UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Ability Inc.
(Name of Issuer)
Ordinary Shares, par value $0.001 per share
(Title of Class of Securities)
G8789K124
(CUSIP Number)
Anatoly Hurgin
c/o Ability Inc.
Yad Harutzim 14
Tel Aviv, Israel, 6770007
972-3-6879777
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
November 27, 2018
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ☐
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP No. G8789K124
| 1 |
NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Anatoly Hurgin |
| 2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) ☐ (b) ☐ |
| 3 | SEC USE ONLY |
| 4 |
SOURCE OF FUNDS (SEE INSTRUCTIONS) OO |
| 5 | CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) ☒ |
| 6 |
CITIZENSHIP OR PLACE OF ORGANIZATION Israel |
|
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER 832,500 shares |
| 8 |
SHARED VOTING POWER 0 shares |
|
| 9 |
SOLE DISPOSITIVE POWER 832,500 shares |
|
| 10 |
SHARED DISPOSITIVE POWER 0 shares |
| 11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 832,500 shares |
| 12 | CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) ☐ |
| 13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 15.3% |
| 14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN |
* Based on 5,424,677 ordinary shares outstanding as of November 30, 2018.
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The following constitutes Amendment No. 2 (“Amendment No. 2”) to the Schedule 13D originally filed on December 31, 2015 (the “Original Schedule 13D”), as further amendment on August 22, 2018 (the “Amendment No. 1”), filed by the Reporting Person with the Securities and Exchange Commission (“SEC”) with respect to its ownership of Ordinary Shares, par value $0.001 per share (the “Ordinary Shares”) in Ability Inc., a Cayman Islands corporation (the “Company”). This Amendment No. 2 amends the Original Schedule 13D, as amended by Amendment No. 1, as specifically set forth herein.
On December 27, 2017, the Company effected a 1-for-10 consolidation of Ordinary Shares (the “Consolidation”) with a market effective date of March 23, 2018. The share amounts of Ordinary Shares specified in this Amendment No. 2 have been adjusted to give effect to the Consolidation.
Item 5. Interests of Securities of the Issuer .
Item 5 of the Original Schedule 13D is hereby amended to add the following:
(a) and (b) There were 5,424,677 Ordinary Shares outstanding as of November 30, 2018. As of November 30, 2018, the Reporting Person beneficially owned 832,500 shares of Ordinary Shares of the Company, which comprises 15.3% of the outstanding Ordinary Shares. All such shares are held through a trust of which the Reporting Person is beneficiary and over which the Reporting Person has voting and dispositive power. Such trust was established in connection with a pre-ruling of the Israel Tax Authority to ensure payment of any tax due to the Israel Tax Authority in connection with the Merger Agreement (as defined in the Original Schedule 13D). The shares reported in this Amendment No. 2 do not include Ordinary Shares which may become issuable to the Reporting Person pursuant to an earn-out under the Merger Agreement described in Item 6 below.
(c) None.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Undertakings or Relationships with Respect to Securities of the Issuer .
Item 6 of the Original Schedule 13D is hereby amended to add the following:
Merger Agreement
Earn-Out Shares
The Company was incorporated under the laws of the Cayman Islands under the name “Cambridge Holdco Corp.” as an exempted company on September 1, 2015 (“Holdco”). The Company was formed as a wholly-owned subsidiary of Cambridge.
On December 23, 2015, Cambridge merged with and into Holdco with Holdco surviving the merger and becoming the public entity (the “Redomestication Merger”), and Holdco consummated a business combination whereby it acquired Ability Computer & Software Industries Ltd. (“Ability”), by way of a share exchange (the “Share Exchange”, and together with the Redomestication Merger, the “Business Combination”), following which Ability became a wholly-owned subsidiary of Holdco, pursuant to Agreement and Plan of Reorganization, dated as of September 6, 2015, or the Merger Agreement. Effective as of the closing of the Business Combination, Holdco changed its name to “Ability Inc.”
Pursuant to the Merger Agreement and in addition to the Ordinary Shares issued to the Reporting Person as consideration for the Business Combination, the Reporting Person was granted the right to receive an additional number of Ordinary Shares to be issued upon and subject to the Company achieving certain net income targets in the fiscal years ending December 31, 2015, 2016, 2017 and 2018. The net income targets for 2015, 2016 and 2017 were not achieved. In the event that the Company achieves the 2018 Net Income Target (as defined in the Merger Agreement), the Company shall issue 47,000 shares of Ordinary Shares to the Reporting Person. In the event that the Company fails to satisfy the 2018 Net Income Target but Net Income (as defined in the Merger Agreement) for fiscal year 2018 is ninety percent (90%) or more of the 2018 Net Income Target but Net Income then the Company shall issue a proportional amount of shares of Ordinary Shares to the Reporting Person.
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Put Option
Pursuant to the Merger Agreement, the Reporting Person was granted the right, on one occasion during January 1, 2018 through March 1, 2018, or the Put Option Period, to put to the Company all or part of his pro rata portion of 117,327 shares of Ordinary Shares received by the Reporting Person in the Share Exchange for an amount in cash equal to (1) (x) the number of shares being put multiplied by (y) $101.0 per share plus (2) the Reporting Person’s pro rata portion of interest, if any, and subject to the pre-ruling granted by the Israel Tax Authority, as generated in the put option escrow account that was established. Pursuant to an escrow agreement dated December 23, 2015 among the Company, Anatoly Hurgin and Alexander Aurovsky (together as shareholders) and the Bank Leumi Le-Israel Trust Company Ltd. as escrow agent, $11.9 million was deposited into an escrow account, referred to as the put option escrow account, by the Company at closing of the Business Combination to fund the payment of the purchase price for the put if it is exercised. On November 13, 2017, the parties amended the escrow agreement to change the Put Option Period to the period commencing on January 1, 2019 and ending on March 1, 2021. On October 31, 2018, the Reporting Person agreed that he would not exercise his put option, in whole or in part, during the period from January 1, 2019 through and including April 1, 2019, or at the date on which the SEC notifies his counsel that its investigation is complete, whichever is earlier.
August 2018 Lock Up Agreement
In connection with the closing of the Company’s registered direct offering that closed on August 16, 2018 (the “August Offering”), the Reporting Person entered into a lock-up agreement pursuant to which he agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic consequence of ownership of, directly or indirectly, or engage in any short selling of, or make any demand or request or exercise any right with respect to the registration of, or file with the SEC a registration statement under the Securities Act of 1933 relating to, any ordinary shares or securities convertible into or exchangeable or exercisable for any ordinary shares without the prior written consent of the placement agent of the August Offering for a period of 90 days from August 14, 2018.
November 2018 Lock Up Agreement
In connection with the closing of the Company’s registered direct offering that closed on November 27, 2018 (the “November Offering”), the Reporting Person entered into a lock-up agreement pursuant to which he agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic consequence of ownership of, directly or indirectly, or engage in any short selling of, or make any demand or request or exercise any right with respect to the registration of, or file with the SEC a registration statement under the Securities Act of 1933 relating to, any ordinary shares or securities convertible into or exchangeable or exercisable for any ordinary shares without the prior written consent of the placement agent of the November Offering for a period of 90 days from November 27, 2018.
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Item 7. Material to Be Filed as Exhibits
The following documents are filed as exhibits to this Schedule:
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
Date: December 3, 2018
| By: | /s/ Anatoly Hurgin | |
| Name: | Anatoly Hurgin |
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Exhibit 99.9
ABILITY INC.
November 22, 2018
Ability Inc.
| Telephone: | +972-3-6879777 |
| Attention: | Avi Levin, CFO |
| E-mail: | avi@ability.co.il |
| Re: | Ability Inc. - Lock-Up Agreement |
Dear Madam/Sir:
This Lock-Up Agreement is being delivered to you in connection with the Securities Purchase Agreement (the “ Purchase Agreement ”), dated as of November 22, 2018 by and among Ability Inc. (the “ Company ”) and the investors party thereto (collectively, the “ Purchasers ”), with respect to the issuance of (i) ordinary shares of the Company, par value $0.001 per share (the “ Ordinary Shares ”), (ii) pre-funded warrants (the “ Pre-Funded Warrants ”) which Pre-Funded Warrants will be exercisable to purchase Ordinary Shares at a nominal exercise price per Ordinary Share of $0.01 and (ii) other warrants (the “ Ordinary Warrants ” and, together with the Pre-Funded Warrants, the “ Warrants ”) which Ordinary Warrants will be exercisable to purchase Ordinary Shares. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement.
In order to induce the Purchasers to enter into the Purchase Agreement, the undersigned agrees that, commencing on the date hereof and ending on 90 days following the date of the Purchase Agreement (the “ Lock-Up Period ”), the undersigned will not, and will cause all affiliates (as defined in Rule 144 promulgated under the 1933 Act) of the undersigned or any person in privity with the undersigned or any affiliate of the undersigned not to, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise dispose of or agree to dispose of, directly or indirectly, any Ordinary Shares or Ordinary Share Equivalents, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities and Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission promulgated thereunder with respect to any Ordinary Shares or Ordinary Share Equivalents owned directly by the undersigned (including holding as a custodian) or with respect to which the undersigned has beneficial ownership within the rules and regulations of the Securities and Exchange Commission (collectively, the “ Undersigned’s Shares ”), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Undersigned’s Shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Ordinary Shares or other securities, in cash or otherwise, (iii) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Ordinary Shares or Ordinary Share Equivalents or (iv) publicly disclose the intention to do any of the foregoing.
The foregoing restriction is expressly agreed to preclude the undersigned, and any affiliate of the undersigned and any person in privity with the undersigned or any affiliate of the undersigned, from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Undersigned’s Shares even if the Undersigned’s Shares would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include, without limitation, any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Undersigned’s Shares or with respect to any security that includes, relates to, or derives any significant part of its value from the Undersigned’s Shares.
Notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Shares (i) as a bona fide gift or gifts, provided that the donee or donees thereof agree to be bound in writing by the restrictions set forth herein, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, (iii) by will or intestate succession upon the death of the undersigned, (iv) as a bona fide gift to a charity or educational institution, (v) if the undersigned is a corporation, partnership, limited liability company or other business entity, any transfers to any shareholder, partner or member of, or owner of a similar equity interest in, the undersigned, as the case may be, provided that such party agrees to be bound in writing by the restrictions set forth herein , (vi) transfers to the Company in connection with, and to the extent necessary to fund, the payment of taxes due with respect to the vesting of restricted stock, restricted stock units, performance stock units, equity appreciation rights or similar rights to purchase Ordinary Shares or any securities convertible into or exercisable or exchangeable for Ordinary Shares, or (vii) transfers of the Undersigned’s Shares by operation of law or pursuant to an order of a court or regulatory agency. For purposes of this Lock-Up Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent (the “ Transfer Agent ”) and registrar against the transfer of the Undersigned’s Shares except in compliance with the foregoing restrictions.
In addition, notwithstanding the foregoing, this lock-up letter agreement shall not restrict the delivery of Ordinary Shares to the undersigned upon (i) the exercise of stock options pursuant to the Company’s existing equity incentive plans or (ii) the exercise of warrants existing as of the date hereof; provided that such Ordinary Shares delivered to the undersigned in connection with such exercise are subject to the restrictions set forth in this Lock-Up Agreement during the Lock-Up Period.
Furthermore, the undersigned may enter into any new plan established in compliance with Rule 10b5-1 of the Securities Exchange Act of 1934; provided that (i) such plan may only be established if no public announcement or filing with the Securities and Exchange Commission, or other applicable regulatory authority, is made in connection with the establishment of such plan during the Lock-up Period and (ii) no sale of Ordinary Shares are made pursuant to such plan during the Lock-up Period.
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In order to enforce this covenant, the Company shall impose irrevocable stop-transfer instructions preventing the Transfer Agent from effecting any actions in violation of this Lock-Up Agreement.
The undersigned acknowledges that the execution, delivery and performance of this Lock-Up Agreement is a material inducement to each Purchaser to complete the transactions contemplated by the Purchase Agreement and that the Company shall be entitled to specific performance of the undersigned’s obligations hereunder. The undersigned hereby represents that the undersigned has the power and authority to execute, deliver and perform this Lock-Up Agreement, that the undersigned has received adequate consideration therefor and that the undersigned will indirectly benefit from the closing of the transactions contemplated by the Purchase Agreement.
The undersigned understands and agrees that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors, and assigns. This Lock-Up Agreement shall not be amended without the prior written consent of the Purchasers and H.C. Wainwright & Co., LLC.
This letter agreement shall automatically terminate if (i) the Purchase Agreement is not executed prior to November 30, 2018 or (ii) the Purchase Agreement is terminated, and upon such termination hereof, the undersigned shall be released from all obligations under this letter agreement.
This Lock-Up Agreement may be executed in two counterparts, each of which shall be deemed an original but both of which shall be considered one and the same instrument.
This Lock-Up Agreement will be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice of law or conflicting provision or rule (whether of the State of New York, or any other jurisdiction) that would cause the laws of any jurisdiction other than the State of New York to be applied. In furtherance of the foregoing, the internal laws of the State of New York will control the interpretation and construction of this Lock-Up Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.
[Remainder of page intentionally left blank]
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| Very truly yours, | ||
| Anatoly Hurgin | ||
| Exact Name | ||
| /s/ Anatoly Hurgin | ||
| Authorized Signature | ||
| CEO | ||
| Title |
Agreed to and Acknowledged:
| ABILITY INC. | |||
| By: | /s/ Avi Levin | ||
| Name: | Avi Levin | ||
| Title: | CFO | ||
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