UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended
December 31, 2016
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission
file number
000-54219
RumbleON,
INC.
(Exact
name of registrant as specified in its charter)
Nevada
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46-3951329
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(State
or other jurisdiction of
incorporation
or organization)
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|
(I.R.S.
Employer
Identification
No.)
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|
4521 Sharon Road, Suite 370, Charlotte, North Carolina
28211
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|
|
(Address
of principal executive offices)
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(704)
448-5240
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
Class B Common Stock, $0.001 par value
(Title
of Class)
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes ☐ No
☒
Indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ☐ No
☒
Indicate by check
mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
☒ No ☐
Indicate by check
mark whether the registrant has submitted electronically and posted
on its corporate Website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes ☒ No
☐
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ☐
Indicate by check
mark whether the registrant a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in Rule 12b-2
of the Exchange Act.
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☐ (Do not check if a smaller reporting
company)
|
Smaller
reporting company ☒
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes ☐ No ☒
As of
June 30, 2016, the aggregate market value of shares held by
non-affiliates of the registrant (computed by reference to the
price at which the common equity was last sold) was approximately
$122,500.
The
number of shares of Class B Common Stock, $0.001 par value,
outstanding on February 13, 2017 was 6,923,809 shares. In addition,
1,000,000 shares of Class A Common Stock, $0.001 par value, were
outstanding on February 13, 2017.
RUMBLEON, INC.
Table of Contents to Annual Report on Form 10-K
for
the Year Ended December 31, 2016
PART I
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Item 1.
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Business.
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1
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Item 1A.
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Risk Factors
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6
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Item 1B.
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Unresolved staff comments.
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17
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Item 2.
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Properties.
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17
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Item 3.
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Legal Proceedings.
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17
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Item 4.
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Mine Safety Disclosures
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17
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PART II
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Item 5.
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Market For Registrant’s Common Equity And Related Stockholder
Matters And Small Business Issuer Purchase Of Equity
Securities
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17
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Item 6.
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Selected Financial Data.
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17
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Item 7.
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Management’s Discussion And Analysis Of Financial Condition
And Results Of Operations.
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18
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Item 7.
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Management’s Discussion And Analysis Of Financial Condition
And Results Of Operations.
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18
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Item 7A.
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Quantitative And Qualitative Disclosures About Market
Risk.
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27
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Item 8.
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Financial Statements And Supplementary Data.
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27
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Item 9.
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Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure.
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27
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Item 9A.
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Control And Procedures.
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28
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Item 9B.
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Other Information.
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28
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PART III
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Item 10.
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Directors, Executive Officers And Corporate
Governance.
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33
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Item 11.
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Executive Compensation.
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35
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Item 12.
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Security Ownership Of Certain Beneficial Owners And Management And
Related Stockholder Matters.
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36
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Item 13.
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Certain Relationships And Related Transactions, And Director
Independence.
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37
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Item 14.
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Principal Accounting Fees And Services.
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38
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules.
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39
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Item
16
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Form 10-K
Summary
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39
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PART
I
Background
and Overview
RumbleON,
Inc.,
a Nevada
corporation, is an early stage company with a business plan to
create a unique, capital light, and disruptive e-commerce platform
facilitating the ability of both consumers and dealers to
Buy-Sell-Trade-Finance pre-owned recreation vehicles. It is our
goal to have the platform recognized as the most trusted and
effective solution for the sale, acquisition, and distribution of
recreation vehicles and provide users an efficient, fast,
transparent, and engaging experience. Our initial focus is the
market for 650cc and larger on road motorcycles, particularly those
concentrated in the Harley Davidson brand; we will look to extend
to other brands and additional vehicle types and products as the
platform matures. In this Annual Report on Form 10-K, we refer to
RumbleON, Inc. as "RumbleON," "RMBL," the "Company," "we," "us,"
and "our," and similar words.
Serving
both consumers and dealers, RumbleON will make such consumers or
dealers a cash offer for the purchase of their vehicle or will
provide them the flexibility to trade, list, consign, or auction
their vehicle through the website and mobile app of RumbleON and
our partner dealers. In addition, RumbleON will offer a large
inventory of vehicles for sale on its website and will offer
financing and associated products. RumbleON operations are designed
to be highly scalable by working through an infrastructure and
capital light model created by forging a synergistic relationship
with dealers. RumbleON will utilize partner dealers in the
acquisition of motorcycles as well as to provide inspection,
reconditioning and distribution services. Correspondingly, RumbleON
will earn fees and transaction income, and partner dealers will
earn incremental revenue and enhance profitability through
increased sales, leads, and fees from inspection, reconditioning
and distribution programs.
RumbleON will be
driven by a proprietary technology platform, designed by an
experienced development team. RumbleON acquired this platform on
February 8, 2017 through its acquisition of NextGen (the
"NextGen Acquisition"), as more fully described below, and
anticipates the platform will be fully implemented by the RumbleON
team in partnership with the developer over the next 60 days. The
system provides integrated accounting, appraisal, inventory
management, CRM, lead and call center management, equity mining,
and other key services necessary to drive the online marketplace.
Over the past 16 years, the developers of the software have
designed and built, for large multi-national clients, a number of
successful dealer and high quality online software applications
solutions including applications for vehicle appraisal and
inventory management, credit reporting and compliance, CRM and lead
management, and a vehicle purchase platform. The product suite
currently has modules supporting the motorcycle, RV, and marine and
auto segments and is easily expandable for additional products in
the future.
Our
principal executive offices are located at 4521 Sharon Road, Suite
370, Charlotte, North Carolina 28211 and our telephone number is
(704) 448-5240. Our Internet website is www.rumbleon.com. The
website address provided in this
Annual Report on
Form 10-K
for the year ended
December 31, 2016 (this "Form 10-K")
is not intended to
function as a hyperlink and information obtained on the website is
not and should not be considered part of this Form 10-K and is not
incorporated by reference in this Form 10-K or any filing with the
Securities and Exchange Commission (the "SEC"). Our Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to reports filed or furnished pursuant to
Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as
amended, are available, free of charge, on our Investor Relations
website at www.rumbleon.com as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the
SEC. You may also read and copy any materials we file with the SEC
at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549. You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet website located at www.sec.gov
that contains the information we file or furnish electronically
with the SEC.
Corporate
History
RumbleON, Inc. was
originally incorporated in the State of Nevada in October 2013 as a
development stage company under the name Smart Server, Inc. ("Smart
Server"). Smart Server was formed to engage in the business of
designing and developing computer application software for smart
phones and tablet computers to provide customers at participating
restaurants, bars, and clubs the ability to pay their bill with
their smartphone without having to ask for the check. Smart Server
ceased its software development activities in 2015 and, having no
operations and no or nominal assets, met the definition of a "shell
company" under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder. Smart
Server continued as a public shell company through the year ended
December 31, 2016, however Smart Server engaged in no business or
operations during 2016.
In
July 2016, Berrard Holdings Limited Partnership ("Berrard
Holdings") acquired 5,475,000 shares of common stock of Smart
Server from the prior owner of such shares pursuant to an Amended
and Restated Stock Purchase Agreement, dated July 13, 2016. The
shares acquired by Berrard Holdings represented 99.5% of the Smart
Server’s issued and outstanding shares of common stock.
Steven Berrard, a director and our Chief Financial Officer and
Secretary, has voting and dispositive control over Berrard
Holdings. The aggregate purchase price of the shares was $148,141.
In addition, at the closing, Berrard Holdings loaned Smart Server,
and Smart Server executed a promissory note, in the principal
amount of $191,858 payable to Berrard Holdings. Effective August
31, 2017, the note was amended to increase the principal amount by
$5,500 to $197,358 in aggregate amount payable to Berrard
Holdings.
In
October 2016, Berrard Holdings sold an aggregate of 3,312,500
shares of Smart Server common stock to Marshall Chesrown, our
Chairman of the Board and Chief Executive Officer, and certain
other purchasers pursuant to letter agreements (each, a "Purchase
Agreement"), dated October 24, 2016. The 2,412,500 shares acquired
by Mr. Chesrown represented 43.9% of Smart Server’s
issued and outstanding shares of common stock. The remaining shares
owned by Berrard Holdings after giving effect to the transaction
represented 39.3% of Smart Server’s issued and outstanding
shares of common stock. The aggregate purchase price for the shares
sold in this transaction was $139,125.
On
November 28, 2016, RumbleON completed a private placement (the
"Private Placement") with certain accredited investors (the
"Purchasers"), with respect to the sale of an aggregate of 900,000
shares of Smart Server common stock at a purchase price of $1.50
per share for total consideration of $1,350,000. In connection with
the Private Placement, Smart Server also entered into loan
agreements with the Purchasers pursuant to which the Purchasers
will loan the Company their pro rata share of up to $1,350,000 in
the aggregate upon the request of the Company at any time on or
after January 31, 2017 and before November 1, 2020, pursuant to the
terms of the convertible promissory note attached to each of the
Loan Agreements.
On January 8, 2017,
Smart Server entered into an Asset Purchase Agreement
(the "NextGen Agreement")
with NextGen Dealer Solutions, LLC ("NextGen"), Halcyon Consulting,
LLC ("Halcyon"), and members of Halcyon signatory thereto ("Halcyon
Members," and together with Halcyon, the "Halcyon Parties")
pursuant to which NextGen agreed to sell to the Company
substantially all of the assets of NextGen in exchange for a
payment of approximately $750,000 in cash, the issuance to NextGen
of 1,523,809 unregistered shares of Company common stock (the
"Purchaser Shares"), the issuance of a subordinated secured
promissory note issued by the Company in favor of NextGen in the
amount of $1,333,333 (the "Acquisition Note") and the assumption by
the Company of certain specified post-closing liabilities of
NextGen under the contracts being assigned to the Company as part
of the transaction. On February 8, 2017, the Company assigned to
NextGen Pro, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of the Company ("NextGen Pro"), the right
to acquire NextGen's assets and liabilities (but not any other
rights or obligations under the NextGen Agreement). NextGen and the
Halcyon Parties are collectively referred to as the "Seller
Parties."
On
January 9, 2017, the Company's Board of Directors (the "Board") and
stockholders holding 6,375,000 of the Company's issued and
outstanding shares of common stock approved an amendment to the
Company's Articles of Incorporation (the "Certificate of
Amendment") to change the name Smart Server, Inc. to RumbleON, Inc.
and to create an additional class of Company common stock. The
Certificate of Amendment became effective on February 13, 2017
(the "Effective Date"), after the notice and accompanying
Information Statement describing the amendment was furnished to
non-consenting stockholders of the Company in accordance with
Nevada and Federal securities law.
Immediately before
approving the Certificate of Amendment, the Company had authorized
100,000,000 shares of common stock, $0.001 par value (the
"Authorized Common Stock"), including 6,400,000 issued and
outstanding shares of common stock (the "Outstanding Common Stock,"
and together with the Authorized Common Stock, the "Common Stock").
Pursuant to the Certificate of Amendment, the Company designated
1,000,000 shares of Authorized Common Stock as Class A Common Stock
(the "Class A Common Stock"), which Class A Common Stock ranks pari
passu with all of the rights and privileges of the Common Stock,
except that holders of Class A Common Stock will be entitled to 10
votes per share of Class A Common Stock issued and outstanding and
(ii) all other shares of Common Stock, including all shares of
Outstanding Common Stock shall be deemed Class B Common Stock (the
"Class B Common Stock"), which Class B Common Stock will be
identical to the Class A Common Stock in all respects, except that
holders of Class B Common Stock will be entitled to one vote per
share of Class B Common Stock issued and outstanding.
Also on
January 9, 2017, the Company's Board and stockholders holding
6,375,000 of the Company's issued and outstanding shares of common
stock approved the issuance to (i) Mr. Chesrown of 875,000 shares
of Class A Common Stock in exchange for an equal number of shares
of Class B Common Stock held by Mr. Chesrown, and (ii) Mr. Berrard
of 125,000 shares of Class A Common Stock in exchange for an equal
number of shares of Class B Common Stock held by Mr.
Berrard.
Also, on February
8, 2017 (the "Closing Date"), RumbleON and NextGen Pro
completed the NextGen
Acquisition in exchange for approximately $750,000 in cash, the
Purchaser Shares, the Acquisition Note, and the other consideration
described above. The Acquisition Note matures on the third
anniversary of the Closing Date (the "Maturity Date"). Interest
accrues and will be paid semi-annually (i) at a rate of 6.5%
annually from the Closing Date through the second anniversary of
such date and (ii) at a rate of 8.5% annually from the second
anniversary of the Closing Date through the Maturity Date. The
Company's obligations under the Acquisition Note are secured by
substantially all the assets of the NextGen Pro pursuant to an
Unconditional Guaranty Agreement (the "Guaranty Agreement"), by and
among NextGen and NextGen Pro, and a related Security Agreement
between the parties, each dated as of the Closing Date. Under the
terms of the Guaranty Agreement, NextGen Pro has agreed to
guarantee the performance of all of the Company's obligations under
the Acquisition Note. The descriptions of the Guaranty Agreement
and Security Agreement are qualified by reference to copies of
these agreements, which are attached as Exhibit 10.12 and 10.13 to
this Form 10-K and are incorporated herein by
reference
On February 14,
2017, the Company filed a press release announcing completion of
the NextGen Acquisition. The press release is attached as Exhibit
99.1 to this Form 10-K and is incorporated herein by
reference.
On
February 13, 2017, the Effective Date, the Company filed the
Certificate of Amendment with the Secretary of State of the State
of Nevada changing the Company's name to RumbleON, Inc. and
creating the Class A and Class B Common Stock. Also on the
Effective Date, the Company issued an aggregate of 1,000,000 shares
of Class A Common Stock to Messrs. Chesrown and Berrard in exchange
for an aggregate of 1,000,000 shares of Class B Common Stock held
by them. Also on the Effective Date, the Company amended its bylaws
to reflect the name change to RumbleON, Inc. and to reflect the
Company's primary place of business as Charlotte, North
Carolina.
Our
Strategy
RumbleON's strategy
is to provide a complete online, direct, pre-owned recreational
vehicle marketplace solution for both consumers and dealers, while
providing dealers access to additional software solutions and
services allowing them to earn incremental revenue and enhance
profitability through increased sales leads, and fees earned from
inspection, reconditioning and distribution programs. The
recognition of the need for RMBL solutions is the result of our
management team gaining a clear understanding of the key drivers of
complete supply chain solutions to create a different and
disruptive way to both acquire and distribute cars and trucks
online from their deep experience in the automotive sector with
disruptive businesses such as: AutoNation, Auto America, and Vroom.
We believe that there is a significant opportunity to disrupt the
pre-owned marketplace in recreational vehicles as it suffers from
many of the same negative consumer sentiments and dealer practices
that existed in the automotive sector prior to the advent of and
the significant influx of new entrants with improved business
models. In addition, the recreation vehicle segment lacks the
significant competition that exists in the automotive sector due to
its fragmented dealer network, relative size and the niche nature
of its products. Management believes consumers prefer to transact
through a well-designed online/mobile solution, with a broad
selection of vehicles at highly competitive prices. RumbleON
applications will provide appraisal, cash-offer, vehicle listing or
consignment, financing options, and logistics/delivery solutions
designed to provide an exceptional consumer experience. We intend
to replicate and improve upon the positive attributes of the
various "Sell us your car" and other related programs that have
proven successful in automotive retail for entities such as
AutoNation, CarMax, Carvana, Vroom and others.
RumbleON dealer
strategy is focused on creating a synergistic relationship wherein
dealers have the ability to leverage the RumbleON marketplace and
dealer services offerings to drive increased revenue through the
purchase or sale of vehicles via the online platform and the
ability to earn fees from inspection, reconditioning and
distribution programs. Dealer partners will have the ability to
show the complete RumbleON vehicle inventory on their website and
will have access to preferred pricing on the acquisition of
vehicles. Management believes that partners utilizing the platform
will significantly enhance their existing online retail strategies.
RumbleON has agreed to add multiple dealers to its network and is
in discussions with several other dealers regarding joining the
network. RumbleON operations, designed to be both capital and
infrastructure light, will leverage the dealer network to provide
inspection, reconditioning and distribution, thus alleviating the
need for RumbleON to operate multiple warehouse locations,
reconditioning centers and logistics facilities. RumbleON plans on
operating a centralized headquarters, warehouse and call center
model while decentralizing inspection and reconditioning
activities.
RumbleON's initial
focus on pre-owned Harley Davidson motorcycles provides a targeted,
identifiable segment to establish the functionality of the platform
and the RumbleON brand. Harley is a highly regarded and dominant
brand (approximately 50% market share of new 650 cc+ on road
motorcycles according to both Harley-Davidson public filings and
the Motorcycle Industry Council) in the motorcycle market with a
base of over 3 million preowned motorcycles registered for use in
the United States. Management estimates that each year
approximately 400,000 preowned Harleys are sold with Harley dealers
selling approximately 125,000 units, 250,000 units sold in private
consumer and independent dealer transactions, and 25,000 via other
means. As Harley-Davidson has discussed in its public filings,
Harley’s efforts to grow ridership, including increasing its
marketing spend by 65% ($75 million worldwide) in 2016 and driving
brand awareness among all customers via dealer hosted experiences
and the Harley Davidson Riding Academy, are designed to capitalize
on the fact that the percentage of first time motorcycle buyers who
purchase a Harley-Davidson has increased from 26% in 2011 to 33% in
2015. This not only is expected to provide a stable market of like
equipment and a more informed buyer, but also allows RumbleON to
potentially enjoy a halo effect from Harley’s advertising as
not all young new buyers will purchase new motorcycles. RumbleON
extension into the "metric" brands (Honda, Yamaha, Kawasaki,
Suzuki, etc.) essentially doubles the available market and is a
natural extension as these vehicles are often sold or traded for
Harley vehicles. The metric market and dealer profile closely
mirrors that of the Harley market although it is more highly
fragmented. In addition, many of the metric dealers also retail
ATVs, UTVs, snowmobiles and personal watercraft providing the next
natural product extension after motorcycles leveraging existing
dealer relationships.
RumbleON initially
intends to gain market share by targeting the significant number of
private consumer transactions. We believe we can drive RumbleON
brand recognition and awareness at a relatively low expense by
utilizing aggressive digital, social media and guerrilla marketing
techniques, as there are few national competitors and consumers are
very brand focused and loyal. For example, approximately 15 key
motorcycle events such as Daytona Bike Week and the Sturgis Bike
Rally attract roughly 4.8 million attendees, many of whom are
both motorcycle enthusiasts and Harley consumers. RumbleON intends
on having a significant presence at several of these events, with
onsite advertising and sales facilities to build brand awareness.
In addition, we anticipate engaging with or sponsoring many of the
active Harley Owner Group ("HOG") chapters, providing us a targeted
audience to which to market RumbleON and showcase the ease with
which they can buy, sell, or trade motorcycles. Once motorcycle
enthusiasts have sampled the RumbleON website, we believe the
unique experience will be compelling and drive organic growth. Over
time, management believes RumbleON will be able to build a
proprietary database of customers and their interests, which will
facilitate customer retention and cross-sell
activities.
Our
Market
We
operate in a market with significant scale and breadth of products.
The Motorcycle Industry Council estimates that 9.2 million people
own 10.1 million motorcycles in the United States; 87% of these are
on highway models, our initial targeted segment. Used motorcycle
registrations were 1.1 million units in 2015 with new unit sales of
approximately 500,000 or approximately $7 billion in new vehicle
sales. The owner demographic is favorable to the market outlook as
millennials and baby boomers are maturing into the median ranges.
The owner group is characterized by brand loyal riding enthusiasts.
The median owner age is 47 years with a median income of $62,170
which is approximately 10% above the US average. The dealer market
is fragmented with an estimated 5,000 new vehicle retail outlets in
the motorcycle segment.
The
ATV, UTV, side-by-side, snowmobile and personal watercraft vehicle
("PWC") markets (collectively with motorcycles,
“Powersports”) are a logical next extension for our
platform, as there is significant overlap in the motorcycle dealer
base with dealers of these products. According to Powersports
Business’ 2016 Market Data Book, 2015 registrations for new
and used side-by-sides were approximately 250,000 units and ATV
unit sales represented an additional 228,000 units. Snowmobile
sales were estimated at 57,000 units with PWC sales estimated at an
additional 40,000 units.
As we
look to further extend the platform the two largest adjacent
segments are represented by the recreational boating industry which
generated sales of $26.7 billion in 2015 for boats and trailers and
the recreational vehicle (
motor
vehicle or trailer equipped with living space and amenities found
in a home)
market which had estimated 2015 retail sales of
approximately $16.5 billion.
Competition
We will
face competition in all of our business segments. The U.S. used
recreational vehicle marketplace is highly fragmented, and we face
competition from franchised dealers, who sell both new and used
vehicles; independent dealers; online and mobile sales platforms;
and private parties. We believe that the principal competitive
factors in our industry are delivering an outstanding consumer
experience, competitive sourcing of vehicles, breadth and depth of
product selection, and value pricing. Our competitors vary in size
and breadth of their product offerings. We believe that our
principal competitive advantages in used vehicle
retailing will include our ability to
provide a high degree of customer satisfaction with the buying
experience by virtue of our low, no-haggle prices and our
customer-friendly sales process; our breadth of selection of the
most popular makes and models available on our website. In
addition, we believe our willingness to appraise and purchase a
customer’s vehicle, whether or not the customer is buying a
vehicle from us, provides a competitive sourcing advantage for
retail vehicles. We believe the principal competitive
factors for our ancillary products and services include an ability
to offer a full suite of products at competitive prices delivered
in an efficient manner to the customer. We will compete with a
variety of entities in offering these products including banks,
finance companies, insurance and warranty providers and extended
vehicle service contract providers. We believe our competitive
strengths in this category will include our ability to deliver
products in an efficient manner to customers utilizing our
technology and our ability to partner with key participants in each
category to offer a full suite of products at competitive prices.
Lastly, additional competitors may enter the businesses in which we
will operate.
Intellectual Property and Proprietary Rights
Our
brand image is a critical element of our business
strategy. Our principal trademark, RumbleON has an
application pending with the U.S. Patent and Trademark
Office.
Government
Regulation
Various
aspects of our business are or may be subject, directly or
indirectly, to U.S. federal and state laws and regulations. Failure
to comply with such laws or regulations may result in the
suspension or termination of our ability to do business in affected
jurisdictions or the imposition of significant civil and criminal
penalties, including fines or the award of significant damages
against us and our dealers in class action or other civil
litigation.
State Motor Vehicle Sales, Advertising and Brokering
Laws
The
advertising and sale of new or used motor vehicles is highly
regulated by the states in which we do business. Although we do not
anticipate selling new vehicles, state regulatory authorities or
third parties could take the position that some of the regulations
applicable to dealers or to the manner in which recreational
vehicles are advertised and sold generally are directly applicable
to our business. If our products and services are determined to not
comply with relevant regulatory requirements, we could be subject
to significant civil and criminal penalties, including fines, or
the award of significant damages in class action or other civil
litigation as well as orders interfering with our ability to
continue providing our products and services in certain states. In
addition, even absent such a determination, to the extent dealers
are uncertain about the applicability of such laws and regulations
to our business, we may lose, or have difficulty increasing the
number of dealers in our network, which would affect our future
growth.
Several
states have laws and regulations that strictly regulate or prohibit
the brokering of motor recreational vehicles or the making of
so-called "bird-dog" payments by dealers to third parties in
connection with the sale of motor vehicles through persons other
than licensed salespersons. If our products or services are
determined to fall within the scope of such laws or regulations, we
may be forced to implement new measures, which could be costly, to
reduce our exposure to those obligations, including the
discontinuation of certain products or services in affected
jurisdictions. Additionally, such a determination could subject us
to significant civil or criminal penalties, including fines, or the
award of significant damages in class action or other civil
litigation.
In
addition to generally applicable consumer protection laws, many
states in which we may do business either have or may implement
laws and regulations that specifically regulate the advertising for
sale of new or used recreational vehicles. These state advertising
laws and regulations may not be uniform from state to state,
sometimes imposing inconsistent requirements on the advertiser of a
new or used recreational vehicle. If the content displayed on the
websites we operate is determined or alleged to be inaccurate or
misleading, we could be subject to significant civil and criminal
penalties, including fines, or the award of significant damages in
class action or other civil litigation. Moreover, such allegations,
even if unfounded or decided in our favor, could be extremely
costly to defend, could require us to pay significant sums in
settlements, and could interfere with our ability to continue
providing our products and services in certain states.
Federal Advertising Regulations
The
Federal Trade Commission ("FTC"), has authority to take actions to
remedy or prevent advertising practices that it considers to be
unfair or deceptive and that affect commerce in the United States.
If the FTC takes the position in the future that any aspect of our
business constitutes an unfair or deceptive advertising practice,
responding to such allegations could require us to pay significant
damages, settlements, and civil penalties, or could require us to
make adjustments to our products and services, any or all of which
could result in substantial adverse publicity, loss of
participating dealers, lost revenue, increased expenses, and
decreased profitability.
Federal Antitrust Laws
The
antitrust laws prohibit, among other things, any joint conduct
among competitors that would lessen competition in the marketplace.
Some of the information that we may obtain from dealers may be
sensitive and, if disclosed inappropriately, could potentially be
used by dealers to impede competition or otherwise diminish
independent pricing activity. A governmental or private civil
action alleging the improper exchange of information, or unlawful
participation in price maintenance or other unlawful or
anticompetitive activity, even if unfounded, could be costly to
defend and adversely impact our ability to maintain and grow our
dealer network.
In
addition, governmental or private civil actions related to the
antitrust laws could result in orders suspending or terminating our
ability to do business or otherwise altering or limiting certain of
our business practices, including the manner in which we handle or
disclose pricing information, or the imposition of significant
civil or criminal penalties, including fines or the award of
significant damages against us in class action or other civil
litigation.
Other
The
foregoing description of laws and regulations to which we are or
may be subject is not exhaustive, and the regulatory framework
governing our operations is subject to continuous change. The
enactment of new laws and regulations or the interpretation of
existing laws and regulations in an unfavorable way may affect the
operation of our business, directly or indirectly, which could
result in substantial regulatory compliance costs, civil or
criminal penalties, including fines, adverse publicity, loss of
participating dealers, lost revenue, increased expenses, and
decreased profitability. Further, investigations by government
agencies, including the FTC, into allegedly anticompetitive,
unfair, deceptive or other business practices by us, could cause us
to incur additional expenses and, if adversely concluded, could
result in substantial civil or criminal penalties and significant
legal liability.
Employees
As of
December 31, 2016, the Company had two full-time
employees.
Available
Information
We file
annual, quarterly and other reports and other information with the
SEC. You can read these SEC filings and reports over the Internet
at the SEC's website at www.sec.gov. You can also obtain copies of
the documents at prescribed rates by writing to the Public
Reference Section of the SEC at 100 F Street, NE, Washington, DC
20549 on official business days between the hours of 10:00 am and
3:00 pm. Please call the SEC at (800) SEC-0330 for further
information on the operations of the public reference facilities.
We will provide a copy of our annual report to security holders,
including audited financial statements, at no charge upon receipt
of a written request to us at RumbleON, Inc., 4521 Sharon Road,
Suite 370, Charlotte, NC, 28211.
Investing in our common stock involves a high degree of risk.
Investors should carefully consider the risks described below and
all of the other information set forth in this Annual Report on
Form 10-K, including our financial statements and related notes and
"Management’s Discussion and Analysis of Financial Condition
and Results of Operations," before deciding to invest in our common
stock. If any of the events or developments described below occur,
our business, financial condition, or results of operations could
be materially or adversely affected. As a result, the market price
of our common stock could decline, and investors could lose all or
part of their investment.
Risks
Related to Our Business
We have no operating history and we cannot assure you the Company
will achieve or maintain profitability.
Our
business model is unproven and we have no operating history. We are
only in the initial development stage of our business. We expect to
make significant investments in the further development and
expansion of our business and these investments may not result in
the successful development, operation, or growth of our business on
a timely basis or at all. We may not generate sufficient revenue
and we may incur significant losses in the future for a number of
reasons, including a lack of demand for our products and services,
increasing competition, weakness in the motorcycle, power sport,
and other recreational vehicle industries generally, as well as
other risks described in these Risk Factors, and we may encounter
unforeseen expenses, difficulties, complications and delays, and
other unknown factors relating to the development and operation of
our business. Accordingly, we may not be able to successfully
develop and operate our business, generate revenue, or achieve or
maintain profitability.
The initial development and growth of our business over the first
24 months of operations, and such growth may not be indicative of
our future growth and, if we continue to grow rapidly, we may not
be able to manage our growth effectively.
We
expect that, in the future, as our revenue increases, our rate of
growth will decline. In addition, we will not be able to grow as
fast or at all if we do not accomplish the following:
●
maintain and grow
our dealer relationships and network;
●
increase the number
of users of our products and services, and in particular the number
of unique visitors to our website and our branded mobile
applications;
●
further improve the
quality of our existing products and services, and introduce high
quality new products and services;
●
increase the number
of transactions between our users and both RumbleON and our dealer
networks; and
●
introduce third
party ancillary products and services.
We may
not successfully accomplish any of these objectives. We plan to
continue our investment in future growth. We expect to continue to
expend substantial financial and other resources on:
●
marketing and
advertising;
●
product and service
development; including investments in our website, business
processes, infrastructure, product and service development team and
the development of new products and services and new features for
existing products; and
●
general
administration, including legal, accounting and other compliance
expenses related to being a public company.
In
addition, our anticipated growth may place and may continue to
place significant demands on our management and our operational and
financial resources. As we grow, we expect to hire additional
personnel. Also, our organizational structure will become more
complex as we add additional staff, and we will need to ensure we
adequately develop and maintain operational, financial and
management controls as well as our reporting systems and
procedures.
Our auditor’s report reflects the fact that the ability of
the Company to continue as a going concern is dependent upon its
ability to raise additional capital from the sale of common stock
and, ultimately the achievement of significant operating revenue.
If we are unable to continue as a going concern, you will lose your
investment.
Our financial
statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. Our auditor’s
report reflects that the ability of the Company to continue as a
going concern is dependent upon our ability to raise additional
capital from the sale of common stock or through other debt or
equity financings
and, ultimately, the achievement of significant operating revenue.
If we are unable to continue as a going concern, stockholders will
lose their investment. We will be required to seek additional
capital to fund future growth and expansion. No assurance can be
given that such financing will be available or, if available, that
it will be on commercially favorable terms acceptable to us.
Moreover, favorable financing may be dilutive to
investors.
We may require additional capital to pursue our business objectives
and respond to business opportunities, challenges or unforeseen
circumstances. If capital is not available on terms acceptable to
us or at all, we may not be able to develop and grow our business
as anticipated and our business, operating results and financial
condition may be harmed.
We
intend to continue to make investments to support the development
and growth of our business and, we may require additional capital
to pursue our business objectives and respond to business
opportunities, challenges or unforeseen circumstances. Accordingly,
we may need to engage in equity or debt financings to secure
additional funds. However, additional funds may not be available
when we need them, on terms that are acceptable to us, or at all.
Volatility in the credit markets may also have an adverse effect on
our ability to obtain debt financing. Also, the incurrence of
leverage, the debt service requirements resulting therefrom, and
the possibility of a need for financing or any additional financing
could have important and negative consequences, including the
following: (a) the Company’s ability to obtain additional
financing for working capital, capital expenditures, or general
corporate or other purposes may be impaired in the future; (b)
certain future borrowings may be at variable rates of interest,
which will expose the Company to the risk of increased interest
rates; (c) the Company may need to use a portion of the money it
earns to pay principal and interest on their credit facilities,
which will reduce the amount of money available to finance
operations and other business activities, repay other indebtedness,
and pay distributions; and (d) substantial leverage may limit the
Company’s flexibility to adjust to changing economic or
market conditions, reduce their ability to withstand competitive
pressures and make them more vulnerable to a downturn in general
economic conditions.
If we
raise additional funds through further issuances of equity or
convertible debt securities, our existing stockholders could suffer
significant dilution, and any new equity securities we issue could
have rights, preferences and privileges superior to those of
holders of our common stock. If we are unable to obtain adequate
financing or financing on terms satisfactory to us, when we require
it, our ability to continue to pursue our business objectives and
to respond to business opportunities, challenges or unforeseen
circumstances could be significantly limited, and our business,
operating results, financial condition and prospects could be
adversely affected.
If key industry participants, including recreation vehicle dealers
and recreation vehicle manufacturers, perceive us in a negative
light or our relationships with them suffer harm, our ability to
operate and grow our business and our financial performance may be
damaged.
We
anticipate that we will derive a significant portion of or revenue
from fees paid by existing recreation vehicle dealers for dealer
services we may provide them. In addition, we intend to utilize a
select set of dealers to perform services for our benefit,
including, among other things, vehicle reconditioning, vehicle
storage and vehicle photography. If our relationships with our
network of dealers suffer harm in a manner that leads to the
departure of these dealers from our network, then our ability to
operate our business, grow revenue, and lower our costs will be
adversely affected.
We
cannot assure you that we will maintain strong relationships with
the dealers in our network or that we will not suffer dealer
attrition in the future. We may also have disputes with dealers
from time to time, including relating to the collection of fees
from them and other matters. We may need to modify our products,
change pricing or take other actions to address dealer concerns in
the future. If we are unable to create and maintain a compelling
value proposition for dealers to become and remain dealers, our
dealer network will not grow and may begin to decline. If a
significant number of these dealers decided to leave our network or
change their financial or business relationship with us, then our
business, growth, operating results, financial condition and
prospects would suffer. Additionally, if we are unable to add
dealers to our network, our growth could be impaired.
We may be unable to maintain or grow relationships with information
data providers or may experience interruptions in the data feeds
they provide, which may limit the information that we are able to
provide to our users and dealers as well as adversely affect the
timeliness of such information and may impair our ability to
attract or retain consumers and our dealers and to timely invoice
all parties.
We
expect to receive data from third-party data providers, including
our network of dealers, dealer management system data feed
providers, data aggregators and integrators, survey companies,
purveyors of registration data and possibly others. There may be
some instances in which we use this information to collect a
transaction fee from those dealers and recognize revenue from the
related transactions.
From
time to time, we may experience interruptions in one or more data
feeds that we receive from third-party data providers, particularly
dealer management system data feed providers, in a manner that
affects our ability to timely invoice the dealers in our network.
These interruptions may occur for a number of reasons, including
changes to the software used by these data feed providers and
difficulties in renewing our agreements with third-party data feed
providers. Additionally, when an interruption ceases, we may not
always be able to collect the appropriate fees and any such
shortfall in revenue could be material to our operating
results.
If we suffer a significant interruption in our ability to gain
access to third-party data, our business and operating results will
suffer.
Our
business also relies on our ability to analyze significant amounts
of data in a timely manner. The effectiveness of our user
acquisition efforts depends in part on the availability of data
relating to existing and potential users of our platform. If we
experience a material disruption in the data provided to us or if
third-party data providers terminate their relationship with us,
the quality of this information may suffer, and our business,
results of operations and financial conditions could be materially
and adversely affected.
The success of our business relies heavily on our marketing and
branding efforts, especially with respect to the RumbleON website
and our branded mobile applications, and these efforts may not be
successful.
We
believe that an important component of our development and growth
will be the business derived from the RumbleON website and our
branded mobile applications. Because RumbleON is a consumer brand,
we rely heavily on marketing and advertising to increase the
visibility of this brand with potential users of our products and
services.
Our
business model relies on our ability to scale rapidly and to
decrease incremental user acquisition costs as we grow. Some of our
methods of marketing and advertising may not be profitable because
they may not result in the acquisition of a sufficient users
visiting our website and mobile applications such that we may
recover these costs by attaining corresponding revenue growth. If
we are unable to recover our marketing and advertising costs
through increases in user traffic and in the number of transactions
by users of our platform, it could have a material adverse effect
on our growth, results of operations and financial
condition.
The failure to develop and maintain our brand could harm our
ability to grow unique visitor traffic and to expand our dealer
network.
Developing and
maintaining the RumbleON brand will depend largely on the success
of our efforts to maintain the trust of our users and dealers and
to deliver value to each of our users and dealers. If our potential
users perceive that we are not focused primarily on providing them
with a better recreation vehicle buying experience, our reputation
and the strength of our brand will be adversely
affected.
Complaints or
negative publicity about our business practices, our marketing and
advertising campaigns, our compliance with applicable laws and
regulations, the integrity of the data that we provide to users,
data privacy and security issues, and other aspects of our
business, irrespective of their validity, could diminish users' and
dealers' confidence in and the use of our products and services and
adversely affect our brand. There can be no assurance that we will
be able to develop, maintain or enhance our brand, and failure to
do so would harm our business growth prospects and operating
results.
We will rely on Internet search engines to drive traffic to our
website, and if we fail to appear prominently in the search
results, our traffic would decline and our business would be
adversely affected.
We will
depend in part on Internet search engines such as Google™,
Bing™, and Yahoo!™ to drive traffic to our website. For
example, when a user searches the internet for a particular type of
recreational vehicle, we will rely on a high organic search ranking
of our webpages in these search results to refer the user to our
website. However, our ability to maintain high, non-paid search
result rankings is not within our control. Our competitors'
Internet search engine optimization efforts may result in their
websites receiving a higher search result page ranking than ours,
or Internet search engines could revise their methodologies in a
way that would adversely affect our search result rankings. If
Internet search engines modify their search algorithms in ways that
are detrimental to us, or if our competitors' efforts are more
successful than ours, overall growth in our user base could slow or
our user base could decline. Internet search engine providers could
provide recreation vehicle dealer and pricing information directly
in search results, align with our competitors or choose to develop
competing services. Any reduction in the number of users directed
to our website through Internet search engines could harm our
business and operating results.
A significant disruption in service on our website or of our mobile
applications could damage our reputation and result in a loss of
consumers, which could harm our business, brand, operating results,
and financial condition.
Our
brand, reputation and ability to attract consumers, affinity groups
and advertisers depend on the reliable performance of our
technology infrastructure and content delivery. We may experience
significant interruptions with our systems in the future.
Interruptions in these systems, whether due to system failures,
computer viruses, or physical or electronic break-ins, could affect
the security or availability of our products on our website and
mobile application, and prevent or inhibit the ability of consumers
to access our products. Problems with the reliability or security
of our systems could harm our reputation, result in a loss of
consumers, dealers and affinity group marketing partners, and
result in additional costs.
We
intend to locate our communications, network, and computer hardware
used to operate our website and mobile applications at facilities
in various parts of the country to minimize the risk and create an
environment where we can remain online if one of the facilities in
which our equipment is housed goes offline. Nevertheless, we will
not own or control the operation of these facilities, and our
systems and operations will be vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failure, terrorist
attacks, acts of war, electronic and physical break-ins, computer
viruses, earthquakes, and similar events. The occurrence of any of
these events could result in damage to our systems and hardware or
could cause them to fail.
Problems faced by
any third-party web hosting providers we may utilize could
adversely affect the experience of our consumers. Any third-party
web hosting providers could close their facilities without adequate
notice. Any financial difficulties, up to and including bankruptcy,
faced by any third-party web hosting providers or any of the
service providers with whom they contract may have negative effects
on our business, the nature and extent of which are difficult to
predict. If our third-party web hosting providers are unable to
keep up with our growing capacity needs, our business could be
harmed.
Any
errors, defects, disruptions, or other performance or reliability
problems with our network operations could cause interruptions in
access to our products as well as delays and additional expense in
arranging new facilities and services and could harm our
reputation, business, operating results, and financial
condition.
If we are unable to provide a compelling recreation vehicle buying
experience to our users, the number of transactions between our
users, RumbleON and dealers will decline and our revenue and
results of operations will suffer harm.
We
cannot assure you that we are able to provide a compelling
recreation vehicle buying experience to our users, and our failure
to do so will mean that the number of transactions between our
users, RumbleON and dealers will decline and we will be unable to
effectively monetize our user traffic. We believe that our ability
to provide a compelling recreation vehicle buying experience is
subject to a number of factors, including:
●
our ability to
launch new products that are effective and have a high degree of
consumer engagement; and
●
compliance of the
dealers within our dealer network with applicable laws, regulations
and the rules of our platform.
The growth of our business relies significantly on our ability to
increase the number of dealers in our network such that we are able
to increase the number of transactions between our users and
dealers. Failure to do so would limit our growth.
Our
ability to grow the number of dealers in our network is an
important factor in growing our business. We are a new participant
in the recreational vehicle industry, our business may be viewed in
a negative light by recreation vehicle dealerships, and there can
be no assurance that we will be able to maintain or grow the number
of recreation vehicle dealers in our network.
Our ability to grow our complementary product offerings may be
limited, which could negatively impact our development, growth,
revenue and financial performance.
As we
introduce or expand additional offerings for our platform, such as
recreation vehicle trade-ins, lead management, transaction
processing, financing, leasing, maintenance and insurance, we may
incur losses or otherwise fail to enter these markets successfully.
Our expansion into these markets may place us in competitive and
regulatory environments with which we are unfamiliar and involves
various risks, including the need to invest significant resources
and the possibility that returns on such investments will not be
achieved for several years, if at all. In attempting to establish
such new product offerings, we may incur significant expenses and
face various other challenges, such as expanding our sales force
and management personnel to cover these markets and complying with
complicated regulations that apply to these markets. In addition,
we may not successfully demonstrate the value of these ancillary
products to consumers or dealers, and failure to do so would
compromise our ability to successfully expand into these additional
revenue streams.
We will be relying on third-party financing providers to finance a
significant portion of our customers’ vehicle
purchases.
We will
be relying on third-party financing providers to finance a
significant portion of our customers’ vehicle purchases.
Accordingly, our revenue and results of operations are partially
dependent on the actions of these third parties. We will provide
financing to qualified customers through a number of third-party
financing providers. If one or more of these third-party providers
cease to provide financing to our customers, provide financing to
fewer customers or no longer provide financing on competitive
terms, it could have a material adverse effect on our business,
sales and results of operations. Additionally, if we were unable to
replace the current third-party providers upon the occurrence of
one or more of the foregoing events, it could also have a material
adverse effect on our business, sales and results of operations. We
will rely on third-party providers to supply Extended Protection
Plan ("EPP") products to our customers. Accordingly, our revenue
and results of operations will be partially dependent on the
actions of these third-parties. If one or more of these third-party
providers cease to provide EPP products, make changes to their
products or no longer provide their products on competitive terms,
it could have a material adverse effect on our business, revenue
and results of operations. Additionally, if we were unable to
replace the current third-party providers upon the occurrence of
one or more of the foregoing events, it could also have a material
adverse effect on our business, revenue and results of
operations.
Retail sales of recreational vehicles by the Company may be
adversely impacted by increased supply of and/or declining prices
for used recreational vehicles and excess supply of new
recreational vehicles.
Retail
sales of recreational vehicles by the Company may be adversely
impacted by increased supply of and/or declining prices for used
recreational vehicles and excess supply of new recreational
vehicles. The Company believes that when prices for used
recreational vehicles have declined, it can have the effect of
reducing demand among retail purchasers for new recreational
vehicles (at or near manufacturer’s suggested retail prices).
Further, the manufacturers of recreational vehicles can and do take
actions that influence the markets for new and used recreational
vehicles. For example, introduction of new models with
significantly different functionality, technology or other customer
satisfiers can result in increased supply of used recreational
vehicles, and a decrease in the inventory of used recreational
vehicles available for sale at dealers in the U.S. could result in
an increased supply or decreased demand in the market for used
recreational vehicles, which could result in declining prices for
used recreational vehicles, and prior model-year new recreational
vehicles. Also, while historically manufacturers have taken steps
designed to balance production volumes for its new recreational
vehicles with demand, those steps may not be effective, or further
manufacturers could choose to supply new recreational vehicles to
the market in excess of demand at reduced prices which could also
have the effect of reducing demand for used recreational vehicles.
Ultimately, reduced demand among retail purchasers for new
recreational vehicles leads to reduced shipments by the
Company.
We rely on a number of third parties to perform certain operating
and administrative functions for the Company.
We rely
on a number of third parties to perform certain operating and
administrative functions for us. We may experience problems with
outsourced services, such as unfavorable pricing, untimely delivery
of services, or poor quality. Also, these suppliers may experience
adverse economic conditions due to difficulties in the global
economy that could lead to difficulties supporting our operations.
In light of the amount and types of functions that we will
outsource, these service provider risks could have a material
adverse effect on our business and results of
operations.
We participate in a highly competitive market, and pressure from
existing and new companies may adversely affect our business and
operating results.
We face
significant competition from companies that provide listings,
information, lead generation, and recreation vehicle buying
services designed to reach consumers and enable dealers to reach
these consumers. We will compete for a share of overall recreation
vehicle purchases as well as recreation vehicle dealer’s
marketing and technology spend. To the extent that recreation
vehicle dealers view alternative strategies to be superior to
RumbleON, we may not be able to maintain or grow the number of
dealers in our network, we may sell fewer recreation vehicles to
users of our platform, and our business, operating results and
financial condition will be harmed.
We also
expect that new competitors will continue to enter the online
recreation vehicle retail industry with competing products and
services, which could have an adverse effect on our revenue,
business and financial results.
Our
competitors could significantly impede our ability to expand our
network of dealers and to reach consumers. Our competitors may also
develop and market new technologies that render our existing or
future products and services less competitive, unmarketable or
obsolete. In addition, if our competitors develop products or
services with similar or superior functionality to our solutions,
we may need to decrease the prices for our solutions in order to
remain competitive. If we are unable to maintain our current
pricing structure due to competitive pressures, our revenue will be
reduced and our operating results will be negatively
affected.
Our
current and potential competitors may have significantly more
financial, technical, marketing and other resources than we have,
and the ability to devote greater resources to the development,
promotion, and support of their products and services.
Additionally, they may have more extensive recreation vehicle
industry relationships than we have, longer operating histories and
greater name recognition. As a result, these competitors may be
better able to respond more quickly to undertake more extensive
marketing or promotional campaigns. If we are unable to compete
with these companies, the demand for our products and services
could substantially decline.
In
addition, if one or more of our competitors were to merge or
partner with another of our competitors, the change in the
competitive landscape could adversely affect our ability to compete
effectively. Our competitors may also establish or strengthen
cooperative relationships with our current or future third-party
data providers, technology partners, or other parties with whom we
may have relationships, thereby limiting our ability to develop,
improve, and promote our solutions. We may not be able to compete
successfully against current or future competitors, and competitive
pressures may harm our revenue, business and financial
results.
Seasonality or weather trends may cause fluctuations in our unique
visitors, revenue and operating results.
Our
revenue trends are likely to be a reflection of consumers'
recreation vehicle buying patterns. While different types of
recreation vehicles are designed for different seasons (motorcycles
are typically for non-snow seasons, while snowmobiles are typically
designed for winter), our revenue may be cyclical if, for example,
motorcycles and motorcycle dealers represent a large percentage of
our revenue. Our business will also be impacted by cyclical trends
affecting the overall economy, specifically the retail recreation
vehicle industry, as well as by actual or threatened severe weather
events.
We collect, process, store, share, disclose and use personal
information and other data, and our actual or perceived failure to
protect such information and data could damage our reputation and
brand and harm our business and operating results.
We
collect, process, store, share, disclose and use personal
information and other data provided by consumers and dealers. We
rely on encryption and authentication technology licensed from
third parties to effect secure transmission of such information. We
may need to expend significant resources to protect against
security breaches or to address problems caused by breaches. Any
failure or perceived failure to maintain the security of personal
and other data that is provided to us by consumers and dealers
could harm our reputation and brand and expose us to a risk of loss
or litigation and possible liability, any of which could harm our
business and operating results. In addition, from time to time, it
is possible that concerns will be expressed about whether our
products, services, or processes compromise the privacy of our
users. Concerns about our practices with regard to the collection,
use or disclosure of personal information or other privacy related
matters, even if unfounded, could harm our business and operating
results.
There
are numerous federal, state and local laws around the world
regarding privacy and the collection, processing, storing, sharing,
disclosing, using and protecting of personal information and other
data, the scope of which are changing, subject to differing
interpretations, and which may be costly to comply with and may be
inconsistent between countries and jurisdictions or conflict with
other rules. We generally comply with industry standards and are
subject to the terms of our privacy policies and privacy-related
obligations to third parties. We strive to comply with all
applicable laws, policies, legal obligations and industry codes of
conduct relating to privacy and data protection, to the extent
possible. However, it is possible that these obligations may be
interpreted and applied in new ways or in a manner that is
inconsistent from one jurisdiction to another and may conflict with
other rules or our practices or that new regulations could be
enacted. Any failure or perceived failure by us to comply with our
privacy policies, our privacy-related obligations to consumers or
other third parties, or our privacy-related legal obligations, or
any compromise of security that results in the unauthorized release
or transfer of sensitive information, which may include personally
identifiable information or other user data, may result in
governmental enforcement actions, litigation or public statements
against us by consumer advocacy groups or others and could cause
consumers and recreation vehicle dealers to lose trust in us, which
could have an adverse effect on our business. Additionally, if
vendors, developers or other third parties that we work with
violate applicable laws or our policies, such violations may also
put consumer or dealer information at risk and could in turn harm
our reputation, business and operating results.
Failure to adequately protect our intellectual property could harm
our business and operating results.
A
portion of our success may be dependent on our intellectual
property, the protection of which is crucial to the success of our
business. We expect to rely on a combination of patent, trademark,
trade secret and copyright law and contractual restrictions to
protect our intellectual property. In addition, we will attempt to
protect our intellectual property, technology, and confidential
information by requiring our employees and consultants to enter
into confidentiality and assignment of inventions agreements and
third parties to enter into nondisclosure agreements. These
agreements may not effectively prevent unauthorized use or
disclosure of our confidential information, intellectual property,
or technology and may not provide an adequate remedy in the event
of unauthorized use or disclosure of our confidential information,
intellectual property, or technology. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our website features, software, and functionality
or obtain and use information that we consider
proprietary.
Competitors may
adopt service names similar to ours, thereby harming our ability to
build brand identity and possibly leading to user confusion. In
addition, there could be potential trade name or trademark
infringement claims brought by owners of other registered
trademarks or trademarks that incorporate variations of the term
"RumbleON” or "RMBL."
We
currently hold the "RumbleON.com" Internet domain name and various
other related domain names. The regulation of domain names in the
United States is subject to change. Regulatory bodies could
establish additional top-level domains, appoint additional domain
name registrars, or modify the requirements for holding domain
names. As a result, we may not be able to acquire or maintain all
domain names that use the name RumbleON or RMBL.
We may in the future be subject to intellectual property disputes,
which are costly to defend and could harm our business and
operating results.
We may
from time to time face allegations that we have infringed the
trademarks, copyrights, patents and other intellectual property
rights of third parties, including from our competitors or
non-practicing entities.
Patent
and other intellectual property litigation may be protracted and
expensive, and the results are difficult to predict and may require
us to stop offering some features, purchase licenses or modify our
products and features while we develop non-infringing substitutes
or may result in significant settlement costs.
In
addition, we use open source software in our products and will use
open source software in the future. From time to time, we may face
claims against companies that incorporate open source software into
their products, claiming ownership of, or demanding release of, the
source code, the open source software or derivative works that were
developed using such software, or otherwise seeking to enforce the
terms of the applicable open source license. These claims could
also result in litigation, require us to purchase a costly license
or require us to devote additional research and development
resources to change our platform or services, any of which would
have a negative effect on our business and operating
results.
Even if
these matters do not result in litigation or are resolved in our
favor or without significant cash settlements, these matters, and
the time and resources necessary to litigate or resolve them, could
harm our business, our operating results and our
reputation.
We depend on key personnel to operate our business, and if we are
unable to retain, attract and integrate qualified personnel, our
ability to develop and successfully grow our business could be
harmed.
We
believe our success will depend on the efforts and talents of our
executives and employees, including Marshall Chesrown, our Chairman
and Chief Executive Officer, and Steven R. Berrard, our Chief
Financial Officer and Secretary. Our future success depends on our
continuing ability to attract, develop, motivate and retain highly
qualified and skilled employees. Qualified individuals are in high
demand, and we may incur significant costs to attract and retain
them. In addition, the loss of any of our senior management or key
employees could materially adversely affect our ability to execute
our business plan and strategy, and we may not be able to find
adequate replacements on a timely basis, or at all. Our executive
officers are at-will employees, which means they may terminate
their employment relationship with us at any time, and their
knowledge of our business and industry would be extremely difficult
to replace. We cannot ensure that we will be able to retain the
services of any members of our senior management or other key
employees. If we do not succeed in attracting well-qualified
employees or retaining and motivating existing employees, our
business could be materially and adversely affected.
We may acquire other companies or technologies, which could divert
our management's attention, result in additional dilution to our
stockholders and otherwise disrupt our operations and harm our
operating results.
Our
success will depend, in part, on our ability to grow our business
in response to the demands of consumers, dealers and other
constituents within the recreation vehicle industry as well as
competitive pressures. In some circumstances, we may determine to
do so through the acquisition of complementary businesses and
technologies rather than through internal development. The
identification of suitable acquisition candidates can be difficult,
time-consuming, and costly, and we may not be able to successfully
complete identified acquisitions. The risks we face in connection
with acquisitions include:
●
diversion of
management time and focus from operating our business to addressing
acquisition integration challenges;
●
coordination of
technology, research and development and sales and marketing
functions;
●
transition of the
acquired company's users to our website and mobile
applications;
●
retention of
employees from the acquired company;
●
cultural challenges
associated with integrating employees from the acquired company
into our organization;
●
integration of the
acquired company's accounting, management information, human
resources, and other administrative systems;
●
the need to
implement or improve controls, procedures, and policies at a
business that prior to the acquisition may have lacked effective
controls, procedures, and policies;
●
potential
write-offs of intangibles or other assets acquired in such
transactions that may have an adverse effect our operating results
in a given period;
●
liability for
activities of the acquired company before the acquisition,
including patent and trademark infringement claims, violations of
laws, commercial disputes, tax liabilities, and other known and
unknown liabilities; and
●
litigation or other
claims in connection with the acquired company, including claims
from terminated employees, consumers, former stockholders, or other
third parties.
Our
failure to address these risks or other problems encountered in
connection with our future acquisitions and investments could cause
us to fail to realize the anticipated benefits of these
acquisitions or investments, cause us to incur unanticipated
liabilities, and harm our business generally. Future acquisitions
could also result in dilutive issuances of our equity securities,
the incurrence of debt, contingent liabilities, amortization
expenses, or the impairment of goodwill, any of which could harm
our financial condition. Also, the anticipated benefits of any
acquisitions may not materialize to the extent we anticipate or at
all.
We may not be able to protect our proprietary
technology.
Our
success will depend, in part, on our ability to obtain patents,
protect our trade secrets and operate without infringing on the
proprietary rights of others. We may rely upon a combination of
patents, trade secret protection, and confidentiality agreements to
protect the intellectual property of our products and services.
Patents might not be issued or granted with respect to our patent
applications that are currently pending, and issued or granted
patents might later be found to be invalid or unenforceable, be
interpreted in a manner that does not adequately protect our
business, or fail to otherwise provide us with any competitive
advantage. As such, we do not know the degree of future protection,
if any, that we will have on what we consider our intellectual
property, if any, and a failure to obtain adequate intellectual
property protection with respect to our technology and marketplace
solutions could have a material adverse impact on our
business.
If we
must spend significant time and money protecting or enforcing our
intellectual property rights our business, results of operations
and financial condition may be harmed.
Risks
Related to Ownership of our Common Stock
There has been a limited public market for our common stock, and we
do not know if one will develop that will provide you with adequate
liquidity. The trading price for our common stock may be volatile
and could be subject to wide fluctuations.
Although our common
stock is listed for trading on the Over-the-Counter Pink Sheets
("OTCPK") under the trading symbol "RMBL," and we intend to apply
for the Over-the-Counter Quotation Board ("OTCQB"), we cannot
assure you that we will meet OTCQB's listing requirements, and
therefore may not be able to meet the standards for such listing.
Furthermore, we cannot assure you that an active trading market for
our common stock will develop. The liquidity of any market for the
shares of our common stock will depend on a number of factors,
including:
●
the number of
stockholders;
●
our operating
performance and financial condition;
●
the market for
similar securities;
●
the extent of
coverage of us by securities or industry analysts; and
●
the interest of
securities dealers in making a market in the shares of our common
stock.
Historically, the
market for equity securities has also been subject to disruptions
that have caused substantial volatility in the prices of these
securities, which may not have corresponded to the business or
financial success of the particular company. We cannot assure you
that the market for the shares of our common stock will be free
from similar disruptions. Any such disruptions could have an
adverse effect on stockholders. In addition, the price of the
shares of our common stock could decline significantly if our
future operating results fail to meet or exceed the expectations of
market analysts and investors.
Even if
an active trading market develops, the market price for our common
stock may be highly volatile and could be subject to wide
fluctuations. Some of the facts that could negatively affect our
share price include:
●
actual or
anticipated variations in our quarterly operating
results.
Our principal stockholders and management own a significant
percentage of our stock and an even greater percentage of the
Company's voting power and will be able to exert significant
control over matters subject to stockholder approval.
Following the
NextGen Acquisition and the Effective Date, our executive officers
and directors beneficially own approximately
81.6% of our voting stock,
representing
91.1%
in aggregate voting power, including
80.2%
in aggregate voting power held by Messrs. Chesrown and Berrard as
the only holders of our 1,000,000 outstanding shares of Class A
Common Stock, which has 10 votes for each one share outstanding. As
a result, these stockholders have the ability to determine all
matters requiring stockholder approval. For example, these
stockholders are able to control elections of directors, amendments
of our organizational documents, or approval of any merger, sale of
assets, or other major corporate transaction. This may prevent or
discourage unsolicited acquisition proposals or offers for our
common stock that you may believe are in your best interest as a
stockholder or to take other action that you may believe are not in
your best interest as a stockholder.
The pro forma financial statements were presented for illustrative
purposes only and may not be an indication of our financial
condition or results of operations following the NextGen
Acquisition.
The pro
forma financial statements we have filed with the SEC in connection
with the NextGen Acquisition were presented for illustrative
purposes only and may not be an indication of our financial
condition or results of operations following the NextGen
Acquisition for several reasons. For example, the pro forma
financial statements were derived from our historical financial
statements and NextGen’s, and certain adjustments and
assumptions have been made regarding us after giving effect to the
NextGen Acquisition. The information upon which these adjustments
and assumptions have been made is preliminary, and these kinds of
adjustments and assumptions are difficult to make with accuracy.
Moreover, our actual financial condition and results of operations
following the NextGen Acquisition may not be consistent with, or
evident from, the pro forma financial statements.
In
addition, the assumptions used in preparing the pro forma financial
data may not prove to be accurate, and other factors may affect our
financial condition or results of operations following the NextGen
Acquisition. Any potential decline in our financial condition or
results of operations may cause significant variations in the
trading price of our securities.
Because our common stock is deemed a low-priced "penny" stock, an
investment in our common stock should be considered high risk and
subject to marketability restrictions.
Since
our common stock is a penny stock, as defined in Rule 3a51-1 under
the Exchange Act, it will be more difficult for investors to
liquidate their investment even if and when a market develops for
the common stock. Until the trading price of the common stock rises
above $5.00 per share, if ever, trading in the common stock is
subject to the penny stock rules of the Exchange Act specified in
rules 15g-1 through 15g-10. Those rules require broker-dealers,
before effecting transactions in any penny stock, to:
●
deliver to the
customer, and obtain a written receipt for, a disclosure
document;
●
disclose certain
price information about the stock;
●
disclose the amount
of compensation received by the broker-dealer or any associated
person of the broker-dealer;
●
send monthly
statements to customers with market and price information about the
penny stock; and
●
in some
circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with
information specified in the rules.
Consequently, the
penny stock rules may restrict the ability or willingness of
broker-dealers to sell the common stock and may affect the ability
of holders to sell their common stock in the secondary market and
the price at which such holders can sell any such securities. These
additional procedures could also limit our ability to raise
additional capital in the future.
Our internal controls may be inadequate which could cause our
financial reporting to be unreliable and lead to misinformation
being disseminated to the public.
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting. As defined in Exchange
Act Rule 13a-15(f), internal control over financial reporting is a
process designed by, or under the supervision of, the principal
executive and principal financial officer and effected by the board
of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. The
Exchange Act rule includes those policies and procedures that: (i)
pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of
the assets of the Company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the financial
statements.
If securities or industry analysts do not publish research or
reports about our business, or if they issue an adverse or
misleading opinion regarding our stock, our stock price and trading
volume could decline.
The
trading market for our common stock will be influenced by the
research and reports that industry or securities analysts publish
about us or our business. We do not currently have and may never
obtain research coverage by securities and industry analysts. If no
or few securities or industry analysts commence coverage of us, the
trading price for our stock would be negatively impacted. In the
event we obtain securities or industry analyst coverage, if any of
the analysts who cover us issue an adverse or misleading opinion
regarding us, our business model, our intellectual property or our
stock performance, or if our operating results fail to meet the
expectations of analysts, our stock price would likely decline. If
one or more of these analysts cease coverage of us or fail to
publish reports on us regularly, we could lose visibility in the
financial markets, which in turn could cause our stock price or
trading volume to decline.
Our annual and quarterly operating results may fluctuate
significantly or may fall below the expectations of investors or
securities analysts, each of which may cause our stock price to
fluctuate or decline.
We
expect our operating results to be subject to annual and quarterly
fluctuations, and they will be affected by numerous factors,
including:
●
a change in
consumer discretionary spending;
●
weather, which may
impact the ability or desire for potential end customers to
consider whether they wish to own a recreation
vehicle;
●
the timing and cost
of, and level of investment in, research and development activities
relating to our software services, which may change from time to
time;
●
our ability to
attract, hire and retain qualified personnel;
●
expenditures that
we will or may incur to acquire or develop additional product and
service offerings;
●
future accounting
pronouncements or changes in our accounting policies;
and
●
the changing and
volatile U.S., European and global economic
environments.
If our
annual or quarterly operating results fall below the expectations
of investors or securities analysts, the price of our common stock
could decline substantially. Furthermore, any annual or quarterly
fluctuations in our operating results may, in turn, cause the price
of our stock to fluctuate substantially. We believe that annual and
quarterly comparisons of our financial results are not necessarily
meaningful and should not be relied upon as an indication of our
future performance.
Raising additional funds through debt or equity financing could be
dilutive and may cause the market price of our common stock to
decline.
To the
extent that we raise additional capital through the sale of equity
or convertible debt securities, your ownership interest may be
diluted, and the terms of these securities may include liquidation
or other preferences that adversely affect your rights as a
stockholder. Debt financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take
certain actions, such as incurring additional debt, making capital
expenditures or declaring dividends. If we raise additional funds
through collaborations, strategic collaborations or partnerships,
or marketing, distribution or licensing arrangements with third
parties, we may be required to limit valuable rights to our
intellectual property, technologies, or future revenue streams, or
grant licenses or other rights on terms that are not favorable to
us. Furthermore, any additional fundraising efforts may divert our
management from their day-to-day activities, which may adversely
affect our ability to develop and grow our business.
Sales of a substantial number of shares 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. We are unable to predict the effect that sales may have
on the prevailing market price of our common stock.
In
connection with the NextGen Acquisition, stockholders
holding
7,898,809
shares of our common stock have
entered into an Amended and Restated Stockholders Agreement (the
"Stockholders Agreement") restricting the stockholders’
ability to transfer shares of our common stock through the earlier
of (i) October 19, 2017, or (ii) the date on which the Company
receives at least $3,500,000 in proceeds of any equity financing
(the "Restricted Period"), subject to certain exceptions. The
Stockholders Agreement limits the number of shares of our common
stock that may be sold immediately following the NextGen
Acquisition. Subject to certain limitations, including sales volume
limitations with respect to shares held by our affiliates,
substantially all of our outstanding shares prior to the NextGen
Acquisition will become eligible for sale upon expiration of the
Restricted Period. Sales of stock by these stockholders could have
a material adverse effect on the trading price of our common
stock.
Future sales and issuances of our common stock or rights to
purchase our common stock could result in additional dilution of
the percentage ownership of our stockholders and could cause our
stock price to fall.
We
expect that additional capital will be needed in the future to
continue our planned operations, particularly to fund inventory
purchases or develop additional software. To the extent we raise
additional capital by issuing equity securities, our stockholders
may experience substantial dilution. We may sell our common stock,
convertible securities or other equity securities in one or more
transactions at prices and in a manner we determine from time to
time. If we sell our common stock, convertible securities or other
equity securities in more than one transaction, investors may be
materially diluted by subsequent sales. These sales may also result
in material dilution to our existing stockholders, and new
investors could gain rights superior to our existing
stockholders.
We do not intend to pay dividends on our common stock so any
returns will be limited to the value of our stock.
We have
never declared or paid any cash dividends on our common stock. We
currently anticipate that we will retain future earnings for the
development, operation and expansion of our business and do not
anticipate declaring or paying any cash dividends for the
foreseeable future. Any return to stockholders will therefore be
limited to the appreciation of their stock.
We are an "emerging growth company" under the JOBS Act of 2012, and
we cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make our common stock
less attractive to investors.
We are
an "emerging growth company," as defined in the Jumpstart Our
Business Startups Act of 2012 ("JOBS Act"), and we may take
advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not
"emerging growth companies" including, but not limited to, not
being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not
previously approved. We cannot predict if investors will find our
common stock less attractive because we may rely on these
exemptions. If some investors find our common stock less attractive
as a result, there may be a less active trading market for our
common stock and our stock price may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an
"emerging growth company" can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities
Act of 1933, as amended (the "Securities Act") for complying with
new or revised accounting standards. In other words, an "emerging
growth company" can delay the adoption of certain accounting
standards until those standards would otherwise apply to private
companies. We are choosing to take advantage of the extended
transition period for complying with new or revised accounting
standards. As a result, our financial statements may not be
comparable to those of companies that comply with public company
effective dates.
We will
remain an "emerging growth company" for up to five years, although
we will lose that status sooner if our revenue exceeds $1 billion,
if we issue more than $1 billion in non-convertible debt in a
three-year period, or if the market value of our common stock that
is held by non-affiliates exceeds $700 million.
Even if we no longer qualify as an "emerging growth company", we
may still be subject to reduced reporting requirements so long as
we are considered a "smaller reporting company."
Many of
the exemptions available for emerging growth companies are also
available to smaller reporting companies like us that have less
than $75 million of worldwide common equity held by non-affiliates.
So, although we may no longer qualify as an emerging growth
company, we may still be subject to reduced reporting
requirements.
We may not be able to adequately protect our intellectual property
rights or may be accused of infringing intellectual property rights
of third parties.
We
regard our trademarks, service marks, copyrights, trade dress,
trade secrets, proprietary technology, and similar intellectual
property as critical to our success, and we rely on trademark,
copyright, and patent law, trade secret protection, and
confidentiality and/or license agreements with our employees,
customers, and others to protect our proprietary rights. Effective
intellectual property protection may not be available in every
market in which our products and services are made available. We
also may not be able to acquire or maintain appropriate domain
names in all markets in which we do business. Furthermore,
regulations governing domain names may not protect our trademarks
and similar proprietary rights. We may be unable to prevent third
parties from acquiring domain names that are similar to, infringe
upon, or diminish the value of our trademarks and other proprietary
rights.
We may
not be able to discover or determine the extent of any unauthorized
use of our proprietary rights. Third parties that license our
proprietary rights also may take actions that diminish the value of
our proprietary rights or reputation. The protection of our
intellectual property may require the expenditure of significant
financial and managerial resources. Moreover, the steps we take to
protect our intellectual property may not adequately protect our
rights or prevent third parties from infringing or misappropriating
our proprietary rights.
We also
cannot be certain that others will not independently develop or
otherwise acquire equivalent or superior technology or other
intellectual property rights.
Other
parties also may claim that we infringe their proprietary rights.
We may be subject to claims and legal proceedings regarding alleged
infringement by us of the intellectual property rights of third
parties. Such claims, whether or not meritorious, may result in the
expenditure of significant financial and managerial resources,
injunctions against us or the payment of damages. We may need to
obtain licenses from third parties who allege that we have
infringed their rights, but such licenses may not be available on
terms acceptable to us or at all. In addition, we may not be able
to obtain or utilize on terms that are favorable to us, or at all,
licenses or other rights with respect to intellectual property we
do not own. These risks have been amplified by the increase in
third parties whose sole or primary business is to assert such
claims.
Item
1B
.
Unresolved staff comments
.
None.
We
currently maintain an office at 4521 Sharon Road, Suite 370,
Charlotte, NC 28211. We currently have no monthly rent, nor do we
accrue any expense for monthly rent. We do not believe that we will
need to obtain additional office space at any time in the
foreseeable future, approximately 12 months, until our business
plan is more fully implemented. In the future, we anticipate
requiring additional office space and additional personnel;
however, it is unknown at this time how much space or how many
individuals will be required.
Item
3.
Legal
Proceedings.
We are
not a party to any material legal proceedings.
Item
4.
Mine
Safety Disclosures.
Not
Applicable.
PART
II
Item
5.
Market
For Registrant’s Common Equity And Related Stockholder
Matters And Small Business Issuer Purchase Of Equity
Securities
Market
Information
Our
common stock is traded in the OTC Markets PK (“OTCPK”),
under the symbol “RMBL.” We have been eligible to
participate in the OTCPK since July 1, 2014 and through December
31, 2016 our common stock has not traded, except for 5,000 shares,
which traded on the OTCPK on January 22, 2016 at a price of $0.245
per share.
Holders
of Common Stock
As of
February 13, 2017, we had approximately 13 stockholders of record
of 6,923,809 issued and outstanding shares of Class B Common Stock
and two holders of record of 1,000,000 issued and outstanding
shares of Class A Common Stock.
Dividends
We have
never declared or paid any cash dividends. We currently do not
intend to pay cash dividends in the foreseeable future on the
shares of common stock. We intend to reinvest any earning in the
development and expansion of our business. Any cash dividends in
the future to common stockholders will be payable when, as and if
declared by our board of directors, based upon the Board’s
assessment of:
●
our financial
condition;
●
prior claims of
preferred stock to the extent issued and outstanding;
and
●
other factors,
including any applicable law.
Therefore, there
can be no assurance that any dividends on the common stock will
ever be paid.
Item
6.
Selected
Financial Data.
This
item is not applicable, as we are considered a smaller reporting
company.
Item
7.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
We
provide under this Item 7, management's discussion and analysis of
financial condition and results of operations for (i) RumbleON,
Inc. (“RumbleON”) for the year ended December 31, 2016,
for the month ended December 31, 2015, and for the year ended
November 30, 2015 and (ii) NextGen Dealer Solutions, LLC,
(“NextGen”) which we acquired on February 8, 2017, as
described elsewhere in this 2016 Form 10-K as of and for the year
ended December 31, 2016 and as of and for the period from December
10, 2015 and ended December 31, 2015. The MD&A for both these
entities should be read in conjunction with their respective
audited financial statements and accompanying notes beginning on
page F-2 and F-16 respectively.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations for RumbleON
Background and Business Overview
RumbleON, Inc. was
originally incorporated in the State of Nevada in October 2013 as a
development stage company under the name Smart Server, Inc. Smart
Server was formed to engage in the business of designing and
developing computer application software for smart phones and
tablet computers (“mobile payment application”) to
provide customers at participating restaurants, bars, and clubs the
ability to pay their bill with their smartphone without having to
ask for the check. Smart Server ceased its software development
activities in 2014 and, having no operations and no or nominal
assets, met the definition of a "shell company" under the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
In
July 2016, Berrard Holdings Limited Partnership ("Berrard
Holdings") acquired 99.5% of the common stock of Smart Server from
the prior owner of such shares and efforts began on the development
of a unique, capital light, and disruptive e-commerce platform
facilitating the ability of both consumers and dealers to
Buy-Sell-Trade-Finance pre-owned recreation vehicles. It is our
goal to have the platform recognized as the most trusted and
effective solution for the sale, acquisition, and distribution of
recreation vehicles and provide users an efficient, fast,
transparent, and engaging experience. Our initial focus is the
market for 650cc and larger on road motorcycles, particularly those
concentrated in the Harley Davidson brand; we will look to extend
to other brands and additional vehicle types and products as the
platform matures. In February 2017, the Company’s name was
changed to RumbleON, Inc.
Serving
both consumers and dealers, RumbleON will make such consumers or
dealers a cash offer for the purchase of their vehicle or will
provide them the flexibility to trade, list, consign, or auction
their vehicle through the website and mobile app of RumbleON and
our partner dealers. In addition, RumbleON will offer a large
inventory of vehicles for sale on its website and will offer
financing and associated products. RumbleON operations are designed
to be highly scalable by working through an infrastructure and
capital light model created by forging a synergistic relationship
with dealers. RumbleON will utilize partner dealers in the
acquisition of motorcycles as well as to provide inspection,
reconditioning and distribution services. Correspondingly, RumbleON
will earn fees and transaction income, and partner dealers will
earn incremental revenue and enhance profitability through
increased sales, leads, and fees from inspection, reconditioning
and distribution programs.
RumbleON will be
driven by a proprietary technology platform, designed by an
experienced development team. RumbleON acquired this platform on
February 8, 2017 through its acquisition of NextGen and anticipates
the platform will be fully implemented by the RumbleON team in
partnership with the developer over the next 60 days. The system
provides integrated accounting, appraisal, inventory management,
CRM, lead and call center management, equity mining, and other key
services necessary to drive the online marketplace. Over the past
16 years, the developers of the software have designed and built,
for large multi-national clients, a number of successful dealer and
high quality online software applications solutions including
applications for vehicle appraisal and inventory management, credit
reporting and compliance, CRM and lead management, and a vehicle
purchase platform. The product suite currently has modules
supporting the motorcycle, RV, marine, and auto segments and is
easily expandable for additional products in the future. For
additional information see Item 1 Business, “Background and
Overview” and Item 8 of Part II, Note 11 “Subsequent
Events.”
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with generally
accepted accounting principles of the United States
(“GAAP”) requires estimates and assumptions that affect
the reported amounts of assets and liabilities, revenue and
expenses, and related disclosures of contingent assets and
liabilities in the consolidated financial statements and
accompanying notes. The Securities and Exchange Commission (the
"SEC") has defined a company’s critical accounting policies
as the ones that are most important to the portrayal of the
company’s financial condition and results of operations,
and which require the company to make its most difficult and
subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Based on this
definition, we have identified the critical accounting policies and
judgments addressed below. We also have other key accounting
policies, which involve the use of estimates, judgments, and
assumptions that are significant to understanding our results. For
additional information, see Item 8 of Part II, Financial
Statements Note 1 “Description of Business and Accounting
Policies.” Although we believe that our estimates,
assumptions, and judgments are reasonable, they are based upon
information presently available. Actual results may differ
significantly from these estimates under different assumptions,
judgments, or conditions.
Purchase Accounting for Business Combinations
The
Company will account for acquisitions by allocating the fair value
of the consideration transferred to the fair value of the assets
acquired and liabilities assumed on the date of the acquisition and
any remaining difference will be recorded as goodwill. Adjustments
may be made to the preliminary purchase price allocation when facts
and circumstances that existed on the date of the acquisition
surface during the allocation period subsequent to the preliminary
purchase price allocation, not to exceed one year from the date of
acquisition. Contingent consideration will be recorded at fair
value based on the facts and circumstances on the date of the
acquisition and any subsequent changes in the fair value are
recorded through earnings each reporting period. Transactions that
occur in conjunction with or subsequent to the closing date of the
acquisition will be evaluated and accounted for based on the facts
and substance of the transactions.
Goodwill
Goodwill will not
be amortized but rather tested for impairment at least annually.
The Company will test goodwill for impairment annually during the
fourth quarter of each year. Goodwill will also be tested for
impairment between annual tests if an event occurs or circumstances
change that would more likely than not reduce the fair value of the
reporting unit below its carrying amount. Impairment testing for
goodwill will be done at the reporting unit level. A reporting unit
is an operating segment or one level below an operating segment
(also known as a component). A component of an operating segment is
a reporting unit if the component constitutes a business for which
discrete financial information is available, and segment management
regularly reviews the operating results of that component. The
Company has concluded that currently it has one reporting
unit.
Determining fair
value includes the use of significant estimates and assumptions.
Management will utilize an income approach, specifically the
discounted cash flow technique as a means for estimating fair
value. This discounted cash flow analysis requires various
assumptions including those about future cash flows, transactional
and customer growth rates and discount rates. Expected cash flows
will be based on historical customer growth and the growth in
transactions, including attrition, future strategic initiatives and
continued long-term growth of the business. The discount rates used
for the analysis will reflect a weighted average cost of capital
based on industry and capital structure adjusted for equity risk
and size risk premiums. These estimates can be affected by factors
such as customer and transaction growth, pricing, and economic
conditions that can be difficult to predict.
Other Intangible Assets
Identifiable
intangible assets may include customer relationships, non-compete
agreements, trademarks, trade names and internet domain names. The
estimated fair value of these intangible assets at the time of
acquisition will be based upon various valuation techniques
including replacement cost and discounted future cash flow
projections. Customer relationships will be amortized on a
straight-line basis over the expected average life of the acquired
accounts, which will be based upon several factors, including
historical longevity of customers and contracts acquired and
historical retention rates. Non-compete agreements will be
amortized on a straight-line basis over the term of the agreement,
which will generally not exceed five years. The Company will review
the recoverability of these assets if events or circumstances
indicate that the assets may be impaired and will periodically
reevaluate the estimated remaining lives of these
assets.
Trademarks, trade
names and internet domain names are considered to be indefinite
lived intangible assets unless specific evidence exists that a
shorter life is more appropriate. Indefinite lived intangible
assets will be tested, at a minimum, on an annual basis using an
income approach or sooner whenever events or changes in
circumstances indicate that an asset may be impaired.
Long-Lived Assets
Fixed
assets will be reviewed for impairment when events or changes in
circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable. Recoverability of assets to be
held and used will be measured by a comparison of the carrying
amount of an asset to the future net cash flows expected to be
generated by the asset. If such assets or asset groups are
considered to be impaired, the impairment to be recognized will be
measured by the amount by which the carrying amount of the assets
or asset groups exceeds the related fair values. The Company will
also perform a periodic assessment of the useful lives assigned to
the long-lived assets.
Technology and Content
Technology costs for the RumbleON technology
platform will be accounted for
pursuant to ASC 350,
Intangibles — Goodwill and
Other
and will
consist
principally of development activities including payroll and related
expenses for employees and third-party contractors involved in
application, content, production, maintenance, operation, and
platform development for new and existing products and services, as
well as other technology infrastructure expenses. Technology and
content costs for design or maintenance of internal-use software
and general website development will be expensed as incurred. Costs
incurred to develop new website functionality as well as new
software products for resale and significant upgrades to existing
platforms or modules will be capitalized and amortized over seven
years.
Beneficial Conversion Feature
From
time to time, the Company may issue convertible notes that may have
conversion prices that create an embedded beneficial conversion
feature pursuant to the guidelines established by the Financial
Accounting Standards Board’s (“FASB”) Accounting
Standards Codification (“ASC”) Topic 470-20,
Debt with Conversion and Other
Options
.
The
Beneficial Conversion Feature ("BCF") of a convertible security is
normally characterized as the convertible portion or feature of
certain securities that provide a rate of conversion that is below
market value or in-the-money when issued. The Company records a BCF
related to the issuance of a convertible security when issued and
also records the estimated fair value of any conversion feature
issued with those securities. Beneficial conversion features that
are contingent upon the occurrence of a future event are recorded
when the contingency is resolved.
The BCF
of a convertible note is measured by allocating a portion of the
note's proceeds to the conversion feature, if applicable, and as a
reduction of the carrying amount of the convertible note equal to
the intrinsic value of the conversion feature, both of which are
credited to additional paid-in-capital. The Company calculates the
fair value of the conversion feature embedded in any convertible
security using either a) the Black Scholes valuation model, or b) a
discount cash flow analysis tested for sensitivity to key Level 3
inputs using the Monte Carlo simulation.
The
value of the proceeds received from the convertible security are
then allocated between the conversion features and the underlying
security on a relative fair value basis. The allocated fair value
is recorded in the financial statements as a debt discount from the
face amount of the security with a corresponding amount to
additional paid in capital. The debt discount is amortized to
interest expense over the life of the note using the effective
interest method.
Revenue Recognition
We will
recognize revenue when all of the following conditions are
satisfied: (i) there is persuasive evidence of an arrangement;
(ii) the product or service has been provided to the customer;
(iii) the amount of the product sale or fees to be paid by the
customer is fixed or determinable; and (iv) the collection of
our sales proceeds or fees are probable.
Valuation Allowance for Accounts Receivable
We will
estimate the allowance for doubtful accounts for accounts
receivable by considering a number of factors, including overall
credit quality, age of outstanding balances, historical write-off
experience and specific account analysis that projects the ultimate
collectability of the outstanding balances. Ultimately, actual
results could differ from these assumptions.
Income Taxes
The
Company follows
ASC Topic
740,
Income
Taxes
for
recording the provision for income taxes. Deferred tax assets and
liabilities are computed based upon the difference between the
financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled. Deferred
income tax expenses or benefits are based on the changes in the
asset or liability each period. If available evidence suggests that
it is more likely than not that some portion or all of the deferred
tax assets will not be realized, a valuation allowance is required
to reduce the deferred tax assets to the amount that is more likely
than not to be realized. Future changes in such valuation allowance
are included in the provision for deferred income taxes in the
period of change. Deferred income taxes may arise from
temporary differences resulting from income and expense items
reported for financial accounting and tax purposes in different
periods. Deferred taxes are classified as current or non-current,
depending on the classification of assets and liabilities to which
they relate. Deferred taxes arising from temporary differences that
are not related to an asset or liability are classified as current
or non-current depending on the periods in which the temporary
differences are expected to reverse.
The
Company applies a more-likely-than-not recognition threshold for
all tax uncertainties. ASC Topic 740 only allows the recognition of
those tax benefits that have a greater than fifty percent
likelihood of being sustained upon examination by the taxing
authorities. As of December 31, 2016, December 31, 2015 and
November 30, 2015, the Company reviewed its tax positions and
determined there were no outstanding, or retroactive tax positions
with less than a 50% likelihood of being sustained upon examination
by the taxing authorities, therefore this standard has not had a
material effect on the Company.
Stock Based Compensation
We will
measure and recognize all stock based compensation at fair value at
the date of grant and recognize compensation expense over the
service period for awards expected to vest. Determining the fair
value of stock based awards at the grant date requires judgment,
including estimating the share volatility, the expected term the
award will be outstanding, and the amount of the awards that are
expected to be forfeited. We will utilize the Black-Scholes option
pricing model or other industry accepted valuation model, as
necessary, to determine the fair value.
Newly Issued Accounting Pronouncements
No
recently adopted or new accounting pronouncements have had, or are
expected to have, a material effect on the Company's net loss,
financial position or cash flows.
RESULTS
OF OPERATIONS
The
following table provides our results of operations for the year
ended December 31, 2016, for the month ended December 31, 2015, and
for the year ended November 30, 2015. As of December 31, 2016, the
Company has not generated any revenue. This financial information
should be read in conjunction with our audited Financial Statements
and Notes thereto.
Operating
expenses:
|
|
|
|
General and
administrative
|
$
57,825
|
$
-
|
$
2,529
|
Depreciation and
amortization
|
1,900
|
158
|
1,900
|
Impairment of
assets
|
792
|
-
|
-
|
Professional
fees
|
152,876
|
2,850
|
37,123
|
|
|
|
|
Total operating
expenses
|
$
213,393
|
$
3,008
|
$
41,552
|
|
|
|
|
Other
expense:
|
|
|
|
Interest expense -
related party
|
11,698
|
719
|
7,257
|
Total other
expense
|
$
11,698
|
$
719
|
$
7,257
|
|
|
|
|
Net loss
before provision for income taxes
|
$
225,091
|
$
3,727
|
$
48,809
|
Operating Expenses
Operating expenses
increased $168,833 or 379% to $213,393 for the year ended December
31, 2016 as compared to the thirteen-month period ended December
31, 2015. The significant components of this change were increases
in general and administrative expenses and professional fees.
General and administrative expenses increased $55,296 to $57,825
for the year ended December 31, 2016, as compared to the
thirteen-month period ended December 31, 2015. The components of
this change were an increase in licenses and permits, insurance and
travel expenses associated with developing the RumbleON business
model and completing the NextGen Acquisition.
Professional fees
consist primarily of legal and accounting fees and costs associated
with: (i) financing activities; (ii) general corporate matters;
(iii) acquisitions; (iv) the preparation of quarterly and annual
financial statements; and (v) the filing of regulatory reports
required of the Company for public reporting purposes. Professional
fees increased $112,903 or 282% to $152,876 for the year ended
December 31, 2016, as compared to the thirteen-month period ended
December 31, 2015. This increase was primarily a result of legal,
accounting and other professional fees and expenses incurred in
connection with the: (i) change of control transaction in August
2016; (ii) private placement of common stock and convertible loan
agreement transaction completed in November 2016; (iii) NextGen
Acquisition; and (iv) various corporate matters resulting from the
discontinuation of the Smart Server business strategy and the
adoption of the RumbleON business plan.
For additional information, see
Item 1
Business "Background Overview", and Note 11 "Subsequent Events" in
the Notes to the Consolidated Financial Statements.
Interest
expense-related party consist of interest on the convertible
note-related party and the note payable-related party. Interest
expense-related party increased $3,722 or 47% to $11,698 as a
result of higher level debt outstanding for the year ended December
31, 2016, as compared to the thirteen-month period ended December
31, 2015. Included in interest expense is $1,282 of interest
related to the beneficial conversion feature on the convertible
note payable-related party.
Liquidity
and Capital Resources
The
following table sets forth a summary of our cash flows for the year
ended December 31, 2016, for the month ended December 31, 2015, and
for the year ended November 30, 2015:
|
|
|
|
Net cash used in
operating activities
|
$
(19,976
)
|
$
(5,850
)
|
$
(32,632
)
|
Net cash used in
investing activities
|
(45,515
)
|
-
|
-
|
Net cash provided
by financing activities
|
1,412,358
|
8,000
|
28,000
|
Net
increase/(decrease) in cash
|
$
1,346,867
|
$
2,150
|
$
(4,632
)
|
Operating Activities
Net
cash used in operating activities decreased $18,506 or 48% to
$19,976 for the year ended December 31, 2016, as compared to the
thirteen-month period ended December 31, 2015. The decrease in net
cash used is primarily due to a $172,042 increase in our net loss
offset by an increase in net working capital of $208,635. The
increase in the net loss for the year ended December 31, 2016 was a
result of beginning to incur startup costs and expenses in
connection with the development of the RumbleON business
plan.
Investing Activities
Net
cash used in investing activities increased $45,515 for the year
ended December 31, 2016, as compared to the thirteen-month period
ended December 31, 2015. The cash used in investment activities was
for the purchase of various domain names. There was no cash used in
investing activities for the month ended December 31, 2015 and for
the year ended November 30, 2015.
Financing Activities
Net
cash provided by financing activities increased $1,376,358 to
$1,412,358 for the year ended December 31, 2016, compared with net
cash provided by financing activities of $36,000 during the
thirteen-month period ended December 31, 2015. This increase is
primarily a result of the: (i) issuance of a $197,358 convertible
note payable to Berrard Holdings Limited Partnership; (iii)
issuance of $17,000 in notes payable to E. Venture Resources Inc.
and (ii) sale of $1,354,000 of common stock in a private placement.
These amounts were offset by a $158,000 repayment of notes payable
E. Venture Resources Inc. Cash Requirements and Financing
Transactions
As of
December 31, 2016, the Company had a total of $1,350,580 in
available cash. If we were to not receive any additional funds, we
could not continue in business for the next 12 months with our
currently available capital. Since inception, we have financed our
cash flow requirements through debt and equity financing. As we
expand our activities, we may, and most likely will, continue to
experience net negative cash flows from operations, pending the
Company’s ability to generate sustainable cash flow from the
implementation of its business strategy and utilization of its
e-commerce platform. See Item 1 Business "Background Overview" for
a further discussion of the Company’s business
strategy.
Since
the completion of the Company’s initial public offering it
has funded its business activities through a series of promissory
notes with E. Venture Resources, Inc., totaling $158,000. The terms
of the promissory notes provide for an interest rate of 6% per
annum with all accrued balances due and payable within 24 months of
the date of the promissory note. During July 2016, the Company
repaid the entire amount of principal and accrued interest to E.
Venture Resources, Inc. During July 2016, the Company executed a
convertible promissory note with Berrard Holdings Limited
Partnership for a total of $197,358. The terms of the promissory
notes provide for an interest rate of 6% per annum with all accrued
balances due and payable in July 2026. The debt is convertible into
shares of common stock at a per share price of $0.75.
On
November 28, 2016, RumbleON completed a private placement (the
"Private Placement") with certain accredited investors (the
"Purchasers"), with respect to the sale of an aggregate of 900,000
shares of common stock of the Company at a purchase price of $1.50
per share for total consideration of $1,350,000. In connection with
the Private Placement, the Company also entered into loan
agreements with the Purchasers pursuant to which the Purchasers
will loan to the Company their pro rata share of up to $1,350,000
in the aggregate upon the request of the Company at any time on or
after January 31, 2017 and before November 1, 2020, pursuant to the
terms of the convertible promissory note attached to each of the
Loan Agreements.
Our
cash requirements for the next twelve months are significant and
will consist primarily of funds needed for: (i) our day-to-day
operations; (ii) capital expenditures associated with computer
equipment and software development; and (iii) the purchase of
inventory held for sale. However, additional funds may not be
available when we need them, on terms that are acceptable to us, or
at all. Volatility in the credit markets may also have an adverse
effect on our ability to obtain debt financing.
Even
though we expect to begin generating revenue, we can make no
assurances and therefore we may incur operating losses in the next
twelve months. Our limited operating history makes predictions of
future operating results difficult to ascertain. Our prospects must
be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving
markets. Such risks for us include, but are not limited to, an
evolving business model, advancement of technology and the
management of growth. To address these risks, we must, among other
things, continue our development of relevant applications, stay
abreast of changes in the marketplace, as well as implement and
successfully execute our business and marketing strategy. There can
be no assurance that we will be successful in addressing such
risks, and the failure to do so can have a material adverse effect
on our business prospects, financial condition and results of
operations.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations for NextGen
Background and Business Overview
On January 8, 2017,
NextGen, Halcyon Consulting, LLC (“Halcyon”), and
members of Halcyon signatory thereto (“Halcyon Members”
and together with Halcyon, the “Halcyon Parties”)
entered into an Asset Purchase Agreement with Smart Server, Inc.
(“Smart Server”). NextGen and the Halcyon Parties are
collectively referred to as the “Seller Parties.” The
Agreement provides that, upon the terms and subject to the
conditions set forth in the Agreement, Smart Server would acquire
all of NextGen's assets, properties and rights of whatever kind,
tangible and intangible, other than the excluded assets under the
terms of the Agreement. Smart Server also would assume liability
only for certain post-closing contractual obligations pursuant to
the terms of the Agreement, primarily related to operating and
maintaining the CyclePro application. Additionally, Smart Server
agreed to be responsible for certain payroll costs and operating
expenses of NextGen
incurred after January 16, 2017 and through the
closing of the NextGen Acquisition, and 2) benefit from all revenue
earned from January 16, 2017 forward. On February 8, 2017, prior to
the closing of the NextGen Acquisition, Smart Server assigned to
NextGen Pro, LLC the right to acquire NextGen's assets and
liabilities (but not any other rights or obligations under the
NextGen Agreement). The transaction closed on February 8,
2017.
NextGen Pro, LLC acquired
substantially all of the assets of NextGen in exchange for the
payment of approximately $750,000 in cash, the issuance to NextGen of
1,523,809 unregistered shares of common stock of the Company (the
"Purchaser Shares"), the issuance of a
subordinated secured promissory note by Smart Server in favor of
the Company in the amount of $1,333,333 (the "Acquisition Note"),
and the assumption by NextGen Pro, LLC of certain specified
liabilities of NextGen. The Acquisition Note matures on the third
anniversary of the date the Acquisition Note is entered into (the
"Maturity Date"). Interest will accrue on the Acquisition Note (i)
at a rate of 6.5% annually from the date the Acquisition Note is
entered into through the second anniversary of such date and (ii)
at a rate of 8.5% annually from the second anniversary of the date
the Acquisition Note is entered into through the Maturity
Date.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with generally
accepted accounting principles of the United States
(“GAAP”) requires estimates and assumptions that affect
the reported amounts of assets and liabilities, revenue and
expenses, and related disclosures of contingent assets and
liabilities in the consolidated financial statements and
accompanying notes. The Securities and Exchange Commission (the
"SEC") has defined a company’s critical accounting policies
as the ones that are most important to the portrayal of the
company’s financial condition and results of operations,
and which require the company to make its most difficult and
subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Based on this
definition, we have identified the critical accounting policies and
judgments addressed below. We also have other key accounting
policies, which involve the use of estimates, judgments, and
assumptions that are significant to understanding our results.
Although we believe that our estimates, assumptions, and judgments
are reasonable, they are based upon information presently
available. Actual results may differ significantly from these
estimates under different assumptions, judgments, or
conditions.
Use of Estimates
The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. Any
adjustments applied to estimated amounts are recognized in the year
such adjustments are determined.
Software Capitalization
NextGen capitalizes
the costs associated with the development of its software solutions
and website pursuant to ASC Topic
350,
Intangibles – Goodwill and
Other
. Other costs related to the maintenance of the
software are expensed as incurred. Amortization is provided over
the estimated useful lives of seven years using the straight-line
method for financial statement purposes.
Revenue Recognition
NextGen
recognizes revenue when all of the following conditions are
satisfied: (1) there is persuasive evidence of an arrangement; (2)
the product or service has been provided to the customer; (3) the
amount of fees to be paid by the customer is fixed or determinable;
and (4) the collection of our fees is probable. Dealers typically
pay monthly subscription fees to access some or all modules on an a
la carte basis, as well as, in certain cases, implementation or
training fees.
Marketing and Advertising Costs
NextGen
expenses marketing and advertising costs as incurred.
Newly Issued Accounting Pronouncements
No
recently adopted or new accounting pronouncements have had, or are
expected to have, a material effect on NextGen's net loss,
financial position or cash flows.
RESULTS
OF OPERATIONS
The
following table provides our results of operations for the year
ended December 31, 2016, and for the period from December 10, 2015
(inception) ended on December 31, 2015. This financial information
should be read in conjunction with NextGen's audited Consolidated
Financial Statements and Notes to the Consolidated Financial
Statements included in Item 8.
|
For the year
ended
December 31,
2016
|
For
the
period
from
December 10,
2015
thru
December 31,
2015
|
Revenue:
|
|
|
Gross
revenue
|
$
138,141
|
$
6,257
|
|
|
|
Cost
and Expenses:
|
|
|
Cost of goods
sold
|
332,559
|
17,857
|
General and
administrative expenses
|
1,586,002
|
96,608
|
|
1,918,561
|
114,465
|
Operating
Loss
|
(1,780,420
)
|
(108,208
)
|
|
|
|
Other
Income
|
644
|
-
|
|
|
|
Net
Loss
|
$
(1,779,776
)
|
$
(108,208
)
|
|
|
|
Revenue
Revenue
consists of: (i) monthly subscription fees paid by dealers for
access to some (a la carte basis) or all modules that the Company
offers; and (ii) implementation and training fees. Subscription
fees comprised approximately 80% of total revenue for the year
ended December 31, 2016, while implementation accounted for the
majority of the balance. Revenue increased $131,884 to $138,141 for
the year ended December 13, 2016 as compared to 2015 primarily as a
result of 2015 containing only 21 days in the period and an
increase in new customers during the year ended December 31,
2016.
Cost of Goods Sold
Cost of
sales consists of amount paid by NextGen for: (i) various data
feeds from third parties; (ii) hosting of the customer facing
website; (iii) commissions for new sales; (iii) labor incurred in
development activities which include
payroll and third-party contractors involved in application,
content, production, maintenance, operation, and platform
development of internal-use software and general website
development; and (iv)
implementation and training of new and
existing customers. These costs and expenses are
charged to cost of goods sold as incurred.
For the year ended December 31, 2016 training costs and hosting
costs represented approximately 62% and 10%, respectively of Cost
of goods sold, with the cost of data feeds from information
providers or integrated software vendors representing the balance
of costs.
General and administrative
General
and administrative for the year ended December 31, 2016 consisted
of the following:
|
|
|
|
|
|
|
|
|
|
Payroll
|
$
548,299
|
35
%
|
$
24,000
|
25
%
|
Technology
costs
|
384,442
|
24
%
|
6,495
|
7
%
|
Depreciation
and amortization
|
253,468
|
16
%
|
9,369
|
10
%
|
Marketing
|
100,035
|
6
%
|
-
|
0
%
|
Rent
|
87,305
|
6
%
|
4,314
|
4
%
|
Other
|
212,453
|
13
%
|
524,430
|
54
%
|
|
$
1,586,002
|
100
%
|
$
96,608
|
100
%
|
Technology
expenditures include those costs that are not capitalized pursuant
to ASC 350,
Intangibles —
Goodwill and Other
.
Depreciation and amortization is primarily comprised of the
amortization on capitalized software and website. Marketing
includes the monthly fees and sales commissions earned by the
Company’s Marketing Partner under a Marketing Services
Agreement.
For additional information,
see Note 3 “Related Party Transactions”
in the
Notes to the Consolidated Financial Statements for
NextGen.
Liquidity
and Capital Resources
The
following table summarizes cash flows from operations for the years
ended December 31, 2016 and 2015:
|
For the year
ended
December 31,
2016
|
For
the
period
from
December 10,
2015
through
December 31,
2015
|
Net cash used in
operating activities
|
$
(1,111,190
)
|
$
-
|
Net cash used in
investing activities
|
(341,919
)
|
-
|
Net cash provided
by financing activities
|
-
|
1,500,000
|
Net
increase/(decrease) in cash
|
$
(1,453,109
)
|
$
1,500,000
|
Operating Activities
Net
cash used in operating activities increased to $1,111,190 for the
year ended December 31, 2016, as compared to the same period in
2015. The increase in net cash used is primarily due to a
$1,671,568 increase in our net loss, offset by an increase in net
working capital of $408,860. The increase in the net loss for the
year ended December 31, 2016 was a result of continuing to incur
startup cost and expenses in connection with the development of the
NextGen business plan.
Investing Activities
Net
cash used in investing activities increased $341,919 for the year
ended December 31, 2016, as compared to the same period of 2015.
The cash used in investment activities was for the capitalized
costs and expenses associated with the development of the
Company’s software solutions and website in accordance with
ASC Topic 350,
Intangibles —
Goodwill and Other
. There was no cash used in investing
activities for the period ended December 31, 2015.
Financing Activities
There
was no net cash provided by financing activities for the year ended
December 31, 2016. The Company financially sustained its activities
for the year ended December 31, 2016 from the initial contribution
of $1,500,000 from an investor in December, 2015
Forward-Looking
Statements
This
Annual Report on Form 10-K contains forward-looking statements and
involves risks and uncertainties that could materially affect
expected results of operations, liquidity, cash flows, and business
prospects. These statements include, among other things, statements
that:
●
We have no
operating history and we cannot assure you the Company will achieve
or maintain profitability;
●
The initial
development and growth of our business over the first 24 months of
operations, and such growth may not be indicative of our future
growth and, if we continue to grow rapidly, we may not be able to
manage our growth effectively;
●
We may require
additional capital to pursue our business objectives and respond to
business opportunities, challenges or unforeseen circumstances. If
capital is not available on terms acceptable to us or at all, we
may not be able to develop and grow our business as anticipated and
our business, operating results and financial condition may be
harmed;
●
If key industry
participants, including recreation vehicle dealers and recreation
vehicle manufacturers, perceive us in a negative light or our
relationships with them suffer harm, our ability to operate and
grow our business and our financial performance may be
damaged;
●
We may be unable to
maintain or grow relationships with information data providers or
may experience interruptions in the data feeds they provide, which
may limit the information that we are able to provide to our users
and dealers as well as adversely affect the timeliness of such
information and may impair our ability to attract or retain
consumers and our dealers and to timely invoice all
parties;
●
If we suffer a
significant interruption in our ability to gain access to
third-party data, our business and operating results will
suffer;
●
The success of our
business relies heavily on our marketing and branding efforts,
especially with respect to the RumbleON website and our branded
mobile applications, and these efforts may not be
successful;
●
The failure to
develop and maintain our brand could harm our ability to grow
unique visitor traffic and to expand our dealer
network;
●
We will rely on
Internet search engines to drive traffic to our website, and if we
fail to appear prominently in the search results, our traffic would
decline and our business would be adversely affected;
●
A significant
disruption in service on our website or of our mobile applications
could damage our reputation and result in a loss of consumers,
which could harm our business, brand, operating results, and
financial condition;
●
If we are unable to
provide a compelling recreation vehicle buying experience to our
users, the number of transactions between our users, RumbleON and
dealers will decline and our revenue and results of operations will
suffer harm;
●
The growth of our
business relies significantly on our ability to increase the number
of dealers in our network such that we are able to increase the
number of transactions between our users and dealers. Failure to do
so would limit our growth;
●
Our ability to grow
our complementary product offerings may be limited, which could
negatively impact our development, growth, revenue and financial
performance;
●
We will be relying
on third-party financing providers to finance a significant portion
of our customers’ vehicle purchases;
●
Retail sales of
recreational vehicles by the Company may be adversely impacted by
increased supply of and/or declining prices for used recreational
vehicles and excess supply of new recreational
vehicles;
●
We rely on a number
of third parties to perform certain operating and administrative
functions for the Company;
●
We participate in a
highly competitive market, and pressure from existing and new
companies may adversely affect our business and operating
results;
●
Seasonality or
weather trends may cause fluctuations in our unique visitors,
revenue and operating results;
●
We collect,
process, store, share, disclose and use personal information and
other data, and our actual or perceived failure to protect such
information and data could damage our reputation and brand and harm
our business and operating results;
●
Failure to
adequately protect our intellectual property could harm our
business and operating results;
●
We may in the
future be subject to intellectual property disputes, which are
costly to defend and could harm our business and operating
results;
●
We depend on key
personnel to operate our business, and if we are unable to retain,
attract and integrate qualified personnel, our ability to develop
and successfully grow our business could be harmed;
●
We may acquire
other companies or technologies, which could divert our
management's attention, result in additional dilution to our
stockholders and otherwise disrupt our operations and harm our
operating results;
●
We may not be able
to protect our proprietary technology;
●
There has been a
limited public market for our common stock, and we do not know if
one will develop that will provide you with adequate liquidity. The
trading price for our common stock may be volatile and could be
subject to wide fluctuations;
●
Our principal
stockholders and management own a significant percentage of our
stock and an even greater percentage of the Company's voting power
and will be able to exert significant control over matters subject
to stockholder approval;
●
The pro forma
financial statements were presented for illustrative purposes only
and may not be an indication of our financial condition or results
of operations following the NextGen Acquisition;
●
Because our common
stock is deemed a low-priced "penny" stock, an investment in our
common stock should be considered high risk and subject to
marketability restrictions;
●
Our internal
controls may be inadequate which could cause our financial
reporting to be unreliable and lead to misinformation being
disseminated to the public;
●
If securities or
industry analysts do not publish research or reports about our
business, or if they issue an adverse or misleading opinion
regarding our stock, our stock price and trading volume could
decline;
●
Our annual and
quarterly operating results may fluctuate significantly or may fall
below the expectations of investors or securities analysts, each of
which may cause our stock price to fluctuate or
decline;
●
Raising additional
funds through debt or equity financing could be dilutive and may
cause the market price of our common stock to decline;
●
Sales of a
substantial number of shares of our common stock in the public
market could cause our stock price to fall;
●
Future sales and
issuances of our common stock or rights to purchase our common
stock could result in additional dilution of the percentage
ownership of our stockholders and could cause our stock price to
fall;
●
We do not intend to
pay dividends on our common stock so any returns will be limited to
the value of our stock;
●
We are an "emerging
growth company" under the JOBS Act of 2012, and we cannot be
certain if the reduced disclosure requirements applicable to
emerging growth companies will make our common stock less
attractive to investors;
●
Even if we no
longer qualify as an "emerging growth company", we may still be
subject to reduced reporting requirements so long as we are
considered a "smaller reporting company";
●
We may not be able
to adequately protect our intellectual property rights or may be
accused of infringing intellectual property rights of third
parties;
●
Our auditor’s
report reflects the fact that the ability of the Company to
continue as a going concern is dependent upon its ability to raise
additional capital from the sale of common stock and, ultimately
the achievement of significant operating revenue. If we are unable
to continue as a going concern, you will lose your
investment;
●
other risks and
uncertainties detailed in this report;
as well
as other statements regarding our future operations, financial
condition and prospects, and business strategies. Forward-looking
statements may appear throughout this report, including without
limitation, the following sections: Item 1 "Business," Item 1A
"Risk Factors," and Item 7. "Management’s Discussion and
Analysis of Financial Condition and Results of Operations."
Forward-looking statements generally can be identified by words
such as "anticipates," "believes," "estimates," "expects,"
"intends," "plans," "predicts," "projects," "will be," "will
continue," "will likely result," and similar expressions. These
forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties, which
could cause our actual results to differ materially from those
reflected in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not
limited to, those discussed in this Annual Report on Form 10-K, and
in particular, the risks discussed under the caption "Risk Factors"
in Item 1A and those discussed in other documents we file with the
Securities and Exchange Commission (SEC). We undertake no
obligation to revise or publicly release the results of any
revision to these forward-looking statements, except as required by
law. Given these risks and uncertainties, readers are cautioned not
to place undue reliance on such forward-looking
statements.
Item
7A.
Quantitative
and Qualitative Disclosures About Market Risk.
This
item in not applicable as we are currently considered a smaller
reporting company.
Item
8.
Financial
Statements and Supplementary Data.
See
Index to Financial Statements and Financial Statement Schedules
beginning on page F-1 of this Form 10-K.
Item
9.
Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure.
On
December 16, 2016, the Board approved the dismissal of Seale and
Beers, CPAs (“Seale and Beers”) as the Company’s
independent registered public accounting firm, effective December
16, 2016.
Seale and Beers audited the
Company’s financial statements for the years ended November
30, 2015 and November 30, 2014. Seale and Beers’ reports on
the Company’s financial statements for the years ended
November 30, 2015 and November 30, 2014 did not contain any adverse
opinion or disclaimer of opinion, nor were the reports qualified or
modified as to uncertainty, audit scope or accounting principles.
However, the Seale and Beers’ reports on the Company’s
financial statements for the years ended November 30, 2015 and
November 30, 2014 each contained an explanatory paragraph noting
there was substantial doubt as to the Company’s ability to
continue as a going concern.
In
connection with Seale and Beers' audit of the Company’s
financial statements for the fiscal years ended November 30, 2015
and November 30, 2014 and through the subsequent interim period
ended December 16, 2016, the Company has had no disagreement with
Seale and Beers on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction
of Seale and Beers, would have caused Seale and Beers to make a
reference to the subject matter of the disagreements in connection
with its reports on the financial statements for the fiscal year
ended November 30, 2015 and November 30, 2014.
The
Company provided Seale and Beers a copy of the disclosures it is
making in this report and requested that Seale and Beers furnish a
letter addressed to the SEC stating whether it agrees with the
statements made by the Company in this report and, if not, stating
the respects in which it does not agree. A copy of such letter is
attached as Exhibit 16.1 to this report.
On
December 20, 2016, the Board also approved the engagement of Scharf
Pera & Co., PLLC (“Scharf Pera”) as the
Company’s independent registered public accounting firm for
the fiscal year ending December 31, 2016. The engagement of Scharf
Pera was effective December 20, 2016. During the fiscal years ended
November 30, 2014 and November 30, 2015, and the subsequent interim
period through December 20, 2016, neither the Company nor anyone on
its behalf consulted with Scharf Pera regarding either (i) the
application of accounting principles to a specific completed or
proposed transaction or the type of audit opinion that might be
rendered on the Company’s financial statements, and Scharf
Pera did not provide written reports or oral advice that was an
important factor considered by the Company in reaching a decision
as to any accounting, auditing or financial reporting issue during
such periods or (ii) any matter that was either the subject of a
disagreement (as defined in Item 304(a)(i)(iv) of Regulation S-K
and related instructions to such item) or a reportable event (as
described in Item 304(a)(i)(v) of Regulation S-K).
Item
9A.
Controls
and Procedures.
Evaluation of Disclosure Controls and Procedures
Our
Principal Executive Officer and Principal Financial Officer,
Marshall Chesrown and Steven R. Berrard, have evaluated the
effectiveness of our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Exchange Act) as of the end of the
period covered by this Report. Based on their evaluation, Messrs.
Chesrown and Berrard concluded that our disclosure controls and
procedures are designed at a reasonable assurance level and are
effective to provide reasonable assurance that information we are
required to disclose in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to
our management, including our chief executive officer and principal
financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.
Management’s Report on Internal Control Over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control, as is defined in the Exchange Act. These internal
controls are designed to provide reasonable assurance that the
reported financial information is presented fairly, that
disclosures are adequate and that the judgments inherent in the
preparation of financial statements are reasonable. There are
inherent limitations in the effectiveness of any system of internal
controls, including the possibility of human error and overriding
of controls. Consequently, an effective internal control system can
only provide reasonable, not absolute, assurance with respect to
reporting financial information.
Our
internal control over financial reporting includes policies and
procedures that: (i) pertain to maintaining records that in
reasonable detail accurately and fairly reflect our transactions;
(ii) provide reasonable assurance that transactions are recorded as
necessary for preparation of our financial statements in accordance
with generally accepted accounting principles and the receipts and
expenditures of company assets are made and in accordance with our
management and directors authorization; and (iii) provide
reasonable assurance regarding the prevention or timely detection
of unauthorized acquisition, use or disposition of assets that
could have a material effect on our financial
statements.
Management has
undertaken an assessment of the effectiveness of our internal
control over financial reporting based on the framework and
criteria established in the Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission ("COSO"). Based upon this evaluation,
management concluded that our internal control over financial
reporting was effective as of December 31, 2016.
This
annual report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by our registered public accounting firm pursuant to
the temporary rules of the Securities and Exchange Commission that
permit the company to provide only the management’s report in
this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting
that occurred during our most recent fiscal quarter that have
materially affected, or reasonably likely to materially affect, our
internal control over financial reporting.
Item
9B.
Other
Information.
As
described elsewhere in this Form 10-K, on February 8, 2017, the
Closing Date, RumbleON completed its previously announced
acquisition of substantially all of the assets of NextGen in
exchange for $750,000 in cash, the Purchaser Shares and the
Acquisition Note.
Before
the NextGen Acquisition, we were a “shell company” (as
such term is defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended, or the Exchange Act). As a result of the
NextGen Acquisition, we have ceased to be a “shell
company.” The information contained in this Item 9B, together
with other information contained in this Annual Report on Form 10-K
for the year ended December 31, 2016 constitute the current
“Form 10 information” necessary to satisfy the
conditions contained in Rule 144(i)(2) under the Securities Act of
1933, as amended, and Item 2.01(f) of Form 8-K.
This
Item 9B contains summaries of the material terms of various
agreements executed in connection with the NextGen Acquisition
described herein. The summaries of these agreements are subject to,
and are qualified in their entirety by, reference to these
agreements, which are filed as exhibits to this Form 10-K and are
incorporated in this Form 10-K by reference.
This
Item 9B and other portions of this Form 10-K also respond to the
following Items in Form 8-K:
Item 1.01.
Entry into a
Material Definitive Agreement.
Item 2.01.
Completion of
Acquisition or Disposition of Assets.
Item
2.03.
Creation of a
Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
Item
3.02.
Unregistered Sales
of Equity Securities.
Item 5.02.
Departure of
Directors or Certain Officers; Election of Directors; Appointment
of Certain Officers; Compensatory Arrangements of Certain
Officers.
Item 5.06.
Change in Shell
Company Status.
Item
9.01.
Financial
Statements and Exhibits.
Agreements
Related to the NextGen Acquisition
Stockholders' Agreement
In
connection with the NextGen Acquisition, the Company, Berrard
Holdings Limited Partnership ("Berrard Holdings"), Steven R.
Berrard, (with Berrard Holdings, the "Berrard Holders"), Marshall
Chesrown, the Seller Parties, and other stockholders of the Company
who are parties to the prior Stockholders' Agreement dated October
24, 2016 (together with Mr. Chesrown and the Berrard Holders, the
"Stockholders") entered into an Amended and Restated Stockholders'
Agreement, dated as of the Closing Date (the “Stockholders'
Agreement”), whereby the parties agreed to take all necessary
actions to (i) set the size of the board of directors of the
Company at six (6) members, (ii) elect to the board of directors of
the Company three (3) directors designated by Mr. Chesrown, until
the date when Mr. Chesrown’s equity holdings in the Company
fall below the Minimum Threshold (as defined in the Stockholders'
Agreement), and (iii) elect to the board of directors of the
Company one (1) director designated by Mr. Berrard, until the date
when Mr. Berrard’s equity holdings in the Company fall below
the Minimum Threshold.
The
Stockholders' Agreement restricts the stockholders’ ability
to transfer shares of our common stock through the earlier of (i)
October 19, 2017, or (ii) the date on which the Company receives at
least $3,500,000 in proceeds of any equity financing (the
"Restricted Period"), subject to certain exceptions. The
Stockholders' Agreement limits the number of shares of our common
stock that may be sold immediately following the NextGen
Acquisition. Subject to certain limitations, including sales volume
limitations with respect to shares held by our affiliates,
substantially all of our outstanding shares prior to the NextGen
Acquisition will become eligible for sale upon expiration of the
Restricted Period.
The Stockholders' Agreement grants
certain major stockholders of the Company the right to require the
other stockholders signatory to the Stockholders' Agreement to
participate in any transaction that constitutes a sale of the
Company's business (whether via merger, asset sale, tender offer or
otherwise). The exercise of the right is subject to certain
customary conditions, limitations and procedural requirements and,
in some circumstances, is conditioned on a prior approval of the
transaction by the Company's Board of Directors. Where the sale of
the Company's business is accomplished through a direct sale of
securities representing more than 50% of the issued and outstanding
common stock of the Company, certain major stockholder have an
obligation to exercise the drag-along rights described in this
paragraph. The drag-along rights, including the obligation to
exercise such rights in certain circumstances, expire on December
31, 2018.
The
Stockholders' Agreement requires each stockholder signatory thereto
(other than Steven Berrard, Berrard Holdings Limited Partnership
and Marshall Chesrown) to make an offer to sell their shares of
stock in the Company to the Company, Steven Berrard, Berrard
Holdings Limited Partnership and Marshall Chesrown prior to seeking
to transfer such shares to any other person. In addition, Steven
Berrard and Berrard Holdings Limited Partnership on the one hand
and Marshall Chesrown on the other hand have agreed that each would
grant the other party the right to purchase its shares of the
Company's stock before transferring such shares to any other
person. The rights described in this paragraph are subject to
certain customary conditions, limitations and procedural
requirements and terminate on the earlier of June 30, 2018 and the
date on which certain stockholders elect to terminate such rights
by written notice to the other stockholders signatory hereto. The
Stockholders' Agreement also contains certain procedural and
information rights related to the election of
directors.
This
description of the Stockholders' Agreement is qualified in its
entirety by reference to the Stockholders' Agreement, a copy of
which is filed as Exhibit 10.1 to this 2016 Form 10-K and is
incorporated into this report by reference.
Registration Rights Agreement
In
connection with the NextGen Acquisition, the Company entered into a
Registration Rights Agreement (the “Registration Rights
Agreement”), with certain of the Seller Parties, as Company
stockholders, pursuant to which the Company will register the
Purchaser Shares for resale. Under the terms of the Registration
Rights Agreement, the Company will be required to file a
registration statement on an appropriate form covering the resale
of the Purchaser Shares no later than June 30, 2017.
This
description of the Registration Rights Agreement is qualified in
its entirety by reference to the Registration Rights Agreement, a
copy of which is filed as Exhibit 10.2 to this 2016 Form 10-K and
is incorporated into this report by reference.
Consulting Agreement
In
connection with the NextGen Acquisition, the Company entered into a
Consulting Agreement with Kartik Kakarala, who formerly served as
the Chief Executive Officer of NextGen and now serves as a director
of the Company (the "Consulting Agreement"). Pursuant to the
Consulting Agreement, Mr. Kakarala will serve as a consultant to
the Company. The Consulting Agreement may be cancelled by either
party, effective upon delivery of a written notice to the other
party. Mr. Kakarala's compensation pursuant to the Consulting
Agreement will be $5,000 per month.
This
description of the Consulting Agreement into this report is
qualified by reference to the Consulting Agreement, a copy of which
is filed with this report as Exhibit 10.3 to this 2016 Form 10-K
and is incorporated into this report by reference.
Services Agreement
In
connection with the NextGen Acquisition, the Company entered into a
Services Agreement with Halcyon to provide development and support
services to the Company (the "Services Agreement"). Pursuant to the
Services Agreement, the Company will pay Halcyon hourly fees for
specific services, set forth in the Services Agreement, and such
fees may increase on an annual basis, provided that the rates may
not be higher than 110% of the immediately preceding year's rates.
The Company will reimburse Halcyon for any reasonable travel and
pre-approved out-of-pocket expenses in connection with its services
to the Company.
The
Services Agreement has a term of 24 months from the Closing Date
(the "Initial Term"), and automatically renews thereafter for
additional, consecutive 12-month renewal periods unless either
party provides the other party notice of non-renewal at least 90
days prior to expiration of the then-current term. Either party may
terminate the Services Agreement immediately (i) upon written
notice if the other party materially breaches any of its
obligations and fails to cure such breach within 30 days of notice
thereof or (ii) if the other party makes a general assignment for
the benefit of creditors, is subject of a petition for bankruptcy,
has a receiver appointed or is otherwise declared insolvent or if
the Company is liquidated. The Company may terminate the Services
Agreement immediately by written notice to Halcyon if Halcyon
violates any applicable law in the performance of its services to
the Company. Additionally, the Company and Halcyon may mutually
agree in writing to terminate the Services Agreement at any time.
The Company or Halcyon may terminate the Services Agreement or any
services thereunder at any time after the Initial Term upon 90
days' prior written notice to the other.
This
description of the Services Agreement into this report is qualified
by reference to the Services Agreement, a copy of which is filed
with this report as Exhibit 10.4 and is incorporated into this
report by reference.
Data Agreement
Additionally, and
in connection with the NextGen Acquisition, as described above, the
Company and Cycle Express, LLC ("Cycle Express"), entered into a
Data Confidentiality Agreement, dated February 8, 2017 (the
“Data Agreement”). Among other things, the Data
Agreement allows Cycle Express to provide to the Company certain
non-public confidential auction data ("Confidential Information"),
including an agreed upon number of NPA Value Guide API look-ups per
year, for the agreed upon monthly fee to be used for (i) trade-in
appraisals and inventory valuation in the Company's product known
as “CyclePro” or (ii) the Company's products that
aggregate Confidential Information with other proprietary data
available to the Company and deliver the aggregated data or
analysis derived therefrom to the Company's customers without
attribution of individual sources of data. Other than usual and
customary exceptions, the parties agreed that all Confidential
Information provided to the Company would remain confidential and
would not be used by the Company for any purpose other than the
purposes described above. The Data Agreement has a term of 1 year
unless earlier terminated by Cycle Express pursuant to the terms of
that agreement.
The
above description of the Data Agreement is qualified in its
entirety by reference to the Data Agreement, a copy of which is
attached hereto as Exhibit 10.5 to this Form 10-K and is
incorporated into this report by reference.
Accounting
Treatment
The
NextGen Acquisition will be accounted for by us an asset
acquisition rather than a reverse recapitalization. The Company
considered a number of factors in reaching this conclusion,
including:
●
the Company's
efforts before the acquisition to developing the technology and
business acquired;
●
the Company's
assessment that we did not intend to pursue NextGen’s
business model exclusively but rather that the NextGen Acquisition
would accelerate our efforts to build our business;
●
the Company's
assumption of operating control of NextGen and, that current Board
and executive officers of the Company will continue as management
of the combined company;
●
the Purchaser
Shares paid as part of the consideration to the Seller Parties
represent only 19.2% of the total shares of common stock issued and
outstanding after the transaction; and
●
voting control over
shareholder matters remains with Marshall Chesrown and Steven R.
Berrard (the “Controlling Shareholders”), both of whom
are members of our Board of Directors and executive officers of the
Company and who in aggregate control approximately 80.2% of the
outstanding voting power of the Company as of February 13,
2017.
Change
in Shell Company Status
Before
the NextGen Acquisition, which is described in Part I, Item 1 of
this report, we were a “shell company”. As a result of
the NextGen Acquisition, we have ceased to be a “shell
company.” The information contained in this Form 10-K
constitutes the current “Form 10 information”
necessary to satisfy the conditions contained in
Rule 144(i)(2) under the Securities Act.
Appointment
of Principal Accounting Officer and Director
Effective as of the
Effective Date, the Company's Board of Directors appointed Steven
Berrard, the Company's Chief Financial Officer, Secretary and a
director, as principal accounting officer of the Company, and
Kartik Kakarala as a director of the Company.
Sales
of Unregistered Securities
Since
January 1, 2017, the Company has issued the following unregistered
securities:
(1)
On the Closing Date, the Company issued 1,523,809 unregistered
shares of Common Stock to NextGen; and
(2)
On the Effective
Date, the Company issued to (i) Mr. Chesrown 875,000 unregistered
shares of Class A Common Stock in exchange for an equal number of
shares of Class B Common Stock held by Mr. Chesrown, and (ii) Mr.
Berrard 125,000 shares of Class A Common Stock in exchange for an
equal number of shares of Class B Common Stock held by Mr.
Berrard.
Neither
of the foregoing transactions involved any underwriters,
underwriting discounts or commissions, or any public offering. We
believe the offer, sale and issuance of the shares in Item (1)
above was exempt from registration under the Securities Act by
virtue of Section 4(a)(2) of the Securities Act and Regulation D
thereunder as an issuance of securities not involving a public
offering, and in Item (2) above by virtue of Section 3(a)(9) of the
Securities Act as a security exchanged by an issuer with existing
security holders where no commission or other remuneration is paid
or given directly or indirectly for soliciting such
exchange.
Description
of Our Securities
General
The
following is a summary of the rights of our Common Stock
and preferred stock and of certain provisions of our Articles of
Incorporation and Bylaws in effect upon the completion of the
NextGen Acquisition. For more detailed information, please see our
Articles of Incorporation and Bylaws, which are filed as exhibits
to this Form 10-K.
Common Stock
Our
Articles of Incorporation authorizes the
issuance of 100,000,000 shares of
common stock, $0.001 par value per share (the "Common Stock"), of
which 1,000,000 shares are designated as Class A Common Stock (the
"Class A Common Stock") and all other shares of Common Stock are
designated as Class B Common Stock (the "Class B Common Stock").
The Class A Common Stock ranks pari passu with all of the rights
and privileges of the Class B Common Stock, except that holders of
the Class A Common Stock are entitled to ten votes per share of
Class A Common Stock issued and outstanding. The Class B Common
Stock will be identical to the Class A Common Stock in all
respects, except that holders of the Class B Common Stock will be
entitled to one vote per share of Class B Common Stock issued and
outstanding. Our Class B Common Stock is registered pursuant to
Section 12(g) of the Securities Act. As of February 13, 2017,
1,000,000 shares of Class A Common Stock and 6,923,809 shares of
Class B Common Stock were issued and outstanding.
Holders
of shares of Common Stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time by the
Board of Directors in its discretion, from funds legally available
to be distributed. In the event of a liquidation, dissolution or
winding up of the Company, the holders of shares of Common Stock
are entitled to share pro rata all assets remaining after payment
in full of all liabilities and the prior payment to the preferred
stockholders if any. Holders of Common Stock have no preemptive
rights to purchase our Common Stock. There are no conversion rights
or redemption or sinking fund provisions with respect to the Common
Stock.
Preferred Stock
Our
Articles of Incorporation authorize the issuance of 10,000,000
shares of preferred stock, $0.001 par value per share, of which no
shares were outstanding as of the date of this Report. The
preferred stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series without
further action or vote by the stockholders.
One of
the effects of undesignated preferred stock may be to enable the
Board of Directors to render more difficult or to discourage an
attempt to obtain control of us by means of a tender offer, proxy
contest, merger or otherwise, and thereby to protect the continuity
of our management. The issuance of shares of preferred stock
pursuant to the Board of Director’s authority described above
may adversely affect the rights of holders of common
stock.
Registration Rights
In
connection with the NextGen Acquisition, the Company entered into a
Registration Rights Agreement (the “Registration Rights
Agreement”), with certain of the Seller Parties, as Company
stockholders, pursuant to which the Company will register the
Purchaser Shares for resale. Under the terms of the Registration
Rights Agreement, the Company will be required to file a
registration statement on an appropriate form covering the resale
of the Purchaser Shares no later than June 30, 2017.
This
description of the Registration Rights Agreement is qualified in
its entirety by reference to the Registration Rights Agreement, a
copy of which is filed as Exhibit 10.2 to this report and is
incorporated into this report by reference.
Nevada Laws
The
Nevada Business Corporation Law contains a provision governing
“Acquisition of Controlling Interest.” This law
provides generally that any person or entity that acquires 20% or
more of the outstanding voting shares of a publicly-held Nevada
corporation in the secondary public or private market may be denied
voting rights with respect to the acquired shares, unless a
majority of the disinterested stockholders of the corporation
elects to restore such voting rights in whole or in part. The
control share acquisition act provides that a person or entity
acquires “control shares” whenever it acquires shares
that, but for the operation of the control share acquisition act,
would bring its voting power within any of the following three
ranges:
A “control share
acquisition” is generally defined as the direct or indirect
acquisition of either ownership or voting power associated with
issued and outstanding control shares. The stockholders or board of
directors of a corporation may elect to exempt the stock of the
corporation from the provisions of the control share acquisition
act through adoption of a provision to that effect in the articles
of incorporation or bylaws of the corporation. Our Articles of
Incorporation and Bylaws do exempt our
Common Stock
from the control share
acquisition act.
Transfer Agent and Registrar
The
transfer agent and registrar for our Common Stock is
West Coast Stock
Transfer, Inc., 721 N. Vulcan Ave., Suite 205, Encinitas, CA
92024
.
Indemnification
of Directors and Officers
Insofar
as indemnification for liabilities arising under the Securities Act
of 1933 (the “Act”) may be permitted to our directors,
officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
No
director of the Company will have personal liability to us or any
of our stockholders for monetary damages for breach of fiduciary
duty as a director involving any act or omission of any such
director since provisions have been made in our Articles of
Incorporation limiting such liability. The foregoing provisions
shall not eliminate or limit the liability of a director
for:
●
any breach of the
director’s duty of loyalty to us or our
stockholders;
●
acts or omissions not in good faith or, which involve intentional
misconduct or a knowing violation of law;
●
under applicable
Sections of the Nevada Revised Statutes;
●
the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes; or
●
for any transaction from which the director derived an improper
personal benefit.
The
Bylaws provide for indemnification of our directors, officers, and
employees in most cases for any liability suffered by them or
arising out of their activities as directors, officers, and
employees if they were not engaged in willful misfeasance or
malfeasance in the performance of his or her duties; provided that
in the event of a settlement the indemnification will apply only
when the Board of Directors approves such settlement and
reimbursement as being for our best interests. The Bylaws,
therefore, limit the liability of directors to the maximum extent
permitted by Nevada law (Section 78.751).
Our
officers and directors are accountable to us as fiduciaries, which
means, they are required to exercise good faith and fairness in all
dealings affecting the Company. In the event that a stockholder
believes the officers and/or directors have violated their
fiduciary duties, the stockholder may, subject to applicable rules
of civil procedure, be able to bring a class action or derivative
suit to enforce the stockholder’s rights, including rights
under certain federal and state securities laws and regulations to
recover damages from and require an accounting by management.
Stockholders, who have suffered losses in connection with the
purchase or sale of their interest in the Company in connection
with such sale or purchase, including the misapplication by any
such officer or director of the proceeds from the sale of these
securities, may be able to recover such losses from
us.
PART
III
Item
10.
Directors,
Executive Officers and Corporate Governance.
Directors
and Executive Officers
Below
are the names of and certain information regarding our current
executive officers and directors:
Name
|
|
Age
|
|
Position
|
Marshall
Chesrown
|
|
59
|
|
Chief
Executive Officer and Chairman
|
Steven
R. Berrard
|
|
62
|
|
Chief
Financial Officer, Secretary and Director
|
Denmar
Dixon
|
|
54
|
|
Director
|
Kartik
Kakarala
|
|
39
|
|
Director
|
Mitch
Pierce
|
|
59
|
|
Director
|
Kevin
Westfall
|
|
61
|
|
Director
|
Marshall Chesrown
has served as our
Chief Executive Officer and Chairman since October 24, 2016. Mr.
Chesrown has over 35 years of leadership experience in the
automotive retail sector. From December 2014 to September 2016, Mr.
Chesrown served as Chief Operating Officer and as a director of
Vroom.com, an online direct car retailer. Mr. Chesrown served as
Chief Operating Officer of AutoAmerica, an automotive retail
company, from May 2013 to November 2014. Previously, Mr. Chesrown
served as the President of Chesrown Automotive Group from January
1985 to May 2013, which was acquired by AutoNation, Inc.
(“AutoNation”), a leading automotive retail company, in
1997. Mr. Chesrown served as Senior Vice President of Retail
Operations for AutoNation from 1997 to 1999. From 1999 to 2013, Mr.
Chesrown served as the Chairman and Chief Executive Officer of
Blackrock Development, a real estate development company widely
known for development of the nationally recognized Golf Club at
Black Rock.
We
believe that Mr. Chesrown possesses specific attributes that
qualify him to serve as a member of our board of directors,
including his extensive experience in the automotive retail
sector.
Steven R. Berrard
has served as our
Chief Financial Officer since January 9, 2017 and served as Interim
Chief Financial Officer from July 13, 2016 through January 9, 2017
and as Chief Executive Officer from July 13, 2016 through October
24, 2016. Mr. Berrard has also served as Secretary and a director
of the Company since July 13, 2016. Mr. Berrard
has served as a director of Walter Investment
Management Corp. (“Walter Investment”) since March
2010. He has served, and continues to serve, on the Compensation
and Human Resources Committee of Walter Investment since March
2010, and he served on the Audit Committee of Walter Investment
from May 2010 until February 2013. He currently also serves on the
Nominating and Corporate Governance Committee and the Finance
Committee of Walter Investment. Mr. Berrard served on the
Board of Directors of Swisher Hygiene Inc., a publicly traded
industry leader in hygiene solutions and products, from 2004 until
May 2014. Mr. Berrard is the Managing Partner of New River
Capital Partners, a private equity fund he co-founded in 1997.
Mr. Berrard was the co-founder and Co-Chief Executive Officer
of AutoNation, Inc. (“AutoNation”), a leading
automotive retail company, from 1996 to 1999. Prior to joining
AutoNation, Mr. Berrard served as President and Chief
Executive Officer of the Blockbuster Entertainment Group, at the
time the world’s largest video store operator.
Mr. Berrard served as President of Huizenga Holdings, Inc., a
real estate management and development company, and served in
various positions with subsidiaries of Huizenga Holdings, Inc. from
1981 to 1987. Mr. Berrard was employed by Coopers &
Lybrand (now PricewaterhouseCoopers LLP (“PwC”)) from
1976 to 1981. Mr. Berrard currently serves on the Board of
Directors of Pivotal Fitness, Inc., a chain of fitness centers
operating in a number of markets in the United States.
Mr. Berrard earned his B.S. in Accounting from Florida
Atlantic University.
We
believe that Mr. Berrard’s management experience and
financial expertise is beneficial in guiding the Company’s
strategic direction. He has served in senior management and/or on
the Board of Directors of several prominent, publicly traded
companies. In several instances, he has led significant growth of
the businesses he has managed. In addition, Mr. Berrard has served
as the Chairman of the audit committee of several boards of
directors.
Denmar Dixon
has served on our board of
directors since January 9, 2017. Mr. Dixon has served as a director
of Walter Investment since April 2009 (and its predecessor since
December 2008). Effective October 2015, Mr. Dixon was promoted to
the positions of Chief Executive Officer and President of Walter
Investment. Mr. Dixon has also served as Vice Chairman of the Board
of Directors and Executive Vice President of Walter Investment
since January 2010 and Chief Investment Officer of Walter
Investment since August 2013. Prior to becoming an executive
officer of Walter Investment, he also had served as a member of
Walter Investment's Board of Directors’ Audit Committee and
Nominating and Corporate Governance Committee and as Chairman of
the Compensation and Human Resources Committee (Mr. Dixon resigned
from each of these committee positions immediately prior to his
appointment as the Vice Chairman of the Board of Directors and
Executive Vice President of the Company). Prior to serving on the
Board of Directors of Walter Investment, Mr. Dixon was elected to
the Board of Managers of JWH Holding Company, LLC
(“JWHHC”), a wholly-owned subsidiary of Walter
Industries, Inc., in anticipation of the spin-off of Walter
Investment Management, LLC (“WIM”) from Walter
Industries, Inc. (now known as Walter Energy, Inc.). In 2008, Mr.
Dixon founded Blue Flame Capital, LLC, a consulting, financial
advisory and investment firm. Prior to forming Blue Flame Capital,
LLC, Mr. Dixon spent 23 years with Banc of America Securities, LLC
(“Banc of America”) and its predecessors. At the time
of his retirement, Mr. Dixon was a Managing Director in the
Corporate and Investment Banking group and held the position of
Global Head of the Basic Industries group.
We
believe that Mr. Dixon possesses specific attributes that qualify
him to serve as a member of our board of directors, including his
extensive business development, mergers and acquisitions and
capital markets/investment banking experience within the financial
services industry. As a director, he provides significant input
into, and is actively involved in, leading the Company’s
business activities and strategic planning efforts. Mr. Dixon has
significant experience in the general industrial, consumer and
business services industries.
Kartik Kakarala
was appointed to our
board of directors immediately following the completion of the
NextGen Acquisition in February 2017. Mr. Kakarala is the Chief
Executive Officer of Halcyon Technologies, a global software
solutions company with over 280 employees worldwide. He is
responsible for sales, business development and innovation, as well
as the creation of technology assets. He has been responsible for
the growth of a number of strategic, horizontal competencies, and
vertical business units like automotive, utilities, finance and
healthcare practices. Mr. Kakarala has served as the Chief
Executive Officer and President of NextGen from January 2016 to
February 2017, which was acquired by the Company in February 2017,
providing inventory management solutions to the powersports,
recreational vehicle and marine sectors in North America. He served
as Chief Executive Officer and President of NextGenAuto from July
2013 to December 2015. Mr. Kakarala served as Chief Executive
Officer of ECarTag solutions since 2014, which provides unique
wireless pricing solutions to automotive dealers. He served as
Director/Co-Founder of Vehicle Systems since 2013 which provides
vehicle purchase program solutions. Mr. Kakarala has served as
Co-Founder and Managing Partner of RedBumper from July 2010 to
August 2014, a company which provided used car inventory management
solutions used by thousands of automotive dealers across North
America and which was later acquired by ADP in 2014. Mr. Kakarala
served as Director/Co-Founder of GridFirst solutions since 2012, a
company providing home automation solutions to energy customers.
Mr. Kakarala holds a Master's degree in Computer Science from
University of Houston.
We
believe that Mr. Kakarala possesses specific attributes that
qualify him to serve as a member of our board of directors, as he
is regarded as a pioneer in developing several systems in the
automotive industry including CRM, ERP, inventory management and
financial applications.
Mitch Pierce
has served on our board of
directors since January 9, 2017. Mr. Pierce has over 35 years of
leadership experience in the automotive retail sector. Mr. Pierce
served as the President of Tempe Toyota Group from January 1985 to
June 1997, which was acquired by AutoNation, Inc.
(“AutoNation”), a leading automotive retail company, in
1997. Mr. Pierce served as a Regional Vice President of Retail
Operations for AutoNation from 1997 to 2003. Mr. Pierce currently
owns one of the five largest Toyota stores in United States and is
a partner in six other major auto dealerships. Mr. Pierce is a
board member of the Southern California Toyota Dealers. He served
on the National Dealer Council for Toyota Dealers in 1996-97. He is
Past Chairman of the Arizona Automobile Dealer
Association.
We
believe that Mr. Pierce possesses specific attributes that qualify
him to serve as a member of our board of directors, including his
more than 30 years of executive experience in the automotive retail
sector and broad base of business knowledge and
experience.
Kevin Westfall
has served on our board
of directors since January 9, 2017. Mr. Westfall previously held
various executive roles including Senior Vice President of Sales
and Senior Vice President of Automotive Finance at AutoNation,
founder of BMW Financial Services, President of World Automotive
Imports and Leasing and Retail Lease Manager of Chrysler Credit
Corporation.
We
believe that Mr. Westfall possesses specific attributes that
qualify him to serve as a member of our board of directors,
including his more than 30 years of executive experience in
automotive retail and finance operations.
Director
Independence
We are
not currently subject to listing requirements of any national
securities exchange that has requirements that a majority of the
board of directors be “independent.” Nevertheless, we
expect that our board of directors will determine that all of our
directors, other than Messrs. Chesrown, Berrard, and Kakarala,
qualify as “independent” directors in accordance with
listing requirements of The NASDAQ Stock Market, or NASDAQ. Messrs.
Chesrown and Berrard are not considered independent because they
are employees of the Company. The NASDAQ independence definition
includes a series of objective tests, such as that the director is
not, and has not been for at least three years, one of our
employees and that neither the director nor any of his family
members has engaged in various types of business dealings with us.
There are no family relationships among any of our directors or
executive officers.
Board Committees
Our
Board currently maintains a standing audit committee, compensation
committee and a nominating and corporate governance
committee.
Audit Committee
Our
Board, by unanimous consent, established an audit committee (the
“Audit Committee”) in January 2017. The initial members
of this committee are Messrs. Dixon (chair) and Westfall. Our Board
of Directors has determined that Mr. Dixon is an “audit
committee financial expert”, as defined in Item 407 of
Regulation S-K, and is the Chairman of the Audit Committee.
Although the Audit Committee has not yet adopted a formal charter,
the Board resolution establishing the Audit Committee authorized
the Audit Committee to operate with the customary responsibilities
and authority typically granted to an audit committee in a formal
charter.
Compensation Committee
In
January 2017, our Board, by unanimous consent, also established a
compensation committee (the “Compensation Committee”).
The initial members of the Compensation Committee are Messrs.
Westfall (Chair) and Dixon. The Compensation Committee was
established to, among other things, administer and approve all
elements of compensation and awards for our executive officers. The
Compensation Committee has the responsibility to review and approve
the business goals and objectives relevant to each executive
officer’s compensation, evaluate individual performance of
each executive in light of those goals and objectives, and
determine and approve each executive’s compensation based on
this evaluation. Although the Compensation Committee has not yet
adopted a formal charter, the Board resolution establishing the
Compensation Committee authorized the Compensation Committee to
operate with the customary responsibilities and authority typically
granted to a compensation committee in a formal
charter.
Nominating and Corporate Governance Committee
In
January 2017, our Board, by unanimous consent, also established a
nominating and corporate governance committee (the
“Nominating and Corporate Governance Committee”). The
initial members of the Nominating and Corporate Governance
Committee are Messrs. Chesrown (Chair), Berrard, Westfall and
Dixon. The Nominating Committee is responsible for identifying
individuals qualified to become members of the Board or any
committee thereof; recommending nominees for election as directors
at each annual stockholder meeting; recommending candidates to fill
any vacancies on the Board or any committee thereof; and overseeing
the evaluation of the Board. Although the Nominating and Corporate
Governance Committee has not yet adopted a formal charter, the
Board resolution establishing the Nominating and Corporate
Governance Committee authorized the Nominating and Corporate
Governance Committee to operate with the customary responsibilities
and authority typically granted to a nominating and corporate
governance committee in a formal charter.
Stockholder Communications
Currently, we do
not have a policy relating to stockholder communications with the
Board or with regard to the consideration of any director
candidates recommended by security holders. To date, no security
holders have made any such recommendations. We intend to approve an
appropriate stockholder communications policy at our next Board
meeting following our 2017 Annual Meeting of
Stockholders.
Code of Ethics
We have
not yet adopted a written code of ethics. We intend to approve an
appropriate written code of ethics at our next Board meeting
following our 2017 Annual Meeting of Stockholders.
Compliance with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires directors and executive officers
of the Company and ten percent stockholders of the Company to file
initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company with the
SEC. Directors, executive officers, and ten percent stockholders
are required to furnish the Company with copies of all Section
16(a) forms they file.
Item
11.
Executive
Compensation.
Summary
Compensation
Pamela
Elliott, who served as the Company's President, CEO, Secretary,
Treasurer, and sole Director from January 1, 2014 through July 13,
2016, has not received any compensation for her service to the
Company, except for $1,500 and $1,200 paid in the fiscal years
ended November 30, 2015 and 2014, respectively.
No
other compensation required to be reported pursuant to this Item
was earned or paid during the three years ended December 31,
2016.
Executive
Employment Arrangements
Marshall Chesrown
We have
not entered into an employment agreement or arrangement with Mr.
Chesrown. Accordingly, he is employed as our Chief Executive
Officer on an at-will basis. Mr. Chesrown currently receives no
annual base salary.
Mr.
Chesrown is eligible for equity compensation under our equity
compensation plans, as determined from time to time by the
compensation committee of our Board, however through the date of
this filing, no grants of equity awards have been
made.
Steven Berrard
We have
not entered into an employment agreement or arrangement with Mr.
Berrard. Accordingly, he is employed as our Chief Financial Officer
on an at-will basis. Mr. Berrard currently receives no annual base
salary.
Mr.
Berrard is eligible for equity compensation under our equity
compensation plans, as determined from time to time by the
compensation committee of our Board, however through the date of
this filing, no grants of equity awards have been
made.
Non-Employee
Director Compensation
We have
not yet established a policy for non-employee director
compensation. We intend to establish a non-employee director
compensation policy at our next Board meeting following our 2017
Annual Meeting of Stockholders.
Employee
Benefit Plans
2017 Stock Incentive Plan
On
January 9, 2017, the Company’s Board of Directors approved
the adoption of the RumbleON, Inc. 2017 Stock Incentive Plan (the
"Plan"), subject to stockholder approval at the Company's 2017
Annual Meeting of Stockholders. The purposes of the Plan are to
attract, retain, reward and motivate talented, motivated and loyal
employees and other service providers ("Eligible Individuals") by
providing them with an opportunity to acquire or increase a
proprietary interest in the Company and to incentivize them to
expend maximum effort for the growth and success of the Company, so
as to strengthen the mutuality of the interests between such
persons and the stockholders of the Company. The Plan will allow
the Company to grant a variety of stock-based and cash-based awards
to Eligible Individuals. Twelve percent (12%) of the Company's
issued and outstanding shares of common stock from time to time are
reserved for issuance under the Plan. As of January 9, 2017,
6,400,000 shares were issued and outstanding, resulting in 768,000
shares available for issuance under the Plan. The foregoing
description of the Plan does not purport to be complete and is
qualified in its entirety by the Plan attached as Exhibit 10.6 to
this report and incorporated herein by reference.
We have
not maintained any other equity compensation plans since our
inception.
Item
12.
Security
Ownership Of Certain Beneficial Owners and Management and Related
Stockholder Matters.
Beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. In accordance with
Securities and Exchange Commission rules, shares of our common
stock that may be acquired upon exercise or vesting of equity
awards within 60 days of the date of the table below are deemed
beneficially owned by the holders of such options and are deemed
outstanding for the purpose of computing the percentage of
ownership of such person, but are not treated as outstanding for
the purpose of computing the percentage of ownership of any other
person.
As of
the Effective Date,
7,923,809
shares of common
stock were issued and outstanding. The following table sets forth
information with respect to the beneficial ownership of our Common
Stock as of the Effective Date, by (i) each of our directors and
executive officers, (ii) all of our directors and executive
officers as a group, and (iii) each stockholder known by us to be
the beneficial owner of more than 5% of our Common Stock (our only
class of voting securities). To the best of our knowledge, except
as otherwise indicated, each of the persons named in the table has
sole voting and investment power with respect to the shares of
Common Stock beneficially owned by such person, except to the
extent such power may be shared with a spouse. To our knowledge,
none of the shares listed below are held under a voting trust or
similar agreement, except as noted. To our knowledge, there is no
arrangement, including any pledge by any person of our securities
or any of our parents, the operation of which may at a subsequent
date result in a change in control of the Company.
Unless
otherwise noted below, the address of each person listed on the
table is c/o RumbleON, Inc., 4521 Sharon Road, Suite 370,
Charlotte, NC 28211.
Name
and Address of Beneficial Owner
|
No. of Shares
of Class A Common Stock Owned
|
Percentage of Class
A Ownership
(1)(2)
|
No. of Shares of
Class B Common Stock Owned
|
Percentage of Class
B Ownership
(1)(3)
|
Named
Executive Officers and Directors:
|
|
|
|
|
Marshall
Chesrown
(4)
|
875,000
|
87.5
%
|
1,537,500
|
|
Steven R.
Berrard
(5)
|
125,000
|
12.5
%
|
2,310,013
(6)
|
32.1
%
|
Denmar
Dixon
(7)
|
-
|
*
|
316,667
|
4.6
%
|
Kartik
Kakarala
(8)
|
-
|
*
|
1,523,809
|
22.0
%
|
Mitch
Pierce
|
-
|
*
|
-
|
*
|
Kevin
Westfall
|
-
|
*
|
-
|
*
|
|
|
|
|
|
5%
Stockholders:
|
|
|
|
|
Ralph
Wegis
(9)
|
-
|
*
|
1,321,878
|
19.1
%
|
NextGen Dealer
Solutions, LLC
|
-
|
*
|
1,523,809
|
22.0
%
|
|
|
|
|
|
All directors and
executive officers
as a group (6
persons)
(10)
|
1,000,000
|
100.0
%
|
5,687,989
|
80.9
%
|
_______________________
*
Represents
beneficial ownership of less than 1%.
(1)
Calculated in
accordance with applicable rules of the SEC.
Based on 1,000,000
shares of Class A Common Stock issued and outstanding as of the
Effective Time, and additional shares deemed to be outstanding as
to a particular person, in accordance with applicable rules of the
SEC. The Class A Common Stock has 10 votes for each share
outstanding compared to one vote for each share of Class B Common
Stock outstanding. As of the Effective Time, the holders of the
Class A Common Stock will have in aggregate voting power
representing 80.2% of the Company's outstanding Common Stock on a
fully diluted basis.
(3)
Based on 6,923,809
shares of Class B Common Stock issued and outstanding as of the
Effective Time, and additional shares deemed to be outstanding as
to a particular person, in accordance with applicable rules of the
SEC.
(4)
As of the Effective
Time, Mr. Chesrown will have voting power representing
approximately 60.8% of the Company's outstanding Common Stock on a
fully diluted basis.
(5)
Shares are owned
directly through Berrard Holdings Limited Partnership ("BHLP"), a
limited partnership controlled by Steven R. Berrard. Mr. Berrard
has the sole power to vote and the sole power to dispose of each of
the shares of Common Stock which he may be deemed to beneficially
own. As of the Effective Time, Mr. Berrard will have voting power
representing approximately 19.4% of the Company's outstanding
Common Stock on a fully diluted basis, which does not include the
272,513 shares of Class B Common Stock issuable upon conversion of
promissory note held by BHLP.
(6)
Includes 272,513
shares of Class B Common Stock issuable upon conversion of a
promissory note held by BHLP as of the Effective Date.
(7)
Shares are owned
directly through Blue Flame Capital, LLC, an entity controlled by
Mr. Dixon. Mr. Dixon has the sole power to vote and the sole power
to dispose of each of the shares of Common Stock which he may be
deemed to beneficially own. As of the Effective Time, Mr. Dixon
will have voting power representing approximately 1.9% of the
Company's outstanding Common Stock on a fully diluted
basis.
(8)
Shares are owned
indirectly through NextGen Dealer Solutions, LLC, a limited
liability company of which Mr. Kakarala is the Manager. Mr.
Kakarala has the sole power to vote and the sole power to dispose
of each of the shares of Common Stock he may be deemed to
beneficially own. As of the Effective Time, Mr. Kakarala will have
voting power representing approximately 9.0% of the Company's
outstanding Common Stock on a fully diluted basis.
(9)
As of the Effective
Time, Mr. Wegis will have voting power representing approximately
7.8% of the Company's outstanding Common Stock on a fully diluted
basis.
(10)
As of the Effective
Time, all directors and executive officers as a group will have
voting power representing approximately 92.4% of the Company's
outstanding Common Stock on a fully diluted basis.
Item
13.
Certain
Relationships and Related Transactions, and Director
Independence.
We have
been a party to the following transactions since December 1,
2015, in which the amount involved exceeded or will exceed $120,000
and in which any director, executive officer, or holder of more
than 5% of any class of our voting stock, or any member of the
immediate family of or entities affiliated with any of them, had or
will have a material interest. Blue Flame Capital, LLC, a Purchaser
and an entity controlled by Denmar Dixon, one of the Company's
directors, received 166,667 shares of the Company's common stock
for $250,000. Ralph Wegis, a holder of more than 5% of our common
stock and a Purchaser, paid $799,999.50 for 533,333 shares of the
Company's common stock.
2016
Financing
In July
2016, BHLP loaned the Company, and the Company executed a
promissory note, in the principal amount of $191,858 payable to
BHLP (the “Note”). Pursuant to the Note, the Company is
obligated to repay $191,858 with interest thereon at the rate of 6%
per annum. The maturity date of the Note is July 13, 2026 (the
"Maturity Date"). Further, the Note provided that from the date of
an equity financing of at least $500,000 through the Maturity Date,
BHLP has the right to convert the outstanding balance under the
Note into shares of capital stock of the Company being issued in
such qualified financing (“Qualified Financing
Securities”) at a conversion price equal to the greater of
(i) $0.06 and (ii) fifty percent (50%) of the price per share at
which the Qualified Financing Securities are sold by the Company in
the qualified financing (the “Conversion Price”). The
November 2016 Private Placement (as described below) was completed
on November 28, 2016 and is considered a qualified financing; as
such, the Conversion Price of the Note has been established at
$0.75.
Effective August
31, 2016, the principal amount of the Note was amended to include
an additional $5,500 loaned to the Company, on the same terms as
the original Note. As of December 31, 2016, the total amount owed
was $197,358 plus accrued interest of $5,580.
November
2016 Private Placement
On
November 28, 2016, the Company completed the Private Placement with
certain Purchasers, with respect to the sale of an aggregate of
900,000 shares of common stock of the Company at a purchase price
of $1.50 per share for total consideration of $1,350,000. In
connection with the Private Placement, the Company also entered
into the Loan Agreements, pursuant to which the Purchasers will
loan to the Company their pro rata share of up to $1,350,000 in the
aggregate (the “Applicable Loan Amount”) upon the
request of the Company at any time on or after January 31, 2017 and
before November 1, 2020.
Related
Party Transaction Policy
Our
Board intends to adopt a formal policy that our executive officers,
directors, holders of more than 5% of any class of our voting
securities, and any member of the immediate family of and any
entity affiliated with any of the foregoing persons, are not
permitted to enter into a related party transaction with us without
the prior consent of our audit committee, or other independent
members of our board of directors if it is inappropriate for our
audit committee to review such transaction due to a conflict of
interest. Any request for us to enter into a transaction with an
executive officer, director, principal stockholder, or any of their
immediate family members or affiliates, in which the amount
involved exceeds $120,000 must first be presented to our audit
committee for review, consideration and approval. In approving or
rejecting any such proposal, our audit committee is to consider the
relevant facts and circumstances available and deemed relevant to
the audit committee, including, but not limited to, whether the
transaction is on terms no less favorable than terms generally
available to an unaffiliated third party under the same or similar
circumstances and the extent of the related party’s interest
in the transaction. The related party transactions described above
were entered into prior to the adoption of this
policy.
Item
14.
Principal
Accounting Fees and Services.
Then
information required by this Item 14 is incorporated by reference
to RumbleON, Inc.'s proxy statement for its 2017 Annual Meeting of
Stockholders to be filed within 120 days of December 31,
2016.
PART
IV
Item
15.
Exhibits,
Financial Statement Schedules.
(a)
We have filed the
following documents as part of this Annual Report on Form
10-K:
1.
The financial
statements listed in the "Index to Financial Statements" on page
F-1 are filed as part of this report.
2.
Financial statement
schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
3.
Exhibits included
or incorporated herein: See index to Exhibits.
|
|
|
|
Incorporated by
reference
|
Exhibit
Number
|
|
Exhibit
Description
|
|
Filed
herewith
|
|
Form
|
|
Exhibit
|
|
Filing
date
|
2.1
|
|
Asset
Purchase Agreement, dated as of January 8, 2017
|
|
|
|
8-K
|
|
2.1
|
|
01/09/17
|
2.2
|
|
Assignment
of APA, dated as of January 31, 2017
|
|
X
|
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation of Smart Server filed on October 24,
2013
|
|
|
|
S-1/A
|
|
3(i)(a)
|
|
03/20/14
|
3.2
|
|
Amended
Bylaws
|
|
X
|
|
|
|
|
|
|
3.3
|
|
Certificate
of Amendment, filed February 13, 2017
|
|
X
|
|
|
|
|
|
|
10.1
|
|
Amended
and Restated
Stockholders Agreement, dated February 8,
2017
|
|
X
|
|
|
|
|
|
|
10.2
|
|
Registration
Rights Agreement, dated February 8, 2017
|
|
X
|
|
|
|
|
|
|
10.3
|
|
Consulting
Agreement, dated February 8, 2017
|
|
X
|
|
|
|
|
|
|
10.4
|
|
Services
Agreement, dated February 8, 2017(Portions of this Exhibit have
been omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for Confidential
treatment)
|
|
X
|
|
|
|
|
|
|
10.5
|
|
Data
Confidentiality Agreement, dated February 8, 2017 (Portions of this
Exhibit have been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential
treatment.)
|
|
X
|
|
|
|
|
|
|
10.6
|
|
2017
RumbleON Stock Incentive Plan+
|
|
|
|
8-K
|
|
10.1
|
|
01/09/17
|
10.7
|
|
Form of
Loan Agreement
|
|
|
|
8-K
|
|
10.1
|
|
12/21/16
|
10.8
|
|
Form of
Promissory Note
|
|
|
|
8-K
|
|
10.2
|
|
12/21/16
|
10.9
|
|
Stockholders'
Agreement dated October 24, 2016
|
|
|
|
8-K
|
|
10.1
|
|
10/28/16
|
10.10
|
|
Promissory
Note, dated July 13, 2016
|
|
|
|
8-K
|
|
10.1
|
|
07/19/16
|
10.11
|
|
Amendment
to Promissory Note, dated August 31, 2016
|
|
X
|
|
|
|
|
|
|
10.12
|
|
Unconditional
Guaranty Agreement
|
|
X
|
|
|
|
|
|
|
10.13
|
|
Security
Agreement
|
|
X
|
|
|
|
|
|
|
16.1
|
|
Letter from Seale and Beers CPAs
|
|
|
|
8-K
|
|
16.1
|
|
12/21/16
|
31.1
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
X
|
|
|
|
|
|
|
31.2
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
X
|
|
|
|
|
|
|
32.1*
|
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
|
|
|
|
|
|
|
32.2*
|
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
|
|
|
|
|
|
|
99.1
|
|
Press
Release, dated February 14, 2017
|
|
X
|
|
|
|
|
|
|
101.INS**
|
|
XBRL
Instance Document
|
|
X
|
|
|
|
|
|
|
101.SCG**
|
|
XBRL
Taxonomy Extension Schema
|
|
X
|
|
|
|
|
|
|
101.CAL**
|
|
XBRL
Taxonomy Extension Calculation Linkbase
|
|
X
|
|
|
|
|
|
|
101.DEF**
|
|
XBRL
Taxonomy Extension Definition Linkbase
|
|
X
|
|
|
|
|
|
|
101.LAB**
|
|
XBRL
Taxonomy Extension Label Linkbase
|
|
X
|
|
|
|
|
|
|
101.PRE**
|
|
XBRL
Taxonomy Extension Presentation Linkbase
|
|
X
|
|
|
|
|
|
|
**
XBRL (Extensible Business Reporting Language) information is
furnished and not filed or a part of a registration statement or
prospectus for purposes of Sections 11 or 12 of the Securities Act
of 1933, as amended, is deemed not filed for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, and otherwise
is not subject to liability under these sections.
+
Management Compensatory Plan
Item
16. Form 10-K Summary.
Registrants may
voluntarily include a summary of information required by Form 10-K
under this Item 16. The Company has elected not to include such
summary information.
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
RumbleON,
INC.
|
|
|
|
|
|
|
By:
|
/s/
Marshall
Chesrown
|
|
|
|
Marshall
Chesrown
|
|
|
|
Chief Executive
Officer
|
|
Date:
February 14, 2017
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated.
Signature
|
Title
|
Date
|
|
|
|
/s/ Marshall
Chesrown
|
Chairman
of the Board of Directors,
|
February
14, 2017
|
Marshall
Chesrown
|
Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
|
/s/ Steven R.
Berrard
|
Director,
Chief Financial Officer and Secretary
|
February
14, 2017
|
Steven
R. Berrard
|
(Principal
Financial Officer and
Principal
Accounting Officer)
|
|
|
|
|
/s/ Denmar
Dixon
|
Director
|
February
14, 2017
|
Denmar
Dixon
|
|
|
|
|
|
/s/ Kartik
Kakarala
|
Director
|
February
14, 2017
|
Kartik
Kakarala
|
|
|
|
|
|
/s/ Mitch
Pierce
|
Director
|
February
14, 2017
|
Mitch
Pierce
|
|
|
|
|
|
/s/ Kevin
Westfall
|
Director
|
February
14, 2017
|
Kevin
Westfall
|
|
|
Index to Financial Statements
RumbleON, Inc. (formerly Smart
Server, Inc.) Financial Statements
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
RumbleON,
Inc. (formerly Smart Server, Inc.) Balance Sheets
|
F-3
|
RumbleON,
Inc. (formerly Smart Server, Inc.) Statements of
Operations
|
F-4
|
RumbleON,
Inc. (formerly Smart Server, Inc.) Statement of Stockholders'
Equity (Deficit)
|
F-5
|
RumbleON,
Inc. (formerly Smart Server, Inc.) Statements of Cash
Flows
|
F-6
|
RumbleON,
Inc. (formerly Smart Server, Inc.) Notes to Financial
Statements
|
F-7
|
NextGen
Dealer Solutions, LLC Financial Statements
|
Report
of Independent Registered Public Accounting Firm
|
F-15
|
NextGen
Dealer Solutions, LLC Balance Sheets
|
F-16
|
NextGen
Dealer Solutions, LLC Statements of Operations and Changes in
Members’ Equity
|
F-17
|
NextGen
Dealer Solutions, LLC Statements of Cash Flows
|
F-18
|
NextGen
Dealer Solutions, LLC Notes to Financial Statements
|
F-19
|
Unaudited
Pro Forma Condensed Combined Financial
Statements
|
RumbleON,
Inc. and Subsidiary Pro Forma Condensed Combined Balance Sheet
(unaudited)
|
PF-3
|
RumbleON,
Inc. and Subsidiary Pro Forma Condensed Combined Statement of
Operations (unaudited)
|
PF-4
|
Notes
to Unaudited Pro Forma Condensed Combined Financial
Statements
|
PF-5
|
RumbleON, Inc.
(formerly Smart Server, Inc.) Financial Statements
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders of
RumbleON, Inc.
We have
audited the accompanying balance sheets of RumbleON, Inc. as of
December 31, 2016, December 31, 2015, and November 30, 2015, and
the related statements of income, stockholders’ equity, and
cash flows for the twelve months ended December 31, 2016 and
November 30, 2015, and for the month ended December 31, 2015.
RumbleON, Inc.’s management is responsible for these
financial statements. Our responsibility is to express an opinion
on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. The company is not required to have, nor
werewe engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the
company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RumbleON, Inc.
as of December 31, 2016, December 31, 2015, and November 30, 2015,
and the results of its operations and its cash flows for the twelve
months ended December 31, 2016 and November 30, 2015, and for the
month ended December 31, 2015, in conformity with accounting
principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern. Since the Company has not
generated revenue from operations substantial doubt exists about
its ability to continue on as a going concern. Management’s
plans concerning these matters are described in Note 2
to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
Scharf
Pera & Co., PLLC
Charlotte, North
Carolina
February 14,
2017
RumbleON, Inc.
(formerly Smart Server, Inc.)
Balance Sheets
|
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
1,350,580
|
$
3,713
|
$
1,563
|
Prepaid
expense
|
1,667
|
-
|
-
|
Total current
assets
|
1,352,247
|
3,713
|
1,563
|
|
|
|
|
Other
assets
|
45,515
|
2,692
|
2,850
|
|
|
|
|
Total
assets
|
$
1,397,762
|
$
6,405
|
$
4,413
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
139,083
|
$
8,799
|
$
11,799
|
Accounts
payable-related party
|
80,018
|
-
|
-
|
Current portion of
note payable-related party
|
-
|
100,000
|
100,000
|
Accrued interest
payable-current portion
|
-
|
11,137
|
10,627
|
Total current
liabilities
|
219,101
|
119,936
|
122,426
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
Accrued interest
payable - related party
|
5,508
|
1,865
|
1,656
|
Note
payable-related party
|
|
41,000
|
33,000
|
Convertible note
payable - related party, net
|
1,282
|
-
|
-
|
Deferred tax
liability
|
78,430
|
-
|
-
|
Total long-term
liabilities
|
85,220
|
42,865
|
34,656
|
|
|
|
|
Total
liabilities
|
304,321
|
162,801
|
157,082
|
|
|
|
|
Commitments and
Contingencies (Notes 3, 6, 9, 10)
|
-
|
-
|
-
|
|
|
|
|
Stockholders'
equity (deficit):
|
|
|
|
Preferred stock,
$0.001 par value, 10,000,000 shares
|
|
|
|
authorized, no
shares issued and outstanding
|
|
|
|
as of December 31,
2016, December 31, 2015 and November 30, 2015
|
-
|
-
|
-
|
Common stock,
$0.001 par value, 100,000,000 shares
|
|
|
|
authorized,
6,400,000, 5,500,000 and 5,500,000 shares issued and
outstanding
|
|
|
|
as of December 31,
2016, December 31, 2015 and November 30, 2015
|
6,400
|
5,500
|
5,500
|
Additional paid-in
capital
|
1,534,015
|
64,500
|
64,500
|
Subscriptions
receivable
|
(1,000
)
|
(5,000
)
|
(5,000
)
|
Accumulated
deficit
|
(445,974
)
|
(221,396
)
|
(217,669
)
|
Total stockholders'
equity (deficit)
|
1,093,441
|
(156,396
)
|
(152,669
)
|
|
|
|
|
Total liabilities
and stockholders' equity (deficit)
|
$
1,397,762
|
$
6,405
|
$
4,413
|
See Accompanying
Notes to Financial Statements.
RumbleON, Inc.
(formerly Smart Server, Inc.)
Statements of Operations
|
|
|
For
the
year
ended
December
31,
2016
|
For
the
month
ended
December
31,
2015
|
For
the
year
ended
November
30,
2015
|
|
|
|
|
Revenue
|
$
-
|
$
-
|
$
-
|
|
|
|
|
Operating
expenses:
|
|
|
|
General and
administrative
|
57,825
|
-
|
2,529
|
Depreciation and
amortization
|
1,900
|
158
|
1,900
|
Impairment of
assets
|
792
|
-
|
-
|
Professional
fees
|
152,876
|
2,850
|
37,123
|
Total operating
expenses
|
213,393
|
3,008
|
41,552
|
|
|
|
|
Other
expense:
|
|
|
|
Interest expense -
related party
|
11,698
|
719
|
7,257
|
Total other
expense
|
11,698
|
719
|
7,257
|
|
|
|
|
Net loss before
provision for income taxes
|
(225,091
)
|
(3,727
)
|
(48,809
)
|
|
|
|
|
Benefit for income
taxes
|
513
|
-
|
-
|
|
|
|
|
Net
loss
|
$
(224,578
)
|
$
(3,727
)
|
$
(48,809
)
|
|
|
|
|
|
|
|
|
Weighted average
number of common
|
|
|
|
shares outstanding
- basic
|
5,581,370
|
5,500,000
|
3,513,699
|
shares outstanding
- diluted
|
5,581,370
|
5,500,000
|
3,513,699
|
|
|
|
|
Net loss per share
- basic
|
$
(0.04
)
|
$
(0.00
)
|
$
(0.01
)
|
Net loss per share
- diluted
|
$
(0.04
)
|
$
(0.00
)
|
$
(0.01
)
|
See Accompanying Notes to Financial
Statements.
RumbleON,
Inc.
(formerly
Smart Server, Inc.)
Statement
of Stockholders' Equity (Deficit)
|
|
|
|
|
Subscription
|
|
Total
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
Balance, November
30, 2014
|
-
|
$
-
|
5,500,000
|
$
5,500
|
$
64,500
|
$
-
|
$
(168,860
)
|
$
(98,860
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchased and
cancellation of common stock
|
-
|
-
|
(5,000,000
)
|
(5,000
)
|
-
|
-
|
-
|
(5,000
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common
stock
|
-
|
-
|
5,000,000
|
5,000
|
-
|
(5,000
)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(48,809
)
|
(48,809
)
|
|
|
|
|
|
|
|
|
|
Balance, November
30, 2015
|
-
|
$
-
|
5,500,000
|
$
5,500
|
$
64,500
|
$
(5,000
)
|
$
(217,669
)
|
$
(152,669
)
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,727
)
|
(3,727
)
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2015
|
-
|
$
-
|
5,500,000
|
$
5,500
|
$
64,500
|
$
(5,000
)
|
$
(221,396
)
|
$
(156,396
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received for
subscriptions receivable
|
-
|
-
|
-
|
-
|
-
|
5,000
|
-
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donated
capital
|
-
|
-
|
-
|
-
|
2,000
|
-
|
-
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common
stock
|
-
|
-
|
900,000
|
900
|
1,349,100
|
(1,000
)
|
-
|
1,349,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature, net of deferred taxes
|
-
|
-
|
-
|
-
|
118,415
|
-
|
-
|
118,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(224,578
)
|
(224,578
)
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2016
|
-
|
$
-
|
6,400,000
|
$
6,400
|
$
1,534,015
|
$
(1,000
)
|
$
(445,974
)
|
$
1,093,441
|
See
Accompanying Notes to Financial Statements.
RumbleON, Inc.
(formerly Smart Server, Inc.)
Statements of Cash Flows
|
|
For
the
year
ended
December
31,
2016
|
For
the
month
ended
December
31,
2015
|
For
the
year
ended
November
30,
2015
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Net
loss
|
$
(224,578
)
|
$
(3,727
)
|
$
(48,809
)
|
Adjustments to
reconcile net loss
|
|
|
|
to net cash used in
operating activities:
|
|
|
|
Depreciation and
amortization
|
1,900
|
158
|
1,900
|
Impairment of
asset
|
792
|
-
|
-
|
Amortization of
beneficial conversion feature
|
1,282
|
-
|
-
|
Increase in
deferred tax liability
|
(513
)
|
-
|
-
|
Changes in
operating assets and liabilities:
|
|
|
|
Increase in prepaid
expenses
|
(1,667
)
|
-
|
-
|
Increase in
accounts payable
|
130,284
|
-
|
-
|
Increase (decrease)
in accounts payable - related party
|
80,018
|
(3,000
)
|
7,020
|
(Decrease) increase
in accrued interest payable - related party
|
(7,494
)
|
719
|
7,257
|
Net cash used in
operating activities
|
(19,976
)
|
(5,850
)
|
(32,632
)
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
Purchase of other
assets
|
(45,515
)
|
-
|
-
|
Net
cash used in investing activities
|
(45,515
)
|
-
|
-
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Proceeds from note
payable - related party
|
214,358
|
8,000
|
33,000
|
Repayments for note
payable - related party
|
(158,000
)
|
-
|
-
|
Proceeds from sale
of common stock
|
1,354,000
|
-
|
-
|
Donated
capital
|
2,000
|
-
|
-
|
Payments for the
purchase of treasury stock
|
-
|
-
|
(5,000
)
|
Net cash provided
by financing activities
|
1,412,358
|
8,000
|
28,000
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH
|
1,346,867
|
2,150
|
(4,632
)
|
|
|
|
|
CASH AT BEGINNING
OF PERIOD
|
3,713
|
1,563
|
6,195
|
CASH AT END OF
PERIOD
|
$
1,350,580
|
$
3,713
|
$
1,563
|
|
|
|
|
SUPPLEMENTAL
INFORMATION:
|
|
|
|
Interest
paid
|
$
17,909
|
$
-
|
$
-
|
Income taxes
paid
|
$
-
|
$
-
|
$
-
|
See
Accompanying Notes to Financial Statements.
Notes
to Financial Statements
Note
1 –Description of Business and Significant Accounting
Policies
Organization
RumbleON, Inc. (the
“Company”) was incorporated in October, 2013 under the
laws of the State of Nevada, as Smart Server, Inc. (“Smart
Server”). On February 13, 2017, the Company changed its name
from Smart Server, Inc. to RumbleON, Inc.
Description
of Business
Smart
Server was formed to engage in the business of designing and
developing computer application software for smart phones and
tablet computers (“
mobile
payment application”)
to provide customers at
participating restaurants, bars, and clubs the ability to pay their
bill with their smartphone without having to ask for the check.
Smart Server ceased its software development activities in 2014
and, having no operations and no or nominal assets, met the
definition of a "shell company" under the Securities Exchange Act
of 1934, as amended, and the rules and regulations
thereunder.
In
July 2016, Berrard Holdings Limited Partnership ("Berrard
Holdings") acquired 99.5% of the common stock of Smart Server from
the prior owner of such shares and efforts began on the development
of a unique, capital light, and disruptive e-commerce platform
facilitating the ability of both consumers and dealers to
Buy-Sell-Trade-Finance pre-owned recreation vehicles. It is our
goal to have the platform recognized as the most trusted and
effective solution for the sale, acquisition, and distribution of
recreation vehicles and provide users an efficient, fast,
transparent, and engaging experience. Our initial focus is the
market for 650cc and larger on road motorcycles, particularly those
concentrated in the Harley Davidson brand; we will look to extend
to other brands and additional vehicle types and products as the
platform matures.
RumbleON intends to
both make consumers or dealers a cash offer for the purchase of
their vehicle and provide them the flexibility to trade, list,
consign, or auction their vehicle through the websites and mobile
apps of RumbleON and our partner dealers. In addition, RumbleON
will offer a large inventory of vehicles for sale on its website
and will offer financing and associated products. RumbleON will
earn fees and transaction income, and partner dealers will earn
incremental revenue and enhance profitability through increased
sales leads, and fees from inspection, reconditioning and
distribution programs. RumbleON will be driven by a proprietary
technology platform that was acquired on February 8, 2017 from
NextGen Dealer Solutions, LLC. The NextGen platform provides
integrated accounting, appraisal, inventory management, CRM, lead
and call center management, equity mining, and other key services
necessary to drive the online marketplace.
For additional information,
see Note 11
“Subsequent Events.”
As of
December 31, 2016, the Company had a total of $1,350,580 in
available cash. If we were to not receive any additional funds, we
could not continue in business for the next 12 months with our
currently available capital. Since inception, we have financed our
cash flow requirements through debt and equity financing. As we
expand our activities, we may, and most likely will, continue to
experience net negative cash flows from operations, pending the
Company’s ability to generate sustainable cash flow from the
implementation of its business strategy and utilization of its
e-commerce platform.
Year
end
In
October 2016, the Company changed its fiscal year-end from
November 30 to December 31.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP
requires estimates and assumptions that affect the reported amounts
of assets and liabilities, revenue and expenses, and related
disclosures of contingent assets and liabilities in the
consolidated financial statements and accompanying notes. Estimates
are used for, but not limited to, inventory valuation, depreciable
lives, carrying value of intangible assets, sales returns,
receivables valuation, restructuring-related liabilities, taxes,
and contingencies. Actual results could differ materially from
those estimates.
Earnings
(Loss) Per Share
The
Company follows the FASB Accounting Standards Codification ("ASC")
Topic 260-
Earnings per
share
. Basic earnings per common share ("EPS") calculations
are determined by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the
year. Diluted earnings (loss) per common share calculations are
determined by dividing net income (loss) by the weighted average
number of common shares and dilutive common share equivalents
outstanding. During periods when common stock equivalents, if any,
are anti-dilutive they are not considered in the
computation.
Revenue
Recognition
We
recognize revenue when all of the following conditions are
satisfied: (1) there is persuasive evidence of an arrangement;
(2) the product or service has been provided to the customer;
(3) the amount to be paid by the customer is fixed or
determinable; and (4) the collection of our payment is
probable.
Purchase
Accounting for Business Combinations
The
Company will account for acquisitions by allocating the fair value
of the consideration transferred to the fair value of the assets
acquired and liabilities assumed on the date of the acquisition and
any remaining difference will be recorded as goodwill. Adjustments
may be made to the preliminary purchase price allocation when facts
and circumstances that existed on the date of the acquisition
surface during the allocation period subsequent to the preliminary
purchase price allocation, not to exceed one year from the date of
acquisition. Contingent consideration is recorded at fair value
based on the facts and circumstances on the date of the acquisition
and any subsequent changes in the fair value are recorded through
earnings each reporting period. Transactions that occur in
conjunction with or subsequent to the closing date of the
acquisition are evaluated and accounted for based on the facts and
substance of the transactions.
Goodwill
Goodwill is not
amortized but rather tested for impairment at least annually. The
Company will test goodwill for impairment annually during the
fourth quarter of each year. Goodwill will also be tested for
impairment between annual tests if an event occurs or circumstances
change that would more likely than not reduce the fair value of the
reporting unit below its carrying amount. Impairment testing
for goodwill will be done at the reporting unit level. A reporting
unit is an operating segment or one level below an operating
segment (also known as a component). A component of an operating
segment is a reporting unit if the component constitutes a business
for which discrete financial information is available, and segment
management regularly reviews the operating results of that
component. The Company has concluded that currently it has
one reporting unit.
Determining fair
value includes the use of significant estimates and
assumptions. Management will utilize an income approach,
specifically the discounted cash flow technique as a means for
estimating fair value. This discounted cash flow analysis requires
various assumptions including those about future cash flows,
transactional and customer growth rates and discount rates.
Expected cash flows are based on historical customer growth and the
growth in transactions, including attrition, future strategic
initiatives and continued long-term growth of the business. The
discount rates used for the analysis will reflect a weighted
average cost of capital based on industry and capital structure
adjusted for equity risk and size risk premiums. These estimates
can be affected by factors such as customer and transaction growth,
pricing, and economic conditions that can be difficult to
predict.
Other
Assets
Included in
“Other Assets” on our balance sheet will be
identifiable intangible assets including customer relationships,
non-compete agreements, trademarks, trade names and internet domain
names, net of amortization. The estimated fair value of these
intangible assets at the time of acquisition will be based upon
various valuation techniques including replacement cost and
discounted future cash flow projections. Customer
relationships will be amortized on a straight-line basis over the
expected average life of the acquired accounts, which will be based
upon several factors, including historical longevity of customers
and contracts acquired and historical retention rates. Non-compete
agreements will be amortized on a straight-line basis over the term
of the agreement, which will generally not exceed five years. The
Company will review the recoverability of these assets if events or
circumstances indicate that the assets may be impaired and will
periodically reevaluate the estimated remaining lives of these
assets.
Trademarks, trade
names and internet domain names are considered to be indefinite
lived intangible assets unless specific evidence exists that a
shorter life is more appropriate. Indefinite lived intangible
assets will be tested, at a minimum, on an annual basis using an
income approach or sooner whenever events or changes in
circumstances indicate that an asset may be impaired.
Long-Lived
Assets
Fixed
assets will be reviewed for impairment when events or changes in
circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable. Recoverability of assets
to be held and used will be measured by a comparison of the
carrying amount of an asset to the future net cash flows expected
to be generated by the asset. If such assets or asset groups
are considered to be impaired, the impairment to be recognized will
be measured by the amount by which the carrying amount of the
assets or asset groups exceeds the related fair values. The
Company will also perform a periodic assessment of the useful lives
assigned to the long-lived assets.
Inventories
Inventories will be
stated at the lower of cost or market.
Valuation
Allowance for Accounts Receivable
We will
estimate the allowance for doubtful accounts for accounts
receivable by considering a number of factors, including overall
credit quality, age of outstanding balances, historical write-off
experience and specific account analysis that projects the ultimate
collectability of the outstanding balances. Ultimately, actual
results could differ from these assumptions.
Cash
and Cash Equivalents
For the
statements of cash flows, all highly liquid investments with an
original maturity of three months or less are considered to be cash
equivalents. The carrying value of these investments approximates
fair value.
Marketing and Advertising Costs
Marketing costs primarily consist of targeted
online advertising, television advertising, public relations
expenditures, and payroll and related expenses for personnel
engaged in marketing and selling activities and will be expensed as
incurred
. There were no marketing costs included in general
and administrative expenses for the year ended December 31, 2016,
for the month ended December 31, 2015 and for the year ended
November 30, 2015.
Technology and Content
Technology costs for the RumbleON technology
platform will be accounted for
pursuant to ASC Topic
350-
Intangibles — Goodwill
and Other
and will
consist
principally of development activities including payroll and related
expenses for employees and third-party contractors involved in
application, content, production, maintenance, operation, and
platform development for new and existing products and services, as
well as other technology infrastructure expenses. Technology and
content costs for design or maintenance of internal-use software
and general website development will be expensed as incurred. Costs
incurred to develop new website functionality as well as new
software products for resale and significant upgrades to existing
platforms or modules will be capitalized and amortized over seven
years.
The
costs associated with the development of the Smart Server mobile
payment application website were capitalized pursuant to ASC Topic
350-
Intangibles — Goodwill
and Other
. Other costs related to the maintenance of the
website were expensed as incurred. The Company commenced
amortization upon the completion of the Company’s fully
operational mobile payment application website. Amortization was
provided over the estimated useful lives of three years using the
straight-line method for financial statement purposes. Amortization
expense for the year ended December 31, 2016, for the month ended
December 31, 2015 and for the year ended November 30, 2015 was
$1,900, $158 and $1,900, respectively. In December, 2016 the
Company evaluated its mobile payment application website and
recorded $792 of impairment. The carrying value of this website as
of December 31, 2016, was $0.
Property and Equipment, Net
Property
and equipment will be stated at cost less accumulated depreciation.
Equipment will include assets such as furniture and fixtures, heavy
equipment, servers, networking equipment, internal-use software and
website development. Depreciation will be recorded on a
straight-line basis over the estimated useful lives of the
assets.
Fair
Value of Financial Instruments
Fair
value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
December 31, 2016, December 31, 2015 and November 30, 2015. The
respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial
instruments include cash, prepaid expenses and accounts payable.
Fair values were assumed to approximate carrying values for cash
and payables because they are short term in nature and their
carrying amounts approximate fair values or they are payable on
demand.
ASC
Topic 820-10-30-2
-Fair Value
Measuement
establishes a fair value hierarchy for inputs
used in measuring fair value that maximizes the use of observable
inputs and minimizes the use of unobservable inputs by requiring
the most observable inputs be used when available. Observable
inputs are from sources independent of the Company, whereas
unobservable inputs reflect the Company’s assumptions about
the inputs market participants would use in pricing the asset or
liability developed on the best information available in the
circumstances. The fair value hierarchy is categorized into three
levels based on the inputs as follows:
Level
1: The preferred inputs to valuation efforts are "quoted prices in
active markets for identical assets or liabilities," with the
caveat that the reporting entity must have access to that market.
Information at this level is based on direct observations of
transactions involving the same assets and liabilities, not
assumptions, and thus offers superior reliability. However,
relatively few items, especially physical assets, actually trade in
active markets.
Level
2: FASB acknowledged that active markets for identical assets and
liabilities are relatively uncommon and, even when they do exist,
they may be too thin to provide reliable information. Inputs other
than quoted market prices included in Level 1, that are observable
for the asset or liability, either directly or indirectly, are
Level 2 inputs.
Level
3: If inputs from levels 1 and 2 are not available, FASB
acknowledges that fair value measures of many assets and
liabilities are less precise. The board describes Level 3 inputs as
"unobservable," and limits their use by saying they "shall be used
to measure fair value to the extent that observable inputs are not
available." This category allows "for situations in which there is
little, if any, market activity for the asset or liability at the
measurement date". Earlier in the standard, FASB explains that
"observable inputs" are gathered from sources other than the
reporting company and that they are expected to reflect assumptions
made by market participants.
Beneficial
Conversion Feature
From
time to time, the Company may issue convertible notes that may have
conversion prices that create an embedded beneficial conversion
feature pursuant to the guidelines established by the ASC Topic
470-20,
Debt with Conversion and
Other Options
. The Beneficial Conversion Feature ("BCF") of
a convertible security is normally characterized as the convertible
portion or feature of certain securities that provide a rate of
conversion that is below market value or in-the-money when issued.
The Company records a BCF related to the issuance of a convertible
security when issued and also records the estimated fair value of
any conversion feature issued with those securities. Beneficial
conversion features that are contingent upon the occurrence of a
future event are recorded when the contingency is
resolved.
The BCF
of a convertible note is measured by allocating a portion of the
note's proceeds to the conversion feature, if applicable, and as a
reduction of the carrying amount of the convertible note equal to
the intrinsic value of the conversion feature, both of which are
credited to additional paid-in-capital. The debt discount is
amortized to interest expense over the life of the note using the
effective interest method. The Company calculates the fair value of
the conversion feature embedded in any convertible security using
either a) the Black Scholes valuation model, or b) a discount cash
flow analysis tested for sensitivity to key Level 3 inputs using
Monte Carlo simulation.
Stock-Based
Compensation
The
Company records stock based compensation in accordance with the
guidance in ASC Topic 505-
Equity
and 718
-
Compensation, Stock Expense
which
requires the Company to recognize expenses related to the fair
value of its employee stock option awards. This eliminates
accounting for share-based compensation transactions using the
intrinsic value and requires instead that such transactions be
accounted for using a fair-value-based method. The Company
recognizes the cost of all share-based awards on a graded vesting
basis over the vesting period of the award.
The
Company accounts for equity instruments issued in exchange for the
receipt of goods or services from other than employees in
accordance with ASC Topic 718-10 and the conclusions reached by the
ASC Topic 505-50. Costs are measured at the estimated fair market
value of the consideration received or the estimated fair value of
the equity instruments issued, whichever is more reliably
measurable. The value of equity instruments issued for
consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance
by the provider of goods or services as defined by ASC Topic
505-50.
Income
Taxes
The
Company follows ASC Topic 740-
Income Taxes
for recording the
provision for income taxes. Deferred tax assets and liabilities are
computed based upon the difference between the financial statement
and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is
expected to be realized or settled. Deferred income tax expenses or
benefits are based on the changes in the asset or liability each
period. If available evidence suggests that it is more likely than
not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred
tax assets to the amount that is more likely than not to be
realized. Future changes in such valuation allowance are included
in the provision for deferred income taxes in the period of
change. Deferred income taxes may arise from temporary
differences resulting from income and expense items reported for
financial accounting and tax purposes in different periods.
Deferred taxes are classified as current or non-current, depending
on the classification of assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or
non-current depending on the periods in which the temporary
differences are expected to reverse.
The
Company applies a more-likely-than-not recognition threshold for
all tax uncertainties. ASC Topic 740 only allows the recognition of
those tax benefits that have a greater than fifty percent
likelihood of being sustained upon examination by the taxing
authorities. As of December 31, 2016, December 31, 2015 and
November 30, 2015, the Company reviewed its tax positions and
determined there were no outstanding, or retroactive tax positions
with less than a 50% likelihood of being sustained upon examination
by the taxing authorities, therefore this standard has not had a
material effect on the Company.
The
Company does not anticipate any significant changes to its total
unrecognized tax benefits within the next 12
months.
The
Company classifies tax-related penalties and net interest as income
tax expense. As of December 31, 2016, December 31, 2015 and
November 30, 2015, no income tax expense has been
incurred.
Recent
Pronouncements
The
Company has evaluated the recent accounting pronouncements through
January 2017 and believes that none of them will have a material
effect on the company’s financial statements.
Note
2 – Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern, which contemplates
the recoverability of assets and the satisfaction of liabilities in
the normal course of business. As noted above, the Company is in
the development stage and, accordingly, has not yet generated
revenue from operations. Since its inception, the Company has been
engaged substantially in financing activities and developing its
mobile payment application business plan and incurring start-up
costs and expenses, resulting in an accumulated net losses from
inception (October 24, 2013) through the period ended December 31,
2016 of $445,974. The Company’s development activities since
inception have been financially sustained through debt and equity
financing.
The
ability of the Company to continue as a going concern is dependent
upon its continued ability to raise additional capital from the
sale of common stock and, ultimately, the achievement of
significant operating revenue. These financial statements do not
include any material adjustments relating to the recoverability and
classification of recorded asset amounts, or amounts and
classification of liabilities that might result from this
uncertainty.
Note
3 – Notes Payable – Related Party
During
2013, the Company entered into a series of unsecured promissory
notes with a related party for aggregate proceeds of $30,000. Each
unsecured note bears interest at 6% per annum with principal and
interest due at the end of twenty-four months beginning in November
2015.
During
2014, the Company entered into a series of unsecured promissory
notes with a related party for aggregate proceeds of $70,000. Each
unsecured note bears interest at 6% per annum with principal and
interest due at the end of twenty-four months beginning in August
2015.
During
2015, the Company entered into a series of unsecured promissory
notes with a related party for aggregate proceeds of $41,000. Each
unsecured note bears interest at 6% per annum with principal and
interest due at the end of twenty-four months beginning in February
2016.
During
2016, the Company entered into a series of unsecured promissory
notes with a related party for aggregate proceeds of $17,000. Each
unsecured note bears interest at 6% per annum with principal and
interest due at the end of twenty-four months beginning in February
2018.
In
July, 2016, the Company repaid the total outstanding principal and
accrued interest of $175,909 on the unsecured promissory note with
the related party.
Interest expense on
this note for the year ended December 31, 2016, for the month ended
December 31, 2015 and for the year ended November 30, 2015 was
$5,626, $719 and $7,257, respectively.
Note
4 – Other Assets
At
December 31, 2016, other assets consisted of $45,515 of costs to
acquire domain names to be used in connection
with the launch of the
Company’s e-commerce platform
.
As of December 31, 2015, and November
30, 2015 other assets was $0.
Note
5 – Income Taxes
At
December 31, 2016, December 31, 2015 and November 30, 2015, the
Company has operating loss carryforwards of $230,564, $221,396 and
$217,669, respectively, which begin to expire in 2033. We believe
that it is more likely than not that the benefit from our operating
loss carryforwards will not be realized. In recognition of this
risk, we have provided a valuation allowance on the deferred tax
assets relating to these operating loss carryforwards of $87,614,
$77,489 and $76,184 for the periods ended December 31, 2016,
December 31, 2015 and November 30, 2015, respectively. In
assessing the recovery of the deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income in the periods in which those
temporary differences become deductible. Management
considers the scheduled reversals of future deferred tax assets,
projected future taxable income, and tax planning strategies in
making this assessment.
The
Company’s effective tax rate benefit for the year ended
December 31, 2016 was .01% and was a result of the amortization of
the debt discount on the convertible note payable-related party.
For the year ended December 31, 2016, there was a $78,943 deferred
tax liability associated with the beneficial conversion feature on
the convertible note payable-related party.
For additional information,
see Note 6
“Convertible Notes Payable-Related Party.”
Note 6 – Convertible Notes Payable
– Related Party
On July
13, 2016, the Company entered into unsecured Convertible Note
(“Note”) with Berrard Holdings Limited Partnership
(“BHLP”), an entity owned and controlled by a current
officer and director, Mr. Berrard, pursuant to which the Company
received $191,858. The Note is due on July 13, 2026 and bears
interest at 6% per annum. The Note is convertible into common
stock, in whole at any time prior to maturity at the option of the
holder at the greater of $0.06 per share or 50% of the price per
share of the next qualified financing which is defined as $500,000
or greater. The Note is due on July 13, 2026 and bears interest at
6% per annum.
Effective August
31, 2016, the principal amount of the Note was amended to include
an additional $5,500 loaned to the Company, on the same terms as
the original Note. As of August 31, 2016, the total amount owed was
$197,358.
On
November 28, 2016, the Company completed its qualified financing at
$1.50 per share which established the conversion price per share
for the Note of $0.75 per share, resulting in the principal amount
of the Note being convertible into 263,144 shares of common stock.
As such, November 28, 2016 became the “commitment date”
for purposes of determining the value of the Note conversion
feature. Given that there was no trading in the Company common
stock since July, 2014, other than the purchase by BHLP of 99.5% of
the shares in a single transaction, the Company used the Monte
Carlo simulation to determine the intrinsic value of the conversion
feature of the Note which resulted in a value in excess of the
principal amount of the Note. Thus, the Company recorded as a Note
discount of $197,358 with the corresponding amount as an addition
to paid in capital. The Note discount will be amortized to interest
expense until the Note matures in July, 2026 using the effective
interest method. The effective interest rate at December 31, 2016
was 7.4%.
As of
December 31, 2016, the balance of the note consists
of:
|
|
Principal
|
$
197,358
|
|
(196,076
)
|
|
$
1,282
|
Interest expense on
this note for the year ended December 31, 2016 was $5,508 and the
amortization of the beneficial conversion feature was $1,282. The
holder of the Note has indicated to the Company despite being
permitted under the terms of the Note, he will neither request
payment of, nor consent to prepayment by the Company of any accrued
and unpaid interest.
The
debt discount related to the Note creates a timing difference for
taxes and results in the creation of a deferred tax liability and a
reduction in paid-in-capital of $78,943 assuming a tax rate of 40%
of the $197,358 Note discount. Correspondingly, the $1,282 of debt
discount amortization in 2016 yields a $513 reduction in the
deferred tax liability and is correspondingly reflected as an
income tax benefit in the statements of operations.
Note
7 – Stockholders’ Equity
At
December 31, 2016, the Company was authorized to issue 100,000,000
shares of its $0.001 par value common stock and 10,000,000 shares
of its $0.001 par value preferred stock. For additional
information, see Note 11, "Subsequent Events."
On
January 9, 2017, the Company's Board and stockholders holding
6,375,000 of the Company's issued and outstanding shares of common
stock approved the issuance to (i) Marshall Chesrown of 875,000
shares of Class A Common Stock in exchange for an equal number of
shares of Class B Common Stock held by Mr. Chesrown, and (ii)
Steven R. Berrard of 125,000 shares of Class A Common Stock in
exchange for an equal number of shares of Class B Common Stock held
by Mr. Berrard, effective at the time the Certificate of Amendment
was filed with the Secretary of State of Nevada.
On June
24, 2015, the Company repurchased and cancelled 5,000,000 shares of
common stock from a former officer and director of the Company for
$5,000.
On July
24, 2015, the Company issued 5,000,000 shares of common stock for
services to an officer and director. The Company and the officer
and director mutually agreed to rescind the
transaction.
On
November 16, 2015, the Company sold 5,000,000 shares of common
stock to an officer and director for subscriptions receivable of
$5,000. In February 2016, the Company received $5,000.
In July
2016, the Company received donated capital of $2,000 from a
shareholder of the Company.
On
November 28, 2016, the Company sold 900,000 shares of common stock
to three investors for cash of $1,349,000 and subscriptions
receivable of $1,000.
On
November 28, 2016, the Company recorded a beneficial conversion
feature of $197,358 related to the convertible note with an entity
owned and controlled by a current officer and director, Steven
Berrard.
For additional
information,
see Note 6, “Convertible Notes Payable
– Related Party.”
Note
8 – Warrants and Options
As of
December 31, 2016, December 31, 2015 and November 30, 2015, there
were no warrants or options outstanding to acquire any additional
shares of common stock.
Note
9 – Related Party Transactions
As of
December 31, 2016, the Company had convertible notes payable of
$197,358 and accrued interest totaling $5,508 due to an entity that
is owned and controlled by a current officer and director of the
Company.
For additional
information,
see Note 6 “Convertible Notes Payable
– Related Party.”
As of
December 31, 2015, and November 30, 2015, the Company had loans
totaling $141,000 and $133,000 and accrued interest totaling
$13,002 and $12,283 due to an entity that is owned and controlled
by a family member of an officer and director of the Company.
During the year ended December 31, 2016, month ended December 31,
2015 and for the year ended November 30, 2015, the interest expense
was $4,907, $719 and $7,257, respectively. In March 2015, there was
a new officer and director appointed and the lender is now
considered a related party. All convertible notes and related party
notes outstanding as of July 13, 2016, were paid in full in July,
2016.
Note
10 – Commitments and Contingencies
We may
be involved in litigation from time to time in the ordinary course
of business. If any such litigation arises, we may not be able to
provide assurance that the ultimate resolution of any such legal or
administrative proceedings or disputes will not have a material
adverse effect on our business, financial condition and results of
operations. As of December 31, 2016, December 31, 2015 and November
30, 2015 we were not aware of any threatened or pending
litigation.
Note
11 – Subsequent Events
On
January 8, 2017, RumbleON entered into an Asset Purchase
Agreement with NextGen Dealer Solutions, LLC ("NextGen"), Halcyon
Consulting, LLC ("Halcyon"), and members of Halcyon signatory
thereto ("Halcyon Members," and together with Halcyon, the "Halcyon
Parties"), as amended by that certain Assignment, dated February 8,
2017, between the Company and NextGen Pro, LLC (the "NextGen
Agreement"). NextGen and the Halcyon Parties are collectively
referred to as the "Seller Parties." NextGen has developed a
proprietary technology platform that will underpin the operations
of the Company. The Agreement provides that, upon the terms and
subject to the conditions set forth in the Agreement, the Company
will acquire all of NextGen's assets, properties and rights of
whatever kind, tangible and intangible, other than the excluded
assets under the terms of the Agreement. The Company will assume
liability only for certain post-closing contractual obligations
pursuant to the terms of the Agreement. The transaction closed in
the first quarter of 2017.
The
Agreement provides that the Company will acquire substantially all
of the assets of NextGen in exchange for approximately $750,000 in
cash, plus 1,523,809 unregistered shares of common stock of the
Company (the "Purchaser Shares"), and a subordinated secured
promissory note issued by the Company in favor of NextGen in the
amount of $1,333,333 (the "Acquisition Note"). The Acquisition Note
matures on the third anniversary of the date the Acquisition Note
is entered into (the "Maturity Date"). Interest will accrue and be
paid semi-annually on the Acquisition Note (i) at a rate of 6.5%
annually from the date the Acquisition Note is entered into through
the second anniversary of such date and (ii) at a rate of 8.5%
annually from the second anniversary of the date the Acquisition
Note is entered into through the Maturity Date. In connection with
the closing of the transaction, the Company has agreed with certain
investors to accelerate the funding of the second tranche of their
investment totaling $1.35 million by issuing such investors
1,161,920 shares of the Company's common stock and a note in the
amount of $667,000, to be issued on the closing date.
On
January 9, 2017, the Company’s Board of Directors approved
the adoption of the RumbleON, Inc. 2017 Stock Incentive Plan (the
"Plan"), subject to stockholder approval at the Company's next
Annual Meeting of Stockholders. The purposes of the Plan are to
attract, retain, reward and motivate talented, motivated and loyal
employees and other service providers ("Eligible Individuals") by
providing them with an opportunity to acquire or increase a
proprietary interest in the Company and to incentivize them to
expend maximum effort for the growth and success of the Company, so
as to strengthen the mutuality of the interests between such
persons and the stockholders of the Company. The Plan will allow
the Company to grant a variety of stock-based and cash-based awards
to Eligible Individuals. Twelve percent (12%) of the Company's
issued and outstanding shares of common stock from time to time are
reserved for issuance under the Plan. As of the date of this
report, 6,400,000 shares are issued and outstanding, resulting in
768,000 shares available for issuance under the Plan.
On
January 9, 2017, the Company's Board and stockholders holding
6,375,000 of the Company's issued and outstanding shares of common
stock approved an amendment to the Company's Articles of
Incorporation (the "Certificate of Amendment"), to change the name
of the Company to RumbleON, Inc. and to create an additional class
of common stock of the Company, which was effective on
February 13, 2017 (the "Effective Date").
Immediately before
approving the Certificate of Amendment, the Company had authorized
100,000,000 shares of common stock, $0.001 par value (the
"Authorized Common Stock"), including 6,400,000
issued and outstanding shares of
common stock (the "Outstanding Common Stock, and together with the
Authorized Common Stock, the "Common Stock"). Pursuant to the
Certificate of Amendment, the Company designated 1,000,000 shares
of Authorized Common Stock as Class A Common Stock (the "Class A
Common Stock"), which Class A Common Stock ranks pari passu with
all of the rights and privileges of the Common Stock, except that
holders of the Class A Common Stock are entitled to ten votes per
share of Class A Common Stock issued and outstanding, and (ii) all
other shares of Common Stock, including all shares of Outstanding
Common Stock shall be deemed Class B Common Stock (the "Class B
Common Stock"), which Class B Common Stock will be identical to the
Class A Common Stock in all respects, except that holders of the
Class B Common Stock are entitled to one vote per share of Class B
Common Stock issued and outstanding.
Also on
January 9, 2017, the Company's Board and stockholders holding
6,375,000 of the Company's issued and outstanding shares of common
stock approved the issuance to (i) Marshall Chesrown of 875,000
shares of Class A Common Stock in exchange for an equal number of
shares of Class B Common Stock held by Mr. Chesrown, and (ii)
Steven R. Berrard of 125,000 shares of Class A Common Stock in
exchange for an equal number of shares of Class B Common Stock held
by Mr. Berrard, effective at the time the Certificate of Amendment
was filed with the Secretary of State of Nevada.
On
February 8, 2017 (the "Closing Date"), RumbleON completed the
NextGen Acquisition in exchange for $750,000 in cash, the Purchaser
Shares, and the Acquisition Note. The Acquisition Note matures on
the third anniversary of the Closing Date (the "Maturity Date").
Interest accrues and will be paid semi-annually (i) at a rate of
6.5% annually from the Closing Date through the second anniversary
of such date and (ii) at a rate of 8.5% annually from the second
anniversary of the Closing Date through the Maturity
Date.
On
February 13, 2017, the Effective Date, the Company filed the
Certificate of Amendment with the Secretary of State of the State
of Nevada changing the Company's name to RumbleON, Inc. and
creating the Class A and Class B Common Stock. Also on the
Effective Date, the Company issued an aggregate of 1,000,000 shares
of Class A Common Stock to Messrs. Chesrown and Berrard in exchange
for an aggregate of 1,000,000 shares of Class B Common Stock held
by them. Also on the Effective Date, the Company amended its bylaws
to reflect the name change to RumbleON, Inc. and to reflect the
Company's primary place of business as Charlotte, North
Carolina.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Members of NextGen Dealer Solutions, LLC
We have
audited the accompanying balance sheets of NextGen Dealer
Solutions, LLC as of December 31, 2016 and 2015, and the related
statements of operations and changes in members’ equity, and
cash flows for the year ended December 31, 2016 and the period
December 10, 2015 to December 31, 2015. NextGen Dealer Solutions,
LLC’s management is responsible for these financial
statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. The company is not required to have, nor
were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the
company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NextGen Dealer
Solutions, LLC as of December 31, 2016, and 2015, and the results
of its operations and its cash flows for the year ended December
31, 2016 and the period December 10, 2015 to December 31, 2015, in
conformity with accounting principles generally accepted in the
United States of America.
|
Scharf Pera & Co.,
PLLC
|
|
Charlotte,
North Carolina
|
|
|
February
14, 2017
|
|
NextGen Dealer Solutions, LLC
Balance Sheets
|
|
|
|
|
Assets:
|
|
|
Current
Assets
|
|
|
Cash
|
$
46,891
|
$
1,500,000
|
Prepaid
expenses
|
5,635
|
-
|
Total current
assets
|
52,526
|
1,500,000
|
|
|
|
Property
and Equipment - Net of Accumulated Depreciation
|
1,400,703
|
1,312,252
|
|
|
|
|
|
|
Total
Assets
|
$
1,453,229
|
$
2,812,252
|
|
|
|
Liabilities
and Members’ Equity
|
|
|
Current
Liabilities:
|
|
|
Accounts
payable
|
$
3,445
|
$
21,495
|
Due to related
parties
|
516,146
|
77,343
|
|
|
|
Total current
liabilities
|
519,591
|
98,838
|
Commitments
and Contingencies
|
-
|
-
|
Members'
Equity
|
933,638
|
2,713,414
|
|
|
|
Total
liabilities and Members’ equity
|
$
1,453,229
|
$
2,812,252
|
See
Accompanying Notes to Financial Statements
NextGen Dealer Solutions, LLC
Statements of Operations and Changes in Members’
Equity
|
For the year
ended
December 31,
2016
|
For
the
period
from
December 10,
2015
through
December 31,
2015
|
Revenue:
|
|
|
Gross
revenue
|
$
138,141
|
$
6,257
|
|
|
|
Cost
and Expenses:
|
|
|
Cost of goods
sold
|
332,559
|
17,857
|
General and
administrative expenses
|
1,586,002
|
96,608
|
|
1,918,561
|
114,465
|
|
|
|
Operating
Loss
|
(1,780,420
)
|
(108,208
)
|
|
|
|
Other
Income
|
644
|
-
|
|
|
|
Net
Loss
|
(1,779,776
)
|
(108,208
)
|
|
|
|
Members'
Equity - Beginning
|
2,713,414
|
-
|
|
|
|
Contributions
|
-
|
2,821,622
|
|
|
|
Members'
Equity - Ending
|
$
933,638
|
$
2,713,414
|
See
Accompanying Notes to Financial Statements
NextGen Dealer Solutions, LLC
Statements of Cash Flows
|
|
For the year
ended
December 31,
2016
|
For
the
period
from
December 10,
2015
through
December 31,
2015
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
Net
loss
|
$
(1,779,776
)
|
$
(108,208
)
|
Adjustments to
reconcile net loss
|
|
|
to net cash used in
operating activities:
|
|
|
Depreciation and
amortization
|
253,468
|
9,370
|
Changes in
operating assets and liabilities:
|
|
|
Increase in prepaid
expenses
|
(5,635
)
|
-
|
Increase (decrease)
in accounts payable
|
(18,050
)
|
21,495
|
Increase in
accounts payable - related party
|
438,803
|
77,343
|
Net cash used in
operating activities
|
(1,111,190
)
|
-
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
Investments in
software
|
(341,919
)
|
-
|
Net
cash used in investing activities
|
(341,919
)
|
-
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
Proceeds from
member contribution
|
-
|
1,500,000
|
Net cash provided
by financing activities
|
-
|
1,500,000
|
|
|
-
|
NET (DECREASE)
INCREASE IN CASH
|
(1,453,109
)
|
1,500,000
|
|
|
|
CASH AT BEGINNING
OF PERIOD
|
1,500,000
|
-
|
CASH AT END OF
PERIOD
|
$
46,891
|
$
1,500,000
|
See
Accompanying Notes to Financial Statements
NextGen
Dealer Solutions, LLC
Notes to Financial
Statements
Note
1 - Description of Business and Significant Accounting
Policies
Organization
NextGen
Dealer Solutions, LLC (“Company”) was formed on
December 10, 2015 as a limited liability company under the laws of
the State of Delaware.
Nature of operations
The
Company has developed a software platform for the powersports
vehicle industry incorporating modules sales, operations, customer
relationship management, equity mining and marketing with dealer
management systems and website providers under the brand name of
CyclePro Solutions. The solution is intended to provide powersports
vehicle dealers with increased visibility and information related
to their sales process, inventory levels, and customer data.
Additionally, the platform offers dealers the ability to more
easily communicate with their customers, with the goal of driving
incremental sales. Dealers typically pay monthly subscription fees
to access some or all modules on an a la carte basis.
Year end
The
Company’s year-end is December 31.
Cash and Cash Equivalents
For the
statements of cash flows, all highly liquid investments with an
original maturity of three months or less are considered to be cash
equivalents. The carrying value of these investments approximates
fair value.
Software Capitalization
The
Company capitalizes the costs associated with the development of
the Company’s software solutions and website pursuant to ASC
Topic 350. Other costs related to the maintenance of the software
are expensed as incurred. Amortization is provided over the
estimated useful lives of 7 years using the straight-line method
for financial statement purposes.
Revenue Recognition
The
Company recognizes revenue when all of the following conditions are
satisfied: (1) there is persuasive evidence of an arrangement; (2)
the product or service has been provided to the customer; (3) the
amount of fees to be paid by the customer is fixed or determinable;
and (4) the collection of our fees is probable. Dealers typically
pay monthly subscription fees to access some or all modules on an a
la carte basis, as well as, in certain cases, implementation or
training fees.
Cost of Sales
Cost of
sales represents amount paid by the Company for hosting of the
customer facing website, various data feeds from third parties, and
the Company’s labor for implementing and training new
customers.
Marketing and Advertising Costs
The
Company expenses marketing and advertising costs as incurred. The
Company’s marketing and advertising costs in the period ended
December 31, 2016, and December 31, 2015 were $100,235 and $0,
respectively, primarily driven by the costs of the marketing
services agreement between the Company and a member of the Company.
For additional information,
see
Note 3 “Related Party Transactions.”
Fair Value of
Financial Instruments
Fair
value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
December 31, 2016, and 2015. The respective carrying value of
certain on-balance-sheet financial instruments approximated their
fair values. These financial instruments include cash, prepaid
expenses and accounts payable. Fair values approximate carrying
values for cash and payables because they are short term in nature
and their carrying amounts approximate fair values or they are
payable on demand.
NextGen
Dealer Solutions, LLC
Notes to Financial
Statements
FASB
ASC 820-10-30-2 establishes a fair value hierarchy for inputs used
in measuring fair value that maximizes the use of observable inputs
and minimizes the use of unobservable inputs by requiring the most
observable inputs be used when available. Observable inputs are
from sources independent of the Company, whereas unobservable
inputs reflect the Company’s assumptions about the inputs
market participants would use in pricing the asset or liability
developed on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on
the inputs as follows:
Level
1: The preferred inputs to valuation efforts are “quoted
prices in active markets for identical assets or
liabilities,” with the caveat that the reporting entity must
have access to that market. Information at this level is
based on direct observations of transactions involving the same
assets and liabilities, not assumptions, and thus offers superior
reliability. However, relatively few items, especially physical
assets, actually trade in active markets.
Level
2: FASB acknowledged that active markets for identical assets and
liabilities are relatively uncommon and, even when they do exist,
they may be too thin to provide reliable information. Inputs other
than quoted market prices in Level 1 that are observable for the
asset or liability, either directly or indirectly, are considered
Level 2 inputs.
Level
3: If inputs from levels 1 and 2 are not available, FASB
acknowledges that fair value measures of many assets and
liabilities are less precise. The board describes Level 3 inputs as
“unobservable,” and limits their use by saying they
“shall be used to measure fair value to the extent that
observable inputs are not available.” This category allows
“for situations in which there is little, if any, market
activity for the asset or liability at the measurement date”.
Earlier in the standard, FASB explains that “observable
inputs” are gathered from sources other than the reporting
company and that they are expected to reflect assumptions made by
market participants.
Income Taxes
The
Company is a limited liability company and has elected to be taxed
under partnership provisions of the Internal Revenue Code. Under
these provisions, the members are taxed on their share of the
Company's taxable income. The Company bears no liability or expense
for income taxes and none is reflected in these financial
statements. Similar provisions apply for state income
taxes.
The
Company accounts for income taxes in accordance with ASC Topic 740,
“Income Taxes.” ASC 740-10 clarifies the accounting for
income taxes by prescribing a minimum recognition threshold a tax
position is required to meet before being recognized in the balance
sheet. It also provides guidance on derecognition, measurement and
classification of amounts related to uncertain tax positions,
accounting for and disclosure of interest and penalties, accounting
in interim period disclosures and transition relating to the
adoption of new accounting standards. Under ASC 740-10, the
recognition for uncertain tax positions should be based on a
more-likely-than-not threshold that the tax position will be
sustained upon audit. The tax position is measured as the largest
amount of benefit that has a greater than fifty percent probability
of being realized upon settlement. Management has determined that
adoption of this topic has had no effect on the Company’s
balance sheet. The Company’s tax returns for 2016 and 2015
remain open to potential Internal Revenue Service
investigation.
Use of Estimates
The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. Any
adjustments applied to estimated amounts are recognized in the year
such adjustments are determined.
Recent
Pronouncements
The
Company has evaluated the recent accounting pronouncements through
January 2017 and believes that none of them will have a material
effect on the company’s financial statements.
Note
2 – Property and Equipment - Software
Capitalization
The
Company capitalizes the costs associated with the development of
the Company’s software solutions and website pursuant to ASC
Topic 350. Other costs related to the maintenance of the software
are expensed as incurred. Additionally, upon formation the
Company determined the fair value of software contributed to the
Company to be $
1,312,252.
Amortization is provided over
the estimated useful lives of 7 years using the straight-line
method for financial statement purposes. The Company capitalized a
total of $341,919 during the twelve months ending December 31,
2016, and incurred amortization expense for the periods ending
December 31, 2016 and December 31, 2015 of $253,468 and $9,370,
respectively.
NextGen
Dealer Solutions, LLC
Notes to Financial
Statements
Note
3 - Related Party Transactions
The Company and a
technology consulting firm (“Developer”) owned and
managed by Company’s majority Member entered into a Services
Agreement in December, 2015 whereby Developer agreed to make
available up to 15 full time equivalent resources to perform
software development, corrections and testing. Additionally, an
entity owned by the majority Member provided billing services and
start-up support to the Company (“Services Provider”).
The total amounts billed by Developer for development fees in the
periods ending December 31, 2016 and December 31, 2015 was $723,475
and $0, respectively. The total amount owed to both the Developer
and the Services Provider as of December
2016 and 2015, was $468,932 and
$49,433, respectively.
Amounts
owed to the Developer will be paid as and when the proceeds from
the sale of the Company’s assets are received.
The Company and its
minority member (“Marketing Partner”) entered into a
Marketing Services Agreement in December, 2015 whereby 1) Marketing
Partner would assist in identifying potential customers for Company
and facilitate in the closing of sales to such prospective
customers; 2) Company would pay Marketing Partner $10,000 per month
plus reasonable out of pocket expenses incurred by the Marketing
Partner’s person(s) assisting Company , and 3) pay to
Marketing Partner a percentage of all receipts by Company from such
prospects equal to 15% for the first year that such prospect is a
customer and 5% for each of the two succeeding years. Amounts
billed to Marketing Partner in the periods ending December 31, 2016
and December 31, 2015 were $60,541 and $0, respectively, and the
balance owed Marketing Partner at December 31, 2016 and 2015
was $47,214 and
$27,910, respectively.
The
Company uses a portion of certain leased premises in Irving, Texas
that are leased by the majority owner of the Company pursuant to a
Sublease Agreement dated October 25, 2016 by and between the
landlord and the majority owner. The sublease ends April 30,
2018. The Company uses the premises on a month to month basis. The
Company pays $3,488 per month for the use of the
premises.
Note
4 – Members’ Equity
The
Company was formed on December 10, 2015 as a limited liability
company under the laws of the State of Delaware. Upon formation on
December 10, 2015, the Company authorized the issuance of up to
80,000 Class A Preferred Units and 10,000 Class B Preferred Units;
on the same date, the Company issued 60,000 Class A Preferred Units
as well as granted a member of the Company an option to purchase
20,000 Class A Preferred Units prior to December 10, 2016. The
option was not exercised, so as of each of December 31, 2016 and
2015 there were 60,000 Class A Preferred Units
outstanding.
Each of
the Class A Preferred Units and Class B Preferred Units are
convertible at any time to Common Units; however the Common Units
have no preferences related to distributions and the like. As of
December 31, 2016, there were no Common Units
outstanding.
During
the period from December 15, 2015 through the period ended December
31, 2016, there have been no other units, preferred or otherwise,
issued, except as noted below.
On
August 1, 2016, the Company approved the NextGen Dealer Solutions,
LLC Incentive Plan providing for the issuance of up to 15,000 Class
C Profit Units; and on the same date, the Company awarded 6,667
Class C Profit Units to one of the Company’s employees,
representing 10% of total issued and outstanding Units post award.
Class C Profit Units have no voting rights, vest over a period of
four (4) years, accelerate vesting upon a change in control and
share in distributions in accordance with the terms set forth in
the Incentive Plan and in the Limited Liability Company Agreement
of the Company dated December 10, 2015. No value or expense
associated with such grant was recorded.
As part
of the initial contributions, one member, in exchange for 40,000
Class A Preferred Units, contributed the sales session management,
inventory management, customer relationship management, equity
mining, and back office and call center business development center
functionality software product and application known as CyclePro,
including all designs, source code, databases, user interfaces, and
derivatives thereof valued at $1,321,622. The other member, in
exchange for 20,000 Class A Preferred Units and an option to
purchase an additional 20,000 Class A Preferred Units prior to
December 10, 2016, contributed $1,500,000.
Note
5- Subsequent Events
On
January 8, 2017, the Company, Halcyon Consulting, LLC
(“Halcyon”), and members of Halcyon signatory thereto
(“Halcyon Members” and together with Halcyon, the
“Halcyon Parties”) entered into an Asset Purchase
Agreement with Smart Server Inc. (“Smart Server”). The
Company and the Halcyon Parties are collectively referred to as the
“Seller Parties.” The Agreement provides that, upon the
terms and subject to the conditions set forth in the Agreement,
Smart Server would acquire all of the Company's assets, properties
and rights of whatever kind, tangible and intangible, other than
the excluded assets under the terms of the Agreement. Smart Server
also would assume liability only for certain post-closing
contractual obligations pursuant to the terms of the Agreement,
primarily related to operating and maintaining the CyclePro
application. Additionally, Smart Server agreed to be responsible
for certain payroll costs and operating expenses incurred after
January 16, 2017, and 2) benefit from all revenue earned from
January 16, 2017 forward. The transaction closed on February 8,
2017.
Smart
Server acquired substantially all of the assets of the Company in
exchange for approximately $750,000 in cash, plus 1,523,809
unregistered shares of common stock of Smart Server (the "Purchaser
Shares"), and a subordinated secured promissory note issued by
Smart Server in favor of the Company in the amount of $1,333,333
(the "Acquisition Note"). The Acquisition Note matures on the third
anniversary of the date the Acquisition Note is entered into (the
"Maturity Date"). Interest will accrue on the Acquisition Note (i)
at a rate of 6.5% annually from the date the Acquisition Note is
entered into through the second anniversary of such date and (ii)
at a rate of 8.5% annually from the second anniversary of the date
the Acquisition Note is entered into through the Maturity
Date.
As of
the date of this filing, Smart Server has changed its name to
RumbleON, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
On
January 8, 2017, Smart Server, Inc. entered into an Asset
Purchase Agreement with NextGen Dealer Solutions, LLC ("NextGen"),
Halcyon Consulting, LLC ("Halcyon"), and members of Halcyon
signatory thereto ("Halcyon Members," and together with Halcyon,
the "Halcyon Parties"), as amended by that certain Assignment,
dated January 31, 2017, between the Company and NextGen Pro, LLC
(the "NextGen Agreement"). The NextGen Agreement provided that
NextGen Pro, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of the Company, will acquire substantially
all of the assets of NextGen in exchange for approximately $750,000
in cash, plus 1,523,809 unregistered shares of Company common stock
(the "Purchaser Shares"), and a subordinated secured
promissory note issued by the Company in favor of NextGen in the
amount of $1,333,333 (the "Acquisition Note"). NextGen and the
Halcyon Parties are collectively referred to as the "Seller
Parties."
On
January 9, 2017, the Company's Board of Directors (the "Board") and
stockholders holding 6,375,000 of the Company's issued and
outstanding shares of common stock approved an amendment to the
Company's Articles of Incorporation (the "Certificate of
Amendment") to change the name Smart Server, Inc. to RumbleON, Inc.
and to create an additional class of Company common stock. The
Certificate of Amendment became effective on February 13, 2017
(the "Effective Date"), after the notice and accompanying
Information Statement describing the amendment was furnished to
non-consenting stockholders of the Company in accordance with
Nevada and Federal securities law.
Immediately before
approving the Certificate of Amendment, the Company had authorized
100,000,000 shares of common stock, $0.001 par value (the
"Authorized Common Stock"), including 6,400,000 issued and
outstanding shares of common stock (the "Outstanding Common Stock,"
and together with the Authorized Common Stock, the "Common Stock").
Pursuant to the Certificate of Amendment, the Company designated
1,000,000 shares of Authorized Common Stock as Class A Common Stock
(the "Class A Common Stock"), which Class A Common Stock ranks pari
passu with all of the rights and privileges of the Common Stock,
except that holders of Class A Common Stock will be entitled to 10
votes per share of Class A Common Stock issued and outstanding and
(ii) all other shares of Common Stock, including all shares of
Outstanding Common Stock shall be deemed Class B Common Stock (the
"Class B Common Stock"), which Class B Common Stock will be
identical to the Class A Common Stock in all respects, except that
holders of Class B Common Stock will be entitled to one vote per
share of Class B Common Stock issued and outstanding.
Also on
January 9, 2017, the Company's Board and stockholders holding
6,375,000 of the Company's issued and outstanding shares of common
stock approved the issuance to (i) Mr. Chesrown of 875,000 shares
of Class A Common Stock in exchange for an equal number of shares
of Class B Common Stock held by Mr. Chesrown, and (ii) Mr. Berrard
of 125,000 shares of Class A Common Stock in exchange for an equal
number of shares of Class B Common Stock held by Mr.
Berrard.
On
February 8, 2017 (the "Closing Date"), RumbleON completed the
NextGen Acquisition in exchange for $750,000 in cash, the Purchaser
Shares, and the Acquisition Note. The Acquisition Note matures on
the third anniversary of the Closing Date (the "Maturity Date").
Interest accrues (i) at a rate of 6.5% annually from the Closing
Date through the second anniversary of such date and (ii) at a rate
of 8.5% annually from the second anniversary of the Closing Date
through the Maturity Date.
On
February [13], 2017, the Company agreed with the Purchasers in the
Private Placement to accelerate the funding of the second tranche
of their investment totaling $1.35 million by issuing such
Purchasers 1,161,920 shares of the Company's common stock and a
note in the amount of $667,000 (the "Investor Note") and cancelling
the Loan Agreements.
On
February 13, 2017, the Effective Date, the Company filed the
Certificate of Amendment with the Secretary of State of the State
of Nevada changing the Company's name to RumbleON, Inc. and
creating the Class A and Class B Common Stock. Also on the
Effective Date, the Company issued an aggregate of 1,000,000 shares
of Class A Common Stock to Messrs. Chesrown and Berrard in exchange
for an aggregate of 1,000,000 shares of Class B Common Stock held
by them. Also on the Effective Date, the Company amended its bylaws
to reflect the name change to RumbleON, Inc. and to reflect the
Company's primary place of business as Charlotte, North
Carolina.
The
following Unaudited Pro Forma Condensed Combined Financial
Statements are based on the historical financial statements of
RumbleON and NextGen after giving effect to the
Company’s acquisition of NextGen. The unaudited Pro Forma
Condensed Combined Balance Sheet as of December 31, 2016, gives
effect to the NextGen Acquisition as if it had occurred on that
date. The unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 2016 gives effect to the
NextGen Acquisition as if it had occurred on January 1,
2016.
The
Unaudited Pro Forma Condensed Combined Financial Statements should
be read in conjunction with RumbleON’s historical
consolidated financial statements as of and for the year ended
December 31, 2016 and the accompanying notes thereto, as filed with
this Annual Report on form 10-K, NextGen’s historical
financial statements as of and for the year ended December 31, 2016
and the accompanying notes thereto included with this filing, and
the accompanying Notes to these Unaudited Pro Forma Condensed
Combined Financial Statements.
The
unaudited pro forma financial data are based on the historical
financial statements of RumbleON and NextGen, and on publicly
available information and certain assumptions RumbleON believes are
reasonable, which are described in the notes to the Unaudited Pro
Forma Condensed Combined Financial Statements included in this Form
10-K. RumbleON has not performed a detailed valuation analysis
necessary to determine the fair market values of NextGen’s
assets to be acquired and liabilities to be assumed. For the
purpose of the Unaudited Pro Forma Condensed Combined Financial
Statements, preliminary allocations of estimated acquisition
consideration have been based on the payment of $750,000, issuance
of the Purchaser Shares, and issuance of the Acquisition Note. The
acquisition consideration has been allocated to certain assets and
liabilities using management assumptions as further described in
the accompanying notes. After the closing of the NextGen
Acquisition, RumbleON will complete its valuations of the fair
value of the assets acquired and the liabilities assumed and
determine the useful lives of the assets acquired.
The
Unaudited Pro Forma Condensed Combined Financial Statements are
provided for informational purpose only. The pro forma information
provided is not necessarily indicative of what the combined
company’s financial position and results of operations would
have actually been had the NextGen Acquisition been completed on
the dates used to prepare these pro forma financial statements. The
adjustments to fair value and the other estimates reflected in the
accompanying Unaudited Pro Forma Condensed Combined Financial
Statements may be materially different from those reflected in the
combined company’s consolidated financial statements
subsequent to the NextGen Acquisition. In addition, the Unaudited
Pro Forma Condensed Combined Financial Statements do not purport to
project the future financial position or results of operations of
the merged companies. Reclassifications and adjustments may be
required if changes to RumbleON’s financial presentation are
needed to conform RumbleON’s and NextGen Acquisition’s
accounting policies.
These
Unaudited Pro Forma Condensed Combined Financial Statements do not
give effect to any anticipated synergies, operating efficiencies or
cost savings that may be associated with the transaction. These
financial statements also do not include any integration costs the
companies may incur related to the NextGen Acquisition as part of
combining the operations of the companies. The Unaudited Pro Forma
Condensed Combined Statement of Operations do not include an
estimate for transaction costs of approximately
$175,000.
RumbleON,
Inc. and Subsidiary
Pro
Forma Condensed Combined Balance Sheet
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
$
1,350,580
|
$
46,891
|
$
(796,891
)
|
A
|
$
600,580
|
Prepaid
expense
|
1,667
|
5,635
|
(5,635
)
|
A
|
1,667
|
Total current
assets
|
1,352,247
|
52,526
|
(802,526
)
|
|
602,247
|
|
|
|
|
|
|
Software ,
net
|
-
|
1,400,703
|
-
|
|
1,400,703
|
Other
assets
|
45,515
|
-
|
-
|
|
45,515
|
Goodwill and other
intangibles
|
-
|
-
|
3,349,297
|
B
|
3,349,297
|
|
|
|
|
|
|
Total
assets
|
$
1,397,762
|
$
1,453,229
|
$
2,546,771
|
|
$
5,397,762
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
139,083
|
$
3,445
|
$
(3,445
)
|
A
|
$
139,083
|
Accounts
payable-related party
|
80,018
|
516,146
|
(516,146
)
|
A
|
80,018
|
Total current
liabilities
|
219,101
|
519,591
|
(519,591
)
|
|
219,101
|
|
|
|
|
|
|
Long term
liabilities:
|
|
|
|
|
|
Accrued interest
payable - related party
|
5,508
|
-
|
-
|
|
5,508
|
Convertible note
payable - related party, net
|
1,282
|
-
|
-
|
|
1,282
|
Deferred tax
liability
|
78,430
|
-
|
-
|
|
78,430
|
Promissory
note
|
-
|
-
|
1,333,333
|
C
|
1,333,333
|
Total long term
liabilities
|
85,220
|
|
1,333,333
|
|
1,418,553
|
|
|
|
|
|
|
|
304,321
|
519,591
|
813,742
|
|
1,637,654
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Preferred stock,
$0.001 par value, 10,000,000 shares
|
|
|
|
|
|
authorized, 7,923,809, shares issued and
outstanding
as of December 31, 2016,
|
6,400
|
-
|
1,524
|
D
|
7,924
|
Additional paid-in
capital
|
1,534,015
|
-
|
2,665,143
|
D
|
4,199,158
|
Members’
equity
|
-
|
933,638
|
(933,638
)
|
E
|
|
Subscriptions
receivable
|
(1,000
)
|
-
|
-
|
|
(1,000
)
|
Accumulated
deficit
|
(445,974
)
|
-
|
-
|
|
(445,974
)
|
Total stockholders'
equity
|
1,093,441
|
933,638
|
1,733,029
|
|
3,760,108
|
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
$
1,397,762
|
$
1,453,229
|
$
2,546,771
|
|
$
5,397,762
|
See
Accompanying Notes to Pro Forma Financial
Statements.
RumbleON,
Inc. and Subsidiary
Pro
Forma Condensed Combined Statement of Operations
(unaudited
)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
-
|
$
138,141
|
|
|
$
138,141
|
|
|
|
|
|
|
Cost of
sales
|
-
|
332,559
|
|
|
332,559
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
General and
administrative
|
57,825
|
332,534
|
|
|
1,390,359
|
Depreciation and
amortization
|
1,900
|
253,468
|
(33,508
)
|
F
|
221,860
|
Impairment of
assets
|
792
|
-
|
|
|
792
|
Professional
fees
|
152,876
|
-
|
|
|
152,876
|
Total operating
expenses
|
213,393
|
1,918,561
|
(33,508
)
|
|
2,098,446
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Other
income
|
-
|
644
|
|
|
644
|
Interest expense -
related party
|
(11,698
)
|
-
|
(86,667
)
|
G
|
(98,365
)
|
Total other
expense
|
(11,698
)
|
644
|
(86,667
)
|
|
(97,721
)
|
|
|
|
|
|
|
Net loss before
provision for income taxes
|
(225,091
)
|
(1,779,776
)
|
(53,159
)
|
|
(2,058,026
)
|
|
|
|
|
|
|
Benefit for income
taxes
|
513
|
-
|
|
|
513
|
|
|
|
|
|
|
Net
loss
|
$
(224,578
)
|
$
(1,779,776
)
|
$
(53,159
)
|
|
$
(2,057,513
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common
|
|
|
|
|
|
shares outstanding
- basic
|
|
|
|
|
7,105,179
|
shares outstanding
- diluted
|
|
|
|
|
7,105,179
|
|
|
|
|
|
|
Net loss per share
- basic
|
|
|
|
|
$
(0.29
)
|
Net loss per share
- diluted
|
|
|
|
|
$
(0.29
)
|
See
Accompanying Notes to Pro Forma Financial
Statements.
Notes
to Unaudited Pro Forma
Condensed Combined
Financial Statements
The
following unaudited pro forma financial statements of RumbleON,
Inc. (the “Company”) are based on the historical
financial statements of the Company after giving effect to our
purchase of certain assets (the “NextGen Transaction”)
from NextGen Dealer Solutions, LLC ("NextGen") and the assumptions
and adjustments described in the accompanying notes to the
unaudited pro forma financial statements.
The
unaudited pro forma balance sheet as of December 31, 2016, is
presented as if the NextGen Transaction had occurred on December
31, 2016. The unaudited pro forma statements of operations for the
year ended December 31, 2016 are presented as if the NextGen
Transaction had taken place on January 1, 2016.
The
allocation of the purchase price used in the unaudited pro forma
financial statements is based upon a preliminary valuation. The
estimated fair values of certain assets and liabilities have been
determined with the assistance of a third-party valuation firm and
such firm’s preliminary work. Our estimates and assumptions
are subject to change upon the finalization of internal studies and
third-party valuations of assets, including investments, property
and equipment, intangible assets including goodwill, and certain
liabilities.
The
unaudited pro forma financial statements are not intended to
represent or be indicative of the combined results of operations or
financial position of the Company that would have been reported had
the NextGen Transaction been completed as of the dates presented,
and should not be taken as representative of the future
combined
results of operations or financial position of the
Company.
The
unaudited pro forma financial statements do not reflect any revenue
enhancements, operating efficiencies, or cost savings that we may
achieve. The allocation of the purchase price to the assets and
liabilities acquired reflected in this pro forma financial data is
preliminary. Accordingly, the actual financial position and results
of operations may differ from these pro forma amounts.
Note
1- Basis of Presentation
The
unaudited pro forma financial statements of the Company are based
on the historical financial statements of RumbleON, Inc. after
giving effect to the NextGen Transaction and the assumptions and
adjustments described in the accompanying notes to the unaudited
pro forma financial statements.
The
historical financial statements of NextGen are presented under
United States Generally Accepted Accounting Principles (“US
GAAP”) and as such, the historical statements of income have
been adjusted to remove the impact of any asset sales that qualify
for discontinued operations treatment. The historical statements of
operations present results through income from continuing
operations.
The
unaudited pro forma balance sheet as of December 31, 2016, is
presented as if the NextGen Transaction had occurred on December
31, 2016. The unaudited pro forma statements of operations for the
year ended December 31, 2016 and the year ended December 31, 2016
are presented as if the NextGen Transaction had taken place on
January 1, 2016.
The
allocation of the purchase price used in the unaudited pro forma
financial statements is based upon a preliminary valuation. The
estimated fair values of certain assets and liabilities have been
determined with the assistance of a third-party valuation firm and
such firm’s preliminary work. Our estimates and assumptions
are subject to change upon the finalization of internal studies and
third-party valuations of assets, including investments, property
and equipment, intangible assets including goodwill, and certain
liabilities.
The
unaudited pro forma financial statements are not intended to
represent or be indicative of the
combined
results of operations or financial position of the Company that
would have been reported had the NextGen Transaction been completed
as of the dates presented, and should not be taken as
representative of the future
combined
results of operations or financial position of the
Company.
The
unaudited pro forma financial statements do not reflect any revenue
enhancements, operating efficiencies, or cost savings that we may
achieve. The allocation of the purchase price to the assets and
liabilities acquired reflected in this pro forma financial data is
preliminary. Accordingly, the actual financial position and results
of operations may differ from these pro forma amounts.
Note
2- NextGen Transaction
On
January 8, 2017, NextGen, Halcyon Consulting, LLC
(“Halcyon”), and members of Halcyon signatory thereto
(“Halcyon Members” and together with Halcyon, the
“Halcyon Parties”) entered into an Asset Purchase
Agreement with the Company. NextGen and the Halcyon Parties are
collectively referred to as the “Seller Parties.” The
Agreement provides that, upon the terms and subject to the
conditions set forth in the Agreement, the Company would acquire
all of NextGen's assets, properties and rights of whatever kind,
tangible and intangible, other than the excluded assets under the
terms of the Agreement. The Company also would assume liability
only for certain post-closing contractual obligations pursuant to
the terms of the Agreement, primarily related to operating and
maintaining the CyclePro application. Additionally, The Company
agreed to be responsible for certain payroll costs and operating
expenses incurred after January 16, 2017, and 2) benefit from all
revenue earned from January 16, 2017 forward. The transaction
closed on February 8, 2017.
The
Company acquired substantially all of the assets of NextGen in
exchange for approximately $750,000 in cash, plus 1,523,809
unregistered shares of common stock of the Company (the "Purchaser
Shares"), and a subordinated secured promissory note issued by the
Company in favor of the NextGen in the amount of $1,333,333 (the
"Acquisition Note"). The Acquisition Note matures on the third
anniversary of the date the Acquisition Note is entered into (the
"Maturity Date"). Interest will accrue on the Acquisition Note and
be paid semi-annually (i) at a rate of 6.5% annually from the date
the Acquisition Note is entered into through the second anniversary
of such date and (ii) at a rate of 8.5% annually from the second
anniversary of the date the Acquisition Note is entered into
through the Maturity Date.
For
purposes of the pro forma December 31, 2016 balance sheet, the
total purchase price of $4,750,000 is allocated as
follows:
Software,
net
|
$
1,400,703
|
Identifiable
intangible assets
|
100,000
|
Goodwill
|
3,249,297
|
|
$
4,750,000
|
Note
3- Pro Forma Adjustments
The
following pro forma adjustments are included in the unaudited pro
forma financial statements:
(A)
To adjust cash to
reflect the payment of $750,000 portion of the consideration to
NextGen and working capital remaining with NextGen;
(B)
To record
goodwill and identifiable
intangible assets as part of the transaction;
(C)
The issuance by the
Company of a Promissory Note in favor of NextGen in the amount of
$1,333,333;
(D)
The account for the
issuance by the Company of 1,523,809 shares of Class B Common Stock
to NextGen;
(E)
To eliminate the
Member’s
Equity of
NextGen;
(F)
To adjust
f
or
depreciation expense
on acquired software over its anticipated seven year useful
life
;
and
(G)
To account for
interest expense related to the Acquisition Note: principal balance
of $1,333,333 and an interest rate of 6.5%.
PF-6
ASSIGNMENT
THIS
ASSIGNMENT (this “
Assignment
”) is made and
entered into this 8th day of February, 2017, by and among
Smart Server, Inc., a Nevada
corporation
(“
Assignor
”), and NextGen
Pro, LLC, a Delaware limited liability company (“
Assignee
”).
WHEREAS, Assignor
is a party to that certain Asset Purchase Agreement, dated as of
January 8, 2017 (the “
APA
”), by and among
Assignor, NextGen Dealer Solutions, LLC, a Delaware limited
liability company (the “
Company
”), and certain
other parties signatory thereto, pursuant to which the Company
agreed to sell, and Assignor agreed to purchase the Purchased
Assets and assume the Assumed Liabilities; and
WHEREAS, Assignor
and Assignee desire for Assignor to assign to Assignee the right
under the APA to purchase the Purchased Assets and assume the
Assumed Liabilities from the Company.
NOW,
THEREFORE, in consideration of the mutual covenants and conditions
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1.
Capitalized Terms
. The
foregoing recitals are hereby incorporated by reference into the
body of this Assignment as if fully set forth herein. Capitalized
terms used but not defined herein shall have the meanings ascribed
to such terms in the APA.
2.
Assignment and Assumption
.
Assignor hereby assigns to Assignee solely the following rights and
obligations under the APA: (i) Assignor's right to acquire the
Purchased Assets and (ii) Assignor's obligation to assume the
Assumed Liabilities; provided that nothing in this Assignment shall
be construed to assign to Assignee any of Assignor's other rights
under the APA or any of Assignor's other obligations under the APA,
including the obligation to indemnify the Company if, when and to
the extent required by the APA.
3.
Counterparts
.
This Assignment may
be signed in any number of counterparts and all such counterparts
shall be read together and construed as one and the same document.
Delivery of an executed signature page of this Assignment by
facsimile, PDF or electronic transmission will be effective as
delivery of a manually executed counterpart hereof.
[Remainder
of page intentionally left blank.]
IN
WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment as of the date first written above.
|
ASSIGNOR
:
SMART
SERVER, INC.,
a
Nevada corporation
By:
/s/ Marshall
Chesrown
Marshall
Chesrown, Chief Executive Officer
ASSIGNEE
:
NEXTGEN
PRO, LLC,
a
Delaware limited liability company
By:
/s/ Marshall
Chesrown
Marshall
Chesrown, President
|
AMENDED
BYLAWS
OF
RumbleON, INC.
a Nevada corporation
ARTICLE I
OFFICES
Section
1.
PRINCIPAL OFFICES
. The
principal office shall be in the City of Charlotte, County of
Mecklenburg, State of North Carolina.
Section
2.
OTHER OFFICES
. The board of
directors may at any time establish branch or subordinate offices
at any place or places where the corporation is qualified to do
business.
ARTICLE
II
MEETINGS OF
STOCKHOLDERS
Section
1.
PLACE OF MEETINGS
. Meetings of
stockholders shall be held at any place within or without the State
of Nevada designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.
Section
2.
ANNUAL MEETINGS
. The annual
meetings of stockholders shall be held at a date and time
designated by the board of directors. (At such meetings, directors
shall be elected and any other proper business may be transacted by
a plurality vote of stockholders.)
Section
3.
SPECIAL MEETINGS
. A special
meeting of the stockholders, for any purpose or purposes
whatsoever, unless prescribed by statute or by the articles of
incorporation, may be called at any time by the president and shall
be called by the president or secretary at the request in writing
of a majority of the board of directors, or at the request in
writing of stockholders holding shares in the aggregate entitled to
cast not less than a majority of the votes at any such
meeting.
The
request shall be in writing, specifying the time of such meeting,
the place where it is to be held and the general nature of the
business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president,
any vice president or the secretary of the corporation. The officer
receiving such request forthwith shall cause notice to be given to
the stockholders entitled to vote, in accordance with the
provisions of Sections 4 and 5 of this Article II, that a meeting
will be held at the time requested by the person or persons calling
the meeting, not less than thirty-five (35) nor more than sixty
(60) days after the receipt of the request. If the notice is not
given within twenty (20) days after receipt of the request, the
person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph of this Section 3 shall be
construed as limiting, fixing or affecting the time when a meeting
of stockholders called by action of the board of directors may be
held.
Section
4.
NOTICE OF STOCKHOLDERS'
MEETINGS
. All notices of meetings of stockholders shall be
sent or otherwise given in accordance with Section 5 of this
Article II not less than ten (10) nor more than sixty (60) days
before the date of the meeting being noticed. The notice shall
specify the place, date and hour of the meeting and (i) in the case
of a special meeting the general nature of the business to be
transacted, or (ii) in the case of the annual meeting those matters
which the board of directors, at the time of giving the notice,
intends to present for action by the stockholders. The notice of
any meeting at which directors are to be elected shall include the
name of any nominee or nominees which, at the time of the notice,
management intends to present for election.
If
action is proposed to be taken at any meeting for approval of (i)
contracts or transactions in which a director has a direct or
indirect financial interest, (ii) an amendment to the articles of
incorporation, (iii) a reorganization of the corporation, (iv)
dissolution of the corporation, or (v) a distribution to preferred
stockholders, the notice shall also state the general nature of
such proposal.
Section
5.
MANNER OF GIVING NOTICE; AFFIDAVIT OF
NOTICE
. Notice of any meeting of stockholders shall be given
either personally or by first-class mail or telegraphic or other
written communication, charges prepaid, addressed to the
stockholder at the address of such stockholder appearing on the
books of the corporation or given by the stockholder to the
corporation for the purpose of notice. If no such address appears
on the corporation's books or is given, notice shall be deemed to
have been given if sent by mail or telegram to the corporation's
principal executive office, or if published at least once in a
newspaper of general circulation in the county where this office is
located. Personal delivery of any such notice to any officer of a
corporation or association or to any member of a partnership shall
constitute delivery of such notice to such corporation, association
or partnership. Notice shall be deemed to have been given at the
time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication. In the event of
the transfer of stock after delivery or mailing of the notice of
and prior to the holding of the meeting, it shall not be necessary
to deliver or mail notice of the meeting to the
transferee.
If any
notice addressed to a stockholder at the address of such
stockholder appearing on the books of the corporation is returned
to the corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver
the notice to the stockholder at such address, all future notices
or reports shall be deemed to have been duly given without further
mailing if the same shall be available to the stockholder upon
written demand of the stockholder at the principal executive office
of the corporation for a period of one year from the date of the
giving of such notice.
An
affidavit of the mailing or other means of giving any notice of any
stockholders' meeting shall be executed by the secretary, assistant
secretary or any transfer agent of the corporation giving such
notice, and shall be filed and maintained in the minute book of the
corporation.
Business transacted
at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
Section
6.
QUORUM
. The presence in person
or by proxy of the holders of one-third (33%) of the shares issued
and outstanding and entitled to vote at any meeting of stockholders
shall constitute a quorum for the transaction of business, except
as otherwise provided by statute or the articles of incorporation.
The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less
than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to
constitute a quorum.
Section
7.
ADJOURNED MEETING AND NOTICE
THEREOF
. Any stockholders' meeting, annual or special,
whether or not a quorum is present, may be adjourned from time to
time by the vote of the majority of the shares represented at such
meeting, either in person or by proxy, but in the absence of a
quorum, no other business may be transacted at such
meeting.
When
any meeting of stockholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at
which the adjournment is taken. At any adjourned meeting the
corporation may transact any business which might have been
transacted at the original meeting.
Section
8.
VOTING
. Unless a record date
set for voting purposes be fixed as provided in Section 1 of
Article VII of these bylaws, only persons in whose names shares
entitled to vote stand on the stock records of the corporation at
the close of business on the business day next preceding the day on
which notice is given (or, if notice is waived, at the close of
business on the business day next preceding the day on which the
meeting is held) shall be entitled to vote at such meeting. Any
stockholder entitled to vote on any matter other than elections of
directors or officers, may vote part of the shares in favor of the
proposal and refrain from voting the remaining shares or vote them
against the proposal, but, if the stockholder fails to specify the
number of shares such stockholder is voting affirmatively, it will
be conclusively presumed that the stockholder's approving vote is
with respect to all shares such stockholder is entitled to vote.
Such vote may be by voice vote or by ballot; provided, however,
that all elections for directors must be by ballot upon demand by a
stockholder at any election and before the voting
begins.
When a
quorum is present or represented at any meeting, the vote of the
holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by
express provision of the statutes or of the articles of
incorporation a different vote is required in which case such
express provision shall govern and control the decision of such
question. Every stockholder of record of the corporation shall be
entitled at each meeting of stockholders to one vote for each share
of stock standing in his name on the books of the
corporation.
Section
9.
WAIVER OF NOTICE OR CONSENT BY ABSENT
STOCKHOLDERS
. The transactions at any meeting of
stockholders, either annual or special, however called and noticed,
and wherever held, shall be as valid as though had at a meeting
duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, not present in person or by
proxy, signs a written waiver of notice or a consent to a holding
of the meeting, or an approval of the minutes thereof. The waiver
of notice or consent need not specify either the business to be
transacted or the purpose of any regular or special meeting of
stockholders, except that if action is taken or proposed to be
taken for approval of any of those matters specified in the second
paragraph of Section 4 of this Article II, the waiver of notice or
consent shall state the general nature of such proposal. All such
waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Attendance of a
person at a meeting shall also constitute a waiver of notice of
such meeting, except when the person objects, at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened, and except that attendance at a
meeting is not a waiver of any right to object to the consideration
of matters not included in the notice if such objection is
expressly made at the meeting.
Section
10.
STOCKHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING
. Any action which may be taken at any
annual or special meeting of stockholders may be taken without a
meeting and without prior notice, if a consent in writing, setting
forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. All
such consents shall be filed with the secretary of the corporation
and shall be maintained in the corporate records. Any stockholder
giving a written consent, or the stockholder's proxy holders, or a
transferee of the shares of a personal representative of the
stockholder of their respective proxy holders, may revoke the
consent by a writing received by the secretary of the corporation
prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the
secretary.
Section
11.
PROXIES
. Every person entitled
to vote for directors or on any other matter shall have the right
to do so either in person or by one or more agents authorized by a
written proxy signed by the person and filed with the secretary of
the corporation. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission or otherwise) by
the stockholder or the stockholder's attorney in fact. A validly
executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless revoked by the person
executing it, prior to the vote pursuant thereto, by a writing
delivered to the corporation stating that the proxy is revoked or
by a subsequent proxy executed by, or attendance at the meeting and
voting in person by the person executing the proxy; provided,
however, that no such proxy shall be valid after the expiration of
six (6) months from the date of such proxy, unless coupled with an
interest, or unless the person executing it specifies therein the
length of time for which it is to continue in force, which in no
case shall exceed seven (7) years from the date of its execution.
Subject to the above and the provisions of Section 78.355 of the
Nevada General Corporation Law, any proxy duly executed is not
revoked and continues in full force and effect until an instrument
revoking it or a duly executed proxy bearing a later date is filed
with the secretary of the corporation.
Section
12.
INSPECTORS OF ELECTION
. Before
any meeting of stockholders, the board of directors may appoint any
persons other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of
election are appointed, the chairman of the meeting may, and on the
request of any stockholder or his proxy shall, appoint inspectors
of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a
meeting on the request of one or more stockholders or proxies, the
holders of a majority of shares or their proxies present at the
meeting shall determine whether one (1) or three (3) inspectors are
to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by
appointment by the board of directors before the meeting, or by the
chairman at the meeting.
The
duties of these inspectors shall be as follows:
(a)
Determine the
number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies;
(b)
Receive votes,
ballots, or consents;
(c)
Hear and determine
all challenges and questions in any way arising in connection with
the right to vote;
(d)
Count and tabulate
all votes or consents;
(e)
Determine the
election result; and
(f)
Do any other acts
that may be proper to conduct the election or vote with fairness to
all stockholders.
ARTICLE
III
DIRECTORS
Section
1.
POWERS
. Subject to the
provisions of the Nevada General Corporation Law and any
limitations in the articles of incorporation and these bylaws
relating to action required to be approved by the stockholders or
by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of
directors.
Without
prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors
shall have the power and authority to:
(a)
Select and remove
all officers, agents, and employees of the corporation, prescribe
such powers and duties for them as may not be inconsistent with
law, with the articles of incorporation or these bylaws, fix their
compensation, and require from them security for faithful
service.
(b)
Change the
principal executive office or the principal business office from
one location to another; cause the corporation to be qualified to
do business in any other state, territory, dependency, or foreign
country and conduct business within or without the State; designate
any place within or without the State for the holding of any
stockholders' meeting, or meetings, including annual meetings;
adopt, make and use a corporate seal, and prescribe the forms of
certificates of stock, and alter the form of such seal and of such
certificates from time to time as in their judgment they may deem
best, provided that such forms shall at all times comply with the
provisions of law.
(c)
Authorize the
issuance of shares of stock of the corporation from time to time,
upon such terms as may be lawful, in consideration of money paid,
labor done or services actually rendered, debts or securities
cancelled, tangible or intangible property actually
received.
(d)
Borrow money and
incur indebtedness for the purpose of the corporation, and cause to
be executed and delivered therefor, in the corporate name,
promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations, or other evidences of debt and securities
therefor.
Section
2.
NUMBER OF DIRECTORS
. The
authorized number of directors shall be no fewer than one (1) nor
more than seven (7). The exact number of authorized directors shall
be set by resolution of the board of directors, within the limits
specified above. The maximum or minimum number of directors cannot
be changed, nor can a fixed number be substituted for the maximum
and minimum numbers, except by a duly adopted amendment to this
bylaw duly approved by a majority of the outstanding shares
entitled to vote.
Section
3.
QUALIFICATION, ELECTION AND TERM OF
OFFICE OF DIRECTORS
. Directors shall be elected at each
annual meeting of the stockholders to hold office until the next
annual meeting, but if any such annual meeting is not held or the
directors are not elected at any annual meeting, the directors may
be elected at any special meeting of stockholders held for that
purpose, or at the next annual meeting of stockholders held
thereafter. Each director, including a director elected to fill a
vacancy, shall hold office until the expiration of the term for
which elected and until a successor has been elected and qualified
or until his earlier resignation or removal or his office has been
declared vacant in the manner provided in these bylaws. Directors
need not be stockholders.
Section
4.
RESIGNATION AND REMOVAL OF
DIRECTORS
. Any director may resign effective upon giving
written notice to the chairman of the board, the president, the
secretary or the board of directors of the corporation, unless the
notice specifies a later time for the effectiveness of such
resignation, in which case such resignation shall be effective at
the time specified. Unless such resignation specifies otherwise,
its acceptance by the corporation shall not be necessary to make it
effective. The board of directors may declare vacant the office of
a director who has been declared of unsound mind by an order of a
court or convicted of a felony. Any or all of the directors may be
removed without cause of such removal is approved by the
affirmative vote of a majority of the outstanding shares entitled
to vote. No reduction of the authorized number of directors shall
have the effect of removing any director before his term of office
expires.
Section
5.
VACANCIES
. Vacancies in the
board of directors, may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining
director. Each director so elected shall hold office until the next
annual meeting of the stockholders and until a successor has been
elected and qualified.
A
vacancy in the board of directors exists as to any authorized
position of directors which is not then filled by a duly elected
director, whether caused by death, resignation, removal, increase
in the authorized number of directors or otherwise.
The
stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such
election by written consent shall require the consent of a majority
of the outstanding shares entitled to vote. If the resignation of a
director is effective at a future time, the board of directors may
elect a successor to take office when the resignation becomes
effective.
If
after the filling of any vacancy by the directors, the directors
then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office,
any holder or holders of an aggregate of five percent or more of
the total number of shares at the time outstanding having the right
to vote for such directors may call a special meeting of the
stockholders to elect the entire board. The term of office of any
director not elected by the stockholders shall terminate upon the
election of a successor.
Section
6.
PLACE OF MEETINGS
. Regular
meetings of the board of directors shall be held at any place
within or without the State of Nevada that has been designated from
time to time by resolution of the board. In the absence of such
designation, regular meetings shall be held at the principal
executive office of the corporation. Special meetings of the board
shall be held at any place within or without the State of Nevada
that has been designated in the notice of the meeting or, if not
stated in the notice or there is not notice, at the principal
executive office of the corporation. Any meeting, regular or
special, may be held by conference telephone or similar
communication equipment, so long as all directors participating in
such meeting can hear one another, and all such directors shall be
deemed to be present in person at such meeting.
Section
7.
ANNUAL MEETINGS
. Immediately
following each annual meeting of stockholders, the board of
directors shall hold a regular meeting for the purpose of
transaction of other business. Notice of this meeting shall not be
required.
Section
8.
OTHER REGULAR MEETINGS
. Other
regular meetings of the board of directors shall be held without
call at such time as shall from time to time be fixed by the board
of directors. Such regular meetings may be held without notice,
provided the notice of any change in the time of any such meetings
shall be given to all of the directors. Notice of a change in the
determination of the time shall be given to each director in the
same manner as notice for special meetings of the board of
directors.
Section
9.
SPECIAL MEETINGS
. Special
meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board or the president
or any vice president or the secretary or any two
directors.
Notice
of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class
mail or facsimile, charges prepaid, addressed to each director at
his or her address as it is shown upon the records of the
corporation. In case such notice is mailed, it shall be deposited
in the United States mail at least four (4) days prior to the time
of the holding of the meeting. In case such notice is delivered
personally, or by telephone or facsimile, it shall be delivered
personally or by telephone or facsimile at least forty-eight (48)
hours prior to the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated to
either the director or to a person at the office of the director
who the person giving the notice has reason to believe will
promptly communicate it to the director. The notice need not
specify the purpose of the meeting nor the place if the meeting is
to be held at the principal executive office of the
corporation.
Section
10.
QUORUM
. A majority of the
authorized number of directors shall constitute a quorum for the
transaction of business, except to adjourn as hereinafter provided.
Every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present shall
be regarded as the act of the board of directors, subject to the
provisions of Section 78.140 of the Nevada General Corporation Law
(approval of contracts or transactions in which a director has a
direct or indirect material financial interest), Section 78.125
(appointment of committees), and Section 78.751 (indemnification of
directors). A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section
11.
WAIVER OF NOTICE
. The
transactions of any meeting of the board of directors, however
called and noticed or wherever held, shall be as valid as though
had at a meeting duly held after regular call and notice if a
quorum be present and if, either before or after the meeting, each
of the directors not present signs a written waiver of notice, a
consent to holding the meeting or an approval of the minutes
thereof. The waiver of notice of consent need not specify the
purpose of the meeting. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed
given to any director who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to such
director.
Section
12.
ADJOURNMENT
. A majority of the
directors present, whether or not constituting a quorum, may
adjourn any meeting to another time and place.
Section
13.
NOTICE OF ADJOURNMENT
. Notice
of the time and place of holding an adjourned meeting need not be
given, unless the meeting is adjourned for more than twenty-four
(24) hours, in which case notice of such time and place shall be
given prior to the time of the adjourned meeting, in the manner
specified in Section 8 of this Article III, to the directors who
were not present at the time of the adjournment.
Section
14.
ACTION WITHOUT MEETING
. Any
action required or permitted to be taken by the board of directors
may be taken without a meeting, if all members of the board shall
individually or collectively consent in writing to such action.
Such action by written consent shall have the same force and effect
as a unanimous vote of the board of directors. Such written consent
or consents shall be filed with the minutes of the proceedings of
the board.
Section
15.
FEES AND
COMPENSATION OF DIRECTORS. Directors and members of committees may
receive such compensation, if any, for their services, and such
reimbursement of expenses, as may be fixed or determined by
resolution of the board of directors. Nothing herein contained
shall be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee,
or otherwise, and receiving compensation for such services. Members
of special or standing committees may be allowed like compensation
for attending committee meetings.
ARTICLE
IV
COMMITTEES
Section
1.
COMMITTEES OF DIRECTORS
. The
board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees,
each consisting of one or more directors, to serve at the pleasure
of the board. The board may designate one or more directors as
alternate members of any committees, who may replace any absent
member at any meeting of the committee. Any such committee, to the
extent provided in the resolution of the board, shall have all the
authority of the board, except with regard to:
(a)
the approval of any
action which, under the Nevada General Corporation Law, also
requires stockholders' approval or approval of the outstanding
shares;
(b)
the filing of
vacancies on the board of directors or in any
committees;
(c)
the fixing of
compensation of the directors for serving on the board or on any
committee;
(d)
the amendment or
repeal of bylaws or the adoption of new bylaws;
(e)
the amendment or
repeal of any resolution of the board of directors which by its
express terms is not so amendable or repealable;
(f)
a distribution to
the stockholders of the corporation, except at a rate or in a
periodic amount or within a price range determined by the board of
directors; or
(g)
the appointment of
any other committees of the board of directors or the members
thereof.
Section
2.
MEETINGS AND ACTION BY
COMMITTEES
. Meetings and action of committees shall be
governed by, and held and taken in accordance with, the provisions
of Article III, Sections 6 (place of meetings), 8 (regular
meetings), 9 (special meetings and notice), 10 (quorum), 11 (waiver
of notice), 12 (adjournment), 13 (notice of adjournment) and 14
(action without meeting), with such changes in the context of those
bylaws as are necessary to substitute the committee and its members
for the board of directors and its members, except that the time or
regular meetings of committees may be determined by resolutions of
the board of directors and notice of special meetings of committees
shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of
directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws. The committees
shall keep regular minutes of their proceedings and report the same
to the board when required.
ARTICLE
V
OFFICERS
Section
1.
OFFICERS
. The officers of the
corporation shall be a president, a secretary and a treasurer. The
corporation may also have, at the discretion of the board of
directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article V. Any
two or more offices may be held by the same person.
Section
2.
ELECTION OF OFFICERS
. The
officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 3 or Section
5 of this Article V, shall be chosen by the board of directors, and
each shall serve at the pleasure of the board, subject to the
rights, if any, of an officer under any contract of employment. The
board of directors at its first meeting after each annual meeting
of stockholders shall choose a president, a vice president, a
secretary and a treasurer, none of whom need be a member of the
board. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section
3.
SUBORDINATE OFFICERS, ETC
. The
board of directors may appoint, and may empower the president to
appoint, such other officers as the business of the corporation may
require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in the bylaws or
as the board of directors may from time to time
determine.
Section
4.
REMOVAL AND RESIGNATION OF
OFFICERS
. The officers of the corporation shall hold office
until their successors are chosen and qualify. Subject to the
rights, if any, of an officer under any contract of employment, any
officer may be removed, either with or without cause, by the board
of directors, at any regular or special meeting thereof, or, except
in case of an officer chosen by the board of directors, by any
officer upon whom such power or removal may be conferred by the
board of directors.
Any
officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of
the receipt of such notice or at any later time specified therein;
and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Any such
resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a
party.
Section
5.
VACANCIES IN OFFICES
. A vacancy
in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner
prescribed in these bylaws for regular appointments to such
office.
Section
6.
CHAIRMAN OF THE BOARD
. The
chairman of the board, if such an officer be elected, shall, if
present, preside at all meetings of the board of directors and
exercise and perform such other powers and duties as may be from
time to time assigned to him by the board of directors or
prescribed by the bylaws. If there is no president, the chairman of
the board shall in addition be the chief executive officer of the
corporation and shall have the powers and duties prescribed in
Section 7 of this Article V.
Section
7.
PRESIDENT
. Subject to such
supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an
officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of
directors, have general supervision, direction and control of the
business and the officers of the corporation. He shall preside at
all meetings of the stockholders and, in the absence of the
chairman of the board, of if there be none, at all meetings of the
board of directors. He shall have the general powers and duties of
management usually vested in the office of president of a
corporation, and shall have such other powers and duties as may be
prescribed by the board of directors or the bylaws. He shall
execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly
delegated by the board of directors to some other officer or agent
of the corporation.
Section
8.
VICE PRESIDENTS
. In the absence
or disability of the president, the vice presidents, if any, in
order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors,
shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have
such other powers and perform such other duties as from time to
time may be prescribed for them respectively by the board of
directors or the bylaws, the president or the chairman of the
board.
Section
9.
SECRETARY
. The secretary shall
attend all meetings of the board of directors and all meetings of
the stockholders and shall record, keep or cause to be kept, at the
principal executive office or such other place as the board of
directors may order, a book of minutes of all meetings of
directors, committees of directors and stockholders, with the time
and place of holding, whether regular or special, and, if special,
how authorized, the notice thereof given, the names of those
present at directors' and committee meetings, the number of shares
present or represented at stockholders' meetings, and the
proceedings thereof.
The
secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer
agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing
the names of all stockholders and their addresses, the number and
classes of shares held by each, the number and date of certificates
issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The
secretary shall give, or cause to be given, notice of all meetings
of stockholders and of the board of directors required by the
bylaws or by law to be given, and he shall keep the seal of the
corporation in safe custody, as may be prescribed by the board of
directors or by the bylaws.
Section
10.
TREASURER
. The treasurer shall
keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings and shares. The books of account shall
at all reasonable times be open to inspection by any
director.
The
treasurer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositories as may
be designated by the board of directors. He shall disburse the
funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever
they request it, an account of all of his transactions as treasurer
and of the financial condition of the corporation, and shall have
other powers and perform such other duties as may be prescribed by
the board of directors or the bylaws.
If
required by the board of directors, the treasurer shall give the
corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful
performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his
control belonging to the corporation.
ARTICLE
VI
INDEMNIFICATION
OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER
AGENTS
Section
1.
ACTIONS OTHER THAN BY THE
CORPORATION
. The corporation may 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, except an
action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, has no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable
cause to believe that his conduct was unlawful.
Section
2.
ACTIONS BY THE CORPORATION
. The
corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees, actually
and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the
best interests of the corporation. Indemnification may not be made
for any claim, issue or matter as to which such a person has been
adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to
the extent that the court in which the action or suit was brought
or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
Section
3.
SUCCESSFUL DEFENSE
. To the
extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1
and 2, or in defense of any claim, issue or matter therein, he must
be indemnified by the corporation against expenses, including
attorneys' fees, actually and reasonably incurred by him in
connection with the defense.
Section
4.
REQUIRED APPROVAL
. Any
indemnification under Sections 1 and 2, unless ordered by a court
or advanced pursuant to Section 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances. The determination must be
made:
(a)
By the
stockholders;
(b)
By the board of
directors by majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding;
(c)
If a majority vote
of a quorum consisting of directors who were not parties to the
act, suit or proceeding so orders, by independent legal counsel in
a written opinion; or
(d)
If a quorum
consisting of directors who were not parties to the act, suit or
proceeding cannot be obtained, by independent legal counsel in a
written opinion.
Section
5.
ADVANCE OF EXPENSES
. The
articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and
in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. The provisions of
this section do not affect any rights to advancement of expenses to
which corporate personnel other than directors or officers may be
entitled under any contract or otherwise by law.
Section
6.
OTHER RIGHTS
. The
indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this Article VI:
(a)
Does not exclude
any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his
official capacity or an action in another capacity while holding
his office, except that indemnification, unless ordered by a court
pursuant to Section 2 or for the advancement of expenses made
pursuant to Section 5, may not be made to or on behalf of any
director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of
action.
(b)
Continues for a
person who has ceased to be a director, officer, employee or agent
and inures to the benefit of the heirs, executors and
administrators of such a person.
Section
7.
INSURANCE
. The corporation may
purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise for any liability asserted
against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the
provisions of this Article VI.
Section
8.
RELIANCE ON PROVISIONS
. Each
person who shall act as an authorized representative of the
corporation shall be deemed to be doing so in reliance upon the
rights of indemnification provided by this Article.
Section
9.
SEVERABILITY
. If any of the
provisions of this Article are held to be invalid or unenforceable,
this Article shall be construed as if it did not contain such
invalid or unenforceable provision and the remaining provisions of
this Article shall remain in full force and effect.
Section
10.
RETROACTIVE EFFECT
. To the
extent permitted by applicable law, the rights and powers granted
pursuant to this Article VI shall apply to acts and actions
occurring or in progress prior to its adoption by the board of
directors.
ARTICLE
VII
RECORDS AND
BOOKS
Section
1.
MAINTENANCE OF SHARE REGISTER
.
The corporation shall keep at its principal executive office, or at
the office of its transfer agent or registrar, if either be
appointed and as determined by resolution of the board of
directors, a record of its stockholders, giving the names and
addresses of all stockholders and the number and class of shares
held by each stockholder.
Section
2.
MAINTENANCE OF BYLAWS
. The
corporation shall keep at its principal executive office, or if its
principal executive office is not in this State at its principal
business office in this State, the original or a copy of the bylaws
as amended to date, which shall be open to inspection by the
stockholders at all reasonable times during office hours. If the
principal executive office of the corporation is outside this state
and the corporation has no principal business office in this state,
the secretary shall, upon the written request of any stockholder,
furnish to such stockholder a copy of the bylaws as amended to
date.
Section
3.
MAINTENANCE OF OTHER CORPORATE
RECORDS
. The accounting books and records and minutes of
proceedings of the stockholders and the board of directors and any
committee or committees of the board of directors shall be kept at
such place or places designated by the board of directors, or, in
the absence of such designation, at the principal executive office
of the corporation. The minutes shall be kept in written form and
the accounting books and records shall be kept either in written
form or in any other form capable of being converted into written
form.
Every
director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and
to inspect the physical properties of this corporation and any
subsidiary of this corporation. Such inspection by a director may
be made in person or by agent or attorney and the right of
inspection includes the right to copy and make extracts. The
foregoing rights of inspection shall extend to the records of each
subsidiary of the corporation.
Section
4.
ANNUAL REPORT TO STOCKHOLDERS
.
Nothing herein shall be interpreted
as
prohibiting the board of directors from issuing annual or other
periodic reports to the stockholders of the corporation as they
deem appropriate.
Section
5.
FINANCIAL STATEMENTS
. A copy of
any annual financial statement and any income statement of the
corporation for each quarterly period of each fiscal year, and any
accompanying balance sheet of the corporation as of the end of each
such period, that has been prepared by the corporation shall be
kept on file in the principal executive office of the corporation
for twelve (12) months.
Section
6.
ANNUAL LIST OF
DIRECTORS, OFFICERS AND RESIDENT AGENT. The corporation shall, on
or before April 1st of each year, file with the Secretary of State
of the State of Nevada, on the prescribed form, a list of its
officers and directors and a designation of its resident agent in
Nevada.
ARTICLE
VIII
GENERAL CORPORATE
MATTERS
Section
1.
RECORD DATE
. For purposes of
determining the stockholders entitled to notice of any meeting or
to vote or entitled to receive payment of any dividend or other
distribution or allotment of any rights or entitled to exercise any
rights in respect of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be
more than sixty (60) days nor less than ten (10) days prior to the
date of any such meeting nor more than sixty (60) days prior to any
other action, and in such case only stockholders of record on the
date so fixed are entitled to notice and to vote or to receive the
dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date fixed
as aforesaid, except as otherwise provided in the Nevada General
Corporation Law.
If the
board of directors does not so fix a record date:
(a)
The record date for
determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(b)
The record date for
determining stockholders entitled to give consent to corporate
action in writing without a meeting, when no prior action by the
board has been taken, shall be the day on which the first written
consent is given.
(c)
The record date for
determining stockholders for any other purpose shall be at the
close of business on the day on which the board adopts the
resolution relating thereto, or the sixtieth (60th) day prior to
the date of such other action, whichever is later.
Section
2.
CLOSING OF TRANSFER BOOKS
. The
directors may prescribe a period not exceeding sixty (60) days
prior to any meeting of the stockholders during which no transfer
of stock on the books of the corporation may be made, or may fix a
date not more than sixty (60) days prior to the holding of any such
meeting as the day as of which stockholders entitled to notice of
and to vote at such meeting shall be determined; and only
stockholders of record on such day shall be entitled to notice or
to vote at such meeting.
Section
3.
REGISTERED STOCKHOLDERS
. The
corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any
other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of
Nevada.
Section
4.
CHECKS, DRAFTS, EVIDENCES OF
INDEBTEDNESS
. All checks, drafts or other orders for payment
of money, notes or other evidences of indebtedness, issued in the
name of or payable to the corporation, shall be signed or endorsed
by such person or persons and in such manner as, from time to time,
shall be determined by resolution of the board of
directors.
Section
5.
CORPORATE CONTRACTS AND INSTRUMENTS;
HOW EXECUTED
. The board of directors, except as in the
bylaws otherwise provided, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances;
and, unless so authorized or ratified by the board of directors or
within the agency power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it
liable for any purpose or to any amount.
Section
6.
STOCK CERTIFICATES
. A
certificate or certificates for shares of the capital stock of the
corporation shall be issued to each stockholder when any such
shares are fully paid, and the board of directors may authorize the
issuance of certificates or shares as partly paid provided that
such certificates shall state the amount of the consideration to be
paid therefor and the amount paid thereon. All certificates shall
be signed in the name of the corporation by the president or vice
president and by the treasurer or an assistant treasurer or the
secretary or any assistant secretary, certifying the number of
shares and the class or series of shares owned by the stockholder.
When the corporation is authorized to issue shares of more than one
class or more than one series of any class, there shall be set
forth upon the face or back of the certificate, or the certificate
shall have a statement that the corporation will furnish to any
stockholders upon request and without charge, a full or summary
statement of the designations, preferences and relatives,
participating, optional or other special rights of the various
classes of stock or series thereof and the qualifications,
limitations or restrictions of such rights, and, if the corporation
shall be authorized to issue only special stock, such certificate
must set forth in full or summarize the rights of the holders of
such stock. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by
the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of
issue.
No new
certificate for shares shall be issued in place of any certificate
theretofore issued unless the latter is surrendered and canceled at
the same time; provided, however, that a new certificate may be
issued without the surrender and cancellation of the old
certificate if the certificate thereto fore issued is alleged to
have been lost, stolen or destroyed. In case of any such allegedly
lost, stolen or destroyed certificate, the corporation may require
the owner thereof or the legal representative of such owner to give
the corporation a bond (or other adequate security) sufficient to
indemnify it against any claim that may be made against it
(including any expense or liability) on account of the alleged
loss, theft or destruction of any such certificate or the issuance
of such new certificate.
Section
7.
DIVIDENDS
. Dividends upon the
capital stock of the corporation, subject to the provisions of the
articles of incorporation, if any, may be declared by the board of
directors at any regular or special meeting pursuant to law.
Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the articles of
incorporation.
Before
payment of any dividend, there may be set aside out of any funds of
the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property
of the corporation, or for such other purpose as the directors
shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserves in the manner in
which it was created.
Section
8.
FISCAL YEAR
. The fiscal year of
the corporation shall be fixed by resolution of the board of
directors.
Section
9.
SEAL
. The corporate seal shall
have inscribed thereon the name of the corporation, the year of its
incorporation and the words "Corporate Seal, Nevada."
Section
10.
REPRESENTATION OF SHARES OF OTHER
CORPORATIONS
. The
chairman of the
board, the president, or any vice president, or any other person
authorized by resolution of the board of directors by any of the
foregoing designated officers, is authorized to vote on behalf of
the corporation any and all shares of any other corporation or
corporations, foreign or domestic, standing in the name of the
corporation. The authority herein granted to said officers to vote
or represent on behalf of the corporation any and all shares held
by the corporation in any other corporation or corporations may be
exercised by any such officer in person or by any person authorized
to do so by proxy duly executed by said officer.
Section
11.
CONTROL SHARE ACQUISITION
EXEMPTION
. The corporation elects not to be governed by the
provisions of NRS §78.378 to NRS §78.3793 inclusive,
generally known as the “Control Share Acquisition
Statute” under the Nevada Business Corporation Law, which
contains a provision governing “Acquisition of Controlling
Interest.”
Section
12.
COMBINATIONS WITH INTERESTED
STOCKHOLDERS
. The corporation elects not to be governed by
the provisions of NRS §78.411 through NRS §78.444,
inclusive, of the Nevada Business Corporation Law.
Section
13.
CONSTRUCTION AND DEFINITIONS
.
Unless the context requires otherwise, the general provisions,
rules of construction, and definitions in the Nevada General
Corporation Law shall govern the construction of the bylaws.
Without limiting the generality of the foregoing, the singular
number includes the plural, the plural number includes the
singular, and the term "person" includes both a corporation and a
natural person.
ARTICLE
IX
AMENDMENTS
Section
1.
AMENDMENTS
. These bylaws or any
of them may be altered or repealed, and new bylaws may be adopted,
by the stockholders by a vote at a meeting or by written consent
without a meeting. The board of directors shall also have the
power, by a majority vote of the Whole Board, to alter or repeal
any of these bylaws, and to adopt new bylaws, except as otherwise
provided by law or by the articles of incorporation.
[BALANCE OF PAGE
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CERTIFICATE
OF SECRETARY
I, the
undersigned, do hereby certify:
1. That
I am the duly elected and acting secretary of RumbleON, Inc., a
Nevada corporation; and
2. That
the foregoing Amended Bylaws, comprising nineteen (18) pages,
constitute the Bylaws of said corporation as duly adopted and
approved by the board of directors of said corporation at a duly
noticed meeting of the Board of Directors on January 30, 2017, to
be effective on February 13, 2017.
IN
WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said corporation this 13th day of February,
2017.
|
/s/ Steven
Berrard
Steven Berrard,
Secretary
|
Certificate of Amendment
1.
The Articles of
Incorporation of the corporation is hereby amended by deleting
Article I thereof and inserting in lieu of said Article the
following new Article I:
"
Article I - NAME
The
exact name of this corporation is: RumbleON, Inc."
2.
The Articles of
Incorporation of the corporation is hereby amended by deleting
Article VI thereof and inserting in lieu of said Article the
following new Article VI:
"
Article VI ñ CAPITAL
STOCK
Section
1.
Authorized
Shares
. The total number of shares which this corporation is
authorized to issue is 100,000,000 shares of Common Stock, of which
1,000,000 shares shall be Class A Common Stock, par value $0.001
per share, and 99,000,000 shares shall be Class B Common Stock, par
value $0.001 per share, and 10,000,000 shares of Preferred Stock,
par value $0.001 per share.
Section
2.
Voting Rights of
Stockholders
. Each holder of the Class A Common Stock shall
be entitled to ten votes for each share of Class A Common Stock
standing in his name on the books of the corporation. Each holder
of the Class B Common Stock shall be entitled to one vote for each
share of Class B Common Stock standing in his name on the books of
the corporation.
Section
3.
Consideration for
Shares
. The Common Stock shall be issued for such
consideration, as shall be fixed from time to time by the Board of
Directors. In the absence of fraud, the judgment of the Directors
as to the value of any property or services received in full or
partial payment for shares shall be conclusive. When shares are
issued upon payment of the consideration fixed by the Board of
Directors, such shares shall be taken to be fully paid stock and
shall be non-assessable. The Articles shall not be amended in this
particular.
Section
4.
Stock Rights and
Options
. The corporation shall have the power to create and
issue rights, warrants, or options entitling the holders thereof to
purchase from the corporation any shares of its capital stock of
any class or classes, upon such terms and conditions and at such
times and prices as the Board of Directors may provide, which terms
and conditions shall be incorporated in an instrument or
instruments evidencing such rights. In the absence of fraud, the
judgment of the Directors as to the adequacy of consideration for
the issuance of such rights or options and the sufficiency thereof
shall be conclusive.
Section
5.
Restrictive
Covenants
. So long as any shares of the Class A Common Stock
are outstanding, the corporation shall not take any of the
following actions without first obtaining the affirmative written
consent of Class A Common Stock holding at least a majority of
outstanding shares of the Class A Common Stock:
(a) authorize
or issue additional shares of the Class A Common Stock;
or
(b) amend,
alter or repeal any provisions of the Articles of Incorporation or
the Bylaws of the corporation in a manner that adversely affects
the powers, preferences or rights of the Class A Common
Stock."
AMENDED AND RESTATED STOCKHOLDERS’ AGREEMENT
This
AMENDED AND RESTATED
STOCKHOLDERS’ AGREEMENT
(this
“Agreement”), dated as of February 8, 2017, is entered
into by and among (i) Smart Server, Inc., a Nevada corporation (the
“Company”), (ii) Berrard Holdings Limited Partnership,
a Delaware limited partnership (“BHLP”), (iii) Steven
R. Berrard (“Berrard” and together with BHLP,
“Berrard Holders”), (iv) Marshall Chesrown
(“Chesrown” and together with Berrard Holders, the
“Major Stockholders” and each, a “Major
Stockholder”), and (v) the other stockholders of the Company
listed on the signature page (the “Other Stockholders”)
(each of the Company, the Major Stockholders and the Other
Stockholders is a “Party” and collectively are referred
to in this Agreement as the “Parties”).
WHEREAS,
the Parties desire to provide
for certain governance rights and other matters, and to set forth
certain rights and obligations of the Parties with respect to the
Company and the Common Stock (as defined below) owned by such Party
on and after the date hereof.
NOW THEREFORE,
in consideration of the
mutual covenants and agreements contained in this Agreement, the
receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE
I
DEFINITIONS
As used
in this Agreement, the following terms shall have the following
respective meanings:
“
Accepting Party
” has the
meaning set forth in Section 2.5(a)(ii).
“
Affiliate
” means, with
respect to any Person, any (a) director, officer, limited or
general partner, member or stockholder holding five percent (5%) or
more of the outstanding capital stock or other equity interests of
such Person, (b) spouse, parent, sibling or descendant of such
Person (or a spouse, parent, sibling or descendant of a Person
specified in clause (a) above relating to such Person) and (c)
other Person that, directly or indirectly, through one or more
intermediaries, Controls, or is Controlled by, or is under common
Control with, such Person.
“
Agreement
”
has the meaning set forth in the preamble.
“
Approved Sale
” has the
meaning set forth in Section 2.4(a).
“
Beneficial Owner
” has the
meaning given to such term in Rule 13d-3 and Rule 13d-5 promulgated
under the Securities Exchange Act.
“
Berrard
”
has the meaning set forth in the preamble.
“
Berrard Director
” has the
meaning set forth in Section 2.1(d).
“
Berrard
Holders
” has the meaning set forth in the
preamble.
“
BHLP
” has
the meaning set forth in the preamble.
“
Board
”
means the Board of Directors of the Company.
“
Change of Control
Transaction
” means a transaction or a series of
related transactions (including by way of merger, consolidation,
recapitalization, or reorganization, but excluding a Stock Sale)
the result of which is that the stockholders of the Company
immediately prior to such transaction or series of related
transactions are (after giving effect to such transaction or series
of related transactions) no longer, in the aggregate, the
Beneficial Owners, directly or indirectly through one or more
intermediaries, of more than 50% of the issued and outstanding
voting securities of the Company.
“
Charter
” has the meaning
set forth in Section 2.1(b).
“
Chesrown
”
has the meaning set forth in the preamble.
“
Chesrown Directors
” has
the meaning set forth in Section 2.1(a).
“
Committee
” has the
meaning set forth in Section 2.1(b).
“
Common
Stock
” means the shares of any class of common stock
of the Company.
“
Company
”
has the meaning set forth in the preamble.
“
Company Transaction
Notice
” has the meaning set forth in Section
2.4(a).
“
Control
” means
(including, with correlative meanings, “
controlled by
” and
“
under common
control with
”), with respect to any Person, the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
“
Equity Securities
” means
all shares of capital stock of the Company, including, without
limitation, all securities convertible into or exchangeable for
shares of capital stock of the Company, and all options, warrants,
and other rights to purchase or otherwise acquire from the Company
shares of such capital stock, including any stock appreciation or
similar rights, contractual or otherwise.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended.
“
Exempt Sale
” means a sale
of Common Stock if the number of shares being sold, together with
all sales of Common Stock sold for the account of the seller within
three months from the date of the proposed sale do not exceed 1% of
the shares of Common Stock outstanding as shown by the most recent
report or statement published by the Company.
“
Exiting Major
Stockholder
” has the meaning set forth in Section
2.5(b).
“
Exiting Stockholder
” has
the meaning set forth in Section 2.5(a).
“
Exiting Stockholder
Notice
” has the meaning set forth in Section
2.5(a)(i).
“
Independent Third Party
”
means any Person who is not a Stockholder or an Affiliate of any
Stockholder.
“
Major
Stockholders
” has the meaning set forth in the
preamble and “
Major
Stockholder
” means each of them.
“
Minimum Threshold
” has
the meaning set forth in Section 2.1(a).
“
Offered Shares
” has the
meaning set forth in Section 2.5(a).
“
Other
Stockholders
” has the meaning set forth in the
preamble.
“
Parties
”
has the meaning set forth in the preamble and “
Party
” means each of
them.
“
Permitted
Transfer
” means any of the foregoing: (a)
a Transfer of Equity Securities as a bona fide gift,
(b) a Transfer to such Stockholder’s family or by will
or intestate succession to such Stockholder’s family or to a
trust, the beneficiaries of which are exclusively such Stockholder
or members of such Stockholder’s family, (c) a Transfer
by such Stockholder to any entity that is directly or indirectly
Controlled by, or is under common Control with, such Stockholder,
(d) the establishment of a trading plan pursuant to Rule
10b5-1 under the Exchange Act for the sale of Equity Securities,
provided
that such plan
does not provide for the transfer of Equity Securities during the
Restricted Period, (e) a Transfer of Equity Securities for
purposes of paying any such Stockholder’s tax liability
related to or in connection with vested equity awards of the
Company or (f) in the case of NextGen Dealer Solutions, LLC a
transfer to Halcyon Consulting, LLC.
“
Person
” means an
individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, association or other
entity or a governmental entity.
“
Public Offering
” means
any underwritten sale of common equity securities of the Company or
any of its subsidiaries (or any corporate successor to either of
them) pursuant to an effective registration statement under the
Securities Act filed with the SEC.
“
Restricted Period
” means
the earlier of (i) October 19, 2017, or (ii) the date on which the
Company receives at least $3,500,000 in proceeds of any equity
financing.
“
ROFO Acceptance Notice
”
has the meaning set forth in Section 2.5(a)(ii).
“
ROFO Notice Period
” has
the meaning set forth in Section 2.5(a)(i).
“
Sale of the Company
”
means either (i) the sale, lease, license, transfer, conveyance or
other disposition, in one transaction or a series of related
transactions, of all or substantially all of the assets of the
Company and its subsidiaries, taken as a whole, including through a
direct or indirect sale of subsidiary equity securities, or (ii) a
Change of Control Transaction.
“
SEC
” means the U.S.
Securities and Exchange Commission.
“
Securities Act
” means the
Securities Act of 1933, as amended.
“
Selling Stockholders
” has
the meaning set forth in Section 2.4(b).
“
Stock Sale
” has the
meaning set forth in Section 2.4(b).
“
Stock Sale Notice
” has
the meaning set forth in Section 2.4(b).
“
Stockholders
” means the
Major Stockholders and the Other Stockholders and
“
Stockholder
” means any of
them.
“
Transfer
” means (i) offer
to sell, (ii) pledge of, (iii) sale of, (iv) contract to sell, (v)
sale of any option or contract to purchase, (vi) purchase of any
option or contract to sell, (vii) grant of any option, right or
warrant to purchase, or (viii) lending or otherwise transferring or
disposing of, directly or indirectly, any Equity
Securities.
ARTICLE
II
BOARD
REPRESENTATION; LOCK-UP; DRAG-ALONG RIGHTS; RIGHTS OF FIRST
OFFER
2.1.
Board
Representation.
(a)
As of the date
hereof, the Board shall be comprised of six (6) directors. From and
after the date hereof and for so long as Chesrown, or an Affiliate
of Chesrown beneficially owns, in the aggregate, at least 1,000,000
shares of the issued and outstanding Common Stock (the
“Minimum Threshold”), the Board shall be comprised of
no more than six (6) directors, and Chesrown shall be entitled to
(i) nominate three (3) individuals to the Board (such individuals,
including their respective successors, the “Chesrown
Directors”), to serve as members of the Board until their
respective successors are elected and qualified, (ii) nominate any
successor to each Chesrown Director, and (iii) direct the removal
from the Board of any Chesrown Director;
provided
, that at least two of the
Chesrown Directors shall be “independent” as defined by
the applicable rules and regulations of the SEC and the NASDAQ
stock market. The Chesrown Directors shall initially be
Marshall Chesrown,
Mitch Pierce,
and Kevin Westfall.
(b)
Beginning with the
first annual meeting of stockholders after the date hereof and
thereafter, for so long as Chesrown or an Affiliate of Chesrown
beneficially owns, in the aggregate, at least the Minimum
Threshold, each nomination to the Board of any Chesrown Director
for election at an annual meeting of stockholders of the Company
shall be made by delivering to the Company a notice signed by
Chesrown, which notice shall include the names and qualifications
of such proposed Chesrown Directors. As promptly as practicable,
the Company shall provide a copy of such notice to the
Company’s Corporate Governance and Nominating Committee (the
“Committee”), which shall, if the proposed Chesrown
Director satisfies the criteria for qualifications of directors set
forth in the Charter of the Committee (the “Charter”)
in all material respects, as determined in good faith by the
Committee, at the next Committee meeting at which Board nominees
are determined for purposes of the Company’s annual meeting
of stockholders, make a recommendation to the Board that such
Chesrown Directors shall be nominated for election to the Board at
the Company's next annual meeting of stockholders and shall, in the
Company’s proxy statement relating to such annual meeting,
recommend to the Company's stockholders that the stockholders
should vote their Common Stock in favor of the election of the
proposed Chesrown Directors. If the Committee reasonably determines
in good faith that a proposed Chesrown Director does not meet such
criteria, the Committee shall notify Chesrown of such fact within
10 days following receipt of the Chesrown Notice, specifying in
reasonable detail the reasons for the determination that such
criteria have not been met, and within 10 calendar days Chesrown
may submit to the Committee a new proposed Chesrown
Director.
(c)
For so long as
Chesrown or an Affiliate of Chesrown beneficially owns, in the
aggregate, at least the Minimum Threshold, each nomination to the
Board of any Chesrown Director for election other than at an annual
meeting of stockholders of the Company (whether due to the
resignation, removal or death of a Chesrown Director or otherwise)
shall be made by delivering to the Company a notice signed by
Chesrown, which notice shall include the names and qualifications
of such proposed Chesrown Director. As promptly as practicable, the
Company shall provide a copy of such notice to the Committee, which
shall, if the proposed Chesrown Director satisfies the criteria for
qualifications of directors set forth in the Charter in all
material respects, as determined in good faith by the Committee, as
promptly as practicable, make a recommendation to the Board that
such Chesrown Directors shall be appointed for election to the
Board, which appointment may be made by the Board to the extent
permitted pursuant to the Company’s bylaws. As promptly as
practicable thereafter, the Company shall take or cause to be taken
such corporate actions as may be required to cause such appointment
to be effected. If the Committee reasonably determines in good
faith that such proposed Chesrown Director does not meet such
criteria, the Committee shall notify Chesrown of such fact within
10 days of receipt of the Chesrown Notice, specifying in reasonable
detail the reasons for the determination that such criteria have
not been met, and within 10 calendar days Chesrown may submit to
the Committee a new proposed Chesrown Director.
(d)
From and after the
date hereof and for so long as Berrard, or an Affiliate of Berrard
beneficially owns, in the aggregate, at least the Minimum
Threshold, the Board shall be comprised of no more than six (6)
directors, and Berrard shall be entitled to (i) nominate one
individual to the Board (such individual, including such
individual's successor, the “Berrard Director”), to
serve as a member of the Board until the Berrard Director's
successor is elected and qualified, (ii) nominate any successor to
the Berrard Director, and (iii) direct the removal from the Board
of the Berrard Director. The Berrard Director shall initially be
Steven R. Berrard.
(e)
Beginning with the
first annual meeting of stockholders following the date hereof and
thereafter, for so long as Berrard, or an Affiliate of Berrard
beneficially owns, in the aggregate, at least the Minimum
Threshold, each nomination to the Board of any Berrard Director for
election at an annual meeting of stockholders of the Company shall
be made by delivering to the Company a notice signed by Berrard,
which notice shall include the name and qualifications of the
proposed Berrard Director. As promptly as practicable, the Company
shall provide a copy of such notice to the Committee which shall,
if the proposed Berrard Director satisfies the criteria for
qualifications of directors set forth in the Charter in all
material respects, as determined in good faith by the Committee, at
the next Committee meeting at which Board nominees are determined
for purposes of the Company’s annual meeting of stockholders,
make a recommendation to the Board that such Berrard Director shall
be nominated for election to the Board at the Company's next annual
meeting of stockholders and shall, in the Company’s proxy
statement relating to such annual meeting, recommend to the
Company's Stockholders that the Stockholders should vote their
Common Stock in favor of the election of the proposed Berrard
Director. If the Committee reasonably determines in good faith that
a proposed Berrard Director does not meet such criteria, the
Committee shall notify Berrard of such fact within 10 days
following receipt of the Berrard Notice, specifying in reasonable
detail the reasons for the determination that such criteria have
not been met, and within 10 calendar days Berrard may submit to the
Committee a new proposed Berrard Director.
(f)
For so long as
Berrard or an Affiliate of Berrard beneficially owns, in the
aggregate, at least the Minimum Threshold, each nomination to the
Board of any Berrard Director for election other than at an annual
meeting of stockholders of the Company (whether due to the
resignation, removal or death of a Berrard Director or otherwise)
shall be made by delivering to the Company a notice signed by
Berrard, which notice shall include the names and qualifications of
such proposed Berrard Director. As promptly as practicable, the
Company shall provide a copy of such notice to the Committee, which
shall, if the proposed Berrard Director satisfies the criteria for
qualifications of directors set forth in the Charter in all
material respects, as determined in good faith by the Committee, as
promptly as practicable, make a recommendation to the Board that
such Berrard Director shall be appointed for election to the Board,
which appointment may be made by the Board to the extent permitted
pursuant to the Company’s bylaws. As promptly as practicable
thereafter, the Company shall take or cause to be taken such
corporate actions as may be required to cause such appointment to
be effected. If the Committee reasonably determines in good faith
that such proposed Berrard Director does not meet such criteria,
the Committee shall notify Berrard of such fact within 10 days of
receipt of the Berrard Notice, specifying in reasonable detail the
reasons for the determination that such criteria have not been met,
and within 10 calendar days Berrard may submit to the Committee a
new proposed Berrard Director.
(g)
The Company shall
include in the slate of nominees recommended by the Board for
election as directors each Chesrown Director and the Berrard
Director for so long as Chesrown and Berrard, respectively, are
entitled to nominate the Chesrown Directors and the Berrard
Director pursuant to this Agreement. Each of Berrard, Chesrown, and
each of the Stockholders covenants and agrees to vote all Equity
Securities held by such person or their Affiliate for the election
to the Board of all individuals nominated in accordance with this
Section 2.1.
2.2.
Vacancies
and Removal
.
Each
Stockholder agrees to vote, or cause to be voted, all Equity
Securities beneficially owned by it, or over which such Person has
voting control, from time to time and at all times, in whatever
manner as shall be necessary to ensure that:
(a)
the Berrard
Director and the Chesrown Directors are elected at each annual
meeting of the Company’s stockholders and serve until their
successors are duly elected and qualified or until their earlier
resignation or removal in accordance with this
Agreement;
(b)
neither the Berrard
Director nor any Chesrown Director is removed from office unless
such removal is directed or approved by Berrard or Chesrown,
respectively, or such removal is for cause, as reasonably
determined in good faith by the Board; and
(c)
any vacancies
created by the resignation, removal or death of the Berrard
Director or any Chesrown Director shall be filled as proposed by
Berrard or Chesrown, respectively, in accordance with Section 2.1
of this Agreement.
2.3.
Restrictions
on Transfer and Other Agreements
.
(a)
Each Stockholder
hereby agrees that such Stockholder will not, prior to the end of
the Restricted Period, Transfer any Common Stock held by such
Stockholder as of the date hereof. The foregoing sentence shall not
apply to (a) any Permitted Transfer of Common Stock acquired prior
to the date hereof, (b) any Transfer of Common Stock acquired by a
Stockholder after the date hereof, or (c) any Transfer by any Other
Stockholder which is approved in writing by the Major Stockholders.
For purposes of this Section 2.3(a), to the extent any Transfer of
Common Stock by a Stockholder reduces the number of shares of
Common Stock held by such Stockholder below the number of shares
held by such Stockholder as of the date hereof such Transfer shall
constitute a Transfer of Common Stock acquired prior to the date
hereof.
(b)
Neither any
Stockholder nor any of its Affiliates shall grant any proxy or
enter into or agree to be bound by any voting trust, agreement or
arrangement of any kind with any Person with respect to its Common
Stock if and to the extent the terms thereof conflict with the
provisions of this Agreement and each Stockholder shall take all
necessary actions within its power to cause the Company to comply
with the provisions of this Agreement.
(c)
For as long as this
Agreement remains in effect, any Person acquiring Common Stock from
a Stockholder, other than any Person acquiring such Common Stock in
an Exempt Sale, as a condition of effecting the Transfer on the
books of the Company and acquiring any rights as a stockholder of
the Company, shall execute and deliver to the Company a joinder
agreeing to be bound by the terms of this Agreement in the same
capacity as the transferring Stockholder.
2.4.
Drag-Along
Rights
.
(a)
If (1) the Board
approves a Sale of the Company or the Company's stockholders
receive a tender offer (other than a self tender) with respect to a
majority of the issued and outstanding Common Stock and (2) each
Major Stockholder that owns 10% or more of the issued and
outstanding Common Stock votes or consents in writing to such Sale
of the Company or agrees in writing to so vote or consent or, if
applicable, tenders pursuant to such tender offer all (but not less
than all) Common Stock of which such Major Stockholder is a
Beneficial Owner (any Sale of the Company or tender offer that
meets the requirements set forth in clauses (1) and (2), an
“Approved Sale”), then, promptly after the satisfaction
of both conditions, Major Stockholders that individually own 10% or
more of the issued and outstanding Common Stock at the time of the
Board approval, acting jointly with each other such Major
Stockholder (or individually if there is only one Major Stockholder
owning 10% or more of the issued and outstanding Common Stock at
such time), may issue a written notice to all Other Stockholders
stating that the transaction constitutes an Approved Sale and
specifying the material terms of such Approved Sale (the
“Company Transaction Notice”). From and after the date
on which any Other Stockholder is in receipt of the Company
Transaction Notice, such Other Stockholder shall vote for (whether
at a meeting of stockholders or by written consent), cooperate with
and raise no objections against
,
waive any dissenters rights, appraisal
rights or similar rights,
not
otherwise impede, delay or dispute
such Approved Sale and,
in the case of a tender offer that constitutes an Approved Sale,
tender their Common Stock in accordance with the terms of the
tender offer. In the event that any Other Stockholder fails to
comply with the terms of this Section 2.4(a), such Other
Stockholder shall not be entitled to receive the consideration to
which he, she or it is entitled until such Other Stockholder so
complies.
(b)
If the stockholders
of the Company, including each Major Stockholder (such stockholders
together, the “Selling Stockholders”), enter into a
binding agreement to sell Common Stock representing more than 50%
of the issued and outstanding Common Stock as of the date of the
binding agreement (such sale, the “Stock Sale”), the
Major Stockholders shall deliver to all Other Stockholders, with a
copy to the Company, a written notice specifying the pricing and
other material terms of the Stock Sale (the “Stock Sale
Notice”). From and after the date on which any Other
Stockholder is in receipt of the Stock Sale Notice, such Other
Stockholder shall agree to sell and shall sell in the Stock Sale on
the terms and conditions thereof all Common Stock owned by the
Other Stockholders. Without limiting the foregoing,
(i)
each Other
Stockholder shall make or provide the same representations,
warranties, covenants, indemnities and agreements as the Selling
Stockholders make or provide in connection with the Stock Sale
(except that in the case of representations, warranties, covenants,
indemnities and agreements pertaining specifically to the Selling
Stockholder, such Other Stockholder shall make the comparable
representations, warranties, covenants, indemnities and agreements
pertaining specifically to such Other Stockholder);
provided
, that all representations,
warranties, covenants and indemnities shall be made by such Other
Stockholder severally and not jointly and any indemnification
obligation shall be pro rata based on the consideration received by
such Other Stockholder, in each case in an amount not to exceed the
aggregate proceeds received by such Other Stockholder in connection
with the Stock Sale; and
(ii)
the
Company and each Other Stockholder shall take all necessary or
desirable actions in connection with the consummation of the Stock
Sale and any related transactions as reasonably requested by the
Selling Stockholders, including (A) retaining investment bankers
and other advisors approved by the Selling Stockholders; (B)
furnishing information and copies of documents, (C) preparing and
making filings with governmental authorities; (D) providing
assistance with legal, accounting, tax, financial, benefits and
other due diligence; and (E) otherwise cooperating with the Selling
Stockholders and their respective representatives.
(c)
The obligations of
each Other Stockholder under Sections 2.4(a) and under Section
2.4(b) with respect to a Stock Sale are subject to the satisfaction
of the following conditions: (i) that such Other Stockholder shall
receive in exchange for his, her or its Common Stock the same form
and amount of consideration per share of Common Stock as is
received by each other holder of the same class of Common Stock and
(ii) that such Approved Sale or Stock Sale is to an Independent
Third Party.
(d)
Each Other
Stockholder hereby constitutes and appoints the Board in the case
of an Approved Sale pursuant to Section 2.4(a) or the Selling
Stockholders or their authorized representative in the case of a
Stock Sale pursuant to Section 2.4(b) with full power of
substitution, as his, her, or its true and lawful agent and
attorney-in-fact, with full power and authority in his, her or its
name, place and stead to execute, swear to, acknowledge, deliver,
file and record in the appropriate public offices to do and perform
everything required or permitted to be done in connection with any
Approved Sale or Stock Sale, as fully to all intents and purposes
as such Other Stockholder might or could do in person, including
taking any and all action on behalf of such Other Stockholder from
time to time as contemplated hereunder, including executing and/or
approving, on behalf of such Other Stockholder, any merger
agreement, stock sale agreement, asset sale agreement or similar
agreement relating to the Approved Sale or the Stock Sale, as the
case may be, and any amendments thereto and waivers thereof, any
transmittal letters and stock powers necessary to Transfer or
surrender such Other Stockholder's Common Stock in accordance with
any such agreement, and any other agreements, consents, approvals,
resolutions, certificates, or other documents reasonably necessary
or desirable to be executed and delivered in connection with the
Approved Sale or the Stock Sale, as applicable. The foregoing
powers of attorney are irrevocable and coupled with an interest,
and shall survive the death, disability, incapacity, dissolution,
bankruptcy, insolvency or termination of such Other Stockholder and
shall extend to such Other Stockholder’s heirs and personal
representatives.
(e)
The provisions of
this Section 2.4 shall terminate and shall be of no further force
or effect on December 31, 2018; provided that the Stockholders
shall comply with the provisions of this Section with respect to
any Company Transaction Notice or Stock Sale Notice delivered or
required to be delivered prior to December 31, 2018.
2.5.
Rights
of First Offer
.
(a)
Except for
Permitted Transfers, Exempt Sales and Transfers required pursuant
to Section 2.4(a) or Section 2.4(b), if any Other Stockholder (such
Stockholder, the “Exiting Stockholder”) proposes to
Transfer any Common Stock owned by it (the “Offered
Shares”) to any proposed transferee(s), the Exiting
Stockholder shall first make an offering of the Offered Shares to
the Major Stockholders and the Company in accordance with the
provisions of this Section 2.5(a).
(i)
The Exiting
Stockholder shall give written notice (the “Exiting
Stockholder Notice”) to the Company and the Major
Stockholders stating its bona fide intention to Transfer the
Offered Shares and specifying the number of Offered Shares and the
material terms and conditions, including the price, pursuant to
which the Exiting Stockholder proposes to Transfer the Offered
Shares. The Exiting Stockholder Notice shall constitute the Exiting
Stockholder's offer to Transfer the Offered Shares to the Major
Stockholders and the Company, which offer shall be irrevocable for
a period of 20 business days (the “ROFO Notice
Period”). By delivering the Exiting Stockholder Notice, the
Exiting Stockholder represents and warrants to the Company and each
Major Stockholder that (x) the Exiting Stockholder has full right,
title and interest in and to the Offered Shares, (y) the Exiting
Stockholder has all the necessary power and authority and has taken
all necessary action to sell such Offered Shares as contemplated by
this Section 2.5(a), and (z) the Offered Shares are free and clear
of any and all liens other than those arising as a result of or
under the terms of this Agreement.
(ii)
Upon
receipt of the Exiting Stockholder Notice, each Major Stockholder
and the Company shall have the right, exercisable by delivering a
written notice (a “ROFO Acceptance Notice”) to the
Exiting Stockholder prior to the end of the ROFO Notice Period, to
purchase all (but not less than all) of the Offered Shares on the
terms specified in the Exiting Stockholder Notice. Any ROFO
Acceptance Notice so delivered shall be binding upon delivery and
irrevocable by the Person delivering the notice. If more than one
Person delivers a ROFO Acceptance Notice (each such Person, the
“Accepting Party”), the Offered Shares shall be sold to
each Accepting Party in equal shares (i.e. if each Major
Stockholder and the Company accept, each such Person will acquire
one-third of the Offered Shares), provided that Berrard and BHLP
shall be treated as a single Person for purposes of this sentence.
The Exiting Stockholder and each Accepting Party shall take all
actions as may be reasonably necessary to consummate the sale
contemplated by this Section 2.5(a) including, without limitation,
entering into agreements and delivering certificates and
instruments and consents as may be deemed necessary or appropriate,
and shall use their respective commercially reasonable efforts to
consummate such sale as soon as practicable.
(iii)
If
the Company or any Major Stockholder does not deliver a ROFO
Acceptance Notice during the ROFO Notice Period, such Person shall
be deemed to have waived all of its or his rights to purchase the
Offered Shares under this Section 2.5(a) in connection with the
offering to which the Exiting Stockholder Notice relates. If
neither any Major Stockholder nor the Company delivers a ROFO
Acceptance Notice in accordance with Section 2.5(a)(ii), the
Exiting Stockholder may, during the 60 day period following the
expiration of the ROFO Notice Period and subject to any other
applicable restrictions set forth in this Agreement, Transfer all
of the Offered Shares to another transferee on terms and conditions
no more favorable to that transferee than those set forth in the
Exiting Stockholder Notice. If the Exiting Stockholder does not
Transfer the Offered Shares within such 60 day period, the rights
provided hereunder shall be deemed to be revived and the Offered
Shares shall not be Transferred to the proposed transferee(s)
unless the Exiting Stockholder sends a new Exiting Stockholder
Notice in accordance with, and otherwise complies with, this
Section 2.5(a).
(b)
If Berrard or BHLP
on the one hand or Chesrown on the other hand (any such Major
Stockholder, the “Exiting Major Stockholder”) proposes
to Transfer any Common Stock owned by such Person to any another
Person, other than in an Exempt Sale, Permitted Transfer or
pursuant to a Sale of the Company or a Stock Sale, the Exiting
Major Stockholder shall first make an offering of such Common Stock
to the Company and the other Major Stockholders; and such
offeree(s) shall have the right to purchase such Common Stock from
the Exiting Major Stockholder. The provisions of Section 2.5(a),
including the obligation to deliver the Exiting Stockholder Notice
to the Company and the other Major Stockholders, shall apply to any
such offering (treating an Exiting Major Stockholder as an Exiting
Stockholder and not as a Major Stockholder).
(c)
This Section 2.5
shall terminate on the earlier of (i) June 30, 2018 and (ii) the
date on which the Major Stockholders terminate the same by written
notice to the Other Stockholders; provided that in the case of the
termination pursuant to clause (i) the Stockholders shall comply
with the provisions of this Section 2.5 with respect to any Exiting
Stockholder Notice delivered or required to be delivered prior to
June 30, 2018.
ARTICLE
III
MISCELLANEOUS
3.1.
Termination
.
This
Agreement shall terminate and be of no further force and effect
upon the written agreement of Mr. Berrard and Mr.
Chesrown.
3.2.
Successors
and Assigns; Beneficiaries
.
Except
as otherwise provided herein, all of the terms and provisions of
this Agreement shall be binding upon, shall inure to the benefit of
and shall be enforceable by the respective successors and permitted
assigns of the parties hereto and any of their respective
successors and permitted assigns. This Agreement may not be
assigned without the express prior written consent of the other
parties hereto, and any attempted assignment, without such
consents, will be null and void.
3.3.
Amendment
and Modification; Waiver of Compliance
.
(a)
This Agreement may
be amended only by a written instrument duly executed by the
Company and the Parties hereto.
(b)
Except as otherwise
provided in this Agreement, any failure of any of the parties to
comply with any obligation, covenant, agreement or condition herein
may be waived by the party entitled to the benefits thereof only by
a written instrument signed by the party granting such waiver, but
such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other
failure.
3.4.
Notices
.
Any
notice, request, claim, demand, document and other communication
hereunder to any party shall be effective upon receipt (or refusal
of receipt) and shall be in writing and delivered personally or
sent by e-mail, facsimile, or first class mail, or by Federal
Express, United Parcel Service or other similar courier or other
similar means of communication to:
the
Company, BHLP or Berrard:
4521
Sharon Road
Suite
370
Charlotte, NC
28211
sberrard@newrivercapital.com
with a
copy to:
Akerman
LLP
Attn:
Michael Francis
350
East Las Olas Blvd, Suite 1600
Fort
Lauderdale, FL 33301
michael.francis@akerman.com
Fax:
954.463.2224
Chesrown:
Marshall
Chesrown
7303
Tidal Trace
Arlington, TX
76016
marshallchesrown@gmail.com
with a
copy to:
S. Lee
Terry, Jr.
Davis
Graham & Stubbs LLP
1550
17
th
Street #500
Denver,
CO 80202
less.terry@dgslaw.com
Fax:
303.893.1379
The
Stockholders:
at such
address set forth opposite such Stockholder’s
name on
the signature page,
or, in
each case, to such other address as such party may designate in
writing to the other parties by written notice given in the manner
specified herein.
3.5.
Specific
Performance
.
Each
party hereto acknowledges and agrees that in the event of any
breach of this Agreement by any of them, the other parties hereto
would be irreparably harmed and could not be made whole by monetary
damages. Each party accordingly agrees to waive the defense in any
action for specific performance that a remedy at law would be
adequate and agrees that the parties, in addition to any other
remedy to which they may be entitled at law or in equity, shall be
entitled to specific performance of this Agreement without the
posting of bond.
3.6.
Entire
Agreement
.
The
provisions of this Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof
contain the entire agreement among the parties hereto with respect
to the subject matter hereof and supersede all prior oral and
written agreements and memoranda and undertakings among the parties
hereto with regard to such subject matter, including that certain
Stockholders' Agreement dated October 19, 2016 by and among the
Company, Berrard Holders, Chesrown and the other Company
stockholders signatory thereto, as amended prior to the date
hereof.
3.7.
Severability
.
If any
provision of this Agreement, or the application of such provision
to any Person or circumstance or in any jurisdiction, shall be held
to be invalid or unenforceable to any extent, (i) the remainder of
this Agreement shall not be affected thereby, and each other
provision hereof shall be valid and enforceable to the fullest
extent permitted by law, (ii) as to such Person or circumstance or
in such jurisdiction such provision shall be reformed to be valid
and enforceable to the fullest extent permitted by law and (iii)
the application of such provision to other Persons or circumstances
or in other jurisdictions shall not be affected
thereby.
3.8.
Governing
Law.
This
Agreement shall be governed by and construed in accordance with the
laws of the State of Nevada without regard to conflicts of law
principles thereof.
3.9.
Waiver
of Jury Trial
.
EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES OR ANY OF THEM IN RESPECT
OF THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION. EACH PARTY AGREES THAT THE OTHER
MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
3.10.
Counterparts
.
This
Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
3.11.
Further
Assurances
.
At any
time or from time to time after the date hereof, the parties hereto
agree to cooperate with each other, and at the request of any other
party, to execute and deliver any further instruments or documents
and to take all such further action as any other party may
reasonably request in order to evidence or effectuate the
provisions of this Agreement and to otherwise carry out the intent
of the parties hereunder.
3.12.
Schedule
13D
.
In
accordance with the requirements of Rule 13d-1(k) under the
Exchange Act, and subject to the limitations set forth therein,
each Stockholder agrees to file, if appropriate, Schedule 13D no
later than 10 calendar days following the date hereof and, if
required, a Form 3 no later than 10 calendar days following the
date on which a Stockholder first acquires Equity
Securities.
IN
WITNESS WHEREOF, each of the undersigned has signed this
Stockholders’ Agreement as of the date first above
written.
Smart
Server, Inc.
By:
/s/ Marshall
Chesrown
Title:
Chief Executive
Officer
Berrard
Holdings Limited Partnership
By:
/s/ Steven R.
Berrard
/s/ Steven R.
Berrard
Steven R. Berrard
/s/ Marshall
Chesrown
Marshall
Chesrown
[Signature
Page to Stockholders’ Agreement]
IN
WITNESS WHEREOF, the undersigned has signed this
Stockholders’ Agreement as of the date first above
written.
Stockholder:
By:
/s/ Marshall Chesrown
Name:
[Signature
Page to Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
By:
/s/ Lori Sue Chesrown
Name:
Lori Sue Chesrown
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
Name:
Thomas Aucamp
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
Name:
Beverley Rath
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
Name:
Jay Goodart
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder: Blue
Flame Capital, LLC
Name:
Denmar J. Dixon
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
By:
/s/ Steven R. Berrard
Name:
Steven R. Berrard
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
Name:
Jeffrey Cheek
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
NextGen Dealer Solutions, LLC
Name:
Kartik Kakarala
[Signature Page to
Stockholders’ Agreement]
IN WITNESS
WHEREOF, the undersigned has signed this Stockholders’
Agreement as of the date first above written.
Stockholder:
Name:
Jack Lynn
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
Name:
Thomas Byrne
[Signature Page to
Stockholders’ Agreement]
IN WITNESS WHEREOF,
the undersigned has signed this Stockholders’ Agreement as of
the date first above written.
Stockholder:
Name:
Ralph Wegis
[Signature
Page to Stockholders’ Agreement]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS
AGREEMENT
(this “
Agreement
”),
dated as of February 8, 2017 (the “
Effective
Date
”), is by and among
Smart Server, Inc.,
a Nevada corporation
(the “
Company
”),
NextGen
Dealer Solutions, LLC, a Delaware limited liability company (the
“
Stockholder
”), and Kartik
Kakarala, as the representative of the Stockholder (the
“
Representative
”).
Capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Asset Purchase Agreement,
dated as of January 8, 2017, by and among the parties hereto,
Halcyon Consulting, LLC and Srinivas Kakarala (the
“
Purchase
Agreement
”).
WHEREAS
, the Company has
agreed to provide Stockholder certain registration rights with
respect to shares of common stock of the Company, par value $0.001
per share (the “
Purchaser Shares
”), under
the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute
(collectively, the “
Securities
Act
”), and applicable state securities
laws.
NOW, THEREFORE,
in
consideration of the promises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
As used
in this Agreement, the following terms shall have the following
meanings:
(a)
“
FINRA
” means the
Financial Industry Regulatory Authority, Inc.
(b)
“
NextGen
Seller
” means the Stockholder and any transferee or
assignee to whom the Stockholder assigns its rights under this
Agreement in accordance with
Section 8
and who agrees to
become bound by the provisions of this Agreement, and any
transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement in accordance with
Section 9
and who
agrees to become bound by the provisions of this
Agreement.
(c)
“
Person
”
means any individual or entity including but not limited to any
corporation, limited liability company, association, partnership,
organization, business, individual, governmental or political
subdivision thereof or governmental agency.
(d)
“
Registrable
Securities
” means (i) any Purchaser Shares owned by
any NextGen Seller at any time and (ii) any other securities
issued or issuable with respect to any Purchaser Shares by way of a
stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other
reorganization (it being understood that for purposes of this
Agreement, a Person will be deemed to be a holder of Registrable
Securities whenever such Person has the right to then acquire or
obtain from the Company any Registrable Securities, whether or not
such acquisition has actually been effected).
As to any particular Registrable Securities, once
issued, such Registrable Securities shall cease to be Registrable
Securities when (x) they have been registered under the Securities
Act, the registration statement in connection therewith has been
declared effective, and they have been disposed of pursuant to such
effective registration statement, (y) they are eligible to be sold
or distributed pursuant to Rule 144 by such NextGen Seller without
limitation, or (z) they shall have ceased to be
outstanding.
(e)
“
Rule 415
”
means Rule 415 under the Securities Act or any successor rule
providing for offering securities on a continuous or delayed
basis.
(f)
“
SEC
” means the United
States Securities and Exchange Commission.
(a)
Mandatory
Registration.
The Company shall, no later than June 30,
2017, file with the SEC a registration statement on an appropriate
form covering the
NextGen
Sellers’ Registrable Securities so as to permit the resale of
such Registrable Securities by the
NextGen
Sellers under Rule 415 under the
Securities Act at then prevailing market prices (and not fixed
prices)
(the
“
Shelf Registration
Statement
”). The Shelf Registration Statement shall
register only the Registrable Securities. The Representative (on
behalf of the
NextGen
Sellers)
and one counsel to the
NextGen
Sellers shall have a reasonable opportunity to review and comment
upon the Shelf Registration Statement and any amendment or
supplement to such Shelf Registration Statement and any related
prospectus prior to its filing with the SEC, and the Company shall
incorporate all such reasonable comments from the Representative
and the
NextGen
Sellers’
counsel. The Company shall use commercially reasonable efforts to
have the Shelf Registration Statement and any amendment declared
effective by the SEC at the earliest possible date. The Company
shall use commercially reasonable efforts to maintain the Shelf
Registration Statement effective pursuant to Rule 415 promulgated
under the Securities Act and available for the resale by the
NextGen
Sellers of all of the
Registrable Securities covered thereby at all times until the date
on which the
NextGen
Sellers
shall have sold all the Registrable Securities covered thereby (the
“
Registration
Period
”) or when such securities are no longer
Registrable Securities.
(b)
Rule 424
Prospectus
. The Company shall, as required by applicable
securities regulations, from time to time file with the SEC,
pursuant to Rule 424 promulgated under the Securities Act, the
prospectus and prospectus supplements, if any, to be used in
connection with sales of the Registrable Securities under the Shelf
Registration Statement. The Representative and its counsel shall
have a reasonable opportunity to review and comment upon such
prospectus and prospectus supplements prior to any filing thereof
with the SEC, and the Company shall incorporate all such reasonable
comments from the Representative and NextGen Sellers'
counsel.
(c)
Sufficient Number of
Shares Registered
. In the event that at any time, the number
of shares registered pursuant to the Shelf Registration Statement
is insufficient to cover all of the Registrable Securities, the
Company shall amend the Shelf Registration Statement or file a new
Shelf Registration Statement (any such new registration statement,
a “
New Registration
Statement
”, and together with the initial Shelf
Registration Statement, the “
Registration
Statements
”), so as to cover all of such Registrable
Securities as soon as practicable, but in any event not later than
thirty (30) Business Days after the necessity therefor arises. The
Company shall use commercially reasonable efforts to cause such
amendment to the Shelf Registration Statement or New Registration
Statement, as applicable, to become effective as soon as
practicable following the filing thereof. The Registration
Statements (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading.
3.
REGISTRATION
PROCEDURES AND OBLIGATIONS
.
With
respect to the Registrable Securities registered pursuant to any
Registration Statement, the Company shall use commercially
reasonable efforts to effect the registration of such Registrable
Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following
obligations:
(a)
The Company shall
prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to any Registration
Statement and the prospectus used in connection with such
Registration Statement as may be necessary to keep such
Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of
all Registrable Securities covered by any Registration Statement
until such time as all of such Registrable Securities shall have
been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such
Registration Statement.
(b)
With respect to
each registration statement filed pursuant to this Agreement and
any and all amendments and supplements thereto, the Company shall
permit the Representative to review and comment thereupon at least
five (5) Business Days prior to its filing with the SEC, and the
Company shall not file any registration statement, amendment or
supplement thereto, or prospectus or prospectus supplement in a
form to which the Representative reasonably objects. The Company
shall furnish to Representative, without charge, any correspondence
from the SEC to the Company or its representatives relating to any
registration statement filed hereunder, and any and all amendments
and supplements to such registration statements.
(c)
Upon request of the
Representative, the Company shall furnish to the Representative,
(i) promptly after the same is prepared and filed with the SEC, at
least one copy of each registration statement and any amendment(s)
thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits, (ii)
upon the effectiveness of any registration statement, a copy of the
prospectus included in such registration statement and all
amendments and supplements thereto (or such other number of copies
as the Representative may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus,
as the Representative may reasonably request from time to time in
order to facilitate the disposition of the Registrable
Securities.
(d)
Without limitation
of any of the foregoing obligations of the Company, the Company
shall use commercially reasonable efforts to (i) register and
qualify the Registrable Securities covered by a registration
statement under such other securities or “blue sky”
laws of such jurisdictions in the United States as the
Representative reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness
thereof during the Registration Period, (iii) cause the Registrable
Securities covered by any registration statement to be registered
with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such
Registrable Securities and (iv) take such other actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and take all
other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions;
provided, however
, that the Company
shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
Section
3(d)
, (y) subject itself to general taxation in any such
jurisdiction or (z) file a general consent to service of process in
any such jurisdiction. The Company shall promptly notify the
Representative of the receipt by the Company of any notification
with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities
or “blue sky” laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(e)
As promptly as
practicable after becoming aware of such event or facts, the
Company shall notify the Representative in writing of the happening
of any event or existence of such facts as a result of which the
prospectus included in any registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, and promptly prepare a
supplement or amendment to such registration statement to correct
such untrue statement or omission, and deliver a copy of such
supplement or amendment to the Representative (or such other number
of copies as the Representative may reasonably request). The
Company shall also promptly notify the Representative in writing
(i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a registration
statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to the
Representative by email or facsimile on the same day of such
effectiveness and by overnight mail), (ii) of any request by the
SEC for amendments or supplements to any registration statement or
related prospectus or related information, and (iii) of the
Company’s reasonable determination that a post-effective
amendment to a registration statement would be
appropriate.
(f)
The Company shall
use commercially reasonable efforts to prevent the issuance of any
stop order or other suspension of effectiveness of any registration
statement, or the suspension of the qualification of any
Registrable Securities for sale in any jurisdiction and, if such an
order or suspension is issued, to obtain the withdrawal of such
order or suspension at the earliest possible moment and to notify
the Representative of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
(g)
The Company shall
cause all the Registrable Securities to be listed on each
securities exchange on which securities of the same class or series
issued by the Company are then listed. The Company shall pay all
fees and expenses in connection with satisfying such
obligations.
(h)
The Company shall
cooperate with the Representative to facilitate the timely
preparation and delivery of certificates representing the
Registrable Securities to be offered pursuant to any registration
statement and enable such certificates to be in such denominations
or amounts as the Representative may reasonably request and
registered in such names as the
NextGen
Sellers may request, and upon sale,
to not bear any restrictive legend.
(i)
The Company shall
at all times provide a transfer agent and registrar with respect to
the Registrable Securities.
(j)
If reasonably
requested by the Representative, the Company shall (i) as soon as
reasonably practicable, incorporate in a prospectus supplement or
post-effective amendment such information as the Representative
believes should be included therein relating to the sale and
distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being sold, the purchase price being paid therefor and
any other terms of the offering of the Registrable Securities; and
(ii) make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable upon notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment.
(k)
Within one (1)
Business Day after any registration statement which includes the
Registrable Securities is declared effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Representative) confirmation that
such registration statement has been declared effective by the SEC.
Thereafter, if requested by the Representative at any time, the
Company shall require its counsel to deliver to the Representative
a written confirmation whether or not the effectiveness of such
registration statement has lapsed at any time for any reason
(including, without limitation, the issuance of a stop order) and
whether or not the registration statement is current and available
to the Representative and each of the
NextGen
Sellers for sale of all of the
Registrable Securities
.
(l)
The Company shall
take all other reasonable actions necessary to expedite and
facilitate disposition by each
NextGen
Seller of Registrable Securities
pursuant to any registration statement.
4.
OBLIGATIONS OF THE
REPRESENTATIVE AND THE NEXTGEN SELLERS
.
(a)
The Company shall
notify the Representative in writing of the information the Company
reasonably requires from each of the
NextGen
Sellers in connection with any
registration statement hereunder. The Representative shall furnish
to the Company such information regarding each
NextGen
Seller, the Registrable Securities
held by each
NextGen
Seller and
the intended method of disposition of the Registrable Securities
held by each
NextGen
Seller as
shall be reasonably required to effect the registration of such
Registrable Securities and each
NextGen
Seller shall execute such documents
in connection with such registration as the Company may reasonably
request.
(b)
Each
NextGen
Seller agrees to cooperate with the
Company as reasonably requested by the Company in connection with
the preparation and filing of any registration statement
hereunder.
(c)
Each
NextGen
Seller agrees that, upon receipt of
any notice from the Company of the happening of any event or
existence of facts of the kind described in the first sentence of
Section
3(e)
, such
NextGen
Seller will immediately discontinue disposition of Registrable
Securities pursuant to any registration statement(s) covering such
Registrable Securities until such
NextGen
Seller’s receipt of the
copies of the supplemented or amended prospectus contemplated by
the first sentence of
Section
3(e)
.
Notwithstanding anything to the contrary, the Company shall cause
its transfer agent to promptly deliver shares of common stock of
the Company in connection with any sale of Registrable Securities
with respect to which any
NextGen
Seller has entered into a contract
for sale prior to the
NextGen
Seller’s receipt of a notice from the Company of the
happening of any event of the kind described in the first sentence
of
Section
3(e)
and for which such
NextGen
Seller has not yet
settled.
5.
EXPENSES OF
REGISTRATION
.
The
Company shall pay and be responsible for any and all fees, costs,
disbursements and expenses incidental to the Company’s
performance of or compliance with the terms of this Agreement,
including, without limitation, the following: (i) all registration
and filing fees, and any other fees and expenses associated with
filings required to be made with the SEC or FINRA, (ii) all
fees and expenses relating to compliance with state securities or
“blue sky” laws, (iii) all printing, duplicating,
word processing, messenger, telephone, facsimile and delivery
expenses, (iv) all fees and disbursements of the Company’s
counsel and accountants, and (v) all fees and expenses
incurred in connection with the listing of the Registrable
Securities on any securities exchange;
provided,
however
, that all underwriting
discounts, selling commissions, selling or placement agent or
broker fees and commissions, and transfer taxes, if any, applicable
to the Registrable Securities shall be borne by the NextGen
Sellers, in proportion to the number of Registrable Securities sold
by each such NextGen Seller
.
(a)
To the fullest
extent permitted by law, the Company will indemnify, hold harmless
and defend each
NextGen
Seller,
the members, directors, officers, partners, employees, agents,
representatives of each
NextGen
Seller and each Person, if any, who controls any
NextGen
Seller within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended
(the “
Exchange
Act
”) (each, an “
Indemnified
Person
”), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs,
attorneys’ fees, amounts paid in settlement or expenses,
joint or several (collectively, “
Claims
”),
incurred in investigating, preparing or defending any action,
claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether
pending or threatened, whether or not an indemnified party is or
may be a party thereto (“
Indemnified
Damages
”), to which any of them may become subject
insofar as such Claims arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact in any
registration statement, prospectus, or any amendment or supplement
thereto or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading. The Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this
Section
6(a)
shall not apply to a Claim by an Indemnified Person to
the extent such Claim is based on an untrue statement, alleged
untrue statement, omission or alleged omission that is contained in
any information furnished in writing to the Company by any
NextGen
Seller expressly for
use in connection with the preparation of the applicable
registration statement, prospectus or any amendments or supplements
thereto.
(b)
To the fullest
extent permitted by law, each
NextGen
Seller agrees to severally
indemnify, hold harmless and defend, in the same manner as is set
forth in
Section 6(a)
,
the Company, each of its directors, each of its officers who signs
a registration statement covering Registrable Securities, each
underwriter, broker or other Person acting on behalf of the holders
of Registrable Securities and each Person, if any, who controls any
of the foregoing Persons within the meaning of the Securities Act
or the Exchange Act (collectively and together with an Indemnified
Person, an “
Indemnified
Party
”), against any Claim or Indemnified Damages to
which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact in any registration
statement, prospectus, or any amendment or supplement thereto or
the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, occurring based on
written information furnished to the Company by such
NextGen
Seller or the Representative
expressly for use in connection therewith;
provided, however
, that no
NextGen
Seller shall be liable under this
Section
6(b)
for the amount of any Claim or Indemnified Damages that
exceeds the net proceeds to such
NextGen
Seller as a result of the sale of
Registrable Securities pursuant to such registration
statement.
(c)
Promptly after
receipt by an Indemnified Person or Indemnified Party under this
Section
6
of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a
Claim, such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying
party under this
Section 6
,
deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be
;
provided
,
however
, that if any
Indemnified Party
shall have reasonably concluded that
there may be one or more legal or equitable defenses available to
such
Indemnified Party
which
are additional to or conflict with those available to the
indemnifying party, or that such claim or litigation involves or
could have an effect upon matters beyond the scope of the indemnity
agreement provided hereunder, the indemnifying party shall not have
the right to assume the defense of such action on behalf of
such
Indemnified Party
(but
shall have the right to participate therein with counsel of its
choice) and such indemnifying party shall reimburse such
Indemnified Party
for that portion of
the fees and expenses of any counsel retained by the
Indemnified Party
which is reasonably
related to the matters covered by the indemnity agreement provided
hereunder
. The Indemnified Party or the Indemnified Person,
as the case may be, shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such
action or claim by the Indemnifying Party or Indemnified Person, as
the case may be, and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or claim. The
indemnifying party shall keep the Indemnified Party or Indemnified
Person, as applicable, fully apprised at all times as to the status
of the defense or any settlement negotiations with respect thereto.
No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent,
provided, however
, that the
indemnifying party shall not unreasonably withhold, delay or
condition its consent. No indemnifying party shall, without the
consent of the Indemnified Party or Indemnified Person, as
applicable, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person, as applicable, of
a release from all liability in respect to such claim or
litigation. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any
liability to the Indemnified Party or Indemnified Person, as
applicable, under this
Section 6
, except to the extent
that the indemnifying party is prejudiced in its ability to defend
such action.
(d)
The indemnification
required by this
Section
6
shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when
bills are received or Indemnified Damages are
incurred.
(e)
The indemnity
agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to
the law.
7.
CONTRIBUTION
.
If the indemnification provided for hereunder is
held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any Claim or Indemnified Damages,
then the indemnifying party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amounts paid
or payable by such Indemnified Party as a result of such Claim or
Indemnified Damages in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of
the Indemnified Party on the other in connection with the
statements or omissions which resulted in such Claim or Indemnified
Damages, as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the Indemnified
Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or by the
Indemnified Party and the parties’ relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties agree that it would
not be just and equitable if contribution pursuant hereto were
determined by
pro rata
allocation or by any other method or allocation
which does not take account of the equitable considerations
referred to herein. No Person guilty or liable of fraudulent
misrepresentation shall be entitled to contribution from any
Person.
8.
ASSIGNMENT OF
REGISTRATION RIGHTS
.
The
Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
Representative, except as permitted by the terms of the Purchaser
Shareholders Agreement and the Purchase Agreement.
Each NextGen Seller may assign its rights
hereunder to any purchaser or transferee of Registrable Securities,
subject to the terms of the Purchaser Stockholders Agreement and
the Purchase Agreement;
provided,
however
, no NextGen Seller
shall assign any of its rights hereunder to a Person not already a
party to this Agreement as a NextGen Seller unless and until such
Person executes and delivers to the Company a joinder to this
Agreement, pursuant to which such Person will thereupon become a
party to, and be bound by and obligated to comply with the terms
and provisions of this Agreement as a NextGen Seller
hereunder.
(a)
A Person is deemed
to be a holder of Registrable Securities whenever such Person owns
or is deemed to own of record such Registrable Securities. If the
Company receives conflicting instructions, notices or elections
from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such
Registrable Securities.
(b)
All notices and
other communications under this Agreement shall be in writing and
shall be given by personal delivery, nationally recognized
overnight courier or certified mail at the following addresses (or
to such other address as a Party may have specified by notice given
to the other Party pursuant to this provision):
|
If to
the Company:
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|
|
|
Smart
Server, Inc.
4521
Sharon Road, Suite 370
Charlotte,
NC 28211
Attn:
Steven Berrard
|
|
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|
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With a
copy to (which shall not constitute notice or service of
process):
|
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Akerman
LLP
350
East Las Olas Blvd., Suite 1600
Fort
Lauderdale, FL 33301
Attn:
Michael Francis
|
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If to
the Representative or any
NextGen
Seller:
|
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NextGen
Dealer Solutions, LLC
300 E.
John Carpenter Freeway, Suite 650Irving, TX 75062
Attn:
Kartik Kakarala
|
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With a
copy to (which shall not constitute notice or service of
process):
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Offit
Kurman, P.A.
8171
Maple Lawn Boulevard, Suite 200
Maple
Lawn, MD 20759
Attn:
Glenn D. Solomon, Esquire
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Any
such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered, (ii) on the next
Business Day after dispatch, if sent postage pre-paid by nationally
recognized, overnight courier guaranteeing next Business Day
delivery, and (iii) on the 5th Business Day following the date on
which the piece of mail containing such communication is posted, if
sent by certified mail, postage prepaid, return receipt
requested.
(c)
If any provision of
this Agreement is invalid, illegal or unenforceable, the balance of
this Agreement shall remain in effect. Upon such determination that
any term or other provision is invalid, illegal or unenforceable,
the parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
(d)
This Agreement may
be executed in one or more counterparts, each of which shall be
deemed an original but all of which together will constitute one
and the same instrument. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile, .pdf or other
electronic means shall be effective as delivery of a manually
executed counterpart to the Agreement.
(e)
This Agreement
shall be governed by and construed in accordance with the internal
laws of the State of Nevada (without giving effect to any choice or
conflict of law provision or rule (whether of the State of Nevada
or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Nevada). Each of
the parties submits to the exclusive jurisdiction of any state or
federal court within [_______] County, Nevada in any action or
proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding shall be
exclusively heard and determined in any such court. The parties
hereby irrevocably waive, to the fullest extent permitted by
applicable Law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court.
Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought. The court shall
award to the prevailing party in any dispute under this Agreement
all of its costs and expenses, including reasonable attorneys'
fees, incurred in connection with the proceeding. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
This
Agreement and the Purchase Agreement represent the entire
understanding and agreement among the parties with respect to the
subject matter hereof and can only be amended, supplemented or
changed by written instrument making specific reference to this
Agreement signed by the Company or the Representative on behalf of
the NextGen Sellers. Any provision hereof can be waived by written
instrument signed by the Company, in the case of an amendment,
supplement, modification or waiver sought to be enforced against
the Company, or by written instrument signed by the applicable
NextGen Seller or the Representative on behalf of such NextGen
Sellers, in the case of an amendment, supplement, modification or
waiver sought to be enforced against any NextGen Seller. The waiver
by any party of a breach of any provision of this Agreement shall
not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further
exercise thereof or the exercise of any other right, power or
remedy. All remedies hereunder are cumulative and are not exclusive
of any other remedies provided by law.
* * * * *
IN WITNESS WHEREOF,
the
parties have caused this Registration Rights Agreement to be duly
executed as of day and year first above written.
|
THE
COMPANY:
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SMART
SERVER
, INC.
/s/ Marshall Chesrown
Name:
Marshall Chesrown
Title:
Chief Executive Officer
|
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REPRESENTATIVE
:
/s/ Kartik Kakarala
Kartik
Kakarala
STOCKHOLDER
:
NEXTGEN
DEALER SOLUTIONS, LLC
By:
/s/
Kartik Kakarala
Name:
Kartik Kakarala
Title:
Manager
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[Signature
Page to Registration Rights Agreement]
CONSULTING AGREEMENT
This
CONSULTING AGREEMENT (this “
Agreement
”) is made and
entered into as of the February 8, 2017 (the "
Effective Date
"), by and
between Smart Server, Inc., a Nevada corporation (the "
Company
"), and Kartik Kakarala
(the “
Consultant
” and together
with the Company the “
Parties
” and each a
“
Party
”).
WHEREAS, the
Company desires to engage the Consultant to perform certain
services upon the terms and conditions hereinafter set forth;
and
WHEREAS, the
Consultant is willing to make his expertise and experience
available to the Company upon the terms and conditions hereinafter
set forth.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, the Parties hereby agree
as follows:
1.
Term; Termination
. The term of
this Agreement shall commence on the date hereof and shall continue
until terminated (the “
Term
”). Either Party may
terminate this Agreement for any reason at any time, which
termination shall be effective upon delivery by the terminating
Party of a written notice to the other Party. The termination of
this Agreement shall be without prejudice to the rights and claims
of the Parties hereunder accrued prior to the
termination.
2.
Services
. The Consultant shall
provide the services set forth on
Annex A
to the Company and its
subsidiaries (“
Services
”). Such Services
shall include, but not be limited to, consulting with the
Company’s management, employees and representatives (whether
by phone or in person), attending meetings, and other
responsibilities inherent or ancillary to the
Services.
3.
Fees
. As sole compensation for
the Services, the Company hereby agrees to pay the Consultant
during the Term services fees at the rate of $5,000 per month (the
“
Fees
”). The Fees will be
prorated for the first and last month of the Term based on the
number of actual days included in the Term. The Fees with respect
to any month during the Term will be due and payable not later than
15 calendar days after the end of such calendar month.
4.
Independent Contractor
. In
performing the Services provided for hereunder, the Consultant is
acting as an independent contractor, and the Consultant's employees
at all times during the term of this Agreement shall be in the
employment, and under the supervision and responsibility, of the
Consultant and no person employed by the Consultant either directly
or indirectly shall be deemed by virtue of this Agreement to be the
servant, agent or employee of the Company or any affiliate of the
Company for any purpose whatsoever. The Company will not withhold
any monies for any state, local or federal taxing authorities from
compensation earned by the Consultant pursuant to this Agreement.
The Company shall prepare and file a Form 1099 with the Internal
Revenue Service reporting the compensation paid to the Consultant.
The Consultant shall receive no fringe benefits from the Company
whatsoever and will not be eligible for any medical, dental or
other health and welfare plans of the Company or its affiliates.
The Consultant shall be solely responsible for the payment of all
taxes on the amounts received or receivable by Consultant under
this Agreement.
5.
Indemnification
. The Consultant
shall indemnify the Company and its affiliates and their respective
officers, directors, employees, stockholders, representatives,
members, managers, successors, assigns and agents and hold each of
them harmless, from and against and in respect of any and all
damage, loss, deficiency, liability, obligation, commitment, cost
or expense (including the reasonable fees and expenses of counsel)
resulting from, or in respect of, any taxes, penalties, interest or
other amounts related to the compensation received or receivable by
Consultant or its employees or affiliates hereunder.
6.
Assignment
. All of the terms of
this Agreement shall inure to the benefit of, be enforceable by and
be binding upon the parties hereto and their respective successors
and assigns;
provided
, that the Consultant
shall not have the right to assign his rights or duties hereunder
or any interest herein without the prior written consent of the
Company.
7.
Notices
. All notices, requests,
consents and other communications hereunder shall be in writing and
shall be deemed to have been duly given if sent by registered or
certified mail, return receipt requested, with first-class postage
fees prepaid, or if hand delivered against receipt or if sent via
facsimile transmission upon electronic confirmation of receipt
thereof during normal business hours, to the applicable Party at
the address indicated below:
If to
the Consultant:
Kartik
Kakarala
1431
Greenway Drive
Suite
775
Irving,
TX 75038
If to
the Company:
Smart
Server, Inc.
4521
Sharon Road
Suite
370
Charlotte, NC
28211
Attn:
Steven Berrard
With a
copy (which shall not constitute notice or services of process)
to:
Akerman
LLP
Three
Brickell City Centre
98 SE
7
th
Street, Suite
1100
Miami,
FL 33131
Attn:
Scott A. Wasserman
or, to
each Party, to such other address as shall be designated by such
Party in a written notice to the other Party pursuant to the
provisions of this Section 7.
8.
Severability
. In the event any
part of this Agreement, for any reason, shall be finally adjudged
by any court of competent jurisdiction to be invalid, such judgment
shall not affect, impair or invalidate the remainder of this
Agreement and this Agreement shall be reformed consistent with the
original objectives of this Agreement. The invalidity of any part
or parts of this Agreement shall not relieve the parties from their
other duties and obligations under this Agreement.
9.
Waiver
. The failure of either
Party to enforce any provision of this Agreement or exercise any
right granted hereby shall not be construed to be a waiver of such
provision or right nor shall it affect the validity of this
Agreement or any part hereof or limit in any way the right of
either Party subsequently to enforce any such provision or exercise
such right in accordance with its terms.
10.
No Third-Party Beneficiaries
.
This Agreement shall be construed to be for the benefit of only the
parties hereto and shall confer no right or benefit upon any other
person based on the theory of third party beneficiaries or
otherwise.
11.
Amendments
. The terms of this
Agreement may be amended, modified, discharged, waived or
terminated only by a written instrument executed by both parties
or, in the case of a waiver, by the Party waiving compliance,
unless such waiver is conditional.
12.
Titles and Headings
. The titles
and headings included in this Agreement are inserted for
convenience only and shall not be deemed to be a part of or
considered in construing this Agreement, nor limit or otherwise
affect the meaning hereof.
13.
Counterparts
. This Agreement
may be executed simultaneously in two (2) or more counterparts,
each of which shall be deemed an original, and which together shall
constitute but one and the same instrument.
14.
Entire Agreement
. This
Agreement constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof.
15.
Several Remedies
. Monetary
damages and losses would not be a sufficient remedy for any breach
of this Agreement by the Consultant. The Company shall be entitled
to equitable relief, including injunction and specific performance,
as a remedy for any such breach. Such remedies shall not be deemed
to be the exclusive remedies for a breach of this Agreement but
shall be in addition to all other remedies available at
law.
16.
Applicable Law
. This Agreement
shall be governed, interpreted and construed in accordance with the
laws of the State of Texas without regard to choice-of-law
principles thereof.
17.
WAIVER OF JURY TRIAL
. EACH
PARTY HERETO EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL
CONCERNING ANY CIVIL ACTION THAT MAY ARISE FROM THIS AGREEMENT OR
THE RELATIONSHIP OF THE PARTIES HERETO.
18.
CONSENT
TO JURISDICTION; SERVICE OF PROCESS
. EACH PARTY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE OR FEDERAL
COURTS LOCATED IN DALLAS COUNTY, TEXAS, IN CONNECTION WITH ANY
SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE
IN ANY SUCH SUIT, ACTION OR PROCEEDING THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT
OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED BY SUCH
COURTS.
* *
*
IN
WITNESS WHEREOF, the parties hereto have caused this Consulting
Agreement to be duly executed on the date and year first above
written.
SMART
SERVER, INC.
By: /s/ Marshall
Chesrown
Name:
Marshall Chesrown
Title:
Chief Executive Officer
KARTIK
KAKARALA
/s/ Kartik
Kakarala
ANNEX A
SERVICES
●
Act as the
Company's Chief Technology Advisor;
●
Provide advisory
services in support of the technology related aspects of the
Company's business;
●
Provide advisory
services related to the design and implementation of technology
platform necessary to operate the business;
●
Advise Company
project manager on Company’s efforts to design and implement
software offerings for dealer services;
●
Support overall
business planning strategy as requested by the CEO.
SERVICES
AGREEMENT
This
Services Agreement, dated as of February 8, 2017 (the "
Effective Date
"), is by and between
Smart Server, Inc., a Nevada corporation (the "
Company
"), and
Halcyon Consulting, LLC
,
a Maryland limited liability
company ("
Halcyon
") (each a
"
Party
" and collectively,
the "
Parties
").
WHEREAS, the
Company has agreed to engage Halcyon to, and Halcyon has agreed to,
deliver certain development and support services to the Company
with respect to the technology described in
Exhibit A
(the "
Technology
").
NOW,
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth
herein, subject to the terms and conditions set forth herein and
intending to be legally bound, the Parties hereby agree as
follows:
1.1.
Overview.
Halcyon shall perform
the services described in
Exhibit A
with respect to
development, enhancement and support of the Technology, and such
other services as agreed in writing between the Parties from
time-to-time (collectively, the "
Services
"). At the Company's request,
Halcyon shall work with and cooperate with the Company's personnel
and third party service providers.
1.2.
Delivery; Remote Access.
Halcyon shall deliver all software to the Company in both source
code and object code format, as applicable and as requested by the
Company. All audiovisual works and documentation shall be delivered
in formats as requested by the Company. Throughout the Term,
Halcyon shall make all work-in-progress remotely accessible to the
Company on a real-time basis to enable the Company to monitor,
test, download and otherwise review all work-in-progress under the
Services. Such access shall be through a secure, password-protected
virtual private network (or other mode mutually agreed between the
Parties) accessible only by Halcyon and the Company and/or the
Company's designated representatives.
1.3.
Review.
All work product shall
be subject to the Company's review and approval. In the event that
the Company identifies any issues with the work product, Halcyon
shall promptly address the issues and resubmit for review by the
Company. No deliverables shall be deemed complete until finally
approved and accepted by the Company.
1.4.
Workmanship.
All work performed
by Halcyon shall be in accordance with best practices. Halcyon
shall take all necessary precautions to ensure the safety,
security, integrity and quality of all work performed, including
but not limited to engineering and management practices, regular
backup and recovery, disaster prevention and recovery, anti-virus
and intrusion prevention, server and system performance and
availability, and documentation. Halcyon shall be liable for any
loss of source code, designs, data, or other work or work in
progress resulting from the actions of Halcyon or its
subcontractors.
1.5.
Time of the
Essence
. Halcyon acknowledges that time is of the essence
with respect to Halcyon’s obligations hereunder and agrees
that prompt and timely performance of all such obligations in
accordance with this Agreement is strictly required.
2.1.
Project Manager.
Company shall
appoint a "Project Manager" who (a) will be the primary contact
with Halcyon during the Term, and (b) will have overall
responsibility for managing and coordinating Halcyon's resources
and cooperation with the Company hereunder.
2.2.
Staffing.
Halcyon shall assign
sufficient onshore personnel at appropriate levels of experience
and responsibility to timely perform its obligations under this
Agreement. Upon request, Halcyon shall provide the Company with an
opportunity to review and approve such personnel. Halcyon
acknowledges and agrees that continuity of personnel on the
projects hereunder is critical to the success of the Services.
Accordingly, Halcyon shall not, without the Company's prior written
consent, transfer, reassign or otherwise re-deploy any onshore
senior designers, engineers or other critical personnel from
performance of the Services and shall not take any other action
which would result in the material reduction of time expended by
such personnel in performance of the Services unless such personnel
cease to employed by Halcyon. Notwithstanding the foregoing, if the
Company identifies an issue with any Halcyon personnel, Halcyon
shall promptly meet with the Company and work to resolve the
problem as mutually agreed by the parties (including, as necessary,
reassigning such personnel off the Services). For purposes of this
Agreement, with prior written consent of the Company, Halcyon may
perform the Services through its affiliates and their personnel
provided that such affiliates shall be subject to the terms of this
Agreement and Halcyon shall be liable for all acts and omissions
thereof. For as long as the following conditions are satisfied,
Company hereby consents that Halcyon may perform Services hereunder
through its offshore affiliate, Halcyon Technologies Pvt. Ltd.: (1)
that certain Independent Contractor Work for Hire & Assignment
Agreement by and between Halcyon and Halcyon Technologies Pvt.
Ltd., in the form attached hereto as
Exhibit B
(the "
Subcontractor Invention Assignment
Agreement
") remains in full force and effect, (2) neither
Halcyon, nor to the knowledge of Halcyon after due inquiry, Halcyon
Technologies Pvt. Ltd. are in breach of the Subcontractor Invention
Assignment Agreement, and (3) Halcyon Technologies Pvt. Ltd. does
not sub-subcontract the performance of the Services to any other
party.
2.3.
Independent Contractor Status.
Neither Halcyon nor any of its personnel shall be considered
employees or agents of the Company. As between the Company and
Halcyon, Halcyon shall be solely responsible for payment of any and
all unemployment, social security, and other payroll related taxes,
worker's compensation premiums and any other comparable taxes,
premiums or payments for its employees and agents, as applicable,
including any related assessments and contributions required by
law. Halcyon and its personnel shall not be eligible for any of the
Company's employee benefit programs, for sick or vacation leave,
retirement benefits, worker's compensation benefits or unemployment
benefits, and the Company shall not be liable for the payment of
same to any government or agency.
2.4.
Subcontracting.
Halcyon may not
subcontract any of its obligations under this Agreement without the
Company's prior written consent. In any event, Halcyon shall be
liable for all acts and omissions of its subcontractors and such
subcontractors shall be subject to all provisions applicable to
Halcyon and Halcyon's personnel hereunder including, without
limitation,
Sections
2.3,
5
, and
7.1
.
3.1.
Fees.
Except as otherwise
agreed by the Parties in writing for specific Services, all
Services shall be performed on a time and materials basis.
Halcyon's initial hourly rates are specified in
Exhibit A.
After the first year of the Term, and annually thereafter, Halcyon
and the Company shall agree on such rates, provided, however, the
rates may not be higher than one hundred ten percent (110%) of the
immediately preceding year's rates.
3.2.
Expenses.
The Company shall
reimburse Halcyon for any pre-approved out-of-pocket or reasonable
Company-requested travel expenses in connection with performance of
the Services. Halcyon shall use commercially reasonable efforts to
minimize such out-of-pocket expenses.
Notwithstanding the foregoing or anything else
contained in this Agreement, in no event shall license fees or
royalties incurred by H
alcyon
be a reimbursable expense.
3.3.
Invoices.
Halcyon shall invoice
the Company on a monthly basis for all work actually performed
during the preceding month. Each invoice shall be in a form
reasonably agreed upon by the Parties, including detail reasonably
sufficient to enable the Company to verify the calculation of fees
due thereunder. All fees and expenses are payable in U.S. dollars.
The Company shall pay all undisputed invoices within thirty (30)
days of receipt thereof.
3.4.
Taxes.
Halcyon is responsible
for any and all
taxes
in connection with the Services including, without limitation,
income, payroll, sales, use, gross receipt or other taxes imposed
upon Halcyon in connection with this Agreement.
3.5.
Records; Inspection.
Halcyon
shall maintain complete and accurate records relating to the
Services and the performance of its duties hereunder. All records
shall be maintained by Halcyon for at least three (3) years after
the termination of this Agreement, and shall at all reasonable
times be available for inspection or audit by the Company or its
representatives. Halcyon shall, upon a request by the Company,
promptly prepare and deliver to the Company and its representatives
reports regarding its activities and expenses in connection with
this Agreement. If the Company discovers that Halcyon has
overcharged the Company by more than five percent (5%) with respect
to any invoice, then Halcyon shall refund or credit the Company
with the amount of such overcharge already paid by the Company,
correct and resubmit all relevant invoices not yet paid by the
Company, and reimburse the Company for the cost of the
inspection.
4.1.
Initial Term; Renewals.
The
initial term of this Agreement shall run for a period of
twenty-four (24) months from the Effective Date ("Initial Term").
Thereafter, this Agreement shall automatically renew for
additional, consecutive twelve (12) month renewal periods unless
either Party provides the other Party notice of non-renewal at
least ninety (90) days prior to expiration of the then current term
or it is terminated pursuant to
Section 4.2
or
4.3
below. The initial term and all
renewal terms are collectively referred to hereinafter as the
"Term."
4.2.
Termination for Cause.
Either
Party may terminate this Agreement upon written notice if the other
Party materially breaches any of its obligations and fails to cure
such breach within thirty (30) days of notice thereof. Either Party
may terminate this Agreement immediately if the other party makes a
general assignment for the benefit of creditors, is subject of a
petition for bankruptcy, has a receiver appointed or is otherwise
declared insolvent or if the Company is liquidated. The Company may
terminate this Agreement immediately by written notice to Halcyon
if Halcyon violates any applicable law in the performance of the
Services.
4.3.
Other Termination.
Company and
Halcyon may mutually agree in writing to terminate this Agreement
at any time. The Company or Halcyon may terminate this Agreement or
any Services hereunder at any time after the Initial Term upon
ninety (90) days' prior written notice to the other.
4.4.
Effect of Termination.
In the
event of termination, Halcyon shall immediately deliver to the
Company all Company materials, deliverables, databases,
documentation and any other work in progress developed or then in
development by Halcyon. With respect to software, such materials
shall be delivered in both source code and object code formats.
Halcyon shall also return all Confidential Information, as defined
below, to the Company.
5.1.
Intellectual Property Rights
.
Intellectual Property Rights means all or any of the following: (a)
patents, patent disclosures, and inventions (whether patentable or
not); (b) trademarks, service marks, trade dress, trade names,
logos, corporate names, and domain names, together with all of the
goodwill associated therewith; (c) copyrights and copyrightable
works (including computer programs), mask works, and rights in data
and databases; (d) trade secrets, know-how, and other confidential
information; and (e) all other intellectual property rights, in
each case whether registered or unregistered and including all
applications for, and renewals or extensions of, such rights, and
all similar or equivalent rights or forms of protection provided by
applicable law in any jurisdiction throughout the
world.
5.2.
Work Product.
Halcyon hereby
agrees that all items delivered by Halcyon to the Company and all
information and Intellectual Property Rights arising from Halcyon's
performance of the Services for the Company (such as ideas,
technology, software, databases, data, inventions, concepts,
designs, discoveries, developments, media, content, improvements
and innovations, whether or not patentable or reduced to practice)
conceived, made or developed by Halcyon whether alone or together
with others, during the course of performing the Services are and
shall be the sole and exclusive property of the Company. All of the
rights and things described in the foregoing sentence and
Intellectual Property Rights shall be defined, collectively, as the
"Halcyon Work Product." Halcyon agrees that all Halcyon Work
Product is created as a "work made for hire" for the Company
as defined in Section 101 of the
Copyright Act of 1976
. To the extent any Halcyon Work
Product does not qualify as, or otherwise fails to be, "work made
for hire", Halcyon hereby gives, transfers and assigns to the
Company all right, title and interest in and to the Halcyon Work
Product, including all
Intellectual
Property Rights therein
, and hereby assigns to the Company
or waives any so-called "moral rights"
or rights of
droit moral
in the
Halcyon Work Product, to the extent permitted by law. Such
assignments are perpetual, worldwide and irrevocable. Halcyon
agrees to, and to cause its personnel to, execute and deliver such
additional documents and take such additional reasonable actions as
the Company deems necessary or convenient to perfect or evidence
the Company's ownership of the Halcyon Work Product or to enable
the Company to record this Agreement and/or secure rights of
copyright and/or letters patent in its name, or otherwise to
enforce its rights in the Halcyon Work Product in any country
throughout the world or otherwise carry out the provisions of this
Section
5.2.
5.3.
Company Materials.
Halcyon
acknowledges and agrees that all software, content, equipment and
other materials provided by the Company to Halcyon in connection
with this Agreement, including, without limitation, the Technology
and all intellectual property rights related thereto, shall remain
the exclusive property of the Company. Nothing in this Agreement
shall be deemed to grant Halcyon any right or title in such
materials and Halcyon shall use such materials solely to provide
the Services to the Company hereunder.
5.4.
Third Party Materials.
Halcyon
shall not, and shall ensure that its personnel do not, incorporate
any third party materials (including, without limitation, open
source software, freeware, shareware, so called "public domain"
materials, etc.) into any deliverables or Halcyon Work Product
hereunder or into the Company materials (including, without
limitation, the Technology) without the Company's prior written
consent. In any event, Halcyon shall not incorporate into any
deliverable (or otherwise combine, compile or otherwise integrate
the Technology with) any "open source" software that is subject to
a license (e.g., the GPL or Affero GPL) that could: (a) require
divulgement to any third party of any source code that is part of
the Company's Technology or other products; (b) grant a license to
any Company intellectual property for purpose of derivative works;
or (c) grant a license to any third party to redistribute any
Company intellectual property at no charge.
5.5.
Pre-Existing Halcyon Materials.
In addition, Halcyon shall not incorporate any Halcyon materials
developed independent of Halcyon's work for the Company or NextGen
Dealer Solutions, LLC as the Company's predecessor in interest into
any deliverables, Halcyon Work Product or Company materials without
the Company's prior written consent. In the event that Halcyon
incorporates such independently developed or pre-existing Halcyon
materials (or any other Halcyon know-how or other intellectual
property), Halcyon hereby grants to the Company a perpetual,
worldwide, sublicensable, transferrable, royalty-free, irrevocable
license to
use, reproduce, perform
(publicly or otherwise), display (publicly or otherwise), modify,
improve, create derivative works of, distribute, import, make, have
made, sell, and offer to sell
and otherwise exploit
for all or any purposes
whatsoever
such Halcyon materials and Intellectual Property
Rights in connection with the Company's products and
services.
6.1.
Warranties.
Halcyon represents,
warrants and covenants that:
6.1.1.
the Services will
be performed in a timely, competent and workmanlike manner by
individuals of appropriate training and experience, and that all
work will meet or exceed industry standards and the Company's
specifications;
6.1.2.
the deliverables
and Halcyon Work Product created or contributed by Halcyon
hereunder do not and will not violate or infringe upon the rights
of any third party, including without limitation, Intellectual
Property Rights or other proprietary rights of any
kind;
6.1.3.
(i) Halcyon and its
affiliates have obtained and will obtain written
confidentiality, work-for-hire, and intellectual
property rights assignment agreements
substantially in the
form provided to the Company
giving
the Company rights consistent with those set forth herein
from all personnel, employees, independent contractors,
consultants, subcontractors and co-developers of any rights they
may have in the Technology, any of the deliverables or Halcyon Work
Product, (ii) no person that has developed or created or will
develop or create on Halcyon's behalf any software, code or other
copyrightable work for the Company retains or will retain any
rights, interest or title in the Technology or any software, code
or other copyrightable work made part thereof and (iii) prior to
the assignment set forth in
Section 5.2
above, Halcyon and
its affiliates did not transfer, and will not transfer, any right
or interest in the foregoing (including, without limitation, a
license) to any third party;
6.1.4.
except as agreed in
writing by the Parties, Halcyon has not incorporated into the
deliverables or any other software serviced under this Agreement
any hidden or otherwise undocumented screens or other functions; or
secret or otherwise undocumented sounds, images or other features
unless and only to the extent that the same have been expressly
approved in writing to the Company; and
6.1.5.
the deliverables
and Halcyon Work Product provided by Halcyon hereunder do not, and
shall not, contain any programming devices (e.g., viruses, key
locks, etc.) which would (a) cause an unforeseen disruption in the
performance of the software or any part of the network connected to
the software, or (b) permit Halcyon personnel or other third
parties to access the software or any of the Company's equipment
connected to the software without the Company's
authorization.
6.2.
Security.
Halcyon shall use
commercially reasonable efforts to protect the physical security
and electronic security of the equipment utilized to provide the
Services to the Company, including by using anti-virus, security
and firewall technology commonly used in the industry.
6.3.
Export.
In the event that
Halcyon elects to use non-U.S. citizens or other offshore resources
to perform any Services hereunder, Halcyon shall at all times be
responsible for related regulatory compliance issues including,
without limitation, obtaining any relevant export/import licenses
or regulatory approvals. Software, Technology and other technical
information hereunder may be subject to the export and re-export
laws and regulations of the United States and other
jurisdictions.
6.4.
Insurance
. Throughout the Term,
Halcyon shall maintain commercially reasonable insurance in
accordance with industry standards and regulatory requirements,
including, without limitation: (i) comprehensive commercial general
liability insurance; (ii) worker's compensation insurance as
required by the jurisdictions applicable to all personnel
performing the Services; (iii) professional errors & omissions
insurance; and (iv) cyber liability insurance.
6.5.
Liens
. Halcyon shall not
encumber or permit a lien on any work-in-progress, code, software
or other deliverables included in the Services without the
Company's prior written consent. The Company will receive good and
valid title to all Halcyon Work Product, free and clear of all
encumbrances or liens of any kind.
7.
Confidentiality;
Non-Compete
7.1.
Halcyon
acknowledges that it will have access to certain confidential
information of the Company and its customers concerning their
business, plans, employees, and other information held in
confidence by the Company ("Confidential Information").
Confidential Information includes all information in tangible or
intangible form regarding the Company, including the information
that (a) relates to the Company's products and services (including,
without limitation, the Technology), (b) relates to the Company's
customers, or (c) is otherwise marked or designated as confidential
or that, under the circumstances of its disclosure, should be
considered confidential. Confidential Information also includes
this Agreement and all services provided by Halcyon to the Company.
Halcyon agrees that it will not use in any way, for its own account
or the account of any third party, except as necessary to meet its
obligations under this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys,
accountants and other advisors as reasonably necessary), any of the
Company's Confidential Information and will take reasonable
precautions to protect the confidentiality of such information, at
least as stringent as it takes to protect its own Confidential
Information. Halcyon shall require all of its personnel involved in
the Services to sign written confidentiality agreements that are at
least as strict as the confidentiality requirements of this
Section 7.1
, and
Halcyon shall remind each individual of his/her confidentiality
obligations upon termination of such individual's employment with
Halcyon.
7.2.
Information will
not be deemed Confidential Information hereunder if such
information: (i) is known to Halcyon prior to receipt from the
disclosing party directly or indirectly from a source other than
NextGen Dealer Solutions, LLC, its representatives or another third
party having an obligation of confidentiality to the disclosing
party; (ii) becomes known (independently of disclosure by the
disclosing party) to the receiving party directly or indirectly
from a source other than one having an obligation of
confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except
through a breach of this Agreement by Halcyon or its
representatives or sub-contractors; or (iv) is independently
developed by Halcyon after the date of this Agreement. Halcyon may
disclose Confidential Information pursuant to the requirements of a
governmental agency or by operation of law, provided that it gives
the Company reasonable prior written notice sufficient to permit
the disclosing party to contest such disclosure.
7.3.
Halcyon agrees that
during the Term and for a further period of two (2) years
thereafter, Halcyon and its affiliates shall not directly or
indirectly (i) engage in any Restricted Business or (ii) assist,
provide any services or any technology, software or other materials
to any third party engaged in any Restricted Business. If requested
by the Company, Halcyon shall require all of its personnel involved
in providing the Services to sign a written non-competition
agreement on substantially the same terms as the preceding
sentence. "Restricted Business" means (i) any business that
provides software programs or applications that provide inventory
management to the powersports, recreational vehicle, or marine,
industries (which includes, without limitation, motorcycles,
all-terrain vehicles, and personal watercraft), including all
ancillary functionality; and (ii) any other business in which the
Company is engaged or actively pursuing at the applicable time of
determination for which the Company has engaged Halcyon to provide
software development services pursuant to an executed services
agreement; provided, however, that a Restricted Business shall not
include any business disclosed on Schedule 7.3 hereto, in the case
of a business referred to in clause (i); and, in the case of a
business referred to in clause (ii), that it was engaged in and had
commercialized without violation of this Section 7.3 prior to the
time at which the Company first engaged in or began to actively
pursue that otherwise Restricted Business. Following a termination
of this Agreement, the phrase "applicable time of determination"
shall mean the date of termination.
7.4.
Notwithstanding
anything contained in this Services Agreement to the contrary, upon
a monetary default under the Subordinated Secured Confessed
Judgement Promissory Note executed on the date hereof by the
Company in favor of NextGen Dealer Solutions, LLC, and the failure
to cure the default after the expiration of any applicable cure
period, the restrictive covenants contained in Section 7.3 that
restrict Halcyon shall lapse and be of no further force or
effect.
7.5.
Arbitration.
Any dispute
whatsoever arising as to the interpretation of any provision of
this Agreement or as to the rights, duties, or obligations of any
of the parties hereto in connection with any provision of this
Agreement, as well as any and all statutory and tort claims arising
out of the same operative facts (a "Dispute"), shall be settled in
accordance with the JAMS Comprehensive Arbitration Rules and
Procedures (the "Rules"), and judgment on the award rendered by the
arbitrator may be entered in any court in the State of Delaware
having jurisdiction thereof, subject to the following
conditions:
7.5.1.
The arbitration
shall be held in Wilmington, Delaware and in accordance with the
Rules, except that pre-hearing discovery between the parties shall
be limited to the exchange of documents.
7.5.2.
The arbitration
shall be heard by a single arbitrator who shall be selected
mutually by the parties within 10 days of receipt of a notice of
arbitration of a Dispute or, if the parties fail to select an
arbitrator by mutual agreement within such 10 day period, by JAMS
in accordance with the Rules. Any arbitrator selected by JAMS shall
be an attorney or retired judge experienced in business
matters.
7.5.3.
The hearings shall
be transcribed by a certified court reporter.
7.5.4.
The arbitrator
shall issue a reasoned award, which shall include a memorandum
opinion discussing the facts and legal grounds supporting the
award. The arbitrator appointed, rather than a court, shall
determine any and all challenges and disputes with respect to the
arbitrability of a Dispute and the scope of the arbitration
obligation under this Agreement. Furthermore, the arbitrator shall,
rather than a court, determine all challenges to the enforceability
of this Agreement and the obligation to arbitrate a
Dispute.
7.5.5.
Each party to any
arbitration proceeding hereunder shall bear its own expenses in
connection with such arbitration, including those of attorneys and
experts, and each party shall bear 50% of the costs of the
arbitrator and arbitration proceeding, e.g., the arbitration
facilities and transcript. Failure to pay the fees of JAMS and the
arbitrator when due shall constitute a separate breach of this
Agreement for which the damages shall be awarded by the arbitrator
and shall consist of the reasonable attorneys' fees and costs
incurred to obtain payment of such fees. Notwithstanding anything
in this Section 7.4.5 to the contrary, the prevailing party in any
such proceeding (as determined by the arbitrator) shall be entitled
to recover from the non-prevailing party all fees, costs and
expenses, including reasonable attorneys' fees and the cost of
arbitration, incurred in prosecuting the dispute.
7.5.6.
The parties
hereby exclude any right of appeal to any court on the merits of a
Dispute. The provisions of this
Section 7.4
may be enforced in
any court having jurisdiction over the award or any of the parties
or any of their respective assets, and judgment on award (including
without limitation equitable relief required for enforcement of the
award) may be entered in any such court.
7.5.7.
The arbitration of
a Dispute under this
Section 7.4
shall be governed,
construed and enforced solely pursuant to the United States
Arbitration Act, 9 U.S.C. Section 1 et seq.
8.1.
Relationship of the Parties.
Halcyon agrees to perform the Services hereunder solely as an
independent contractor. The parties to this Agreement recognize
that this Agreement does not create any actual or apparent agency,
partnership or relationship of employer and employee between the
parties. Halcyon is not authorized to enter into or commit the
Company to any agreements, and Halcyon shall not represent itself
as the agent or legal representative of the Company.
8.2.
Successors and Assigns.
This
Agreement is binding upon and inures to the benefit of the parties
hereto and their respective successors and assigns, but is not
assignable by any party without the prior written consent of the
other parties hereto; provided, however, that the Company may
assign any or all of its respective rights or obligations hereunder
to any of its respective lenders as collateral security, or in
connection with a sale of all or substantially all of its assets
and business in either case, without the consent of
Halcyon.
8.3.
Third Party Beneficiaries.
This
Agreement does not benefit or create any right or cause of action
in or on behalf of any Person other than the parties
hereto.
8.4.
Notices.
Any notice or other
communication provided for herein or given hereunder to a party
hereto must be in writing, and (i) sent by facsimile transmission,
(ii) delivered in person, (iii) mailed by first class registered or
certified mail, postage prepaid, (iv) sent by electronic mail or
(iv) sent by Federal Express or other overnight courier of national
reputation, addressed as follows:
If to
Company:
Smart
Server, Inc.
4521
Sharon Road
Suite
370
Charlotte, NC
28211
Attn:
Steven Berrard
If to
Halcyon:
Halcyon
Consulting, LLC
1431
Greenway Drive
Suite
775
Irving,
TX 75038
Attn:
Kartik Kakarala
With a
copy to:
Offit
Kurman, P.A.
8171
Maple Lawn Boulevard
Suite
200
Maple
Lawn, MD 20759
Attn:
Glenn D. Solomon, Esquire
or to
such other address with respect to a party as such party notifies
the other in writing as above provided. Each such notice or
communication will be effective (i) if given by facsimile, when the
successful sending of such facsimile is electronically confirmed,
(ii) if given by any other means specified in the first sentence of
this
Section 8.4
upon delivery or refusal of delivery at the address specified in
this
Section 8.4.
Each such notice or communication shall be deemed to have been
received on the next Business Day if not received on a Business Day
or if required after 5 p.m. on a Business Day
8.5.
Complete Agreement.
This
Agreement and the Annexes, Schedules and Exhibits and the other
documents delivered by the parties in connection herewith, contain
the complete agreement between the Parties hereto with respect to
the transactions contemplated hereby and thereby and supersede all
prior agreements and understandings among the Parties with respect
hereto and thereto.
8.6.
Indemnification
. Halcyon shall
defend, indemnify, and hold harmless the Company and the Company's
affiliates, and each of their respective officers, directors,
employees, agents, successors, and assigns (each, a "
Company Indemnitee
") from and
against all any and all losses, damages, liabilities, deficiencies,
claims, actions, judgments, settlements, interest, awards,
penalties, fines, costs, or expenses of whatever kind, including
reasonable attorneys' fees, fees, and the cost of enforcing any
right to indemnification hereunder and the cost of pursuing any
insurance providers that are incurred by a Company Indemnitee
("Losses") arising out of or resulting from any third party claim,
suit, action, or proceeding (each, an "Action") that results
from:
8.6.1.
Halcyon's breach of
any representation, warranty, covenant, or obligation of Halcyon
(including any action or failure to act by any subcontractor that,
if taken or not taken by Halcyon, would constitute such a breach by
Halcyon) under this Agreement; or
8.6.2.
any negligence or
willful misconduct in connection with the performance or activity
required by or conducted in connection with this Agreement by
Halcyon or any of its subcontractors in connection with performing
Services under this Agreement.
8.7.
Captions.
The captions
contained in this Agreement are for convenience of reference only
and do not form a part of this Agreement.
8.8.
Amendment.
This Agreement may
be amended or modified only by an instrument in writing duly
executed by all Parties.
8.9.
Waiver.
Any Party may extend
the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the
covenants, agreements or conditions contained herein, to the extent
permitted by applicable Law. Any agreement to any such extension or
waiver will be valid only if set forth in a writing signed by the
Party granting such extension or waiver. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such
occurrence.
8.10.
Governing Law; Consent to
Jurisdiction.
This Agreement and the transactions
contemplated hereby, and all disputes between the parties under or
relating to this Agreement or the transactions contemplated hereby,
whether in contract, tort or otherwise, shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Delaware, without regard to its rules of conflict of laws, and, as
applicable, U.S. federal law.
8.11.
Waiver of Jury Trial.
EACH
PARTY TO THIS AGREEMENT HERETO HEREBY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND
(IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS
SECTION
8.10.
8.12.
Severability.
Any term or
provision of this Agreement that is invalid or unenforceable in any
jurisdiction will, as to that jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without rendering
invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable,
the provision will be interpreted to be only so broad as is
enforceable.
8.13.
Counterparts; Electronic
Transmission.
This Agreement may be executed in two or more
counterparts (any of which may be delivered by facsimile or
electronic mail transmission), each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
8.14.
Construction.
The Parties
hereto have participated jointly in the negotiation and drafting of
this Agreement. If any ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto, and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement. The
words "include," "includes" or "including" (or any other tense or
variation of the word "include") in this Agreement shall be deemed
to be followed by the words "without limitation." When reference is
made in this Agreement to an Article, Section, Exhibit or Schedule,
such reference shall be to an Article, Section, Exhibit or Schedule
of this Agreement unless otherwise indicated. The words "hereof,"
"herein" and "hereunder" and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. The definitions
contained in this Agreement are applicable to the singular as well
as to the plural forms of such terms and to the masculine as well
as the feminine and neuter genders of such
terms.
[Signature
Pages Follow]
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the day and year first above written.
Smart
Server, Inc.
By:/s/
Marshall Chesrown
Its: Chier Executive
Officer
|
Halcyon
Consulting, LLC
By:
/s/ Kartik Kakarala
|
[Signature Page to Smart Server, Inc. Services Agreement with
Halcyon Consulting, LLC]
EXHIBIT
A
Technology
:
The
"Technology" refers to the inventory management, functionality
software product for the powersports, recreational vehicles and
marine industries (which includes, but is not limited to,
motorcycles, personal watercraft, all-terrain vehicles and personal
watercraft) commonly known as CyclePro and all of its variants held
by Halcyon, its affiliates or subsidiaries, which includes but is
not limited to all designs, source code, databases, user
interfaces, functionality, documentation, brands, media, logos,
artwork, domain names, business processes and derivative works that
may be known by other names, as well as any updates, enhancements,
modifications, adaptations, error corrections or improvements
thereto developed under this Agreement or otherwise provided by the
Company to Halcyon to work on under this Agreement.
Services
:
Development
Services
●
Halcyon shall
initially make up to 15 full time equivalent resources available to
the Company to perform software design, development, corrections,
testing, delivery, installation, configuring, integration and
customization upon request.
Halcyon
shall ensure all Technology complies with the specifications
therefor.
●
The Company may
increase or decrease the utilization of such resources — or
the allocation of such resources (e.g., switching developers for
quality assurance personnel) upon ten (10) business days' prior
written notice.
●
Halcyon personnel
will work side-by-side with Company personnel and contractors upon
request by, and at the direction of, the Company. Such direction
shall include working on developments within the Company's product
roadmap for the Technology.
Documentation
●
Prior to or concurrently with the delivery of any
software hereunder,
Halcyon
shall provide the Company with complete and
accurate documentation for such software, such documentation
including, but not limited to, all user manuals, operating manuals,
technical manuals, and any other instructions, specifications,
documents, and materials, in any form or media, that describe the
functionality, installation, testing, operation, use, maintenance,
support, and technical and other components, features, and
requirements of any software that, collectively, includes all such
information as may be reasonably necessary for the effective
installation, testing, use, support, and maintenance of the
applicable software by the Company, including the effective
configuration, integration, and systems administration of the
software and performance of all other functions set forth in the
specifications.
On-Going Support
Services
●
Halcyon shall
devote staff to address bugs identified in the Technology by the
Company.
●
With respect to
bugs, errors or other performance issues that the Company
identifies as critical (i.e., materially impacting performance of
the Technology and operation of the Company or its customers),
Halcyon shall, upon the Company's request, work to address the bug
within 24 hours of becoming aware of the issue and to resolve the
bug as soon as is reasonably practical.
Hourly
Rates:
The
following * rates apply for the * of the Term: *
*
Portions of this
Exhibit have been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for Confidential
treatment
DATA
CONFIDENTIALITY AGREEMENT
|
February
8, 2017
|
1.
Sharing of Data
. Cycle Express,
LLC (the “
Company
”) shall provide to Smart
Server, Inc. and its wholly-owned subsidiaries (collectively,
“
Recipient
”)
certain non-public, confidential auction data (“
Confidential Information
”),
including up to the number of NPA Value Guide API look-ups per year
specified on Annex A attached hereto (the “
Pricing Annex
”), to be used for
(i) trade-in appraisals and inventory valuation in
Recipient’s product known as “CyclePro” or (ii)
Recipient’s products that aggregate Confidential Information
with other proprietary data available to Recipient and deliver the
aggregated data or analysis derived therefrom to Recipient's
customers without attribution of individual sources of data
(collectively, the “
Purpose
”). For the purposes of
this agreement, Confidential Information shall include any notes,
analyses, reports, compilations, or studies that either contain or
are derived from such information. The parties acknowledge that the
Confidential Information may contain third party data. The
continued provision to Recipient by the Company of such third party
data is conditioned upon consent from the applicable third party to
such data sharing arrangement. As between Recipient and the
Company, the Company retains all right, title and ownership
interests in all Confidential Information. Recipient shall acquire
no rights in the Confidential Information other than those limited
rights of access and use specifically conferred by the terms of
this Agreement.
2.
Use of Data
. The Confidential
Information shall be made available to Recipient on an on-demand
basis via electronic methods and in accordance with Company's
specifications. Recipient shall not use the Confidential
Information for any purpose other than the Purpose. For the
avoidance of doubt, Recipient shall not be permitted to publish,
license, sell or distribute the Confidential Information, other
than for the Purpose, nor shall Recipient be permitted to retain or
reuse Confidential Information for any purpose, except to the
extent such information is retained as part of the aggregated data
or analysis derived therefrom for no more than 30
days.
3.
Consideration
. As consideration
for the rights granted to Recipient herein, Recipient shall pay to
the Company the sum specified on the Pricing Annex. Amounts payable
pursuant hereunder shall be paid in immediately available cash by
wire transfer, valid company check of Recipient, or such other
method of payment as may be agreed between the parties from time to
time to the Company on or prior to the 1st day of every
month.
4.
Confidentiality Obligations
.
Recipient shall not disclose any Confidential Information to any
person except (a) authorized users of the CyclePro product or users
of any product of Recipient that uses Confidential Information only
in the aggregated form, (b) to its employees, officers, directors,
representatives, advisers, counsel or agents (any such person, a
"
Representative
" and the
Recipient together with its Representatives, the "
Recipient Entities
") who have a need to
know the Confidential Information in connection with the Purpose,
(c) with the written consent of the Company, (d) to its applicable
regulatory authorities, examiners (including self-regulatory
authorities) and auditors or (e) pursuant to a subpoena, civil
investigative demand (or similar process), order, statute, rule or
other legal requirement, including the rules of any stock exchange
on which Recipient's stock is traded. If the Recipient intends to
disclose any Confidential Information pursuant to clause (e) above,
Recipient will give the Company prompt written notice of such
intent so that the Company may seek an appropriate order or other
remedy protecting the Confidential Information from disclosure, and
Recipient will reasonably cooperate with the Company to obtain such
protective order or other remedy. In the event that a protective
order or other remedy is not obtained or the Company waives its
right to seek such an order or other remedy, Recipient may, without
liability under this Agreement, furnish only that portion of the
Confidential Information which, in the opinion of the
Recipient’s counsel, Recipient is legally required to
disclose, provided that Recipient gives the Company written notice
of the information to be disclosed as far in advance of its
disclosure as practicable and Recipient uses its commercially
reasonable efforts to obtain assurances that confidential treatment
will be accorded to such information.
Recipient shall be
responsible for any actions taken by its Representatives in
violation of this agreement. Recipient further agrees (i) to notify
the Company promptly in writing of any use, disclosure or
misappropriation of the Confidential Information in violation of
this agreement which may come to Recipient’s attention and
(ii) to cooperate with the Company in remedying such unauthorized
use or disclosure or misappropriation of the Confidential
Information.
Information will
not be deemed Confidential Information if it is or becomes
available in the public domain on or after the date hereof (other
than as a result of a disclosure by any Recipient Entity in breach
of this agreement).
5.
Trademark
. During the term of
this agreement, the Company hereby grants Recipient a limited,
non-exclusive, non-transferable, non-sublicenseable license to
display the mark “NPA Value Guide” (the
“
Mark
”) solely
for the Purpose stated in clause (i) of Section 1. Recipient shall
not acquire any right, title or interest in to the Mark, or any
goodwill associated with the Mark, by its use of the Mark;
Recipient’s use of the Mark inures solely to the benefit of
the Company. The foregoing license does not include the right to
use any marks of the Company other than the Mark. Recipient
shall not do anything inconsistent with the Company’s
ownership of the Mark, interfere with the Company’s use
and/or registration of the Mark, or attempt to register a
trademark, service mark, logo, tag line, company name, trade name,
user name, e-mail address or domain name that contains, is
confusingly similar to, or is suggestive or derivative of the Mark.
Recipient shall not combine the Mark with any other trademarks,
service marks or copyrightable subject matter (other than the
"CyclePro" mark so long as the two marks are clearly
distinguishable) without prior written approval of the Company.
Recipient acknowledges the importance to the Company of the
goodwill of the Mark. Recipient shall conform its use of the Mark
to reasonable standards that the Company may establish from time to
time. Recipient shall use reasonable commercial efforts to protect
and preserve the commercial value of the Mark and to immediately
notify the Company in writing if it becomes aware of any
infringement, dilution, misappropriation or other violation of the
Company’s rights in the Mark by Recipient or its
Representatives. Company shall have the sole right and discretion
to bring and/or defend actions or proceedings involving the Mark,
including, without limitation, actions for infringement, dilution
and/or unfair competition. At the Company's expense,
Recipient agrees to cooperate in any such proceedings brought by
the Company. If the Company decides to enforce or defend its
rights in the Mark against a third party, all costs incurred and
recoveries made from such third party shall be for the account of
the Company. Recipient shall not delete, remove, modify, obscure or
in any way interfere with any trade secret, trademark or copyright
notice.
6.
Security
. Smart Server shall
comply with all applicable data security laws, use commercially
reasonable efforts to protect the electronic security of the
Confidential Information, including by using anti-virus, security
and firewall technology commonly used in the industry, and promptly
notify the Company of any failure to comply with law, breach of
security, unauthorized access to Confidential Information or
unauthorized access to Company's systems.
7.
Restrictive Covenant
. Recipient
shall not use the Confidential Information or the Mark in any
business other than the Business or in any way that materially and
directly interferes with the Company’s auction and
auction-related business taken as a whole. "Business" means the
development, marketing, distribution, licensing, operation and/or
maintenance of CyclePro software and the product(s) contemplated in
clause (ii) of Section 1.
8.
Indemnity
. From and after the
date hereof, Recipient shall indemnify, defend and hold harmless
the Company, its affiliates and each of their respective officers,
directors, members, partners, employees, agents and representatives
from and against any and all claims, liabilities, obligations,
losses, fines, costs, proceedings or damages, including all
reasonable fees and disbursements of counsel incurred in the
investigation or defense of any of the same or in asserting any of
the Company’s rights hereunder, based on, resulting from,
arising out of or relating to (a) Recipient’s use of the
Confidential Information or the Mark or (b) Recipient’s
breach of this agreement.
9.
Further Cooperation
. When and
if the Company subsequently develops a form data licensing
agreement, Recipient agrees to enter into such agreement (on the
terms mutually acceptable to both parties) to formalize the terms
pursuant to which Recipient may continue to use the Confidential
Information.
10.
Termination
. This agreement and
the obligations of all parties hereunder shall terminate one (1)
year from the date of this agreement. In addition, the
Company may terminate this agreement by providing written notice to
Recipient if Recipient or any of its Representatives: (a) breaches
this agreement (other than Section 7 hereof) and fails to cure such
breach with 15 days of a notice by the Company specifying the
breach, (b) breaches Section 7 of this agreement and fails to cure
such breach within 30 days of a notice by the Company specifying
such breach, (c) disparages the Company, or its products, Mark or
clients (other than in the course of legal proceedings to enforce
the rights of the parties hereunder), (d) makes any unauthorized
use of the Mark, the Confidential Information and fails to
discontinue such unauthorized use within 10 days after receipt of a
notice from the Company specifying the unauthorized use, or (e)
takes any action which tarnishes the Company’s reputation or
Mark (other than in the course of legal proceedings to enforce the
rights of the parties hereunder). Upon termination, Recipient
shall immediately cease all use of the Confidential Information and
the Mark and shall not thereafter use any name, mark, logo, trade
name, domain name or other indicia of origin that is identical or
visually, aurally or phonetically similar to the Mark. Sections 4,
8 and 10-13 of this agreement shall survive the termination of this
agreement.
11.
Assignment
. This Agreement may
not be assigned by Recipient except to a successor to all of its
assets and business.
12.
Disclaimer of Warranties &
Limitation of Liability
. Recipient acknowledges and
agrees that the Mark, Confidential Information and other materials
and products provided under this agreement are provided “AS
IS” and THE COMPANY HEREBY EXPRESSLY DISCLAIMS ALL EXPRESS OR
IMPLIED WARRANTIES OF ANY KIND, INCLUDING WITHOUT LIMITATION ANY
WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. Under no circumstances shall the Company
be liable to Recipient or any third party in connection with this
agreement for any special, indirect, incidental or consequential
damages, including, but not limited to, any loss of revenues, lost
profits or other lost or interrupted business, however caused and
whether based in tort (including negligence), contract or any other
theory of liability, even if such party had been advised of the
possibility of such damages. In any event, under no
circumstances shall the Company’s aggregate liability to
Recipient or third parties under this Agreement exceed an amount
equal to $10,000.
13.
Miscellaneous
. This agreement
shall be governed by and construed and enforced in accordance with
the laws of the State of Delaware, without respect to principles
regarding conflicts of law, and shall benefit and be binding upon
the parties hereto and their respective successors and assigns.
This letter agreement may be executed simultaneously in any number
of counterparts and may be executed by facsimile. Each such
counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute one
agreement.
IN
WITNESS WHEREOF, the parties have executed this Data
Confidentiality Agreement as of the date first set forth
above.
|
SMART
SERVER, INC.
By: /s/ Marshall Chesrown
Name:
Marshall Chesrown
Title:
Chief Executive Officer
CYCLE
EXPRESS, LLC
Name:
James Woodruff
Title:
Chief Operating Officer
|
[Signature Page to Data Confidentiality
Agreement]
ANNEX A
Pricing Annex
*
Confidential terms omitted and provided separately to the
Securities and Exchange Commission.
Exhibit 10.11
Amendment to Convertible Note
Reference is made
to that certain 6% Convertible Note made by Smart Server, Inc. (the
"Company") in favor of Berrard Holdings Limited Partnership (the
“Holder”) dated July 13, 2016 and having and aggregate
principal amount of $191,858.25 (the
“Note”).
For
good and valuable consideration, including the funding by Holder of
the Company's bank account with Wells Fargo, N.A. in the amount of
$5,000.00 and the payment by Holder of certain invoices of the
Company in the amount of $500.00, the Company and Holder hereby
agree that the aggregate principal amount of the note shall be
increased by $5,500.00 such that the new aggregate principal amount
of the Note shall be $197,358.25, effective as of August 31, 2016.
Other than as expressly set forth herein, all other terms of the
Note remain unchanged.
IN
WITNESS WHEREOF, the parties hereto have executed this Amendment to
Note as of the date first above written.
|
SMART
SERVER, INC.
a
Nevada corporation
|
|
By:
/s/ Steven
Berrard
Name:
Steven R. Berrard
Title:
Chief Executive Officer
|
UNCONDITIONAL GUARANTY AGREEMENT
THIS
UNCONDITIONAL GUARANTY AGREEMENT (the "Guaranty") is made as of the
8th day of February, 2017, by NEXTGEN PRO, LLC, a Delaware limited
liability company (the "Guarantor") to and for the benefit of
NEXTGEN DELAER SOLUTIONS, LLC, a Delaware limited liability company
(the "Lender").
R E C I T A L S
A. Pursuant
to the Asset Purchase Agreement executed on January 8, 2017 by and
among the Lender, Smart Server, Inc. (“Borrower”),
Halcyon Consulting, LLC (“Halcyon”) and certain other
parties signatory thereto, the Lender agreed to sell and the
Borrower agreed to purchase substantially all of the assets of the
Lender (the “Asset Purchase Agreement”).
B. One
Million Three Hundred Thirty-Three Thousand Three Hundred
Thirty-Three Dollars ($1,333,333.00) of the purchase price under
the Asset Purchase Agreement is to be paid pursuant to the terms
and conditions set forth in the Subordinated Secured Confessed
Judgment Promissory Note of even date herewith executed by Borrower
in favor of the Lender (the "Note").
C. On
the date hereof, Borrower assigned its rights, but not obligations,
under the Asset Purchase Agreement to the Guarantor.
D. As
a condition precedent to the Lender’s agreement to close
under the Asset Purchase Agreement, the Guarantor has agreed to
execute and deliver this Guaranty pursuant to which the Guarantor
will guarantee to the Lender (the "Beneficiary") the full payment
and performance of all of the Borrower's obligations under the
Note.
NOW,
THEREFORE, in consideration of the foregoing recitals, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Guarantor agrees as
follows:
1.
Guaranty.
The Guarantor unconditionally guarantees to the Beneficiary and its
respective successors and assigns, the full and prompt payment to
the Beneficiary when due of all amounts of every kind due to the
Beneficiary from the Borrower pursuant to the Note, and the full
and prompt performance of all of the Borrower's obligations to the
Beneficiary under the Note. The Guarantor unconditionally
guarantees that all sums due and owing under the Note shall be paid
when and as due, whether by reason of installments, acceleration or
otherwise, time being of the essence.
2.
Nature
of the Guaranty.
This is a guaranty of payment and not of
collection and the obligations of the Guarantor hereunder shall be
direct, immediate and primary. This Guaranty shall in all respects
be a continuing absolute and unconditional guarantee irrespective
of the genuineness, validity or enforceability of the Note or any
part thereof, or by the existence, enforceability, perfection or
extent of any collateral therefor.
3.
Beneficiaries
Need Not Pursue Rights Against Borrower, Any Guarantor, or
Collateral.
The Guarantor authorizes the Beneficiary without
notice, demand or any reservation of rights against the Guarantor
and without affecting the Guarantor's obligations hereunder, from
time to time, to resort to the Guarantor for payment of the amounts
due and performance of the obligations under the Note or any part
thereof, whether or not the Beneficiary shall have resorted to any
collateral securing the Note or any part thereof or shall have
proceeded against any other person principally or secondarily
obligated with respect to the Note or any part
thereof.
4.
Accuracy
of Representations.
The Guarantor warrants that all of the
representations made by the Guarantor in connection with the Note
and the transactions contemplated thereby are true and correct and
not knowingly misleading and the Guarantor agrees to indemnify the
Beneficiary from any loss or expense as a result of any
representation or statement of the Guarantor or the Borrower being
false, incorrect, or knowingly misleading
5.
Representations
of the Guarantor.
To induce the Beneficiary to accept this
Guaranty for the purposes for which it is given, the Guarantor
represents and warrants to the Beneficiary as follows:
A.
Organization
. Guarantor is a limited
liability company, duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all
requisite corporate power and authority to own, lease and operate
its properties and to carry on its business. Guarantor is duly
qualified or authorized to do business as a foreign company and is
in good standing under the laws of each jurisdiction in which the
conduct of its business or the ownership of its properties requires
such qualification or authorization, except to the extent the
failure to do so would not reasonably be expected to result in a
material adverse effect on Guarantor.
B.
Non-Existence
of Defaults, etc.
The Guarantor is not in material default
with respect to any of its existing indebtedness, and the making
and performance of this Guaranty will not immediately, or with the
passage of time, the giving of notice, or both, constitute a
default under any existing indebtedness of Guarantor.
C.
Violation
of Laws.
In the conduct of its businesses and affairs, the
Guarantor is not in violation of any applicable federal, state or
local laws, the violation of which would cause a material adverse
effect on the Guarantor.
D.
Capacity.
The execution, delivery and performance of this Guaranty has been
duly authorized by all necessary action by or on behalf of
Guarantor. The Guarantor has the legal capacity to execute and
deliver this Guaranty as a valid obligation, which is binding and
enforceable in accordance with the terms hereof.
E.
No
Insolvency
. There is no pending or threatened bankruptcy or
insolvency proceeding by or against the Guarantor.
6.
Security
.
As security for the prompt payment and complete performance by
Guarantor of its obligations under this Guaranty, Guarantor has
executed and delivered to the Lender on the date hereof the
Security Agreement (hereinafter defined in Section 9).
7.
Rights
of Beneficiary to Deal With Borrower, Guarantor, and
Collateral.
The Beneficiary may, without compromising,
impairing, diminishing, or in any way releasing the Guarantor from
the Guarantor's obligations hereunder and without notifying or
obtaining the prior approval of the Guarantor at any time or from
time to time: (a) waive or excuse a default or defaults by the
Borrower or any person who has guaranteed in whole or in part any
of the Borrower's obligations under the Note, or a delay in the
exercise by the Beneficiary of any or all of the Beneficiary's
rights or remedies with respect to such default or defaults; (b)
grant extensions of time for payment or performance by the Borrower
or any person who has guaranteed in whole or in part any of the
Borrower's obligations under the Note; (c) release, substitute,
exchange, surrender, or add collateral of the Borrower or any
person who has guaranteed in whole or in part any of the Borrower's
obligations under the Note, or waive, release or subordinate, in
whole or in part, any lien or security interest held by the
Beneficiary on any real or personal property securing payment or
performance, in whole or in part, of the Borrower's obligations
under the Note; (d) release the Borrower or any person who has
guaranteed in whole or in part, any of the Borrower's obligations
under the Note; (e) apply payments made by the Borrower, or by any
person who has guaranteed in whole or in part, any of the
Borrower's obligations under the Note, to any sums owed by the
Borrower to the Beneficiary, in any order, or manner, or to any
specific account or accounts, as the Beneficiary may elect; or (f)
modify, change, renew, extend, or amend, in any respect any of the
provisions of the Note or this Guaranty.
8.
Waivers
by the Guarantor.
The Guarantor waives: (a) any and all
notices whatsoever with respect to this Guaranty or with respect to
any of the Borrower's obligations under the Note, including, but
not limited to, notice of: (i) the Beneficiary's acceptance hereof
or the Beneficiary's intention to act, or the Beneficiary's action,
in reliance hereon; (ii) the present existence or future occurrence
of an event of default of any of the Borrower's obligations under
the Note or any terms or amounts thereof of any change therein;
(iii) any default by the Borrower or any surety, pledgor, grantor
of security, guarantor or other person who has guaranteed or
secured in whole or in part the Borrower's obligations under the
Note; and (iv) the obtaining or release of any guaranty or surety
agreement (in addition to this Guaranty), pledge, assignment, or
other security for any of the Borrower's obligations under the
Note; and (b) (i) presentment, protest and demand for payment of
any sum due from the Borrower under the Note or any person who has
guaranteed in whole or in part any of the Borrower's obligations
under the Note, including the Guarantor; (ii) notice of default by
the Borrower or any person who has guaranteed in whole or in part
any of the Borrower's obligations under the Note, including the
Guarantor; (iii) demand for performance by the Borrower or any
person who has guaranteed in whole or in part any of the Borrower's
obligations under the Note.
9.
Events
Authorizing Acceleration of Guaranty.
In the event any of
the following occur with respect to the Guarantor or, with respect
to the Borrower (an "Event of Default"), the Beneficiary may, in
the Beneficiary's sole and absolute discretion, accelerate and call
due as to the Guarantor all sums due from the Borrower: (a)
Guarantor shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled
“Bankruptcy,” as now or hereafter in effect, or any
successor thereto (the “
Bankruptcy Code
”); or an
involuntary case is commenced against Guarantor under the
Bankruptcy Code, and the petition is not controverted within 30
days, or is not dismissed within 90 days, after commencement of the
case; or a trustee or custodian is appointed for, or takes charge
of, all or substantially all of the property of Guarantor, or
Guarantor commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to Guarantor, or there
is commenced against Guarantor any such proceeding which remains
undismissed for a period of 90 days, or Guarantor is adjudicated
insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or Guarantor
makes a general assignment for the benefit of creditors; (b) any
"Default" as defined under the Note or under the Security Agreement
between the Guarantor and the Lender, dated the date hereof,
attached hereto as Exhibit A and incorporated herein by reference
(the “Security Agreement”), or (c) a default by the
Guarantor in payment or in performance of any of its obligations
under this Guaranty.
10.
Confession of
Judgment.
UPON A DEFAULT OF
THIS GUARANTY, THE GUARANTOR AUTHORIZES ANY ATTORNEY ADMITTED TO
PRACTICE BEFORE ANY COURT OF RECORD IN THE UNITED STATES, INCLUDING
GLENN D. SOLOMON,
AS GUARANTOR’S TRUE AND
LAWFUL ATTORNEY-IN-FACT, WITH FULL POWER AND AUTHORITY FOR
GUARANTOR, IN GUARANTOR’S NAME, PLACE AND STEAD,
ON GUARANTOR’S BEHALF, TO
WAIVE THE ISSUANCE AND SERVICE OF PROCESS
AND CONFESS JUDGMENT AGAINST GUARANTOR, IN THE
FULL AMOUNT THEN DUE UNDER THIS GUARANTY, INCLUDING ANY EXPENSES OF
COLLECTION, PLUS REASONABLE ATTORNEYS’ FEES. THE AUTHORITY
AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST GUARANTOR SHALL
NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH
AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM
TIME TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS
THE BENEFICIARY SHALL DEEM NECESSARY OR ADVISABLE UNTIL ALL SUMS
DUE UNDER THE GUARANTY HAVE BEEN PAID IN FULL
.
11.
Collection
Expenses.
All reasonable and documented out-of-pocket costs
and expenses (including reasonable attorney fees and expenses) of
the prevailing party in any action to enforce any rights under this
Guaranty, shall be borne and paid by the non-prevailing
party.
12.
Subordination of Certain
Indebtedness
. If the Guarantor shall advance any sums to
Borrower or its successors or assigns or if the Borrower or its
successors or assigns shall hereafter become indebted to the
Guarantor, such sums and indebtedness shall be subordinate in all
respects to the amounts then or thereafter due and owing to the
Beneficiary. Nothing herein contained shall be construed to give
the Guarantor any right of subrogation in and to any obligations of
the Borrower to the Beneficiary, or in any of the collateral
therefor, or all or any part of the Beneficiary's interest
therein.
13.
Invalidity of Any
Part.
If any provision or part of any provision of this
Guaranty shall for any reason be held invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions or the
remaining part of any effective provisions of this Guaranty and
this Guaranty shall be construed as if such invalid, illegal, or
unenforceable provision or part thereof had never been contained
herein, but only to the extent of its invalidity, illegality, or
unenforceability.
14.
Subrogation Rights.
The Guarantor waives and releases the Beneficiary from any damages
which the Guarantor may incur as a result of any impairing,
diminishing, or destroying of any of the Guarantor's rights of
subrogation, unless such impairing, diminishing or destroying is
willful or grossly negligent. To the extent that the Guarantor
satisfies or discharges any of the Borrower's obligations to the
Beneficiary, the Beneficiary does hereby assign, transfer and
convey unto the Guarantor any and all rights, interests, actions or
causes of action, claims and remedies of the Beneficiary, provided,
that, any and all such rights of the Guarantor shall be subordinate
to the rights and interests of the Beneficiary
hereunder.
15.
Notices
. Any notice
or consent required or permitted by this Guaranty (but without
implying any obligation to give a notice or obtain a consent) shall
be in writing and shall be made by hand delivery, by overnight mail
by nationally recognized courier, by wire or by certified mail,
return receipt requested, postage prepaid, addressed to the
Beneficiary or the Guarantor at the appropriate address set forth
below or to such other address as may be hereafter specified by
written notice by either party, and shall be considered given as of
the date of hand delivery or wire, one day after being sent by
overnight mail or as of two (2) business days after the date of
mailing, as the case may be:
If to
the Beneficiary:
NextGen
Dealer Solutions, LLC
1431
Greenway Drive
Suite
775
Irving,
TX 75038
Attention: Kartik
Kakarala
With a
copy (which shall not constitute notice) to:
Glenn
D. Solomon, Esquire
Offit
Kurman, P.A.
8171
Maple Lawn Boulevard
Suite
200
Maple
Lawn, MD 20759
If to
the Guarantor:
NextGen
Pro, LLC
4521
Sharon Road
Suite
370
Charlotte, NC
28211
Attn:
Steven Berrard
With a
copy (which shall not constitute notice) to:
Akerman
LLP
Three
Brickell City Centre
98 SE
7
th
Street
Miami,
FL 33131
Attn:
Scott A. Wasserman
16.
Effective
Date.
The guaranty of the Guarantor as herein set forth
shall be effective as of the date of this Guaranty, independent of
the date of execution or delivery thereof.
17.
Duration.
This Guaranty shall be a continuing one and shall be binding upon
the Guarantor regardless of how long before or after the date of
this Guaranty any of the Borrower's obligations to the Beneficiary
were or are incurred by the Borrower. The guaranty under this
Guaranty shall be terminated upon the repayment and performance in
full of all of the Borrower's obligations under the
Note.
18.
Binding
Nature.
This Guaranty shall inure to the benefit of and be
enforceable by the Beneficiary and the Beneficiary's successors and
assigns and any other person to whom the Beneficiary may grant an
interest in the Borrower's obligations to the Beneficiary, and
shall be binding upon and enforceable against the Guarantor's
heirs, personal representatives, and assigns.
19.
Assignability.
This Guaranty may be assigned by the Beneficiary at any time or
from time to time. This Guaranty may not be assigned by the
Guarantor.
20.
Choice
of Law; Consent to Jurisdiction.
This Guaranty shall be
construed, interpreted, and enforced under the laws of the State of
Maryland.
21.
Tense,
Gender, Defined Terms, Captions.
As used herein, the plural
shall refer to and include the singular, and the singular the
plural, and the use of any gender shall include and refer to any
other gender. All captions are for the purpose of convenience
only.
IN
WITNESS WHEREOF, the Guarantor has executed this Guaranty under
seal as of the date first written above, with the specific
intention that this Guaranty constitutes an instrument under
seal.
WITNESS:
________________________________
|
GUARANTOR
NEXTGEN
PRO, LLC
By:
/s/ Marshall
Chesrown
(SEAL)
|
SECURITY AGREEMENT
THIS
SECURITY AGREEMENT (the “Agreement”), made this 8th day
of February, 2017, by and between NEXTGEN PRO, LLC, a Delaware
limited liability company, with an address of 4521 Sharon Road,
Suite 370, Charlotte, North Carolina 28211 ("
Debtor
"),
and NEXTGEN DEALER SOLUTIONS, LLC, a Delaware limited liability
company, with an address of 1431 Greenway Drive, Suite 775, Irving,
Texas 75038 (the "
Secured
Party
").
1.
Grant of Security
Interest
. Subject to the applicable terms of this Security
Agreement, Debtor grants to Secured Party a security interest in
the Collateral to secure the payment of the Obligation, provided
that the security interest granted hereby is subject to the
provisions of applicable law (e.g., UCC Section
9-408(c).
2.
The
Obligation
. As used in this Agreement, "
Obligation
"
means collectively all of the following:
(a)
All amounts due
pursuant to the terms of an Unconditional Guaranty Agreement dated
even date herewith (the "
Guaranty
")
from the Debtor to Secured Party, pursuant to which the Debtor
guaranteed the payment and performance of all obligations of Smart
Server, Inc. under a Subordinated Secured Confessed Judgment
Promissory Note dated even date herewith in the face amount of One
Million Three Hundred Thirty-Three Thousand Three Hundred
Thirty-Three Dollars ($1,333,333.00).
(b)
All costs incurred
by Secured Party to enforce the security interest granted hereby
("
Security
Interest
"), collect the Obligation, and maintain the
Collateral free of liens (other than Permitted Encumbrances as
defined on
Exhibit
A
attached hereto), and including (but not limited to)
reasonable attorneys' fees and legal expenses, and expenses of
sale.
3.
The
Collateral
. As used in this Security Agreement,
"
Collateral
"
shall mean all of Debtor's assets, both now and hereafter acquired,
and wherever located, including but not limited to:
(a)
Accounts;
(b)
Chattel
paper;
(c)
Contracts;
(d)
Deposit
accounts;
(e)
Documents;
(f)
Equipment;
(g)
Farm
products;
(h)
Fixtures;
(i)
General
intangibles;
(j)
Goods;
(k)
Instruments;
(l)
Inventory;
(m)
Investment
property;
(n)
Letter-of-credit
rights;
(o)
Franchise
agreements; and
(p)
The Patent
Collateral (hereinafter defined);
(q)
The Trademark
Collateral (hereinafter defined);
(r)
Intellectual
property; and
(s)
Proceeds and
products of all of the foregoing;
provided however,
that the "Collateral" shall exclude the "
Excluded
Property
". Excluded Property means (i) motor vehicles and
other assets subject to certificates of title, letter of credit
rights and commercial tort claims; (ii) pledges and security
interests prohibited by applicable law, rule, regulation; (iii)
equity interests in any person other than wholly-owned subsidiaries
of Borrower; (iv) any lease, license or other agreement to the
extent that a grant of a security interest therein would violate or
invalidate such lease, license or agreement or create a right of
termination in favor of any other party thereto; (v) any
governmental licenses or state or local franchises, charters and
authorizations (but not registered patents and trademarks); (vi)
any equipment or other asset subject to liens securing capitalized
lease obligations or permitted purchase money
indebtedness.
“Patent
Collateral” means:
(a)
All patents and
patent applications, including patent application number 14614160
known as “Near Field Communication (NFC) Vehicle
Identification System and Process” filed with the United
States Patent and Trademark Office and all registrations, reissues,
divisions, continuations, continuations-in-part, renewals,
extensions and reexaminations thereof and amendments thereto (the
"
Patents
");
(b)
all rights of any
kind whatsoever of Debtor accruing under any of the Patents
provided by applicable law of any jurisdiction, by international
treaties and conventions and otherwise throughout the
world;
(c)
any and all
royalties, fees, income, payments and other proceeds now or
hereafter due or payable with respect to any and all of the
Patents; and
(d)
any and all claims
and causes of action, with respect to any of the Patents, whether
occurring before, on or after the date hereof, including all rights
to and claims for damages, restitution and injunctive and other
legal and equitable relief for past, present and future
infringement, misappropriation, violation, misuse, breach or
default, with the right but no obligation to sue for such legal and
equitable relief and to collect, or otherwise recover, any such
damages.
“Trademark
Collateral” means:
(a)
All trademark
registrations and applications, including the trademark
“CyclePro” registered with the United States Patent and
Trademark Office, Registration number 4,662,863, together with the
goodwill connected with the use of and symbolized thereby and all
extensions and renewals thereof (the
"
Trademarks
"),
excluding only United States
intent-to-use trademark applications to the extent that and solely
during the period in which the grant of a security interest therein
would impair, under applicable federal law, the registrability of
such applications or the validity or enforceability of
registrations issuing from such applications;
(b)
all rights of any
kind whatsoever of Debtor accruing under any of the Trademarks
provided by applicable law of any jurisdiction, by international
treaties and conventions and otherwise throughout the
world;
(c)
any and all
royalties, fees, income, payments and other proceeds now or
hereafter due or payable with respect to any and all of the
Trademarks; and
(d)
any and all claims
and causes of action, with respect to any of the Trademarks,
whether occurring before, on or after the date hereof, including
all rights to and claims for damages, restitution and injunctive
and other legal and equitable relief for past, present and future
infringement, dilution, misappropriation, violation, misuse, breach
or default, with the right but no obligation to sue for such legal
and equitable relief and to collect, or otherwise recover, any such
damages.
4.
Debtor's
Covenants
.
(a)
Debtor shall
maintain at its principal place of business complete records
regarding all account balances due Debtor, whether secured or
unsecured, which account balances comprise the Collateral
hereunder. Such records shall include, without limitation, current
statements of balances due, and copies of all contracts,
instruments or documents evidencing, securing or guarantying such
balances. Upon reasonable prior notice by Secured Party, Debtor
shall make all such records available for inspection and copying by
Secured Party and/or its agents during normal business
hours.
(b)
Debtor covenants
and agrees that it shall: (i) take adequate care of the Collateral
(except as provided in 4(b)(viii) below) in accordance with
reasonable and customary business practices for similar businesses
as the Debtor's, reasonable wear and tear excepted; (ii) insure the
Collateral for such hazards and in such amounts customary for
similar businesses as the Debtor's, with policies to name the
Secured Party as additional insured and/or loss payee, as the case
may be; (iii) pay all costs necessary to enforce the Security
Interest, collect the Obligation, and maintain the Collateral free
of liens (other than Permitted Encumbrances), including (but not
limited to) taxes, assessments, reasonable attorneys' fees and
legal expenses, and expenses of sale; (iv) furnish Secured Party
with any information on the Collateral reasonably requested by
Secured Party; (v) upon receipt of reasonable prior written notice,
allow Secured Party to inspect the Collateral, and inspect and copy
all records relating to the Collateral and the Obligation, in each
case, during business hours; (vi) take commercially reasonable
steps to preserve the liability of account debtors, obligors, and
secondary parties whose obligations are part of the Collateral;
(vii) notify Secured Party of any material change occurring in or
to the Collateral, taken as a whole, and (viii) in its sole
discretion, make the decisions regarding any continued prosecution
and maintenance of the Patent Collateral and Trademark
Collateral.
(c)
Debtor agrees and
covenants that it shall not (without Secured Party's consent, which
shall not be unreasonably withheld): (i) remove the Collateral or
any records relating thereto from the address set forth above; (ii)
allow the Collateral to become an accession to other goods; or
(iii) allow the Collateral to be affixed to real estate, except
goods identified herein as fixtures.
(d)
Debtor warrants and
represents to the best of its information, knowledge and belief, as
follows: no financing statement or collateral assignment has been
filed or executed with respect to the Collateral except in favor of
the Secured Party; (ii) Debtor is absolute owner of the Collateral
and the Collateral is not encumbered other than by Permitted
Encumbrances; (iii) none of the Collateral is affixed to real
estate or an accession to other goods, nor will Collateral acquired
hereafter be affixed to real estate or an accession to other goods
when acquired, unless Debtor has furnished Secured Party the
consents or disclaimers necessary to make this Security Interest
valid against persons holding interests in the real estate or other
goods; (iv) all of the Collateral is located at Debtor's address
set forth above; (v) Debtor has never been known by, or done
business under, any name other than those set forth
above.
(e)
Debtor authorizes
Secured Party to (i) file financing statements and assignments
covering the Collateral and all personal property of Debtor and
containing such legends as Secured Party shall deem necessary or
desirable to protect Secured Party's interest in the Collateral,
and (ii) file and have recorded with the United States Patent and
Trademark Office a short-form of a security agreement evidencing
the Security Interest in the Patent Collateral and Trademark
Collateral in the forms attached hereto and incorporated herein by
reference as Exhibits B and C.
5.
Default
.
(a)
Any "Default" as
defined under the Note or the Guaranty shall be an event of default
hereunder. "Senior Debt" means any indebtedness of the Debtor as
defined under United States Generally Accepted Accounting
Principles ("
GAAP
"), as
in effect on the date hereof, that is secured by any assets of the
Debtor, including, but not limited to (i) any indebtedness for
borrowed money or indebtedness evidenced by notes, bonds or similar
instruments, including any term loan, revolving credit financing,
working capital financing, floor plan financing or real estate
financing, and (ii) purchase money indebtedness and capital leases,
in each case, whether now existing or entered into after the date
hereof.
(b)
When an event of
default occurs, the entire Obligation becomes immediately due and
payable at Secured Party's option without notice to Debtor, and
Secured Party may proceed to enforce payment of same and exercise
any and all of the rights and remedies available to a secured party
under the Uniform Commercial Code as well as all other rights and
remedies provided for herein or by law. When Debtor is in default,
Debtor, upon demand by Secured Party, shall assemble the Collateral
and make it available to Secured Party at a place reasonably
convenient to both parties. Debtor is entitled to any surplus and
shall be liable to Secured Party for any deficiency, arising from
accounts, contract rights, or chattel paper included in the
Collateral through sale thereof to the Secured Party.
6.
Remedies of Secured
Party
. Secured Party may, in its discretion, after an event
of default: (i) require Debtor to give possession or control of the
Collateral to Secured Party, and Secured Party may take possession
of the Collateral without the exercise of judicial process; (ii)
indorse as Debtor's agent any instruments or chattel paper in the
Collateral; (iii) notify account debtors and obligors on
instruments to make payment directly to Secured Party; (iv) contact
account debtors directly to verify information furnished by Debtor;
(v) take control of proceeds and use cash proceeds to reduce any
part of the Obligation; (vi) take any action Debtor is required to
take or otherwise necessary to perfect, preserve, and enforce the
Security Interest, and maintain and preserve the Collateral,
without notice to Debtor, and add costs of same to the Obligation
(but Secured Party is under no duty to take any such action); (vii)
release Collateral in its possession to Debtor, temporarily or
otherwise; (viii) take control of funds generated by the
Collateral, such as dividends, interest, proceeds or refunds from
insurance, and use same to reduce any part of the Obligation; and
(ix) waive any of its rights hereunder without such waiver
prohibiting the later exercise of the same or similar
rights.
7.
Satisfaction of
Liens
. If Secured Party disposes of the Collateral following
default, the proceeds of such disposition shall be applied first to
the Note secured by the Guaranty included in the Obligation, and
thereafter to all remaining Obligations secured hereby. For
purposes of this paragraph, an extended or renewed guaranty will be
considered executed on the date of the original
Guaranty.
8.
Subordination
.
Notwithstanding anything to the contrary set forth in this Security
Agreement:
(a)
The Security
Interest shall be subordinated for all purposes and in all respects
to the liens and security interests securing any Senior Debt,
regardless of the time, manner or order of perfection of any such
liens and security interests.
(b)
Promptly upon
Debtor's request, Secured Party will from time to time execute and
deliver a subordination agreement on the terms consistent with
Section 7 of the Note and this Section 8 and reasonably requested
by any holder of any Senior Debt (or any agent for such holders),
including but not limited to subordination provisions providing for
subordination of the Note, the Obligation and the Security Interest
to any Senior Debt.
9.
Release
.
Upon payment in full of the Obligation, the Security Interest shall
automatically terminate and be released without any further action
of the Secured Party, and at such time Debtor is authorized to file
terminations, releases and any other document necessary to
terminate and release any evidence of the Security Interest
delivered by Debtor or otherwise recorded or filed to evidence the
Security Interest, including releases of UCC financing
statements.
10.
Miscellaneous
.
The rights and privileges of Secured Party shall inure to its
successors and assigns. All representations, warranties, covenants
and agreements of Debtor shall bind Debtor and Debtor's successors
and assigns. Unless otherwise defined herein, definitions in the
Uniform Commercial Code apply to words and phrases in this
Agreement. Debtor waives presentment, demand, notice of dishonor,
protest, and extension of time without notice as to any instruments
and chattel paper in the Collateral. Notice mailed to Debtor's
address set forth above, or to Debtor's most recent changed address
on file with Secured Party, at least five (5) days prior to the
related action (or, if the Uniform Commercial Code specifies a
longer period, such longer period prior to the related action),
shall be deemed reasonable. The laws of the State of Maryland shall
govern the rights and obligations of the parties to this Security
Agreement and the interpretation, construction and enforceability
thereof. As used herein, the singular shall include the plural, the
plural shall include the singular, and the use of any gender shall
include all genders. A photographic or other reproduction of this
Security Agreement, or any financing statement signed by Debtor, is
sufficient as a financing statement.
IN
WITNESS WHEREOF, the parties have executed this Security Agreement
under seal as of the day and year first above written.
WITNESS:
______________________________________________
|
NEXTGEN
PRO, LLC
By:
/s/
Marshall Chesrown
(SEAL)
Marshall Chesrown,
President
"Debtor"
|
|
|
|
|
WITNESS:
|
NEXTGEN
DEALER SOLUTIONS, LLC
By:
/s/
Kartik Kakarala
(SEAL)
Kartik
Kakarala, Manager
"Secured
Party"
|
EXHIBIT "A"
Permitted Encumbrances
(a)
liens created
hereby or otherwise securing the Note;
(b)
the following liens
existing on the date hereof and any renewals or extensions thereof:
________________________________________________________;
(c)
liens (other than
liens imposed under ERISA) for taxes, assessments or governmental
charges or levies not yet due or which are being contested in good
faith and by appropriate proceedings diligently conducted, if
adequate reserves with respect thereto are maintained on the books
of the applicable person in accordance with GAAP;
(d)
statutory or common
law liens of landlords (and customary landlords’ liens in
leases), carriers, warehousemen, mechanics, materialmen and
suppliers and other liens imposed by law or pursuant to customary
reservations or retentions of title arising in the ordinary course
of business, provided that such liens secure only amounts not
overdue by more than 90 days or, if more than 90 days overdue, are
unfiled and no other action has been taken to enforce such lien or
which are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have
been established;
(e)
pledges or deposits
in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other
social security legislation, other than any lien imposed by
ERISA;
(f)
deposits to secure
the performance of bids, trade contracts and leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(g)
easements,
rights-of-way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially
detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of
the applicable person;
(h)
judgment liens in
respect of judgments, the uninsured portion of which, if any, does
not exceed $100,000;
(i)
liens securing
Senior Debt;
(j)
leases or subleases
granted to others not interfering in any material respect with the
business of Debtor;
(k)
any interest of
title of a lessor under, and liens arising from UCC financing
statements (or equivalent filings, registrations or agreements in
foreign jurisdictions) relating to, leases;
(l)
normal and
customary rights of setoff upon deposits of cash in favor of banks
or other depository institutions;
(m)
liens of a
collection bank arising under Section 4-210 of the Uniform
Commercial Code on items in the course of collection;
(n)
liens of sellers of
goods to the Debtor arising under Article 2 of the Uniform
Commercial Code or similar provisions of applicable law in the
ordinary course of business, covering only the goods sold and
securing only the unpaid purchase price for such goods and related
expenses; and
(o)
liens existing on
property at the time of its acquisition;
provided
,
that
, (i) such lien was not
created in contemplation of such acquisition, and (ii) such lien
does not encumber any property other than the property encumbered
at the time of such acquisition.
EXHIBIT
“B”
PATENT
SECURITY AGREEMENT
THIS
PATENT SECURITY AGREEMENT (the “
Agreement
”), made this
8th day of February, 2017, by and between NEXTGEN PRO, LLC, a
Delaware limited liability company, with an address of 4521 Sharon
Road, Suite 370, Charlotte, North Carolina 28211
(“
Debtor
”), and NEXTGEN
DEALER SOLUTIONS, LLC, a Delaware limited liability company, with
an address of 1431 Greenway Drive, Suite 775, Irving, Texas 75038
(the “
Secured
Party
”).
WHEREAS, Debtor has
executed an Unconditional Guaranty Agreement dated even date
herewith (the "
Guaranty
")
in favor of the Secured Party, pursuant to which the Debtor
guaranteed the payment and performance of all obligations of Smart
Server, Inc. under a Subordinated Secured Confessed Judgement
Promissory Note executed in favor of the Secured Party on the date
hereof.
WHEREAS, to secure
the obligations under the Guaranty, the Debtor executed and
delivered to the Secured Party that certain Security Agreement
dated as of the date hereof (the “
Security
Agreement
”).
WHEREAS, under the
terms of the Security Agreement, the Debtor granted to the Secured
Party, a security interest in, among other property, certain
intellectual property of the Debtor, and agreed to execute and
deliver this Patent Security Agreement, for recording with
national, federal and state government authorities, including, but
not limited to, the United States Patent and Trademark
Office.
NOW
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor agrees with
the Secured Party as follows:
1.
Grant of Security
. Debtor
hereby pledges and grants to the Secured Party a security interest
in and to all of the right, title and interest of such Debtor in,
to and under the following, wherever located, and whether now
existing or hereafter arising or acquired from time to time (the
“
Patent
Collateral
”):
(a)
All patents and
patent applications, including patent application number 14614160
entitled “Near Field Communication (NFC) Vehicle
Identification System and Process” filed with the United
States Patent and Trademark Office and all registrations, reissues,
divisions, continuations, continuations-in-part, renewals,
extensions and re-examinations thereof and amendments thereto (the
“
Patents
”);
(b)
all rights of any
kind whatsoever of such Debtor accruing under any of the Patents
provided by applicable law of any jurisdiction, by international
treaties and conventions and otherwise throughout the
world;
(c)
any and all
royalties, fees, income, payments and other proceeds now or
hereafter due or payable with respect to any and all of the
Patents; and
(d)
any and all claims
and causes of action, with respect to any of the Patents, whether
occurring before, on or after the date hereof, including all rights
to and claims for damages, restitution and injunctive and other
legal and equitable relief for past, present and future
infringement, misappropriation, violation, misuse, breach or
default, with the right but no obligation to sue for such legal and
equitable relief and to collect, or otherwise recover, any such
damages.
2.
Recordation
. Debtor authorizes
the Commissioner for Patents and any other government officials to
record and register this Patent Security Agreement upon request by
the Secured Party.
3.
Loan Documents
. This Patent
Security Agreement has been entered into pursuant to and in
conjunction with the Security Agreement, which is hereby
incorporated by reference. The provisions of the Security
Agreement, including the provisions in Section 8 for subordination,
shall supersede and control over any conflicting or inconsistent
provision herein. The rights and remedies of the Secured Party with
respect to the Patent Collateral are as provided by the Security
Agreement, and nothing in this Patent Security Agreement shall be
deemed to limit such rights and remedies.
4.
Execution in Counterparts
. This
Patent Security Agreement may be executed in counterparts (and by
different parties hereto in different counterparts), each of which
shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of an executed
counterpart of a signature page to this Patent Security Agreement
by facsimile or in electronic (i.e., “pdf” or
“tif” format) shall be effective as delivery of a
manually executed counterpart of this Patent Security
Agreement.
5.
Successors and Assigns
. This
Patent Security Agreement will be binding on and shall inure to the
benefit of the parties hereto and their respective successors and
assigns.
6.
Governing Law
. This Patent
Security Agreement and any claim, controversy, dispute or cause of
action (whether in contract or tort or otherwise) based upon,
arising out of or relating to this Patent Security Agreement and
the transactions contemplated hereby and thereby shall be governed
by, and construed in accordance with, the laws of the United States
and the State of Maryland, without giving effect to any choice or
conflict of law provision or rule (whether of the State of Maryland
or any other jurisdiction).
[Intentionally
Left BlankóSignature Page Follows]
IN
WITNESS WHEREOF, Debtor has caused this Patent Security Agreement
to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
|
NEXTGEN
PRO, LLC
|
|
By:
/s/ Marshall
Chesrown
Name:
Marshall
Chesrown
Title:President
Address
for Notices:
4521
Sharon Road
Suite
370
Charlotte,
North Carolina 28211
Attention:
Steven Berrard
|
AGREED
TO AND ACCEPTED:
NEXTGEN DEALER SOLUTIONS, LLC
|
By:
/s/
Kartik
Kakarala
Name:
Kartik
Kakarala
Title:President
Address
for Notices:
1431
Greenway Drive
Suite
775
Irving,
Texas 75038
Attention:
Kartik Kakarala
|
EXHIBIT
“C”
TRADEMARK
SECURITY AGREEMENT
THIS
TRADEMARK SECURITY AGREEMENT (the “
Agreement
”), made this
8th day of February, 2017, by and between NEXTGEN PRO, LLC, a
Delaware limited liability company, with an address of 4521 Sharon
Road, Suite 370, Charlotte, North Carolina 28211
(“
Debtor
”), and NEXTGEN
DEALER SOLUTIONS, LLC, a Delaware limited liability company, with
an address of 1431 Greenway Drive, Suite 775, Irving, Texas 75038
(the “
Secured
Party
”).
WHEREAS, Debtor has
executed an Unconditional Guaranty Agreement dated even date
herewith (the "
Guaranty
")
in favor of the Secured Party, pursuant to which the Debtor
guaranteed the payment and performance of all obligations of Smart
Server, Inc. under a Subordinated Secured Confessed Judgement
Promissory Note executed in favor of the Secured Party on the date
hereof.
WHEREAS, to secure
the obligations under the Note, the Debtor executed and delivered
to the Secured Party that certain Security Agreement dated as of
the date hereof (the “
Security
Agreement
”).
WHEREAS, under the
terms of the Security Agreement, the Debtor granted to the Secured
Party, a security interest in, among other property, certain
intellectual property of the Debtor, and agreed to execute and
deliver this Trademark Security Agreement, for recording with
national, federal and state government authorities, including, but
not limited to, the United States Patent and Trademark
Office.
NOW
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor agrees with
the Secured Party as follows:
1.
Grant of Security
. Debtor
hereby pledges and grants to the Secured Party a security interest
in and to all of the right, title and interest of such Debtor in,
to and under the following, wherever located, and whether now
existing or hereafter arising or acquired from time to time (the
“
Trademark
Collateral
”):
(a)
All trademark
registrations and applications, including the
trademark
registered with the United States Trademark and Trademark Office,
Registration number 4,662,863, together with the goodwill connected
with the use of and symbolized thereby and all extensions and
renewals thereof (the “
Trademarks
”),
excluding only United States intent-to-use trademark applications
to the extent that and solely during the period in which the grant
of a security interest therein would impair, under applicable
federal law, the registrability of such applications or the
validity or enforceability of registrations issuing from such
applications;
(b)
all rights of any
kind whatsoever of such Debtor accruing under any of the Trademarks
provided by applicable law of any jurisdiction, by international
treaties and conventions and otherwise throughout the
world;
(c)
any and all
royalties, fees, income, payments and other proceeds now or
hereafter due or payable with respect to any and all of the
Trademarks; and
(d)
any and all claims
and causes of action, with respect to any of the Trademarks,
whether occurring before, on or after the date hereof, including
all rights to and claims for damages, restitution and injunctive
and other legal and equitable relief for past, present and future
infringement, dilution, misappropriation, violation, misuse, breach
or default, with the right but no obligation to sue for such legal
and equitable relief and to collect, or otherwise recover, any such
damages.
2.
Recordation
. Debtor authorizes
the Commissioner for Trademarks and any other government officials
to record and register this Trademark Security Agreement upon
request by the Secured Party.
3.
Loan Documents
. This Trademark
Security Agreement has been entered into pursuant to and in
conjunction with the Security Agreement, which is hereby
incorporated by reference. The provisions of the Security
Agreement, including the provisions in Section 8 for subordination,
shall supersede and control over any conflicting or inconsistent
provision herein. The rights and remedies of the Secured Party with
respect to the Trademark Collateral are as provided by the Security
Agreement, and nothing in this Trademark Security Agreement shall
be deemed to limit such rights and remedies.
4.
Execution in Counterparts
. This
Trademark Security Agreement may be executed in counterparts (and
by different parties hereto in different counterparts), each of
which shall constitute an original, but all of which when taken
together shall constitute a single contract. Delivery of an
executed counterpart of a signature page to this Trademark Security
Agreement by facsimile or in electronic (i.e., “pdf” or
“tif” format) shall be effective as delivery of a
manually executed counterpart of this Trademark Security
Agreement.
5.
Successors and Assigns
. This
Trademark Security Agreement will be binding on and shall inure to
the benefit of the parties hereto and their respective successors
and assigns.
6.
Governing Law
. This Trademark
Security Agreement and any claim, controversy, dispute or cause of
action (whether in contract or tort or otherwise) based upon,
arising out of or relating to this Trademark Security Agreement and
the transactions contemplated hereby and thereby shall be governed
by, and construed in accordance with, the laws of the United States
and the State of Maryland, without giving effect to any choice or
conflict of law provision or rule (whether of the State of Maryland
or any other jurisdiction).
IN
WITNESS WHEREOF, Debtor has caused this Trademark Security
Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above
written.
|
NEXTGEN
PRO, LLC
|
|
By:
/s/
Marshall
Chesrown
Name:
Marshall
Chesrown
Title:President
Address
for Notices:
4521
Sharon Road
Suite
370
Charlotte,
North Carolina 28211
Attention:
Steven Berrard
|
AGREED
TO AND ACCEPTED:
NEXTGEN DEALER SOLUTIONS, LLC
|
By:
/s/
Kartik
Kakarala
Name:
Kartik
Kakarala
Title:President
Address
for Notices:
1431
Greenway Drive
Suite
775
Irving,
Texas 75038
Attention:
Kartik Kakarala
|
Exhibit 31.1
CERTIFICATION
I,
Marshall Chesrown, certify that:
(1)
I have reviewed this Annual Report on Form 10-K of RumbleON,
Inc.;
(2)
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
(3)
Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
(4)
The registrant’s other certifying officer and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
(5)
The registrant’s other certifying officer and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrant’s internal control over financial
reporting.
February
14, 2017
|
By:
|
/s/
Marshall
Chesrown
|
|
|
|
Marshall
Chesrown
|
|
|
|
Chairman
and Chief Executive Officer
|
|
Exhibit 31.2
CERTIFICATION
I,
Steven R. Berrard, certify that:
(1)
I have
reviewed this Annual Report on Form 10-K of RumbleON,
Inc.;
(2)
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
(3)
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
(4)
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a)
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
(b)
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(d)
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
(5)
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a)
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
(b)
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
By:
|
/s/
Steven
R. Berrard
|
|
|
|
Steven
R. Berrard
|
|
|
|
Chief
Financial Officer
|
|
Exhibit 32.1
CERTIFICATION PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the accompanying Annual Report on Form 10-K of
RumbleON, Inc. (the "Company") for the year ended December 31,
2016, as filed with the U.S. Securities and Exchange Commission
(the “Report”), the undersigned hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge
and belief, that:
(1)
|
the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
|
(2)
|
the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company
.
|
February
14, 2017
|
By:
|
/s/
Marshall
Chesrown
|
|
|
|
Marshall
Chesrown
|
|
|
|
Chairman
and Chief Executive Officer
|
|
Exhibit 32.2
CERTIFICATION PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the accompanying Annual Report on Form 10-K of
RumbleON, Inc. (the "Company") for the year ended December 31,
2016, as filed with the U.S. Securities and Exchange Commission
(the “Report”), the undersigned hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge
and belief, that:
(1)
|
the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
|
(2)
|
the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
|
|
By:
|
/s/
Steven
R. Berrard
|
|
|
|
Steven
R. Berrard
|
|
|
|
Chief
Financial Officer
|
|
Exhibit
99.1
RumbleOn Announces Acquisition of NextGen Dealer Solutions, LLC
and
Technology Services Agreement with Halcyon Consulting,
LLC
Kartik Kakarala will join the Board of Directors of RumbleON and
serve as Chief Technology Advisor
Charlotte, NC, February 14, 2017:
RumbleON (OTCQB: RMBL)
today announced it has closed on the previously announced
acquisition of the assets of NextGen Dealer Solutions, LLC and a
technology services agreement with Halcyon Consulting,
LLC.
NextGen’s
proprietary technology platform will underpin the operations of
RumbleON and accelerate the implementation of its business plan. In
addition, the technology services agreement with Halcyon Consulting
will provide RumbleON with the ability to integrate NextGen’s
technology into the RumbleON platform and lead future enhancements.
Mr. Kakarala will join the Board of Directors of RumbleON and serve
as its Chief Technology Advisor.
“The
acquisition of NextGen Dealer Solutions and the associated services
agreement with Halcyon is a significant milestone for RumbleOn as
the software acquired will significantly accelerate the RumbleON
business plan and will provide us the opportunity to quickly roll
out our online platform, said Marshall Chesrown, Chairman and CEO
of RumbleON. “I have had personal experience with many of the
previous game-changing technologies
designed and built by Halcyon including
applications for vehicle appraisal, inventory management and credit
reporting.
We are confident that utilizing this software
will allow RumbleON the same opportunity in the powersports sector
as we move forward. I am also pleased to welcome Kartik to the
Board of Directors and as our Chief Technology Advisor, and I am
confident that he will add significant value and insight to
RumbleON in both roles.”
About RumbleON
RumbleON
(RMBL) is designed to be a unique, capital light,
and disruptive e-commerce platform facilitating the ability of both
consumers and dealers to Buy-Sell-Trade-Finance pre-owned
recreation vehicles. It is our goal to have the platform recognized
as the most trusted and effective solution for the sale,
acquisition, and distribution of recreation vehicles and provide
users an efficient, fast, transparent, and engaging experience. Our
initial focus is the market for 650cc and larger on road
motorcycles, particularly those concentrated in the Harley Davidson
brand; we will look to extend to other brands and additional
vehicle types and products as the platform matures.
FORWARD-LOOKING STATEMENTS
This
press release contains “forward-looking statements,” as
that term is defined under the Private Securities Litigation Reform
Act of 1995 (PSLRA), which statements may be identified by words
such as “expects,” “plans,”
“projects,” “will,” “may,”
“anticipate,” “believes,”
“should,” “intends,”
“estimates,” and other words of similar meaning. Such
forward looking statements include statements about the NextGen
acquisition, and the company’s implementation of its updated
business plan and strategy. Readers are cautioned not to place
undue reliance on these forward-looking statements, which are based
on the company’s expectations as of the date of this press
release and speak only as of the date of this press release and are
advised to consider the following factors: the company has no
operating history and no assurance can be given that the company
will achieve or maintain profitability; the initial development and
growth of the company’s business over the first 24 months of
operations may not be indicative of the company’s future
growth and, if the company continues to grow rapidly, it may not be
able to manage its growth effectively; the company may require
additional capital to pursue its business objectives and respond to
business opportunities, challenges or unforeseen circumstances and
if capital is not available on terms acceptable to the company or
at all, the company may not be able to develop and grow its
business as anticipated and its business, operating results and
financial condition may be harmed; if key industry participants
perceive the company in a negative light or relationships with them
suffer harm, the company’s ability to operate and grow its
business and its financial performance may be damaged; the company
may be unable to develop, maintain or grow relationships with
information data providers or may experience interruptions in the
data feeds it provides, which may limit the information that it is
able to provide to its users and dealers as well as adversely
affect the timeliness of such information and may impair its
ability to attract or retain consumers and dealers and to timely
invoice all parties; if the company suffers a significant
interruption in its ability to gain access to third-party data, its
business and operating results will suffer; the success of its
business will depend heavily on its marketing and branding efforts,
especially with respect to the company’s website and branded
mobile applications, as well as those websites of dealers that
provide website solutions, and these efforts may not be successful;
the failure to develop and maintain the company’s brand could
harm its ability to grow unique visitor traffic and to expand the
company’s dealer network; the company anticipates relying on
internet search engines to drive traffic to its website, and if the
company fails to appear prominently in the search results, its
business would be adversely affected; a significant disruption in
service on the company’s website or of its mobile
applications could damage its reputation and result in a loss of
consumers, which could harm its business, brand, operating results,
and financial condition; if the company is unable to provide a
compelling buying experience to its users, the number of
transactions between the company’s users, the company and the
dealers will decline and the company’s revenue and results of
operations will suffer harm; the company expects that the growth of
its business will rely significantly on its ability to increase the
number of dealers such that the company is able to increase the
number of transactions between its users and dealers and the
failure to do so would limit the company’s growth; the
company’s ability to grow its complementary product offerings
may be limited, which could negatively impact its development,
growth, revenue and financial performance; the company will be
relying on third-party financing providers to finance a significant
portion of its customers’ vehicle purchases; the
company’s ability to sell recreational vehicles may be
adversely impacted by increased supply of and/or declining prices
for used recreational vehicles and excess supply of new
recreational vehicles; the company will rely on a number of third
parties to perform certain operating and administrative functions
for the company; the company participates in a highly competitive
market, and pressure from existing and new companies may adversely
affect its business and operating results; seasonality or weather
trends may cause fluctuations in the company’s unique
visitors, revenue and operating results; the company expects to be
subject to a complex framework of federal and state laws and
regulations primarily concerning vehicle sales, advertising and
brokering, many of which are unsettled, still developing and
contradictory, which have in the past, and could in the future,
subject the company to claims, challenge the company’s
business model or otherwise harm its business; the company
collects, processes, stores, shares, discloses and uses personal
information and other data, and its actual or perceived failure to
protect such information and data could damage its reputation and
brand and harm its business and operating results; failure to
adequately protect intellectual property could harm the
company’s business and operating results; the company may in
the future be subject to intellectual property disputes, which are
costly to defend and could harm its business and operating results;
the company depends on key personnel to operate its business, and
if the company is unable to retain, attract and integrate qualified
personnel, its ability to develop and successfully grow its
business could be harmed; and the company may acquire other
companies or technologies, which could divert management's
attention, result in additional dilution to its stockholders and
otherwise disrupt its operations and harm its operating results.
Also, readers are advised to consider the additional factors under
the heading “Cautionary Statement Regarding Forward-Looking
Statements” and “Risk Factors” in the
company’s Annual Report on Form 10-K, as may be supplemented
or amended by the company’s Quarterly Reports on Form 10-Q
and other filings with the SEC. The company undertakes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as required by law.
Contact Information:
Investor
and Media Contacts:
John
Rouleau/Alecia Pulman, ICR
RumbleON@icrinc.com