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Filed Pursuant to Rule 424(b)(2)
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Registration File No. 333-227858
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PROSPECTUS SUPPLEMENT
(To Prospectus dated November 9, 2018)
DROPCAR, INC.
Pre-Funded Series K Warrants to purchase 1,666,666 Shares of Common
Stock
(1,666,666 shares of Common Stock underlying the Pre-Funded
Series K Warrants)
Pursuant to this prospectus supplement and the accompanying
prospectus, we are offering Pre-Funded Series K Warrants to
purchase 1,666,666 shares of our common stock, par value $0.0001
per share (and the shares of common stock issuable upon exercise of
the Pre-Funded Series K Warrants), to an investor. The purchase
price of each Pre-Funded Series K Warrant is $0.59 and the
Pre-Funded Series K Warrants are immediately exercisable at a price
of $0.01 per share of common stock.
Our common stock is listed on The Nasdaq Capital Market under the
symbol “DCAR.” On November 8, 2018, the last reported
sale price of our common stock on The Nasdaq Capital Market was
$0.41 per share. We do not intend to
apply for listing of the Pre-Funded Series K Warrants on any securities
exchange or other nationally recognized trading system. There is no
established public trading market for the Pre-Funded Series K Warrants, and we do not
expect a market to develop.
As of November 8, 2018, the aggregate market value of our common
stock held by non-affiliates pursuant to General Instruction I.B.6.
of Form S-3 was approximately $4.1 million, which was calculated
based on 6,887,374 outstanding shares of our common stock held by
non-affiliates and at a price of $0.60 per share, the closing sale
price of our common stock reported on The Nasdaq Capital Market on
October 2, 2018. As a result, we are eligible to offer and sell up
to an aggregate of approximately $1.4 million of shares of our
common stock pursuant to General Instruction I.B.6. of Form S-3.
Following and including this offering, we will have sold securities
with an aggregate market value of approximately $1,000,000 pursuant
to General Instruction I.B.6. of Form S-3 during the prior 12
calendar month period that ends on, and includes, the date of this
prospectus supplement.
Investing in our securities involves a high degree of risk. Before
making an investment decision, please read “Risk
Factors” beginning on page S-5 of this prospectus supplement,
page 5 of the accompanying prospectus and in the documents
incorporated by reference into this prospectus supplement and the
accompanying prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
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Per Series K
Pre-Funded Warrant
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Public offering
price
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$0.59
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$983,332.94
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Delivery of the Pre-Funded Series K Warrants will take place on or
about November 16, 2018, subject to the satisfaction of certain
conditions.
The date of this prospectus supplement is November 14,
2018.
TABLE OF CONTENTS
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Page
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Prospectus Supplement
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About
this Prospectus Supplement
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S-1
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Prospectus
Supplement Summary
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S-2
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The
Offering
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S-4
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Risk
Factors
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S-5
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Special
Note Regarding Forward-Looking Statements
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S-8
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Use of
Proceeds
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S-9
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Dividend
Policy
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S-9
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Price
Range of Our Common Stock
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S-9
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Description
of Securities We Are Offering
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S-10
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Plan of
Distribution
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S-10
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Legal
Matters
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S-11
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Experts
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S-11
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Where
You Can Find More Information
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S-11
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Incorporation
of Certain Documents by Reference
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S-11
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Page
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Prospectus
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About
This Prospectus
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i
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Prospectus
Summary
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1
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Risk
Factors
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5
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Cautionary
Note Regarding Forward-Looking Statements
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6
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Ratio
of Earnings to Fixed Charges
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7
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Use of
Proceeds
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8
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Plan of
Distribution
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9
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Description
of Capital Stock
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11
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Description
of Debt Securities
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16
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Description
of Warrants
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19
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Description
of Rights
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21
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Description
of Units
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23
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Selling
Stockholders
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25
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Legal
Matters
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27
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Experts
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27
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Where
You Can Find More Information
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27
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Incorporation
of Information by Reference
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27
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ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus are part
of a “shelf” registration statement on Form S-3 (File
No. 333-227858) that we filed with the Securities and Exchange
Commission on October 16, 2018 and declared effective on November
9, 2018.
This document is in two parts. The first part is this prospectus
supplement, which describes the terms of this offering and also
adds to and updates information contained in the accompanying
prospectus and the documents incorporated by reference into this
prospectus supplement and the accompanying prospectus. The second
part is the accompanying prospectus, which gives more general
information about the shares of our common stock and other
securities we may offer from time to time under our shelf
registration statement, some of which does not apply to the
securities offeredby this prospectus supplement. To the extent
there is a conflict between the information contained in this
prospectus supplement, on the one hand, and the information
contained in the accompanying prospectus or any document
incorporated by reference herein or therein, on the other hand, you
should rely on the information in this prospectus
supplement.
You should read this prospectus supplement, the accompanying
prospectus, the documents incorporated by reference in this
prospectus supplement and the accompanying prospectus and any free
writing prospectus that we have authorized for use in connection
with this offering before making an investment decision. You should
also read and consider the information in the documents referred to
in the sections of this prospectus supplement entitled “Where
You Can Find More Information” and “Incorporation of
Certain Documents by Reference.”
You should rely only on the information contained or incorporated
by reference in this prospectus supplement, the accompanying
prospectus and any free writing prospectus that we have authorized
for use in connection with this offering. We have not authorized
anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you should
not rely on it.
We are not making an offer to sell the securities covered by this
prospectus supplement in any jurisdiction where the offer or sale
is not permitted.
The information appearing in this prospectus supplement, the
accompanying prospectus, the documents incorporated by reference in
this prospectus supplement and the accompanying prospectus and any
free writing prospectus that we have authorized for use in
connection with this offering is accurate only as of its respective
date, regardless of the time of delivery of the respective document
or of any sale of securities covered by this prospectus supplement.
You should not assume that the information contained in or
incorporated by reference in this prospectus supplement or the
accompanying prospectus, or in any free writing prospectus that we
have authorized for use in connection with this offering, is
accurate as of any date other than the respective dates
thereof.
Unless the context indicates otherwise, as used in this prospectus,
the terms “DropCar,” “the Company,”
“we,” “us” and “our” refer to
DropCar, Inc., a Delaware corporation.
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PROSPECTUS SUMMARY
The following is a summary of what we believe to be the most
important aspects of our business and the offering of our
securities under this prospectus. We urge you to read this entire
prospectus, including the more detailed consolidated financial
statements, notes to the consolidated financial statements and
other information incorporatedby reference from our other filings
with the SEC or included in any applicable prospectus supplement.
Investing in our securities involves risks. Therefore, carefully
consider the risk factors set forth in any prospectus supplements
and in our most recentannual and quarterly filings with the SEC, as
well as other information in this prospectus and any prospectus
supplements and the documents incorporated by reference herein or
therein, before purchasing our securities. Each of the risk factors
could adversely affect our business, operating results and
financial condition, as well as adversely affect the value of an
investment in our securities.
Overview
Operating Segments
We have two reportable operating segments: DropCar Operating and
WPCS International Incorporated (“WPCS”).
DropCar Operating
We are a provider of automotive vehicle support, fleet logistics,
and concierge services for both consumers and the automotive
industry. Our cloud-based Enterprise Vehicle Assistance and
Logistics (“VAL”) platform and mobile application
(“app”) assists consumers and automotive-related
companies reduce the costs, hassles and inefficiencies of owning a
car, or fleet of cars, in urban centers. Our VAL platform is a
web-based interface to our core service that coordinates the
movements and schedules of trained valets who pickup and drop off
cars at dealerships and customer locations. The app tracks progress
and provides email and text notifications on status to both dealers
and customers, increasing the quality of communication and
subsequent satisfaction with the service.
In July 2018, we launched our Mobility Cloud platform which
provides automotive-related businesses with a 100% self-serve SaaS
version of its VAL platform to manage our own operations and
drivers, as well as customer relationship management
(“CRM”) tools that enable their clients to schedule and
track their vehicles for service pickup and delivery. Our Mobility
Cloud also provides access to private APIs (application programming
interface) which automotive-businesses can use to integrate our
logistics and field support directly into their own applications
and processes natively, to create more seamless client
experiences.
We believe that consumers love the freedom and comfort of having a
personal vehicle, but are held hostage by their dependence on the
physical location of garages and service centers for parking and
maintenance. The continued population shift into cities and
resulting increase in real estate prices are only compounding this
burden. We seek to solve this problem by freeing clients from the
reliance on the physical location of garages and service
centers.
We achieve this balance of increased consumer flexibility and lower
consumer cost by aggregating demand for parking and other
automotive services and redistributing their fulfillment to
partners in the city and on city outskirt areas that have not
traditionally had access to lucrative city business. Beyond the
immediate unit economic benefits of securing bulk discounts from
vendor partners, we believe there is significant opportunity to
further vertically integrate such businesses along the supply chain
into our platform.
To date, we operate primarily in the New York metropolitan area. In
May 2018, we expanded operations with our B2B business in San
Francisco and in June 2018 we expanded operations with our B2B
business in Washington DC, both new market expansions are with a
major original equipment manufacturer (“OEM”)
customer.
On the enterprise side, OEMs, dealers, and other service providers
in the automotive space are increasingly being challenged with
consumers who have limited time to bring in their vehicles for
maintenance and service, making it difficult to retain valuable
post-sale service contracts or scheduled consumer maintenance and
service appointments. Additionally, many of the vehicle support
centers for automotive providers (i.e., dealerships, including body
work and diagnostic shops) have moved out of urban areas thus
making it more challenging for OEMs and dealers in urban areas to
provide convenient and efficient service for their consumer and
business clientele. Similarly, shared mobility providers and other
fleet managers, such as rental car companies, face a similar urban
mobility challenge: getting cars to and from service bays,
rebalancing vehicle availability to meet demand and getting
vehicles from dealer lots to fleet locations.
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While our business-to-business (“B2B”) and
business-to-consumer (“B2C”) services generate revenue
and help meet the unmet demand for vehicle support services, we are
also building-out a platform and customer base that positions us
well for developments in the automotive space when vehicle
ownership becomes more subscription based with transportation
services and concierge options well-suited to match a
customer’s immediate needs. For example, certain car
manufacturers are testing new services in which customers pay the
manufacturer a flat fee per month to drive a number of different
models for any length of time.
WPCS
WPCS provides low voltage communication infrastructure services.
The Company specializes in the installation and service of low
voltage communications, voice and data networks, security systems,
audio-visual solutions, and distributed antenna systems and provide
experienced project management and deliver complex projects to key
vertical markets that include healthcare, education,
transportation, energy and utilities, oil and gas, manufacturing,
commercial real estate, financial, and government.
Company Information
We were incorporated in the State of Delaware on December 18,
1997 under the name “Internet International Communications
Ltd.” Pursuant to a Certificate of Amendment to our
Certificate of Incorporation filed on December 23, 2004, our
name was changed to “WPCS International
Incorporated.” On January 30, 2018, we
completed a business combination with DropCar, Inc., a then
privately held Delaware corporation (“Private
DropCar”), in accordance with the terms of a merger
agreement, pursuant to which a merger subsidiary merged with and
into Private DropCar, with Private DropCar surviving as our wholly
owned subsidiary (the “Merger”). On January 30, 2018,
immediately after completion of the Merger, we changed our name to
“DropCar, Inc.” The Merger was
treated as a reverse
merger under the acquisition method of accounting in accordance
with U.S. GAAP.
Our principal corporate office is located at 1412 Broadway, Suite
2105, New York, New York 10018, telephone (646) 342-1595. Our
internet address is www.dropcar.com.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to those reports,
are available to you free of charge through the
“Investors” section of our web site as soon as
reasonably practicable after such materials have been
electronically filed with, or furnished to, the Securities and
Exchange Commission. Information contained on our web site does not
form a part of this prospectus.
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THE OFFERING
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Pre-Funded
Series K Warrants offered by us
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1,666,666
warrants
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Common
stock outstanding before this offering
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8,883,511
shares (as more fully described in the notes following this
table)
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Common
stock to be outstanding after this offering
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8,883,511
shares (as more fully described in the notes following this
table)
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Manner
of offering
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Registered
direct offering. See “Plan of Distribution” on page
S-11 of this prospectus supplement.
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Use of
proceeds
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We
currently intend to use the net proceeds from this offering for
general corporate purposes, including working capital. See
“Use of Proceeds” on page S-9 of this prospectus
supplement.
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Nasdaq
Capital Market symbol
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DCAR
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Risk
factors
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Investing
in our securities involves a high degree of risk. See “Risk
Factors” beginning on page S-5 of this prospectus
supplement.
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Description
of Pre-Funded Series K Warrants
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The
Pre-Funded Series K Warrants are being issued to prevent the
beneficial ownership of the purchaser in this offering (together
with its affiliates and certain related parties) of our common
stock from exceeding 9.99%. Each Pre-Funded Series K Warrant has a
purchase price of $0.59 and features an exercise price of $0.01 per
share of common stock. The Pre-Funded Series K Warrants are
exercisable upon issuance.
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The number of shares of our common stock shown
above to be outstanding immediately after this offering is based
on 8,883,511 shares outstanding
as of November 8, 2018, and excludes, as of such
date:
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2,739,225 shares of
our common stock underlying our Series H Preferred Stock, Series
H-3 Preferred Stock, and Series H-4 Preferred Stock;
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941,282 shares of
our common stock subject to outstanding options having a weighted
average exercise price of $5.50 per share, and 1,467,858 shares of
common stock subject to outstanding unvested restricted stock
awards with a weighted average grant date fair value of
$2.21;
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118,132 shares of our common stock reserved
for future issuance pursuant to our existing stock incentive plans;
and
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3,511,840 shares of
our common stock issuable upon exercise of warrants outstanding as
of November 8, 2018, having a weighted average exercise price of
$2.12 per share.
RISK FACTORS
Investing in our securities involves a high degree of risk. Before
deciding whether to invest in our securities, you should consider
carefully the risks discussed below, together with the risks under
the heading “Risk Factors” as disclosed in our Current
Report on Form 8-K/A filed with the Securities and Exchange
Commission on April 2, 2018, which includes financial
statements for the fiscal year ended December 31,
2017, and any subsequent Quarterly
Reports on Form 10-Q, which are incorporated by reference into this
prospectus supplement and the accompanying prospectus, as well as
the other information in this prospectus supplement, the
accompanying prospectus, the information and documents incorporated
by reference and in any free writing prospectus that we have
authorized for use in connection with this offering. If any of the
identified risks actually occur, they could materially adversely
affect our business, financial condition, operating results or
prospects and the trading price of our securities. Additional risks
and uncertainties that we do not presently know or that we
currently deem immaterial may also impair our business, financial
condition, operating results and prospects and the trading price of
our securities.
RISKS RELATED TO THIS OFFERING AND OUR SECURITIES
The price of our common stock may be volatile and fluctuate
substantially, and you may not be able to resell your shares at or
above the price you paid for them.
The trading price of our common stock is highly volatile and could
be subject to wide fluctuations in response to various factors,
some of which are beyond our control, such as reports by industry
analysts, investor perceptions or negative announcements by other
companies involving similar technologies. The stock market in
general and the market for smaller companies, like DropCar in
particular, have experienced extreme volatility that has often been
unrelated to the operating performance of particular companies. As
a result of this volatility, our stockholders may not be able to
sell their common stock at or above the price they paid for it. The
following factors, in addition to other factors described in the
“Risk Factors” section of our most recent filings with
the Securities and Exchange Commission, may have a significant
impact on the market price of our common stock:
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issuances of new
equity securities pursuant to a future offering, including
issuances of preferred stock;
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the success of
competitive products, services or technologies;
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regulatory or legal
developments in the United States and other countries;
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adverse actions taken by regulatory agencies with respect to the
services we provide;
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developments or
disputes concerning patent applications, issued patents or other
proprietary rights;
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the recruitment or
departure of key personnel;
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actual or
anticipated changes in estimates as to financial results,
development timelines or recommendations by securities
analysts;
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variations in our
financial results or those of companies that are perceived to be
similar to us;
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variations in the costs of the services we provide;
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market conditions
in the market segments in which we operate;
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variations in
quarterly and annual operating results;
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announcements of
new products and/or services by us or our competitors;
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the gain or loss of
significant customers;
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changes in
analysts’ earnings estimates;
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short selling of
shares of our common stock;
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changing the
exchange or quotation system on which shares of our common stock
are listed;
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trading volume of our common stock;
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sales of our common stock by us, our executive officers and
directors or our stockholders in the future;
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changes in
accounting principles; and
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general economic and market conditions and overall fluctuations in
the U.S. equity markets.
In addition, broad market and industry factors may negatively
affect the market price of our common stock, regardless of our
actual operating performance, and factors beyond our control may
cause our stock price to decline rapidly and
unexpectedly.
We may be unable to maintain compliance with The Nasdaq Marketplace
Rules which could cause our common stock to be delisted from The
Nasdaq Capital Market. This could result in the lack of a market
for our common stock, cause a decrease in the value of an
investment in us, and adversely affect our business, financial
condition and results of operations.
On September 25, 2018, we received written notice from the Listing
Qualifications Department of The Nasdaq Stock Market LLC
(“Nasdaq”) that for the preceding 30 consecutive
business days, our common stock did not maintain a minimum closing
bid price of $1.00 per share as required by Nasdaq Listing Rule
5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A),
we were given an initial compliance period of 180 calendar days, or
until March 25, 2019, to regain compliance with Nasdaq Listing Rule
5550(a)(2). In addition, compliance can beachieved automatically
and without further action if the closing bid price of our common
stock is at or above $1.00 for a minimum of ten consecutive
business days at any time during the 180-day compliance period, in
which case Nasdaq will notify us of our compliance and the matter
will be closed.
If our common stock is delisted from Nasdaq, our ability to raise
capital in the future may be limited. Delisting could also result
in less liquidity for our stockholders and a lower stock price.
Such a delisting would likely have a negative effect on the price
of our common stock and would impair your ability to sell or
purchase our common stock when you wish to do so. In the event of a
delisting, we expect to take actions to restore our compliance with
Nasdaq’s listing requirements, but we can provide no
assurance that any action taken by us would result in our common
stock becoming listed again, or that any such action would
stabilize the market price or improve the liquidity of our common
stock.
Future sales of our common stock in the public market could cause
our stock price to fall.
Sales of a substantial number of shares of our common stock in the
public market, or the perception that these sales might occur,
could depress the market price of our common stock and could impair
our ability to raise capital through the sale of additional
equity securities. As of November 8, 2018, we had 8,883,511
shares of common stock outstanding,
all of which shares were eligible for sale in the public market,
subject in some cases to compliance with the requirements of Rule
144, including the volume limitations and manner of sale
requirements. As of November 8, 2018, we had outstanding equity
awards (option and restricted stock awards) and warrants to
purchase 2,409,140 and 3,511,840 shares of common stock,
respectively, and 2,739,225 shares of common stock issuable upon
the conversion of outstanding preferred stock. To the extent these
options and warrants are exercised and shares of preferred stock
are converted, a significant number of shares will be available for
sale into the public market.
Our stockholders may experience significant dilution as a result of
future equity offerings or issuances and exercise of outstanding
options and warrants.
In order to raise additional capital or pursue strategic
transactions, we may in the future offer, issue or sell additional
shares of our common stock or other securities convertible into or
exchangeable for our common stock. Our stockholders may experience
significant dilution as a result of future equity offerings or
issuances. Investors purchasing shares or other securities in the
future could have rights superior to existing stockholders. As of
November 8, 2018, we had a significant number of securities
convertible into, or allowing the purchase of, our common stock,
including 3,511,840 shares of common stock issuable upon exercise
of the outstanding warrants, 2,409,140 shares of common stock
underlying the outstanding options and outstanding restricted stock
awards and 2,739,225 shares of common stock issuable upon the
conversion of outstanding preferred stock.
We have broad discretion in the use of the net proceeds from this
offering.
Our management will have broad discretion in the application of the
net proceeds from this offering and could spend the proceeds in
ways with which you may not agree. Accordingly, you will be relying
on the judgment of our management with regard to the use of the net
proceeds, and you will not have the opportunity, as part of your
investment decision, to assess whetherthe proceeds are being used
appropriately. We may use the net proceeds to continue or expand
our research and development activities or to fund possible
investments in, or acquisitions of, complementary businesses,
technologies or products. It is possible that the net proceeds will
be invested or otherwise used in a way that does not yield a
favorable, or any, return for us.
The adverse capital and credit market conditions could affect our
liquidity.
Adverse capital and credit market conditions could affect our
ability to meet liquidity needs, as well as our access to capital
and cost of capital. The capital and credit markets have
experienced extreme volatility and disruption in recent years. Our
results of operations, financial condition, cash flows and capital
position could be materially adversely affected by continued
disruptions in the capital and credit markets.
Our ability to use net operating losses to offset future taxable
income are subject to certain limitations.
At December 31, 2017, we had approximately $7.9 million of
operating loss carryforwards for federal and $7.9 million New York
state tax purposes that may be applied against future taxable
income. The net operating loss carryforwards will begin to expire
in the year 2035 if not utilized prior to that date. To the extent
available, we intend to use these net operating loss carryforwards
to reduce the corporate income tax liability associated with our
operations. The ability to utilize this net operating loss
carryforwards may be limited under Section 382 of the Code, which
apply if an ownership change occurs. To the extent our use of net
operating loss carryforwards is significantly limited, our income
could be subject to corporate income tax earlier than it would if
we were able to use net operating loss carryforwards, which could
have a negative effect on our financial results.
We have never paid cash dividends on our common stock in the past
and do not anticipate paying cash dividends on our common stock in
the foreseeable future.
We have never declared or paid cash dividends on our common stock.
We do not anticipate paying any cash dividends on our common stock
in the foreseeable future. We currently intend to retain all
available funds and any future earnings to fund the development and
growth of our business. As a result, capital appreciation, if any,
of our common stock will be the sole source of gain for the
foreseeable future for holders of our common stock.
Anti-takeover provisions in our charter documents and
Delaware law could prevent or delay a
change in control.
Our certificate of incorporation and bylaws may discourage, delay
or prevent a merger or acquisition that a stockholder may consider
favorable by authorizing the issuance of “blank check”
preferred stock. This preferred stock may be issued by our board of
directors on such terms as it determines, without further
stockholder approval. Therefore, our board of directors may issue
such preferred stock on terms unfavorable to a potential bidder in
the event that our board of directors opposes a merger or
acquisition. Certain other provisions of our bylaws and of Delaware
law may also discourage, delay or prevent a third party from
acquiring or merging with us, even if such action were beneficial
to some, or even a majority, of our stockholders.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement contains forward-looking statements that
involve substantial risks and uncertainties. All statements, other
than statements of historical facts, contained in this prospectus
supplement, including statements regarding our future results of
operations and financial position, business strategy and plans and
objectives of management for future operations, are forward-looking
statements. The words “may,” “will,”
“should,” “expects,” “plans,”
“anticipates,” “could,”
“intends,” “target,”
“projects,” “contemplates,”
“believes,” “estimates,”
“predicts,” “potential” or
“continue” or the negative of these terms or other
similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain
these identifying words.
These
forward-looking statements were based on various factors and were
derived utilizing numerous assumptions and other factors that could
cause our actual results to differ materially from those in the
forward-looking statements. These factors include, but are not
limited to, our inability to obtain adequate financing, our
inability to expand our business, existing or increased
competition, stock volatility and illiquidity, and the failure to
implement our business plans or strategies.
We may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements, and you should not
place undue reliance on our forward-looking statements. Actual
results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking
statements we make. We have included important factors in the
cautionary statements included in this prospectus, particularly in
the “Risk Factors” section, as well as the risk factors
incorporated by reference in this prospectus, discussed under
“Item 1A-Risk Factors” contained in our Current
Report on Form 8-K/A filed with the SEC on April 2, 2018, and under
similar headings in our subsequently filed quarterly reports on
Form 10-Q and annual reports on Form 10-K, that could
cause actual results or events to differ materially from the
forward-looking statements that we make. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or investments
we may make.
You should read this prospectus supplement and the documents that
we have filed as exhibits to this prospectus completely and with
the understanding that our actual future results may be materially
different from what we expect. We do not assume any obligation to
update any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
This prospectus supplement includes statistical and other industry
and market data that we obtained from industry publications and
research, surveys and studies conducted by third parties.
Industry publications and third-party research, surveys and
studies generally indicate that their information has been obtained
from sources believed to be reliable, although they do not
guarantee the accuracy or completeness of such
information.
USE OF PROCEEDS
We currently intend to use the net proceeds from this offering for
general corporate purposes, including working capital. We may also
use all or a portion of the net proceeds from this offering to fund
possible investments in, or acquisitions of, complementary
businesses, technologies or products, but we currently have no
agreements or commitments with respect to any investment or
acquisition. Pending the application of the net proceeds, we intend
to invest the net proceeds in short-term, investment grade,
interest-bearing securities, if such proceeds are
invested.
As of the date of this prospectus supplement, we cannot specify
with certainty all of the particular uses for the net proceeds to
us from this offering, if any. As a result, our management will
have broad discretion regarding the timing and application of the
net proceeds from this offering.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common
stock and do not currently anticipate declaring or paying cash
dividends on our common stock in the foreseeable future. We
currently intend to retain all of our future earnings, if any, to
finance operations. Any future determination relating to our
dividend policy will be made at the discretion of our board of
directors and will depend on a number of factors, including future
earnings, capital requirements, financial conditions, future
prospects, contractual restrictions and other factors that our
board of directors may deem relevant.
PRICE RANGE OF OUR COMMON STOCK
Our common stock trades on The Nasdaq Capital Market under the
symbol “DCAR.” The following table sets forth, for the
periods indicated, the reported high and low sales prices per share
of our common stock on The Nasdaq Capital Market.
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Period
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Year
Ended December 31, 2016
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First
Quarter
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$6.59
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$3.64
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Second
Quarter
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$7.84
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$4.56
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Third
Quarter
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$7.40
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$4.60
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Fourth
Quarter
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$5.84
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$4.52
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Year
Ended December 31, 2017
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First
Quarter
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$7.20
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$5.00
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Second
Quarter
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$6.08
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$4.80
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Third
Quarter
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$7.80
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$4.72
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Fourth
Quarter
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$13.52
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$3.28
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Year
Ending December 31, 2018
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First
Quarter
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$6.28
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$1.85
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Second
Quarter
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$2.50
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$1.17
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Third
Quarter
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$1.83
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$0.50
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Fourth Quarter
(through November 8, 2018)
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$0.66
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$0.31
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On November 8, 2018, the last reported closing sale price of our
common stock on The Nasdaq Capital Market was $0.41 per
share.
Holders
As of November 8,
2018, there were approximately
39 stockholders of record of our common stock. The number of record
holders was determined from the records of our transfer agent and
does not include beneficial owners of our common stock whose shares
are held in the names of various security brokers, dealers, and
registered clearing agencies.
Trading Market
Our common stock is listed on The Nasdaq Capital Market under the
symbol “DCAR.”
DESCRIPTION OF THE SECURITIES WE ARE OFFERING
We are offering Pre-Funded Series K Warrants to purchase up to
1,666,666 shares of our common stock. Each Pre-Funded Series K
Warrant has a purchase price of $0.59 and features an exercise
price of $0.01 per share of common stock. The Pre-Funded
Series K Warrants are exercisable at any time after their original
issuance until exercised in full. The exercise of the Pre-Funded
Series K Warrants is subject to certain exercise limitations, such
that the holder may not exercise the Pre-Funded Series K Warrants
if such exercise results in the holder becoming the beneficial
owner of more than 9.99% of the number of shares of common stock
outstanding immediately after giving effect to such exercise,
provided that, upon prior notice to us, the holder may increase or
decrease such limitation up to a maximum of 9.99% of the number of
shares of common stock outstanding, provided that any increase in
such beneficial ownership shall not be effective until 61 days
following such notice. Each Pre-Funded Series K Warrant will have a
cashless exercise right in the event that the shares of common
stock underlying such warrants are not covered by an effective
registration statement at the time of such exercise.
The Pre-Funded Series K Warrants provide for the adjustment of the
exercise price and number of shares issuable upon exercise of the
Pre-Funded Series K Warrants in connection with stock dividends and
splits, such that the number of shares issuable upon exercise of
the Pre-Funded Series K Warrants is adjusted in proportion to the
change in the number of shares outstanding and the aggregate
exercise price of the Pre-Funded Series K Warrants remains
unchanged. In addition, if we grant, issue or sell any common
stock equivalents or rights to purchase stock, warrants, securities
or other property pro rata to the record holders of any class of
shares of common stock (and not the holder of the Pre-Funded Series
K Warrants), then the Pre-Funded Series K Warrant holder will be
entitled to acquire, upon the terms applicable to such purchase
rights, the aggregate purchase rights which the holder could have
acquired if the holder had held the number of shares of common
stock acquirable upon complete exercise of the Pre-Funded Series K
Warrants. If we declare or make any dividend or other
distribution of our assets to holders of our common stock, the
Pre-Funded Series K Warrant holder shall be entitled to participate
in the distribution to the same extent that the holder would have
participated therein if the holder had held the number of shares of
common stock acquirable upon complete exercise of the Pre-Funded
Series K Warrants. Other than as described above, the
Pre-Funded Series K Warrants do not contain anti-dilution
provisions.
Upon the reclassification, reorganization or recapitalization of
our common stock, our merger or consolidation with or into another
entity, the consummation of a stock purchase agreement whereby more
than 50% of the outstanding shares of the common stock are acquired
by another person or entity, or a sale or other disposition of
substantially all of our assets, the holder of each of the
Pre-Funded Series K Warrants is entitled to receive the number of
shares of our common stock or the common stock of our successor or
acquirer that such holder would have been entitled to receive
immediately prior to such transaction, and the exercise price for
such shares shall be adjusted based on the amount of any alternate
consideration receivable as a result of such transaction by a
holder of the number of shares of common stock for which the
Pre-Funded Series K Warrants is exercisable immediately prior to
such transaction.
The Pre-Funded Series K Warrants will be exercisable, at the option
of each holder, in whole or in part by delivering to us a duly
executed exercise notice. No fractional shares of common stock will
be issued in connection with the exercise of a Pre-Funded Series K
Warrant. Subject to applicable laws, the Pre-Funded Series K
Warrants may be offered for sale, sold, transferred or assigned
without our consent. We do not plan on applying to list the
Pre-Funded Series K Warrants on The Nasdaq Capital Market, any
other national securities exchange or any other nationally
recognized trading system. Except as otherwise provided in the
Pre-Funded Series K Warrants or by virtue of such holder’s
ownership of shares of our common stock, the holder of Pre-Funded
Series K Warrants does not have the rights or privileges of a
holder of our common stock, including any voting rights, until the
holder exercises the Pre-Funded Series K Warrant. Amendments and
waivers of the terms of the Pre-Funded Series K Warrants require
the written consent of the holder of such Pre-Funded Series K
Warrant and us.
PLAN OF DISTRIBUTION
We are selling Pre-Funded Series K
Warrants to purchase up to 1,666,666 shares of our common
stock offered under this
prospectus supplement directly to a single institutional investor
in a privately negotiated transaction in which no party is acting
as an underwriter or placement agent. Subject to the terms of a
securities purchase agreement dated as of November 14, 2018, the
purchaser has agreed to purchase and we have agreed to sell to the
purchaser Pre-Funded Series K
Warrants to purchase up to an aggregate of 1,666,666 shares of our
common stock at
a
purchase price of $0.59 per Pre-Funded Series K Warrant and an
exercise price of $0.01 per share of common stock.
We determined the common stock price
per share through negotiations with the purchaser. We expect to
deliver the shares of common stock underlying the
Pre-Funded Series K
Warrants through the book entry
facilities of The Depository Trust Company against payment of the
aggregate purchase price for the shares of common stock
purchased.
LEGAL MATTERS
Certain legal matters in connection with the shares of common stock
underlying the Pre-Funded Series K Warrants offered hereby will be
passed upon for us by Mintz, Levin, Cohn, Ferris, Glovsky &
Popeo, P.C., New York, New York. Grushko & Mittman, P.C.,
Valley Stream, New York, acted as counsel to the investor in
connection with this offering.
EXPERTS
The balance sheets of DropCar, Inc. as of December 31,
2017 and 2016, and the related statements of operations,
changes in stockholders’ equity, and cash flows for each
of the years then ended, have been audited by EisnerAmper LLP,
independent registered public accounting firm, as stated in their
report which is incorporated herein by reference, which report
contains an explanatory paragraph regarding the Company’s
ability to continue as a going concern. Such financial
statements have been incorporated herein by reference in reliance
on the report of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, and file annual, quarterly and
current reports, proxy statements and other information with the
Securities and Exchange Commission (the “SEC”). You may
read and copy these reports, proxy statements and other information
at the SEC’s public reference facilities at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. You can request
copies of these documents by writing to the SEC and paying a fee
for the copying cost. Please call the SEC at 1-800-SEC-0330 for
more information about the operation of the public reference
facilities. SEC filings are also available at the SEC’s web
site at www.sec.gov.
This prospectus supplement and the accompanying prospectus are only
part of a registration statement on Form S-3 that we have
filed with the SEC under the Securities Act and therefore omit
certain information contained in the registration statement. We
have also filed exhibits and schedules with the registration
statement that are excluded from this prospectus and the
accompanying prospectus, and you should refer to the applicable
exhibit or schedule for a complete description of any statement
referring to any contract or other document. You may inspect a copy
of the registration statement, including the exhibits and
schedules, without charge, at the public reference room or obtain a
copy from the SEC upon payment of the fees prescribed by the
SEC.
We also maintain a website at www.dropcar.com,
through which you can access our SEC filings. The information set
forth on, or accessible from, our website is not part of this
prospectus supplement or the accompanying
prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate by reference”
information that we file with them. Incorporation by reference
allows us to disclose important information to you by referring you
to those other documents. The information incorporated by reference
is an important part of this prospectus, and information that we
file later with the SEC will automatically update and supersede
this information. This prospectus omits certain information
contained in the registration statement, as permitted by the SEC.
You should refer to the registration statement and any prospectus
supplement filed hereafter, including the exhibits, for further
information about us and the securities we may offer pursuant to
this prospectus. Statements in this prospectus regarding the
provisions of certain documents filed with, or incorporated by
reference in, the registration statement are not necessarily
complete and each statement is qualified in all respects by that
reference. Copies of all or any part of the registration statement,
including the documents incorporated by reference or the exhibits,
may be obtained upon payment of the prescribed rates at the offices
of the SEC listed above in “Where You Can Find More
Information.” The documents we are incorporating by reference
are:
●
our
Quarterly Reports on Form 10-Q for the quarters ended March 31,
2018, June 30, 2018 and September 30, 2018, filed on May 21, 2018,
August 14, 2018 and November 14, 2018, respectively (File Nos.
001-34643);
●
our
Current Reports on Form 8-K and Form 8-K/A, as applicable, filed on
January 17, 2018, January 30, 2018, February 5, 2018, March 9,
2018, March 21, 2018, April 2, 2018, April 20, 2018, May 21, 2018,
July 13, 2018, August 1, 2018, August 16, 2018, September
4, 2018, September 10, 2018 and September 25, 2018 (File Nos.
001-34643);
●
our
definitive proxy statement filed on October 9, 2018, as revised on
October 16, 2018 and as supplemented on October 24,
2018;
●
the
description of our common stock contained in our Registration
Statement on Form 8-A filed on February 26, 2010 (File
No. 001-34643) pursuant to Section 12(b) of the Exchange
Act, and any amendment or report filed with the SEC for purposes of
updating such description; and
●
all
reports and other documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after
the date of this prospectus and prior to the termination or
completion of the offering of securities under this prospectus
shall be deemed to be incorporated by reference in this prospectus
and to be a part hereof from the date of filing such reports and
other documents.
In addition, all reports and other documents filed by us pursuant
to the Exchange Act after the date of the initial registration
statement and prior to effectiveness of the registration statement
shall be deemed to be incorporated by reference into this
prospectus.
Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference into this
prospectus will be deemed to be modified or superseded for purposes
of this prospectus to the extent that a statement contained in this
prospectusor any other subsequently filed document that is deemed
to be incorporated by reference into this prospectus modifies or
supersedes the statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
You may request, orally or in writing, a copy of these documents,
which will be provided to you at no cost, by contacting DropCar,
Inc., 1412 Broadway, Suite 2105, New York, NY 10018, Attention:
Investor Relations. The Investor Relations Department can be
reached via telephone at (646) 342-1595.
You should rely only on information contained in, or incorporated
by reference into, this prospectus supplement. We have not
authorized anyone to provide you with information different from
that contained in this prospectus or incorporated by reference in
this prospectus. We are not making offers to sell the securities in
any jurisdiction in which such an offer or solicitation is not
authorized or in which the person making such offer or solicitation
is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
Filed Pursuant to
Rule 424(b)(2)
Registration File
No. 333-227858
PROSPECTUS
DROPCAR,
INC.
$50,000,000
COMMON
STOCK
PREFERRED
STOCK
DEBT
SECURITIES
WARRANTS
RIGHTS
UNITS
This prospectus
will allow us to issue, from time to time at prices and on terms to
be determined at or prior to the time of the offering, up to
$50,000,000 of any combination of the securities described in this
prospectus, either individually or in units. We may also offer
common stock or preferred stock upon conversion of or exchange for
the debt securities; common stock or preferred stock or debt
securities upon the exercise of warrants or rights.
This prospectus
describes the general terms of these securities and the general
manner in which these securities will be offered. We will provide
you with the specific terms of any offering in one or more
supplements to this prospectus. The prospectus supplements will
also describe the specific manner in which these securities will be
offered and may also supplement, update or amend information
contained in this document. You should read this prospectus and any
prospectus supplement, as well as any documents incorporated by
reference into this prospectus or any prospectus supplement,
carefully before you invest.
Our securities may
be sold directly by us to you, through agents designated from time
to time or to or through underwriters or dealers. For additional
information on the methods of sale, you should refer to the section
entitled “Plan of Distribution” in this prospectus and
in the applicable prospectus supplement. If any underwriters or
agents are involved in the sale of our securities with respect to
which this prospectus is being delivered, the names of such
underwriters or agents and any applicable fees, commissions or
discounts and over-allotment options will be set forth in a
prospectus supplement. The price to the public of such securities
and the net proceeds that we expect to receive from such sale will
also be set forth in a prospectus supplement.
In addition, the
selling stockholders identified in this prospectus may offer and
sell from time to time up to 1,560,696 shares of our common stock
underlying Series J Warrants which were issued to the selling
stockholders on September 5, 2018. We are registering these shares
of our common stock pursuant to an offer letter that we entered
into with certain of the selling stockholders. The selling
stockholders may offer and sell their shares of our common stock in
public or private transactions, or both. These sales may occur at
fixed prices, at market prices prevailing at the time of sale, at
prices related to prevailing market prices, or at negotiated
prices. See “Plan of Distribution” for more information
on how the selling stockholders may conduct sales of their shares
of our common stock. We will not receive any proceeds from any sale
of shares of our common stock by the selling
stockholders.
Our common stock is
listed on The Nasdaq Capital Market, under the symbol
“DCAR.” On October 11, 2018, the last reported sale
price of our common stock on The Nasdaq Capital Market was $0.52
per share.
Investing
in our securities involves a high degree of risk. Before deciding
whether to invest in our securities, you should consider carefully
the risks that we have described on page 5 of this prospectus under
the caption “Risk Factors.” We may include specific
risk factors in supplements to this prospectus under the caption
“Risk Factors.” This prospectus may not be used to sell
our securities unless accompanied by a prospectus
supplement.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this
prospectus is November 9, 2018.
TABLE OF CONTENTS
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Page
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ABOUT THIS
PROSPECTUS
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i
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PROSPECTUS
SUMMARY
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1
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RISK
FACTORS
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5
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CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
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6
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RATIO OF EARNINGS
TO FIXED CHARGES
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7
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USE OF
PROCEEDS
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8
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PLAN OF
DISTRIBUTION
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9
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DESCRIPTION OF
CAPITAL STOCK
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11
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DESCRIPTION OF DEBT
SECURITIES
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16
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DESCRIPTION OF
WARRANTS
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19
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DESCRIPTION OF
RIGHTS
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21
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DESCRIPTION OF
UNITS
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23
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SELLING
STOCKHOLDERS
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25
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LEGAL
MATTERS
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27
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EXPERTS
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27
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WHERE YOU CAN FIND
MORE INFORMATION
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27
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INCORPORATION OF
INFORMATION BY REFERENCE
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27
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ABOUT
THIS PROSPECTUS
This prospectus is
part of a registration statement that we filed with the Securities
and Exchange Commission, or SEC, utilizing a “shelf”
registration process. Under this shelf registration process, we and
the selling stockholders may offer shares of our common stock,
preferred stock, various series of debt securities and/or warrants
or rights to purchase any of such securities, either individually
or in units, in one or more offerings, with a total value of up to
$50,000,000. In addition, the selling stockholders identified in
this prospectus may offer and sell from time to time up to
1,560,696 shares of our common
stock underlying Series J Warrants which were issued to the selling
stockholders on September 5, 2018. This prospectus provides you
with a general description of the securities we or the selling
stockholders may offer. Each time we or the selling stockholders
offer a type or series of securities under this prospectus, we or
the selling stockholders will provide a prospectus supplement that
will contain specific information about the terms of that
offering.
This prospectus
does not contain all of the information included in the
registration statement. For a more complete understanding of the
offering of the securities, you should refer to the registration
statement, including its exhibits. The prospectus supplement may
also add, update or change information contained or incorporated by
reference in this prospectus. However, no prospectus supplement
will offer a security that is not registered and described in this
prospectus at the time of its effectiveness. This prospectus,
together with the applicable prospectus supplements and the
documents incorporated by reference into this prospectus, includes
all material information relating to the offering of securities
under this prospectus. You should carefully read this prospectus,
the applicable prospectus supplement, the information and documents
incorporated herein by reference and the additional information
under the heading “Where You Can Find More Information”
before making an investment decision.
You should rely
only on the information provided or incorporated by reference in
this prospectus or any prospectus supplement. Neither we nor any
selling stockholder has authorized anyone to provide you with
information different from that contained or incorporated by
reference in this prospectus. No dealer, salesperson or other
person is authorized to give any information or to represent
anything not contained or incorporated by reference in this
prospectus. You must not rely on any unauthorized information or
representation. This prospectus is an offer to sell only the
securities offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. You should assume that
the information in this prospectus or any prospectus supplement is
accurate only as of the date on the front of the document and that
any information incorporated herein by reference is accurate only
as of the date of the document incorporated by reference,
regardless of the time of delivery of this prospectus or any sale
of a security.
We further note
that the representations, warranties and covenants made by us in
any agreement that is filed as an exhibit to any document that is
incorporated by reference in the accompanying prospectus were made
solely for the benefit of the parties to such agreement, including,
in some cases, for the purpose of allocating risk among the parties
to such agreements, and should not be deemed to be a
representation, warranty or covenant to you. Moreover, such
representations, warranties or covenants were accurate only as of
the date when made. Accordingly, such representations, warranties
and covenants should not be relied on as accurately representing
the current state of our affairs.
This prospectus may
not be used to consummate sales of our securities, unless it is
accompanied by a prospectus supplement. To the extent there are
inconsistencies between any prospectus supplement, this prospectus
and any documents incorporated by reference, the document with the
most recent date will control.
Unless the context
otherwise requires, “DropCar,” “the
Company,” “we,” “us,”
“our” and similar terms refer to
Dropcar, Inc.
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PROSPECTUS
SUMMARY
The following is a summary of what we believe to be the most
important aspects of our business and the offering of our
securities under this prospectus. We urge you to read this entire
prospectus, including the more detailed consolidated financial
statements, notes to the consolidated financial statements and
other information incorporated by reference from our other filings
with the SEC or included in any applicable prospectus supplement.
Investing in our securities involves risks. Therefore, carefully
consider the risk factors set forth in any prospectus supplements
and in our most recent annual and quarterly filings with the SEC,
as well as other information in this prospectus and any prospectus
supplements and the documents incorporated by reference herein or
therein, before purchasing our securities. Each of the risk factors
could adversely affect our business, operating results and
financial condition, as well as adversely affect the value of an
investment in our securities.
Overview
Operating Segments
We
have two reportable operating segments: DropCar Operating and WPCS
International Incorporated (“WPCS”).
DropCar Operating
We
are a provider of automotive vehicle support, fleet logistics, and
concierge services for both consumers and the automotive industry.
Our cloud-based Enterprise Vehicle Assistance and Logistics
(“VAL”) platform and mobile application
(“app”) assists consumers and automotive-related
companies reduce the costs, hassles and inefficiencies of owning a
car, or fleet of cars, in urban centers. Our VAL platform is a
web-based interface to our core service that coordinates the
movements and schedules of trained valets who pickup and drop off
cars at dealerships and customer locations. The app tracks progress
and provides email and text notifications on status to both dealers
and customers, increasing the quality of communication and
subsequent satisfaction with the service.
In
July 2018, we launched our Mobility Cloud platform which provides
automotive-related businesses with a 100% self-serve SaaS version
of its VAL platform to manage our own operations and drivers, as
well as customer relationship management (“CRM”) tools
that enable their clients to schedule and track their vehicles for
service pickup and delivery. Our Mobility Cloud also provides
access to private APIs (application programming interface) which
automotive-businesses can use to integrate our logistics and field
support directly into their own applications and processes
natively, to create more seamless client experiences.
We
believe that consumers love the freedom and comfort of having a
personal vehicle, but are held hostage by their dependence on the
physical location of garages and service centers for parking and
maintenance. The continued population shift into cities and
resulting increase in real estate prices are only compounding this
burden. We seek to solve this problem by freeing clients from the
reliance on the physical location of garages and service
centers.
We
achieve this balance of increased consumer flexibility and lower
consumer cost by aggregating demand for parking and other
automotive services and redistributing their fulfillment to
partners in the city and on city outskirt areas that have not
traditionally had access to lucrative city business. Beyond the
immediate unit economic benefits of securing bulk discounts from
vendor partners, we believe there is significant opportunity to
further vertically integrate such businesses along the supply chain
into our platform.
To
date, we operate primarily in the New York metropolitan area. In
May 2018, we expanded operations with our B2B business in San
Francisco and in June 2018 we expanded operations with our B2B
business in Washington DC, both new market expansions are with a
major original equipment manufacturer (“OEM”)
customer.
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On
the enterprise side, OEMs, dealers, and other service providers in
the automotive space are increasingly being challenged with
consumers who have limited time to bring in their vehicles for
maintenance and service, making it difficult to retain valuable
post-sale service contracts or scheduled consumer maintenance and
service appointments. Additionally, many of the vehicle support
centers for automotive providers (i.e., dealerships, including body
work and diagnostic shops) have moved out of urban areas thus
making it more challenging for OEMs and dealers in urban areas to
provide convenient and efficient service for their consumer and
business clientele. Similarly, shared mobility providers and other
fleet managers, such as rental car companies, face a similar urban
mobility challenge: getting cars to and from service bays,
rebalancing vehicle availability to meet demand and getting
vehicles from dealer lots to fleet locations.
While
our business-to-business (“B2B”) and
business-to-consumer (“B2C”) services generate revenue
and help meet the unmet demand for vehicle support services, we are
also building-out a platform and customer base that positions us
well for developments in the automotive space when vehicle
ownership becomes more subscription based with transportation
services and concierge options well-suited to match a
customer’s immediate needs. For example, certain car
manufacturers are testing new services in which customers pay the
manufacturer a flat fee per month to drive a number of different
models for any length of time.
WPCS
WPCS
provides low voltage communication infrastructure services. The
Company specializes in the installation and service of low voltage
communications, voice and data networks, security systems,
audio-visual solutions, and distributed antenna systems and provide
experienced project management and deliver complex projects to key
vertical markets that include healthcare, education,
transportation, energy and utilities, oil and gas, manufacturing,
commercial real estate, financial, and government.
Recent Developments
Reverse Merger and Exchange Ratio
On
January 30, 2018, DC Acquisition Corporation (“Merger
Sub”), a wholly-owned subsidiary of WPCS, completed its
merger with and into DropCar, Inc. (“Private DropCar”),
with Private DropCar surviving as a wholly owned subsidiary of
WPCS. This transaction is referred to as the “Reverse
Merger.” The Reverse Merger was effected pursuant to an
Agreement and Plan of Merger and Reorganization (the “Merger
Agreement”), dated September 6, 2017, by and among WPCS,
Private DropCar and Merger Sub.
As
a result of the Reverse Merger, each outstanding share of Private
DropCar share capital (including shares of Private DropCar share
capital to be issued upon the conversion of outstanding convertible
debt) automatically converted into the right to receive
approximately 0.3273 shares of WPCS’s common stock, par value
$0.0001 per share (the “Exchange Ratio”). Following the
closing of the Reverse Merger, holders of WPCS’s common stock
immediately prior to the Reverse Merger owned approximately 22.9%
on a fully diluted basis, and holders of Private DropCar common
stock immediately prior to the Reverse Merger owned approximately
77.1% on a fully diluted basis, of WPCS’s common
stock.
The
Reverse Merger has been accounted for as a reverse acquisition
under the acquisition method of accounting where Private DropCar is
considered the accounting acquirer and WPCS is the acquired company
for financial reporting purposes. Private DropCar was determined to
be the accounting acquirer based on the terms of the Merger
Agreement and other factors, such as relative voting rights and the
composition of the combined company’s board of directors and
senior management, which was deemed to have control. The
pre-acquisition financial statements of Private DropCar became the
historical financial statements of WPCS following the Reverse
Merger. The historical financial statement, outstanding shares and
all other historical share information have been adjusted by
multiplying the respective share amount by the Exchange Ratio as if
the Exchange Ratio had been in effect for all periods
presented.
Immediately
following the Reverse Merger, the combined company changed its name
from WPCS International Incorporation to DropCar, Inc. The combined
company following the Reverse Merger may be referred to herein as
“the combined company,” “DropCar,” or the
“Company.”
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The
Company’s shares of common stock listed on The Nasdaq Capital
Market, previously trading through the close of business on January
30, 2018 under the ticker symbol “WPCS,” commenced
trading on The Nasdaq Capital Market, on a post-Reverse Stock Split
adjusted basis, under the ticker symbol “DCAR” on
January 31, 2018.
Consumer Services Product Offering Change
In
July 2018, DropCar Operating began assessing demand for a Self-Park
Spaces monthly parking plan whereby consumers could designate
specific garages for their vehicles to be stored at a base monthly
rate, with 24/7 access for picking up and returning their vehicle
directly, and the option to pay a la carte on a per hour basis for
a driver to perform functions such as picking up and returning the
vehicle to the client’s front door. This model aligns more
directly with how the Company has structured the enterprise B2B
side of its business, where an interaction with a vehicle on behalf
of its drivers typically generates net new revenue. DropCar
Operating has decided that the Self-Park Spaces plan combined with
its on-demand valet service will be the only plans that it will
offer consumers from September 1, 2018 onwards. Subscriber plans
prior to this date will continue to receive service on a prorated
basis. Additionally, the Company is scaling back its 360 Services
for the Consumer portion of the market. As a result of this shift,
in August 2018, the Company has begun to significantly streamline
its field teams, operations and back office support tied to its
pre-September 1, 2018 consumer subscription plans.
Term Sheet for Sale of WPCS Business
On August 9, 2018 the Company entered into a term
sheet with the management of WPCS International Suisun City, Inc.
for the sale of select assets and liabilities of the
Company’s WPCS business for $3.5 million. It is anticipated
that the transaction will close in the 4th
quarter of 2018, however, there can be
no assurance that the sale will be consummated on the terms
previously negotiated or at all. The contemplated sales price is
exptected to be below the carrying value of the Company's goodwill
and intangibles In the event the transaction is consummated
under its current terms, the Company would record a material
impairment charge.
Issuance of Series J Warrants
On
August 31, 2018, the Company offered (the “Repricing Offer
Letter”) to the holders (the “Holders”) of the
Company’s outstanding Series H-4 Warrants to purchase common
stock of the Company issued on March 8, 2018 (the “Series H-4
Warrants”) the opportunity to exercise such Series H-4
Warrants for cash at a reduced exercise price of $0.60 per share
(the “Reduced Exercise Price”) provided such Series H-4
Warrants were exercised for cash on or before 5:00 P.M. Eastern
Daylight Time on September 4, 2018 (the “End Date”). In
addition, the Company issued a “reload” warrant (the
“Series J Warrants”) to each Holder who exercised their
Series H-4 Warrants prior to the End Date, covering one share for
each Series H-4 Warrant exercised during that period. The terms of
the Series J Warrants are substantially identical to the terms of
the Series H-4 Warrants except that (i) the exercise price is equal
to $1.00, (ii) the Series J Warrants may be exercised at all times
beginning on the 6-month anniversary of the issuance date on a cash
basis and also on a cashless basis as described in Section 2(d) of
the Series J Warrant, (iii) the Series J Warrants do not contain
any provisions for anti-dilution adjustment and (iv) the Company
has the right to require the Holders to exercise all or any portion
of the Series J Warrants still unexercised for a cash exercise if
the VWAP (as defined in the Series J Warrant) for the
Company’s common stock equals or exceeds $1.50 for not less
than ten consecutive trading days.
On
September 4, 2018, the Company received executed Repricing Offer
Letters from a majority of the Holders, which resulted in the
issuance of Series J Warrants to purchase up to 1,560,696 shares of
the Company’s common stock. The Company received gross
proceeds of approximately $937,000 from the exercise of the Series
H-4 Warrants pursuant to the terms of the Repricing Offer
Letter.
Company Information
We were incorporated in the State of Delaware on
December 18, 1997 under the name “Internet International
Communications Ltd.” Pursuant to a Certificate of Amendment
to our Certificate of Incorporation filed on December 23,
2004, our name was changed to “WPCS International
Incorporated.” On January 30, 2018, we
completed a business combination with DropCar, Inc., a then
privately held Delaware corporation (“Private
DropCar”), in accordance with the terms of a merger
agreement, pursuant to which a merger subsidiary merged with and
into Private DropCar, with Private DropCar surviving as our wholly
owned subsidiary (the “Merger”). On January 30, 2018,
immediately after completion of the Merger, we changed our name to
“DropCar, Inc.” The Merger was treated
as a reverse merger under the
acquisition method of accounting in accordance with U.S.
GAAP.
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Our principal corporate office is located at 1412
Broadway, Suite 2105, New York, New York 10018, telephone
(646) 342-1595. Our internet address
is www.dropcar.com.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to those reports,
are available to you free of charge through the
“Investors” section of our web site as soon as
reasonably practicable after such materials have been
electronically filed with, or furnished to, the Securities and
Exchange Commission. Information contained on our web site does not
form a part of this prospectus.
Offerings Under This Prospectus
Under this prospectus, we may offer shares of our
common stock, preferred stock, various series of debt securities
and/or warrants or rights to purchase any of such securities,
either individually or in units, with a total value of up
to $50,000,000, from time
to time at prices and on terms to be determined by market
conditions at the time of the offering. In addition to the
securities we may offer, the selling stockholders identified
in this prospectus may offer and sell from time to time up to
1,560,696 shares of our common stock underlying Series J Warrants
which were issued to the selling stockholders on September 5, 2018.
This prospectus provides you with a
general description of the securities we or the selling
stockholders may offer. Each time we or the selling stockholders
offer a type or series of securities under this prospectus, we or
the selling stockholders will provide a prospectus supplement that
will describe the specific amounts, prices and other important
terms of the securities, including, to the extent
applicable:
●
designation or
classification;
●
aggregate principal
amount or aggregate offering price;
●
maturity, if
applicable;
●
rates and times of
payment of interest or dividends, if any;
●
redemption,
conversion or sinking fund terms, if any;
●
voting or other
rights, if any; and
●
conversion or
exercise prices, if any.
The
prospectus supplement also may add, update or change information
contained in this prospectus or in documents incorporated by
reference into this prospectus. However, no prospectus supplement
will fundamentally change the terms that are set forth in this
prospectus or offer a security that is not registered and described
in this prospectus at the time of its effectiveness.
We
or the selling stockholders may sell the securities directly to
investors or to or through agents, underwriters or dealers. We, the
selling stockholders, and our respective agents or underwriters,
reserve the right to accept or reject all or part of any proposed
purchase of securities. If we or the selling stockholders offer
securities through agents or underwriters, we or the selling
stockholders, as applicable, will include in the applicable
prospectus supplement:
●
the names of those
agents or underwriters;
●
applicable fees,
discounts and commissions to be paid to them;
●
details regarding
over-allotment options, if any; and
●
the net proceeds to
us or the selling stockholders, as applicable.
This
prospectus may not be used to consummate a sale of any securities
unless it is accompanied by a prospectus supplement.
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RISK
FACTORS
Please carefully
consider the risk factors described in our periodic reports filed
with the SEC, which are incorporated by reference in this
prospectus. Before making an investment decision, you should
carefully consider these risks as well as other information we
include or incorporate by reference in this prospectus or include
in any applicable prospectus supplement. Additional risks and
uncertainties not presently known to us or that we deem currently
immaterial may also impair our business operations or adversely
affect our results of operations or financial
condition.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus
contains forward-looking statements that involve substantial risks
and uncertainties. All statements, other than statements of
historical facts, contained in this prospectus, including
statements regarding our future results of operations and financial
position, business strategy and plans and objectives of management
for future operations, are forward-looking statements. The words
“may,” “will,” “should,”
“expects,” “plans,”
“anticipates,” “could,”
“intends,” “target,”
“projects,” “contemplates,”
“believes,” “estimates,”
“predicts,” “potential” or
“continue” or the negative of these terms or other
similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain
these identifying words.
The forward-looking
statements in this prospectus include, among other things,
statements about:
●
our ability to
obtain adequate financing to meet our future operational and
capital needs;
●
our ability to
continue as a going concern without additional
financing;
●
the timing of and
our ability to obtain marketing approval of our product candidates,
and the ability of our product candidates to meet existing or
future regulatory standards;
●
our ability to
comply with government laws and regulations;
●
our
commercialization, marketing and manufacturing capabilities and
strategy;
●
our estimates
regarding the potential market opportunity for our product
candidates;
●
the timing of or
our ability to enter into partnerships to market and commercialize
our product candidates;
●
the rate and degree
of market acceptance of any product candidate for which we receive
marketing approval;
●
our intellectual
property position;
●
our estimates
regarding expenses, future revenues, capital requirements and needs
for additional funding and our ability to obtain additional
funding;
●
the success of
competing treatments; and
●
our competitive
position.
We may not actually
achieve the plans, intentions or expectations disclosed in our
forward-looking statements, and you should not place undue reliance
on our forward-looking statements. Actual results or events could
differ materially from the plans, intentions and expectations
disclosed in the forward-looking statements we make. We have
included important factors in the cautionary statements included in
this prospectus, particularly in the “Risk Factors”
section, as well as the risk factors incorporated by reference in
this prospectus, discussed under “Item 1A-Risk
Factors” contained in our
Current Report on Form 8-K/A filed with the SEC on April 2,
2018, and under similar headings in our subsequently filed
quarterly reports on Form 10-Q and annual reports on
Form 10-K, that could cause actual results or events to differ
materially from the forward-looking statements that we make. Our
forward-looking statements do not reflect the potential impact of
any future acquisitions, mergers, dispositions, joint ventures or
investments we may make.
You should read
this prospectus and the documents that we have filed as exhibits to
this prospectus completely and with the understanding that our
actual future results may be materially different from what we
expect. We do not assume any obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable
law.
This prospectus
includes statistical and other industry and market data that we
obtained from industry publications and research, surveys and
studies conducted by third parties. Industry publications and
third-party research, surveys and studies generally indicate
that their information has been obtained from sources believed to
be reliable, although they do not guarantee the accuracy or
completeness of such information.
RATIO
OF EARNINGS TO FIXED CHARGES
Any time debt
securities are offered pursuant to this prospectus, we will provide
a table setting forth our ratio of earnings to fixed charges on a
historical basis in the applicable prospectus supplement, if
required.
USE
OF PROCEEDS
We cannot assure
you that we will receive any proceeds in connection with securities
which may be offered pursuant to this prospectus. Unless otherwise
indicated in the applicable prospectus supplement, we intend to use
any net proceeds from the sale of securities under this prospectus
for our operations and for other general corporate purposes,
including, but not limited to, general working capital and possible
future acquisitions. We have not determined the amounts we plan to
spend on any of the areas listed above or the timing of these
expenditures. As a result, our management will have broad
discretion to allocate the net proceeds, if any, we receive in
connection with securities offered pursuant to this prospectus for
any purpose. Pending application of the net proceeds as described
above, we may initially invest the net proceeds in short-term,
investment-grade, interest-bearing securities or apply them to the
reduction of short-term indebtedness.
We will not receive
any proceeds in connection with sales by any selling
stockholder.
PLAN
OF DISTRIBUTION
General
Plan of Distribution
We may offer
securities under this prospectus from time to time pursuant to
underwritten public offerings, negotiated transactions, block
trades or a combination of these methods. We may sell the
securities (1) through underwriters or dealers,
(2) through agents or (3) directly to one or more
purchasers, or through a combination of such methods. We may
distribute the securities from time to time in one or more
transactions at:
●
a fixed price or
prices, which may be changed from time to time;
●
market prices
prevailing at the time of sale;
●
prices related to
the prevailing market prices; or
We may directly
solicit offers to purchase the securities being offered by this
prospectus. We may also designate agents to solicit offers to
purchase the securities from time to time. We will name in a
prospectus supplement any underwriter or agent involved in the
offer or sale of the securities.
If we utilize a
dealer in the sale of the securities being offered by this
prospectus, we will sell the securities to the dealer, as
principal. The dealer may then resell the securities to the public
at varying prices to be determined by the dealer at the time of
resale.
If we utilize an
underwriter in the sale of the securities being offered by this
prospectus, we will execute an underwriting agreement with the
underwriter at the time of sale, and we will provide the name of
any underwriter in the prospectus supplement which the underwriter
will use to make re-sales of the securities to the public. In
connection with the sale of the securities, we, or the purchasers
of the securities for whom the underwriter may act as agent, may
compensate the underwriter in the form of underwriting discounts or
commissions. The underwriter may sell the securities to or through
dealers, and the underwriter may compensate those dealers in the
form of discounts, concessions or commissions.
With respect to
underwritten public offerings, negotiated transactions and block
trades, we will provide in the applicable prospectus supplement
information regarding any compensation we pay to underwriters,
dealers or agents in connection with the offering of the
securities, and any discounts, concessions or commissions allowed
by underwriters to participating dealers. Underwriters, dealers and
agents participating in the distribution of the securities may be
deemed to be underwriters within the meaning of the Securities Act
of 1933, as amended, or the Securities Act, and any discounts and
commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts
and commissions. We may enter into agreements to indemnify
underwriters, dealers and agents against civil liabilities,
including liabilities under the Securities Act, or to contribute to
payments they may be required to make in respect
thereof.
If so indicated in
the applicable prospectus supplement, we will authorize
underwriters or other persons acting as our agents to solicit
offers by certain institutions to purchase securities from us
pursuant to delayed delivery contracts providing for payment and
delivery on the date stated in the prospectus supplement. Each
contract will be for an amount not less than, and the aggregate
amount of securities sold pursuant to such contracts shall not be
less nor more than, the respective amounts stated in the prospectus
supplement. Institutions with whom the contracts, when authorized,
may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but shall in all
cases be subject to our approval. Delayed delivery contracts will
not be subject to any conditions except that:
●
the purchase by an
institution of the securities covered under that contract shall not
at the time of delivery be prohibited under the laws of the
jurisdiction to which that institution is subject; and
●
if the securities
are also being sold to underwriters acting as principals for their
own account, the underwriters shall have purchased such securities
not sold for delayed delivery. The underwriters and other persons
acting as our agents will not have any responsibility in respect of
the validity or performance of delayed delivery
contracts.
Shares of our
common stock sold pursuant to the registration statement of which
this prospectus is a part will be authorized for quotation and
trading on The Nasdaq Capital Market. The applicable prospectus
supplement will contain information, where applicable, as to any
other listing, if any, on The Nasdaq Capital Market or any
securities market or other securities exchange of the securities
covered by the prospectus supplement. We can make no assurance as
to the liquidity of or the existence of trading markets for any of
the securities.
In order to
facilitate the offering of the securities, certain persons
participating in the offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the
securities. This may include over-allotments or short sales of the
securities, which involve the sale by persons participating in the
offering of more securities than we sold to them. In these
circumstances, these persons would cover such over-allotments or
short positions by making purchases in the open market or by
exercising their over-allotment option. In addition, these persons
may stabilize or maintain the price of the securities by bidding
for or purchasing the applicable security in the open market or by
imposing penalty bids, whereby selling concessions allowed to
dealers participating in the offering may be reclaimed if the
securities sold by them are repurchased in connection with
stabilization transactions. The effect of these transactions may be
to stabilize or maintain the market price of the securities at a
level above that which might otherwise prevail in the open market.
These transactions may be discontinued at any time.
In compliance with
the guidelines of the Financial Industry Regulatory
Authority, Inc., or FINRA, the maximum consideration or
discount to be received by any FINRA member or independent broker
dealer may not exceed 8% of the aggregate amount of the securities
offered pursuant to this prospectus and any applicable prospectus
supplement.
The underwriters,
dealers and agents may engage in other transactions with us, or
perform other services for us, in the ordinary course of their
business.
The selling
stockholders may from time to time sell their shares of our common
stock listed in the table under “Selling Stockholders.”
The selling stockholders, including their transferees, may sell
their shares directly to purchasers or through underwriter,
broker-dealers or agents, who may receive compensation in the form
of discounts, concessions, or commissions from the selling
stockholders or the purchasers of the shares. In the case of sales by the selling
stockholders, we will not receive any
of the proceeds from the sale by them of their shares. Unless
otherwise described in an applicable prospectus supplement, the
description herein of sales by us regarding underwriters, dealers
and agents will apply similarly to sales by the selling
stockholders through underwriters,
dealers and agents. We will name any underwriters, dealers or
agents acting for the selling stockholders in a prospectus supplement and describe the
principal terms of the agreement between the selling
stockholders and any such
underwriters, dealers or agents.
In addition, any shares that qualify for sale
pursuant to Rule 144 under the Securities Act, may be sold by
the selling stockholders under
Rule 144 rather than pursuant to this
prospectus.
In order to comply with the securities laws of
some states, if applicable, the securities may be sold in those
jurisdictions only through registered or licensed brokers or
dealers. In offering their shares covered by this prospectus,
the selling stockholders and
any underwriters, broker-dealers or agents that participate in the
sale of those shares may be “underwriters” within the
meaning of Section 2(a)(11) of the Securities Act. Any discounts,
commissions, concessions or profit they earn on any resale of such
shares may be underwriting discounts or commissions under the
Securities Act. Any selling stockholder who is an “underwriter” within the
meaning of Section 2(a)(11) of the Securities Act will be subject
to the prospectus delivery requirements of the Securities Act.
The selling stockholders will
be obligated to comply with the applicable provisions of the
Exchange Act and the rules and regulations thereunder, including
without limitation Regulation M under the Exchange
Act.
DESCRIPTION
OF CAPITAL STOCK
General
The following
description of our capital stock and provisions of our amended and
restated certificate of incorporation, as amended
(“Certificate of Incorporation”), and amended and
restated bylaws (“Bylaws”), are summaries and are
qualified by reference to the Certificate of Incorporation and the
Bylaws that are on file with the SEC.
We
are authorized to issue up to 100,000,000 shares of common stock
and up to 5,000,000 shares of preferred stock with the rights,
preferences and privileges determined by our board of directors
from time to time. Based on our capitalization as of October 9,
2018, we had issued and outstanding:
●
8,884,411 shares of our common stock held
by 39 stockholders of record;
●
29,040 shares of our convertible preferred
stock held by 16 stockholders
of record; and
●
8,739,460 shares of our common stock reserved for future
issuance as follows: (i) 1,020,539 shares for issuance upon
exercise of stock options granted under the WPCS International Incorporated Amended and
Restated 2014 Equity Incentive Plan, at a weighted
average exercise price of $4.58 per share, all of which are
issuable upon exercise of currently outstanding options, subject to
vesting; (ii) 1,467,858 shares for issuance upon exercise of
restricted stock units granted under the WPCS International Incorporated Amended and
Restated 2014 Equity Incentive Plan, all of which are
issuable upon vesting of currently outstanding restricted stock
units; (iii) 2,739,225 shares for issuance upon conversion of the
outstanding shares of our convertible preferred stock; and (iv)
3,511,838 shares for issuance
upon exercise of the outstanding warrants.
Common
Stock
Holders of our
common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have
cumulative voting rights. Each election of directors by our
stockholders will be determined by a plurality of the votes cast by
the stockholders entitled to vote on the election. Holders of
common stock are entitled to receive proportionately any dividends
as may be declared by our board of directors, subject to any
preferential dividend rights of outstanding preferred
stock.
In the event of our
liquidation or dissolution, the holders of our common stock are
entitled to receive proportionately all assets available for
distribution to stockholders after the payment of all debts and
other liabilities and subject to the prior rights of any of our
outstanding preferred stock. Holders of our common stock have no
preemptive, subscription, redemption or conversion rights. The
rights, preferences and privileges of holders of our common stock
are subject to and may be adversely affected by the rights of the
holders of shares of any series of our preferred stock that we may
designate and issue in the future.
Preferred
Stock
Under the terms of
our Certificate of Incorporation, our board of directors is
authorized to issue shares of preferred stock in one or more series
without stockholder approval. Our board of directors has the
discretion to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights, conversion
rights, redemption privileges and liquidation preferences, of each
series of preferred stock.
The purpose of
authorizing our board of directors to issue preferred stock and
determine its rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The
issuance of preferred stock, while providing flexibility in
connection with possible acquisitions, future financings and other
corporate purposes, could have the effect of making it more
difficult for a third party to acquire, or could discourage a third
party from seeking to acquire, a majority of our outstanding voting
stock.
Series H Convertible Preferred Stock
On
June 30, 2015, we entered into Amendment, Waiver and Exchange
Agreements (the “Exchange Agreements”) with certain of
our promissory note holders, who held $1,299,000 in principal
amount of unsecured promissory notes of ours. Pursuant to the terms
of the Exchange Agreements, the holders of such notes agreed to
exchange all the existing indebtedness for, and we agreed to issue
to the holders, an aggregate of 8,435 shares of Series H
Convertible Preferred Stock, par value $0.0001 per share
(“Series H Stock”). On June 30, 2015, we filed
with the Secretary of State of the State of Delaware a Certificate
of Designations, Preferences and Rights of the Series H Convertible
Preferred Stock (the “Series H Certificate of
Designation”). Under the terms of the Series H Certificate of
Designation, each share of Series H Stock has a stated value
of $154 and is convertible into shares of our common stock,
equal to the stated value divided by the conversion price of $1.54
per share (subject to adjustment in the event of stock splits or
dividends). We are prohibited from effecting the conversion of the
Series H Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 9.99%, in the
aggregate, of the issued and outstanding shares of our common stock
calculated immediately after giving effect to the issuance of
shares of our common stock upon such conversion.
As of October 9,
2018, there were 8 shares of Series H
Stock issued and outstanding.
Series H-3 Convertible Preferred Stock
On
March 30, 2017, we entered into a Securities Purchase
Agreement (the “Series H-3 Securities Purchase
Agreement”) with five investors (the “Series H-3
Investors”) pursuant to which we issued to the Series H-3
Investors an aggregate of 7,017 shares of Series H-3 Preferred
Convertible Stock, par value $0.0001 per share (the “Series
H-3 Stock”), and warrants to purchase 1,101,751 shares of
common stock, with an exercise price of $1.38 per share (the
“Series H-3 Warrants”). The purchase price for each
share of Series H-3 Stock was $138 and the purchase price for each
Series H-3 Warrant was $0.1250, for aggregate gross proceeds of
$1,100,000.
On
March 30, 2017, we filed with the Secretary of State of the
State of Delaware a Certificate of Designations, Preferences and
Rights of the Series H-3 Stock (the “Series H-3 Certificate
of Designation”). Under the terms of the Series H-3
Certificate of Designation, each share of the Series H-3 Stock has
a stated value of $138 and is convertible into shares of
common stock, equal to the stated value divided by the conversion
price of $1.38 per share (subject to adjustment in the event
of stock splits and dividends). We are prohibited from effecting
the conversion of the Series H-3 Stock to the extent that, as a
result of such conversion, the holder or any of its affiliates
would beneficially own more than 9.99%, in the aggregate, of the
issued and outstanding shares of common stock calculated
immediately after giving effect to the issuance of shares of common
stock upon the conversion of the Series H-3 Stock.
As of October 9,
2018, there were 2,189 shares of
Series H-3 Stock issued and outstanding.
Series H-4 Convertible Preferred Stock
On March 8, 2018, we entered into a Securities Purchase Agreement
(the “Securities Purchase Agreement”) with certain
institutional and accredited investors (collectively, the
“Investors”), pursuant to which we issued to the
Investors an aggregate of 26,843 shares (the “Series H-4
Shares”) of our Series H-4 Convertible Preferred Stock, par
value $0.0001 per share (the “Series H-4 Stock”), and
warrants to purchase 2,684,300 shares of our common stock, with an
exercise price of $2.60 per share, subject to adjustments (the
“Series H-4 Warrants”). The purchase price per Series
H-4 Share was $235.50, equal to (i) the closing price of our common
stock on The Nasdaq Capital Market (“Nasdaq”) on March
7, 2018, plus $0.125 multiplied by (ii) 100. The aggregate purchase
price for the Series H-4 Shares and Series H-4 Warrants was
approximately $6.0 million. The Series H-4 Shares are convertible
into 2,684,300 shares of our common stock.
On
September 5, 2018, we received a request from Nasdaq to amend our
Certificate of Designations, Preferences and Rights of the Series
H-4 Convertible Preferred Stock, originally filed with the
Secretary of State of the State of Delaware on March 8, 2018 (the
“Certificate of Designations”) to provide that the
Series H-4 Stock may not be converted into shares of our common
stock until we obtain stockholder approval of the issuance of the
common stock underlying the Series H-4 Stock pursuant to the
applicable rules and regulations of Nasdaq. On September 10, 2018,
we filed a Certificate of Amendment (the “COD
Amendment”) to the Certificate of Designations to provide for
stockholder approval as described above prior to the conversion of
the Series H-4 Stock.
As of October 9,
2018, there were 26,843 shares of
Series H-4 Stock issued and outstanding.
Options
As of October 9,
2018, we had outstanding options to purchase 1,020,539 shares of
our common stock, at a weighted average exercise price of $4.58 per
share.
Restricted Stock Units
As of October 9,
2018, we had outstanding restricted stock units to purchase
1,467,858 shares of our common stock.
Warrants
As of October 9,
2018, we had outstanding warrants to
purchase an aggregate of 3,511,838 shares of our common stock with exercise
prices ranging from $0.60 to $5.52, with an approximate weighted average exercise
price of $1.48 per
share. The classes of warrants are described
below.
Merger Warrants
On April 19, 2018, we entered into separate
Warrant Exchange Agreements (the “Exchange Agreements”)
with the holders (the “Merger Warrant Holders”) of
existing merger warrants (the “Merger Warrants”) to
purchase shares of our common stock, pursuant to which the Merger
Warrant Holders exchanged each Merger Warrant for
1/3rd of
a share of Common Stock (collectively, the “New
Shares”) and ½ of a warrant to purchase a share of our
common stock (collectively, the “Series I Warrants”).
In connection with the Exchange Agreements, we issued an aggregate
of (i) 292,714 New Shares and (ii) Series I Warrants to purchase an
aggregate of 439,070 shares of our common stock. The closing took
place on May 16, 2018.
The
Series I Warrants have an exercise price of $2.30 per share
(reflecting 110% of the market value of our common stock on The
Nasdaq Capital Market as of the close of trading on April 18, 2018,
prior to the entry into the Warrant Exchange Agreements), and do
not contain any price-based anti-dilution protections. In addition,
the Series I Warrants are exercisable for three years from the date
of issuance and contain a mandatory exercise feature if (i) the
volume weighted average price of our common stock equals or exceeds
$4.60 (subject to appropriate adjustments for stock splits, stock
dividends, recapitalizations, reorganizations, reclassifications,
combinations, reverse stock splits or other similar transactions
after the issuance date) for not less than ten (10) consecutive
trading days (the “Mandatory Exercise Measuring
Period”); (ii) the daily average number of shares of our
common stock traded during the Mandatory Exercise Measuring Period
equals or exceeds 150,000 (subject to appropriate adjustments for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassifications, combinations, reverse stock splits or other
similar transactions after the issuance date); and (iii) no Equity
Conditions Failure (as defined in the form of Series I Warrant) has
occurred (unless the holder has waived such Equity Conditions
Failure).
The Merger Warrants were originally issued
pursuant to an Agreement and Plan of Merger and Reorganization,
dated as of September 6, 2017, as subsequently amended, by and
among us, DC Acquisition Corporation (“Merger Sub”) and
DropCar Operating Company, Inc. (formerly known as DropCar, Inc.)
(“Private DropCar”), 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 Merger was completed on January 30,
2018. The Merger Warrants, which are exercisable to purchase up to
878,146 shares of Common Stock, were issued in exchange for
previously outstanding Private DropCar warrants and have terms
identical to the terms of the Private DropCar warrants for which
they were exchanged, except that the number of shares covered by
the Merger Warrants and the exercise price per share were adjusted
for an exchange ratio of 0.3273.
As of October
9,2018, there were 0 Merger Warrants issued and
outstanding.
Series H-1 Warrants
During July 2015, we
issued warrants to purchase 1,279,759 shares of our common stock, with exercise prices
between $1.63 and $1.66 per share, subject to adjustments (the
“Series H-1 Warrants”). Subject to certain
ownership limitations, the Series H-1 Warrants are immediately
exercisable from the issuance date and will be exercisable for a
period of five years from the issuance date.
As
of October 9, 2018, there were 304,464 Series H-1 Warrants issued
and outstanding.
Series H-3 Warrants
As described above
under “Description of Capital Stock – Preferred
Stock” in connection with the issuance of the Series H-3
Shares, on March 30, 2017, we issued warrants to purchase 1,101,751
shares of our common stock, with an exercise price of $1.38 per
share, subject to adjustments (the “Series H-3
Warrants”). Subject
to certain ownership limitations, the Series H-3 Warrants are
immediately exercisable from the issuance date and will be
exercisable for a period of five years from the issuance
date.
As
of October 9, 2018, there were 84,004 Series H-3 Warrants issued
and outstanding.
Series H-4 Warrants
As described above under “Description of
Capital Stock - Preferred Stock,” in connection with the issuance of the Series H-4
Shares, on March 8, 2018, we issued warrants to purchase
2,684,300 shares of our common
stock, with an exercise
price of $2.60 per share, subject to adjustments (the “Series
H-4 Warrants”). Subject to certain ownership limitations, the
Series H-4 Warrants are immediately exercisable from the issuance
date and will be exercisable for a period of five years from the
issuance date.
On
September 5, 2018, in connection with the Repricing Offer Letter
described below, we received a request from Nasdaq to amend our
Series H-4 Warrants to provide that the Series H-4 Warrants may not
be exercised until we have obtained stockholder approval of the
issuance of our common stock underlying the Series H-4 Warrants
pursuant to the applicable rules and regulations of Nasdaq. On
September 10, 2018, we entered into an amendment (the
“Warrant Amendment”) with the holders of our Series H-4
Warrants to provide for stockholder approval as described above
prior to the exercise of the Series H-4 Warrants.
As of October 9,
2018, there were 1,123,604 Series H-4
Warrants issued and outstanding.
Series J Warrants
On
August 31, 2018, we offered (the “Repricing Offer
Letter”) to the holders (the “H-4 Holders”) of
our Series H-4 Warrants the opportunity to exercise such Series H-4
Warrants for cash at a reduced exercise price of $0.60 per share
(the “Reduced Exercise Price”) provided such Series H-4
Warrants were exercised for cash on or before 5:00 P.M. Eastern
Daylight Time on September 4, 2018 (the “End Date”). In
addition, we issued a “reload” warrant (the
“Series J Warrants”) to each H-4 Holder who exercised
their Series H-4 Warrants prior to the End Date, covering one share
for each Series H-4 Warrant exercised during that period. The terms
of the Series J Warrants are substantially identical to the terms
of the Series H-4 Warrants except that (i) the exercise price is
equal to $1.00, (ii) the Series J Warrants may be exercised at all
times beginning on the 6-month anniversary of the issuance date on
a cash basis and also on a cashless basis as described in Section
2(d) of the Series J Warrant, (iii) the Series J Warrants do not
contain any provisions for anti-dilution adjustment and (iv) we
have the right to require the holders to exercise all or any
portion of the Series J Warrants still unexercised for a cash
exercise if the VWAP (as defined in the Series J Warrant) for our
common stock equals or exceeds $1.50 for not less than ten
consecutive trading days.
On
September 4, 2018, we received executed Repricing Offer Letters
from a majority of the Holders, which resulted in the issuance of
Series J Warrants to purchase up to 1,560,696 shares of our common
stock. We received gross proceeds of approximately $937,000 from
the exercise of the Series H-4 Warrants pursuant to the terms of
the Repricing Offer Letter.
As of October 9,
2018, there were 1,560,696 Series J
Warrants issued and outstanding.
Anti-Takeover Effects of Certain Provisions of Delaware Law and Our
Certificate of Incorporation and Bylaws
Delaware Law
We are subject to
Section 203 of the Delaware General Corporation Law, which
prohibits a publicly-held Delaware corporation from engaging in a
business combination with an interested stockholder, generally a
person which together with its affiliates owns, or within the last
three years has owned, 15% of our voting stock, for a period of
three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination
is approved in a prescribed manner. Subject to certain exceptions,
Section 203 prevents a publicly held Delaware corporation from
engaging in a “business combination” with any
“interested stockholder” for three years following the
date that the person became an interested stockholder, unless
either the interested stockholder attained such status with the
approval of our board of directors, the business combination is
approved by our board of directors and stockholders in a prescribed
manner or the interested stockholder acquired at least 85% of our
outstanding voting stock in the transaction in which it became an
interested stockholder. A “business combination”
includes, among other things, a merger or consolidation involving
us and the “interested stockholder” and the sale of
more than 10% of our assets. In general, an “interested
stockholder” is any entity or person beneficially owning 15%
or more of our outstanding voting stock and any entity or person
affiliated with or controlling or controlled by such entity or
person. The restrictions contained in Section 203 are not
applicable to any of our existing stockholders that owned 15% or
more of our outstanding voting stock upon the closing of our
IPO.
Potential Effects of Authorized but Unissued Stock
We
have shares of common stock and preferred stock available for
future issuance without stockholder approval. We may utilize these
additional shares for a variety of corporate purposes, including
future public offerings to raise additional capital, to facilitate
corporate acquisitions or payment as a dividend on the capital
stock.
The existence of unissued and unreserved common
stock and preferred stock may enable our Board of Directors to
issue shares to persons friendly to current management or to issue
preferred stock with terms that could render more difficult or
discourage a third-party attempt to obtain control of us by means
of a merger, tender offer, proxy contest or otherwise, thereby
protecting the continuity of our management. In addition, the Board
of Directors has the discretion to determine designations, rights,
preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and
liquidation preferences of each series of preferred stock, all to
the fullest extent permissible under the Delaware General
Corporation Law and subject to any limitations set forth in
our Certificate of Incorporation. The purpose of authorizing the Board of
Directors to issue preferred stock and to determine the rights and
preferences applicable to such preferred stock is to eliminate
delays associated with a stockholder vote on specific issuances.
The issuance of preferred stock, while providing desirable
flexibility in connection with possible financings, acquisitions
and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or could discourage a
third party from acquiring, a majority of our outstanding voting
stock.
Limitations of Director Liability and Indemnification of Directors,
Officers and Employees
Section 145
of the Delaware General Corporation Law, permits indemnification of
directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a
director, officer or agent of the corporation or another enterprise
if serving at the request of the Company. Depending on the
character of the proceeding, a corporation may indemnify against
expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding if the person
indemnified acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to, the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct
was unlawful. In the case of an action by or in the right of the
corporation, no indemnification may be made with respect to any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action
or suit was brought shall determine that despite the adjudication
of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a present or
former director or officer of a corporation has been successful in
the defense of any action, suit or proceeding referred to above or
in the defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys’
fees) actually and reasonably incurred by such person in connection
therewith.
Transfer
Agent and Registrar
The transfer agent
and registrar for our common stock is Issuer Direct Corporation.
Nasdaq
Capital Market Listing
Our common stock
has been publicly traded on The Nasdaq Capital Market under the
symbol “DCAR.”
DESCRIPTION
OF DEBT SECURITIES
The following
description, together with the additional information we include in
any applicable prospectus supplements, summarizes the material
terms and provisions of the debt securities that we may offer under
this prospectus. While the terms we have summarized below will
apply generally to any future debt securities we may offer pursuant
to this prospectus, we will describe the particular terms of any
debt securities that we may offer in more detail in the applicable
prospectus supplement. If we so indicate in a prospectus
supplement, the terms of any debt securities offered under such
prospectus supplement may differ from the terms we describe below,
and to the extent the terms set forth in a prospectus supplement
differ from the terms described below, the terms set forth in the
prospectus supplement shall control.
We may sell from
time to time, in one or more offerings under this prospectus, debt
securities, which may be senior or subordinated. We will issue any
such senior debt securities under a senior indenture that we will
enter into with a trustee to be named in the senior indenture. We
will issue any such subordinated debt securities under a
subordinated indenture, which we will enter into with a trustee to
be named in the subordinated indenture. We use the term
“indentures” to refer to either the senior indenture or
the subordinated indenture, as applicable. The indentures will be
qualified under the Trust Indenture Act of 1939, as in effect on
the date of the indenture. We use the term “debenture
trustee” to refer to either the trustee under the senior
indenture or the trustee under the subordinated indenture, as
applicable.
The following
summaries of material provisions of the senior debt securities, the
subordinated debt securities and the indentures are subject to, and
qualified in their entirety by reference to, all the provisions of
the indenture applicable to a particular series of debt
securities.
General
Each indenture will
provide that debt securities may be issued from time to time in one
or more series and may be denominated and payable in foreign
currencies or units based on or relating to foreign currencies.
Neither indenture will limit the amount of debt securities that may
be issued thereunder, and each indenture will provide that the
specific terms of any series of debt securities shall be set forth
in, or determined pursuant to, an authorizing resolution and/or a
supplemental indenture, if any, relating to such
series.
We will describe in
each prospectus supplement the following terms relating to a series
of debt securities:
●
the title or
designation;
●
the aggregate
principal amount and any limit on the amount that may be
issued;
●
the currency or
units based on or relating to currencies in which debt securities
of such series are denominated and the currency or units in which
principal or interest or both will or may be payable;
●
whether we will
issue the series of debt securities in global form, the terms of
any global securities and who the depositary will be;
●
the maturity date
and the date or dates on which principal will be
payable;
●
the interest rate,
which may be fixed or variable, or the method for determining the
rate and the date interest will begin to accrue, the date or dates
interest will be payable and the record dates for interest payment
dates or the method for determining such dates;
●
whether or not the
debt securities will be secured or unsecured, and the terms of any
secured debt;
●
the terms of the
subordination of any series of subordinated debt;
●
the place or places
where payments will be payable;
●
our right, if any,
to defer payment of interest and the maximum length of any such
deferral period;
●
the date, if any,
after which, and the price at which, we may, at our option, redeem
the series of debt securities pursuant to any optional redemption
provisions;
●
the date, if any,
on which, and the price at which we are obligated, pursuant to any
mandatory sinking fund provisions or otherwise, to redeem, or at
the holder’s option to purchase, the series of debt
securities;
●
whether the
indenture will restrict our ability to pay dividends, or will
require us to maintain any asset ratios or reserves;
●
whether we will be
restricted from incurring any additional indebtedness;
●
a discussion on any
material or special U.S. federal income tax considerations
applicable to a series of debt securities;
●
the denominations
in which we will issue the series of debt securities, if other than
denominations of $1,000 and any integral multiple thereof;
and
●
any other specific
terms, preferences, rights or limitations of, or restrictions on,
the debt securities.
We may issue debt
securities that provide for an amount less than their stated
principal amount to be due and payable upon declaration of
acceleration of their maturity pursuant to the terms of the
indenture. We will provide you with information on the federal
income tax considerations and other special considerations
applicable to any of these debt securities in the applicable
prospectus supplement.
Conversion
or Exchange Rights
We will set forth
in the prospectus supplement the terms, if any, on which a series
of debt securities may be convertible into or exchangeable for our
common stock or our other securities. We will include provisions as
to whether conversion or exchange is mandatory, at the option of
the holder or at our option. We may include provisions pursuant to
which the number of shares of our common stock or our other
securities that the holders of the series of debt securities
receive would be subject to adjustment.
Information
Concerning the Debenture Trustee
The debenture
trustee, other than during the occurrence and continuance of an
event of default under the applicable indenture, undertakes to
perform only those duties as are specifically set forth in the
applicable indenture. Upon an event of default under an indenture,
the debenture trustee under such indenture must use the same degree
of care as a prudent person would exercise or use in the conduct of
his or her own affairs. Subject to this provision, the debenture
trustee is under no obligation to exercise any of the powers given
it by the indentures at the request of any holder of debt
securities unless it is offered reasonable security and indemnity
against the costs, expenses and liabilities that it might
incur.
Payment
and Paying Agents
Unless we otherwise
indicate in the applicable prospectus supplement, we will make
payment of the interest on any debt securities on any interest
payment date to the person in whose name the debt securities, or
one or more predecessor securities, are registered at the close of
business on the regular record date for the interest.
We will pay
principal of and any premium and interest on the debt securities of
a particular series at the office of the paying agents designated
by us, except that unless we otherwise indicate in the applicable
prospectus supplement, we will make interest payments by check
which we will mail to the holder. Unless we otherwise indicate in a
prospectus supplement, we will designate the corporate trust office
of the debenture trustee in the City of New York as our sole paying
agent for payments with respect to debt securities of each series.
We will name in the applicable prospectus supplement any other
paying agents that we initially designate for the debt securities
of a particular series. We will maintain a paying agent in each
place of payment for the debt securities of a particular
series.
All money we pay to
a paying agent or the debenture trustee for the payment of the
principal of or any premium or interest on any debt securities
which remains unclaimed at the end of two years after such
principal, premium or interest has become due and payable will be
repaid to us, and the holder of the security thereafter may look
only to us for payment thereof.
Governing
Law
The indentures and
the debt securities will be governed by and construed in accordance
with the laws of the State of New York, except to the extent that
the Trust Indenture Act is applicable.
Subordination
of Subordinated Debt Securities
Our obligations
pursuant to any subordinated debt securities will be unsecured and
will be subordinate and junior in priority of payment to certain of
our other indebtedness to the extent described in a prospectus
supplement. The subordinated indenture does not limit the amount of
senior indebtedness we may incur. It also does not limit us from
issuing any other secured or unsecured debt.
DESCRIPTION OF WARRANTS
General
We may issue
warrants to our stockholders to purchase shares of our common
stock. We may offer warrants separately or together with one or
more debt securities, common stock or rights, or any combination of
those securities in the form of units, as described in the
applicable prospectus supplement. Each series of warrants will be
issued under a separate warrant agreement to be entered into
between us and a bank or trust company, as warrant agent. The
warrant agent will act solely as our agent in connection with the
certificates relating to the rights of the series of certificates
and will not assume any obligation or relationship of agency or
trust for or with any holders of rights certificates or beneficial
owners of rights. The following description sets forth certain
general terms and provisions of the rights to which any prospectus
supplement may relate. The particular terms of the warrant to which
any prospectus supplement may relate and the extent, if any, to
which the general provisions may apply to the rights so offered
will be described in the applicable prospectus supplement. To the
extent that any particular terms of the warrant, warrant agreement
or warrant certificates described in a prospectus supplement differ
from any of the terms described below, then the terms described
below will be deemed to have been superseded by that prospectus
supplement. We encourage you to read the applicable warrant
agreement and warrant certificate for additional information before
you decide whether to purchase any of our rights.
We will provide in
a prospectus supplement the following terms of the warrants being
issued:
●
the specific
designation and aggregate number of, and the price at which we will
issue, the warrants;
●
the currency or
currency units in which the offering price, if any, and the
exercise price are payable;
●
the designation,
amount and terms of the securities purchasable upon exercise of the
warrants;
●
if applicable, the
exercise price for shares of our common stock and the number of
shares of common stock to be received upon exercise of the
warrants;
●
if applicable, the
exercise price for shares of our preferred stock, the number of
shares of preferred stock to be received upon exercise, and a
description of that series of our preferred stock;
●
if applicable, the
exercise price for our debt securities, the amount of debt
securities to be received upon exercise, and a description of that
series of debt securities;
●
the date on which
the right to exercise the warrants will begin and the date on which
that right will expire or, if you may not continuously exercise the
warrants throughout that period, the specific date or dates on
which you may exercise the warrants;
●
whether the
warrants will be issued in fully registered form or bearer form, in
definitive or global form or in any combination of these forms,
although, in any case, the form of a warrant included in a unit
will correspond to the form of the unit and of any security
included in that unit;
●
any applicable
material U.S. federal income tax consequences;
●
the identity of the
warrant agent for the warrants and of any other depositaries,
execution or paying agents, transfer agents, registrars or other
agents;
●
the proposed
listing, if any, of the warrants or any securities purchasable upon
exercise of the warrants on any securities exchange;
●
if applicable, the
date from and after which the warrants and the common stock,
preferred stock and/or debt securities will be separately
transferable;
●
if applicable, the
minimum or maximum amount of the warrants that may be exercised at
any one time;
●
information with
respect to book-entry procedures, if any;
●
the anti-dilution
provisions of the warrants, if any;
●
any redemption or
call provisions;
●
whether the
warrants may be sold separately or with other securities as parts
of units; and
●
any additional
terms of the warrants, including terms, procedures and limitations
relating to the exchange and exercise of the warrants.
Each warrant will
entitle the holder of rights to purchase for cash the principal
amount of shares of common stock or other securities at the
exercise price provided in the applicable prospectus supplement.
Warrants may be exercised at any time up to the close of business
on the expiration date for the rights provided in the applicable
prospectus supplement.
Holders may
exercise warrants as described in the applicable prospectus
supplement. Upon receipt of payment and the warrant certificate
properly completed and duly executed at the corporate trust office
of the rights agent or any other office indicated in the prospectus
supplement, we will, as soon as practicable, forward the shares of
common stock or other securities, as applicable, purchasable upon
exercise of the rights. If less than all of the warrants issued in
any rights offering are exercised, we may offer any unsubscribed
securities directly to persons other than stockholders, to or
through agents, underwriters or dealers or through a combination of
such methods, including pursuant to standby arrangements, as
described in the applicable prospectus supplement.
Warrant
Agent
The warrant agent
for any warrants we offer will be set forth in the applicable
prospectus supplement.
DESCRIPTION
OF RIGHTS
General
We may issue rights
to our stockholders to purchase shares of our common stock or the
other securities described in this prospectus. We may offer rights
separately or together with one or more additional rights, debt
securities, common stock or warrants, or any combination of those
securities in the form of units, as described in the applicable
prospectus supplement. Each series of rights will be issued under a
separate rights agreement to be entered into between us and a bank
or trust company, as rights agent. The rights agent will act solely
as our agent in connection with the certificates relating to the
rights of the series of certificates and will not assume any
obligation or relationship of agency or trust for or with any
holders of rights certificates or beneficial owners of rights. The
following description sets forth certain general terms and
provisions of the rights to which any prospectus supplement may
relate. The particular terms of the rights to which any prospectus
supplement may relate and the extent, if any, to which the general
provisions may apply to the rights so offered will be described in
the applicable prospectus supplement. To the extent that any
particular terms of the rights, rights agreement or rights
certificates described in a prospectus supplement differ from any
of the terms described below, then the terms described below will
be deemed to have been superseded by that prospectus supplement. We
encourage you to read the applicable rights agreement and rights
certificate for additional information before you decide whether to
purchase any of our rights.
We will provide in
a prospectus supplement the following terms of the rights being
issued:
●
the date of
determining the stockholders entitled to the rights
distribution;
●
the aggregate
number of shares of common stock or other securities purchasable
upon exercise of the rights;
●
the aggregate
number of rights issued;
●
whether the rights
are transferrable and the date, if any, on and after which the
rights may be separately transferred;
●
the date on which
the right to exercise the rights will commence, and the date on
which the right to exercise the rights will expire;
●
the method by which
holders of rights will be entitled to exercise;
●
the conditions to
the completion of the offering, if any;
●
the withdrawal,
termination and cancellation rights, if any;
●
whether there are
any backstop or standby purchaser or purchasers and the terms of
their commitment, if any;
●
whether
stockholders are entitled to oversubscription rights, if
any;
●
any applicable U.S.
federal income tax considerations; and
●
any other terms of
the rights, including terms, procedures and limitations relating to
the distribution, exchange and exercise of the rights, as
applicable.
Each right will
entitle the holder of rights to purchase for cash the principal
amount of shares of common stock or other securities at the
exercise price provided in the applicable prospectus supplement.
Rights may be exercised at any time up to the close of business on
the expiration date for the rights provided in the applicable
prospectus supplement.
Holders may
exercise rights as described in the applicable prospectus
supplement. Upon receipt of payment and the rights certificate
properly completed and duly executed at the corporate trust office
of the rights agent or any other office indicated in the prospectus
supplement, we will, as soon as practicable, forward the shares of
common stock or other securities, as applicable, purchasable upon
exercise of the rights. If less than all of the rights issued in
any rights offering are exercised, we may offer any unsubscribed
securities directly to persons other than stockholders, to or
through agents, underwriters or dealers or through a combination of
such methods, including pursuant to standby arrangements, as
described in the applicable prospectus supplement.
Rights
Agent
The rights agent
for any rights we offer will be set forth in the applicable
prospectus supplement.
DESCRIPTION
OF UNITS
The following
description, together with the additional information that we
include in any applicable prospectus supplements summarizes the
material terms and provisions of the units that we may offer under
this prospectus. While the terms we have summarized below will
apply generally to any units that we may offer under this
prospectus, we will describe the particular terms of any series of
units in more detail in the applicable prospectus supplement. The
terms of any units offered under a prospectus supplement may differ
from the terms described below.
We will incorporate
by reference from reports that we file with the SEC, the form of
unit agreement that describes the terms of the series of units we
are offering, and any supplemental agreements, before the issuance
of the related series of units. The following summaries of material
terms and provisions of the units are subject to, and qualified in
their entirety by reference to, all the provisions of the unit
agreement and any supplemental agreements applicable to a
particular series of units. We urge you to read the applicable
prospectus supplements related to the particular series of units
that we may offer under this prospectus, as well as any related
free writing prospectuses and the complete unit agreement and any
supplemental agreements that contain the terms of the
units.
General
We may issue units
consisting of common stock, one or more debt securities, warrants
or rights for the purchase of common stock and/or debt securities
in one or more series, in any combination. Each unit will be issued
so that the holder of the unit is also the holder of each security
included in the unit. Thus, the holder of a unit will have the
rights and obligations of a holder of each security included in the
unit. The unit agreement under which a unit is issued may provide
that the securities included in the unit may not be held or
transferred separately, at any time or at any time before a
specified date.
We will describe in
the applicable prospectus supplement the terms of the series of
units being offered, including:
●
the designation and
terms of the units and of the securities comprising the units,
including whether and under what circumstances those securities may
be held or transferred separately;
●
any provisions of
the governing unit agreement that differ from those described
below; and
●
any provisions for
the issuance, payment, settlement, transfer or exchange of the
units or of the securities comprising the units.
The provisions
described in this section, as well as those set forth in any
prospectus supplement or as described under “Description of
Capital Stock,” “Description of Debt Securities,”
“Description of Warrants” and “Description of
Rights” will apply to each unit, as applicable, and to any
common stock, debt security, warrant or right included in each
unit, as applicable.
Unit
Agent
The name and
address of the unit agent for any units we offer will be set forth
in the applicable prospectus supplement.
Issuance
in Series
We may issue units
in such amounts and in such numerous distinct series as we
determine.
Enforceability
of Rights by Holders of Units
Each unit agent
will act solely as our agent under the applicable unit agreement
and will not assume any obligation or relationship of agency or
trust with any holder of any unit. A single bank or trust company
may act as unit agent for more than one series of units. A unit
agent will have no duty or responsibility in case of any default by
us under the applicable unit agreement or unit, including any duty
or responsibility to initiate any proceedings at law or otherwise,
or to make any demand upon us. Any holder of a unit may, without
the consent of the related unit agent or the holder of any other
unit, enforce by appropriate legal action its rights as holder
under any security included in the unit.
Provisions
of Delaware Law Governing Business Combinations
We are subject to
the “business combination” provisions of
Section 203 of the Delaware General Corporation Law. In
general, such provisions prohibit a publicly held Delaware
corporation from engaging in any “business combination”
transactions with any “interested stockholder” for a
period of three years after the date on which the person became an
“interested stockholder,” unless:
●
prior to such date,
the board of directors approved either the “business
combination” or the transaction which resulted in the
“interested stockholder” obtaining such status;
or
●
upon consummation
of the transaction which resulted in the stockholder becoming an
“interested stockholder,” the “interested
stockholder” owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting stock outstanding
(but not the outstanding voting stock owned by the
“interested stockholder”) those shares owned by
(a) persons who are directors and also officers and
(b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer;
or
●
at or subsequent to
such time the “business combination” is approved by the
board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the “interested stockholder.”
A “business
combination” is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder.
In general, an “interested stockholder” is a person
who, together with affiliates and associates, owns 15% or more of a
corporation’s voting stock or within three years did own 15%
or more of a corporation’s voting stock. The statute could
prohibit or delay mergers or other takeover or change in control
attempts with respect to us and, accordingly, may discourage
attempts to acquire us.
Limitations
on Liability and Indemnification of Officers and
Directors
Section 145 of
the Delaware General Corporation Law authorizes a court to award,
or a corporation’s board of directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the
Securities Act of 1933. Our Certificate of Incorporation limits the
liability of our officers and directors to the fullest extent
permitted by the Delaware General Corporation Law, and our
Certificate of Incorporation provides that we will indemnify our
officers and directors to the fullest extent permitted by such
law.
Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant
has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
SELLING
STOCKHOLDERS
The selling
stockholders indicated below may resell from time to time in whole
or in part up to 1,560,696 shares of common stock issuable upon the
exercise of the Series J Warrants.
The securities set
forth in the table below are being registered to permit secondary
public trading of our securities. Subject to the restrictions
described in this prospectus, the selling stockholders may offer
our securities covered under this prospectus for resale from time
to time. In addition, subject to the restrictions described in this
prospectus, the selling stockholders may sell, transfer or
otherwise dispose of all or a portion of our securities being
offered under this prospectus in transactions exempt from the
registration requirements of the Securities Act of 1933. See
“Plan of Distribution.”
The table below
lists the selling stockholders and other information regarding the
beneficial ownership (as determined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of the
shares of common stock held by each of the selling stockholders.
The final column lists the percentage of shares of common stock
beneficially owned by the selling stockholders, based on their
respective ownership of shares of common stock, as of September 15,
2018, assuming exercise of the warrants and conversion of the
Preferred Stock held by each such selling stockholder on that date
but taking account of any limitations on exercise set forth
therein. The percentage of shares beneficially owned prior to the
offering is based on 8,884,411
shares of our common stock outstanding as of September 15, 2018.
The number of shares in the column “Maximum Number of Shares
of Common Stock to be Sold Pursuant to this Prospectus”
represents all of the shares that the selling stockholder may offer
under this prospectus and does not take into account any
limitations on the exercise of warrants set forth
therein.
|
Name of Selling
Securityholder
|
Shares of Common
Stock Beneficially Owned Prior to Offering
|
Maximum Number
of Shares of Common Stock to be Sold Pursuant to this
Prospectus
|
Shares of Common
Stock Beneficially Owned After Offering
|
% of Shares
of Common Stock Beneficially Owned After
Offering
|
|
Alpha Capital
Anstalt
|
3,905,477
|
827,320
|
3,078,157
|
9.99%
|
|
Iroquois Capital
Investment Group LLC (2)
|
981,481
|
185,230
|
796,251
|
8.96%
|
|
Iroquois Master
Fund Ltd. (2)
|
1,493,153
|
185,230
|
1,307,923
|
9.99%
|
|
Brio Capital Master
Fund Ltd. (3)
|
647,431
|
123,506
|
523,925
|
5.90%
|
|
Fame Associates
(4)
|
297,694
|
43,224
|
254,470
|
2.86%
|
|
Isaac Fruchthandler
(5)
|
14,800
|
4,305
|
10,495
|
*
|
|
The Hewlett Fund LP
(6)
|
212,200
|
61,724
|
150,476
|
1.69%
|
|
Mada Equities LLC
(7)
|
259,294
|
61,724
|
197,570
|
2.22%
|
|
Richard Molinsky
(8)
|
73,050
|
19,100
|
53,050
|
*
|
|
SOS Investors Group
LLC (9)
|
193,060
|
18,500
|
174,560
|
1.96%
|
|
Zeiger Tower LLC
(10)
|
240,253
|
30,833
|
209,420
|
2.36%
|
*
Less
than 1%.
(1)
Includes Series J
Warrants to acquire 827,320 shares of common stock. The selling stockholder shares voting and
investment power with Konrad Ackermann.
(2)
Ownership by
Iroquois Capital Investment Group LLC includes Series J Warrants to
acquire 185,230 shares of common stock. Ownership by Iroquois
Master Fund Ltd. includes Series J Warrants to acquire 185,230
shares of common stock. Richard Abbe is the natural person with
voting and dispositive power over the shares held by Iroquois
Capital Investment Group LLC and Iroquois Master Fund.
(3)
Includes Series J
Warrants to acquire 123,506 shares of common stock. The selling
stockholder shares voting and investment power with Shaye Hirsch,
Director of Brio Capital Master Fund Ltd.
(4)
Includes
Series J Warrants to acquire 43,224 shares of common stock. The
selling stockholder shares voting and investment power with Abraham
Fruchthandler.
(5)
Includes Series J
Warrants to acquire 4,305 shares of common stock.
(6)
Includes Series J
Warrants to acquire 61,724 shares of common stock. The selling
stockholder shares voting and investment power over all securities
with Martin Chopp.
(7)
Includes Series J
Warrants to acquire 61,724 shares of common stock. The selling stockholder shares voting and
investment power over all securities with Mark Weinberger, Member
of Mada Equities LLC.
(8)
Includes Series J
Warrants to acquire 20,000 shares of common stock. The selling stockholder shares voting and
investment power over 18,850 shares with Maria
Molinsky.
(9)
Includes Series J
Warrants to acquire 18,500 shares of common stock. The selling stockholder shares voting and
investment power over all securities with Dovid
Obstfeld.
(10)
Includes Series J
Warrants to acquire 30,833 shares of common stock. The selling stockholder shares voting and
investment power over all securities with Samuel
Reinhold.
LEGAL
MATTERS
Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., New York, New York, will pass upon
the validity of the issuance of the securities to be offered by
this prospectus.
EXPERTS
The balance sheets of DropCar, Inc. as
of December 31, 2017 and
2016, and the related statements of operations, changes
in stockholders’ equity, and cash flows for each of the years then ended, have
been audited by EisnerAmper LLP, independent registered public
accounting firm, as stated in their report which is incorporated
herein by reference, which report contains an explanatory paragraph
regarding the Company’s ability to continue as a going
concern. Such financial statements have been incorporated
herein by reference in reliance on the report of such firm given
upon their authority as experts in accounting and
auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended, and file annual,
quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy these reports,
proxy statements and other information at the SEC’s public
reference facilities at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. You can request copies of these documents
by writing to the SEC and paying a fee for the copying cost. Please
call the SEC at 1-800-SEC-0330 for more information about the
operation of the public reference facilities. SEC filings are also
available at the SEC’s web site at www.sec.gov.
This
prospectus is only part of a registration statement on
Form S-3 that we have filed with the SEC under the Securities
Act and therefore omits certain information contained in the
registration statement. We have also filed exhibits and schedules
with the registration statement that are excluded from this
prospectus, and you should refer to the applicable exhibit or
schedule for a complete description of any statement referring to
any contract or other document. You may inspect a copy of the
registration statement, including the exhibits and schedules,
without charge, at the public reference room or obtain a copy from
the SEC upon payment of the fees prescribed by the
SEC.
We also maintain a website at www.dropcar.com,
through which you can access our SEC filings. The information set
forth on, or accessible from, our website is not part of this
prospectus.
INCORPORATION
OF INFORMATION BY REFERENCE
The
SEC allows us to “incorporate by reference” information
that we file with them. Incorporation by reference allows us to
disclose important information to you by referring you to those
other documents. The information incorporated by reference is an
important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this
information. This prospectus omits certain information contained in
the registration statement, as permitted by the SEC. You should
refer to the registration statement and any prospectus supplement
filed hereafter, including the exhibits, for further information
about us and the securities we may offer pursuant to this
prospectus. Statements in this prospectus regarding the provisions
of certain documents filed with, or incorporated by reference in,
the registration statement are not necessarily complete and each
statement is qualified in all respects by that reference. Copies of
all or any part of the registration statement, including the
documents incorporated by reference or the exhibits, may be
obtained upon payment of the prescribed rates at the offices of the
SEC listed above in “Where You Can Find More
Information.” The documents we are incorporating by reference
are:
●
our Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2018 and June
30, 2018 filed on May 21, 2018 and August 14, 2018, respectively
(File Nos. 001-34643);
●
our Current Reports
on Form 8-K and Form 8-K/A, as applicable, filed on January 17,
2018, January 30, 2018, February 5, 2018, March 9, 2018, March 21,
2018, April 2, 2018, April 20, 2018, May 21, 2018, July 13, 2018,
August 1, 2018, August 16,
2018, September 4, 2018, September 10, 2018 and September
25, 2018 (File Nos. 001-34643);
●
our definitive
proxy statement filed on October 9, 2018, as revised on October 16,
2018 and as supplemented on October 24, 2018;
●
the description of
our common stock contained in our Registration Statement on Form
8-A filed on February 26, 2010 (File No. 001-34643) pursuant
to Section 12(b) of the Exchange Act, and any amendment or
report filed with the SEC for purposes of updating such
description; and
●
all
reports and other documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after
the date of this prospectus and prior to the termination or
completion of the offering of securities under this prospectus
shall be deemed to be incorporated by reference in this prospectus
and to be a part hereof from the date of filing such reports and
other documents.
In
addition, all reports and other documents filed by us pursuant to
the Exchange Act after the date of the initial registration
statement and prior to effectiveness of the registration statement
shall be deemed to be incorporated by reference into this
prospectus.
Any
statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference into this
prospectus will be deemed to be modified or superseded for purposes
of this prospectus to the extent that a statement contained in this
prospectus or any other subsequently filed document that is deemed
to be incorporated by reference into this prospectus modifies or
supersedes the statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
You
may request, orally or in writing, a copy of these documents, which
will be provided to you at no cost, by contacting DropCar, Inc.,
1412 Broadway, Suite 2105, New York, NY 10018, Attention: Investor
Relations. The Investor Relations Department can be reached via
telephone at (646) 342-1595.
You
should rely only on information contained in, or incorporated by
reference into, this prospectus and any prospectus supplement. We
have not authorized anyone to provide you with information
different from that contained in this prospectus or incorporated by
reference in this prospectus. We are not making offers to sell the
securities in any jurisdiction in which such an offer or
solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to anyone to
whom it is unlawful to make such offer or
solicitation.