Item 1.01. Entry into a Material Definitive Agreement
Securities Purchase Agreement
Preferred Stock
On January 6, 2023, HyreCar Inc. (the "Company") entered into a Securities
Purchase Agreement, which was subsequently amended on January 12, 2023 pursuant
to the Amendment (as defined below) (as amended, the "Purchase Agreement"), with
four purchasers (the "Purchasers") for the issuance of Series B Preferred Stock,
Warrants and Debentures (each, as hereinafter defined) in two tranches, which
will generate aggregate proceeds of $12,250,000 after the closing of both
tranches. As part of the first tranche, which closed on January 6, 2023 (the
"First Closing Date"), and pursuant to the Purchase Agreement, the Company
issued 4,724 shares of Series B Preferred Stock, par value $0.00001 per share
("Series B Preferred Stock"), at a 10% discount to the stated value of
$4,722,221.75 for total proceeds of $4,250,000. Of the shares of the Series B
Preferred Stock issued, 502 shares were issued pursuant to the Company's
effective shelf registration statement on Form S-3 (File No. 333-257372) (the
"Registered Shares") and the remaining shares were issued in a private placement
to accredited investors pursuant to exemptions from registration in Section
4(a)(2) under the Securities Act of 1933, as amended (the "Securities Act"),
and/or the safe harbors under Rule 506 of Regulation D and/or Regulation S
promulgated thereunder.
Subject to the Ownership Cap and the Conversion Limitations (each, as
hereinafter defined), each share of Series B Preferred Stock is convertible into
that number of shares of the Company's common stock, par value $0.00001 per
share (the "Common Stock"), determined by dividing $1,000 by the lesser of (i)
$1.00 (the "Fixed Conversion Price") and (ii) 90% of the average of the three
lowest volume-weighted average prices ("VWAPs") during the 10 consecutive
trading days immediately prior to the applicable conversion date (the "Variable
Conversion Price" and together with the Fixed Conversion Price, collectively,
the "Conversion Price"); provided, however, that in no instance shall the
Conversion Price be less than $0.08988, which is 20% of the Minimum Price (as
defined under applicable NASDAQ rules)(the "Floor Price"). In the event the
Variable Conversion Price is less than the Floor Price, the Company shall pay to
the holder, in cash, an amount equal to the product of (i) the number of shares
of Common Stock issuable pursuant to such conversion date and (ii) the
difference between (A) the Variable Conversion Price (ignoring for such purposes
the Floor Price) and (B) the Floor Price.
As described in greater detail under Item 5.03 below, the Series B Preferred
Stock is subject to customary adjustments for stock dividends, stock splits,
reclassifications and similar events, and is subject to price-based
anti-dilution adjustments on a "full ratchet" basis.
The Purchase Agreement contains customary representations and warranties. In
addition, pursuant to the Purchase Agreement, the Company (i) agreed to a
standstill for a period of 180 days pursuant to which the Company is prohibited,
subject to certain exceptions, from issuing additional securities or filing
additional registration statements, (ii) obtained lock-up agreements from
certain directors and officers of the Company prohibiting such persons from
selling shares of the Company's securities, subject to certain exceptions, for a
period of 180 days, and, with respect to other directors and officers, 60 days,
and (iii) obtained voting agreements from all directors, officers and major
stockholders of the Company amounting to, in the aggregate, at least 37% of the
issued and outstanding Common Stock, to vote in favor of the Stockholder
Approval (as defined below).
The foregoing summary of the Purchase Agreement and the subsequent Securities
Purchase Agreement and Registration Rights Agreement Amendment, dated as of
January 12, 2023, by and among the Company and the Purchasers (the "Amendment")
is qualified in its entirety by reference to the Purchase Agreement and the
Amendment, which are filed as Exhibits 10.1 and 10.2, respectively, to this Form
8-K and are incorporated by reference herein. The foregoing summary of the
Series B Preferred Stock is qualified in its entirety by reference to the
Certificate of Designation, as described under Item 5.03 below, which is filed
as Exhibit 3.1 to this Form 8-K and is incorporated by reference herein.
Warrants
On January 6, 2023, as part of the closing of the first tranche and pursuant to
the Purchase Agreement, the Company also issued common stock purchase warrants
(the "Warrants") to the Purchasers that are exercisable for up to 6,125,000
shares of Common Stock at an exercise price of $1.00 per share (subject to
certain adjustments as set forth in the Warrants) for a term of five years.
Prior to obtaining stockholder approval to authorize the issuance of more than
19.99% of the Company's outstanding stock as of the date of the Purchase
Agreement and to increase the authorized capital stock of the company
(collectively, the "Stockholder Approval"), the Warrants may not be exercised
for shares of Common Stock which, when aggregated with any shares of Common
Stock issued pursuant to conversion of the Series B Preferred Stock or the
exercise of any Warrant, would exceed (i) 19.99% of the Company's outstanding
stock as of January 6, 2023, subject to adjustments for stock splits, stock
dividends and the like (the "Issuable Maximum") or (ii) 10,856,945 shares of
Common Stock, the maximum number of shares of Common Stock available for
issuance from the Company's authorized capital stock (such number of shares, the
"Authorized Maximum Shares"). The Warrants are also subject to the Ownership Cap
(as defined below).
. . .
Item 1.02. Termination of a Material Definitive Agreement
On January 6, 2023, the Company terminated its Equity Offering Sales Agreement,
dated November 9, 2021 (the "ATM Agreement"), with D.A. Davidson & Co. and
Northland Securities, Inc. (the "Agents"), as amended on August 17, 2022,
pursuant to which the Company could from time to time offer and sell up to an
aggregate of $7,900,000 of shares of its common stock, subject to any applicable
limits when using Form S-3, through the Agents in "at-the-market-offerings" (the
"ATM Program"), as defined in Rule 415 under the Securities Act of 1933, as
amended. Prior to termination, the Company issued and sold 1,346,265 shares of
its common stock under the ATM Agreement, raising net proceeds of approximately
$1,672,999. The Company terminated the ATM Agreement because it does not intend
to raise additional capital through the ATM Program.
The foregoing description of the ATM Agreement, as amended, is not complete and
is qualified in its entirety by reference to the full text of the ATM Agreement,
a copy of which was filed as Exhibit 1.1 to the Company's Current Report on Form
8-K (File No. 001-38561) filed with the Securities and Exchange Commission on
November 9, 2021 and incorporated herein by reference.
Item 3.02. Unregistered Sales of Equity Securities
Except with respect to the Registered Securities, the Series B Preferred Stock,
the Warrants, the Debentures and the Exchange Securities were, or will be,
issued to accredited investors pursuant to exemptions from registration in
Section 4(a)(2) under the Securities Act, and/or the safe harbors under Rule 506
of Regulation D and/or Regulation S promulgated thereunder. The information
related to the Securities Purchase Agreement, the Series B Preferred Stock, the
Warrants, the Debentures and the Exchange Securities presented in Item 1.01
above is incorporated by reference into this Item 3.02.
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Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year
On January 6, 2023, the Company filed a Certificate of Designation of
Preferences, Rights and Limitations of the Series B Preferred Stock (the
"Certificate of Designation") with the Secretary of State of the State of
Delaware. The Certificate of Designation provides for the designation of 6,850
shares of the Company's preferred stock, par value $0.00001 per share, as the
Series B Preferred Stock. As described in the Certificate of Designation, the
shares of the Series B Preferred Stock have no voting rights, except with
respect to certain actions that would adversely affect the holders of the Series
B Preferred Stock.
As to dividend rights and distributions declared by the Company's Board of
Directors, the shares of Series B Preferred Stock are entitled to receive such
dividends and distributions on an as-converted basis in the same form as
dividends and distributions actually paid on shares of the Common Stock when, as
and if such dividends or distributions are paid on shares of the Common Stock.
Upon any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, the holders of the Series B Preferred Stock shall be
entitled to receive out of the assets, whether capital or surplus, of the
Company an amount equal to the Stated Value (as defined in the Certificate of
Designation), plus any accrued and unpaid dividends thereon, for each share of
Series B Preferred Stock before any distribution or payment shall be made to the
holders of the Common Stock.
As described above under Item 1.01, each share of the Series B Preferred Stock
is convertible into that number of shares of the Company's Common Stock
determined by dividing $1,000 by the Conversion Price. Subject to certain
conditions described in the Certificate of Designation, the Company may redeem
some or all of the then outstanding Series B Preferred Stock after giving
notice, for cash in an amount equal to the sum of (a) 125% of the aggregate
stated value of the Series B Preferred Stock then outstanding, (b) accrued but
unpaid dividends and (c) all liquidated damages and other amounts due in respect
of the Series B Preferred Stock on the 10th trading day following the date
notice of the optional redemption was given.
The Series B Preferred Stock is subject to customary adjustments for stock
dividends, stock splits, reclassifications and the like, and will be subject to
price-based anti-dilution adjustment, on a "full ratchet" basis, in the event of
any issuances of Common Stock, or securities convertible, exercisable or
exchangeable for, Common Stock at a price below the then-applicable Conversion
Price (subject to certain exceptions). The Certificate of Designation further
provides that the Company will not effect any conversion of the shares of the
Series B Preferred Stock in certain circumstances, including any conversions in
excess of the Issuable Maximum or the Authorized Maximum Shares (the "Conversion
Limitations") or in excess of the Ownership Cap.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
3.1 Certificate of Designation of Preferences, Rights and
Limitations of Series B Convertible Preferred Stock, filed
with the Delaware Secretary of State on January 6, 2023
4.1 Form of Common Stock Purchase Warrant
4.2 Form of Common Stock Purchase Warrant
10.1 Securities Purchase Agreement, dated January 6, 2023, by and
among the Company and the certain Purchasers who are
signatories thereto
10.2 Securities Purchase Agreement and Registration Rights
Agreement Amendment, dated January 12, 2023, to the Securities
Purchase Agreement, dated January 6, 2023, by and among the
Company and certain Purchasers who are signatories thereto,
and the Registration Rights Agreement, dated January 6, 2023,
by and among the Company and the certain signatories thereto
10.3 Registration Rights Agreement, dated January 6, 2023, by and
among the Company and the certain signatories thereto
10.4 Voting Agreement, dated January 6, 2023, by and between the
Company and Altium Growth Fund, L.P.
10.5 Voting Agreement, dated January 6, 2023, by and between the
Company and Walleye Opportunities Master Fund Ltd.
10.6 Exchange Agreement, dated January 12, 2023, by and between
the Company and Altium Growth Fund, L.P.
10.7 Exchange Agreement, dated January 12, 2023, by and between
the Company and Walleye Opportunities Master Fund Ltd.
104 Cover Page Interactive Data File (embedded within Inline XBRL
document).
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HYRECAR INC. 