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
August 23, 2017
Date of
Report (Date of Earliest Event Reported)
NOVUME SOLUTIONS, INC.
(Exact
Name of Small Business Issuer as Specified in Its
Charter)
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DELAWARE
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333-216014
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81-56266334
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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(Commission File
Number)
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(I.R.S.
Employer
Identification
No.)
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14420 Albemarle Point Place, Suite 200,
Chantilly, VA, 20151
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(Address
of Principal Executive Offices)
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(703) 953-3838
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(Issuer’s
Telephone Number, Including Area Code)
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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 (see General Instruction A.2.
below):
☐ Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐ 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))
Item 1.01 Entry into a Material Definitive Agreement.
Closing of Merger Agreement
On
August 28, 2017, the merger transactions (the
“Mergers”)
contemplated by that certain Second Amended Agreement and Plan of
Merger (the “Merger
Agreement”) dated as of July 12, 2017, by and among
Novume Solutions, Inc. (the “Company”), KeyStone
Solutions, Inc. (“KSI”), Brekford Traffic
Safety, Inc. (“Brekford”), Brekford
Merger Sub, Inc. (“Brekford Merger Sub”),
and KeyStone Merger Sub, LLC (“KeyStone”), were consummated. As a
result, Brekford became a wholly-owned subsidiary of the Company,
and Brekford Merger Sub ceased to exist. KeyStone also became a
wholly-owned subsidiary of the Company, and KSI ceased to exist.
When KeyStone filed its certificate of merger with the Secretary of
State of the State of Delaware, it immediately effecutated a
name-change to KeyStone Solutions, LLC, the name by which it is now
known.
Upon completion of the Mergers, the merger consideration therefore
was issued in accordance with the terms of the Merger Agreement.
Immediately upon completion of the Mergers, the pre-merger
stockholders of KSI owned approximately 80% of the issued and
outstanding capital stock of the Company on a fully-diluted basis,
and the pre-merger stockholders of Brekford owned approximately 20%
of the issued and outstanding capital stock of the Company on a
fully-diluted basis. As of August 28, 2017,
there were 13,934,018 issued and outstanding shares of the common
stock, par value $0.0001 per share, of the Company ("Common Stock"); 808,501 shares
of Common Stock issuable upon the exercise of outstanding warrants;
1,003,385 shares of Common Stock issuable upon the exercise of
outstanding options; and 502,327 outstanding shares of the
Company’s Series A Cumulative Convertible Redeemable
Preferred Stock, par value $0.0001 per share
(“Series
A Preferred Stock”).
In
connection with the consummation of the Mergers, the Company no
longer meets the definition of a "shell" company as defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”).
The terms and provisions of the Merger Agreement, and the
transactions contemplated thereby, are described in detail
in the sections entitled “The Transaction” and
“The Merger Agreement” in Pre-Effective Amendment No. 4
to the Registration Statement
on Form S-4 (Reg. No.: 333-216014) (the “Registration
Statement”) of the
Company, as filed on August 2, 2017, and declared effective by the
SEC on August 3, 2017. The Registration Statement also contains the
Company's "Form 10 information", as such term is defined in Rule 144 promulgated
under the Securities Act of 1933, as amended. The
information provided in response to in this Item 1.01 is not
complete and is qualified in its entirety by reference to the
Registration Statement and the financial statements contained
therein and the exhibits thereto, all of which are incorporated
herein by reference in response to this Item 1.01, and to the full
text of the Merger Agreement, a copy of which is filed as Exhibit
2.1 to the Registration Statement and incorporated herein by
reference in response to this Item 1.01.
Avon Road Replacement Note
In
accordance with the Merger Agreement, on August 25, 2017, the
Company assumed that certain promissory note (the
“Avon Road
Note”) of KSI in favor of Avon Road Partners, L.P.
(“Avon
Road”), a limited partnership controlled by Robert A.
Berman, the Chief Executive Officer of the Company and, previously,
of KSI. KSI issued the Avon Road Note to Mr. Berman pursuant to
that certain Subordinated Note and
Warrant Purchase Agreement dated as of March 16, 2017. Upon
assumption of the Avon Road Note, the Company issued to Mr. Berman
a replacement note (the “Avon Road Replacement
Note”) having terms substantially identical to the
Avon Road Note. The Avon Road Replacement Note has an outstanding
principal amount of $500,000, the payment of which may be subordinated to
the Company’s financing facilities. The unpaid principal
under the Avon Road Replacement Note will accrue simple interest at
a rate equal to the lower of (a) 9% per annum, or
(b) the highest rate permitted by applicable law. Interest is
payable monthly and the maturity date is March 16,
2019.
The
foregoing description of the Avon Road Replacement Note is
qualified in its entirety by reference to the full text of the
note, a copy of which is filed as Exhibit 10.1 hereto and
incorporated herein by reference in response to this Item
1.01.
Item 2.01 Completion of Acquisition or Disposition of
Assets.
The
information in Item 1.01 is incorporated herein by reference in
response to this Item 2.01.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
The
information in Item 1.01 is incorporated herein by reference in
response to this Item 2.03.
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Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
Appointment of Christine Harada as a Director
On
August 23, 2017, the board of directors of the Company (the
“Board”) appointed
Christine Harada, 44, as a
member of the Board, with such appointment to take effect upon the
consummation of the Mergers. Ms. Harada was
designated as a proposed director by Brekford, and approved by
KSI. She is an independent
director within the meaning of NASDAQ Rule
5605. Ms. Harada’s appointment took effect on
August 28, 2017, and on such date she was awarded fully-vested
options to purchase 48,499 shares of Common Stock at a strike price
of $1.6753 per share.
Ms.
Harada previously served as the Federal Chief Sustainability
Officer from November 2015 through January 2017. Prior to that role, Ms. Harada was
the Acting Chief of Staff of the U.S. General Services
Administration (“GSA”) from March 2015
through November 2015. While at the GSA, Ms.
Harada also served as Associate Administrator, Government-wide
Policy and Chief Acquisition Officer for the GSA from June 2014
through February 2015. Ms. Harada’s private sector experience
includes serving as Global Manager, Transformation/Large Scale
Change Practice at the Boston Consulting Group from May 2013
through June 2014, and her tenure as a principal at Booz Allen
Hamilton from January 2004 through April 2013. Ms. Harada holds an
MA, International Studies and an MBA, Finance from the Lauder
Institute and the Wharton School at the University of Pennsylvania,
respectively. She also holds an MS Aeronautics/Astronautics and a
BS Aeronautics/Astronautics from Stanford University and the
Massachusetts Institute of Technology, respectively. The Company
believes Ms. Harada is a suitable appointee to the Board due to her
over 20 years of success in leading government and management
consulting organizations. She has not held any other directorships
during the prior five years.
Resignation of Riaz Latifullah as Chief Financial Officer;
Appointment of Riaz Latifullah as
Executive Vice President, Corporate Development;
Restated, Amended and Supplemented Latifullah Employment
Agreement
On
August 23, 2017, Riaz Latifullah, the Chief Financial Officer of
the Company, resigned as Chief Financial Officer, the Board
approved the appointment of Mr. Latifullah as Executive Vice
President, Corporate Development of the Company, each effective
upon the consummation of the Mergers. Mr. Latifullah’s
resignation and re-appointment became effective as of August 28,
2017.
Biographical
information related to Mr. Latifullah is incorporated herein by
reference from the section entitled “Directors and Officers
of Novume” in the Registration Statement.
In connection with Mr. Latifullah’s transition to
Executive Vice President, Corporate Development, on August 28, 2017,
Mr. Latifullah and the Company entered into a Restated, Amended and
Supplemental Employment Agreement (the “Amended
Latifullah Agreement”), which amended
and restated his original employment agreement with KSI effective
as of December 23, 2016, which was assumed by the Company. The
Amended Latifullah Agreement provides that he is Executive
Vice President, Corporate Development for a term that ends on
December 23, 2019. His base salary is $205,000 per annum, and he
will be eligible for a bonus as determined by the Company’s
newly established Compensation Committee (see Item 8.01 below).
Mr. Latifullah is also eligible to receive all such other
benefits as are provided by the Company to other management
employees that are consistent with the Company’s fringe
benefits available to any other officer or executive of the
Company. Mr. Latifullah was previously granted options to
purchase 90,000 shares of the common stock, par value $0.001 per
share, of KSI at a strike price of $2.75 per share. These options
were converted into options to purchase 174,595 shares of Common Stock
at a strike price of $1.4176 per share, upon the effectiveness of
the Mergers, in accordance with the terms of the Merger Agreement.
The conversion did not affect their vesting schedule; the options
began vesting in equal monthly installments on March 1, 2017 and
will continue vesting monthly until March 1,
2019.
The Amended Latifullah Agreement may be terminated with or without
cause, as defined in the agreement. Subject to certain conditions,
the Amended Latifullah Agreement provides that, if Mr. Latifullah
is terminated without cause, or if he leaves for good reason (as
defined in the agreement), he will be provided a severance
package equal to a pre-determined number of months of base salary
and such percentage of health premiums for his family as would have
been paid for by the Company during the corresponding time period
(collectively, the “Separation Payment”)
pursuant to the schedule below:
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September
1-September 30, 2017, a period of twelve (12) months after
termination;
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October 1-October
31, 2017, a period of eleven (11) months after
termination;
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November 1-November
30, 2017, a period of ten (10) months after
termination;
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December 1-December
31, 2017, a period of nine (9) months after
termination;
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January 1-January
31, 2018, a period of eight (8) months after
termination;
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February 1-February
28, 2018, a period of seven (7) months after termination;
or
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March 1, 2018 or
after, a period of six (6) months after termination.
The
Separation Payment would be paid in equal monthly installments and
beginning within fifteen (15) business days of the date of Mr.
Latifullah’s execution of a general release of the Company.
Additionally, half of all unvested options issued to Mr. Latifullah
under the Amended Latifullah Agreement would vest immediately
(together with Separation Payment, the “Separation
Consideration”).
The foregoing summary of the Amended Latifullah Agreement is not
complete and is qualified in its entirety by reference to
the full text of the Amended Latifullah Agreement attached as
Exhibit 10.2 hereto and incorporated by reference
herein.
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Appointment of Carl Malcolm Kumpf, Jr. as Chief Financial Officer;
Kumpf Employment Agreement
On
August 23, 2017, the Board approved the appointment of Carl Malcolm Kumpf, Jr., 51, as the
Company’s Chief Financial Officer, with such appointment to take effect upon
consummation of the Mergers. His appointment took effect as of
August 28, 2017, and on the same day he entered into an employment
agreement with the Company (the
“Kumpf
Employment Agreement”).
Prior
to this appointment, Mr. Kumpf co-founded Integral Financial Group
(“IFG”)
in 2005 and has served as the principal and Chief Executive Officer
of such company since that time. As a principal and CEO of IFG, Mr.
Kumpf served as the external accounting advisor to several IPOs and
as the interim CFO/Controller for several private high-tech and
services companies and oversaw the successful first year
Sarbanes-Oxley implementation of a large government contractor. Mr.
Kumpf also served the Chief Accounting Officer at InPhonic, Inc.
from September 2004 through October 2015. Prior to InPhonic, from May 2002
through April 2004, he was the Chief Financial Officer for
MorganFranklin Corporation. Mr. Kumpf holds a B.B.A in
Accounting from the College of William and Mary. He is a CPA in the
Commonwealth of Virginia. Mr. Kumpf is a past chairman of the News
Media Internal Auditor Association, a member of the AICPA and a
member of the Virginia State Society of CPAs.
The Kumpf Employment Agreement provides that Mr. Kumpf is Chief
Financial Officer of the Company for an initial three-year term
that begins on August 28, 2017. His base salary is $275,000 per
annum, and he will be eligible for a bonus as determined by the
Company’s newly established Compensation Committee (see Item
8.01 below). Mr. Kumpf is also eligible to receive all such
other benefits as are provided by the Company to other management
employees that are consistent with the Company’s fringe
benefits available to any other officer or executive of the
Company. Mr. Kumpf was granted options to purchase
174,595 shares of Common Stock,
which will begin vesting on August 28, 2017 and continue vesting in
equal monthly installments over the following three years, at a
strike price of $1.6753 per share.
The foregoing summary of the Kumpf Employment Agreement is not
complete and is qualified in its entirety by reference to
the full text of the Kumpf Employment Agreement attached as Exhibit
10.3 hereto and incorporated by reference herein.
Item 5.06 Change in Shell Company Status.
The
information in Item 1.01 is incorporated herein by reference in
response to this Item 5.06.
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Item 8.01 Other Events
Approval for Trading on the OTCQX
On
August 28, 2017, the Company received a written notice from OTC
Markets ("OTC"),
that the Company’s Common Stock, Series A Preferred Stock and
Novume Unit Warrants will commence trading on the OTCQX Best Market
of the OTC Markets Group, Inc. (“OTCQX”) under the symbols
“NVMM”, “NVMMP” and “NVMMW”,
respectively, on August 29, 2017.
Establishment of Board Committees
On
August 23, 2017, the Board authorized the creation of an Audit
Committee (the “Audit Committee”), a
Compensation Committee (the "Compensation Committee"), a
Governance Committee (the "Governance Committee"). Paul de
Bary (Chair), Glenn Goord and Christine Harada were appointed to
serve on the Audit Committee. Richard Nathan, PhD (Chair), Paul de
Bary and Christine Harada were appointed to serve on the Governance
Committee. Glenn Goord (Chair) and Christine Harada were appointed
to serve on the Compensation Committee.
Each of Mr. de Bary, Mr. Goord and Ms. Harada has been determined
by the Board to be an
independent director within the meaning of NASDAQ Rule
5605. Paul de Bary was
identified and designated by the Board as an “audit committee
financial expert,” as defined by the SEC in Item 407 of
Regulation S-K. The Board has also adopted charters for the
Audit Committee, the Compensation Committee and the Governance
Committee, which are attached as Exhibits 14.1, 14.2 and 14.3
hereto, respectively, and incorporated herein by reference in
response to this Item 8.01.
Termination of KeyStone 2016 Line of Credit
On
August 25, 2017, the Company received written confirmation that KSI
had terminated that certain Loan and Security Agreement (the
“2016 Line of
Credit”) by and among the KSI, AOC Key Solutions, Inc.
(“AOC”), a Delaware
corporation, and Sandy Spring Bank (“Lender”), dated
August 11, 2016, as amended; that a payoff letter had been
signed by KSI and Lender, and that payments had been made by KSI
pursuant thereto; and that Lender had no further liens on the
assets of KSI or AOC. Accordingly, the Company has not and
will not assume the 2016 Line of Credit as previously contemplated
by the Merger Agreement.
Announcement of the Mergers
On
August 29, 2017, the Company issued a press release announcing,
among other things, the closing of transactions contemplated by the
Merger Agreement and the approvals for trading on the OTCQX. A copy
of the press release is filed as Exhibit 99.1 to this Current
Report on Form 8-K and is incorporated herein by
reference.
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Item 9.01
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Financial Statements and Exhibits.
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(d)
Exhibits
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Exhibit No.
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Description
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2.1
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Second
Amended and Restated Agreement and Plan of Merger dated July 12,
2017, among Novume Solutions, Inc., KeyStone Solutions, Inc.,
Brekford Traffic Safety, Inc., KeyStone Merger Sub, LLC, and
Brekford Merger Sub, Inc. (Previously filed as Exhibit 2.1 to the
Pre-Effective Amendment No. 2 to the Registration Statement on Form
S-4 (Reg. No.: 333-216014) as filed with the SEC on July 13,
2017.)
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10.1
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Avon
Road Replacement Note, dated August 25, 2017.
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10.2
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Restated,
Amended and Supplemental Employment Agreement between Riaz
Latifullah and the Company, dated as of August 28,
2017
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10.3
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Employment
Agreement between Carl Kumpf and the Company, dated as of August
28, 2017
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14.1
14.2
14.3
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Audit
Committee Charter of the Company dated August 23, 2017
Compensation
Committee Charter of the Company dated August 23, 2017
Corporate
Governance Committee Charter of the Company dated August 23,
2017
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99.1
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Press
release dated August 29, 2017
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5
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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Date:
August 29, 2017
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By:
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/s/
Robert A. Berman
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Robert
A. Berman, Chief Executive Officer
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EXHIBIT INDEX
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Exhibit No.
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Description
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2.1
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Second
Amended and Restated Agreement and Plan of Merger dated July 12,
2017, among Novume Solutions, Inc., KeyStone Solutions, Inc.,
Brekford Traffic Safety, Inc., KeyStone Merger Sub, LLC, and
Brekford Merger Sub, Inc. (Previously filed as Exhibit 2.1 to the
Pre-Effective Amendment No. 2 to the Registration Statement on Form
S-4 (Reg. No.: 333-216014) as filed with the SEC on July 13,
2017.)
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Avon
Road Replacement Note, dated August 25, 2017.
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Restated,
Amended and Supplemental Employment Agreement between Riaz
Latifullah and the Company, dated as of August 28,
2017
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Employment
Agreement between Carl Kumpf and the Company, dated as of August
28, 2017
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Audit
Committee Charter of the Company dated August 23, 2017
Compensation
Committee Charter of the Company dated August 23, 2017
Corporate
Governance Committee Charter of the Company dated August 23,
2017
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Press
release dated August 29, 2017
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