On December 6, 2019, Palladium Capital Advisors served as Placement Agent to DropCar, Inc. (the “Company”) which entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors (collectively, the “Investors”), pursuant to which the Company issued to the Investors an aggregate of 34,722 shares of the Company’s newly designated Series H-5 Convertible Preferred Stock, par value $0.0001 per share (the “Series H-5 Shares”), and warrants to purchase 3,472,200 shares of common stock of the Company, par value $0.0001 per share (“Common Stock”), with an exercise price of $0.792 per share, subject to adjustments (the “Warrants”). The purchase price per Series H-5 Share was $72.00, equal to (i) the closing price of the Common Stock on the Nasdaq Capital Market on December 5, 2019, plus $0.125 multiplied by (ii) 100. The aggregate purchase price for the Series H-5 Shares and Warrants was approximately $2.5 million. Subject to certain ownership limitations, the Warrants will be exercisable beginning six months from the issuance date and will be exercisable for a period of five years from the initial exercise date.
In connection with the offering, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Investors, pursuant to which the Company is obligated, among other things, to (i) file a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) by the earlier of (a) the 120th day after the date of signing of the Registration Rights Agreement or (b) the 45th day following a change in control of the Company, for purposes of registering the shares of Common Stock issuable upon conversion of the Series H-5 Shares and the shares of Common Stock issuable upon exercise of the Warrants for resale by the Investors, (ii) use its commercially reasonable efforts to have the registration statement declared effective as soon as practicable after filing, and in any event no later than 60 days after the initial filing date (or 100 days after the initial filing date if the registration statement is reviewed by the SEC), and (iii) maintain the registration until all registrable securities may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), without restriction as to volume. The Registration Rights Agreement contains customary terms and conditions for a transaction of this type, including certain customary cash penalties on the Company for its failure to satisfy specified filing and effectiveness time periods.
The offering is exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) the Securities Act and Regulation D under the Securities Act.
The securities sold and issued in connection with the Securities Purchase Agreement are not registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from the registration requirements.
The foregoing descriptions of the Securities Purchase Agreement, the Registration Rights Agreement and the form of Warrant are not complete and are subject to and qualified in their entirety by reference to the Securities Purchase Agreement, the Registration Rights Agreement and the form of Warrant, respectively, copies of which are attached as Exhibits 10.1, 10.2 and 4.1 to this Current Report on Form 8-K, respectively, and are incorporated herein by reference.