UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed
by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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AYRO,
Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
party:
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(4)
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Date
Filed:
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900
E. Old Settlers Boulevard, Suite 100
Round
Rock, Texas 78664
Telephone:
(512) 994-4917
November
17, 2021
Dear
Stockholder:
You
are cordially invited to attend the Annual Meeting of Stockholders of AYRO, Inc. to be held at 12:00 p.m., New York time, on December
14, 2021. The annual meeting will be conducted in a virtual format only via live webcast at www.virtualshareholdermeeting.com/AYRO2021.
In
light of public health concerns regarding the coronavirus outbreak, this year’s annual meeting will be conducted in a virtual format
only in order to assist in protecting the health and well-being of our stockholders and employees and to provide access to our stockholders
regardless of geographic location. Stockholders will not be able to attend the annual meeting in person; however, stockholders of record
will be able to vote and submit questions electronically prior to the annual meeting by visiting www.proxyvote.com, and during the annual
meeting by visiting www.virtualshareholdermeeting.com/AYRO2021. Specific instructions for accessing the meeting are provided in the enclosed
Notice of Annual Meeting of Stockholders, proxy card or voting instruction form you received. If you encounter any difficulties accessing
the virtual annual meeting, please call the technical support number available on the virtual meeting page on the morning of the annual
meeting.
Your
vote is very important. Whether or not you expect to be present at the annual meeting, please vote as promptly as possible to ensure
your representation and the presence of a quorum at the annual meeting. As an alternative to voting during the annual meeting, you may
vote online, by phone or by mail by following the instructions on the enclosed proxy card. Voting online or by phone or written proxy
ensures your representation at the annual meeting regardless of whether you attend the virtual meeting. If your shares are held in the
name of a broker, trust, bank or other nominee, and you receive these materials through your broker or through another intermediary,
please complete and return the materials in accordance with the instructions provided to you by such broker or other intermediary or
contact your broker directly in order to obtain a proxy issued to you by your nominee holder to attend the annual meeting and vote. Failure
to do so may result in your shares not being eligible to be voted by proxy at the annual meeting. On behalf of the board of directors,
I urge you to submit your proxy as soon as possible, even if you currently plan to attend the meeting virtually.
If
you have any questions or need assistance with voting, please contact Kingsdale Advisors, our proxy solicitor, by calling toll-free at
888-518-6554 or collect at 416-867-2272, or via e-mail at contactus@kingsdaleadvisors.com.
If
you plan to virtually attend the annual meeting, you will need the 16-digit control number on the enclosed proxy card or on the instructions
that accompany your proxy materials. The annual meeting will begin promptly at 12:00 p.m., New York time. Online check-in will begin
at 11:45 a.m., New York time, and you should allow ample time for the online check-in procedures.
Thank
you for your support of our company. I look forward to seeing you at the annual meeting.
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Sincerely,
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/s/
Joshua Silverman
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Joshua
Silverman
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Chairman
of the Board of Directors
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON DECEMBER 14, 2021:
Our
official Notice of Annual Meeting of Stockholders, Proxy Statement and
2020 Annual Report to Stockholders are available at:
www.proxyvote.com
900
E. Old Settlers Boulevard, Suite 100
Round
Rock, Texas 78664
Telephone:
(512) 994-4917
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held December 14, 2021
The
2021 Annual Meeting of Stockholders (the “Annual Meeting”) of AYRO, Inc., a Delaware corporation (the “Company”)
will be held at 12:00 p.m., New York time, on December 14, 2021, virtually only via live webcast over the Internet at www.virtualshareholdermeeting.com/AYRO2021.
We will consider and act on the following items of business at the Annual Meeting:
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(1)
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Election
of seven directors to serve on our board of directors for a term of one year or until their successors are elected and qualified,
for which the following are nominees: Thomas M. Wittenschlaeger, Joshua Silverman, Wayne R. Walker, George Devlin, Sebastian Giordano,
Zvi Joseph, and Greg Schiffman.
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(2)
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Ratification
of the appointment of Friedman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021.
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(3)
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Such
other business as may properly come before the Annual Meeting.
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Stockholders
are referred to the Proxy Statement accompanying this notice for more detailed information with respect to the matters to be considered
at the Annual Meeting. After careful consideration, the board of directors recommends a vote “FOR” each director nominee
and “FOR” Proposal 2.
In
light of public health concerns regarding the coronavirus outbreak, this year’s Annual Meeting will be conducted in a virtual format
only in order to assist in protecting the health and well-being of our stockholders and employees and to provide access to our stockholders
regardless of geographic location. Stockholders will not be able to attend the Annual Meeting in person; however, stockholders of record
will be able to vote and submit questions electronically prior to the Annual Meeting by visiting www.proxyvote.com, and during the Annual
Meeting by visiting www.virtualshareholdermeeting.com/AYRO2021, and entering the 16-digit control number included on the enclosed proxy
card or on the instructions that accompany your proxy materials. Specific instructions for accessing the meeting are provided in the
enclosed Notice of Annual Meeting of Stockholders, proxy card or voting instruction form you received.
The
board of directors has fixed the close of business on November 5, 2021 as the record date (the “Record Date”) for the Annual
Meeting. Only holders of record at the close of business on the Record Date of shares of our common stock and our Series H-6 Convertible
Preferred Stock are entitled to receive notice of the Annual Meeting. Only holders of record at the close of business on the Record Date
of shares of our common stock and our Series H-6 Convertible Preferred Stock, subject to the terms of the Certificate of Designations,
Preferences and Rights of the Series H-6 Convertible Preferred Stock, are entitled to vote at the Annual Meeting or at any postponement(s)
or adjournment(s) of the Annual Meeting. A complete list of registered stockholders entitled to vote at the Annual Meeting will be available
for inspection at the office of the Company during regular business hours for the 10 calendar days prior to and during the Annual Meeting.
A complete list of registered stockholders entitled to vote at the Annual Meeting will also be available for viewing during the Annual
Meeting by visiting www.virtualshareholdermeeting.com/AYRO2021.
You
can vote virtually during the Annual Meeting by use of a proxy card if you receive a printed copy of our proxy materials, or via the
Internet or telephone as indicated on the proxy card. If you hold shares of our common stock as the stockholder of record, then you have
the right to vote those shares at the Annual Meeting. If you are a beneficial owner and hold shares of our common stock in street name,
then you can vote the shares you beneficially own through the online voting platform under a legal proxy from your bank, brokerage firm,
or other nominee and are not required to take any additional action to obtain a legal proxy. Please follow the instructions at www.virtualshareholdermeeting.com/AYRO2021
in order to vote your shares during the Annual Meeting, whether you hold your shares of record or in street name.
Whether
or not you expect to attend the Annual Meeting, we urge you to vote your shares as promptly as possible by Internet, telephone or mail
so that your shares may be represented and voted at the Annual Meeting.
YOUR
VOTE AND PARTICIPATION IN THE COMPANY’S AFFAIRS ARE IMPORTANT. TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING.
PLEASE VOTE IN ONE OF THESE WAYS:
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USE
THE TOLL-FREE NUMBER shown on your proxy card;
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VISIT
THE WEBSITE noted on your proxy card to vote via the Internet; or
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MARK,
SIGN, DATE AND PROMPTLY RETURN the enclosed proxy card in the postage-paid envelope.
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STOCKHOLDERS
WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE VIRTUALLY IF THEY DESIRE.
If
your shares are held in the name of a broker, trust, bank or other nominee, and you receive these materials through your broker or
through another intermediary, please complete and return the materials in accordance with the instructions provided to you by such broker
or other intermediary or contact your broker directly in order to obtain a proxy issued to you by your nominee holder to attend the Annual
Meeting virtually and vote. Failure to do so may result in your shares not being eligible to be voted by proxy at the Annual Meeting.
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By
Order of the Board of Directors,
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/s/
Thomas M. Wittenschlaeger
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Thomas
M. Wittenschlaeger
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Chief
Executive Officer
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November
17, 2021
TABLE
OF CONTENTS
AYRO,
INC.
900
E. Old Settlers Boulevard, Suite 100
Round
Rock, Texas 78664
Telephone:
(512) 994-4917
PROXY
STATEMENT
FOR
THE
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD ON DECEMBER 14, 2021
Unless
the context otherwise requires, references in this Proxy Statement to “we,” “us,” “our,” the “Company,”
or “AYRO” refer to AYRO, Inc., a Delaware corporation, and its direct and indirect subsidiaries. In addition, unless the
context otherwise requires, references to “stockholders” are to the holders of our voting securities, which consist of our
common stock and Series H-6 Convertible Preferred Stock, par value $0.0001 per share (“Series H-6 Preferred Stock”).
The
accompanying proxy is solicited by the board of directors (the “Board”) on behalf of AYRO, Inc., a Delaware corporation,
to be voted at the 2021 annual meeting of stockholders of the Company (the “Annual Meeting”) to be held virtually via live
webcast on the Internet at www.virtualshareholdermeeting.com/AYRO2021, on December 14, 2021 at 12:00 p.m., New York time, for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders, and at any postponement(s), adjournment(s) or recess(es) thereof.
This Proxy Statement and accompanying form of proxy are dated November 17, 2021. On or about November 18, 2021, we will
commence mailing of copies of the proxy materials to stockholders.
If
you held shares of our common stock or Series H-6 Preferred Stock at the close of business on November 5, 2021 (the “Record
Date”), you are invited to attend the Special Meeting virtually at www.virtualshareholdermeeting.com/NAOV2021SM2 and vote on
the proposal described in this proxy statement.
The
executive offices of the Company are located at, and the mailing address of the Company is, 900 E. Old Settlers Boulevard, Suite 100,
Round Rock, Texas 78664.
The
Company will pay the costs of soliciting proxies from stockholders. We have retained Kingsdale Advisors to assist in the solicitation
of proxies for a fee of $10,000 plus reimbursement of expenses. In addition to solicitation by mail and by Kingsdale Advisors, our directors,
officers and employees may solicit proxies on behalf of the Company, without additional compensation, by telephone, facsimile, mail,
on the Internet or in person.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON DECEMBER 14, 2021:
Our
official Notice of Annual Meeting of Stockholders, Proxy Statement and
2020 Annual Report to Stockholders are available at:
www.proxyvote.com
ABOUT
THE ANNUAL MEETING
What
is a proxy?
A
proxy is another person that you legally designate to vote your stock. If you designate someone as your proxy in a written document,
that document is also called a “proxy” or a “proxy card.” If you are a street name holder, you must obtain a
proxy from your broker or nominee in order to vote your shares during the Annual Meeting.
What
is a proxy statement?
A
proxy statement is a document that regulations of the Securities and Exchange Commission (the “SEC”) require that we give
to you when we ask you to sign a proxy card to vote your stock at the Annual Meeting.
What
is the purpose of the Annual Meeting?
At
our Annual Meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders, including the following:
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(1)
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Election
of seven directors to serve on our Board for a term of one year or until their successors are elected and qualified, for which the
following are nominees: Thomas M. Wittenschlaeger, Joshua Silverman, Wayne R. Walker, George Devlin, Sebastian Giordano, Zvi Joseph,
and Greg Schiffman (“Proposal 1”).
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(2)
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Ratification
of the appointment of Friedman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021
(“Proposal 2”).
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(3)
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Such
other business as may properly come before the Annual Meeting.
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What
is “householding” and how does it affect me?
With
respect to eligible stockholders who share a single address, we may send only one Proxy Statement to that address unless we receive instructions
to the contrary from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing
and postage costs. Eligible stockholders of record receiving multiple copies of our Proxy Statement can request householding by contacting
us in the same manner. Stockholders who own shares through a bank, broker or other nominee can request householding by contacting the
nominee.
We
hereby undertake to deliver promptly, upon written or oral request, a copy of the Proxy Statement to a stockholder at a shared address
to which a single copy of the document was delivered. If you are a stockholder of record, you may obtain additional copies at the same
address you share with other stockholders by contacting Broadridge Financial Solutions, Inc., either by calling (866) 540-7095, or by
writing to Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you are a beneficial owner and hold your
shares in a brokerage or custody account, you can request additional copies of the Special Meeting materials at the same address you
share with other stockholders or you can request householding by notifying your broker, bank or other nominee.
SEC
rules permit companies to send you a notice that proxy information is available on the Internet, instead of mailing you a complete set
of materials. In the future, the Company may choose to distribute proxy information in this manner.
What
should I do if I receive more than one set of voting materials?
You
may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxy cards or voting
instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction
card for each brokerage account in which you hold shares. Similarly, if you are a stockholder of record and hold shares in a brokerage
account, you will receive a proxy card for shares held in your name and a voting instruction card for shares held in street name. Please
complete, sign, date and return each proxy card and voting instruction card that you receive, or vote by telephone or Internet in accordance
with the instructions set forth thereon, to ensure that all your shares are voted.
What
is the record date and what does it mean?
The
record date to determine the stockholders entitled to notice of and to vote at the Annual Meeting is the close of business on November
5, 2021 (the “Record Date”). The Record Date is established by the Board as required by Delaware law. Only holders of record
at the close of business on the Record Date of shares of our common stock and Series H-6 Preferred Stock are entitled to receive notice
of the Annual Meeting. Only holders of record at the close of business on the Record Date of shares of our common stock and our Series
H-6 Convertible Preferred Stock, subject to the terms of the Certificate of Designations, Preferences and Rights of the Series H-6 Convertible
Preferred Stock, are entitled to vote, as a single class, at the Annual Meeting or at any postponement(s) or adjournment(s) of the Annual
Meeting. On the Record Date, 36,866,956 shares of common stock were issued and outstanding. On the Record Date, 50 shares of Series H-6
Preferred Stock, which are convertible into 1,440 shares of common stock, were issued and outstanding, and after application of the conversion
price applicable for determination of the maximum number of votes a holder of Series H-6 Preferred Stock is entitled to cast pursuant
to the terms of the Series H-6 Preferred Stock, subject also to the beneficial ownership limitation, as set forth in the Certificate
of Designations, Preferences and Rights of the Series H-6 Preferred Stock, holders of Series H-6 Preferred Stock are entitled to an aggregate
of 1,000 votes on the proposals described in this Proxy Statement. See “What are the voting rights of the stockholders?”
below.
Who
is entitled to vote at the Annual Meeting?
The
holders of common stock and Series H-6 Preferred Stock at the close of business on the Record Date are entitled to vote at the Annual
Meeting, voting together as a single class on all matters described in this Proxy Statement. On the Record Date, such holders held total
voting power of 36,867,956 shares.
What
are the voting rights of the stockholders?
Each
holder of common stock is entitled to one vote per share of common stock on all matters to be acted upon at the Annual Meeting. Each
holder of Series H-6 Preferred Stock is entitled to the number of votes equal to the number of whole shares of common stock into which
the Series H-6 Preferred Stock beneficially owned by such holder are convertible as of the Record Date (subject to the 9.99% beneficial
ownership limitations) on all matters presented to the stockholders, voting together with the holders of common stock as a single class;
however, pursuant to the terms of the Series H-6 Preferred Stock as set forth in the Certificate of Designations, Preferences and Rights
of the Series H-6 Preferred Stock, holders of Series H-6 Preferred Stock in no event shall be permitted to exercise a greater number
of votes than such holders would have been entitled to cast if the Series H-6 Preferred Stock had immediately been converted into shares
of common stock at a conversion price equal to $3.60. Accordingly, each holder of Series H-6 Preferred Stock is entitled to exercise
votes for approximately 20.0 shares for each share of Series H-6 Preferred Stock held.
What
constitutes a quorum for the Annual Meeting?
The
presence, in person or by proxy, of the holders of no less than 33 1/3% of the outstanding shares of the Company’s capital stock
entitled to vote is necessary to constitute a quorum to transact business. If a quorum is not present or represented at the Annual Meeting,
the stockholders entitled to vote at the Annual Meeting, present in person or by proxy, or the chairperson of the Annual Meeting (if
any), may adjourn the Annual Meeting from time to time without notice or other announcement until a quorum is present or represented.
What
is the difference between a stockholder of record and a “street name” holder?
If
your shares are registered directly in your name with Issuer Direct Corporation, our stock transfer agent, you are considered the stockholder
of record with respect to those shares. The Proxy Statement and proxy card have been sent directly to you by us.
If
your shares are held in a stock brokerage account or by a bank or other nominee, the nominee is considered the record holder of those
shares. You are considered the beneficial owner of these shares, and your shares are held in “street name.” The proxy materials
have been forwarded to you by your nominee. As the beneficial owner, you have the right to direct your nominee concerning how to vote
your shares by using the voting instructions they included in the mailing or by following their instructions for voting by telephone
or the Internet.
What
is a broker non-vote?
Broker
non-votes occur when shares are held indirectly through a broker, bank or other intermediary on behalf of a beneficial owner (referred
to as held in “street name”), and the broker submits a proxy but does not vote for a matter because the broker has not received
voting instructions from the beneficial owner, and (i) the broker does not have discretionary voting authority on the matter or (ii)
the broker chooses not to vote on a matter for which it has discretionary voting authority. Under the rules of the New York Stock Exchange
that govern how brokers may vote shares for which they have not received voting instructions from the beneficial owner, brokers are permitted
to exercise discretionary voting authority only on “routine” matters when voting instructions have not been timely received
from a beneficial owner. Proposal 2 is considered a “routine matter.” Therefore, if you do not provide voting instructions
to your broker regarding such proposal, your broker will be permitted to exercise discretionary voting authority to vote your shares
on such proposal. In the absence of specific instructions from you, your broker does not have discretionary authority to vote your shares
with respect to Proposal 1.
How
do I vote my shares?
If
you are a record holder, you may vote your voting securities at the Annual Meeting in person virtually or by proxy. To vote in person
virtually, you must be logged in and registered to virtually attend the Annual Meeting and cast your vote before the announcement of
the close of voting during the Annual Meeting. To vote by proxy, you must do one of the following:
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USE
THE TOLL-FREE NUMBER shown on your proxy card;
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VISIT
THE WEBSITE shown on your proxy card to vote via the Internet; or
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MARK,
SIGN, DATE AND PROMPTLY RETURN the enclosed proxy card in the postage-paid envelope.
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The
telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow you to vote your shares
and to confirm that your instructions have been properly recorded. Please refer to your proxy card or the information forwarded by your
bank, broker or other nominee to see which options are available to you. The proxy card is fairly simple to complete, with specific instructions
right on the card. By completing and submitting it, you will direct the designated persons (known as “proxies”) to vote your
stock at the Annual Meeting in accordance with your instructions. The Board has appointed Joshua Silverman, Chairman of the Board, to
serve as the proxy for the Annual Meeting.
Your
proxy card will be valid only if you sign, date and return it before the Annual Meeting. If you complete all of the proxy card except
one or more of the voting instructions, then the designated proxies will vote your shares as to which you provide no voting instructions
in the manner described under “What if I do not specify how I want my shares voted?” below. We do not anticipate that any
other matters will come before the Annual Meeting, but if any other matters properly come before the meeting, then the designated proxies
will vote your shares in accordance with applicable law and their judgment.
If
you hold your shares in “street name,” your bank, broker or other nominee should provide to you a request for voting instructions
along with the Company’s proxy solicitation materials. By completing the voting instruction card, you may direct your nominee how
to vote your shares. If you complete the voting instruction card except for one or more of the voting instructions, then your broker
may be unable to vote your shares with respect to the proposal as to which you provide no voting instructions. See “What is a broker
non-vote?” Alternatively, if you want to vote your shares during the Annual Meeting, you must contact your nominee directly in
order to obtain a proxy issued to you by your nominee holder. Note that a broker letter that identifies you as a stockholder is not the
same as a nominee issued proxy.
Even
if you currently plan to attend the Annual Meeting, we recommend that you also submit your proxy as described above so that your votes
will be counted if you later decide not to attend the Annual Meeting or are unable to attend.
What
if I have technical difficulties or trouble accessing the Annual Meeting?
We
will have technicians ready to assist you with any technical difficulties you may have in accessing the Annual Meeting. If you encounter
any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will
be posted on the Virtual Shareholder Meeting log in page.
Who
counts the votes?
All
votes will be tabulated by Broadridge Investor Communication Solutions, Inc. (“Broadridge”), the inspector of election appointed
for the Annual Meeting. Each proposal will be tabulated separately.
What
are my choices when voting?
When
you cast your vote on:
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Proposal
1:
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You
may vote for all director nominees or may withhold your vote as to one or more director nominees.
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Proposal
2:
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You
may vote for the proposal, against the proposal or abstain from voting on the proposal.
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What
are the Board’s recommendations on how I should vote my shares?
The
Board recommends that you vote your shares as follows:
“FOR”
each director nominee and “FOR” Proposal 2.
What
if I do not specify how I want my shares voted?
If
you are a record holder who returns a completed proxy that does not specify how you want to vote your shares on one or more proposals,
the proxies will vote your shares for each proposal as to which you provide no voting instructions, and such shares will be voted in
the following manner:
“FOR”
each director nominee and “FOR” Proposal 2.
If
you are a “street name” holder and do not provide voting instructions on one or more proposals, your bank, broker or other
nominee will be unable to vote those shares with respect to Proposal 1, but will be able to vote those shares with respect to Proposal
2. See “What is a broker non-vote?”
Can
I change my vote?
Yes.
If you are a record holder, you may revoke your proxy at any time by any of the following means:
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Attending
the Annual Meeting and voting during the Annual Meeting. Your attendance at the Annual Meeting will not by itself revoke a proxy.
You must vote your shares online during the Annual Meeting to revoke your proxy.
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Completing
and submitting a new valid proxy bearing a later date by Internet, telephone or mail.
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Giving
written notice of revocation to the Company addressed to Curt Smith, Chief Financial Officer, at the Company’s
address above, which notice must be received before noon, New York time on December 13, 2021.
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If
you are a street name holder, your bank, broker or other nominee should provide instructions explaining how you may change or revoke
your voting instructions.
What
percentage of the vote is required to approve each proposal?
Assuming
the presence of a quorum, with respect to Proposal 1, the seven director nominees who receive the most votes present in person or represented
by proxy at the Annual Meeting and entitled to vote on the election of directors will be elected. Assuming the presence of a quorum,
approval of Proposal 2 will require the affirmative vote of a majority of the voting power of the shares of our common stock represented
in person or by proxy at the Annual Meeting and entitled to vote on such proposals.
How
are abstentions and broker non-votes treated?
Abstentions
or votes withheld are included in the determination of the number of shares present at the Annual Meeting for determining a quorum at
the meeting. Votes withheld will have no effect with respect to the election of directors (Proposal 1). Abstentions will have the same
effect as a vote against the ratification of the independent registered public accounting firm (Proposal 2).
Broker
non-votes are included in the determination of the number of shares present at the Annual Meeting for determining a quorum at the meeting.
Broker non-votes will have no effect upon Proposals 1or 2.
Do
I have any dissenters’ or appraisal rights with respect to any of the matters to be voted on at the Annual Meeting?
No.
None of our stockholders have any dissenters’ or appraisal rights with respect to the matters to be voted on at the Annual Meeting.
What
are the solicitation expenses and who pays the cost of this proxy solicitation?
Our
Board is asking for your proxy and we will pay all of the costs associated with asking for stockholder proxies. We will reimburse brokerage
houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material
to the beneficial owners of common stock and collecting voting instructions. We may use officers and employees of the Company to ask
for proxies, as described below.
Is
this Proxy Statement the only way that proxies are being solicited?
No.
In addition to the solicitation of proxies by use of the mail, officers and employees of the Company may solicit the return of proxies,
either by mail, telephone, fax, e-mail or through personal contact. These officers and employees will not receive additional compensation
for their efforts but will be reimbursed for out-of-pocket expenses. Brokerage houses and other custodians, nominees and fiduciaries,
in connection with shares of the common stock registered in their names, will be requested to forward solicitation material to the beneficial
owners of shares of common stock.
Are
there any other matters to be acted upon at the Annual Meeting?
Management
does not intend to present any business at the Annual Meeting for a vote other than the matters set forth in the Notice of Annual Meeting
of Stockholders and has no information that others will do so. If other matters requiring a vote of the stockholders properly come before
the Annual Meeting, it is the intention of the persons named in the accompanying proxy card to vote the shares represented by the proxies
held by them in accordance with applicable law and their judgment on such matters.
Where
can I find voting results?
The
Company expects to publish the voting results in a current report on Form 8-K, which it expects to file with the SEC within four business
days following the Annual Meeting.
Who
can help answer my questions?
The
information provided above in this “Question and Answer” format is for your convenience only and is merely a summary of the
information contained in this Proxy Statement. We urge you to carefully read this entire Proxy Statement, including the documents we
refer to in this Proxy Statement. If you have any questions, need additional material, or need assistance in voting your shares, please
feel free to contact the firm assisting us in the solicitation of proxies, Kingsdale Advisors. If you have any questions or need assistance
with voting, please contact Kingsdale Advisors, our proxy solicitor, by calling toll-free at 888-518-6554 or collect at 416-867-2272,
or via e-mail at contactus@kingsdaleadvisors.com.
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board currently consists of seven members. Our Board accepted the recommendation of the Nominating and Corporate Governance Committee
and voted to nominate Thomas M. Wittenschlaeger, Joshua Silverman, Sebastian Giordano, Greg Schiffman, Zvi Joseph, George Devlin and
Wayne R. Walker for election at the Annual Meeting for a term of one year to serve until the 2022 annual meeting of stockholders, or
until their respective successors have been elected and qualified. The seven director nominees who receive the most votes present in
person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors will be elected. Should any of
the director nominees become unable or unwilling to accept nomination or election, the proxy holders may vote the proxies for the election,
in his stead, of any other person the Board may nominate or designate. Each of the director nominees has expressed his intention to serve
the entire term for which election is sought.
Directors
and Nominees
The
following table sets forth the name, age and positions of the director nominees and each director:
Name
|
|
Age
|
|
Position
with the Company
|
Thomas
M. Wittenschlaeger
|
|
64
|
|
Chief
Executive Officer and Director Nominee
|
Joshua
Silverman
|
|
50
|
|
Chairman
of the Board
|
Sebastian
Giordano
|
|
63
|
|
Director
|
Greg
Schiffman
|
|
63
|
|
Director
|
Zvi
Joseph
|
|
54
|
|
Director
|
George
Devlin
|
|
67
|
|
Director
|
Wayne
R. Walker
|
|
62
|
|
Director
|
The
following sets forth biographical information and the qualifications and skills for each director nominee:
Thomas
M. Wittenschlaeger. Mr. Wittenschlaeger is an experienced executive with a background in the electric vehicle (“EV”)
industry and vehicle technologies businesses. From August 2019 to September 2021, Mr. Wittenschlaeger served as chief executive officer
of Nantmobility, Inc., an EV company in the micromobility segment. From February 2015 to July 2019, he served as an executive at FOX
Factory, Inc., a developer of off-road and performance vehicle components, serving as President of its Powered Vehicles Group from February
2015 to June 2018, and as Chief Strategy Officer from June 2018 to July 2019. Prior to joining FOX Factory, Inc., Mr. Wittenschlaeger
served as President of NantTronics, Inc., a wireless infrastructure and enabling technologies company, from November 2012 to January
2015. From December 2011 to November 2012 he served as chairman and chief executive officer of KeyOn Communications Holdings, Inc., during
which time he guided the company through a business rationalization, comprehensive financial restructuring, asset divestiture and controlled
wind-down and restored two businesses to operations from a shutdown state. During a 16-year stint at the Hughes Aircraft Company, he
researched advanced technology products for the automotive market as well as for the military transport market decades in advance of
their ultimate adoption. Mr. Wittenschlaeger holds a B.S. in electrical engineering from the United States Naval Academy and is a graduate
of the Executive Program in Management, Business Administration, and Operations at the Anderson School of Management, University of California
at Los Angeles. His portfolio of patents includes IP in vehicle damper tuning, wireless infrastructure, cyber resiliency and supercomputing.
Joshua
Silverman. Mr. Silverman served as a member of the DropCar, Inc. (“DropCar”) Board of Directors since the completion
of the business combination with Private DropCar and DC Acquisition Corporation, pursuant to which Private DropCar became a wholly owned
subsidiary of WPCS International Incorporated (“WPCS”), which then changed its name to DropCar on January 30, 2018 (the “2018
Merger”) and, prior to that time, served as a director of WPCS since August 2016, and has continued to serve as a director following
the Merger with Private AYRO (as defined and described in “CORPORATE GOVERANCE—Board Composition” below). Mr. Silverman
currently serves as the Managing Member of Parkfield Funding LLC. Mr. Silverman was the co-founder and a Principal and Managing Partner
of Iroquois Capital Management, LLC (“Iroquois”), an investment advisory firm. Since its inception in 2003 until July 2016,
Mr. Silverman served as Co-Chief Investment Officer of Iroquois. While at Iroquois, he designed and executed complex transactions, structuring
and negotiating investments in both public and private companies and has often been called upon by the companies to solve inefficiencies
as they relate to corporate structure, cash flow, and management. From 2000 to 2003, Mr. Silverman served as Co-Chief Investment Officer
of Vertical Ventures, LLC, a merchant bank. Prior to forming Iroquois, Mr. Silverman was a Director of Joele Frank, a boutique consulting
firm specializing in mergers and acquisitions. Previously, Mr. Silverman served as Assistant Press Secretary to The President of the
United States. Mr. Silverman currently serves as a director of Protagenic Therapeutics, Neurotrope, Inc., and TapImmune Inc., all of
which are public companies. He previously served as a Director of National Holdings Corporation from July 2014 through August 2016, MGT
Capital Investments, Inc. from December 2014 to May 2016, and Alanco Technologies Inc. from March 2016 through August 2016. Mr. Silverman
received his B.A. from Lehigh University in 1992. Mr. Silverman’s qualifications to sit on the Board include his experience as
an investment banker, management consultant and as a director of numerous public companies.
Sebastian
Giordano. Mr. Giordano served as a member of the DropCar Board of Directors since the closing of the 2018 Merger and, prior to
that time, served as a director of WPCS since February 2013, and has continued to serve as a director following the Merger with Private
AYRO. Mr. Giordano served as the Interim Chief Executive Officer of WPCS from August 2013 until April 25, 2016, when the interim label
was removed from his title. He served as the Chief Executive Officer of WPCS since such time through the closing of the 2018 Merger.
Since 2002, Mr. Giordano has been Chief Executive Officer of Ascentaur, LLC, a business consulting firm providing comprehensive strategic,
financial and business development services to start-up, turnaround and emerging growth companies. From 1998 to 2002, Mr. Giordano was
Chief Executive Officer of Drive One, Inc., a safety training and education business. From 1992 to 1998, Mr. Giordano was Chief Financial
Officer of Sterling Vision, Inc., a retail optical chain. Mr. Giordano received B.B.A. and M.B.A. degrees from Iona College. Mr. Giordano’s
qualifications to sit on the Board include his broad management experience, including having served as Chief Executive Officer of WPCS.
Greg
Schiffman. Mr. Schiffman served as a member of the DropCar Board of Directors since the closing of the 2018 Merger and has continued
to serve as a director following the Merger with Private AYRO. Mr. Schiffman has served as the Chief Financial Officer of privately-held
AbSci, LLC since April 2020. He previously served as the Chief Financial Officer of Vineti, Inc. from October 2017 through April 2018.
He also previously served as the Chief Financial Officer of each of Iovance Biotherapeutics (formerly Lion Biotechnologies), from October
2016 through June 2017, Stem Cells, Inc., from January 2014 through September 2016, Dendreon Corporation, from December 2006 through
December 2013 and Affymetrix Corporation, from August 2001 through November 2006. He currently serves on the boards of directors of several
private companies. Mr. Schiffman holds a B.S. in Accounting from DePaul University and an MM (MBA) from Northwestern University Kellogg
Graduate School of Management. Mr. Schiffman’s qualifications to sit on the Board include his financial background, business experience
and education.
Zvi
Joseph. Mr. Joseph served as a member of the DropCar Board of Directors since the closing of the 2018 Merger, and has continued
to serve as a director following the Merger with Private AYRO. He has served as Deputy General Counsel of Amdocs Limited, a publicly
traded corporation that provides software and services to communications and media companies, since October 2005. He received his A.A.S.
in Business Administration from Rockland Community College, his B.A. in Literature from New York University and his J.D. from Fordham
University School of Law. He also holds a Certificate in Business Excellence from Columbia University School of Business and a Corporate
Director Certificate, Corporate Governance, from Harvard Business School. Mr. Joseph’s qualifications to sit on the Board include
his legal experience and education.
George
Devlin. Mr. Devlin has, since 2007, managed his own consulting business, Venture Connections, primarily focused on helping early
stage companies with fundraising, commercialization and strategic planning. From 2005 to 2007, Mr. Devlin worked in operations at Texas
Pacific Group (TPG – Private Equity), where he supported deal partners on due diligence and transformation activities involved
in deals. From 2002 to 2005, Mr. Devlin served as Chief Executive Officer of Vivecon, a Stanford University start-up in Supply Chain
Risk Management solutions. From 2001 to 2002, he served as Chief Operations Officer of Converge, Inc. From 1998 to 2001, Mr. Devlin worked
at Compaq Computer Corporation, eventually holding the post of Senior Vice President of Global Operations based in Houston, Texas. He
is a native of Scotland and graduated with a Business Studies diploma and a post-graduate diploma in Human Resources from Glasgow Polytechnic,
now called Caledonian University. Mr. Devlin’s international experience and expertise, ranging from a successful career as an executive
in a major global corporation (supply chain and operations) to becoming an entrepreneur and helping many early stage start-up technology
companies globally, qualify him as a valuable addition to the Board.
Wayne
R. Walker. Mr. Walker has over 35 years of experience in corporate governance, turnaround management, corporate restructuring
and bankruptcy matters. In 1998, Mr. Walker founded Walker Nell Partners, Inc., an international business consulting firm, and has served
as its president from its founding to the present. Before founding Walker Nell Partners, Inc., Mr. Walker worked for 15 years at the
DuPont Company in Wilmington, Delaware in the Securities and Bankruptcy group, where he worked in the Corporate Secretary’s office
and served as Senior Counsel. From 2018 to the present, Mr. Walker has served as a director of Wrap Technologies, Inc., an innovator
of modern policing solutions, where he also serves as Chair of the Nominating and Governance Committee and of the Compensation Committee.
From 2018 to the present, Mr. Walker has served as a director of Pitcairn Company and as the Chair of its Compensation Committee. From
2013 to 2014, Mr. Walker served as Chairman of the Board of Directors of BridgeStreet Worldwide, Inc., a global provider of extending
corporate housing. From 2016 to 2018, Mr. Walker served as Chairman of the Board of Directors of Last Call Operating Companies, an owner
of various national restaurants. From 2013 to 2020, Mr. Walker served as Chairman of the Board of Trustees of National Philanthropic
Trust, a public charity. From 2018 to 2020, Mr. Walker served as Vice President of the Board of Education of the City of Philadelphia.
From 2020 to the present, Mr. Walker has served as a director of Petros Pharmaceuticals, Inc., which focuses on men’s health, where
he also serves as Chair of the Nominating and Governance Committee. Mr. Walker has also served on the board of directors for the following
companies and foundations: Seaborne Airlines, Inc., Green Flash Brewery, Inc., and Eagleville Hospital and Foundation. Mr. Walker has
a Doctor of Jurisprudence from Catholic University (Washington, DC) and a Bachelor of Arts from Loyola University (New Orleans). He is
an attorney licensed by the State Bar of Georgia. He is a member of the State Bar Association of Georgia, American Bar Association, American
Bankruptcy Institute and Turnaround Management Association.
The
Board regards all of the individuals above as competent professionals with many years of experience in the business community. The Board
believes that the overall experience and knowledge of the members of Board will contribute to the overall success of our business.
Unless
otherwise directed in the proxy, it is the intention of the persons named in the proxy to vote the shares represented by such proxy for
the election of the director nominees. Six of the seven director nominees are presently directors of the Company.
Family
Relationships
There
are no family relationships among any of our directors and executive officers.
Vote
Required
The
seven director nominees who receive the most votes present in person or represented by proxy at the Annual Meeting and entitled to vote
on the election of directors will be elected.
The
Board recommends a vote FOR the director nominees.
|
CORPORATE
GOVERNANCE
AYRO,
Inc., with the oversight of the Board and its committees, operates within a comprehensive plan of corporate governance for the purpose
of defining independence, assigning responsibilities, setting high standards of professional and personal conduct and assuring compliance
with such responsibilities and standards. We regularly monitor developments in the area of corporate governance.
Corporate
Code of Conduct and Ethics and Whistleblower Policy
We
have adopted a Corporate Code of Conduct and Ethics and Whistleblower Policy that applies to all of our associates, as well as each of
our directors and certain persons performing services for us. The Corporate Code of Conduct and Ethics and Whistleblower Policy addresses,
among other things, competition and fair dealing, conflicts of interest, protection and proper use of Company assets, government relations,
compliance with laws, rules and regulations and the process for reporting violations of the Corporate Code of Conduct and Ethics and
Whistleblower Policy, employee misconduct, improper conflicts of interest or other violations. Our Corporate Code of Conduct and Ethics
and Whistleblower Policy is available on our website at https://ayro.com/ in the “Governance” section found
under the “Investors” tab. We intend to disclose any amendments to, or waivers from, our Corporate Code of Conduct and Ethics
and Whistleblower Policy at the same website address provided above.
Board
Composition
On
January 30, 2018, the Company completed its business combination with DropCar, Inc. (“Private DropCar”) in accordance with
the terms of the Agreement and Plan of Merger and Reorganization, dated as of September 6, 2017, as subsequently amended, by and among
us, DC Acquisition Corporation (“WPCS Merger Sub”), and Private DropCar, pursuant to which WPCS Merger Sub merged with and
into Private DropCar, with Private DropCar surviving as the Company’s wholly owned subsidiary (the “2018 Merger”).
On January 30, 2018, immediately after completion of the 2018 Merger, the Company changed its name to “DropCar, Inc.”
On
May 28, 2020, pursuant to the Agreement and Plan of Merger, dated December 19, 2019 (the “Merger Agreement”), by and among
the Company, ABC Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and
AYRO Operating Company, a Delaware corporation previously known as AYRO, Inc. (“Private AYRO”), Merger Sub was merged with
and into Private AYRO, with Private AYRO continuing after the merger as the surviving entity and a wholly owned subsidiary of the Company
(the “Merger”). Upon completion of the Merger on May 28, 2020, the Company changed its name to “AYRO, Inc.” Immediately
prior to the effective time of the Merger, the Board consisted of Spencer Richardson, David Newman, Joshua Silverman, Sebastian Giordano,
Zvi Joseph, Solomon Mayer, and Greg Schiffman. At the effective time of the Merger, David Newman, the Company’s former Chief Business
Development Officer and a former director of the Board, Spencer Richardson, the Company’s former Chief Executive Officer and a
former director of the Board, and Solomon Mayer, a former director of the Board, all tendered their resignations from their respective
positions as officers and directors of the Company. These letters did not contain any statements describing disagreements with the Company
related to its operations, policies or practices, nor did any disagreements lead to their resignation. Pursuant to the terms of the Merger
Agreement, the Board appointed Rodney C. Keller, Jr., George Devlin and Mark Adams, who were members of Private AYRO’s board of
directors immediately prior to the effective time of the Merger, to the Board at the effective time of the Merger. Our Amended and Restated
Certificate of Incorporation and our Amended and Restated Bylaws, as amended (“Bylaws”), provide that our Board will consist
of such number of directors as determined from time to time by resolution adopted by our Board. Any vacancies or newly created directorships
resulting from an increase in the authorized number of directors may be filled by a majority of the directors then in office. As of November
17, 2021, the Board consists of Joshua Silverman, Wayne R. Walker, George Devlin, Sebastian Giordano, Zvi Joseph, and Greg Schiffman.
We
have no formal policy regarding Board diversity. Our Board believes that each director should have a basic understanding of the principal
operational and financial objectives and plans and strategies of the Company, our results of operations and financial condition and relative
standing in relation to our competitors. The Company values diversity on a Company-wide basis and seeks to achieve a mix of directors
that represent a diversity of background and experience, including with respect to age, gender, race, ethnicity, and occupation. Although
the Board does not establish specific goals with respect to diversity, the Board’s overall diversity is a significant consideration
in the director nomination process. Generally, we will strive to assemble a Board that brings to us a variety of perspectives and skills
derived from business and professional experience as we may deem are in our and our stockholders’ best interests. In doing so,
we will also consider candidates with appropriate non-business backgrounds.
Director
Independence
We
are currently listed on the NASDAQ Capital Market and therefore rely on the definition of independence set forth in the NASDAQ Listing
Rules (“NASDAQ Rules”). Under the NASDAQ Rules, a director will only qualify as an “independent director” if,
in the opinion of our Board, that person does not have a relationship that would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director. Based upon information requested from and provided by each director and director
nominee concerning his background, employment, and affiliations, including family relationships, we have determined that our current
directors Messrs. Silverman, Schiffman, Joseph, Devlin and Walker, have no material relationship with us that would interfere with the
exercise of independent judgment and are “independent directors” as that term is defined in the NASDAQ Listing Rules. We
also determined that a former director of the Board, Adams, during the time he served on the Board, had no such material relationship
with us.
Board
Committees, Meetings and Attendance
During
the fiscal year ended December 31, 2020, the Board held 8 meetings. We expect our directors to attend Board meetings, meetings of any
committees and subcommittees on which they serve, and each annual meeting of stockholders, either in person or by teleconference. During
2020, each director (other than George Devlin) attended, either in person or telephonically, at least 75% of the aggregate Board meetings
and meetings of committees on which he served during his tenure as a director or committee member.
The
Board delegates various responsibilities and authority to different Board committees. Committees regularly report on their activities
and actions to the full Board. Currently, the Board has established an Audit Committee, a Compensation Committee and a Nominating and
Corporate Governance Committee. Committee assignments are re-evaluated annually. Each of these committees operates under a charter that
has been approved by our Board. The current charter of each of these committees is available on our website at https://ayro.com/ in
the “Governance” section under “Investors.”
As
of November 17, 2021, the following table sets forth the membership of each of the Board committees listed above.
Name
|
|
Audit Committee
|
|
Compensation
Committee
|
|
Nominating and
Corporate Governance
Committee
|
Joshua Silverman*
|
|
Member
|
|
Member
|
|
Chairman
|
Greg Schiffman
|
|
Chairman
|
|
Member
|
|
Member
|
Zvi Joseph
|
|
Member
|
|
Chairman
|
|
Member
|
|
*
|
Chairman
of the Board of Directors
|
Audit
Committee
Our
Audit Committee is responsible for, among other matters:
|
●
|
approving
and retaining the independent auditors to conduct the annual audit of our financial statements;
|
|
●
|
reviewing
the proposed scope and results of the audit;
|
|
●
|
reviewing
and pre-approving audit and non-audit fees and services;
|
|
●
|
reviewing
accounting and financial controls with the independent auditors and our financial and accounting staff;
|
|
●
|
reviewing
and approving transactions between us and our directors, officers and affiliates;
|
|
●
|
recognizing
and preventing prohibited non-audit services;
|
|
●
|
establishing
procedures for complaints received by us regarding accounting matters;
|
|
●
|
overseeing
internal audit functions, if any; and
|
|
●
|
preparing
the report of the audit committee that the rules of the SEC require to be included in our annual meeting proxy statement.
|
Our
Audit Committee is composed of Greg Schiffman (chairman), Zvi Joseph and Joshua Silverman. Our Board has determined that Messrs. Schiffman,
Joseph and Silverman are independent in accordance with NASDAQ Rules and Rule 10A-3 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Our Board has also reviewed the education, experience and other qualifications of each member of the
Audit Committee. Based upon that review, our Board has determined that Greg Schiffman qualifies as an “audit committee financial
expert,” as defined by the rules of the SEC. During the fiscal year ended December 31, 2020, the Audit Committee held 8 meetings.
Compensation
Committee
Our
Compensation Committee is responsible for, among other matters:
|
●
|
reviewing
and recommending the compensation arrangements for management, including the compensation for our president and chief executive officer;
|
|
●
|
appointing,
compensating and overseeing the work of any compensation consultant, legal counsel or other advisor retained by the Compensation
Committee;
|
|
●
|
establishing
and reviewing general compensation policies with the objective to attract and retain superior talent, to reward individual performance
and to achieve our financial goals;
|
|
●
|
administering
our stock incentive plans; and
|
|
●
|
preparing
the report of the compensation committee that the rules of the SEC require to be included in our annual meeting proxy statement.
|
Our
Compensation Committee is composed of Greg Schiffman, Zvi Joseph (chairman) and Joshua Silverman. Our Board has determined that Messrs.
Schiffman, Joseph and Silverman are independent in accordance with NASDAQ Rules. The Compensation Committee has the authority to delegate
to subcommittees of the Compensation Committee any of the responsibilities of the full committee. During the fiscal year ended December
31, 2020, the Compensation Committee held 4 meetings. In the fiscal year ended December 31, 2020, the Compensation Committee retained
the services of Streeter Wyatt, a compensation consultant that advises boards and companies on the proper structure and levels of executive
and board member compensation, to review the Company’s compensation practices and methodologies as to its executives and non-employee
directors in relation to such practices and methodologies of other publicly traded, peer group companies.
Nominating
and Corporate Governance Committee
Our
Nominating and Corporate Governance Committee is responsible for, among other matters:
|
●
|
evaluating
the current composition, organization and governance of the Board and its committees, and making recommendations for changes thereto;
|
|
●
|
reviewing
each director and nominee annually;
|
|
●
|
determining
desired Board member skills and attributes and conducting searches for prospective members accordingly;
|
|
●
|
evaluating
nominees, and making recommendations to the Board concerning the appointment of directors to Board committees, the selection of Board
committee chairs, proposal of the slate of directors for election to the Board, and the termination of membership of individual directors
in accordance with the Board’s governance principles;
|
|
●
|
overseeing
the process of succession planning for the chief executive officer and, as warranted, other senior officers of the Company;
|
|
●
|
developing,
adopting and overseeing the implementation of a code of business conduct and ethics; and
|
|
●
|
administering
the annual Board performance evaluation process.
|
Our
Nominating and Corporate Governance Committee is composed of Greg Schiffman, Zvi Joseph and Joshua Silverman (chairman). During the fiscal
year ended December 31, 2020, the Nominating Committee held 1 meeting.
Director
Nominations
Our
Nominating and Corporate Governance Committee considers all qualified candidates identified by members of the Board, by senior management
and by stockholders. The Nominating and Corporate Governance Committee follows the same process and uses the same criteria for evaluating
candidates proposed by stockholders, members of the Board and members of senior management. We did not pay fees to any third party to
assist in the process of identifying or evaluating director candidates during 2020.
Our
Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the Board
at our Annual Meeting. To recommend a nominee for election to the Board, a stockholder must submit his or her recommendation to our Secretary
at our corporate offices at 900 E. Old Settlers Boulevard, Suite 100, Round Rock, Texas 78664. Such nomination must satisfy the notice,
information and consent requirements set forth in our Bylaws and must be received by us prior to the date set forth under “Submission
of Future Stockholder Proposals” below. A stockholder’s recommendation must be accompanied by the information with respect
to stockholder nominees as specified in our Bylaws, including among other things, the name, age, address and occupation of the recommended
person, the proposing stockholder’s name and address, the ownership interests of the proposing stockholder and any beneficial owner
on whose behalf the nomination is being made (including the number of shares beneficially owned, any hedging, derivative, short or other
economic interests and any rights to vote any shares) and any material monetary or other relationships between the recommended person
and the proposing stockholder and/or the beneficial owners, if any, on whose behalf the nomination is being made.
In
evaluating director nominees, the Nominating and Corporate Governance Committee considers the following factors:
|
●
|
the
appropriate size and diversity of our Board;
|
|
●
|
our
needs with respect to the particular knowledge, skills and experience of nominees, including experience in corporate finance, technology,
business, administration and sales, in light of the prevailing business conditions and the knowledge, skills and experience already
possessed by other members of the Board;
|
|
●
|
experience
with accounting rules and practices, and whether such a person qualifies as an “audit committee financial expert” pursuant
to SEC rules; and
|
|
●
|
balancing
continuity of our Board with periodic injection of fresh perspectives provided by new Board members.
|
Our
Board believes that each director should have a basic understanding of our principal operational and financial objectives and plans and
strategies, our results of operations and financial condition and our relative standing in relation to our competitors.
In
identifying director nominees, the Board will first evaluate the current members of the Board willing to continue in service. Current
members of the Board with skills and experience that are relevant to our business and who are willing to continue in service will be
considered for re-nomination.
If
any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the
Board will identify another nominee with the desired skills and experience described above. The Board takes into consideration the overall
composition and diversity of the Board and areas of expertise that director nominees may be able to offer, including business experience,
knowledge, abilities and customer relationships. Generally, the Board will strive to assemble a Board that brings to us a variety of
perspectives and skills derived from business and professional experience as it may deem are in our and our stockholders’ best
interests. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.
Board
Leadership Structure and Role in Risk Oversight
The
positions of Chairman of the Board and principal executive officer are filled by two separate individuals. Mr. Silverman currently serves
as our Chairman of the Board, and Mr. Wittenschlaeger currently serves as our principal executive officer. The Board acknowledges that
there are different leadership structures that could allow it to effectively oversee the management of the risks relating to the Company’s
operations and believes its current leadership structure enables it to effectively provide oversight with respect to such risks. Our
Audit Committee is primarily responsible for overseeing the Company’s risk management processes on behalf of the full Board. The
Audit Committee receives reports from management concerning the Company’s assessment of risks. In addition, the Audit Committee
reports regularly to the full Board, which also considers the Company’s risk profile. The Audit Committee and the full Board focus
on the most significant risks facing the Company and the Company’s general risk management strategy. In addition, as part of its
oversight of our Company’s executive compensation program, the Compensation Committee considers the impact of such program, and
the incentives created by the compensation awards that it administers, on our Company’s risk profile. In addition, the Compensation
Committee reviews all of our compensation policies and procedures, including the incentives that they create and factors that may reduce
the likelihood of excessive risk taking, to determine whether they present a significant risk to our Company. The Compensation Committee
has determined that, for all employees, our compensation programs do not encourage excessive risk and instead encourage behaviors that
support sustainable value creation.
Communications
with Directors
The
Board welcomes communication from our stockholders. Stockholders and other interested parties who wish to communicate with a member or
members of our Board or a committee thereof may do so by addressing correspondence to the Board member, members or committee, c/o Secretary,
AYRO, Inc., 900 E. Old Settlers Boulevard, Suite 100, Round Rock, Texas 78664. Our Secretary will review and forward correspondence to
the appropriate person or persons.
All
communications received as set forth in the preceding paragraph will be opened by our Secretary for the sole purpose of determining whether
the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or
service or patently offensive material will be forwarded promptly to the addressee(s). In the case of communications to the Board or
any group or committee of directors, our Secretary will make sufficient copies of the contents to send to each director who is a member
of the group or committee to whom the communication is addressed. If the amount of correspondence received through the foregoing process
becomes excessive, our Board may consider approving a process for review, organization and screening of the correspondence by our Secretary
or another appropriate person.
Family
Relationships
There
are no family relationships amongst our directors and executive officers, or person nominated or chosen by the Company to become a director
or executive officer.
Involvement
in Certain Legal Proceedings
There
have been no material legal proceedings that would require disclosure under the federal securities laws that are material to an evaluation
of the ability or integrity of our directors or executive officers, or in which any director, officer, nominee or principal stockholder,
or any affiliate thereof, is a party adverse to us or has a material interest adverse to us.
DIRECTOR
COMPENSATION
The
following table sets forth summary information concerning the total compensation earned by the non-employee directors during the year
ended December 31, 2020 for services to the Company. At the effective time of the Merger on May 28, 2020, David Newman, the Company’s
former Chief Business Development Officer and a former director of the Board, Spencer Richardson, the Company’s former Chief Executive
Officer and a former director of the Board, and Solomon Mayer, a former director of the Board, all tendered their resignations from their
respective positions as officers and directors of the Company.
Effective
as of 6:05 pm Eastern Time on May 26, 2020, we filed an amendment to our Amended and Restated Certificate of Incorporation to effect
a reverse stock split of the issued and outstanding shares of our common stock, at a ratio of one share for ten shares. Immediately following
the reverse stock split, we issued a stock dividend of one share of the Company’s common stock for each outstanding share of common
stock to all holders of record immediately following the effective time of the reverse stock split. The net result of the reverse stock
split and the stock dividend was a 1-for-5 reverse stock split (the “Reverse Split”). The stock awards listed below have
been adjusted to give effect to the Reverse Split.
Name
|
|
Fees Earned or
Paid in
Cash ($)
|
|
|
Stock
Awards ($) (1)
|
|
|
All other
compensation
|
|
|
Total ($)
|
|
Mark Adams (2)(3)
|
|
|
25,040
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,040
|
|
Greg Schiffman
|
|
|
71,324
|
|
|
|
239,056
|
|
|
|
-
|
|
|
|
310,380
|
|
Joshua Silverman
|
|
|
175,506
|
|
|
|
388,474
|
|
|
|
-
|
|
|
|
563,980
|
|
Sebastian Giordano
|
|
|
88,898
|
|
|
|
246,540
|
|
|
|
-
|
|
|
|
335,438
|
|
Solomon Mayer (4)
|
|
|
62,164
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,164
|
|
Zvi Joseph
|
|
|
95,730
|
|
|
|
239,056
|
|
|
|
-
|
|
|
|
334,786
|
|
George Devlin (2)
|
|
|
26,734
|
|
|
|
135,080
|
|
|
|
-
|
|
|
|
161,814
|
|
Wayne R. Walker (5)
|
|
|
1,694
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,694
|
|
|
(1)
|
The
dollar amounts in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions
underlying the determination of fair value of the awards are set forth in Note 11 of the financial statements included in the Company’s
Annual Report on Form 10-K filed with the SEC on March 31, 2021, and as amended by the Company’s Form 10-K/A filed with the
SEC on April 30, 2021.
|
|
(2)
|
Appointed
following the effective time of the Merger on May 28, 2020.
|
|
(3)
|
Term
expired November 9, 2020.
|
|
(4)
|
Resigned
following the effective time of the Merger on May 28, 2020.
|
|
(5)
|
Elected
November 9, 2020.
|
On
July 30, 2019, the Board approved of certain modifications to director compensation. As consideration for services to the Board, the
Chairman of the Board received (i) an annual cash retainer equal to $90,000 and, as compensation for the period from February 1, 2019
through January 31, 2020, a grant of shares of restricted stock in an amount equal to $60,000 and (ii) each non-Chairman member of the
Board receives an annual cash retainer equal to $30,000 and, as compensation for the period from February 1, 2019 through January 31,
2020, a grant of shares of restricted stock in an amount equal to $50,000, each to be paid as determined by the Compensation Committee.
Due
to the limited number of shares available for grant pursuant to the DropCar, Inc. Amended and Restated 2014 Equity Incentive Plan, the
restricted stock grants referred to in the foregoing paragraph could not be granted in full in fiscal 2019. Mr. Schiffman received a
grant of 6,330 shares of restricted stock, which represented half of the shares of common stock Mr. Schiffman was entitled to receive.
The shares vested on the date of grant. None of the other non-employee directors received a grant of restricted stock.
In
January 2020, the Board entered into letter agreements with each non-executive member of the Board to address the restricted stock grants.
In lieu of such grants, DropCar and each non-employee director agreed that upon (i) a merger or consolidation with another entity where
DropCar retains more than 50% of the outstanding voting securities of DropCar or (ii) the consummation of a change of control prior to
November 14, 2020, each non-employee director will receive a transaction payment, payable in cash, shares of DropCar’s common stock
or shares of a successor company’s common stock, at the discretion of DropCar (each, a “Transaction Payment”). Mr.
Silverman would receive a Transaction Payment equal to $60,000, Mr. Schiffman would receive a Transaction Payment equal to $25,000 (which
reflects that the other half of his $50,000 compensation was already paid in the form of a restricted stock grant) and all other non-employee
directors would receive a Transaction Payment equal to $50,000. Pursuant to such agreements, DropCar granted the following shares prior
to the Merger on May 28, 2020:
Name
|
|
Number of Shares
|
|
Joshua Silverman
|
|
|
9,756
|
|
Zvi Joseph
|
|
|
8,130
|
|
Sebastian Giordano
|
|
|
8,130
|
|
Solomon Mayer
|
|
|
8,130
|
|
Greg Schiffman
|
|
|
4,065
|
|
On
September 29, 2020, the Board approved annual director compensation, which was prorated based on the number of days in such annual director
compensation cycle beginning on May 28, 2020, the closing date of the Merger. The Board approved the following annual cash retainer fees
for the members of the Board: (A) to each non-executive director, an annual cash retainer fee of $45,000; (B) to the chairman of the
Board, an additional annual cash retainer fee of $80,000; (C) to the chair of each Board committee, additional cash compensation as follows:
(x) $12,500 to the Audit Committee Chair, (y) $11,500 to the Compensation Committee Chair, and (z) $8,000 to the Nominating and Governance
Committee Chair. Additionally, on September 29, 2020, the following Company directors were granted restricted stock, as shown in the
following table:
Director
|
|
Awarded Shares
|
|
|
Vesting Schedule
|
Josh Silverman
|
|
|
5,668
|
|
|
See (1) below
|
Josh Silverman
|
|
|
116,879
|
|
|
See (2) below
|
Mark Adams
|
|
|
42,612
|
|
|
See (2) below
|
George Devlin
|
|
|
42,612
|
|
|
See (2) below
|
Sebastian Giordano
|
|
|
4,723
|
|
|
See (1) below
|
Sebastian Giordano
|
|
|
73,050
|
|
|
See (2) below
|
Zvi Joseph
|
|
|
2,362
|
|
|
See (1) below
|
Zvi Joseph
|
|
|
73,050
|
|
|
See (2) below
|
Greg Schiffman
|
|
|
2,362
|
|
|
See (1) below
|
Greg Schiffman
|
|
|
73,050
|
|
|
See (2) below
|
|
1)
|
Fully
vested on the grant date.
|
|
2)
|
Fully
vests on May 28, 2021, provided that the director has continuously provided services to the Company through that date.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership of our common stock as of November 5, 2021 by:
|
●
|
each
person known by us to beneficially own more than 5.0% of our common stock;
|
|
●
|
each
of our directors and nominees;
|
|
●
|
each
of the named executive officers of the Company; and
|
|
●
|
all
of our directors and executive officers as a group.
|
The
percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial
ownership of securities. Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the
power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial
owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s
address, unless otherwise specified in the notes below, is c/o AYRO, Inc., 900 E. Old Settlers Boulevard, Suite 100, Round Rock, Texas
78664. As of November 5, 2021, we had 36,866,956 shares of common stock outstanding.
Name of Beneficial Owner
|
|
Number of
Shares
Beneficially
Owned
(1)
|
|
|
Percentage
Beneficially
Owned (1)
|
|
Beneficial Owners of 5% or More of Our Common Stock
|
|
|
|
|
|
|
|
|
Alpha Capital Anstalt (2)
|
|
|
3,683,009
|
|
|
|
9.99
|
%
|
Invesco Ltd. (3)
|
|
|
2,215,172
|
|
|
|
6.0
|
%
|
Richard Abbe (4)
|
|
|
2,957,574
|
|
|
|
8.0
|
%
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
George Devlin (5)
|
|
|
70,160
|
|
|
|
*%
|
|
Sebastian Giordano (6)
|
|
|
109,801
|
|
|
|
*%
|
|
Brian Groh (7)
|
|
|
59,755
|
|
|
|
*%
|
|
Zvi Joseph (8)
|
|
|
97,873
|
|
|
|
*%
|
|
Rodney C. Keller, Jr. (9)
|
|
|
1,072,104
|
|
|
|
2.9
|
%
|
Richard Perley (10)
|
|
|
93,840
|
|
|
|
*%
|
|
Joshua Silverman (11)
|
|
|
164,547
|
|
|
|
*%
|
|
Greg Schiffman (12)
|
|
|
100,235
|
|
|
|
*%
|
|
Curtis Smith (13)
|
|
|
225,316
|
|
|
|
*%
|
|
Wayne R. Walker (14)
|
|
|
21,125
|
|
|
|
*%
|
|
All Current Executive Officers and Directors as a Group
|
|
|
2,014,756
|
|
|
|
5.4
|
|
|
*
|
represents
ownership of less than 1%.
|
|
(1)
|
Shares
of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise of
all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently exercisable
or exercisable within 60 days of November 5, 2021. Shares issuable pursuant to the exercise of stock options and warrants exercisable
within 60 days are deemed outstanding and held by the holder of such options or warrants for computing the percentage of outstanding
common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common
stock beneficially owned by any other person.
|
|
(2)
|
Based
on a Schedule 13G filed on February 16, 2021 by Alpha Capital Anstalt. The address of Alpha Capital Anstalt is Lettstrasse 32, FL-9490
Vaduz, Furstentums, Liechtenstein. Alpha Capital Anstalt is the beneficial owner of 3,683,009 shares of our common stock, including
shares of our common stock underlying warrants that are currently exercisable. Nicola Feuerstein, Director of Alpha Capital Anstalt,
has sole voting and dispositive power over such shares of our common stock. Alpha Capital Anstalt owns securities that would be exercisable
for additional shares of our common stock, except for a contractual limitation that restricts Alpha Capital Anstalt’s ability
to exercise such securities if such exercise would result in Alpha Capital Anstalt (including its affiliates) owning more than 9.99%
of the currently outstanding number of shares of our common stock. Thus, the number of shares of our common stock beneficially owned
by Alpha Capital Anstalt as of November 5, 2021 was 3,683,009, which represents 9.99% beneficial ownership of the 36,866,956 shares
of our common stock that were outstanding as of November 5, 2021.
|
|
(3)
|
Based
on a Schedule 13G filed on July 12, 2021 by Invesco Ltd. The address of Invesco Ltd. is 1555 Peachtree Street NE, Suite 1800, Atlanta,
GA 30309. Invesco Ltd. is the beneficial owner of 2,215,172 shares of our common stock.
|
|
(4)
|
Based
on a Schedule 13G jointly filed on February 3, 2021 by Richard Abbe, Kimberly Page and Iroquois Capital Management L.L.C. Represents
(i) 1,125,000 shares of our common stock, currently exercisable warrants to purchase 723,578 shares of our common stock and preferred
stock convertible into 963 shares of our common stock held by Iroquois Capital Investment Group LLC (“ICIG”) and (ii)
541,667 shares of our common stock, currently exercisable warrants to purchase 564,498 shares of our common stock and preferred stock
convertible into 1,868 shares of our common stock held by Iroquois Master Fund Ltd. (“Iroquois Master Fund”). Mr. Abbe
exercises sole voting and dispositive power over the shares held by ICIG and shares voting and dispositive power over the shares
held by Iroquois Master Fund with Ms. Page. As such, Mr. Abbe may be deemed to be the beneficial owner of all shares of common stock
held by and underlying the warrants (subject to certain beneficial ownership blockers) and shares of preferred stock held by ICIG
and Iroquois Master Fund. The address of each of Mr. Abbe, ICIG and Iroquois Master Fund is 125 Park Avenue, 25th Floor, New York,
NY 10017.
|
|
(5)
|
Mr.
Devlin’s total includes 70,160 shares of common stock.
|
|
(6)
|
Mr.
Giordano’s total includes 109,801 shares of common stock.
|
|
(7)
|
Mr.
Groh’s total includes options to purchase 59,755 shares of common stock that are exercisable within 60 days of November 5,
2021.
|
|
(8)
|
Mr.
Joseph’s total includes 97,873 shares of common stock.
|
|
(9)
|
Mr.
Keller’s total includes 651,250 shares of common stock and options to purchase 420,854 shares of common stock that are exercisable
within 60 days of November 5, 2021.
|
|
(10)
|
Mr.
Perley’s total includes 34,085 shares of common stock and options to purchase 59,755 shares of common stock that are exercisable
within 60 days of November 5, 2021.
|
|
(11)
|
Mr.
Silverman’s total includes 164,547 shares of common stock.
|
|
(12)
|
Mr.
Schiffman’s total includes 100,235 shares of common stock.
|
|
(13)
|
Mr.
Smith’s total includes options to purchase 225,316 shares of common stock that are exercisable within 60 days of November 5,
2021.
|
|
(14)
|
Mr.
Walker’s total includes 21,125 shares of common stock.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with related persons are governed by our Corporate Code of Conduct and Ethics and Whistleblower Policy, which applies to all of our associates,
as well as each of our directors and certain persons performing services for us. This code covers a wide range of potential activities,
including, among others, conflicts of interest, self-dealing and related party transactions. Waiver of the policies set forth in this
code will only be permitted when circumstances warrant. Such waivers for directors and executive officers, or that provide a benefit
to a director or executive officer, may be made only by our Board, as a whole, or the Audit Committee and must be promptly disclosed
as required by applicable law or regulation. Absent such a review and approval process in conformity with the applicable guidelines relating
to the particular transaction under consideration, such arrangements are not permitted. All related party transactions for which disclosure
is required to be provided herein were approved in accordance with our Corporate Code of Conduct and Ethics and Whistleblower Policy.
Related
Party Transactions
Asset
Sale
On
December 19, 2019, the Company and DropCar Operating entered into the Asset Purchase Agreement with DC Partners, Spencer Richardson and
David Newman. DC Partners was a New York limited liability company managed by Spencer Richardson and David Newman. The Asset Purchase
Agreement provided that DC Partners would purchase from DropCar Operating substantially all of the assets and certain specified liabilities
of the Company business prior to the Merger, for a purchase price consisting of (i) the cancellation of any liabilities pursuant to the
employment agreements by and between DropCar Operating and each of Mr. Richardson and Mr. Newman, respectively (except as otherwise set
forth in (x) a Termination and Release Agreement to be entered into between the Company and each of Mr. Richardson and Mr. Newman and/or
(y) Section 3(h) of the employment agreements, which relates to indemnification with respect to services as a director of the Company)
and (ii) the assumption of all liabilities or obligations of the Company (x) relating to or arising out of workers’ compensation
claims of any employee which relate to events occurring prior to the closing of the Asset Sale Transaction and (y) arising under or relating
to the assigned contracts pursuant to the Asset Purchase Agreement. On May 28, 2020, the parties to the Asset Purchase Agreement entered
into Amendment No. 1 to the Asset Purchase Agreement (the “Asset Purchase Agreement Amendment”), which Asset Purchase Agreement
Amendment (i) provided for the inclusion of up to $30,000 in refunds associated with certain insurance premiums as assets being purchased
by DC Partners, (ii) amended the covenant associated with the funding of the Company’s business, such that the Company provided
the Company business with additional funding of $175,000 at the closing of the transactions contemplated by the Asset Purchase Agreement
and (iii) provided for a current employee of the Company being transferred to DC Partners to provide transition services to the Company
for a period of three months after the closing of the transactions contemplated by the Asset Purchase Agreement. The Asset Purchase Agreement
closed on May 28, 2020, immediately following the consummation of the Merger.
Private
AYRO Related Party Transactions
Royalty
Agreement
On
March 1, 2017, Private AYRO entered into the Outsourced CVO Services Agreement with Sustainability Initiatives, LLC (“SI”)
that is controlled by Mr. Okonsky, a founder of Private AYRO, and Mr. Adams, a founder of Private AYRO and a current AYRO board member,
in its effort to accelerate the start-up of Private AYRO’s operations. In return for acceleration assistance and SI providing services
of the Chief Visionary Officer role, pursuant to the agreement, Private AYRO paid a monthly retainer of $6,000 per month. On a quarterly
basis, Private AYRO also remitted to SI a royalty of a percentage (see table below) of its revenues less the retainer amounts for the
measurement quarter paid. In connection with this agreement, Private AYRO granted 95,438 options to purchase shares of Private AYRO common
stock at an exercise price of $2.446 per share under the Private AYRO Equity Plan, which was subsequently cancelled in December 2019.
|
|
Royalty Percentage
|
|
Revenues
|
|
|
|
|
$0 - $25,000,000
|
|
|
3.0
|
%
|
$25,000,000 - $50,000,000
|
|
|
2.0
|
%
|
$50,000,000 - $100,000,000
|
|
|
1.0
|
%
|
Over $100,000,001
|
|
|
0.5
|
%
|
SI
was also granted a right to nominate up to two members of Private AYRO’s board of directors.
In
addition, on April 1, 2017, Private AYRO and SI entered into a fee-for-service agreement, pursuant to which SI agreed to provide accounting
and financial, graphics and marketing services to Private AYRO, based on the market-standard hourly rates as set forth in the agreement.
Effective
as of January 1, 2019, Private AYRO agreed to an amendment to the Outsourced CVO Services Agreement to reduce the royalty percentage
to a flat 0.5% for all revenue levels. In connection to this amendment, Private AYRO granted each of Mr. Okonsky and Mr. Adams an additional
190,876 options to purchase $3.48 per share, pursuant to the Private AYRO Equity Plan, which options were fully vested as of September
30, 2019 and subsequently cancelled in December 2019.
Effective
as of October 14, 2019, Private AYRO and SI terminated the Outsourced CVO Services Agreement, and as consideration for SI to terminate
the agreement, Private AYRO issued 231,778 shares of Private AYRO common stock to SI (or its designees).
In
December 2019, the Private AYRO, SI, Christian Okonsky and Mark Adams agreed to cancel (i) the options to purchase 95,438 shares of Private
AYRO common stock previously granted to SI in March 2017 and (ii) the options to purchase an aggregate of 381,752 shares of Private AYRO
common stock previously granted to Mr. Okonsky and Mr. Adams in connection with the amendment to the Outsourced CVO Services Agreement
to reduce the royalty percentages, in exchange for 434,529 shares of Private AYRO common stock.
For
the years ended 2017, 2018, and 2019 prior to termination, Private AYRO paid SI $60,000, $187,494 and $60,000, respectively, pursuant
to the Outsourced CVO Services Agreement, and $123,538, $36,694 and $1,275, respectively, pursuant to the fee-for service agreement for
accounting and financial, graphics and marketing services.
Consulting
Agreement
On
January 15, 2019, Private AYRO entered into a fee-for-service-based agreement with Sustainability Consultants, LLC (“SCLLC”),
an entity that is controlled by Mr. Adams, John Constantine and Will Steakley, who were principal stockholders of Private AYRO, in an
effort to support the strategic direction of Private AYRO. The duties of SCLLC include (a) participating in strategic advisory conference
calls with management; (b) making introductions to interested parties of strategic value; (c) advising Private AYRO on capital structure;
and (d) acting as ambassadors to promote the company within the Central Texas community. In 2019, SCLLC received five-year warrants to
purchase an aggregate of 177,924 shares of Private AYRO common stock at a $7.33 exercise price and 67,488 shares of the Private AYRO
common stock in connection with the services rendered.
Loan
from SI
In
January 2019, Private AYRO received $50,000 in a short-term loan from SI. The short-term loan did not bear any interest. The amount was
repaid in March 2019.
Adams
Note, Amendment, Lock-Up Agreement and Guarantee
On
October 14, 2019, Mr. Adams, a current member of the Board, was issued a secured promissory note in the aggregate principal amount of
$500,000, in exchange for funding $100,000 to Private AYRO on or before October 15, 2019, and $400,000 on or before October 24, 2019.
The note was secured by a first lien security interest in all of the assets of Private AYRO and accrued interest at 14% per annum, until
the promissory note was repaid. The note was to mature on the earlier of March 12, 2020, or the date that is three business days following
the closing of a reverse merger transaction involving Private AYRO.
On
December 13, 2019, Private AYRO and Mr. Adams entered into an amendment to the promissory note, extending the maturity date of the note
to April 30, 2021. As consideration, Private AYRO issued 136,340 shares of common stock to Mr. Adams. Such shares are subject to a six-month
lock-up period.
AYRO
has not paid any principal on the promissory note, but has paid all accrued interest timely as per the terms of the note. As of September
30, 2020, the aggregate principal amount of $500,000 and accrued interest was fully paid.
In
April 2020, Private AYRO issued a secured promissory note in the aggregate amount of $600,000 to an investor of Private AYRO, pursuant
to which Mark Adams entered into a personal guaranty for up to $300,000 of amounts owing under such secured loan, and, in connection
therewith, Private AYRO agreed to grant to each of the investor and Mark Adams a number of shares of Private AYRO common stock that will
convert into two percent (2%) of the aggregate issued and outstanding shares of DropCar immediately post-Merger. The entire principal
balance of the loan plus accrued interest was paid off upon closing of the Merger.
Cenntro
Agreement
In
April 2017, Private AYRO entered into a Manufacturing Licensing Agreement with Cenntro, that provides for its four-wheel sub-assemblies
to be licensed and sold to Private AYRO for final manufacturing and sale in the United States.
Supply
Chain Agreements
In
2017, Private AYRO executed a supply chain contract with Cenntro Automotive Group (“Cenntro”), our primary supplier, a manufacturer
located in the People’s Republic of China. Through our partnership with Cenntro, Cenntro acquired 19% of Private AYRO’s common
stock in 2017. As of December 31, 2020, Cenntro beneficially owned approximately 4.38% of our common stock. Currently, we purchase 100%
of our vehicle chassis, cabs and wheels through this supply chain relationship with Cenntro. We must sell a minimum number of units in
order to maintain our exclusive supply chain contract. We were in default of the original exclusive term of the contract; however, in
2019 and 2020, the contract was amended to remove the default clause. In December 2019, Cenntro agreed to convert $1.10 million of trade
accounts payable due from us to 299,948 shares of Private AYRO’s Seed Preferred Stock. The parties also agreed that any accrued
interest on the trades payable as a result of this conversion would be forgiven, which resulted in a recapture of interest expense in
the amount of $0.17 million in the year ended December 31, 2019. As of December 31, 2020 and 2019, the amounts outstanding to Cenntro
as a component of accounts payable were $0.05 million and $0.08 million, respectively. Under a memorandum of understanding signed between
us and Cenntro on March 22, 2020, upon availability of the 411x product, we agreed to purchase 300 units within the twelve months following
the signing of the memorandum of understanding, and 500 units and 800 units in each of the following respective twelve-month periods.
On July 9, 2020, in exchange for certain percentage discounts for raw materials, we made a $1.2 million prepayment for inventory. As
of December 31, 2020 and 2019, the prepayment deposits were $0.98 million and $0.05 million.
Adams
Loan
In
October 2019, we borrowed $0.50 million under a bridge loan from Mark Adams, a founding board member. As an inducement for the bridge
loan, we granted Mr. Adams 143,975 shares of common stock and in December 2019, we granted an additional 136,340 shares of common stock
to Mr. Adams as consideration for extending the term date of the loan to April 30, 2021. In September 2020, the loan principal and accrued
interest were paid in full.
EXECUTIVE
COMPENSATION
Unless
otherwise indicated, the disclosures in this section regarding the Company’s common stock or securities convertible into common
stock for periods or as of a date that precedes the closing of the Merger have been adjusted to give effect to the Reverse Split.
Executive
Officers
The
following table sets forth the names, ages and positions of our executive officers as of November 17, 2021:
Name
|
|
Age
|
|
Position
with the Company
|
Thomas
M. Wittenschlaeger
|
|
64
|
|
Chief
Executive Officer
|
Curtis
Smith
|
|
53
|
|
Chief
Financial Officer
|
Brian
Groh
|
|
63
|
|
Chief
of Business Development
|
Richard
Perley
|
|
56
|
|
Chief
Marketing Officer
|
Please
see the biography of Mr. Wittenschlaeger on page 7 of this Proxy Statement.
Curtis
Smith. Mr. Smith, 53, in addition to serving as the Company’s Chief Financial Officer, served as Private AYRO’s chief
financial officer from March 2018 until the closing of the Merger. Mr. Smith has been a CPA for more than 25 years with experience in
public accounting and executive level experience in financial, operations and IT systems management. From November 2015 through February
2018, Mr. Smith served as the chief financial officer for LAC Group, a private equity-backed portfolio company, responsible for all aspects
of strategic planning, investor relations, treasury management, finance, accounting, HR and IT. Prior to LAC Group, he served as a consultant
to various private companies regarding their financial and operational affairs. From November 2010 to February 2013, he served as the
chief financial officer of AgileAssets, a software developer building transportation asset management enterprise software. Mr. Smith
was instrumental in developing the SaaS-business model for AgileAssets. Prior to AgileAssets, Mr. Smith served as Vice President-Finance
and Administration for Troux Technologies. Prior to Troux Technologies, he served as Director of Finance and Director of Operations with
Verio (Nasdaq: VRIO), a 55+ company rollup and was instrumental in both the rollup as well as the company’s successful IPO in 1998.
Mr. Smith holds a B.B.A in accounting from Texas A&M University.
Brian
Groh. Mr. Groh, 63, in addition to his role as the Company’s Chief of Business Development, served as Private AYRO’s
contracted Chief of Business Development from September 2019 until the closing of the Merger. Mr. Groh is an executive and entrepreneur
with over thirty-five years’ experience in technology start-ups, accelerated growth and large corporations, with an extensive experience
in negotiations, mergers and acquisitions, in addition to establishing mutually beneficial and long-term partner relationships. Mr. Groh
was the founder and chief executive officer of public companies for over twenty years in various technology companies in the cellular,
tablet and mobile computing sectors. Since January 2018, Mr. Groh has been on the Board of Advisors Meghraj Capital International, an
international banking advisory, fiduciary services and consulting company headquartered in the British Isles that manages over $100 billion
in client assets. Mr. Groh also serves on the board of WellSmith, an Austin-based digital platform company for population health management
of chronic diseases that has partnered with Cone Health, a private, not-for-profit, healthcare delivery system. From August 2015 to January
2018, Mr. Groh was employed as General Manager of Business Development at Wistron Corporation, a Taiwanese global technology engineering
and manufacturing leader, and was responsible for creating Wistron’s smart product business development operations in North America.
From October 2008 until July 2015, Mr. Groh served as General Manager of Business Development of Wistron as a contractor and oversaw
the growth of Wistron’s smartphone business where he was successful in securing over $7 billion in contacts. From 2005 until 2008,
Mr. Groh provided consulting services to a number of high tech companies in Canada and the United States. Prior to working with Wistron,
Mr. Groh founded and served as CEO of Xplore Technologies Corp. from 1995 to September 2005, a global rugged tablet provider, and Mr.
Groh spearheaded Xplore’s initial public offering and acquisitions, raising more than $70 million in funding. From 1986 to 1995,
Mr. Groh founded and served as the CEO of Telular Canada, an innovative wireless data company with patented rights from its U.S. counterpart,
Telular Corporation. Mr. Groh led Telular Canada’s $18 million initial public offering in 1992 and acquisition of 20% of Telular
Corporation that had a $40 million market cap at the time. Less than one year after the acquisition, Telular Corporation conducted its
initial public offering as a $400 million market cap company. From 1985 until 1989, Mr. Groh was the Founder and CEO of Roadway Communications,
one of Canada’s first cellular phone dealers.
Richard
Perley. Mr. Perley, 56, in addition to serving as the Company’s Chief Marketing Officer, served as Private AYRO’s
contracted Chief Marketing Officer from September 2019 until the closing of the Merger, and previously from October 2018 through April
2019. Mr. Perley is an experienced technology executive and entrepreneur who has led successful marketing, product management, business
development and operational teams over a thirty-two-year career. He has extensive experience in high-growth, early-stage technology/innovation
companies in the consumer, commercial, industrial and government sectors. From February 2018 through August 2018, and from May 2019 through
August 2019, Mr. Perley founded and was a managing director and Chief Marketing Officer of PerlTek, a technology consulting firm providing
marketing, product management and business development services to a range of companies from the healthcare, cybersecurity and blockchain
industries. From September 2015 to January 2018, Mr. Perley served as Vice President, Business Development for Wistron Corporation. Mr.
Perley helped create Wistron’s smart product business development operations in North America where major account customer acquisition
opportunities expanded by 20 times during Mr. Perley’s employment. From September 2015 to January 2018, Mr. Perley was Chief Marketing
Officer and Managing Partner of Kinetex, LLC, an integrated product marketing, launch, sales and strategic planning accelerator for B2B
and B2C companies in North America and Western Europe he co-founded. Prior to Kinetex, Mr. Perley served as VP of Marketing and Services
for Augmentix and Xplore Technologies (co-founder), both rugged field computing companies. He was instrumental in driving accelerated
product, market and revenue growth for both organizations which ultimately were successfully sold to larger entities. Mr. Perley was
also a Director at Motorola where he led wireline marketing and sales team. He has an honors Business Degree from McMaster University,
Ontario Canada.
Compensation
Philosophy and Process
The
responsibility for establishing, administering and interpreting our policies governing the compensation and benefits for our executive
officers lies with our senior management, subject to the review and approval of our Board. Our Board has retained the services of Streeter
Wyatt, a compensation consultant that advises boards and companies on the proper structure and levels of executive and board member compensation
The
goals of our executive compensation program are to attract, motivate and retain individuals with the skills and qualities necessary to
support and develop our business within the framework of our size and available resources. In 2021, we designed our executive compensation
program to achieve the following objectives:
|
●
|
attract
and retain executives experienced in developing and delivering products such as our own;
|
|
●
|
motivate
and reward executives whose experience and skills are critical to our success;
|
|
●
|
reward
performance; and
|
|
●
|
align
the interests of our executive officers and other key employees with those of our stockholders by motivating our executive officers
and other key employees to increase stockholder value.
|
Summary
Compensation Table
The
following table sets forth all compensation earned, in all capacities, during the fiscal years ended December 31, 2020 and 2019 by the
Company’s named (i) former Chief Executive Officer and (ii) the two most highly compensated former executive officers other than
the former Chief Executive Officer who were serving as an executive officer at the end of the 2020 fiscal year and whose salary, as determined
by Regulation S-K, Item 402, exceeded $100,000 (the individuals falling within categories (i) and (ii) are collectively referred to as
the “named executive officers”).
Name and Principal Position
|
|
Year
|
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Option
Grants
($) (1)
|
|
|
All Other
Compensation
($)
|
|
|
Total ($)
|
|
Spencer Richardson(2)
|
|
2020
|
|
|
|
149,989
|
|
|
|
-
|
|
|
|
38,125
|
|
|
|
3,600
|
|
|
|
188,114
|
|
Former Chief Executive Officer
|
|
2019
|
|
|
|
299,010
|
|
|
|
75,000
|
|
|
|
106,722
|
|
|
|
-
|
|
|
|
480,732
|
|
David Newman (2)
|
|
2020
|
|
|
|
162,489
|
|
|
|
-
|
|
|
|
38,125
|
|
|
|
-
|
|
|
|
200,614
|
|
Former Chief Business Development Officer
|
|
2019
|
|
|
|
299,010
|
|
|
|
75,000
|
|
|
|
106,722
|
|
|
|
-
|
|
|
|
480,732
|
|
Richard Perley (3)
|
|
2020
|
|
|
|
118,904
|
|
|
|
29,726
|
|
|
|
129,290
|
|
|
|
-
|
|
|
|
277,920
|
|
Chief Marketing Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rod Keller (3)
|
|
2020
|
|
|
|
148,630
|
|
|
|
74,315
|
|
|
|
5,408,408
|
|
|
|
-
|
|
|
|
5,631,353
|
|
Former Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtis Smith (3)
|
|
2020
|
|
|
|
118,904
|
|
|
|
29,726
|
|
|
|
391,243
|
|
|
|
-
|
|
|
|
539,873
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Groh (3)
|
|
2020
|
|
|
|
118,904
|
|
|
|
29,726
|
|
|
|
129,290
|
|
|
|
-
|
|
|
|
277,920
|
|
Chief of Business Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
dollar amounts in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions
underlying the determination of fair value of the awards are set forth in Note 11 the financial statements included in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2021, as amended.
|
|
(2)
|
Resigned
effective May 28, 2020 in connection with the closing of the Merger.
|
|
(3)
|
Appointed
as an officer of the Company in connection with the consummation of the Merger on May 28, 2020. Compensation paid by Private AYRO
prior to the closing of the merger is not reflected in the Summary Compensation Table.
|
Narrative
Disclosure to Summary Compensation Table
Private
AYRO had entered into employment agreements with each of Mr. Keller and Mr. Smith. Pursuant to the Merger Agreement, as a condition to
the closing of the Merger, immediately prior to the effective time of the Merger, (i) the employment agreement between Private AYRO and
Mr. Keller then in effect was terminated, and DropCar entered into a new executive employment agreement with Mr. Keller, effective upon
completion of the Merger, and (ii) Private AYRO entered into an amendment to the current executive employment agreement with Mr. Smith,
effective upon completion of the Merger.
Each
of Mr. Groh and Mr. Perley provided services as a contractor to Private AYRO pursuant to an independent contractor agreement Private
AYRO entered into with the respective entity controlled by Mr. Groh and Mr. Perley.
The
material terms of the employment agreements and the independent contractor agreements with the named executive officers of Private AYRO
are summarized below.
Executive
Employment Agreements with Rodney C. Keller, Jr.
Keller
Employment Agreement
Pursuant
to the Merger Agreement, effective upon consummation of the Merger and as a condition to the closing of the Merger, immediately prior
to the effective time of the Merger, we entered into an executive employment agreement with Mr. Keller (the “Keller Employment
Agreement”). Pursuant to the Keller Employment Agreement, Mr. Keller agreed to serve as our chief executive officer and as a director
for the one-year initial term commencing upon effective time of the Merger, which term shall be automatically renewed for a successive
one-year term, unless earlier terminated by either party upon four months’ written notice or terminated otherwise as set forth
in the new employment agreement. Mr. Keller agreed to also serve as one of our directors.
The
Keller Employment Agreement provides that Mr. Keller is entitled to a base salary of $250,000, which may be increased at the discretion
of the Board but may not be decreased without Mr. Keller’s consent. Mr. Keller is also eligible to receive for fiscal years during
the term of his employment periodic bonuses up to 50% of his annual base salary upon achievement of target objectives and performance
criteria, payable on or before March 15 of the fiscal year following the fiscal year to which the bonus relates. Except upon termination
by us without cause or upon non-renewal, or by Mr. Keller for good reason, Mr. Keller shall be entitled to a bonus for a year, subject
to achievement of the performance criteria, if he is employed by us as of December 31 for the year to which services to which the bonus
applies were performed. Targets and performance criteria shall be established by the Board after consultation with Mr. Keller, but the
evaluation of Mr. Keller’s performance shall be at the Board’s sole discretion.
As
soon as administratively practicable after the closing date of the Merger, we agreed to grant Mr. Keller an award of 1,514,354 restricted
stock units (giving effect to the Exchange Ratio and Reverse Split), equivalent to 5% of the issued and outstanding shares of Company
common stock on a fully diluted basis, subject to the terms and conditions of our equity plan and form of restricted stock unit award
agreement, which terms shall include (i) forfeiture of any unvested restricted stock units on termination of employment for any reason;
and (ii) vesting of the restricted stock units as follows: (A) 33.33% will vest upon our receipt of purchase orders for at least 500
AYRO vehicles to be sold to Club Car in calendar year 2020 with specified quarterly targets, provided, that (1) on or before December
16, 2019, a definitive written agreement with respect to such purchase is executed, and at least $1,000,000 of the purchase has been
received by us; (2) on the closing date of the Merger, Private AYRO secures borrowing based on a line of credit of $4,000,000 to support
inventory purchase flow in line with the our 2020 budget; (3) the Merger closes on or before April 23, 2020 and we receives additional
funding of at least $5,000,000 by the closing date of the Merger; (4) in the event the closing date of the Merger is after January 25,
2020, Private AYRO and the investors mutually agree on the earlier release of approved funding of at least $500,000; and (5) we receive
additional funding from third parties of at least $1,500,000 on or before September 30, 2020; (B) an additional 33.33% on the date that,
in addition to the conditions set forth in (A), we enter into a definitive written agreement with Club Car or Ingersoll Rand on or before
May 31, 2020, that results in a minimum equity investment of $1,500,000, and publicly discloses such investment; and (C) the remainder
on the date that we achieves a minimum average valuation of 25% higher for twenty out of the thirty calendar days following the end of
the first full quarter after the closing date of the Merger than our valuation on the date of the Merger, provided that the conditions
set forth in (A) have been achieved by such date.
On
September 29, 2020, we entered into an amendment with Mr. Keller (the “Keller Amendment”) to the Keller Employment Agreement.
The Keller Amendment (i) changed the form of certain equity awards from restricted stock units to shares of our restricted common stock,
(ii) modified certain vesting conditions that apply to the restricted stock award as described in the Keller Employment Agreement and
(iii) reduced the number of shares of restricted stock to be granted to Mr. Keller by the number of stock options to be granted to him
by us contemporaneously with the Keller Amendment. Pursuant to the Keller Amendment, on September 29, 2020, we granted Mr. Keller 651,250
shares of restricted stock and options to purchase 459,468 shares of common stock at an exercise price of $3.17 per share. One-third
of the shares underlying the options will vest on the first anniversary of the date of grant, and the remaining optioned shares will
vest in twenty-four substantially equal monthly installments on each of the next twenty-four monthly anniversaries of the initial vesting
date, provided that Mr. Keller has remained continuously employed by or has been providing services to us through the applicable vesting
date.
We
may terminate Mr. Keller’s employment for cause at any time after providing written notice to Mr. Keller, and without cause with
thirty days’ written notice. Mr. Keller may terminate his employment without good reason at any time upon thirty days’ written
notice or with good reason, which requires delivery of a notice of termination within ninety days after Mr. Keller first learns of the
existence of the circumstances giving rise to good reason, and failure of the combined company to cure the circumstances giving rise
to the good reason within thirty days following delivery of such notice.
If
we terminate Mr. Keller’s employment for cause or if Mr. Keller resigns, Mr. Keller shall receive, within thirty days of such termination,
any accrued but unpaid base salary and expenses required to be reimbursed, and all vested outstanding stock options will remain exercisable
until the earlier of expiration of the option’s term or the date that is two years following the termination.
If
Mr. Keller’s employment is terminated due to his death or disability, Mr. Keller or his estate will receive the accrued obligation
Mr. Keller would have received upon termination by us for cause or by Mr. Keller by resignation, and any earned, but unpaid, bonus for
services rendered during the year preceding the date of termination.
If
we terminate Mr. Keller’s employment without cause or upon non-renewal or by Mr. Keller for good reason, Mr. Keller is entitled
to receive the accrued obligation Mr. Keller would have received upon termination by us for cause or by Mr. Keller by resignation, and
any earned, but unpaid, bonus for services rendered during the year preceding the date of termination. In addition, subject to compliance
with the restrictive covenants set forth in the Keller Employment Agreement and the execution of a release of claims, we will pay the
following severance payments and benefits: (1) an amount equal to twelve months’ base salary, payable in equal monthly installments
over a twelve-month severance period; (2) an amount equal to the greater of (x) the most recent annual bonus earned by Mr. Keller, (y)
the average of the immediately preceding two year’s annual bonuses earned by Mr. Keller, or (z) if Mr. Keller’s termination
of employment occurs during the first calendar year of the initial employment term before any annual bonus for a full twelve-month period
of service has been paid, then the target bonus Mr. Keller is eligible for under the employment agreement; provided that no bonus amount
shall be payable if the bonuses for the year of termination are subject to achievement of performance goals and such performance goals
are not achieved by the combined company for such year; provided further that the bonus amount shall be paid at the same time bonuses
would be payable under the employment agreement as if Mr. Keller was actively employed; (3) all outstanding stock options and restricted
stock unit awards granted shall be fully and immediately vested, to the extent not previously vested and shares with respect to the restricted
stock unit awards that become vested under the employment agreement shall be delivered within ten days of termination; and (4) continued
healthcare coverage under the group health plan at the same cost, if any, imposed on our active employees, until the earlier of (x) the
expiration of the severance period or (y) the date Consolidated Omnibus Budget Reconciliation Act of 1986 coverage terminates or expires.
If
we terminate Mr. Keller’s employment without cause or upon non-renewal or by Mr. Keller for good reason in connection with or within
24 months following a change in control (as defined in our 2020 Long-Term Incentive Plan), Mr. Keller shall receive the severance payments
and benefits he would receive in the event that we terminate Mr. Keller’s employment without cause or upon non-renewal or by Mr.
Keller for good reason set forth above, but instead of twelve months’ base salary, Mr. Keller will receive twenty-four months’
base salary over a twelve-month severance period and double the bonus amount he would have received without change in control.
The
Keller Employment Agreement also contains certain standard noncompetition, non-solicitation, non-disparagement, confidentiality, and
assignment of inventions requirements for Mr. Keller.
Resignation
of Chief Executive Officer and President
On
September 21, 2021 (the “Resignation Date”), Mr. Keller tendered his resignation from his roles as an officer, employee and
director of the Company, effective immediately. Mr. Keller’s resignation from the Board was not in connection with any disagreement
between Mr. Keller and the Company, its management, the Board or any committee of the Board on any matter relating to the Company’s
operations, policies or practices, or any other matter.
Voluntary
Separation Agreement, Release and Consulting Agreement.
On
September 21, 2021, in connection with Mr. Keller’s resignation, the Company and Mr. Keller entered into a Voluntary Separation
Agreement, Release and Consulting Agreement, dated September 20, 2021 (the “Separation Agreement”). Pursuant to the Separation
Agreement, Mr. Keller will perform certain consultant services for the Company pertaining to matters and business of the Company for
a period of not less than one month and not more than three months, depending on the employment status of Mr. Keller during such period
(the “Consultancy Period”). During the Consultancy Period, Mr. Keller will be entitled to receive (i) a base salary of $20,833.30
per month, representing Mr. Keller’s base salary prior to the Resignation Date, (ii) a cash separation payment in the amount of
$650,000.00, less applicable tax deductions and withholdings (the “Separation Payment”), with $312,500.00 of the Separation
Payment payable within 14 days of the Resignation Date, subject to certain conditions being met, and the remainder being payable within
30 days of the last day of the Consultancy Period, and (iii) reimbursement for continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), for Mr. Keller, his spouse and dependents for a period of up to 18 months
following the Resignation Date, provided that Mr. Keller has not obtained subsequent employment with comparable or better medical, vision
and dental coverage. The Separation Agreement provides Mr. Keller the opportunity to revoke his acceptance of the Separation Agreement
within eight calendar days of the Resignation Date, in which case the Separation Agreement shall not be effective and shall be deemed
void.
In
exchange for the consideration provided to Mr. Keller in the Separation Agreement, Mr. Keller and the Company have agreed to mutually
waive and release any claims in connection with Mr. Keller’s employment, separation and resignation from the Company.
In
connection with the execution of the Separation Agreement, Mr. Keller’s existing executive employment agreement, as amended (the
“Prior Employment Agreement”), was terminated; provided, however, that certain surviving customary confidentiality provisions
and restrictive covenants remain in full force and effect. The Separation Agreement also provides for certain customary covenants regarding
confidentiality and non-disparagement.
Pursuant
to Mr. Keller’s Prior Employment Agreement, all of his outstanding stock options and awarded shares will be delivered by the Company
within ten days of the Resignation Date, to the extent such awards have not previously vested; provided, however that Mr. Keller has
not exercised any revocation rights prior to the payment being due.
Executive
Employment Agreement with Curtis Smith
Pre-Merger
Smith Employment Agreement
Pursuant
to his employment agreement, effective March 8, 2018, and to subsequent actions by Private AYRO’s board of directors, Curtis E.
Smith was entitled to a base salary of $200,000 and a target annual bonus in the amount of 25% of his annual base salary. The target
annual bonus was based on Mr. Smith’s performance, as determined by Private AYRO’s board of directors in its sole discretion,
against fundamental corporate and/or individual objectives to be determined by Private AYRO’s board of directors. Mr. Smith was
eligible to participate in the Private AYRO Equity Plan (as defined below), subject to the discretion of Private AYRO’s board of
directors, if and when the board of directors determined to make a grant to him. Pursuant to Mr. Smith’s employment agreement,
as consideration for entering into the employment agreement, Private AYRO granted nonqualified options to acquire 109,072 shares of Private
AYRO common stock (giving effect to the Exchange Ratio and Reverse Split) with an exercise price of $2.446 in March 2018.
Smith
Employment Agreement Amendment
On
May 28, 2020, immediately prior to the effective time of the Merger, Private AYRO entered into an amendment to its executive employment
agreement with Mr. Smith (the “Smith Amendment”). The Smith Amendment provides that if Mr. Smith’s employment is terminated
upon either party’s failure to renew or by Mr. Smith without good reason, then all of Mr. Smith’s vested, outstanding stock
options will remain exercisable until the earlier of the expiration of the option’s term or the date that is two years following
the termination. The Smith Amendment further provides that if Mr. Smith’s employment is terminated by Private AYRO without cause
or by Mr. Smith for good reason, then all outstanding equity awards granted to Mr. Smith pursuant to his employment agreement shall be
fully and immediately vested, to the extent not previously vested, and all of his then vested, outstanding stock options shall remain
exercisable until the earlier of the expiration of the options’ term or the date that is two years following termination. On September
29, 2020, Mr. Smith was awarded options to purchase 169,906 shares of our common stock, at an exercise price of $3.17 per share. One-third
of the shares underlying the options vest on the first anniversary of the date of grant, and the remaining optioned shares vest in twenty-four
substantially equal monthly installments on each of the next twenty-four monthly anniversaries of the initial vesting date, provided
that Mr. Smith has remained continuously employed by or has been providing services to us through the applicable vesting date.
Independent
Contractor Agreement with Brian Groh
Private
AYRO and 2196005 Ontario, Inc., an Ontario corporation owned and controlled by Mr. Groh (the “Groh Entity”), entered into
an independent contractor agreement on September 16, 2019. Pursuant to the agreement, the Groh Entity agreed to provide services as chief
of business development for a term of 12 months, which has been renewed by the parties each year.
Private
AYRO initially paid the Groh Entity $8,333 per month, based on 50% normal business hours utilization, upon receipt of invoice, which
was later increased to $16,667 per month on October 1, 2019 when Mr. Groh became a full-time associate. Such amount may have been increased
or decreased based on actual hours worked. Private AYRO was to pay to the Groh Entity quarterly management by objectives (“MBO”)
targeted at $12,500 per quarter, based on MBOs mutually agreed upon by the parties, payment of which was scheduled to commence after
the completion of the Merger. The Groh Entity was also eligible to participate in a commission pooling plan with the other sales team
participants. Pursuant to the independent contractor agreement, Private AYRO granted Mr. Groh options to purchase 54,536 shares of Private
AYRO common stock pursuant to the Private AYRO Equity Plan (as defined below).
Either
the Groh Entity or Private AYRO may have terminated the independent contractor agreement at any time and for any reason with 90 days’
advance written notice.
If
Private AYRO terminated the contract for cause or the Groh Entity terminated the contract without good reason, the Groh Entity would
have received its earned fees, commissions and quarterly MBO payment. If the contract was terminated by the Groh Entity for good reason
or by Private AYRO without cause, the Groh Entity would have received its earned fees, commissions and quarterly MBO payment and continued
payments of fees, quarterly MBO payment and commissions owned based on the mutually agreed commission plan for six months following their
termination date in an aggregate amount equal to the greater of (1) the Groh Entity’s monthly fees, quarterly MBO and qualifying
commissions for the year in which the termination date occurs, or (2) the Groh Entity’s monthly fees, quarterly MBO and qualifying
commissions averaged for 6 months prior to the termination date. In addition, pursuant to the option award agreements executed upon each
option grant made to Mr. Groh, upon termination by Private AYRO not for cause (as defined in such option agreements), Mr. Groh may have
exercised the options vested as of the date of his termination by the earlier of (i) the date that was 3 months following Mr. Groh’s
termination or (ii) the expiration date (unless being exercised by his estate).
The
agreement also contained certain standard non-solicitation, confidentiality, indemnification and assignment of work products.
On
September 29, 2020, Mr. Groh was awarded options to purchase 56,147 shares of our common stock.at an exercise price of $3.17 per share.
One-third of the shares underlying the options will vest on the first anniversary of the date of grant, and the remaining optioned shares
will vest in twenty-four substantially equal monthly installments on each of the next twenty-four monthly anniversaries of the initial
vesting date, provided that Mr. Groh has remained continuously employed by or has been providing services to us through the applicable
vesting date.
Independent
Contractor Agreement with Richard Perley
On
September 9, 2019, Private AYRO appointed Mr. Perley as Chief Marketing Officer. Private AYRO initially paid Mr. Perley $8,333 per month,
based on 50% normal business hours utilization, upon receipt of invoice, which was later increased to $16,667 per month on October 1,
2019 when Mr. Perley became a full-time associate. Such amount may have been increased or decreased based on actual hours worked. Private
AYRO was to pay Mr. Perley quarterly MBO targeted at $12,500 per quarter, based on MBOs mutually agreed upon by the parties, payment
of which will commence after the completion of the Merger. Mr. Perley was also eligible to participate in a commission pooling plan with
the other sales team participants. Pursuant to the independent contractor agreement, Private AYRO granted Mr. Perley options to purchase
54,536 shares of Private AYRO common stock pursuant to the Private AYRO Equity Plan (as defined below), with such share numbers giving
effect to the Exchange Ratio and Reverse Split.
Either
Mr. Perley or Private AYRO may have terminated the independent contractor agreement at any time and for any reason with 90 days’
advance written notice.
If
Private AYRO terminated the contract for cause or if Mr. Perley terminated the contract without good reason, Mr. Perley would have received
his earned fees, commissions and quarterly MBO payment. If the contract was terminated by Mr. Perley for good reason or by Private AYRO
without cause, Mr. Perley would have received his earned fees, commissions and quarterly MBO payment and continued payments of fees,
quarterly MBO payment and commissions owned based on the mutually agreed commission plan for six months following their termination date
in an aggregate amount equal to the greater of (1) Mr. Perley’s monthly fees, quarterly MBO and qualifying commissions for the
year in which the termination date occurred, or (2) Mr. Perley’s monthly fees, quarterly MBO and qualifying commissions averaged
for 6 months prior to the termination date. In addition, pursuant to the option award agreements executed upon each option grant made
to Mr. Perley, upon termination by Private AYRO not for cause (as defined in such option agreements), Mr. Perley may have exercised the
options vested as of the date of his termination by the earlier of (i) the date that was 3 months following Mr. Perley’s termination
or (ii) the expiration date (unless being exercised by his estate).
The
agreement also contained certain standard non-solicitation, confidentiality, indemnification and assignment of work products.
On
September 29, 2020, Mr. Perley was awarded options to purchase 56,147 shares of our common stock.at an exercise price of $3.17 per share.
One-third of the shares underlying the options will vest on the first anniversary of the date of grant, and the remaining optioned shares
will vest in twenty-four substantially equal monthly installments on each of the next twenty-four monthly anniversaries of the initial
vesting date, provided that Mr. Perley has remained continuously employed by or has been providing services to us through the applicable
vesting date.
Employment
Agreement with Spencer Richardson
In
connection with the 2018 Merger, DropCar entered into an employment agreement with Mr. Richardson pursuant to which he served as DropCar’s
Chief Executive Officer until his resignation at the effective time of the Merger. The employment agreement provided for an initial term
of three (3) years with automatic one (1) year renewals. The employment agreement provided for the following cash-based compensation:
(a) an annual base salary equal to $275,000, subject to a 10% increase per year; (b) a bonus payment of $250,000 in connection
with the closing of the 2018 Merger; (c) quarterly bonuses of at least $12,500; (d) milestone bonus payments based on DropCar’s
achievement of certain specified milestones; and (e) allowances for automobile, medical and dental.
Mr.
Richardson was also entitled to annual option grants equivalent to 1% of the outstanding shares of DropCar. Subject to continued employment
through each vesting date, these annual grants would vest and become exercisable with respect to 1/8th of the shares on each 90th day
following the date of grant; provided that all options would vest on a change of control of DropCar. In addition to annual option grants,
Mr. Richardson was eligible to receive additional option grants based on DropCar’s achievement of certain specified milestones.
In
the event that Mr. Richardson’s employment with DropCar was terminated (a) by DropCar without “cause” (including as
a result of death or disability) following the end of the initial term, (b) by Mr. Richardson for “good reason”, or (c) due
to non-renewal of the initial term by DropCar, then DropCar would pay or provide (x) 24 months’ of salary continuation, (y) $100,000
(such amount representing the guaranteed quarterly bonus for 24 months), and (z) to the extent unvested, full acceleration of the vesting
of any outstanding options.
In
addition, Mr. Richardson entered into a non-solicitation and non-competition agreement that applies during the term of employment and
for 12 months thereafter.
At
the effective time of the Merger, Mr. Richardson tendered his resignation from his positions as officer and director of DropCar. Pursuant
to (i) Section 3(e) of an employment agreement, dated as of September 6, 2017, by and between DropCar and Mr. Richardson, on January
30, 2020, Mr. Richardson was entitled to receive a grant of options to purchase shares of DropCar’s stock in an amount equal to
1% of the then-outstanding shares of Company common stock on a fully diluted basis (which would have been equal to options to purchase
25,140 shares). Such grant was not issued due to a lack of shares available for issuance pursuant to DropCar’s Amended and Restated
2014 Equity Incentive Plan. Following approval of the AYRO, Inc. 2020 Long-Term Incentive Plan by the stockholders of DropCar and prior
to the consummation of the Merger and in lieu of the January 30, 2020 options at the request of Mr. Richardson, DropCar issued to Mr.
Richardson a grant of 12,500 restricted shares. Such shares were granted pursuant to an exemption from registration pursuant to Rule
506(b) of Regulation D.
Employment
Agreement with David Newman
In
connection with the 2018 Merger, DropCar entered into an employment agreement with Mr. Newman pursuant to which he served as DropCar’s
Chief Business Development Officer until his resignation at the effective time of the Merger. The employment agreement provided for an
initial term of three (3) years with automatic one (1) year renewals. The employment agreement provided for the following cash-based
compensation: (a) an annual base salary equal to $275,000, subject to a 10% increase per year; (b) a bonus payment of $250,000
in connection with the closing of the 2018 Merger; (c) quarterly bonuses of at least $12,500; (d) milestone bonus payments based on DropCar’s
achievement of certain specified milestones; and (e) allowances for automobile, medical and dental.
Mr.
Newman was also entitled to annual option grants equivalent to 1% of the outstanding shares of DropCar. Subject to continued employment
through each vesting date, these annual grants would vest and become exercisable with respect to 1/8th of the shares on each 90th day
following the date of grant; provided that all options would vest on a change of control of DropCar. In addition to annual option grants,
Mr. Newman was eligible to receive additional option grants based on DropCar’s achievement of certain specified milestones.
In
the event that Mr. Newman’s employment with DropCar was terminated (a) by DropCar without “cause” (including as a result
of death or disability) following the end of the initial term, (b) by Mr. Newman for “good reason”, or (c) due to non-renewal
of the initial term by DropCar, then DropCar would pay or provide (x) 24 months’ of salary continuation, (y) $100,000 (such amount
representing the guaranteed quarterly bonus for 24 months), and (z) to the extent unvested, full acceleration of the vesting of any outstanding
options.
In
addition, Newman entered into a non-solicitation and non-competition agreement that applied during the term of employment and for 12
months thereafter.
At
the effective time of the Merger, Mr. Newman tendered his resignation from his positions as officer and director of DropCar. His resignation
did not contain any statements describing disagreements with DropCar related to its operations, policies or practices, nor did any disagreements
lead to his resignation. Pursuant to (i) Section 3(e) of an employment agreement, dated as of September 6, 2017, by and between DropCar
and Mr. Newman, on January 30, 2020, Mr. Newman was entitled to receive a grant of options to purchase shares of DropCar’s stock
in an amount equal to 1% of the then-outstanding shares of Company common stock on a fully diluted basis (which would have been equal
to options to purchase 25,140 shares). Such grant was not issued due to a lack of shares available for issuance pursuant to DropCar’s
Amended and Restated 2014 Equity Incentive Plan. Following approval of the AYRO, Inc. 2020 Long-Term Incentive Plan by the stockholders
of DropCar and prior to the consummation of the Merger and in lieu of the January 30, 2020 options at the request of Mr. Newman, DropCar
issued to Mr. Newman a grant of 12,500 restricted shares. Such shares were granted pursuant to an exemption from registration pursuant
to Rule 506(b) of Regulation D.
Equity
Compensation
AYRO,
Inc. 2020 Long-Term Incentive Plan
On
April 21, 2020, our Board adopted the AYRO, Inc. 2020 Long-Term Incentive Plan (the “Plan”), subject to stockholder approval,
which was obtained on May 28, 2020. Our outside directors and our employees, including the principal executive officer, principal financial
officer and other named executive officers, and certain contractors are all eligible to participate in the Plan. The Plan was amended
by stockholder vote on November 9, 2020 to increase the total number of shares of our common stock authorized for issuance under the
Plan to 4,089,650 shares.
Purpose.
The purpose of the Plan is to enable us to remain competitive and innovative in our ability to attract and retain the services of key
employees, key contractors, and non-employee directors of the Company or any of our subsidiaries. The Plan provides for the granting
of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance
awards, dividend equivalent rights, and other awards, which may be granted singly, in combination, or in tandem, and which may be paid
in cash or shares of our common stock. The Plan is expected to provide flexibility to our compensation methods in order to adapt the
compensation of our key employees, key contractors, and non-employee directors to a changing business environment, after giving due consideration
to competitive conditions and the impact of applicable tax laws.
Effective
Date and Expiration. The Plan was approved by our Board on April 21, 2020 (the “Effective Date”), subject to the Plan’s
approval by our stockholders. The Plan will terminate on the tenth anniversary of the Effective Date, unless sooner terminated by our
Board. No award may be made under the Plan after its termination date, but awards made prior to the termination date may extend beyond
that date in accordance with their terms.
Share
Authorization. Subject to certain adjustments, the maximum number of shares of our common stock that may be issued pursuant to awards
under the Plan is 4,089,650 shares, 100% of which may be delivered as incentive stock options.
Shares
to be issued may be made available from authorized but unissued shares of our common stock, shares held by us in our treasury, or shares
purchased by us on the open market or otherwise. During the term of the Plan, we will at all times reserve and keep enough shares available
to satisfy the requirements of the Plan. If an award under the Plan is cancelled, forfeited, or expires, in whole or in part, the shares
subject to such forfeited, expired, or cancelled award may again be awarded under the Plan. In the event that previously acquired shares
are delivered to us in full or partial payment of the option price upon the exercise of a stock option or other award granted under the
Plan, the number of shares available for future awards under the Plan shall be reduced only by the net number of shares issued upon the
exercise of the stock option or settlement of an award. Awards that may be satisfied either by the issuance of common stock or by cash
or other consideration shall be counted against the maximum number of shares that may be issued under the Plan only during the period
that the award is outstanding or to the extent the award is ultimately satisfied by the issuance of shares. An award will not reduce
the number of shares that may be issued pursuant to the Plan if the settlement of the award will not require the issuance of shares,
as, for example, a stock appreciation right that can be satisfied only by the payment of cash. Only shares forfeited back to us; shares
cancelled on account of termination, expiration, or lapse of an award; shares surrendered in payment of the option price of an option;
or shares withheld for payment of applicable employment taxes and/or withholding obligations resulting from the exercise of a stock option
shall again be available for grant as incentive stock options under the Plan, but shall not increase the maximum number of shares described
above as the maximum number of shares that may be delivered pursuant to incentive stock options.
Administration.
The Plan shall be administered by our Board or such committee of the Board as it designated by it to administer the Plan (the “Committee”).
At any time there is no Committee to administer the Plan, any reference to the Committee is a reference to the Board. The Committee will
determine the persons to whom awards are to be made; determine the type, size, and terms of awards; interpret the Plan; establish and
revise rules and regulations relating to the Plan; establish performance goals for awards and certify the extent of their achievement;
and make any other determinations that it believes are necessary for the administration of the Plan. The Committee may delegate certain
of its duties to one or more of our officers as provided in the Plan.
Eligibility.
Employees (including any employee who is also a director or an officer), contractors, and non-employee directors of the Company or any
of our subsidiaries, whose judgment, initiative, and efforts contributed to or may be expected to contribute to our successful performance,
are eligible to participate in the Plan. As of the record date, we had 25 employees, 3 contractors, and 6 non-employee directors who
would be eligible for awards under the Plan.
Stock
Options. The Committee may grant either incentive stock options (“ISOs”) qualifying under Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options, provided that only employees of the Company
and our subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs. Stock options may not be granted
with an option price less than 100% of the fair market value of a share of common stock on the date the stock option is granted. If an
ISO is granted to an employee who owns or is deemed to own more than 10% of the combined voting power of all classes of our stock (or
of any parent or subsidiary), the option price shall be at least 110% of the fair market value of a share of common stock on the date
of grant. The Committee will determine the terms of each stock option at the time of grant, including, without limitation, the methods
by or forms in which shares will be delivered to participants or registered in their names. The maximum term of each option, the times
at which each option will be exercisable, and provisions requiring forfeiture of unexercised options at or following termination of employment
or service generally are fixed by the Committee, except that the Committee may not grant stock options with a term exceeding 10 years
or, in the case of an ISO granted to an employee who owns or is deemed to own more than 10% of the combined voting power of all classes
of our stock (or of any parent or subsidiary), a term exceeding five years.
Recipients
of stock options may pay the option price (i) in cash, check, bank draft, or money order payable to the order of the Company; (ii) by
delivering to us shares of common stock (included restricted stock) already owned by the participant having a fair market value equal
to the aggregate option price and that the participant has not acquired from us within six months prior to the exercise date; (iii) by
delivering to us or our designated agent an executed irrevocable option exercise form, together with irrevocable instructions from the
participant to a broker or dealer, reasonably acceptable to us, to sell certain of the shares purchased upon the exercise of the option
or to pledge such shares to the broker as collateral for a loan from the broker and to deliver to us the amount of sale or loan proceeds
necessary to pay the purchase price; (iv) by requesting us to withhold the number of shares otherwise deliverable upon exercise of the
stock option by the number of shares having an aggregate fair market value equal to the aggregate option price at the time of exercise
(i.e., a cashless net exercise); and (v) by any other form of valid consideration that is acceptable to the Committee in its sole
discretion.
Stock
Appreciation Rights. The Committee is authorized to grant stock appreciation rights (“SARs”) as a stand-alone award (or
freestanding SARs) or in conjunction with options granted under the Plan (or tandem SARs). SARs entitle a participant to receive an amount
equal to the excess of the fair market value of a share of common stock on the date of exercise over the fair market value of a share
of our common stock on the date of grant. The grant price of a SAR cannot be less than 100% of the fair market value of a share of our
common stock on the date of grant. The Committee will determine the terms of each SAR award at the time of the grant, including, without
limitation, the methods by or forms in which shares will be delivered to participants or registered in their names. The maximum term
of each SAR award, the times at which each SAR award will be exercisable, and provisions requiring forfeiture of unexercised SARs at
or following termination of employment or service generally are fixed by the Committee, except that no freestanding SAR may have a term
exceeding 10 years and no tandem SAR may have a term exceeding the term of the option granted in conjunction with the tandem SAR. Distributions
to the recipient may be made in common stock, cash, or a combination of both as determined by the Committee.
Restricted
Stock and Restricted Stock Units. The Committee is authorized to grant restricted stock and restricted stock units. Restricted stock
consists of shares of our common stock that may not be sold, assigned, transferred, pledged, hypothecated, encumbered, or otherwise disposed
of, and that may be forfeited in the event of certain terminations of employment or service, prior to the end of the restricted period
as specified by the Committee. Restricted stock units are the right to receive shares of common stock at a future date in accordance
with the terms of such grant upon the attainment of certain conditions specified by the Committee, which include a substantial risk of
forfeiture and restrictions on their sale or other transfer by the participant. The Committee determines the eligible participants to
whom, and the time or times at which, grants of restricted stock or restricted stock units will be made; the number of shares or units
to be granted; the price to be paid, if any; the time or times within which the shares covered by such grants will be subject to forfeiture;
the time or times at which the restrictions will terminate; and all other terms and conditions of the grants. Restrictions or conditions
could include, but are not limited to, the attainment of performance goals (as described below), continuous service with us, the passage
of time, or other restrictions or conditions. Except as otherwise provided in the Plan or the applicable award agreement, a participant
shall have, with respect to shares of restricted stock, all of the rights of a stockholder of the Company holding the class of common
stock that is the subject of the restricted stock, including, if applicable, the right to vote the common stock and the right to receive
any dividends thereon.
Dividend
Equivalent Rights. The Committee is authorized to grant a dividend equivalent right to any participant, either as a component of
another award or as a separate award, conferring upon the participant the right to receive credits based on the cash dividends that would
have been paid on the shares of common stock specified in the award as if such shares were held by the participant. The terms and conditions
of the dividend equivalent right shall be specified in the grant. Dividend equivalents credited to the holder of a dividend equivalent
right may be paid currently or may be deemed to be reinvested in additional shares. Any such reinvestment shall be at the fair market
value at the time thereof. A dividend equivalent right may be settled in cash, shares, or a combination thereof.
Performance
Awards. The Committee may grant performance awards payable at the end of a specified performance period in cash, shares of common
stock, units, or other rights based upon, payable in, or otherwise related to our common stock. Payment will be contingent upon achieving
pre-established performance goals (as described below) by the end of the applicable performance period. The Committee will determine
the length of the performance period, the maximum payment value of an award, and the minimum performance goals required before payment
will be made, so long as such provisions are not inconsistent with the terms of the Plan, and to the extent an award is subject to Section
409A of the Code, are in compliance with the applicable requirements of Section 409A of the Code and any applicable regulations or guidance.
In certain circumstances, the Committee may, in its discretion, determine that the amount payable with respect to certain performance
awards will be reduced from the maximum amount of any potential awards. If the Committee determines, in its sole discretion, that the
established performance measures or objectives are no longer suitable because of a change in our business, operations, corporate structure,
or for other reasons that the Committee deems satisfactory, the Committee may modify the performance measures or objectives and/or the
performance period.
Performance
Goals. Awards of restricted stock, restricted stock units, performance awards, and other awards under the Plan may be made subject
to the attainment of performance goals relating to one or more business criteria which shall consist of one or more or any combination
of the following criteria (“Performance Criteria”): cash flow; cost; revenues; sales; ratio of debt to debt plus equity;
net borrowing, credit quality, or debt ratings; profit before tax; economic profit; earnings before interest and taxes; earnings before
interest, taxes, depreciation, and amortization; gross margin; earnings per share (whether on a pre-tax, after-tax, operational, or other
basis); operating earnings; capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital
spending or any other operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers,
acquisitions, dispositions, public offerings, or similar extraordinary business transactions; sales growth; price of the shares; return
on assets, equity, or stockholders’ equity; market share; inventory levels, inventory turn or shrinkage; or total return to stockholders.
Any Performance Criteria may be used to measure our performance as a whole or of any of our business units and may be measured relative
to a peer group or index. Any Performance Criteria may include or exclude (i) events that are of an unusual nature or indicate infrequency
of occurrence, (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting regulations or laws; (iv) the
effect of a merger or acquisition, as identified in our quarterly and annual earnings releases; or (v) other similar occurrences. In
all other respects, Performance Criteria shall be calculated in accordance with our financial statements, under generally accepted accounting
principles, or under a methodology established by the Committee prior to the issuance of an award, which is consistently applied and
identified in the Company’s audited financial statements, including in footnotes, or the Compensation Discussion and Analysis section
of the Company’s annual report.
Other
Awards. The Committee may grant other forms of awards, based upon, payable in, or that otherwise relate to, in whole or in part,
shares of our common stock, if the Committee determines that such other form of award is consistent with the purpose and restrictions
of the Plan. The terms and conditions of such other form of award shall be specified in the grant. Such other awards may be granted for
no cash consideration, for such minimum consideration as may be required by applicable law, or for such other consideration as may be
specified in the grant.
Vesting,
Forfeiture and Recoupment, Assignment. The Committee, in its sole discretion, may determine that an award will be immediately vested,
in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its date of grant, or until the
occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting,
then, subsequent to the date of grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of
the award may be vested.
The
Committee may impose on any award at the time of grant or thereafter, such additional terms and conditions as the Committee determines,
including terms requiring forfeiture of awards in the event of a participant’s termination of service. The Committee will specify
the circumstances on which performance awards may be forfeited in the event of a termination of service by a participant prior to the
end of a performance period or settlement of such awards. Except as otherwise determined by the Committee, restricted stock will be forfeited
upon a participant’s termination of service during the applicable restriction period. In addition, we may recoup all or any portion
of any shares or cash paid to a participant in connection with any award in the event of a restatement of the Company’s financial
statements as set forth in the Company’s clawback policy, if any, as such policy may be approved or modified by our Board from
time to time.
Awards
granted under the Plan generally are not assignable or transferable except by will or by the laws of descent and distribution, except
that the Committee may, in its discretion and pursuant to the terms of an award agreement, permit transfers of nonqualified stock options
or SARs to (i) the spouse (or former spouse), children, or grandchildren of the participant (“Immediate Family Members”);
(ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; (iii) a partnership in which the only partners are
(a) such Immediate Family Members and/or (b) entities which are controlled by the participant and/or his or her Immediate Family Members;
(iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision; or (v) a split interest
trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be
no consideration for any such transfer, (y) the applicable award agreement pursuant to which such nonqualified stock options or SARs
are granted must be approved by the Committee and must expressly provide for such transferability, and (z) subsequent transfers of transferred
nonqualified stock options or SARs shall be prohibited except those by will or the laws of descent and distribution.
Adjustments
Upon Changes in Capitalization. In the event that any dividend or other distribution (whether in the form of cash, shares of our
common stock, other securities or other property), recapitalization, stock split, reverse stock split, rights offering, reorganization,
merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of shares of common stock or
other securities of the Company, issuance of warrants or other rights to purchase shares of common stock or other securities of the Company,
or other similar corporate transaction or event affects the fair value of an award, then the Committee shall adjust any or all of the
following so that the fair value of the award immediately after the transaction or event is equal to the fair value of the award immediately
prior to the transaction or event: (i) the number of shares and type of common stock (or the securities or property) which thereafter
may be made the subject of awards; (ii) the number of shares and type of common stock (or other securities or property) subject to outstanding
awards; (iii) the number of shares and type of common stock (or other securities or property) specified as the annual per-participant
limitation under the Plan; (iv) the option price of each outstanding stock option; (v) the amount, if any, we pay for forfeited shares
in accordance with the terms of the Plan; and (vi) the number of or exercise price of shares then subject to outstanding SARs previously
granted and unexercised under the Plan, to the end that the same proportion of our issued and outstanding shares of common stock in each
instance shall remain subject to exercise at the same aggregate exercise price; provided, however, that the number of shares of common
stock (or other securities or property) subject to any award shall always be a whole number. Notwithstanding the foregoing, no such adjustment
shall be made or authorized to the extent that such adjustment would cause the Plan or any stock option to violate Section 422 or Section
409A of the Code. All such adjustments must be made in accordance with the rules of any securities exchange, stock market, or stock quotation
system to which we are subject.
Amendment
or Discontinuance of the Plan. Our Board may, at any time and from time to time, without the consent of participants, alter, amend,
revise, suspend, or discontinue the Plan in whole or in part; provided, however, that (i) no amendment that requires stockholder approval
in order for the Plan and any awards under the Plan to continue to comply with Sections 421 and 422 of the Code (including any successors
to such sections or other applicable law) or any applicable requirements of any securities exchange or inter-dealer quotation system
on which our stock is listed or traded, shall be effective unless such amendment is approved by the requisite vote of our stockholders
entitled to vote on the amendment; and (ii) unless required by law, no action by our Board regarding amendment or discontinuance of the
Plan may adversely affect any rights of any participants or obligations of the Company to any participants with respect to any outstanding
awards under the Plan without the consent of the affected participant.
On
May 28, 2020, in connection with the closing of the Merger, the Board awarded 12,500 fully vested shares of restricted stock to each
of Spencer Richardson and David Newman.
On
September 29, 2020, the Board awarded the following options to the named executive officers. The options granted are to be vested quarterly
over three years with a one-year cliff.
Named Executive Officer
|
|
Number of Shares
|
|
|
Exercise Price
|
|
Curtis Smith
|
|
|
169,906
|
|
|
$
|
3.17
|
|
Brian Groh
|
|
|
56,147
|
|
|
$
|
3.17
|
|
Richard Perley
|
|
|
56,147
|
|
|
$
|
3.17
|
|
On
September 29, 2020, the Board awarded 459,486 options to Rodney Keller. The options have an exercise price of $3.17 per share and vest
one-third on December 4, 2020, one-third on December 4, 2021 and one-third on December 4, 2022.
On
December 4, 2020, the Board awarded 651,250 shares of restricted common stock to Rodney Keller. One-third of the shares vest on May 28,
2021 and one-third of the shares vest on December 4, 2021, one-third of the shares vest on December 4, 2022.
Outstanding
Equity Awards at Fiscal Year-End
The
following table includes certain information with respect to all unexercised stock options and unvested shares of common stock outstanding
owned by the named executive officers as of December 31, 2020.
Named Executive Officer or Director
|
|
Number of securities underlying unexercised options (#) exercisable
|
|
|
Number of securities underlying unexercised options (#) unexercisable
|
|
|
Option exercise price
|
|
|
Option expiration date
|
|
Number of shares or units of stock that have not yet vested (#)
|
|
|
Market value of shares or units of stock that have not vested (#)
|
|
Rod Keller
|
|
|
272,680
|
(1)
|
|
|
-
|
|
|
$
|
2.45
|
|
|
11/13/2027
|
|
|
|
|
|
$
|
|
|
President, Chief
|
|
|
20,451
|
(2)
|
|
|
-
|
|
|
|
2.45
|
|
|
11/13/2027
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
10,908
|
(3)
|
|
|
-
|
|
|
|
2.45
|
|
|
12/1/2027
|
|
|
|
|
|
|
|
|
and Director
|
|
|
20,451
|
(4)
|
|
|
-
|
|
|
|
2.45
|
|
|
11/13/2028
|
|
|
|
|
|
|
|
|
|
|
|
47,719
|
(5)
|
|
|
47,719
|
|
|
|
3.48
|
|
|
3/31/2029
|
|
|
|
|
|
|
|
|
|
|
|
20,451
|
(6)
|
|
|
-
|
|
|
|
4.03
|
|
|
11/19/2029
|
|
|
|
|
|
|
|
|
|
|
|
153,156
|
(7)
|
|
|
306,312
|
|
|
|
3.17
|
|
|
9/29/2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
651,250
|
|
|
|
3,959,600
|
|
Curt Smith
|
|
|
90,894
|
(8)
|
|
|
18,178
|
|
|
|
2.45
|
|
|
3/12/2028
|
|
|
|
|
|
|
|
|
Chief Financial
|
|
|
27,268
|
(5)
|
|
|
27,268
|
|
|
|
3.48
|
|
|
3/31/2029
|
|
|
|
|
|
|
|
|
Officer
|
|
|
-
|
|
|
|
169,906
|
(10)
|
|
|
3.17
|
|
|
9/29/2030
|
|
|
|
|
|
|
|
|
Brian Groh
|
|
|
18,179
|
(9)
|
|
|
36,357
|
|
|
|
4.03
|
|
|
9/16/2029
|
|
|
|
|
|
|
|
|
Chief of Business Development
|
|
|
-
|
|
|
|
56,147
|
(10)
|
|
|
3.17
|
|
|
9/29/2030
|
|
|
|
|
|
|
|
|
Richard Perley
|
|
|
18,179
|
(9)
|
|
|
36,357
|
|
|
|
4.03
|
|
|
9/16/2029
|
|
|
|
|
|
|
|
|
Chief Marketing Officer
|
|
|
-
|
|
|
|
56,147
|
(10)
|
|
|
3.17
|
|
|
9/29/2030
|
|
|
|
|
|
|
|
|
Spencer Richardson
|
|
|
13,268
|
(11)
|
|
|
-
|
|
|
|
8.10
|
|
|
12/23/2028
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
9,907
|
(11)
|
|
|
-
|
|
|
|
11.60
|
|
|
1/30/2029
|
|
|
|
|
|
|
|
|
David Newman
|
|
|
23,176
|
(11)
|
|
|
-
|
|
|
|
8.10
|
|
|
12/23/2028
|
|
|
|
|
|
|
|
|
Chief Business Development Officer
|
|
|
9,907
|
(11)
|
|
|
-
|
|
|
|
11.60
|
|
|
1/30/2029
|
|
|
|
|
|
|
|
|
|
(1)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six months, commencing on the six-month anniversary
of November 13, 2017.
|
|
(2)
|
These
options vest over twelve months, with one-quarter (1/4) of the options vesting every three months, commencing on the three-month
anniversary of November 13, 2017.
|
|
(3)
|
These
options are 100% vested upon issuance on December 1, 2017.
|
|
(4)
|
These
options vest over twelve months, with one-quarter (1/4) of the options vesting every three months, commencing on the three-month
anniversary of November 13, 2018.
|
|
(5)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six months, commencing on the six-month anniversary
of March 31, 2019.
|
|
(6)
|
These
options vest over twelve months, with one-quarter (1/4) of the options vesting every three months, commencing on the three-month
anniversary of November 13, 2018.
|
|
(7)
|
These
options vest over three years, with one-third (1/3) of the options vesting on December 4, 2020, one-third (1/3) of the options vesting
on December 4, 2021 and one-third (1/3) of the options vesting on December 4, 2022.
|
|
(8)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six months, commencing on the six-month anniversary
of March 31, 2019.
|
|
(9)
|
These
options vest over three years, with one-sixth (1/6) of the options vesting every six months, commencing on the six-month anniversary
of September 30, 2019.
|
|
(10)
|
These
options vest over three years, with one-third (1/3) of the options vesting on September 29, 2021 and one-twelfth (1/12) of the options
vesting every three months thereafter.
|
|
(11)
|
These
options vested fully at the effective time of the Merger on May 28, 2020.
|
Retirement
Benefits
We
do not currently have plans providing for the payment of retirement benefits to our officers or directors, other than as described under
“Narrative Disclosure to Summary Compensation Table” above.
Change
in Control Agreements
We
do not currently have any change-of-control or severance agreements with any of our executive officers or directors, other than as described
under “Narrative Disclosure to Summary Compensation Table” above. In the event of the termination of employment of the named
executive officers, any and all unexercised stock options shall expire and no longer be exercisable after a specified time following
the date of the termination, other than as described under “Narrative Disclosure to Summary Compensation Table” above.
Old
AYRO Incentive Plans
AYRO,
Inc. 2017 Long Term Incentive Plan (the “Private AYRO Equity Plan”)
Pursuant
to the Merger Agreement, effective as of the effective time of the Merger, the Company assumed the Private AYRO Equity Plan, assuming
all of Private AYRO’s rights and obligations with respect to the options issued thereunder. Immediately thereafter, the Company
terminated the Private AYRO Equity Plan.
The
Private AYRO Equity Plan, effective as of January 1, 2017, allowed for the granting of a variety of equity-based awards to provide Private
AYRO with flexibility in attracting and retaining key employees, consultants, and nonemployee directors and to provide such persons with
additional incentive opportunities designed to enhance Private AYRO’s profitable growth. Consequently, the Private AYRO Equity
Plan primarily provided for the granting of incentive stock options, non-qualified stock options, restricted stock awards, restricted
stock units, stock appreciation rights, other stock-based awards, or a combination of the foregoing.
Authorized
Shares. At inception, a total of 125,000 shares of Private AYRO common stock (without giving effect to the Exchange Ratio or the
Reverse Split) that occurred immediately after the effective time of the Merger, were authorized for issuance under the Private AYRO
Equity Plan. The Private AYRO Equity Plan was amended from time to time to increase the maximum number of shares authorized for issuance
under the Private AYRO Equity Plan. A total of 6,410,000 shares of common stock were authorized under the Private AYRO Equity Plan, without
giving effect to the Exchange Ratio or the Reverse Split that occurred immediately after the effective time of the Merger.
Plan
Administration. As permitted by the terms of the Private AYRO Equity Plan, the Private AYRO board of directors delegated administration
of the Private AYRO Equity Plan to the compensation committee of Private AYRO’s board of directors (the “Private AYRO Committee”).
As used herein with respect to the Private AYRO Equity Plan, the term “Private AYRO Committee” refers to any committee Private
AYRO’s board of directors may have appointed to administer the Private AYRO Equity Plan as well as to the board of directors itself.
Subject to the provisions of the Private AYRO Equity Plan, the Private AYRO Committee had the power to construe and interpret the Private
AYRO Equity Plan and awards granted under it and to determine the persons to whom and the dates on which awards would have been granted,
the number of shares of common stock to be subject to each award, the time or times during the term of each award within which all or
a portion of such award may have been exercised, the exercise price, the type of consideration to have been paid, and the other terms
and provisions of each award, which need not have been identical. All decisions, determinations and interpretations by the Private AYRO
Committee regarding the Private AYRO Equity Plan and any awards granted under it were final, binding and conclusive on all participants
or other persons claiming rights under the Private AYRO Equity Plan or any award.
Options.
Options granted under the Private AYRO Equity Plan may (i) either have been “incentive stock options” within the meaning
of Section 422 of the Code, or “nonqualified stock options,” and (ii) became exercisable in cumulative increments (“vest”)
as determined by the Private AYRO Committee. Such increments may have been based on continued service to Private AYRO over a certain
period of time, the occurrence of certain performance milestones, or other criteria as determined by the Committee. Options granted under
the Private AYRO Equity Plan may have been subject to different vesting terms. The Private AYRO Committee generally had the power to
accelerate the time during which an option may have vested or have been exercised. Options may not have had an exercise price per share
of less than 100% (110% in the case of a participant who owned more than 10% of the combined voting power of Private AYRO or an affiliate
(a “10% Stockholder”)) of the fair market value of a share of Private AYRO common stock on the date of grant or a term longer
than ten years (five years in the case of a 10% Stockholder). To the extent provided by the terms of an option, a participant may have
satisfied any federal, state or local tax withholding obligation relating to the exercise of such option by a cash payment upon exercise,
by authorizing Private AYRO to withhold a portion of the stock otherwise issuable to the participant upon exercise, or by such other
method as may be set forth in the option agreement or authorized by the Private AYRO Committee. The treatment of options under the Private
AYRO Equity Plan upon a participant’s termination of employment with or service to Private AYRO were set forth in the applicable
award agreement, which typically provided that the options will terminate three months after a termination of employment or service.
Incentive stock options are not transferable except by will or by the laws of descent and distribution, provided that a participant may
designate a beneficiary who may exercise an option following the participant’s death. Non-qualified stock options are transferable
to certain permitted transferees (as provided in the AYRO Equity Plan) to the extent included in the option award agreement.
Restricted
Stock and Restricted Stock Unit Awards. Subject to certain limitations, the Private AYRO Committee was authorized to grant awards
of restricted stock and restricted stock units, which were rights to receive shares of Private AYRO common stock or cash, as determined
by the Private AYRO Committee and as set forth in the applicable award agreement, upon the settlement of the restricted stock units at
the end of a specified time period. The Private AYRO Committee may have imposed any restrictions or conditions upon the vesting of restricted
stock or restricted stock unit awards, or that delay the settlement of a restricted stock unit award after it vests, that the Private
AYRO Committee deemed appropriate and in accordance with the requirements of Section 409A of the Code and the regulations and other authoritative
guidance issued thereunder. Dividend equivalents may have been credited in respect of shares covered by a restricted stock or a restricted
stock unit award, as determined by the Private AYRO Committee. At the discretion of the Private AYRO Committee, such dividend equivalents
may have been converted into additional shares covered by restricted stock or restricted stock units, as applicable. If a restricted
stock or restricted stock unit award recipient’s employment or service relationship with Private AYRO terminated, any unvested
portion of the restricted stock or restricted stock unit award would be forfeited, unless the participant’s award agreement provided
otherwise. Restricted stock and restricted stock unit awards are generally not transferable except (i) by will or by the laws of descent
and distribution or (ii) to certain permitted transferee, to the extent provided in the award agreement.
Other
Awards. Other awards permitted under the Private AYRO Equity Plan included stock appreciation rights, bonus stock, dividend equivalents,
and other stock-based awards that were denominated or payable in, valued in whole or in part by reference to or otherwise based on or
related to Private AYRO common stock.
Certain
Adjustments; Change in Control. In connection with any reorganization, recapitalization, reincorporation, reclassification, stock
dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, or other
change in Private AYRO’s capital structure, the Private AYRO Committee would have appropriately adjusted the type(s), class(es)
and number of shares of common stock subject to the Private AYRO Equity Plan (and the other share limits contained therein), and any
outstanding awards would also be appropriately adjusted as to the type(s), class(es), number of shares and exercise price per share of
common stock subject to such awards.
In
the event of a “Change in Control” (as defined in the Private AYRO Equity Plan), the Private AYRO Committee would have approved,
without the consent or approval of any participant, one or more of the following alternatives with respect to outstanding awards under
the Private AYRO Equity Plan: (i) accelerate the time at which outstanding awards may be exercised, whether in full or in part, or for
a limited period of time on or before a specified date after which date all unexercised awards and all rights of holders thereunder shall
terminate; (ii) require the surrender of some or all of a participant’s outstanding awards, upon which such awards shall be cancelled
and the participant shall receive an amount in cash equal to the positive difference, if any, between the underlying stock’s then
current fair market value over the award’s exercise or purchase price, as applicable; or (iii) make such adjustments to outstanding
awards as the Private AYRO Committee deemed appropriate to reflect such Change in Control. Any determination of the Private AYRO Committee
with regard to any outstanding awards under the Private AYRO Equity Plan in connection with a Change in Control would be final, binding
and conclusive.
Amendment,
Termination. Private AYRO’s board of directors may have amended, altered, suspended, discontinued, or terminated the Private
AYRO Equity Plan, provided that no such amendment would have adversely affected the rights of any participant without the participant’s
consent.
Equity
Compensation Plan Information
|
|
Equity Compensation Plan Information
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
|
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and
Rights (1)
|
|
|
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
|
|
Plan Category:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders: 2020 LTIP (Options and Restricted Stock)
|
|
|
1,959,787
|
|
|
$
|
3.06
|
|
|
|
2,051,537
|
|
Equity compensation plans not approved by security holders: 2017 LTIP (Options) (2)
|
|
|
971,549
|
|
|
$
|
2.83
|
|
|
|
—
|
|
Equity compensation plans approved by security holders: 2014 DropCar (Options)
|
|
|
61,440
|
|
|
$
|
46.95
|
|
|
|
—
|
|
Other equity compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
2,992,776
|
|
|
|
|
|
|
|
2,051,537
|
|
|
(1)
|
The
weighted-average exercise price set forth in this column is calculated excluding outstanding restricted stock awards since recipients
of such awards are not required to pay an exercise price to receive shares subject to these awards.
|
|
|
|
|
(2)
|
Represents
shares of common stock deliverable upon exercise of options under the 2017 LTIP adopted by Private AYRO prior to the Merger.
|
AUDIT
COMMITTEE MATTERS
Audit
Committee Report
The
Audit Committee assists the Board in its general oversight of the Company’s financial reporting processes. The Audit Committee
Charter describes in greater detail the full responsibilities of the Audit Committee. During each fiscal year, the Audit Committee reviews
the Company’s financial statements, management reports, internal control over financial reporting and audit matters. In connection
with these reviews, the Audit Committee meets with management and independent public accountants at least once each quarter. The Audit
Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks. These meetings include,
whenever appropriate, executive sessions in which the Audit Committee meets separately with the independent public accountants, financial
management personnel and legal counsel.
As
part of its review of audit matters, the Audit Committee supervises the relationship between the Company and its independent registered
public accountants, including: having direct responsibility for their appointment, compensation and retention; reviewing the scope of
their audit services; approving audit and non-audit services; and confirming the independence of the independent public accountants.
Together with senior members of the Company’s financial management team, the Audit Committee reviewed the overall audit scope and
plans of the independent public accountants, the results of external audit examinations, and evaluations by management of the Company’s
internal control over financial reporting and the quality of the Company’s financial reporting.
In
addition, the Audit Committee reviewed key initiatives and programs aimed at designing and maintaining an effective internal and disclosure
control structure. As part of this process, the Audit Committee continued to monitor the scope and adequacy of the steps taken to maintain
the effectiveness of internal procedures and controls.
In
performing all of these functions, the Audit Committee acts in an oversight capacity. The Audit Committee reviews and discusses the quarterly
and annual consolidated financial statements with management, and the Company’s independent public accountants prior to their issuance.
In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which is responsible
for establishing and maintaining adequate internal control over financial reporting, preparing the financial statements and other reports
and maintaining policies relating to legal and regulatory compliance, ethics and conflicts of interest. Friedman LLP is responsible for
performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial
statements with accounting principles generally accepted in the United States of America. The Audit Committee has reviewed and discussed
the Company’s audited consolidated financial statements and related footnotes for the year ended December 31, 2020, and the independent
auditor’s reports on those financial statements, with management and with our independent auditors, Friedman LLP.
The
Audit Committee has reviewed with the independent public accountants the matters required to be discussed by the applicable requirements
of the Public Company Accounting Oversight Board and the SEC including a discussion with management and the independent public accountants
of the quality (and not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant estimates
and judgments and the disclosures in the Company’s financial statements. In addition, the Audit Committee reviewed and discussed
with Friedman LLP matters related to its independence, including a review of audit and non-audit fees and the written disclosures in
the letters from Friedman LLP to the Audit Committee required by applicable requirements of the Public Company Accounting Oversight Board
regarding the independent public accountants’ communication with the Audit Committee concerning independence. The Audit Committee
concluded that Friedman LLP is independent from the Company and its management.
Taking
all these reviews and discussions into account, the Audit Committee recommended to the Board that the audited financial statements be
included in AYRO’s Annual Report on Form 10-K for fiscal year 2020, as amended, that was filed with the SEC.
AUDIT
COMMITTEE
Greg
Schiffman (Chairman)
Joshua
Silverman
Zvi
Joseph
The
Report of the Audit Committee set forth in this Proxy Statement shall not be deemed to be “soliciting material” or to be
“filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the
Exchange Act. In addition, it shall not be deemed incorporated by reference by any statement that incorporates this Proxy Statement by
reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference.
Pre-Approval
Policies and Procedures
Under
the Audit Committee’s pre-approval policies and procedures, the Audit Committee is required to pre-approve the audit and non-audit
services performed by our independent registered public accounting firms. On an annual basis, the Audit Committee pre-approves a list
of services that may be provided by the independent registered public accounting firms without obtaining specific pre-approval from the
Audit Committee.
The
Audit Committee has delegated pre-approval authority to the Audit Committee chairman and any pre-approved actions by the Audit Committee
chairman as designee are reported to the Audit Committee for approval at its next scheduled meeting.
All
of the services rendered by Friedman LLP in 2020 and 2019 were pre-approved by the Audit Committee.
PROPOSAL
2
RATIFICATION
OF APPOINTMENT OF Friedman LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee has appointed Friedman LLP as the independent registered public accounting firm for the fiscal year ending December 31,
2021, subject to stockholder ratification. Friedman LLP served as our independent registered public accounting firm for the fiscal years
ended December 31, 2020 and 2019. The Audit Committee has reviewed the independence of Friedman LLP as auditor and its performance over
the fiscal year ended December 31, 2020. The Audit Committee has concluded that Friedman LLP is independent and that it is in the best
interests of the Company and its shareholders to retain Friedman LLP as independent auditor for 2021.
Representatives
of Friedman LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
On
July 3, 2019, the Board engaged Friedman LLP as the Company’s independent registered public accountants for the fiscal year ended
December 31, 2019. Prior to July 3, 2019, EisnerAmper LLP served as the Company’s independent registered public accounting firm
since 2017.
The
reports of EisnerAmper LLP on the Company’s financial statements for each of the two fiscal years ended December 31, 2018 and December
31, 2017 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit
scope or accounting principles, except that the report contained an explanatory paragraph relating to the Company’s ability to
continue as a growing concern.
In
connection with the audits of the Company’s financial statements for each of the two fiscal years ended December 31, 2018 and December
31, 2017, and in the subsequent interim period through July 3, 2019, there were no “disagreements” (as that term is defined
in Item 304(a)(1)(iv) of Regulation S-K and related instructions) between the Company and EisnerAmper LLP on any matters of accounting
principles or practices, financial statement disclosure or auditing scope and procedures which, if not resolved to the satisfaction of
EisnerAmper LLP, would have caused EisnerAmper LLP to make reference to the subject matter of the disagreement in their reports.
During
the years ended December 31, 2018 and 2017, and the subsequent interim period through July 3, 2019, neither the Company nor anyone on
its behalf consulted with Friedman LLP, regarding either (i) the application of accounting principles to a specific transaction, completed
or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report
nor oral advice was provided to the Company that Friedman LLP concluded was an important factor considered by the Company in reaching
a decision as to any accounting, auditing or financial reporting issue or (ii) any matter that was either the subject of a disagreement
(as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v)
of Regulation S-K).
Fees
to Independent Registered Public Accounting Firm
The
following table presents fees for professional audit services rendered by Friedman LLP for the audit of our annual financial statements
for the years ended December 31, 2020 and 2019 and fees billed for other services rendered by Friedman LLP and other professional accounting
firms during those periods. The percentage of services set forth above in the category audit related fees that were approved by the Audit
Committee pursuant to Rule 2-01(c)(7)(i)(C) (relating to the approval of a de minimus amount of non-audit services after the fact but
before completion of the audit), was 100%.
|
|
2020
|
|
|
2019
|
|
Audit Fees:(1)
|
|
$
|
226,229
|
|
|
$
|
460,368
|
|
Audit-Related Fees:(2)
|
|
|
253,269
|
|
|
|
2,800
|
|
Tax Fees:(3)
|
|
|
5,800
|
|
|
|
-
|
|
All Other Fees:(4)
|
|
|
|
|
|
|
-
|
|
Total
|
|
$
|
485,298
|
|
|
$
|
463,168
|
|
|
(1)
|
Audit
Fees include fees for services rendered for the audit of our annual financial statements, the review of financial statements
included in our Quarterly Reports on Form 10-Q, assistance with and review of documents filed with the SEC and consents and other
services normally provided in connection with regulatory filings. In 2020, $226,229 was billed for audit fees, of which $148,110
was billed by Friedman LLP in connection with our 2020 10-K and the remainder was billed by Friedman LLP in connection with Forms
10-Q for the second and third quarters of 2020. In 2019, $460,368 was billed for audit fees, of which $320,368 was billed by EisnerAmper
LLP in connection with regulatory filings and the remainder was billed by Friedman LLP in connection with regulatory filings.
|
|
(2)
|
Audit-Related
Fees principally include fees incurred for due diligence in connection with potential transactions and accounting consultations.
|
|
(3)
|
Tax
Fees would include fees for services rendered for tax compliance, tax advice, and tax planning. There were no tax fees incurred
with Friedman LLP in 2020 and 2019.
|
|
(4)
|
All
Other Fees would include fees that do not constitute Audit Fees, Audit-Related Fees, or Tax Fees.
|
Approval
of Independent Registered Public Accounting Firm Services and Fees
The
Board requests that stockholders ratify the appointment of Friedman LLP as the independent registered public accounting firm to conduct
the audit of our financial statements for the fiscal year ending December 31, 2021. In the event that the stockholders fail to ratify
the selection, the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Board, in its discretion,
may direct the appointment of a different independent registered public accounting firm at any time during the fiscal year if the Board
determines that such a change could be in the best interest of our stockholders.
Vote
Required
The
affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on this proposal is required to adopt the proposal to ratify the appointment of Friedman LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2021. Abstentions will have the same effect as a vote against the approval
of this proposal.
The
Board recommends a vote FOR the ratification of the appointment of Friedman LLP.
|
OTHER
BUSINESS
The
Board knows of no other business to be brought before the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote the proxy in accordance with applicable law and as they may
deem appropriate in their discretion, unless directed by the proxy to do otherwise.
SUBMISSION
OF FUTURE STOCKHOLDER PROPOSALS
Pursuant
to rules of the SEC, a stockholder who intends to present a proposal at our next annual meeting of stockholders and who wishes the proposal
to be included in the proxy statement for that meeting must submit the proposal to us in writing to the attention of the Secretary at
AYRO, Inc., 900 E. Old Settlers Boulevard, Suite 100, Round Rock, Texas 78664. The proposal must be received no later than July 19,
2022, after which date such stockholder proposal will be considered untimely. With respect to other shareholder proposals, management
will be able to vote proxies in its discretion without advising shareholders in the 2022 proxy statement about the nature of the matter
and how management intends to vote if notice of the proposal is not received by us at our principal executive offices no earlier than
September 2, 2022 nor later than on October 2, 2022.
A
copy of AYRO, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as amended, is available without charge
(except for exhibits, which are available upon payment of a reasonable fee) upon written request to AYRO, Inc., 900 E. Old Settlers Boulevard,
Suite 100, Round Rock, Texas 78664.
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