
192,750
|
|
Sebastian Giordano, former Chief
Executive Officer(4)
|
2017
|
180,000
|
0
|
0
|
104,000
|
0
|
0
|
0
|
284,000
|
|
|
2016
|
180,000
|
77,000
|
0
|
145,500
|
0
|
0
|
0
|
402,500
|
|
David Allen, former Chief Financial
Officer(5)
|
2017
|
140,000
|
0
|
0
|
78,000
|
0
|
0
|
0
|
218,000
|
|
|
2016
|
140,000
|
20,000
|
0
|
72,750
|
0
|
0
|
0
|
232,750
|
|
Robert Roller, President of Suisun
Operations
|
2017
|
170,000
|
100,000
|
0
|
78,000
|
0
|
0
|
0
|
348,000
|
|
|
2016
|
170,000
|
100,000
|
|
72,750
|
0
|
0
|
0
|
342,500
|
|
David Newman, Chief Business
Development Officer(6)
|
2017
|
17,308
|
250,000
|
273,050
|
0
|
0
|
0
|
156,615
|
696,973
|
|
|
2016
|
0
|
0
|
0
|
0
|
50,000
|
0
|
136,000
|
186,000
|
1.
These amounts represent the aggregate grant
date fair value for stock awards for calendar years 2017 and 2016,
respectively, computed in accordance with FASB ASC Topic
718. A discussion of the assumptions used in
determining grant date fair value may be found in Note 2 to our
Financial Statements, included in our Current Report on Form 8-K/A,
as filed with the Securities and Exchange Commission on April 2,
2018.
2.
These amounts represent the aggregate grant
date fair value for option awards for calendar years 2017 and 2016,
respectively, computed in accordance with FASB ASC Topic
718. A discussion of the assumptions used in
determining grant date fair value may be found in Note 2 to our
Financial Statements, included in our Current Report on Form 8-K/A,
as filed with the Securities and Exchange Commission on April 2,
2018.
3.
Mr.
Richardson was appointed our Chief Executive Officer on January 30,
2018. The amounts shown above reflect amounts paid to an entity
controlled by Mr. Richardson for services rendered to Private
DropCar. In 2016, Mr. Richardson’s entity received $142,750
and an additional $25,250 was accrued by Private DropCar as a
liability owed to Mr. Richardson’s entity. In 2017, Mr.
Richardson's entity received $50,000 of the $250,000 disclosed
under "Bonus" and $176,365 disclosed under "All Other
Compensation."
4.
Mr.
Giordano resigned as Chief Executive Officer on January 30,
2018.
5.
Mr.
Allen resigned as Chief Financial Officer on January 30,
2018.
6.
Mr.
Newman was appointed our Chief Business Development Officer on
January 30, 2018. The amounts shown above reflect amounts paid to
an entity controlled by Mr. Newman for services rendered to Private
DropCar. In 2016, Mr. Newman’s entity received $136,000 and
an additional $18,000 was accrued by Private DropCar as a liability
owed to Mr. Newman’s entity. In 2017, Mr. Newman's entity
received $17,308 disclosed under "Salary," $50,000 of the $250,000
disclosed under "Bonus" and $156,615 disclosed under "All Other
Compensation."
Narrative Disclosure to Summary Compensation Table
Base Salary
Prior to the signing of the Agreement and Plan of
Merger and Reorganization, dated as of September 6, 2017, as
subsequently amended, by and among the Company, DC Acquisition
Corporation (“Merger Sub”), and Private DropCar (as
amended, the “Merger Agreement”), pursuant to which
Merger Sub merged with and into Private DropCar, with Private
DropCar surviving as a wholly owned subsidiary of the Company (the
“Merger”), the
Board of Directors of Private DropCar approved of compensation paid
to its management team. Following the closing of the Merger, which
occurred on January 30, 2018, our Board became responsible for
approving such compensation.
Mr. Richardson’s salary was $0 in 2016, $17,308 in 2017 and
$275,000 in 2018. Mr. Newman’s salary was $0 in 2016, $17,308
in 2017 and $275,000 in 2018.
In connection with the signing of the Merger Agreement, we entered
into employment agreements with each of Mr. Richardson and Mr.
Newman, which provide for an annual base salary equal to $275,000
for each executive officer, subject to a 10% increase per year. The
employment agreements are described below under “Narrative
Disclosure to Summary Compensation Table – Employment
Agreements and Potential Payments upon Termination of Employment or
Change of Control.”
Bonuses
In 2017, the Board of Directors of Private DropCar approved a cash
bonus to Mr. Richardson of $250,000 and to Mr. Newman of
$250,000 based upon the successful signing of the
Agreement
and Plan of Merger and Reorganization.
In 2017, the Board of Directors of Private DropCar approved a
discretionary cash bonus to Mr. Richardson of $50,000 and to
Mr. Newman of $50,000 in recognition of each such executive
officer’s services in the year ended December 31, 2016
and in accordance with the terms of each executive officer’s
employment agreement. These bonus amounts, to the extent they were
in recognition of Mr. Richardson’s and Mr. Newman’s
performance during the indicated year, are reflected in the
“Non-Equity Incentive Plan Compensation” column of the
Summary Compensation Table above for the indicated
year.
In connection with the signing of the Merger Agreement, we entered
into employment agreements with each of Mr. Richardson and Mr.
Newman, which provide for a bonus payment to each executive officer
of $250,000 in connection with the closing of the Merger, quarterly
bonuses of at least $12,500 and milestone bonus payments based on
our achievement of certain specified milestones. The employment
agreements are described below under “Narrative Disclosure to
Summary Compensation Table – Employment Agreements and
Potential Payments upon Termination of Employment or Change of
Control.”
Stock Options
No options to purchase shares of common stock were awarded to Mr.
Richardson or Mr. Newman in 2016 or 2017.
Mr. Richardson and Mr. Newman
Effective January 30, 2018, we entered into employment agreements
with Mr. Richardson and Mr. Newman as described below, and standard
confidential information and/or inventions assignment agreements,
under which each of Mr. Richardson and Mr. Newman has agreed not to
disclose our confidential information.
In connection with the signing of the Merger
Agreement, we entered into
employment agreements with each of Mr. Richardson and Mr. Newman
pursuant to which Mr. Richardson serves as our Chief Executive
Officer and Mr. Newman serves as our Chief Business Development
Officer. Each of the employment agreements provides for an initial
term of three (3) years with automatic one (1) year
renewals.
Each of the employment agreements for Mr. Richardson and Mr. Newman
provide for the following cash-based compensation: (a) an annual
base salary equal to $275,000, subject to a 10% increase per year;
(b) bonus payment of $250,000 in connection with the closing
of the Merger; (c) quarterly bonuses of at least $12,500; (d)
milestone bonus payments based on our achievement of certain
specified milestones; and (e) allowances for automobile, medical
and dental.
Mr. Richardson and Mr. Newman are also each entitled to annual
option grants equivalent to 1% of the outstanding shares of the
Company (on a fully diluted basis). 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. In addition to annual
option grants, Mr. Richardson and Mr. Newman are each eligible to
receive additional option grants based on our achievement of
certain specified milestones.
In the event that Mr. Richardson’s or Mr. Newman’s
employment with us is terminated (a) by us without
“cause” (including as a result of death or disability)
following the end of the initial term, (b) by either Mr. Richardson
or Mr. Newman for “good reason”, or (c) due to
non-renewal of the initial term by us, then we 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, each of Mr. Richardson and Mr. Newman has entered into
a non-solicitation and non-competition agreement that applies
during the term of employment and for 12 months
thereafter.
Mr. Giordano and Mr. Allen
The compensation arrangement of Sebastian Giordano, our former
Chief Executive Officer, was set forth in a letter agreement, dated
July 29, 2013, as amended on February 3, 2015. Pursuant to that
agreement, Mr. Giordano was entitled to a base salary of $180,000
per year (effective as of January 1, 2015). We did not have an
employment agreement with Mr. Allen.
On September 29, 2015, we entered into change of control agreements
with Mr. Giordano and David Allen, our former Chief Financial
Officer. The agreements had initial terms of four years and
automatically extended for additional one-year periods thereafter,
unless either party notified the other of non-renewal no later than
30 days prior to such anniversary. Under the agreements, Messrs.
Giordano and Allen received payments of $350,000 and $150,000,
respectively upon a change in control of the Company.
On January 30, 2018, Mr. Giordano and Mr. Allen resigned as
officers of the Company. In connection with their respective
resignations, each of Mr. Giordano and Mr. Allen entered into a
separation agreement, effective as of January 30, 2018 (the
“Giordano Agreement” and the “Allen
Agreement,” respectively, and collectively, the
“Separation Agreements”), with the Company. Each of the
Giordano Agreement and Allen Agreement includes a customary release
by Mr. Giordano and Mr. Allen, respectively, of certain claims
against the Company that are held by Mr. Giordano and Mr. Allen,
respectively. Pursuant to
the Giordano Agreement, Mr. Giordano ceased serving as an employee
of the Company effective as of January 30, 2018 (the
“Separation Date”). Pursuant to the Giordano Agreement,
Mr. Giordano received a severance payment equal to $350,000.
Pursuant to the Allen Agreement, Mr. Allen ceased serving as
an employee of the Company effective as of the Separation Date.
Pursuant to the Allen Agreement, Mr. Allen received a
severance payment equal to $150,000.
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.
Mr. Roller
On October 21, 2015, our subsidiary, WPCS International - Suisun
City, Inc. (the “Suisun City Operations”), entered into
a change in control agreement with Robert Roller, the President of
the Suisun City Operations. The agreement had an initial term of
two years and automatically extends for additional one-year periods
at the expiration of the initial term and on each anniversary
thereafter unless either party notifies the other party of
non-renewal no later than 30 days prior to such anniversary. Upon a
change in control of the Company or the Suisun City Operations, the
agreement continues for a term of two years and then expires.
Pursuant to the terms of the agreement, Mr. Roller is entitled to a
severance payment of $150,000 and unpaid compensation and benefits
and unused vacation accrued through the date of termination, if he
is terminated without cause or if he is terminated for good reason
within two years following a change in control of the Company or
the Suisun City Operations.
Outstanding Equity Awards at 2017 Fiscal Year-End
The following table shows grants of stock options and grants of
unvested stock awards outstanding on the last day of the fiscal
year ended December 31, 2017, including both awards subject to
performance conditions and non-performance-based
awards, to each of the executive officers named in the
Summary Compensation Table.
|
Name
|
Number of
Securities underlying Unexercised Options (#)
Exercisable
|
Number of
Securities underlying Unexercised Options (#)
Unexercisable
|
Equity incentive
plan awards: Number of securities underlying unexercised unearned
options (#)
|
Option Exercise
Price ($/Sh)
|
|
Number of shares
or units of stock that have not vested (#)
|
Equity incentive
plan awards: Number of unearned shares, units or other rights that
have not vested (#)
|
Equity incentive
plan awards: Market or payout value of unearned shares, units or
other rights that have not vested ($)
|
Market value of
shares or units of stock that have not vested ($)
|
|
Spencer
Richardson
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Sebastian
Giordano
|
130
|
-
|
-
|
$60.06
|
|
-
|
-
|
-
|
-
|
|
|
11,364
|
-
|
|
$26.40
|
|
|
|
|
|
|
|
50,000
|
-
|
|
$1.19
|
|
|
|
|
|
|
|
650,000
|
-
|
|
$1.32
|
|
|
|
|
|
|
|
150,000
|
-
|
|
$1.26
|
|
|
|
|
|
|
|
100,000
|
-
|
|
$1.35
|
|
|
|
|
|
|
|
|
|
200,000(1)
|
$1.35
|
|
200,000
|
|
|
$210,000
|
|
David
Allen
|
20,000
|
-
|
|
$1.19
|
|
|
|
|
|
|
|
325,000
|
-
|
|
$1.32
|
|
|
|
|
|
|
|
75,000
|
-
|
|
$1.26
|
|
|
|
|
|
|
|
75,000
|
-
|
|
$1.35
|
|
|
|
|
|
|
|
|
|
100,000(1)
|
$1.35
|
|
100,000
|
|
|
$105,000
|
|
Robert
Roller
|
162
|
-
|
|
$13.20
|
|
|
|
|
|
|
|
2,273
|
-
|
|
$26.40
|
|
|
|
|
|
|
|
7,500
|
-
|
|
$1.19
|
|
|
|
|
|
|
|
100,000
|
-
|
|
$1.32
|
|
|
|
|
|
|
|
75,000
|
-
|
|
$1.26
|
|
|
|
|
|
|
|
75,000
|
-
|
|
$1.35
|
|
|
|
|
|
|
|
|
|
100,000(1)
|
$1.35
|
|
100,000
|
|
|
$105,000
|
|
David
Newman
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1.
Stock
options were granted under the Amended and Restated 2014 Equity
Incentive Plan and became fully vested upon the closing of the
Merger.
On February 28, 2018, we issued to each of Mr. Richardson and Mr.
Newman a grant of 733,929 restricted stock units, which vest in
full on January 30, 2019.
Pension Benefits
We do not have any qualified or non-qualified defined benefit
plans.
Nonqualified Deferred Compensation
We do not have any nonqualified defined contribution plans or other
deferred compensation plan.
Director Compensation
The following table shows the total compensation paid or accrued
during the fiscal year ended December 31, 2017 to each of our
non-employee directors. Directors who are employed by us are not
compensated for their service on our Board of
Directors.
|
Name
|
Fees Earned
or
Paid
in
Cash
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
|
|
(a)
|
|
|
|
|
|
|
|
|
Sebastian Giordano(3)
|
0
|
0
|
104,000
|
0
|
0
|
0
|
104,000
|
|
Joshua
Silverman
|
24,000
|
0
|
52,000
|
$0
|
0
|
0
|
76,000
|
|
Charles Benton(4)
|
30,000
|
0
|
52,000
|
$0
|
0
|
0
|
82,000
|
|
Norm Dumbroff(4)
|
24,000
|
0
|
52,000
|
$0
|
0
|
0
|
76,000
|
|
Edward Gildea(4)
|
24,000
|
0
|
52,000
|
$0
|
0
|
0
|
76,000
|
|
Jonathan Schechter(4)
|
18,000
|
0
|
0
|
$0
|
0
|
0
|
18,000
|
|
Brian Daly(4)
|
18,000
|
0
|
0
|
$0
|
0
|
0
|
18,000
|
1.
These amounts represent the aggregate grant
date fair value for stock awards for calendar year 2017 computed in
accordance with FASB ASC Topic 718. A discussion of the assumptions used in
determining grant date fair value may be found in Note 2 to our
Financial Statements, included in our Current Report on Form 8-K/A,
as filed with the Securities and Exchange Commission on April 2,
2018.
2.
These amounts represent the aggregate grant
date fair value for option awards for calendar year 2017 computed
in accordance with FASB ASC Topic 718. A discussion of the assumptions used in
determining grant date fair value may be found in Note 2 to our
Financial Statements, included in our Current Report on Form 8-K/A,
as filed with the Securities and Exchange Commission on April 2,
2018.
3.
Reflects
104,000 in option awards paid to Mr. Giordano in connection with
his previous employment as our Chief Executive Officer in 2017.
Following the Merger, Mr. Giordano has served as a non-employee
director. Since June 2018, Mr. Giordano has served as a consultant
to the Company. See “—Narrative Disclosure to Summary
Compensation Table — Employment Agreements” above for
additional information.
4.
Resigned
effective January 30, 2018.
On May
14, 2018, the Board of Directors approved of the following
compensation to non-employee directors:
●
The
Chairman of the Board of Directors is entitled to receive a monthly
cash payment of $10,000 as consideration for his services, in
addition to an annual grant of options to purchase shares of the
Company’s common stock valued at $30,000 on the date of grant
calculated using the Black-Scholes valuation method;
and
●
Each of
the Company’s other non-employee directors is entitled to
receive an annual cash payment of $30,000, paid quarterly in
arrears, in addition to an annual grant of options to purchase
shares of the Company’s common stock valued at $20,000 on the
date of grant calculated using the Black-Scholes valuation
method.
Important Notice Regarding the Availability of Proxy Materials for
the
Annual Meeting of Stockholders to be held on November 15,
2018:
This Amendment No. 2, the Original Proxy
Statement, a sample of the form of proxy card, and a copy of
our Current Report on Form 8-K/A, which includes financial
statements for the fiscal year ended December 31, 2017, are
available at http://www.proxyvote.com.