UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 AMENDMENT NO. 1 TO

FORM 10-K

 

(Mark One)

☒   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2017

 

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to _____________

 

Commission file number 000-54218

 

EVO Transportation & Energy Services, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		37-1615850
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

8285 West Lake Pleasant Parkway Peoria, AZ 85382

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: 877-973-9191

 

Securities registered pursuant to Section 12(b) of the Act:

None.

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, $0.0001 par value per share

(Title of class)

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒ 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐  No ☒ 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐ 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐  

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐  (do not check if smaller reporting company)	Smaller reporting company	☒
Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No ☒ 

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the Registrant’s most recently completed second fiscal quarter was approximately $420,804 based on the price of $1.00 per share, the price at which the Registrant’s common equity was last sold as of the last business day of the Registrant’s most recently completed second fiscal quarter as reported on the OTC Pink Marketplace and as adjusted for the Registrant’s 50-for-1 reverse stock split. 

 

APPLICABLE ONLY TO CORPORATE REGISTRANTS 

 

As of April 27, 2018, there were 2,067,120 shares of the registrant’s common stock, par value $0.0001, outstanding.

 

 

 EXPLANATORY NOTE

 

EVO Transportation & Energy Services, Inc. (“EVO, Inc.,” the “Company,” “we,” “us,” or “our”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment No. 1”) to amend our annual report on Form 10-K for the year ended December 31, 2017, originally filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2018 (the “Original Form 10-K”), to include the information required by Items 10 through 14 of Part III of Form 10-K. This information was previously omitted from the Original Form 10-K in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items to be incorporated in the Form 10-K by reference from our definitive proxy or information statement if such statement is filed no later than 120 days after our fiscal year-end. We are filing this Amendment No. 1 to provide the information required in Part III of Form 10-K because a definitive proxy or information statement containing such information will not be filed by the Company within 120 days after the end of the fiscal year covered by the Form 10-K.

 

Pursuant to the rules of the SEC, Part IV, Item 15 has also been amended to contain the currently dated certifications from the Company’s principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Because no financial statements have been included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted.

 

Except as described above, this Amendment No. 1 does not amend any other information set forth in the Original Form 10-K, and we have not updated disclosures included therein to reflect any subsequent events. This Amendment No. 1 should be read in conjunction with the Original Form 10-K and with our filings with the SEC subsequent to the Original Form 10-K.

 

 

 

PART III

 

Item 10. Directors, Executive Officers, and Corporate Governance.

 

Background Information

 

The Company acquired all of the outstanding equity interests of Titan CNG LLC, a Delaware limited liability company (“Titan”), in exchange for 248,481 shares (taking into account the Company’s subsequent 50-for-1 reverse stock split) of the Company’s common stock (the “Titan Securities Exchange”) on November 22, 2016 pursuant to an Agreement and Plan of Securities Exchange by and among the Company, Titan, and the holders of 100% of the outstanding equity interests of Titan.

 

On November 23, 2016, the Company and Shock Inc., a Delaware corporation owned by John P. Yeros, Kirk S. Honour and Randy Gilbert (“Shock”), entered into an agreement and plan of merger whereby Shock merged with and into the Company (the “Shock Merger”), the separate corporate existence of Shock ceased, and all issued and outstanding shares of common stock of Shock were converted into 44,899 shares (taking into account the Company’s subsequent 50-for-1 reverse stock split) of the Company’s common stock.

 

On January 11, 2017, the Company entered into a securities exchange agreement with Environmental Alternative Fuels, LLC, a Delaware limited liability company (“EAF”), EVO CNG, LLC, a Delaware limited liability company and a wholly-owned subsidiary of EAF (“EVO”), Danny R. Cuzick (“Danny Cuzick”), Damon R. Cuzick, Theril H. Lund and Thomas J. Kiley (together with Danny Cuzick, the “EAF Members”). In accordance with the terms of the securities exchange agreement, the Company acquired all of the membership interests of EAF from the EAF Members and, in exchange, issued a promissory note in the principal amount of $3.8 million to Danny Cuzick and convertible promissory notes in the aggregate principal amount of $9.5 million to the EAF Members (the “EAF Securities Exchange”).

 

(a) Identification of Directors and Executive Officers. 

 

At the effective time of the Titan Securities Exchange, the Company’s board of directors increased the size of the board of directors from three directors to four directors and appointed Scott M. Honour and Thomas J. Abood as directors. At the same time, John P. Yeros was appointed as chief executive officer and Richard Gilbert resigned from his positions as president and secretary of the Company. In connection with the closing of the EAF Securities Exchange, on February 1, 2017, the Company’s board of directors increased the size of the board of directors from four directors to five directors and appointed Danny Cuzick as a director and Damon Cuzick as chief operating officer of the Company.

 

The following table sets forth certain information regarding the Company’s officers and directors. All ages are stated as of January 1, 2018.

 

Name		Age			Position
John P. Yeros		66			Chief Executive Officer
Damon R. Cuzick		37			Chief Operating Officer
Scott M. Honour		51			Director
Danny R. Cuzick		57			Director
Thomas J. Abood		54			Director

 

John P. Yeros. Mr. Yeros has served as our chief executive officer since November 2016. For the past twenty years Mr. Yeros has devoted his business energies to various segments of the business and high technology arena, including healthcare, Internet-related software development, computer hardware manufacturing, service delivery and the automotive dealership industry. He was Founder, Chairman & CEO of Medix Resources from 1988 until 2000; in this capacity he transformed a start-up healthcare software development firm into a public entity with a 2000 market cap of $450 million. Mr. Yeros then founded HyperSpace Communications in 2001 and completed a public stock offering in 2004; during his tenure the company acquired Idaho-based MPC Computers, Gateway’s Professional Services Division and, as the MPC Corp., it eventually had more than a thousand employees and $500 million in revenue by 2008. Mr. Yeros was named CEO of Intelligent Grid Solutions in 2009 after successfully completing a comprehensive business/market analysis of the Smart Grid market sector on behalf of both FirstEnergy Corporation (NYSE: FE) and First Communications, Inc. (FC). Intelligent Grid Solutions provided a series of interconnected consulting/partnering services related to planning, executing and financing of Smart Grid network projects. Since 2012, Mr. Yeros has served as CEO for Altitude Automotive Group (AAG), a Company Yeros formed to pursue the acquisition of automotive dealerships in the Western and Southwestern United States. Prior to undertaking these varied entrepreneurial ventures Mr. Yeros had a highly successful career in the securities industry starting as an account executive with Merrill Lynch Pierce Fenner & Smith in New York in 1977 and culminating in key management roles with E. F. Hutton, Hanifen Imhoff, Inc. and B. C. Christopher Securities where he last served as Regional VP and was overseeing three offices in the Rocky Mountain Region before launching Medix Resources in 1988. Mr. Yeros has a B. S. degree in education from Wichita State University.

 

 

Damon Cuzick. Mr. Cuzick has served as chief operating officer of the Company since February 2017. Mr. Cuzick has been an active businessman and company owner since 2004. In 2004, Damon co-founded both March Development Company, a commercial real estate development company focused on retail shopping centers and office buildings in Phoenix, Arizona, and Cuzick Van Pelt Commercial Group, a related brokerage company. The companies combined for over $40 million in annual sales, and in 2007 merged into Don Bennett Partners, another real estate development company. Damon continued working at Don Bennett Partners until he sold his interest in that company in 2008. From 2008 to 2015, Damon worked with his father, Danny Cuzick, at Freightliner of Arizona, a class 8 truck dealership. Damon’s responsibilities at Freightliner of Arizona included the design, development and construction of a new state-of-the-art corporate headquarters in Tolleson, Arizona and the acquisition of a competing dealership in Tucson, Arizona. In 2012, Damon, his father and two additional partners formed EVO CNG, LLC, a company dedicated to building compressed natural gas fueling stations for the class 8 trucking industry. Damon has acted as the Chief Operating Officer of EVO CNG since its inception, overseeing the development of six CNG stations in Texas, Arizona, California and Wisconsin, as well as customer service, sales and day-to-day operations.

 

Scott M. Honour. Mr. Honour has served as a director of the Company since November 2016, and is a Co-founder of Titan. Scott also serves as Managing Partner of Northern Pacific Group, a Wayzata, Minnesota based private equity firm. Previously, from 2002 to 2012, he was Senior Managing Director of The Gores Group, a Los Angeles based private equity firm with $4 billion of capital under management. Prior to that, Mr. Honour was a Managing Director at UBS Investment Bank from 2000 to 2002 and an investment banker at DLJ from 1991 to 2000. He began his career at Trammell Crow Company in 1988. Scott also co-founded YapStone, Inc. in 1999. Scott holds a BS in business administration and a BA in economics from Pepperdine University and an MBA in finance and marketing from the Wharton School of the University of Pennsylvania.

 

We believe that Mr. Honour’s significant experience in transaction planning and private equity investments make him well qualified to serve as a member of our board of directors.

 

Thomas J. Abood. Mr. Abood is a private investor. Mr. Abood has served as a director of the company since November 2016. From 1994 to 2014, Mr. Abood was an owner and Executive Vice President, General Counsel and Secretary of Dougherty Financial Group LLC. His principal responsibilities included leadership and management of DFG’s investment advisory business division (2004-2014) and supervision of its legal, compliance and human resources departments. Prior to 1994, Mr. Abood was an associate at the law firm of Skadden, Arps, Slate, Meagher & Flom.

 

Mr. Abood is Chair of the Archdiocesan Finance Counsel of the Archdiocese of St. Paul and Minneapolis, past Chair of the board of governors of the University of St. Thomas School of Law, past Chair of the governance committee and a member of the board of directors of MacPhail Center for Music and past President and Governor, The Minikahda Club. Mr. Abood is a past director and Chair of the Board of the Minnesota Children’s Museum and a past director of the Notre Dame Club of Minnesota.

 

Mr. Abood was raised in Lansing, Michigan, received his JD from Georgetown University Law Center, cum laude and his BBA from the University of Notre Dame, magna cum laude.

 

We believe that Mr. Abood’s legal and management experience described above, his significant investing experience and his experience serving on various boards make him well qualified to serve as a member of our board of directors.

 

Danny R. Cuzick. Danny Cuzick has served as a director of the Company since February 2017 and is a lifelong entrepreneur and business owner. In 1981, Danny opened his first business, a retail jewelry store called Cuzick Jewelers, in Glendale, Arizona; a business which he still owns. Danny has also owned and operated numerous other businesses, including a flower shop and lighting store.

 

In the mid-1990s Danny partnered with a Phoenix-based contracting company to start developing residential real estate. The success of that venture led him into the commercial arena and Danny has been a part of developing and owning numerous shopping centers and office buildings in the metro Phoenix area, as well as many large parcels of land throughout the Salt River Valley.

 

In 2005, Danny purchased Freightliner of Arizona, two class 8 truck dealerships. At the time of purchase, the dealerships had two facilities and revenues of approximately $100 million. Under Danny’s leadership, the dealerships expanded to include four locations and revenues of over $400 million until he sold his interest in Freightliner of Arizona in April 2015.

 

In 2012, Danny, his son Damon and two additional partners formed EVO CNG, LLC, a company dedicated to building compressed natural gas fueling stations for the class 8 trucking industry. Danny acted as the Manager of EVO CNG from its inception until the sale of EAF, EVO CNG’s parent company, in February 2017.

 

Danny has always been a family man and is most proud of his 11 children and 12 grandchildren.

 

We believe that Danny Cuzick’s significant experience as an entrepreneur and business owner and his experience in the trucking and CNG industries make him well qualified to serve as a member of our board of directors.

 

 

 

(b) Family Relationships.

 

Danny R. Cuzick, one of our directors, is the father of Damon R. Cuzick, our chief operating officer. There are no other family relationships among our directors or executive officers.

 

(c) Involvement in Certain Legal Proceedings.

 

To our knowledge, there have been no events under any bankruptcy act, no criminal proceedings and no federal or state judicial or administrative orders, judgments or decrees or findings, no violations of any federal or state securities law, and no violations of any federal commodities law material to the evaluation of the ability and integrity of any director (existing or proposed) or executive officer (existing or proposed) of the Company during the past ten (10) years.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to the Company, or written representations that no applicable filings were required, the Company believes that all such filings were filed on a timely basis for the fiscal year ended December 31, 2017, except that (i) Randy Gilbert and Kirk Honour did not file Forms 4 or 5 in connection with no longer serving as executive officers of the Company; (ii) James Jackson and the Alpeter Family Limited Partnership, previously greater than ten percent stockholders, have not filed any Forms 3, 4 or 5; and (iii) Damon Cuzick and Danny Cuzick did not file Forms 3 and 4 following the Company’s February 1, 2017 acquisition of Environmental Alternative Fuels, LLC, a Delaware limited liability company, and its wholly owned subsidiary, EVO CNG, LLC, a Delaware limited liability company.

 

Code of Ethics

 

We have adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions which is attached as Exhibit 14.1 to the Company’s Form 10-K filed on March 28, 2011.

 

Board Committees

 

We do not have a standing nominating, compensation or audit committee, and our full board of directors performs the functions of these committees. The Company intends to form an audit committee in the near future. We currently do not have an “audit committee financial expert” on our board of directors as that term is defined by Item 407(d)(5)(ii) of Regulation S-K. Management does not believe it is currently necessary for our board of directors to appoint a nominating or compensation committee because the volume of matters that come before the board of directors for consideration permits the directors to give sufficient time and attention to such matters to be involved in all decision making.

 

 

Item 11. Executive Compensation.

 

Summary Compensation Table

 

The following table sets forth all of the compensation awarded to, earned by or paid to (i) each individual who served as the Company’s principal executive officer during the fiscal year ended December 31, 2017; and (ii) the two most highly compensated executive officers other than the principal executive officer who were serving as Company executives as of December 31, 2017 and who earned total compensation in excess of $100,000 during such fiscal year (collectively, the “named executive officers”).

 

Name and Principal Position

Year

Salary

Bonus

Stock Awards

Option Awards

Non-Equity Incentive Plan Compensation

Nonqualified Deferred Compensation Earnings

All Other Compensation

Total

John P. Yeros

2017

$

240,000

None

None

None

None

None

None

$

240,000

Chief Executive Officer

2016

$

115,000

None

None

None

None

None

None

$

115,000

Kirk S. Honour(1)

2017

$

150,000

(3)

None

None

None

None

None

None

$

150,000

Former President

2016

$

180,000

None

None

None

None

None

None

$

180,000

Randy W. Gilbert(2)

2017

$

None

None

None

None

None

None

None

$

0

Former Chief Financial Officer

2016

$

None

None

None

None

None

None

None

$

None

Damon R. Cuzick

2017

$

180,000

None

None

None

None

None

None

$

180,000

Chief Operating Officer

2016

$

None

None

None

None

None

None

None

$

None

 

(1)	Kirk Honour served as president of the Company until October 2017.
(2)	Randy Gilbert served as chief financial officer of the Company until December 2017.
(3)	On October 9, 2017, Mr. Honour entered into a mutual separation agreement with the Company whereby Mr. Honor and the Company agreed that Mr. Honour’s last day of employment with the Company would be October 9, 2017. At the time of his separation, the Company owed Mr. Honour $240,276 of accrued but unpaid base salary compensation. Under the mutual separation agreement, the parties agreed that (ii) Mr. Honour would be paid an aggregate of $97,069 within ten business days after the Company raised an aggregate of $2 million in any combination of public or private debt or equity securities offerings, and (iii) in satisfaction of $240,276 of deferred compensation, the Company would issue 89,092 shares of its common stock to Mr. Honour within ten business days after the Company raised an aggregate of $2 million in any combination of public or private debt or equity securities offerings. The Company issued the 89,092 shares of common stock to Mr. Honour in April 2018.

 

We currently have two full-time employees but had no full-time employees in 2016. We entered into a consulting agreement with John Yeros, our chief executive officer, in March 2016 pursuant to which we agreed to pay Mr. Yeros $10,000 per month as an independent contractor and amended that agreement in October 2016 to increase the monthly amount payable to Mr. Yeros to $15,000. During 2016, we also agreed to pay Kirk Honour, our former president, $15,000 per month as an independent contractor pursuant to a verbal agreement with the Company.

 

On November 23, 2016, the Company succeeded as a party to employment agreements with John P. Yeros, our chief executive officer, Kirk S. Honour, our former president, and Randy W. Gilbert, our former chief financial officer. These agreements became effective on February 1, 2017; thus, the Company did not make any payments under these agreements during the year ended December 31, 2016. Also on February 1, 2017, we entered into an employment agreement with Damon R. Cuzick, our chief operating officer. The employment agreements with our executive officers are described below.

 

Stock Option Plan and Option Grants

 

On April 12, 2018, the Board approved the Company's 2018 Stock Incentive Plan (the “2018 Plan”). The principal provisions of the 2018 Plan are summarized below. This summary is not a complete description of all the 2018 Plan's provisions, and is qualified in its entirety by reference to the 2018 Plan, which is filed as an exhibit to the Original Form 10-K. Capitalized terms used but not defined herein will be as defined in the 2018 Plan.

 

Administration

 

The Board will initially be the administrator of the 2018 Plan, but the Board may delegate the administration of the 2018 Plan to a committee of the Board. The Board and any Committee to which it may delegate the administration of the 2018 Plan are collectively referred to in the 2018 Plan as the “Administrator.”

 

The Administrator may delegate to one or more Committees and/or sub-Committees, or to one or more officers of the Company such administrative duties or powers as it may deem advisable. The Administrator may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as the Administrator: (i) designate employees to be recipients of awards under the 2018 Plan and (ii) determine the size of any such awards; provided, however, that the Committee may not delegate such responsibilities to any such officer for awards granted to an employee who is an officer or director of the Company or the beneficial owner of more than 10% of the Company’s common stock; the resolution providing such authorization sets forth the total number of awards such officer(s) may grant; and the officer(s) must report periodically to the Administrator regarding the nature and scope of the awards granted pursuant to the authority delegated.

 

 

Except as otherwise provided in the 2018 Plan, the Administrator will have all of the powers vested in it under the provisions of the 2018 Plan, including but not limited to exclusive authority to determine, in its sole discretion, whether an award will be granted; the individuals to whom, and the time or times at which, awards will be granted; the number of shares subject to each award; the exercise price of Options granted hereunder; and the performance criteria, if any, and any other terms and conditions of each award. The Administrator will have full power and authority to administer and interpret the 2018 Plan, to make and amend rules, regulations and guidelines for administering the 2018 Plan, to prescribe the form and conditions of the respective Agreements evidencing each award (which may vary from Participant to Participant), to amend or revise Agreements evidencing any award (to the extent the amended terms would be permitted by the 2018 Plan and provided that no such revision or amendment, except as is authorized in Section 14 of the 2018 Plan, may impair the terms and conditions of any award that is outstanding on the date of such revision or amendment to the material detriment of the Participant in the absence of the consent of the Participant), and to make all other determinations necessary or advisable for the administration of the 2018 Plan (including to correct any defect, omission or inconsistency in the 2018 Plan or any Agreement, to the extent permitted by law and the 2018 Plan). The Administrator’s interpretation of the 2018 Plan, and all actions taken and determinations made by the Administrator pursuant to the power vested in it under the 2018 Plan will be conclusive and binding on all parties concerned.

 

Eligibility

 

Any employee, director, or consultant may participate in the 2018 Plan; provided, however, that only employees are eligible to receive incentive stock options. Additionally, the Company may grant certain performance-based awards to “covered employees” in compliance with Section 162(m) of the Internal Revenue Code. These covered employees include our executive officers. Section 162(m) generally limits the corporate tax deduction for compensation paid to executive officers that is not “performance-based” to $1,000,000 per executive officer. “Performance-based” compensation meeting certain requirements is not counted against the $1,000,000 limit and generally remains fully deductible for tax purposes.

 

Shares Available for Awards

 

The stock to be awarded or optioned under the Plan (the “share authorization”) will consist of authorized but unissued or reacquired shares of common stock. The maximum aggregate number of shares of common stock reserved and available for awards under the 2018 Plan is 4,250,000 shares, subject to adjustment for any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other similar change in the corporate structure or shares of the Company. Any adjustment determination made by the Administrator will be final, binding and conclusive.

 

Type of Awards and Terms and Conditions

 

The 2018 Stock Plan provides that the Administrator may grant awards to eligible participants in any of the following forms, subject to such terms, conditions and provisions as the Administrator may determine to be necessary or desirable:

 

●	stock options, including both incentive stock options (“ISOs”) and non-qualified stock options;

●	stock appreciation rights;

●	restricted stock;

●	performance awards; and
●	stock bonuses.

 

Options. Options may either be incentive stock options, which are specifically designated as such for purposes of compliance with Section 422 of the Internal Revenue Code, or non-qualified stock options. Options vest as determined by the Administrator, subject to applicable performance objectives and statutory limitations regarding the maximum term of ISOs and the maximum value of ISOs that may vest in one year. The exercise price of each share subject to an ISO will be equal to or greater than the fair market value of a share on the date of the grant of the ISO, except in the case of an ISO grant to a stockholder who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or any subsidiary, the exercise price will be equal to or greater than 110% of the fair market value of a share on the grant date. Non-qualified stock options vest as determined by the Administrator, subject to applicable performance objectives and statutory limitations regarding the maximum term of non-qualified stock options. The exercise price of each share subject to a non-qualified stock option will be determined by the Administrator at the time of grant but must be equal to or greater than the fair market value of a share on the date of grant. Recipients of options have no rights as stockholders with respect to any shares covered by the award until the award is exercised and a stock certificate or book entry evidencing such shares is issued or made, respectively.

 

Restricted Stock Awards. Restricted stock awards consist of shares granted to a participant that are subject to one or more risks of forfeiture. Restricted stock awards may be subject to risk of forfeiture based on the passage of time or the satisfaction of other criteria, such as continued employment or Company performance. Recipients of restricted stock awards are entitled to vote and receive dividends attributable to the shares underlying the awards beginning on the grant date, but have no other rights as stockholders with respect to such shares.

 

Performance Awards. Performance awards, which may be denominated in cash or shares, are earned upon achievement of performance objectives during a performance period established by the Administrator. Recipients of performance awards have no rights as stockholders with respect to any shares covered by the awards until the date a stock certificate or book entry evidencing such shares is issued or made, respectively.

 

Stock Appreciation Rights. A stock appreciation right may be granted independent of, or in tandem with, a previously or contemporaneously granted stock option, as determined by the Administrator. Generally, upon exercise of a stock appreciation right, the recipient will receive cash, shares of Company stock, or a combination of cash and stock, with a value equal to the excess of: (i) the fair market value of a specified number of shares of Company stock on the date of the exercise, over (ii) a specified exercise price. Stock appreciation rights vest as determined by the Administrator, subject to applicable performance objectives and statutory limitations regarding the maximum term of stock appreciation rights. Recipients of stock appreciation rights have no rights as a stockholder with respect to any shares covered by the award until the date a stock certificate or book entry evidencing such shares is issued or made, respectively.

 

 

Stock Bonuses. Stock bonuses consist of awards of shares granted to a participant subject to such terms and conditions as determined by the Administrator. Recipients of stock bonuses have all rights of stockholders with respect to such shares, provided that the Administrator may impose restrictions on the assignment or transfer of stock bonuses.

 

Amendments of the 2018 Plan

 

The Board may from time to time, insofar as permitted by law, suspend or discontinue the 2018 Plan or revise or amend it in any respect. However, to the extent required by applicable law or regulation or as except as provided under the 2018 Plan itself, the Board may not, without stockholder approval, revise or amend the 2018 Plan to (i) materially increase the number of shares subject to the 2018 Plan, (ii) change the designation of participants, including the class of employees, eligible to receive awards, (iii) decrease the price at which options or stock appreciation rights may be granted, (iv) cancel, regrant, repurchase for cash, or replace options or stock appreciation rights that have an exercise price in excess of the fair market value of the common stock with other awards, or amend the terms of outstanding options or stock appreciation rights to reduce their exercise price, (v) materially increase the benefits accruing to participants under the 2018 Plan, or (vi) make any modification that will cause incentive stock options to fail to meet the requirements of Internal Revenue Code Section 422.

 

Term

 

The Administrator may grant awards pursuant to the 2018 Plan until it is discontinued or terminated; provided, however, that ISOs may not be granted after April 12, 2028.

 

Change of Control

 

Unless otherwise provided in the terms of an award, upon a change of control of the Company, as defined in the 2018 Plan, the Administrator may provide for one or more of the following: (i) the acceleration of the exercisability, vesting, or lapse of the risks of forfeiture of any or all awards (or portions thereof); (ii) the complete termination of the 2018 Plan and the cancellation of any or all awards (or portions thereof) that have not been exercised, have not vested, or remain subject to risks of forfeiture, as applicable in each case as of the effective date of the change of control; (iii) that the entity succeeding the Company by reason of such change of control, or the parent of such entity, must assume or continue any or all awards (or portions thereof) outstanding immediately prior to the change of control or substitute for any or all such awards (or portions thereof) a substantially equivalent award with respect to the securities of such successor entity, as determined in accordance with applicable laws and regulations; or (iv) that participants holding outstanding awards will become entitled to receive, with respect to each share of common stock subject to such award (whether vested or unvested, as determined by the Administrator pursuant to the 2018 Plan) as of the effective date of any such change of control, cash in an amount equal to (1) for participants holding options or stock appreciation rights, the excess of the fair market value of such common stock on the date immediately preceding the effective date of such change of control over the exercise price per share of options or stock appreciation rights, or (2) for participants holding awards other than options or stock appreciation rights, the fair market value of such common stock on the date immediately preceding the effective date of such change of control. The Administrator need not take the same action with respect to all awards (or portions thereof) or with respect to all participants.

 

Payment

 

Upon exercise of an option granted under the 2018 Plan, and as permitted in the Administrator’s discretion, the option holder may pay the exercise price in cash (or cash equivalent), by surrendering previously-acquired unencumbered shares of Company common stock, by withholding shares of Company common stock from the number of shares that would otherwise be issuable upon exercise of the option (e.g., a net share settlement), through broker-assisted cashless exercise (if compliant with applicable securities laws and any insider trading policies of the Company), another form of payment authorized by the Administrator, or a combination of any of the foregoing. If the exercise price is paid, in whole or in part, with Company common stock, the then-current fair market value of the stock delivered or withheld will be used to calculate the number of shares required to be delivered or withheld.

 

Transfer Restrictions

 

Unless permitted by law and expressly permitted by the 2018 Plan or underlying award agreement, no award will be transferable, other than by will or by the laws of descent and distribution. The Administrator may permit a recipient of a non-qualified stock option to transfer the award by gift to his or her “immediate family” or to certain trusts or partnerships (as defined and permitted by applicable federal securities law).

 

Forms of Agreement

 

The Administrator has approved forms of agreement to govern incentive stock options, non-qualified stock options, restricted stock awards and restricted stock units. The foregoing summaries of the 2018 Plan and the forms of the agreements do not purport to be complete and are qualified in their entirety by reference to the text of the 2018 Plan and to the text of the forms of agreement, all of which are filed as exhibits to the Original Form 10-K.

 

 

Option Grants

 

On April 12, 2018, the Company granted 10-year non-qualified stock options to purchase shares of the Company’s common stock pursuant to the 2018 Plan as follows:

 

Name		Options Granted
Damon R. Cuzick		1,000,000
John P. Yeros		1,200,000
Danny R. Cuzick		1,500,000
Tim Gorry		200,000
Scott M. Honour		100,000
Thomas J. Abood		100,000

 

The options are exercisable at a price of $2.50 per share, which the Board determined was the fair market value of the Company’s common stock on the grant date. 25% of the options vested on the grant date, and the remaining options vest in equal annual installments on the first, second and third anniversary of the grant date. However, all unvested options vest immediately upon the Company’s closing on an aggregate of at least $30,000,000 in any combination of public and private equity and debt financings after the grant date. 

 

J. Yeros Employment Agreement

 

On November 23, 2016, the Company succeeded as a party to the employment agreement between John Yeros and Shock, Inc. (the “J. Yeros Employment Agreement”), which became effective upon our February 1, 2017 acquisition of Environmental Alternative Fuels, LLC, and its subsidiary, EVO CNG, LLC. The J. Yeros Employment Agreement provides for an initial term of four years, with automatic extensions (absent notice to the contrary) of one year upon the expiration of the initial term or any renewal term. Under the J. Yeros Employment Agreement, Mr. Yeros is eligible to earn base compensation of $240,000 per year, incentive compensation based on Mr. Yeros’ performance as determined by the Company’s board of directors and awards of stock options pursuant to any plans or arrangements the Company may have in effect from time to time.

 

If Mr. Yeros’ employment is terminated without cause or he resigns with good reason, he would receive severance, subject to his execution and non-revocation of a release of claims in favor of the Company and its officers, directors and affiliates, in an amount equal to: (A) any unpaid base salary, reimbursement for unpaid expenses and all other accrued payments or benefits through his termination date, plus (B) his monthly base salary at the level in effect immediately prior to his termination date, multiplied by the longer of (1) the period between his last day of employment and the one year anniversary of his employment if his employment is terminated prior to such one year anniversary or (2) six months.

 

The J. Yeros Employment Agreement also includes a customary confidentiality covenant and two-year post-termination nonsolicitation and non-interference covenants.

 

K. Honour Employment Agreement

 

On November 23, 2016, the Company succeeded as a party to the employment agreement between Kirk Honour and Shock, Inc. (the “K. Honour Employment Agreement”), which became effective on February 1, 2017. The K. Honour Employment Agreement provided for an initial term of four years, with automatic extensions (absent notice to the contrary) of one year upon the expiration of the initial term or any renewal term. Under the K. Honour Employment Agreement, Mr. Honour was eligible to earn base compensation of $180,000 per year, incentive compensation based on Mr. Honour’s performance as determined by the Company’s board of directors and awards of stock options pursuant to any plans or arrangements the Company may have in effect from time to time. The K. Honour Employment Agreement also included a customary confidentiality covenant and two-year post-termination nonsolicitation and non-interference covenants.

 

On October 9, 2017, Mr. Honour entered into a mutual separation agreement with the Company whereby Mr. Honor and the Company agreed that (i) Mr. Honour’s last day of employment with the Company was October 9, 2017, (ii) Mr. Honour would be paid an aggregate of $97,069 within ten business days after the Company raised an aggregate of $2 million in any combination of public or private debt or equity securities offerings, and (iii) in satisfaction of $240,276 of deferred compensation, the Company would issue 89,092 shares of its common stock to Mr. Honour within ten business days after the Company raised an aggregate of $2 million in any combination of public or private debt or equity securities offerings. The Company issued the 89,092 shares of common stock to Mr. Honour in April 2018.

 

Randy W. Gilbert Employment Agreement

 

On November 23, 2016, the Company succeeded as a party to the employment agreement between Randy W. Gilbert and Shock, Inc. (the “R. Gilbert Employment Agreement”), which became effective on February 1, 2017. The R. Gilbert Employment Agreement provided for an initial term of four years, with automatic extensions (absent notice to the contrary) of one year upon the expiration of the initial term or any renewal term. Under the R. Gilbert Employment Agreement, Mr. Gilbert was eligible to earn base compensation of $150,000 per year, incentive compensation based on Mr. Gilbert’s performance as determined by the Company’s board of directors and awards of stock options pursuant to any plans or arrangements the Company may have in effect from time to time. The R. Gilbert Employment Agreement also included a customary confidentiality covenant and two-year post-termination nonsolicitation and non-interference covenants.

 

 

Mr. Gilbert resigned as the chief financial officer of the Company effective December 31, 2017, and in connection with his resignation verbally agreed with the Company that no amounts were owed to Mr. Gilbert after his resignation pursuant to the R. Gilbert Employment Agreement.

 

Damon Cuzick Employment Agreement

 

On February 1, 2017, the Company entered into an employment agreement with Damon Cuzick (the “Damon Cuzick Employment Agreement”). The Damon Cuzick Employment Agreement provides for an initial term of four years, with automatic extensions (absent notice to the contrary) of one year upon the expiration of the initial term or any renewal term. Under the Damon Cuzick Employment Agreement, Mr. Cuzick is eligible to earn base compensation of $180,000 per year, incentive compensation based on Mr. Cuzick’s performance as determined by the Company’s board of directors and awards of stock options pursuant to any plans or arrangements the Company may have in effect from time to time.

 

If Mr. Cuzick’s employment is terminated without cause or he resigns with good reason, he would receive severance, subject to his execution and non-revocation of a release of claims in favor of the Company and its officers, directors and affiliates, equal to any unpaid base salary, reimbursement for unpaid expenses and all other accrued payments or benefits through his termination date, plus the greater of: (1) his monthly base salary at the level in effect immediately prior to his termination date, multiplied by number of full or partial months, if any, in the period beginning on his termination date and ending on the date his initial employment term would have ended, if later than his termination date or (2) one-half of his annual base salary at the level in effect immediately prior to his termination date.

 

The Damon Cuzick Employment Agreement also includes a customary confidentiality covenant and two-year post-termination nonsolicitation and non-interference covenants.

 

Outstanding Equity Awards at Fiscal Year-End

 

As of December 31, 2017, there were no unexercised options, stock that has not vested, or equity incentive plan awards held by our named executive officers. 

 

Director Compensation

 

No members of our Board of Directors are currently compensated for their services. Our directors are reimbursed for reasonable expenses incurred in connection with their service and may be compensated by certain stockholders to the extent they were initially appointed as designees on behalf of such holders.

 

Compensation Committee Interlocks and Insider Participation

 

As a smaller reporting company, we are not required to provide disclosure pursuant to this item. 

 

Compensation Committee Report

 

As a smaller reporting company, we are not required to provide disclosure pursuant to this item. 

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table lists, as of April 27, 2018, the number of shares of our voting stock beneficially owned by (i) each person or entity known to us to be the beneficial owner of more than 5% of our outstanding voting stock; (ii) each of our named executive officers and directors; and (iii) all of our officers and directors as a group. The beneficial ownership is based on 2,067,120 shares of common stock and 100,000 shares of Series A Preferred Stock, which vote with the common stock on an as converted basis on all matters presented for a vote of the holders of common stock, including directors, and are entitled to fifteen votes for each share of Series A Preferred Stock. Unless otherwise indicated, the address of each person listed below is in the care of EVO Transportation & Energy Services, Inc. 8285 West Lake Pleasant Parkway, Peoria, AZ 85382.

 

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants currently exercisable or exercisable within 60 days. Shares of our capital stock issuable pursuant to options or warrants are deemed to be outstanding for purposes of computing the beneficial ownership percentage of the person or group holding such options or warrants but are not deemed to be outstanding for purposes of computing the beneficial ownership percentage of any other person.

 

 

Name of Beneficial Owner or Identity of Group1		Number of Shares Beneficially Owned				Percent
5% Beneficial Owners
Jerry Moyes 2710 E. Old Tower Road Phoenix, AZ 85034			2,000,000(2)				43.8	%
Executive Officers and Directors
John P. Yeros			324,650(3)				8.4	%
Kirk S. Honour 315 E. Lake St. Suite 301 Wayzata, MN 55391			239,297(4)				6.6	%
Randy W. Gilbert Table Trac, Inc. 6101 Baker Road, Suite 206 Minnetonka, MN 55345			10,124(5)				*
Scott M. Honour 315 E. Lake St. Suite 301 Wayzata, MN 55391			260,173(6)				7.1	%
Thomas J. Abood			151,856(7)				2.0	%
Danny R. Cuzick			1,875,000(8)				47.6	%
Damon R. Cuzick			250,000(9)				6.5	%
All executive officers and directors as a group (5 persons)			2,861,679				62.0	%

  

*Less than 1%

 

(1)	Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of voting stock beneficially owned by them. A person is deemed to be the beneficial owner of securities which may be acquired by such person within 60 days from the date indicated above upon the exercise of options, warrants or convertible securities. Each beneficial owner's percentage ownership is determined by assuming that options, warrants or convertible securities that are held by such person (but not those held by any other person) and which are exercisable within 60 days of the date indicated above, have been exercised.
(2)	Includes 1,000,000 shares of common stock issuable upon the exercise of warrants.  Mr. Moyes shares voting and dispositive power of his shares with his spouse.
(3)	Includes 300,000 shares of common stock issuable upon the exercise of options.
(4)	Kirk Honour served as the Company’s president until October 2017.  Includes 73,308 shares of common stock issuable upon the exercise of warrants.
(5)	Randy Gilbert served as the Company’s chief financial officer until December 2017.
(6)	207,903 shares are owned by Falcon Capital LLC, of which Scott M. Honour is the beneficial owner and 27,270 shares are owned by Honour Capital LP, of which Scott M. Honour is the beneficial owner.   Includes 71,074 shares of common stock issuable upon the exercise of warrants held by Falcon Capital LLC and 25,000 shares of common stock issuable upon the exercise of options held by Scott M. Honour. The business address of Falcon Capital LLC and Honour Capital LP is 315 E. Lake St. Suite 301, Wayzata, MN 55391.
(7)	Includes 25,000 shares of common stock issuable upon the exercise of options.
(8)	Includes 375,000 shares of common stock issuable upon the exercise of options and 100,000 shares of Series A Preferred Stock, representing voting rights of 1,500,000 shares of common stock.
(9)	Includes 250,000 shares of common stock issuable upon the exercise of options.

  

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

As of the end of the most recently completed fiscal year, the Company did not have any equity compensation plans or any individual compensation arrangements with respect to its common stock or preferred stock. The issuance of any of our common or preferred stock is within the discretion of our board of directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval. Following the end of fiscal year 2017, the Company’s board of directors adopted an equity compensation plan to retain and incentivize key personnel to drive the success of the Company. Refer to the discussion in Item 11 of this annual report for a description of the plan.

 

Item 13. Certain Relationships, Related Transactions, and Director Independence.

 

Titan Securities Exchange

 

Immediately prior to the Titan Securities Exchange, Titan’s former founders, managing members and directors (including our current directors and executive officers, John P. Yeros, and Scott M. Honour, and our former executive officers, Kirk S. Honour and Randy Gilbert) beneficially owned and held a total of 226,125 of Titan’s total 282,626 Class A Membership Units issued and outstanding, or 80% of Titan’s Units in total. Therefore, Titan’s former founders, managing members and directors were in a position to control Titan. After giving effect to the Titan Securities Exchange, the Shock Merger and the EAF Securities Exchange, our executive officers and directors beneficially owned approximately 135,000 of the Company’s 317,207 issued and outstanding shares of common stock, or approximately 42.4% of the Company’s common stock.

 

Investments in and Loans to Titan El Toro LLC

 

Prior to our 2016 acquisition of Titan El Toro LLC, a wholly owned subsidiary of Titan that operates our Titan El Toro fueling station, Titan’s former founders, managing members and directors invested $109,599 of equity in Titan El Toro LLC which they exchanged for 10,892 Units of Titan. Titan’s former founders, managing members and directors also previously held $594,000 of mezzanine debt and $367,000 in bridge debt in Titan El Toro LLC. Of those amounts, approximately $942,000 of principal and interest was exchanged for 31,652 Units of Titan. All Units of Titan were exchanged for shares of our common stock in the Titan Securities Exchange. In addition, Titan’s former founders, managing members and directors previously held approximately $450,000 in Junior Bridge Notes and $670,000 in Senior Bridge Notes (as such terms are defined below) until such notes were converted.

 

Guarantee of Tradition Facility

 

On December 31, 2014, Titan entered into a co-borrower arrangement for a $1,300,000 U.S. Small Business Administration (SBA) note with Titan El Toro LLC. The proceeds from the note were received by Titan El Toro LLC and the note payable is recorded by Titan El Toro LLC. The note is a ten year term note with interest fixed at 5.50% for the first five years, then adjusted to the SBA LIBOR Base Rate, plus 2.35% for the remaining five years. The note requires monthly principal and interest payments of $15,288. The note is secured by substantially all of Titan’s business assets and is personally guaranteed by certain of Titan’s former founders, managing members and directors. Titan issued 35,491 Class A Membership Units to those former founders, managing members and directors as compensation for the guarantee, which Units were subsequently exchanged for shares of our common stock in connection with the Titan Securities Exchange. The amount outstanding on the note as of December 31, 2017 was $1,093,691. The note was obtained pursuant to a Loan Agreement with Tradition Capital Bank dated December 31, 2014. The Company was, as of December 31, 2017, and currently is, in violation of certain covenants. We received a waiver to remedy the technical non-compliance under our SBA Facility for the year ended December 31, 2016, but have not received a waiver for current non-compliance.  

 

EAF Promissory Notes

 

On February 1, 2017, EVO, Inc. issued the Senior Promissory Note in the principal amount of $3.8 million to Danny Cuzick and Convertible Notes in the aggregate principal amount of $9.5 million to the EAF Members. The Senior Promissory Note bears interest at 7.5% per year with a default interest rate of 12.5% per year and has a maturity date of the earlier of (a) the date that is ten days after the initial closing of a private offering of capital stock of EVO, Inc. in an amount not less than $10 million (a “Private Offering”); (b) December 31, 2017 and (c) declaration by Danny Cuzick of an event of default under the Senior Promissory Note. The Convertible Notes bear interest at 1.5% per year and have a maturity date of February 1, 2026. On April 2, 2018, the Company and Danny Cuzick entered into an amendment to the Convertible Promissory Note issued to Danny Cuzick to extend the maturity date of the note to the earlier of (a) July 1, 2019 and (c) declaration by Danny Cuzick of an event of default under the note.

 

 

The Convertible Notes are convertible into 1,400,000 shares (the “Transaction Shares”) of EVO, Inc.’s Common Stock, subject to adjustment for any stock splits, combinations or similar transactions, representing approximately 81.1% of EVO, Inc.’s total outstanding shares of Common Stock on a post-transaction basis. Accordingly, the conversion of the Convertible Notes would result in a change in control of the Company. The number of Transaction Shares will be increased to equal 70% of the issued and outstanding Common Stock if the issuance of Common Stock pursuant to a private offering of Common Stock of up to $2 million and the conversion into Common Stock of the Company’s subordinated notes payable to members, Senior Bridge Notes, convertible promissory notes, and certain accounts payable would otherwise cause the Transaction Shares to represent less than 70% of the issued and outstanding Common Stock. Pursuant to the terms of the EAF Exchange Agreement, the EAF Members are entitled to demand registration rights and piggyback registration rights with respect to the Transaction Shares upon customary terms, limitations, exceptions and conditions. The Convertible Notes are secured by all of the assets of EAF and the EAF Interests, which the Company pledged to the EAF Members as security for the Convertible Notes.

 

Each Convertible Note is convertible at the applicable holder’s option beginning on the first anniversary of the date of issuance of the Convertible Notes, including at any time within 90 days after the holder’s receipt of notice of consummation of (1) a reorganization, merger or similar transaction where EVO, Inc. is not the surviving or resulting entity or (2) the sale of all or substantially all of EVO, Inc. assets, subject to customary restrictions. Each holder’s conversion option is subject to a monthly limit of the number of shares of Common Stock equal to 10% of the thirty day average trading volume of shares of Common Stock during the prior calendar month. The Convertible Notes are also subject to mandatory conversion at the Company’s option beginning on the first anniversary of the date of issuance of the Convertible Notes if: (i) the closing price of the Common Stock is greater than (A) 150% of the price at which a share of Common Stock is sold in a Private Offering or (B) $10.00 if a Private Offering has not occurred by December 31, 2017 and (ii) the average daily trading volume of shares of Common Stock has equaled 100,000 or more for the 30 days prior to the applicable date. Upon a conversion of the Convertible Notes, accrued interest may also be converted at the greater of (i) the amount of interest to be converted divided by the exchange ratio of 0.1357, subject to adjustment for stock splits or combinations, or (ii) the amount of interest to be converted divided by the closing price of the Common Stock on the trading day preceding the conversion date.

 

In connection with the closing of the EAF Exchange Agreement, on February 1, 2017, the Company issued promissory notes to the EAF Members in the aggregate principal amount of $250,000 that bear interest at 6% per annum with a default rate of 11% per annum and a maturity date of the earlier of (a) the closing of a Private Offering; (b) 180 days from the date of the notes and (c) declaration by a holder of an event of default under the holder’s note (the “Working Capital Notes”). Subsequent to year end the Working Capital Notes were paid in full.

 

In connection with the closing of the EAF Exchange Agreement, on February 1, 2017, the Company guaranteed a note from EAF to an EAF member dated January 30, 2017 in the principal amount of $4 million (the “EAF Note”). The EAF Note is secured by all assets of EAF and is guaranteed by EAF. The EAF Note bears interest at 7.5% per annum with a default rate of 12.5% per annum and has a maturity date of the earlier of (a) February 1, 2020 and (b) declaration by the noteholder of an event of default under the EAF Note. 

 

Junior Bridge Notes 

 

On January 1, 2016, Titan issued eight subordinated notes payable to its former members (the “Junior Bridge Notes”) with a maturity date of December 31, 2020 for approximately $876,000, as well as 64,387 (equivalent to 56,608 common shares) Class A Membership Units in Titan. Titan issued an additional Junior Bridge Note on January 1, 2016 for approximately $99,000 to evidence pre-existing indebtedness. The Junior Bridge Notes bear interest at 12% per year with a default rate of 15% per year. On April 12, 2018, approximately $1,340,261 of the Junior Bridge Notes and related interest were converted into 272,777 shares of Common Stock at $5.00 per share pursuant to subscription agreements between the Company and the Junior Bridge Note holders.

 

Senior Bridge Notes 

 

On February 29, 2016, Titan issued five promissory notes payable to its former members (the “Senior Bridge Notes”) with an original maturity date of June 28, 2016 for approximately $672,000, as well as 14,762 (equivalent to 18,806 common shares) Class A Membership Units. The Senior Bridge Notes originally bore interest at 12% per year with a default interest rate of 15% per year. Two of the Senior Bridge Notes were originally long-term debt of Titan outstanding at December 31, 2015 and converted into Senior Bridge Notes. In the event of a default under the Senior Bridge Notes, Titan is required to pay the holder a stated number of Class A Membership Units on the date of default and each 90 day interval thereafter until all amounts due have been paid in full. Effective July 2016, the maturity date of the Senior Bridge Notes was extended to September 30, 2016 and effective March 14, 2016 the interest rate was increased from 12% to 16%. The default interest rate was increased from 15% to 18%. As part of that first amendment, the note holders received 3,359 Class A Membership Units in Titan (equivalent to 2,953 common shares). On July 26, 2016, Titan issued an additional Senior Bridge Note for $200,000 with 16% interest and an original maturity date of October 2016. In September 2016, Titan issued an additional Senior Bridge Note for $150,000 and the Senior Bridge Notes were amended to extend the maturity date to January 31, 2017 and Titan paid a fee for the extension of 1% of the outstanding principal balance to the note holders. On January 31, 2017, Titan issued an additional Senior Bridge Note in the principal amount of $400,000. A fee of 1% of the outstanding principal balance was paid at January 31, 2017, April 30, 2017, and July 31, 2017 to extend the term of the notes to October 31, 2017. On April 12, 2018, approximately $689,000 of Senior Bridge Notes and related interest were converted into 275,583 shares of Common Stock at $2.50 per share pursuant to subscription agreements between the Company and certain of the Senior Bridge Note holders. 

 

Share Escrow Agreement

 

On or about March 20, 2018, the Company entered into a Share Escrow Agreement (the “Escrow Agreement”) with certain of the Company’s shareholders, including entities affiliated with Scott Honour, a director of the Company, and Kirk Honour, the Company’s former president. Pursuant to the terms of the Escrow Agreement, the shareholders party to the agreement placed an aggregate of 240,000 shares of Common Stock in escrow, to be held by the Company until such time as one or more third parties offers to purchase the escrowed shares and the Company approves such purchase or purchases. 75% of the proceeds of the sale or sales of the escrowed shares will be paid to the Company and will be used by the Company first to repay any amounts outstanding under the Tradition Capital Bank loan facility, and the remaining 25% of the proceeds will be paid pro rata to the shareholders party to the Escrow Agreement. In connection with the Escrow Agreement, the Company issued 240,000 warrants to purchase Common Stock to the shareholders party to the Escrow Agreement, which warrants have an exercise price of $6.11 per share and are exercisable for a period of five years.

 

Stock Option Plan and Option Grants

 

Refer to the discussion in Item 11 of this annual report for a description of the 2018 Plan and grants made under the 2018 Plan.

 

Certificate of Designation

 

On April 13, 2018, the Company filed a Certificate of Designation of Rights and Preferences of Series A Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware, which authorizes the Company to issue up to 100,000 shares of Series A Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”). The Series A Preferred Stock ranks senior in preference and priority to the Company’s common stock with respect to dividend and liquidation rights and, except as provided in the Certificate of Designation or otherwise required by law, will vote with the common stock on an as converted basis on all matters presented for a vote of the holders of common stock, including directors, and are entitled to fifteen votes for each share of Series A Preferred Stock held on the record date for the determination of the stockholders entitled to vote or, if no record date is established, on the date the vote is taken.

 

The Series A Preferred Stock is convertible at any time at the option of the holder or the Company at an initial conversion ratio of one share of Common Stock for each share of Series A Preferred Stock. The initial conversion ratio shall be adjusted in the event of any stock splits, stock dividends and other recapitalizations. In addition, each share of Series A Preferred Stock will automatically convert to one share of Common Stock if the closing price on all domestic securities exchanges on which the Common Stock may at the time be listed exceeds six dollars ($6.00) per share for thirty (30) consecutive trading days and the daily trading volume of the Common Stock is at least twenty thousand (20,000) shares for that same period.

 

The holders of the Series A Preferred Stock are entitled to a liquidation preference of $3.00 per share of Series A Preferred Stock plus any accrued but unpaid dividends upon the liquidation of the Company. The Series A Preferred Stock may be redeemed by the Company at any time at a redemption price equal to $3.00 plus all accrued but unpaid dividends, and each holder of Series A Preferred Stock may cause the Company to redeem the holder’s Series A Preferred Stock at any time after August 1, 2018 at a redemption price equal to $3.00 plus all accrued but unpaid dividends.

 

The approval of the holders of at least a majority of the Series A Preferred Stock, voting together as a separate class, is required for the Company to amend the Certificate of Designation, including by merger or otherwise, to as to alter or repeal the preferences, rights, privileges or powers of the Series A Preferred Stock in a manner that would adversely affect the rights of the holders of the Series A Preferred Stock.

 

A copy of the Certificate of Designation is filed as an exhibit to the Original Form 10-K and is incorporated herein by reference.

 

 

Issuance of Preferred Stock

 

On April 12, 2018, the Company approved the issuance of 100,000 shares of Series A Preferred to Danny R. Cuzick, a member of the Company’s board of directors, as compensation for services rendered to the Company.

 

Other Related Transactions

 

In connection with closing the Titan Securities Exchange, the Company issued three convertible promissory notes (the “Minn Shares Notes”) in the aggregate principal amount of $415,173.98 to Joseph H. Whitney, The Globe Resources Group, LLC and Richard E. Gilbert. The Minn Shares Notes amended and restated the terms of previously outstanding loans from Richard Gilbert, Paramount Trading, Ltd. and The Globe Resources Group, LLC. The Minn Shares notes bear interest at the rate of 5% per annum and mature in November 2019 unless earlier converted. Each Minn Shares Note is convertible at the holder’s option upon (i) a sale by the Company of not less than $7,500,000 of its equity securities, (ii) a corporate transaction such as a merger, consolidation or asset sale involving either the sale of all or substantially all of the Company’s assets or the transfer of at least 50% of the Company’s equity securities or (iii) the maturity date. The Minn Share Notes are subject to mandatory conversion upon the conversion into equity securities of the Junior Bridge Notes and Senior Bridge Notes upon the same conversion terms as the Junior Bridge Notes and Senior Bridge Notes.

 

The Company currently utilizes the office space and equipment of its management at no cost. Management estimates such amounts to be immaterial.

 

Director Independence

 

Our securities are not listed on a national securities exchange or on any inter-dealer quotation system which has a requirement that a majority of directors be independent. We evaluate independence by the standards for director independence set forth in the NASDAQ Listing Rules.

 

Under NASDAQ Rule 5605(a)(2)(A), a director is not considered to be independent if he or she also is an executive officer or employee of the corporation. In considering a director’s independence, the board of directors considers any related-party transactions that currently exist or have occurred during the timeframes specified by NASDAQ Listing Rule 5605(a)(2) and whether the director has any relationships that, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The board of directors determined that Thomas J. Abood is “independent” within the meaning of NASDAQ Listing Rules. Each of Scott M. Honour and Danny R. Cuzick would not be considered an independent director. 

 

Item 14. Principal Accounting Fees and Services

 

The following summarizes the fees we were billed for audit and non-audit services rendered for the fiscal years ended December 31, 2017 and 2016. Lurie, LLP was Titan’s auditor before our acquisition of Titan. EKS&H LLP is our current auditor. No fees for professional services rendered by EKS&H LLP were incurred during the year ended December 31, 2016 because we did not engage EKS&H LLP until February 2017.

 

Audit Fees

 

EKS&H’s audit fees billed were $75,115 for the year ended December 31, 2017. EKS&H’s audit fees billed were $76,000 for the year ended December 31, 2016, and Lurie, LLP’s audit fees billed in connection with Titan’s financial statements were $176,000 for the year ended December 31, 2016.

 

Audit-Related Fees

 

Audit-related fees billed by EKS&H LLP in the fiscal years ended December 31, 2017 and 2016 were $66,935 and $0, respectively.

 

Tax Fees

 

Tax fees billed by EKS&H LLP in the fiscal years ended December 31, 2017 and 2016 were $24,090 and $0, respectively.

 

All Other Fees

 

Other fees billed by EKS&H LLP for other products and services in the fiscal years ended December 31, 2017 and 2016 were $0 and $0, respectively.

 

Audit Committee’s Pre-Approval Process

 

The Board of Directors acts as the audit committee of the Company, and accordingly, all fees and services are approved by all the members of the Board of Directors. 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	EVO TRANSPORTATION & ENERGY SERVICES, INC.
Date: April 30, 2018	By:	/s/ John P. Yeros
		John P. Yeros
		Chief Executive Officer
		Principal Executive Officer and Principal Financial Officer

 

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

		Title		Date
/s/ John P. Yeros		Chief Executive Officer		April 30, 2018
John P. Yeros
/s/ Thomas J. Abood		Director		April 30, 2018
Thomas J. Abood
/s/ Danny Cuzick		Director		April 30,2018
Danny Cuzick
/s/ Scott M. Honour		Director		April 30, 2018
Scott M. Honour

 

 

EXHIBIT INDEX

 

Exhibit		Description
31.1*		Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s annual report on Form 10-K for the year ended December 31, 2017

 

*	Filed herewith

 

 

 

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