Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 25,
2018
RumbleOn, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or Other
Jurisdiction
of Incorporation)
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000-55182
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46-3951329
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(Commission
File Number)
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(I.R.S. Employer
Identification No.)
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4521 Sharon Road, Suite 370
Charlotte, North Carolina
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28211
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(Address of Principal Executive Offices)
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(Zip Code)
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(704) 448-5240
(Registrant’s Telephone Number, Including Area
Code)
(Former Name or Former Address, If Changed Since Last
Report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2 (b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4 (c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (17 CFR
§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR §240.12b-2).
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. ☒
Item 1.01. Entry into a Material Definitive
Agreement
Acquisition of Wholesale, LLC
On October 26, 2018 (the
“Effective
Date”), RumbleOn, Inc.
(the “Company”)
entered into an Agreement and Plan of Merger (as amended, the
“Merger
Agreement”) by and among the Company, the
Company’s newly-formed acquisition subsidiary RMBL Tennessee,
LLC, a Delaware limited liability company
(“Merger
Sub”), Wholesale
Holdings, Inc., a Tennessee corporation (“Holdings”),
Wholesale, LLC, a Tennessee limited liability company
(“Wholesale”),
Steven Brewster and Janelle Brewster (each a
“Stockholder”,
and together the “Stockholders”), Steven Brewster, a
Tennessee resident, as the representative of each Stockholder (the
“Representative”),
and, for the limited purposes of Section 5.8, Marshall Chesrown and
Steven R. Berrard, providing for the merger (the
“Wholesale
Merger”) of Holdings with
and into Merger Sub, with Merger Sub surviving the Wholesale Merger
as a wholly-owned subsidiary of the Company. On October 29, 2018,
the Company entered into an Amendment to the Merger Agreement (the
“Merger Agreement
Amendment”) making a
technical correction to the definition of “Parent
Consideration Shares” contained in the Merger
Agreement.
On October 30, 2018 (the
“Closing
Date”), the Company
completed the Wholesale Merger. As consideration for the Wholesale
Merger, the Company (i) paid cash consideration of $12,000,000,
subject to certain customary post-closing adjustments, and (ii)
issued to the Stockholders 1,317,329 shares (the
“Stock
Consideration”) of the
Company’s Series B Non-Voting Convertible Preferred Stock,
par value $0.001 (the “Series B
Preferred”), as described
below.
The
foregoing description of the Merger Agreement, the Merger Agreement
Amendment, and the transactions contemplated thereby does not
purport to be complete and is qualified in its entirety by the
terms and conditions of the Merger Agreement and the Merger
Agreement Amendment, which are attached hereto as Exhibits 2.1
and 2.2, respectively, and are incorporated herein by
reference.
Acquisition of Wholesale Express
Also on the Effective Date, the Company entered
into a Membership Interest Purchase Agreement (the
“Purchase
Agreement”), by and among
the Company, Steven Brewster and Justin Becker (together the
“Express
Sellers”), and Steven
Brewster as representative of the Express Sellers, pursuant to
which the Company will acquire all of the membership interests (the
“Express
Acquisition”) in
Wholesale Express, LLC, a Tennessee limited liability company
(“Wholesale
Express”). The Express
Acquisition was completed on the Closing Date. As consideration for the Express Acquisition, the
Company paid cash consideration of $4,000,000, subject to certain
customary post-closing adjustments.
The
foregoing description of the Purchase Agreement and the
transactions contemplated thereby does not purport to be complete
and is qualified in its entirety by the terms and conditions of the
Purchase Agreement, which is attached hereto as Exhibit 2.3
and is incorporated herein by reference.
Registration Rights Agreement
In connection with the Wholesale Merger, on the
Closing Date, the Company entered into a registration rights
agreement, by and among the Company and the Stockholders who
received the Stock Consideration (the “Registration Rights
Agreement”). Pursuant to
the Registration Rights Agreement (i) the Stockholders were granted
certain piggyback registration rights with respect to registration
statements filed subsequent to the Closing Date and (ii) the
Company agreed to file a resale registration statement for the
Class B Common Stock underlying the Series B Preferred (the
“Conversion
Shares”) as soon as
practicable after the issuance of the Conversion Shares and in any
event within ten days of such issuance, and to use commercially
reasonable efforts to cause it to become effective as promptly as
practicable following such filing.
The
foregoing description of the Registration Rights Agreement does not
purport to be complete and is qualified in its entirety by the
terms and conditions of the Registration Rights Agreement, which is
attached hereto as Exhibit 10.1 and is incorporated herein by
reference.
Merger Escrow Agreement
On the Closing Date, the Company together with the
Representative entered into an escrow agreement (the
“Escrow
Agreement”) with
Continental Stock Transfer & Trust Company (the
“Escrow
Agent”) pursuant to which
the Company delivered 681,481 shares of the Stock Consideration
(collectively, the “Escrow
Shares”) to the Escrow
Agent. The Escrow Shares will be available to secure claims that
may arise with respect to the representations, warranties,
covenants or indemnification obligations of the Stockholders and
the Express Sellers subject to the terms and conditions in the
Merger Agreement and the Purchase Agreement during the period of 12
months following the Closing Date in which case the Escrow Shares
will serve to reimburse the Company, by the forfeiture of such
shares, in accordance with the valuation of such Escrow Shares as
set forth in the Escrow Agreement. The Escrow Agreement will
terminate on the first anniversary of the date of the Escrow
Agreement, at which time the Escrow Agent will disburse the Escrow
Shares pursuant to the terms of the Escrow
Agreement.
The
foregoing description of the Escrow Agreement and the transactions
contemplated thereby does not purport to be complete and is
qualified in its entirety by the terms and conditions of the Escrow
Agreement, which is attached hereto as Exhibit 10.2 and is
incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of
Assets
The
information set forth under Item 1.01 of this Current Report on
Form 8-K with respect to the Wholesale Merger and the Express
Acquisition is incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of
a Registrant.
Amendment to Loan and Security Agreement
On the Closing Date, the Company, NextGen Pro,
LLC, a Delaware limited liability company
(“NextGen
Pro”), RMBL Missouri,
LLC, a Delaware limited liability company
(“RMBL
Missouri”), RMBL Texas,
LLC, a Delaware limited liability company
(“RMBL
Texas,” and together with
the Company, NextGen Pro, and RMBL Missouri, each, an
“Existing
Borrower”, and collectively, the
“Existing
Borrowers”), Merger Sub, Wholesale, Wholesale
Express, RMBL Express, LLC, a Delaware limited liability company
(“RMBL
Express”, and together
with Merger Sub, Wholesale and Wholesale Express, the
“New
Borrowers”; together with the Existing
Borrowers, the “Borrowers”),
Hercules Capital, Inc., a Maryland corporation
(“Hercules”),
in its capacity as lender (in such capacity,
“Lender”),
and Hercules, in its capacity as administrative agent and
collateral agent for Lender (in such capacities,
“Agent”),
entered into the First Amendment and Waiver to Loan and Security
Agreement (the “Amendment”),
amending that certain Loan and Security Agreement, dated as of
April 30, 2018 (the “Loan
Agreement”; as amended by
the Amendment, the “Amended Loan
Agreement”), by and among
the Existing Borrowers, Lender and Agent.
Under the terms of the Amendment, $5,000,000
(less certain fees and expenses) were funded by Lender
to the Borrowers in connection with the Closing Date
(the “Tranche II
Advance”). The Tranche II
Advance has a maturity date of October 1, 2021 and an initial
interest rate of 11.00%.
Advances under the
Amended Loan Agreement (“Advances”)
will bear interest at a per annum rate equal to the greater of either (i) the prime
rate as reported in The Wall Street Journal plus 5.75% or (ii)
10.25%, based on a year
consisting of 360 days, with interest computed daily based on the
actual number of days elapsed. The Tranche II Advance, and any
future amounts that may be advanced under the Amended Loan
Agreement, will be due and payable on October 1,
2021.
Upon any event of default, the Agent may, at its option, exercise
its right to demand immediate payment of all liabilities and other
indebtedness and amounts owed to Lender by Borrowers. Conditions
for an event of default remain unchanged by the
Amendment.
Agent is secured by a grant of (i) a first
lien security interest in all assets of the Borrowers (other than
Wholesale) and (ii) a second lien security interest in all assets
of Wholesale (clauses (i) and (ii), collectively, the
“Collateral”),
except that the Collateral should not include (a) more than 65% of
the presently existing and later arising issued and outstanding
shares of capital stock owned by any Borrower of any foreign
subsidiary which shares entitle the holder thereof to vote for
directors or any other matter and (b) nonassignable licenses or
contracts.
The
foregoing description of the Amendment is qualified, in its
entirety, by the full text of the Amendment, a copy of which is
attached hereto as Exhibit 10.3, and is incorporated by reference
herein.
Warrant
On the Closing Date, the Company issued to Lender
a warrant to purchase 20,950 shares of the Company’s Class B
Common Stock at an exercise price of $7.16 per share (the
“Warrant”). The
Warrant is immediately exercisable and expires on October 30, 2023.
The Company agreed to file a registration statement registering the
resale of the shares underlying the Warrant no later than 90 days
after issuance. The
information set forth under Item 3.02 of this Current Report on
Form 8-K with respect to the Warrant is incorporated herein by
reference.
The
foregoing description of the Warrant is qualified, in its entirety,
by the full text of the Warrant, a copy of which is attached hereto
as Exhibit 4.1, and is incorporated by reference
herein.
NextGear Floorplan Financing Credit Line
On the Closing Date, Wholesale, as borrower,
entered into a floorplan vehicle financing credit line (the
“NextGear Credit
Line”) with NextGear
Capital, Inc. (“NextGear”),
as lender, pursuant to that certain Demand Promissory Note and Loan
and Security Agreement and Amendment thereto, each dated as of the
Closing Date. The available credit under the NextGear Credit Line
is initially $63,000,000, will decrease to $55,000,000 after
February 28, 2019 and will decrease to zero dollars after October
31, 2019. NextGear retains the exclusive right to make the decision
to make an advance to or on behalf of Wholesale, whether or not an
event of default has occurred, and NextGear may refuse to make an
advance under the NextGear Credit Line at any time, with or without
cause and without prior notice of such decision to Wholesale or its
affiliates.
Advances under the NextGear Credit Line will bear interest at an
initial per annum rate of 5.25%, based upon a 360-day year, and
compounded daily, and the per annum interest rate will vary based
on a base rate, plus the contract rate, which is currently negative
2.0%, until the outstanding liabilities to NextGear are paid in
full.
Advances under the
NextGear Credit Line require Wholesale to maintain at least
$5,500,000 cash collateral in a reserve account in favor of
NextGear, which amount is subject to change in NextGear's sole
discretion.
Advances under NextGear Credit Line, if not demanded earlier, are
due and payable, without notice, on or before the maturity date,
which is (a) for all liabilities relating to inventory or
receivables financed, the date set forth on the applicable advance
schedule or the date of a maturity event that causes NextGear to
declare an event of default, or October 31, 2019; (b) for all
liabilities not relating to inventory or receivables financed, 10
days after the date such liability is posted to Wholesale’s
account; and (c) for loans in excess of the market value of a unit
financed, the date on which such loan is posted to
Wholesale’s account. Notwithstanding the foregoing, upon the
declaration of an event of default by NextGear, the maturity date
for all liabilities will be the earlier of (i) the date on which
such event of default is declared by NextGear, or (ii) the date on
which such event of default first occurred.
Upon any event of default (including, without limitation,
Wholesale’s obligation to pay upon demand any outstanding
liabilities of the NextGear Credit Line), NextGear may, at its
option and without notice to Wholesale, exercise its right to
demand immediate payment of all liabilities and other indebtedness
and amounts owed to NextGear and its affiliates by Wholesale and
its affiliates.
The NextGear Credit Line is secured by a
grant of a first lien security interest in all of Wholesale’s
assets. Payment to NextGear is guaranteed by unsecured guaranties
of each of the Company and Merger Sub (collectively, the
“Parent
Guaranties”).
In connection with the Amendment and the NextGear
Credit Line, NextGear and Agent will enter into an intercreditor
agreement (the “Wholesale Inventory
Financing Intercreditor Agreement”) within 30 days of the Closing Date, by
and among NextGear and Agent, in form and substance satisfactory to
NextGear and Agent in Agent’s reasonable discretion. The
terms of the Wholesale Inventory Financing Intercreditor Agreement
and any additional intercreditor arrangements will control the
priority of Agent’s security interest in the Collateral of
Wholesale relative to NextGear’s security interest in the
Collateral of Wholesale.
The
foregoing description of the NextGear Credit Line and Parent
Guaranties does not purport to be complete and is qualified in its
entirety by the terms and conditions of the NextGear Credit Line
and Parent Guaranties, which are attached hereto as Exhibits 10.4
and 10.5, respectively, and are incorporated herein by
reference.
Item 3.02. Unregistered Sales of Equity Securities
The Private Placement
On October 25, 2018 (the “Placement Date”), the
Company also entered into a Securities Purchase Agreement (the
“Securities Purchase
Agreement”) with certain
accredited investors (the “Investors”)
pursuant to which the Company agreed to sell in a private placement
(the “Private
Placement”) an aggregate
of 3,030,000 shares of its Class B Common Stock (the
“Private Placement
Shares”), at a purchase
price of $7.10 per share for
non-affiliates of the Company, and, with respect to directors
participating in the Private Placement, at a price of $8.10 per
share. The gross proceeds for the private placement were
approximately $21.6 million. National Securities Corporation, a
wholly owned subsidiary of National Holdings Corporation, and
Craig-Hallum Capital Group (together the “Placement
Agents”) served as the
placement agents for the Private Placement. The Company paid the
Placement Agents a fee of 6.5% of the gross proceeds in the Private
Placement. Net proceeds from the Private Placement and $5,000,000
funded under the Tranche II Advance were used to partially fund the
cash consideration of the Wholesale Merger and the Express
Acquisition and the balance will be used for working capital
purposes. In connection with the Private Placement, the Company and
the Placement Agents entered into an Escrow Agreement to facilitate
the Private Placement, which is included as Exhibit A
to the Securities Purchase Agreement,
attached hereto as Exhibit 10.6.
Denmar
Dixon, a member of the Company’s Board of Directors, invested
through Blue Flame Capital, LLC (an entity controlled by Mr. Dixon)
$243,000 in the Private Placement for 30,000 shares of Class B
Common Stock. Also, Joseph Reece, a member of the
Company’s Board of Directors, individually invested $81,000
in the Private Placement for 10,000 shares of Class B Common Stock.
These purchases were approved by the Company’s Board of
Directors in accordance with Rule 16b-3(d)(1) of the Exchange Act.
Messrs. Dixon and Reece abstained from the Company’s Board of
Directors’ vote in favor of the Private
Placement.
Pursuant
to the Securities Purchase Agreement, the Company has agreed to
file with the SEC a registration statement with respect to the
resale of the Private Placement Shares purchased by the Investors
under the Securities Purchase Agreement no later than 30 days after
the Placement Date, and to have such registration statement
declared effective by the SEC no later than (i) 90 days after the
Placement Date in the event the SEC does not review such
registration statement, or, if earlier, five business days after a
determination by the SEC that it will not review such registration
statement, or (ii) 180 days after the Placement Date in the event
the SEC does review such registration statement, or, if earlier,
five business days after the completion of any review by the SEC.
In the event the Company does not file such registration statement
or does not cause such registration statement to become effective
by the applicable deadline or after such registration statement
becomes effective it is suspended or ceases to be effective, then
the Company will be required to make certain payments as liquidated
damages to the Investors under the Securities Purchase
Agreement.
The
foregoing summary of the Securities Purchase Agreement does not
purport to be complete and is qualified in its entirety by
reference to the complete text of the form of Securities Purchase
Agreement, which is attached hereto as Exhibit 10.6 and is
incorporated herein by reference.
The
shares of Series B Preferred (including the underlying Class B
Common Stock) issued in the Wholesale Merger and the Class B Common
Stock issued in the Private Placement and the Warrant (including
the underlying Class B Common Stock) were and will be issued in
reliance on the exemption from registration provided by Section
4(a)(2) under the Securities Act of 1933, as amended, and
Regulation D thereunder, as a sale not involving any public
offering.
Lock-up Agreements
On October 25, 2018, and as a condition precedent
to the closing of the Private Placement, the directors and
executive officers of the Company delivered executed lock-up
agreements (the “Lock-Up
Agreements”) to the
Placement Agents, pursuant to which the directors and executive
officers of the Company agreed, subject to certain customary
exceptions, not to sell, transfer or dispose of any Company common
stock for a period of ninety (90) days from the Closing
Date.
This
description of the Lock-Up Agreements does not purport to be
complete and is qualified in its entirety by the terms and
conditions of the form of the Lock-Up Agreement, a copy of which is
attached as Exhibit A to the Securities Purchase Agreement attached
hereto as Exhibit 10.6 and is incorporated herein by
reference.
Item 5.03 Amendments to Articles of
Incorporation or Bylaws; Change in Fiscal Year
Creation of Series B Convertible Preferred Stock
On the Placement Date, the Company filed the
Certificate of Designation, Preferences, and Rights of Series B
Non-Voting Convertible Preferred Stock (“Certificate of
Designation”) with the
Secretary of State for the State of Nevada, designating 2,500,000
shares of the Company’s preferred stock, par value $0.001 per
share, as Series B Preferred. Shares of Series B Preferred
rank pari
passu with the Class B Common
Stock, except that holders of Series B Preferred shall not be
entitled to vote on any matters presented to the stockholders of
the Company. The Certificate of Designation became effective on the
Placement Date.
Each
share of Series B Preferred is convertible on a one-for-one basis
into shares of the Company’s Class B Common Stock. The Series
B Preferred will automatically convert into Class B Common Stock 21
days after the mailing of a definitive information statement of the
type contemplated by and in accordance with Regulation 14C of the
Securities Exchange Act of 1934, as amended (“the Exchange
Act”), to the Company’s stockholders, without any
further action on the part of the Company or any
holder.
In
connection with the Wholesale Merger, stockholders of the Company
holding a majority of the voting power of the Company’s
common stock approved the conversion of the Series B Preferred into
an equal number of shares of Class B Common Stock. A definitive
information statement describing the acquisitions and the
conversion will be mailed to non-consenting stockholders of the
Company in accordance with Regulation 14C of the Exchange
Act.
The
foregoing description of the Series B Preferred is qualified, in
its entirety, by the full text of the Certificate of Designation, a
copy of which is attached to this Current Report on Form 8-K as
Exhibit 3.1, and is incorporated by reference
herein.
Item
8.01 Other
Events.
On
the Closing Date, the Company issued a press release announcing the
closing of the Wholesale Merger, the Express Acquisition and the
Private Placement. A copy of the press release is furnished as
Exhibit 99.1 and incorporated herein by reference.
Item
9.01. Financial Statements and Exhibits.
(a)
Financial Statements of Businesses Acquired.
The
financial statements required by Item 9.01(a) will be filed by
amendment to this Current Report on Form 8-K not later than 71 days
after the date on which this Current Report is required to be
filed.
(b) Pro
Forma Financial Information.
The pro
forma financial information required by Item 9.01(b) will be filed
by amendment to this Current Report on Form 8-K not later than 71
days after the date on which this Current Report is required to be
filed.
(d)
Exhibits
Exhibit
No.
Description
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Agreement
and Plan of Merger, dated October 26, 2018, by and among RumbleOn,
Inc., RMBL Tennessee, LLC, Wholesale Holdings, Inc., Steven
Brewster and Janet Brewster, Wholesale, LLC, and Steven Brewster as
representative, and for limited purposes, Marshall Chesrown and
Steven R. Berrard.*
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Amendment
to the Agreement and Plan of Merger, dated October 29, 2018, by and
among RumbleOn, Inc., RMBL Tennessee, LLC, Wholesale Holdings,
Inc., Steven Brewster and Janet Brewster, Wholesale, LLC, and
Steven Brewster as representative.
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Membership
Interest Purchase Agreement, dated October 26, 2018, by and among
RumbleOn, Inc. Steven Brewster, Justin Becker, and Steven Brewster
as representative.*
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Certificate
of Designation for the Series B Preferred Stock
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Warrant
to Purchase Class B Common Stock, dated October 30,
2018
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Registration
Rights Agreement, dated October 30, 2018, by and among RumbleOn,
Inc., Steven Brewster and
Janet Brewster, and Steven Brewster as representative.
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Escrow
Agreement, dated October 30, 2018, by and among RumbleOn, Inc.,
Steven Brewster as representative, and Continental Stock Transfer
and Trust Company.
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Amendment
to Loan and Security Agreement, dated October 30, 2018, by and
among the Company, NextGen Pro, LLC, RMBL Missouri, LLC, RMBL
Texas, LLC, RMBL Tennessee, LLC, Wholesale, LLC, Wholesale Express,
LLC, RMBL Express, LLC, and Hercules Capital,
Inc.
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Demand
Promissory Note and Loan and Security Agreement, dated October 30,
2018, by and between NextGear Capital, Inc. and Wholesale,
LLC.
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Corporate
Guaranty, in favor of NextGear Capital, Inc., dated October 30,
2018.
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Form of
Securities Purchase Agreement, dated October 25, 2018.
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Form of
Lock-Up Agreement, dated October 25, 2018 (included as Exhibit D to
the Securities Purchase Agreement attached hereto as Exhibit
10.6).
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Press
Release
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*
Schedules and similar attachments to the Agreement and Plan of
Merger and the Membership Interest Purchase Agreement, both dated
as of October 26, 2018, have been omitted pursuant to Item
601(b)(2) of Regulation S-K. The registrant hereby undertakes to
furnish on a supplemental basis a copy of any omitted schedules and
similar attachments to the Securities and Exchange Commission upon
request.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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RUMBLEON, INC.
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Date:
October 31, 2018
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By:
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/s/ Steven R.
Berrard
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Steven
R. Berrard
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Chief
Financial Officer
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