SmartRent, Inc 8-K/A, filed Aug 31, 2021
SmartRent, Inc. (SMRT)
About this 8-K/A
SmartRent, Inc filed this 8-K/A on August 31, 2021, reporting on events of August 24, 2021.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 2.02: Financial results
- Item 3.02: Unregistered sale of equity
- Item 4.01: Change of auditor
- Item 5.02: Director or officer change, or executive pay
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 5.06: Change in shell company status
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.
Explanatory Note
Unless the context otherwise requires, “we,” “us,” “our,” “SmartRent” and the “Company” refer to SmartRent, Inc., a Delaware corporation (f/k/a Fifth Wall Acquisition Corp. I, a Delaware corporation), and its consolidated subsidiaries following the Closing (as defined below). Unless the context otherwise requires, references to “FWAA” refer to Fifth Wall Acquisition Corp. I, a Delaware corporation, prior to the Closing. All references herein to the “Board” refer to the board of directors of the Company.
Terms used in this Current Report on Form 8-K (this “Report”) but not defined herein, or for which definitions are not otherwise incorporated by reference herein, shall have the meaning given to such terms in the Proxy Statement/Prospectus (as defined below) in the section entitled “Basis of Presentation and Glossary” beginning on page i thereof, and such definitions are incorporated herein by reference.
| Item 1.01 | Entry into a Material Definitive Agreement. |
Business Combination
As disclosed under the sections entitled “Proposal No. 1—The Business Combination Proposal,” “The Business Combination” and “The Merger Agreement” beginning on pages 85, 187 and 215, respectively, of the definitive proxy statement/prospectus (the “Proxy Statement/Prospectus”) filed with the Securities and Exchange Commission (the “SEC”) by FWAA on August 6, 2021, FWAA entered into a Merger Agreement dated April 21, 2021 (as amended by Amendment No. 1 to Merger Agreement, dated July 23, 2021, the “Merger Agreement”), with Einstein Merger Corp. I., a wholly-owned subsidiary of FWAA (“Merger Sub”), and SmartRent.com, Inc., now known as SmartRent Technologies, Inc. (“Legacy SmartRent”). Pursuant to the Merger Agreement, Merger Sub was merged with and into Legacy SmartRent, with Legacy SmartRent surviving the merger as a wholly owned subsidiary of the Company (the “Business Combination” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).
On August 23, 2021, FWAA held a special meeting of stockholders (the “Special Meeting”), at which the FWAA stockholders considered and adopted, among other matters, a proposal to approve the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement and related agreements described in the Proxy Statement/Prospectus.
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, following the Special Meeting, on August 24, 2021 (the “Closing Date”), the Transactions were consummated (the “Closing”).
Item 2.01 of this Report discusses the consummation of the Transactions and the entry into agreements relating thereto and is incorporated herein by reference.
Registration Rights Agreement
On August 24, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, SmartRent, Fifth Wall Acquisition Sponsor, LLC (“Sponsor”) and certain stockholders of Legacy SmartRent entered into that certain Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”). The material terms of the Registration Rights Agreement are described in the section of the Proxy Statement/Prospectus beginning on page 233 entitled “Other Agreements—Registration Rights Agreement.” Such description is qualified in its entirety by the text of the Registration Rights Agreement, which is included as Exhibit 10.1 to this Report and is incorporated herein by reference.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
As described above, on August 23, 2021, FWAA held the Special Meeting, at which the FWAA stockholders considered and adopted, among other matters, a proposal to approve the Merger Agreement and the Transactions. On August 24, 2021, the parties consummated the Business Combination. In connection with the Closing, the Company changed its name from Fifth Wall Acquisition Corp. I to SmartRent, Inc.
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Holders of 246 shares of FWAA’s Class A common stock sold in its initial public offering (the “Initial Shares”) properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from FWAA’s initial public offering, calculated as of two business days prior to the consummation of the Business Combination. Each such share was redeemed for approximately $10.00 per share, or $2,460 in the aggregate.
As a result of the Business Combination, each share of Legacy SmartRent common stock was converted into the right to receive approximately 4.8846 shares of the Company’s Class A common stock, par value $0.0001 per share (“Common Stock”).
Additionally, the shares of FWAA Class B common stock held by Sponsor and FWAA’s independent directors automatically converted to 8,625,000 shares of Common Stock.
Pursuant to subscription agreements entered into in connection with the Merger Agreement (collectively, the “Subscription Agreements”), certain investors agreed to subscribe for an aggregate of 15,500,000 newly-issued shares of Common Stock at a purchase price of $10.00 per share for an aggregate purchase price of $155,000,000 (the “PIPE Investment”). At the Closing, the Company consummated the PIPE Investment.
After giving effect to the Transactions, the redemption of Initial Shares as described above, and the consummation of the PIPE Investment there are currently 193,716,196 shares of Common Stock issued and outstanding.
The Common Stock commenced trading on the New York Stock Exchange (the “NYSE”) under the symbol “SMRT” on August 25, 2021.
As noted above, an aggregate of $2,460 was paid from the Company’s trust account to holders that properly exercised their right to have Initial Shares redeemed, and the remaining balance immediately prior to the Closing of approximately $345.0 million remained in the trust account. The remaining amount in the trust account was used to fund the Business Combination.
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FORM 10 INFORMATION
Item 2.01(f) of Form 8-K states that if the registrant was a shell company, as the Company was immediately before the Business Combination, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. As a result of the consummation of the Business Combination, and as discussed below in Item 5.06 of this Report, the Company has ceased to be a shell company. Accordingly, the Company is providing below the information that would be included in a Form 10 if it were to file a Form 10. Please note that the information provided below relates to the combined company after the consummation of the Business Combination, unless otherwise specifically indicated or the context otherwise requires.
Cautionary Note Regarding Forward-Looking Statements
This Report includes statements that express the Company’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report (including in information that is incorporated by reference into this Report) and include statements regarding our intentions, beliefs or current expectations concerning, among other things, the Transactions and the benefits of the Transactions, including results of operations, financial condition, liquidity, prospects, growth, strategies and the markets in which the Company operates. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting the Company. Factors that may impact such forward-looking statements include:
| • | the ability to maintain the listing of the shares of Common Stock on the NYSE; |
| • | risks related to disruption of management’s time from ongoing business operations due to the Transactions; |
| • | litigation, complaints, product liability claims and/or adverse publicity; |
| • | privacy and data protection laws, privacy or data breaches, or the loss of data; |
| • | the impact of changes in customer spending patterns, customer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability; |
| • | the impact of the COVID-19 pandemic on the financial condition and results of operations of the Company; |
| • | any defects in new products or enhancements to existing products; and |
| • | other risks and uncertainties described in the Proxy Statement/Prospectus, including those under the section entitled “Risk Factors.” |
The forward-looking statements contained in this Report are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described or incorporated by reference under the heading “Risk Factors” below. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company will not and does not undertake any obligation to
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update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Business
The business of the Company is described in the Proxy Statement/Prospectus in the section entitled “Information About SmartRent” beginning on page 135 thereof and that information is incorporated herein by reference.
Risk Factors
The risks associated with the Company’s business are described in the Proxy Statement/Prospectus in the section entitled “Risk Factors” beginning on page 28 thereof and are incorporated herein by reference. A summary of the risks associated with the Company’s business are also described on pages 14-16 of the Proxy Statement/Prospectus under the heading “Summary Risk Factors” and are incorporated herein by reference.
Unaudited Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2021 of Legacy SmartRent set forth in Exhibit 99.1 hereto have been prepared in accordance with U.S. generally accepted accounting principles and pursuant to the regulations of the SEC. The unaudited financial information reflects, in the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of Legacy SmartRent’s financial position, results of operations and cash flows for the period indicated. The results reported for the interim period presented are not necessarily indicative of results that may be expected for the full year.
These unaudited condensed consolidated financial statements should be read in conjunction with the historical unaudited consolidated financial statements of Legacy SmartRent as of and for the three months ended March 31, 2021 and the historical audited consolidated financial statements of Legacy SmartRent for the years ended December 31, 2020 and 2019 and the related notes included in the Proxy Statement/Prospectus, the section entitled “SmartRent’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 146 of the Proxy Statement/Prospectus and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein.
Unaudited Pro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined financial information of the Company as of and for the three-month period ended March 31, 2021 and the audited pro forma condensed combined financial information of the Company as of and for the year ended December 31, 2020 is included in the Proxy Statement/Prospectus in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 65 of the Proxy Statement/Prospectus and is incorporated herein by reference.
The unaudited pro forma condensed combined financial information of the Company as of and for the six months ended June 30, 2021 is set forth in Exhibit 99.2 hereto and is incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis of the financial condition and results of operation of Legacy SmartRent as of and for the three-month period ended March 31, 2021 is included in the Proxy Statement/Prospectus in the section titled “SmartRent’s Management’s Discussion and Analysis of
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Financial Condition and Results of Operations” beginning on page 146 of the Proxy Statement/Prospectus and the Management’s discussion and analysis of the financial condition and results of operations of Legacy SmartRent as of and for the three and six months ended June 30, 2021 contained in Exhibit 99.3 hereto, both of which are incorporated herein by reference.
The discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections entitled “Financial Information” and the financial statements and related notes included as Exhibit 99.1 to this Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections entitled “Risk Factors” and “Forward-Looking Statements” included elsewhere in this Report. Additionally, Legacy SmartRent’s historical results are not necessarily indicative of the results that may be expected for the Company for any period in the future.
Properties
The properties of the Company are described in the Proxy Statement/Prospectus in the section entitled “Information About SmartRent” beginning on page 135 thereof and that information is incorporated herein by reference. Effective as of October 1, 2021, the Company is expected to move its corporate headquarters to 8665 E. Hartford Drive, Suite 120, Scottsdale, AZ 85255 where it has leased approximately 40,893 square feet of office space.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to us regarding the beneficial ownership of our Common Stock immediately following consummation of the Transactions by:
| • | each person who is the beneficial owner of more than 5% of the outstanding shares of our Common Stock; |
| • | each of our named executive officers and directors; and |
| • | all of our executive officers and directors as a group. |
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 that are currently exercisable or exercisable within 60 days. Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed below has sole voting and investment power with respect to such shares. Unless otherwise noted, the address of each beneficial owner is c/o SmartRent, Inc., 18835 N Thompson Peak Parkway, Suite 300, Scottsdale, AZ 85255.
The beneficial ownership of our Common Stock is based on 193,716,196 shares of Common Stock issued and outstanding immediately following consummation of the Transactions, after giving effect to the redemption of Initial Shares as described above and the consummation of the PIPE Investment.
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Beneficial Ownership Table
| Name of Beneficial Owner | Number of Shares | Percent Owned |
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| 5% Holders |
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| Entities Affiliated with RET Ventures(1) |
43,673,430 | 22.5 | % | |||||
| Entities affiliated with Bain Capital Venture Investors, LLC(2) |
21,972,649 | 11.3 | % | |||||
| Lucas Haldeman(3) |
13,091,820 | 6.7 | % | |||||
| Entities affiliated with Spark Capital Partners, LLC(4) |
11,715,137 | 6.0 | % | |||||
| LEN FW Investor, LLC(5) |
10,872,108 | 5.6 | % | |||||
| Fifth Wall Acquisition Sponsor, LLC(6) |
9,528,500 | 4.92 | % | |||||
| Fifth Wall Ventures II, L.P.(6) |
4,686,054 | 2.42 | % | |||||
| Directors and Named Executive Officers |
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| Lucas Haldeman(3) |
13,091,820 | 6.7 | % | |||||
| Robert Best(7) |
4,596,222 | 2.4 | % | |||||
| Frederick Tuomi(8) |
543,276 | * | ||||||
| Alana Beard |
36,000 | * | ||||||
| John Dorman |
— | — | ||||||
| Bruce Strohm |
— | — | ||||||
| Ann Sperling |
— | — | ||||||
| Demetrios Barnes(9) |
1,421,613 | * | ||||||
| Isaiah DeRose-Wilson(10) |
1,421,613 | * | ||||||
| All directors and executive officers as a group (12 individuals)(11) |
22,711,023 | 11.3 | % | |||||
| * | Less than one percent. |
| (1) | Entities affiliated with RET Ventures (“RET”) beneficially own 43,673,430 shares of the Company’s Class A common stock which includes: (i) 526,135 shares owned by Real Estate Technology Ventures Associates, L.P. (“RET Associates”); (ii) 30,129,921 shares owned by Real Estate Technology Ventures, L.P. (“RET Fund I”); (iii) 468,604 shares owned by Real Estate Technology Ventures II, L.P. (“RET Fund II”); (iv) 6,925,506 shares owned by Real Estate Technology Ventures-A, L.P. (“RET Fund I-A”); and (v) 5,623,264 shares owned by RET Ventures SPV I, L.P. (“RET SPV I”). RETV GP, LLC (“RET GP I”) is the general partner of each of RET Associates, RET Fund I, RET Fund I-A (collectively, “RETV I”) and RET SPV I and may be deemed to have sole investment and voting power over the shares held by each of RETV I and RET SPV I. John Helm is the sole Managing Director of RET GP I and may be deemed to have voting and dispositive power over the shares held by each of RETV I and RET SPV I. RETV GP II, LLC (“RET GP II”) is the general partner of RET Fund II and may be deemed to have sole investment and voting power over the shares held by RET Fund II. John Helm and Christopher Yip are the Managing Directors of RET GP II and may be deemed to have shared voting and dispositive power over the shares held by RET Fund II. The address for these entities is c/o RET Ventures, 136 Heber Ave, Suite 304, Park City, UT 84060. |
| (2) | Entities affiliated with Bain Capital Venture Investors, LLC (“BCVI”) beneficially own 21,972,649 shares of the Company’s Class A common stock, which includes: (i) 19,132,251 shares owned by Bain Capital Venture Fund 2019, L.P. (“BCV Fund 2019” ); (ii) 1,946,413 shares owned by BCIP Venture Associates II, L.P.(“BCIP Venture II”); (iii) 158,127 shares owned by BCIP Venture Associates II-B, L.P. (“BCIP Venture |
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| II-B”); and (iv) 735,858 shares owned by BCV 2019-MD Primary, L.P. (“BCV MD Primary,” and together with BCV Fund 2019, BCIP Venture II, and BCIP Venture II-B, the “Bain Capital Venture Entities”). BCVI, the Executive Committee of which consists of Enrique Salem and Ajay Agarwal, is the ultimate general partner of each of BCV Fund 2019 and BCV MD Primary and governs the investment strategy and decision-making process with respect to investments held by BCIP Venture II and BCIP Venture II-B. As a result, each of BCVI and Messrs. Salem and Agarwal may be deemed to share voting and dispositive power with respect to the securities held by the Bain Capital Venture Entities. The address for the Bain Capital Venture Entities is c/o Bain Capital Venture Investors, LLC, 200 Clarendon Street, Boston, MA 02116. |
| (3) | Lucas Haldeman, the Chief Executive Officer of the Company and director beneficially owns 10,854,029 shares of the Company’s Class A common stock and 2,237,791 shares of the Company’s Class A common stock subject to stock options with an exercise price of $0.47 per share that he has the right to acquire within 60 days of August 24, 2021. |
| (4) | Entities affiliated with Spark Capital Partners, LLC beneficially own 11,715,137 shares of the Company’s Class A common stock, which includes: (i) 130,036 shares owned by Spark Capital Growth Founders’ Fund II, L.P. (“SCGFF II”); and (ii) 11,585,101 shares owned by Spark Capital Growth Fund II, L.P. (“SCGF II” and together with SCGFF II, the “Spark Growth II Funds”). Spark Growth Management Partners II, LLC (“Spark Growth II GP”) is the sole general partner of each of the Spark Growth II Funds and may be deemed to have sole voting and dispositive power over the shares held by each of the Spark Growth II Funds. Any action by the Spark Growth II Funds with respect to shares of the Company’s Class A common stock, including voting and dispositive decisions, requires at least a majority vote of the managing members of Spark Growth II GP, who are Jeremy Philips, Santo Politi, Bijan Sabet and Paul Conway. Under the so-called “rule of three,” because voting and dispositive decisions are made by a majority of the managing members, no individual managing member of Spark Growth II GP has voting or dispositive power over such shares and no individual managing member is deemed to be a beneficial owner of the Spark Growth II Funds’ shares of the Company’s Class A common stock. The address for each of the Spark Growth II Funds and Spark Growth II GP is c/o Spark Capital Partners, LLC, 137 Newbury Street, 8th Floor, Boston, MA 02116. |
| (5) | Each of LEN X, LLC and Lennar Corporation have shared voting and dispositive power over the shares held by LEN FW Investor, LLC. The address for LEN FW Investor, LLC is 700 Northwest 107th Avenue, Miami, Florida 33172. |
| (6) | Fifth Wall Acquisition Sponsor, LLC, which we refer to as the Sponsor, holds 9,528,500 shares of the Company’s Class A common stock (the “Sponsor Shares”). The managers of the Sponsor are Brendan Wallace and Andriy Mykhaylovskyy. Fifth Wall Fund II, L.P. (“Fifth Wall Fund II”) holds 4,686,054 shares of the Company’s Class A common stock (the “Fifth Wall Fund II Shares”). The general partner of Fifth Wall Fund II is Fifth Wall Ventures GP II, L.P. (“Fifth Wall Fund II GP”). The general partner of Fifth Wall Fund II GP is Fifth Wall Ventures UGP II, LLC (“Fifth Wall Fund II UGP”). The sole manager of Fifth Wall Fund II UGP is Fifth Wall Ventures Management, L.P. (“Fifth Wall Management”). The general partner of Fifth Wall Management is Fifth Wall Ventures Management GP, LLC. (“Fifth Wall Management GP” and, together with Fifth Wall Fund II, Fifth Wall Fund II GP, Fifth Wall Fund II UGP and Fifth Wall Management, the “Fifth Wall Fund II Entities”). Investment and voting decisions with respect to interests held by Fifth Wall Management GP are made by its members, Brendan Wallace, Andriy Mykhaylovskyy and Brad Greiwe (the “Fifth Wall Members”). Accordingly, (i) each of the Fifth Wall Fund II Entities may be deemed to share beneficial ownership of the Fifth Wall Fund II Shares held directly by Fifth Wall Fund II and (ii) the Sponsor, Mr. Wallace and Mr. Mykhaylovskyy may be deemed to share beneficial ownership of the Sponsor Shares held directly by the Sponsor. Each of the Fund II Entities, the Sponsor and the Fifth Wall Members expressly disclaims beneficial ownership of any such securities except to the extent of their pecuniary interest therein. Without limiting the foregoing, (i) Fifth Wall Fund II expressly disclaims beneficial ownership of any Sponsor Shares held by the Sponsor, (ii) the Sponsor expressly disclaims beneficial ownership of any Fifth Wall Fund II Shares held by Fifth Wall Fund II and (iii) each of the Fifth Wall Members expressly disclaims beneficial ownership of the Fifth Wall Fund II Shares held by the Fifth Wall Fund II. Sponsor, Mr. Wallace, Mr. Mykhaylovskyy and the Fifth Wall Fund II Entities may be deemed to constitute a group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provided that each of them expressly disclaims membership in a group. The address of Sponsor, Mr. Wallace, Mr. Mykhaylovskyy and the Fifth Wall Fund II Entities is 6060 Center Drive, 10th Floor, Los Angeles, California 90045. |
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| (7) | Beneficial ownership consists of 4,596,222 shares of the Company’s Class A common stock to be held by the Best Family Trust, established October 2, 2001 for the benefit of Robert Best and of which Robert Best is a trustee. |
| (8) | Beneficial ownership consists of (i) 150,685 shares of the Company’s Class A common stock subject to stock options with an exercise price of $0.47 that Frederick Tuomi has the right to acquire within 60 days of August 24, 2021 and (ii) 392,591 shares of the Company’s Class A common stock to be owned by Mr. Tuomi through FCT Fund, LTD. |
| (9) | Beneficial ownership consists of 1,421,613 shares the Company’s Class A common stock subject to stock options with an exercise price of $0.47 per share that Demetrios Barnes has the right to acquire within 60 days of August 24, 2021. |
| (10) | Beneficial ownership consists of 1,421,613 shares of the Company’s Class A common stock subject to stock options with an exercise price of $0.47 per share that Isaiah DeRose-Wilson has the right to acquire within 60 days of August 24, 2021. |
| (11) | Beneficial ownership consists of 6,832,181 shares of the Company’s Class A common stock subject to stock options that the directors and executive officers have the right to acquire in the aggregate within 60 days of August 24, 2021. |
Directors and Executive Officers
The Company’s directors and executive officers as of the Closing are described in the Proxy Statement/Prospectus in the section entitled “Management of the Post-Combination Company Following the Business Combination” beginning on page 173 thereof and that information is incorporated herein by reference.
Directors
Pursuant to the approval of FWAA stockholders at the Special Meeting, the following persons constituted the Company’s Board effective upon the Closing: Lucas Haldeman, Alana Beard, Robert Best, John Dorman, Bruce Strohm and Frederick Tuomi. Brendan Wallace, Andriy Mykhaylovskyy, Victor Coleman, Angela Huang and Wisdom Lu resigned as directors of the Company effective as of the Closing. In connection with and immediately after the Closing, the size of the Board was increased to seven directors and the Board appointed Ann Sperling to fill the vacancy and to serve as a director until the next annual meeting following the expiration of her initial term (as set forth below) or until her successors have been duly elected and qualified, or until her earlier death, resignation, retirement or removal.
Additionally, Mr. Tuomi and Ms. Sperling were appointed to serve as Class I directors, with terms expiring at the Company’s first annual meeting of stockholders following the Closing; Messrs. Best and Strohm were appointed to serve as Class II directors, with terms expiring at the Company’s second annual meeting of stockholders following the Closing; and Messrs. Haldeman and Dorman and Ms. Beard were appointed to serve as Class III directors, with terms expiring at the Company’s third annual meeting of stockholders following the Closing.
Biographical information for each of Messrs. Best, Dorman, Haldeman, Strohm and Tuomi and Ms. Beard is set forth in the Proxy Statement/Prospectus in the section entitled “Management of the Post-Combination Company Following the Business Combination” beginning on page 173, which is incorporated herein by reference. Biographical information for Ms. Sperling is set forth below:
Ann Sperling. Ann Sperling has over 39 years of real estate and management experience, including roles in commercial real estate investment and development and leadership roles in public real estate companies. From May 2018 until its spinout of Apartment Income REIT (NYSE: AIRC), she served as a director of Apartment Investment and Management Company (NYSE: AIV). She is now a Director of AIRC, and currently serves as the
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Chairman of AIRC’s Compensation and Human Resources Committee and as a member of AIRC’s Audit and Nominating and Corporate Governance Committees. Ms. Sperling has also served as Senior Director of Trammell Crow Company, the development subsidiary of the public company, CBRE, since October 2013, focusing on the capitalization and execution of new commercial developments. From October 2009 through May 2013, she served in two roles at Jones Lang LaSalle, the public real estate investment and services firm, first as Chief Operating Officer, Americas, and then as President, Markets West. As COO, she oversaw operations, finance, marketing, research, legal and engineering and served on the governance focused Global Operating Committee. From October 2007 through June 2009, Ms. Sperling was Managing Director of Catellus, then a mixed-use development and investment subsidiary of the public REIT, ProLogis, where she was responsible for operations, finance and marketing, prior to this subsidiary’s preparation for sale. Previously, between 1982 and 2006, Ms. Sperling held a variety of roles at the public development and services firm, Trammell Crow Company, the last of which was as Senior Managing Director and Area Director, responsible for all facets of operations, finance, transactions and marketing for the Rocky Mountain Region, prior to the firm’s merger with CBRE in 2006. Ms. Sperling serves on the Advisory Board of Cadence Capital and the Gates Center for Regenerative Medicine. Ms. Sperling holds a Bachelors of Science in Biology and Psychology from Tufts University, and a Master of Business Administration from the Harvard School of Business. We believe that Ms. Sperling’s extensive real estate investment and development, operations, marketing, and finance experience make her well qualified to serve as director of the Company.
Ms. Sperling will receive the standard non-employee director compensation for serving on the Board and committees of the Board as described under “Director Compensation” below. The Company intends to enter into an indemnification agreement with Ms. Sperling in connection with her appointment to the Board, which is in substantially the same form as that entered into with the other directors of the Company and is further described under “Indemnification of Directors and Officers.” There are no arrangements or understandings between Ms. Sperling and any other persons pursuant to which Ms. Sperling was appointed a director of the Company. There are no transactions in which Ms. Sperling has an interest requiring disclosure under Item 404(a) of Regulation S-K.
Independence of Directors
NYSE listing standards require that a majority of our board of directors be independent. Our Board has determined that Ms. Beard and Ms. Sperling, as well as Messrs. Best, Dorman, Strohm and Tuomi, are “independent directors” as defined in the NYSE listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present. Our independent directors have selected Mr. Tuomi to serve as the lead independent director.
Committees of the Board of Directors
Effective as of the Closing, the standing committees of the Company’s Board consist of an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”) and a nominating and corporate governance committee (the “Nominating Committee”). Each of the committees report to the Board.
Effective as of the Closing, the Board appointed Messrs. Best and Tuomi and Ms. Beard to serve on the Compensation Committee, with Mr. Best as chair. The Board appointed Messrs. Dorman and Strohm and Ms. Sperling to serve on the Audit Committee, with Mr. Dorman as chair. The Board appointed Messrs. Strohm and Dorman and Ms. Sperling to serve on the Nominating Committee, with Mr. Strohm as chair.
Executive Officers
Effective as of the Closing, Mr. Wallace resigned as Chairman and Chief Executive Officer of the Company and Mr. Mykhaylovskyy resigned as Chief Financial Officer of the Company. Effective as of the Closing, the Board appointed Mr. Haldeman to serve as Chief Executive Officer, Mr. Demetrios Barnes to serve as Chief Operating Officer, Mr. Isaiah DeRose-Wilson to serve as Chief Technology Officer, Mr. CJ Edmonds to serve
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as Chief Revenue Officer, Mr. Mitch Karren to serve as Chief Product Officer and Mr. Jonathan Wolter to serve as Chief Financial Officer. Biographical information for these individuals is set forth in the Proxy Statement/Prospectus in the section titled “Management of the Post-Combination Company Following the Business Combination” beginning on page 173, which is incorporated herein by reference.
Executive Compensation
The executive compensation of the Company’s named executive officers and directors is described in the Proxy Statement/Prospectus in the section entitled “Executive Compensation” beginning on page 181 thereof and that information is incorporated herein by reference.
Effective as of the Closing, with respect to Messrs. Haldeman, Barnes and DeRose-Wilson, the Board increased (i) the base annual cash compensations to $750,000, $300,000 and $325,000, respectively, (ii) the annual target bonuses to 125%, 50% and 60% of their base annual cash compensations, respectively, contingent upon meeting certain targets and (iii) the annual equity awards of restricted stock units with values of $2.5 million, $0.3 million and $0.4 million, respectively, one-fourth of each such award will vest on the 12-month anniversary thereof and the remaining will vest in equal monthly installments until vested in full. The foregoing cash bonuses and awards will be pro-rated for the fiscal 2021. In addition, in connection with the successful consummation of the Business Combination, Mr. Haldeman received a one-time grant of restricted stock units at Closing with a value of $1.0 million, one-third of which will vest on the 12-month anniversary thereof each year over three years.
Director Compensation
In connection with the consummation of the Business Combination, the Board approved the compensation for the Company’s non-employee directors who are determined not to be affiliated with the Company. Non-employee directors are eligible to receive annual cash compensation of $80,000 paid in four quarterly installments, subject to continued service (and pro-rated if services are not provided for the full year). In addition, non-employee directors will receive annual grants of restricted stock units with a value of $150,000 for each grant, which awards will generally be made at the time of the annual shareholder meeting and vest on the first to occur between the 12-month anniversary thereof and the next annual shareholder meeting. In connection with the Business Combination, non-employee directors will receive one-time grants of restricted stock unit awards with a value of $250,000, one-third of which will vest on the 12-month anniversary thereof each year over three years. The annual grants will be made for new directors, following initial appointment to the Board, provided that new director awards may be prorated if granted off-cycle. In addition to the foregoing, non-employee directors will be entitled to receive additional annual cash compensation in connection with their committee service, including (i) for the Audit Committee, $20,000 per year for the chair and $10,000 for each member; (ii) for the Compensation Committee, $15,000 per year for the chair and $7,500 for each member; and (iii) for the Nominating Committee, $10,000 for the chair and $5,000 for each member. Our lead independent director will be eligible to receive an annual cash compensation of $20,000 paid in four quarterly installments, subject to continued service (and pro-rated if services are not provided for the full year).
Compensation Committee Interlocks and Insider Participation
None of our executive officers serve as a member of a compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our compensation committee.
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Certain Relationships and Related Transactions
Certain Relationships and Related Person Transactions
Certain relationships and related person transactions are described in the Proxy Statement/Prospectus in the section entitled “Certain Relationships and Related Person Transactions” beginning on page 274 thereof and are incorporated herein by reference.
Risk Oversight
Our risk management oversight is described in the Proxy Statement/Prospectus in the section entitled “Management of the Post-Combination Company Following the Business Combination—Risk Oversight” beginning on page 179 thereof and that information is incorporated herein by reference.
Legal Proceedings
Reference is made to the disclosure regarding legal proceedings in the sections of the Proxy Statement/Prospectus entitled “Information About FWAA—Legal Proceedings” beginning on page 114 and “Information About SmartRent—Legal Proceedings” beginning on page 144 and the Current Report on Form 8-K filed with the SEC on August 17, 2021, both of which are incorporated herein by reference.
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Market Price and Dividend Information
The market price of and dividends on FWAA’s common equity and related stockholder matters is described in the Proxy Statement/Prospectus in the Section entitled “Market Price and Dividend Information” beginning on page 25 thereof and that information is incorporated herein by reference.
The Common Stock commenced trading on the NYSE under the symbol “SMRT” on August 25, 2021. FWAA’s Class A common stock ceased trading on the Nasdaq Stock Market LLC upon the close of trading on August 24, 2021.
Holders of Record
As of the Closing and following the completion of the Transactions, and after giving effect to the redemption of Initial Shares as described above and the consummation of the PIPE Investment, the Company had 193,716,196 shares of Common Stock outstanding held of record by 75 holders and no shares of preferred stock outstanding. Such amounts do not include DTC participants or beneficial owners holding shares through nominee names.
Securities Authorized for Issuance Under Equity Compensation Plans
Reference is made to the disclosure described in the Proxy Statement/Prospectus in the sections entitled “Proposal No. 6—The Equity Incentive Plan Proposal” beginning on page 95 thereof and “Proposal No. 7—The Employee Stock Purchase Plan Proposal” beginning on page 105 thereof, which are incorporated herein by reference. As described below, the SmartRent, Inc. 2021 Equity Incentive Plan (the “Equity Incentive Plan”), the SmartRent, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”) and the material terms thereunder, including the authorization of the initial share reserve thereunder, were approved by FWAA’s stockholders at the Special Meeting.
Recent Sales of Unregistered Securities
Reference is made to the disclosure set forth under Item 3.02 of this Report relating to the issuance of Common Stock in connection with the Transactions, which is incorporated herein by reference.
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Description of Registrant’s Securities to be Registered
The Company’s securities are described in the Proxy Statement/Prospectus in the section entitled “Description of Capital Stock of the Post-Combination Company” beginning on page 270 thereof and that information is incorporated herein by reference. As described below, the Company’s third amended and restated certificate of incorporation was approved by FWAA’s stockholders at the Special Meeting and became effective as of the Closing.
Indemnification of Directors and Officers
The indemnification of our directors and officers is described in the Proxy Statement/Prospectus in the section entitled “Certain Relationships and Related Party Transactions—Director and Officer Indemnification” beginning on page 278 thereof and that information is incorporated herein by reference.
| Item 2.02 | Results of Operations and Financial Condition. |
On August 30, 2021, the Company issued a press release reporting second quarter results for fiscal 2021. A copy of the press release is furnished as Exhibit 99.4 to this Report and is incorporated into this Item 2.02 by reference.
The information in this Item 2.02, including Exhibit 99.4, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth in such filing.
| Item 3.02. | Unregistered Sales of Equity Securities. |
At the Closing, the Company consummated the PIPE Investment. The disclosure under Item 2.01 of this Report relating to the PIPE Investment is incorporated into this Item 3.02 by reference.
The Company issued the foregoing securities under Section 4(a)(2) of the Securities Act, and/or Rule 506 of Regulation D promulgated under the Securities Act, as a transaction not requiring registration under Section 5 of the Securities Act. The parties receiving the securities represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution, and appropriate restrictive legends were affixed to the certificates representing the securities (or reflected in restricted book entry with the Company’s transfer agent). The parties also had adequate access, through business or other relationships, to information about the Company.
| Item 3.03. | Material Modification to Rights of Security Holders. |
The information set forth in Item 5.03 to this Report is incorporated herein by reference.
| Item 4.01 | Changes in Registrant’s Certifying Accountant. |
(a) Dismissal of independent registered public accounting firm.
On August 24, 2021, the Audit Committee dismissed WithumSmith+Brown, PC, FWAA’s independent registered public accounting firm prior to the Business Combination, as the Company’ independent registered public accounting firm.
The report of WithumSmith+Brown, PC on the financial statements of FWAA as of December 31, 2020, and for the period from November 23, 2020 (inception) through December 31, 2020 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainties, audit scope or accounting principles.
During the period from November 23, 2020 (inception) through December 31, 2020 and the subsequent interim period through June 30, 2021, there were no disagreements between FWAA and WithumSmith+Brown, PC on any matter of accounting principles or practices, financial disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of WithumSmith+Brown, PC, would have caused it to make reference to the subject matter of the disagreements in its reports on FWAA’s financial statements for such period.
During the period from November 23, 2020 (inception) through December 31, 2020 and the subsequent interim period through June 30, 2021, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act).
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The Company has provided WithumSmith+Brown, PC with a copy of the foregoing disclosures and has requested that WithumSmith+Brown, PC furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the Company set forth above. A copy of WithumSmith+Brown, PC’s letter, dated August 27, 2021, is filed as Exhibit 16.1 to this Report.
(b) Disclosures regarding the new independent registered public accounting firm.
On August 24, 2021, the Audit Committee approved the engagement of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements as of and for the year ending December 31, 2021 subject to Deloitte’s completion of its standard client acceptance procedures. Deloitte served as the independent registered public accounting firm of Legacy SmartRent. During the years ended December 31, 2020 and December 31, 2019 and the subsequent interim period through June 30, 2021, the Company did not consult with Deloitte with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to us by Deloitte that was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any other matter that was the subject of a disagreement or a “reportable event.”
| Item 5.01. | Changes in Control of the Registrant. |
The information set forth above under Item 1.01 and Item 2.01 of this Report is incorporated herein by reference.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
The information set forth above in the sections entitled “Directors and Officers,” “Executive Compensation,” “Certain Relationships and Related Transactions” and “Indemnification of Directors and Officers” in Item 2.01 to this Report is incorporated herein by reference.
As previously disclosed, at the Special Meeting, the stockholders of FWAA considered and approved the Equity Incentive Plan and ESPP which became effective immediately upon the Closing. Descriptions of the Equity Incentive Plan and the ESPP are included in the Proxy Statement/Prospectus in the sections entitled “Proposal No. 6—The Equity Incentive Plan Proposal” beginning on page 95 thereof and “Proposal No. 7—The Employee Stock Purchase Plan Proposal” beginning on page 105 thereof, which are incorporated herein by reference.
The foregoing description of the Equity Incentive Plan and ESPP is qualified in its entirety by the full text of the Equity Incentive Plan and the ESPP and the related forms of award agreements under the Equity Incentive Plan, which are attached hereto as Exhibits 10.9 and 10.10, respectively, and incorporated herein by reference.
| Item 5.03. | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
On August 24, 2021, in connection with the consummation of the Transactions, the Company amended and restated its second amended and restated certificate of incorporation, effective as of the Closing (the “A&R Charter”), and amended and restated its bylaws (as amended, the “A&R Bylaws”) effective as of the Closing.
Copies of the A&R Charter and the A&R Bylaws are attached as Exhibit 3.1 and Exhibit 3.2 to this Report, respectively, and are incorporated herein by reference.
The material terms of each of the A&R Charter and the A&R Bylaws and the general effect upon the rights of holders of the Company’s capital stock are included in the Proxy Statement/Prospectus under the sections entitled “Proposal No. 2—The Charter Proposal,” “Proposal No. 3—The
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Governance Proposal,” “Comparison of Stockholders’ Rights” and “Description of Capital Stock of the Post-Combination Company” beginning on pages 86, 89, 243, and 270 of the Proxy Statement/Prospectus, respectively, which are incorporated herein by reference.
| Item 5.06 | Change in Shell Company Status. |
As a result of the Business Combination, the Company ceased being a shell company. Reference is made to the disclosure in the Proxy Statement/Prospectus in the section entitled “Proposal No. 1—The Business Combination Proposal” beginning on page 85 thereof, which is incorporated herein by reference. Further reference is made to the information contained in Item 2.01 of this Report.
| Item 9.01. | Financial Statement and Exhibits. |
(a) Financial Statements of Businesses Acquired.
The audited consolidated financial statements of Legacy SmartRent as of and for the years ended December 31, 2020 and 2019 and the unaudited consolidated financial statements of Legacy SmartRent as of and for the three months ended March 31, 2021 and the related notes are included in the Proxy Statement/Prospectus beginning on page F-30 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
The unaudited condensed consolidated financial statements of Legacy SmartRent as of and for the three and six months ended June 30, 2021 are set forth in Exhibit 99.1 hereto and are incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma condensed combined financial information of the Company as of and for the year ended December 31, 2020 and as of and for the three months ended March 31, 2021 is included in the Proxy Statement/Prospectus in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 65 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
The unaudited pro forma condensed combined financial information of the Company for the six months ended June 30, 2021 are set forth in Exhibit 99.2 hereto and are incorporated herein by reference.
(d) Exhibits.
Exhibit Index
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* Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
† Indicates a management contract or compensatory plan, contract or arrangement.
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SIGNATURE
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.
Dated: August 31, 2021
| SMARTRENT, INC. | ||
| By: | /s/ Lucas Haldeman | |
| Name: | Lucas Haldeman | |
| Title: | Chief Executive Officer | |
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Exhibit 3.1
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FIFTH WALL ACQUISITION CORP. I
Fifth Wall Acquisition Corp. I (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify as follows:
1. The name of the Corporation is Fifth Wall Acquisition Corp. I. The Corporation was incorporated under the name Fifth Wall Acquisition Corp. I by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on November 23, 2020 (the “Original Certificate”).
2. An Amended and Restated Certificate of Incorporation, which amended and restated the Original Certificate in its entirety, was filed with the Secretary of State of the State of Delaware on December 18, 2020 (as amended by the Certificate of Amendment to the Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on February 4, 2021, the “Restated Certificate”).
3. On February 4, 2021, in connection with the Corporation’s initial public offering, the Corporation adopted and filed a Second Amended and Restated Certificate of Incorporation which amended and restated the Restated Certificate in its entirety, was adopted and filed with the Secretary of State of the State of Delaware (the “Existing Certificate”)
4. This Third Amended and Restated Certificate of Incorporation (the “Third Amended and Restated Certificate”), which amends and restates the Existing Certificate in its entirety, has been approved by the Board of Directors of the Corporation (the “Board of Directors”) in accordance with Sections 242 and 245 of the DGCL and has been adopted by the stockholders of the Corporation at a meeting of the stockholders of the Corporation in accordance with the provisions of Section 211 of the DGCL.
5. The text of the Existing Certificate is hereby amended and restated by this Third Amended and Restated Certificate to read in its entirety as set forth in Exhibit A attached hereto.
6. This Third Amended and Restated Certificate shall become effective on the date of filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, Fifth Wall Acquisition Corp. I has caused this Third Amended and Restated Certificate to be signed by a duly authorized officer of the Corporation, on August 24, 2021.
| FIFTH WALL ACQUISITION CORP. I | ||
| By: | /s/ Andriy Mykhayloskyy | |
| Name: |
Andriy Mykhayloskyy | |
| Title: |
Chief Financial Officer | |
EXHIBIT A
ARTICLE I
NAME
The name of the corporation is SmartRent, Inc. (the “Corporation”).
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the Corporation’s registered office in the State of Delaware is 8 The Green, Ste. R, in the City of Dover, County of Kent, 19901. The name of its registered agent at such address is Resident Agents Inc.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”) as it now exists or may hereafter be amended and supplemented.
ARTICLE IV
CAPITAL STOCK
The Corporation is authorized to issue two classes of stock to be designated, respectively, “Class A Common Stock” and “Preferred Stock.” The total number of shares of capital stock which the Corporation shall have authority to issue is 550,000,000. The total number of shares of Class A Common Stock that the Corporation is authorized to issue is 500,000,000, having a par value of $0.0001 per share, and the total number of shares of Preferred Stock that the Corporation is authorized to issue is 50,000,000, having a par value of $0.0001 per share.
The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any class or classes, with such rights, warrants and options to be evidenced by or in instrument(s) approved by the Board of Directors of the Corporation (the “Board of Directors”). The Board of Directors is empowered to set the exercise price, duration, times for exercise and other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares of capital stock issuable upon exercise thereof may not be less than the par value thereof.
The designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation are as follows:
| A. | CLASS A COMMON STOCK. |
1. General. The voting, dividend, liquidation, and other rights and powers of the Class A Common Stock are subject to and qualified by the rights, powers and preferences of any series of Preferred Stock as may be designated by the Board of Directors and outstanding from time to time.
2. Voting.
a. Except as otherwise provided herein (including any Certificate of Designation) or otherwise required by law, the holders of the shares of Class A Common Stock shall exclusively possess all voting power with respect to the Corporation.
b. Except as otherwise provided herein or expressly required by law, each holder of Class A Common Stock, as such, shall be entitled to vote on each matter submitted to a vote of stockholders and shall be entitled to one (1) vote for each share of Class A Common Stock held of record by such holder as of the record date for determining stockholders entitled to vote on such matter.
c. Except as otherwise provided herein (including any Certificate of Designation) or otherwise required by law, at any annual or special meeting of the stockholders of the Corporation, holders of the Class A Common Stock shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders.
d. Except as otherwise required by law, holders of Class A Common Stock, as such, shall not be entitled to vote on any amendment to this Third Amended and Restated Certificate (including any Certificate of Designation (as defined below)) that relates solely to the rights, powers, preferences (or the qualifications, limitations or restrictions thereof) or other terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Third Amended and Restated Certificate (including any Certificate of Designation) or pursuant to the DGCL.
Subject to the rights of any holders of any outstanding series of Preferred Stock, the number of authorized shares of Class A Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.
3. Dividends. Subject to applicable law and the rights and preferences of any holders of any outstanding series of Preferred Stock, the holders of Class A Common Stock, as such, shall be entitled to the payment of dividends on the Class A Common Stock when, as and if declared by the Board of Directors in accordance with applicable law.
4. Liquidation. Subject to the rights and preferences of any holders of any shares of any outstanding series of Preferred Stock, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the funds and assets of the Corporation that may be legally distributed to the Corporation’s stockholders shall be distributed among the holders of the then outstanding Class A Common Stock pro rata in accordance with the number of shares of Class A Common Stock held by each such holder.
| B. | PREFERRED STOCK. |
Shares of Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the creation and issuance of such series adopted by the Board of Directors as hereinafter provided.
Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designation relating thereto in accordance with the DGCL (a “Certificate of Designation”), to determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, and to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series as shall be stated and expressed in such resolutions, all to the fullest extent now or hereafter permitted by the DGCL. Without limiting the generality of the foregoing, the resolution or resolutions providing for the creation and issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of Preferred Stock to the extent permitted by law and this Third Amended and Restated Certificate (including any Certificate of Designation). Except as otherwise required by law, holders of any series of Preferred Stock shall be entitled only to such voting rights, if any, as shall expressly be granted thereto by this Third Amended and Restated Certificate (including any Certificate of Designation).
The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.
ARTICLE V
BOARD OF DIRECTORS
For the management of the business and for the conduct of the affairs of the Corporation it is further provided that:
A. Subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect directors, the directors of the Corporation shall be classified with respect to the time for which they severally hold office into three classes, as nearly equal in number as possible and designated as Class I, Class II and Class III. The initial Class I directors shall serve for a term expiring at the first annual meeting of the stockholders following the date of this Third Amended and Restated Certificate; the initial Class II directors shall serve for a term expiring at the second annual meeting of the stockholders following the date of this Third Amended and Restated Certificate; and the initial Class III directors shall serve for a term expiring at the third annual meeting following the date of this Third Amended and Restated Certificate. At each annual meeting of the stockholders of the Corporation beginning with the first annual meeting of the stockholders following the date of this Third Amended and Restated Certificate, subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect directors, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of the stockholders held in the third year following the year of their election. Each director shall hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification or removal. No decrease in the number of directors shall shorten the term of any incumbent director. The Board of Directors is authorized to assign members of the Board of Directors already in office to Class I, Class II and Class III.
B. Except as otherwise expressly provided by the DGCL or this Third Amended and Restated Certificate, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors. Directors shall be elected by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon.
C. Subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect directors, the Board of Directors or any individual director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds (66 and 2/3%) of the voting power of all of the then outstanding shares of voting stock of the Corporation entitled to vote at an election of directors.
D. Subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect directors, except as otherwise provided by law, any vacancies on the Board of Directors resulting from death, resignation, disqualification, retirement, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall be filled exclusively by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director (other than any directors elected by the separate vote of one or more outstanding series of Preferred Stock), and shall not be filled by the stockholders. Any director appointed in accordance with the preceding sentence shall hold office until the expiration of the term of the class to which such director shall have been appointed or until his or her earlier death, resignation, retirement, disqualification, or removal.
E. Whenever the holders of any one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately as a series or separately as a class with one or more such other series, to elect directors at an annual or special meeting of stockholders, the election, term of office, removal and other features of such directorships shall be governed by the terms of this Third Amended and Restated Certificate (including any Certificate of Designation). Notwithstanding anything to the contrary in this ARTICLE V, the number of directors that may be elected by the holders of any such series of Preferred Stock shall be in addition to the number fixed pursuant to paragraph B of this ARTICLE V, and the total number of directors constituting the whole Board of Directors shall be automatically adjusted accordingly. Except as otherwise provided in the Certificate of Designation(s) in respect of one or more series of Preferred Stock, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such Certificate of Designation(s), the terms of office of all such additional directors elected by the holders of such series of Preferred Stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate (in which case each such director thereupon shall cease to be qualified as, and shall cease to be, a director) and the total authorized number of directors of the Corporation shall automatically be reduced accordingly.
F. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the Amended and Restated Bylaws of the Corporation (as amended and/or restated from time to time, the “Bylaws”). In addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Third Amended and Restated Certificate (including any Certificate of Designation in respect of one or more series of Preferred Stock) or the Bylaws of the Corporation, the adoption, amendment or repeal of the Bylaws of the Corporation by the stockholders of the Corporation shall require the affirmative vote of the holders of at least two-thirds (66 and 2/3%) of the voting power of all of the then outstanding shares of voting stock of the Corporation entitled to vote generally in an election of directors.
G. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.
ARTICLE VI
STOCKHOLDERS
A. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of the stockholders of the Corporation, and shall not be taken by written consent in lieu of a meeting. Notwithstanding the foregoing, any action required or permitted to be taken by the holders of any series of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly so provided by the applicable Certificate of Designation relating to such series of Preferred Stock, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares of the relevant series of Preferred Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation in accordance with the applicable provisions of the DGCL.
B. Subject to the special rights of the holders of one or more series of Preferred Stock, special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, at any time only by or at the direction of the Board of Directors, the Chairperson of the Board of Directors, the Chief Executive Officer or the President, and shall not be called by any other person or persons.
C. Advance notice of stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
ARTICLE VII
LIABILITY
No director of the Corporation shall have any personal liability to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or hereafter may be amended. Any amendment, repeal or modification of this ARTICLE VII, or the adoption of any provision of the Third Amended and Restated Certificate inconsistent with this ARTICLE VII, shall not adversely affect any right or protection of a director of the Corporation with respect to any act or omission occurring prior to such amendment, repeal, modification or adoption. If the DGCL is amended after approval by the stockholders of this ARTICLE VII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended.
ARTICLE VIII
INDEMNIFICATION
A. To the fullest extent permitted by the DGCL or any other applicable law, as it presently exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he or she or a person for whom he or she is the legal representative is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding; provided that such indemnitee acted in good faith and in a manner such indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such indemnitee’s conduct was unlawful. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this ARTICLE VIII or otherwise. The rights to indemnification and advancement of expenses conferred by this ARTICLE VIII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this ARTICLE VIII, except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.
B. The rights to indemnification and advancement of expenses conferred on any indemnitee by this ARTICLE VIII shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Third Amended and Restated Certificate, the Bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.
C. Any repeal or amendment of this ARTICLE VIII by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Third Amended and Restated Certificate inconsistent with this ARTICLE VIII, shall, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission
D. This ARTICLE VIII shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.
ARTICLE IX
FORUM SELECTION
Unless the Corporation consents in writing to the selection of an alternative forum, (a) the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on behalf of the Corporation, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the DGCL or the bylaws of the Corporation or this Third Amended and Restated Certificate (as either may be amended from time to time) or (iv) any action, suit or proceeding asserting a claim against the Corporation governed by the internal affairs doctrine; and (b) subject to the preceding provisions of this ARTICLE IX, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. If any action the subject matter of which is within the scope of clause (a) of the immediately preceding sentence is filed in a court other than the courts in the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (x) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action brought in any such court to enforce the provisions of clause (a) of the immediately preceding sentence and (y) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article IX. Notwithstanding the foregoing, the provisions of this ARTICLE IX shall not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts of the United States have exclusive jurisdiction.
ARTICLE X
AMENDMENTS
A. Notwithstanding anything contained in this Third Amended and Restated Certificate to the contrary, in addition to any vote required by applicable law, the following provisions in this Third Amended and Restated Certificate may be amended, altered, repealed or rescinded, in whole or in part, or any provision inconsistent therewith or herewith may be adopted, only by the affirmative vote of the holders of at least two-thirds (66 and 2/3%) of the total voting power of all the then outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class: Part B of ARTICLE IV, ARTICLE V, ARTICLE VI, ARTICLE VII, ARTICLE VIII, ARTICLE IX, and this ARTICLE X.
B. If any provision or provisions of this Third Amended and Restated Certificate shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Third Amended and Restated Certificate (including, without limitation, each portion of any paragraph of this Third Amended and Restated Certificate containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not, to the fullest extent permitted by applicable law, in any way be affected or impaired thereby and (ii) to the fullest extent permitted by applicable law, the provisions of this Third Amended and Restated Certificate (including, without limitation, each such portion of any paragraph of this Third Amended and Restated Certificate containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law.
Exhibit 3.2
AMENDED AND RESTATED BYLAWS OF
SMARTRENT, INC.
(A DELAWARE CORPORATION)
TABLE OF CONTENTS
| ARTICLE I | ||||
| CORPORATE OFFICES | ||||
| Section 1.1 | Registered Office | 1 | ||
| Section 1.2 | Other Offices | 1 | ||
| ARTICLE II | ||||
| MEETINGS OF STOCKHOLDERS | ||||
| Section 2.1 | Place of Meetings | 1 | ||
| Section 2.2 | Annual Meeting | 1 | ||
| Section 2.3 | Special Meeting | 1 | ||
| Section 2.4 | Notice of Business to be Brought before a Meeting | 1 | ||
| Section 2.5 | Notice of Nominations for Election to the Board | 4 | ||
| Section 2.6 | Notice of Stockholders’ Meetings | 7 | ||
| Section 2.7 | Quorum | 7 | ||
| Section 2.8 | Adjourned Meeting; Notice | 7 | ||
| Section 2.9 | Conduct of Business | 7 | ||
| Section 2.10 | Voting | 8 | ||
| Section 2.11 | Record Date for Stockholder Meetings and Other Purposes | 8 | ||
| Section 2.12 | Proxies | 8 | ||
| Section 2.13 | List of Stockholders Entitled to Vote | 9 | ||
| Section 2.14 | Inspectors of Election | 9 | ||
| Section 2.15 | Delivery to the Corporation | 9 | ||
| ARTICLE III | ||||
| DIRECTORS | ||||
| Section 3.1 | Powers | 9 | ||
| Section 3.2 | Number of Directors | 10 | ||
| Section 3.3 | Election, Qualification and Term of Office of Directors | 10 | ||
| Section 3.4 | Resignation and Vacancies | 10 | ||
| Section 3.5 | Place of Meetings; Meetings by Telephone | 10 | ||
| Section 3.6 | Regular Meetings | 10 | ||
| Section 3.7 | Special Meetings; Notice | 10 | ||
| Section 3.8 | Quorum | 11 | ||
| Section 3.9 | Board Action without a Meeting | 11 | ||
| Section 3.10 | Fees and Compensation of Directors | 11 | ||
| ARTICLE IV | ||||
| COMMITTEES | ||||
| Section 4.1 | Committees of Directors | 11 | ||
| Section 4.2 | Committee Minutes | 11 | ||
| Section 4.3 | Meetings and Actions of Committees | 11 | ||
| Section 4.4 | Subcommittees | 12 | ||
| ARTICLE V | ||||
| OFFICERS | ||||
| Section 5.1 | Officers | 12 | ||
| Section 5.2 | Appointment of Officers | 12 | ||
| Section 5.3 | Subordinate Officers | 12 | ||
| Section 5.4 | Removal and Resignation of Officers | 12 | ||
| Section 5.5 | Vacancies in Offices | 12 | ||
| Section 5.6 | Representation of Shares of Other Corporations | 12 | ||
| Section 5.7 | Authority and Duties of Officers | 12 | ||
| Section 5.8 | Compensation | 13 | ||
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| ARTICLE VI | ||||
| RECORDS | ||||
| ARTICLE VII | ||||
| GENERAL MATTERS | ||||
| Section 7.1 | Execution of Corporate Contracts and Instruments | 13 | ||
| Section 7.2 | Stock Certificates | 13 | ||
| Section 7.3 | Special Designation of Certificates | 13 | ||
| Section 7.4 | Lost Certificates | 14 | ||
| Section 7.5 | Shares Without Certificates | 14 | ||
| Section 7.6 | Construction; Definitions | 14 | ||
| Section 7.7 | Dividends | 14 | ||
| Section 7.8 | Fiscal Year | 14 | ||
| Section 7.9 | Seal | 14 | ||
| Section 7.10 | Transfer of Stock | 14 | ||
| Section 7.11 | Stock Transfer Agreements | 14 | ||
| Section 7.12 | Registered Stockholders | 15 | ||
| Section 7.13 | Waiver of Notice | 15 | ||
| ARTICLE VIII | ||||
| NOTICE | ||||
| Section 8.1 | Delivery of Notice; Notice by Electronic Transmission | 15 | ||
| ARTICLE IX | ||||
| INDEMNIFICATION | ||||
| Section 9.1 | Indemnification of Directors and Officers | 16 | ||
| Section 9.2 | Indemnification of Others | 16 | ||
| Section 9.3 | Prepayment of Expenses | 16 | ||
| Section 9.4 | Determination; Claim | 16 | ||
| Section 9.5 | Non-Exclusivity of Rights | 16 | ||
| Section 9.6 | Insurance | 16 | ||
| Section 9.7 | Other Indemnification | 17 | ||
| Section 9.8 | Continuation of Indemnification | 17 | ||
| Section 9.9 | Amendment or Repeal; Interpretation | 17 | ||
| ARTICLE X
ARTICLE XI
ARTICLE XII | ||||
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AMENDED AND RESTATED BYLAWS OF
SMARTRENT, INC.
ARTICLE I
Corporate Offices
Section 1.1 Registered Office. The address of the registered office of SmartRent, Inc. (the “Corporation”) in the State of Delaware, and the name of its registered agent at such address, shall be as set forth in the Corporation’s Third Amended and Restated Certificate of Incorporation, as the same may be amended and/or restated from time to time (the “Certificate of Incorporation”).
Section 1.2 Other Offices. The Corporation may have additional offices at any place or places, within or outside the State of Delaware, as the Corporation’s board of directors (the “Board”) may from time to time establish or as the business and affairs of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1 Place of Meetings. Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office, whether within or outside of the State of Delaware.
Section 2.2 Annual Meeting. The Board shall designate the date and time of the annual meeting. At the annual meeting, the stockholders entitled to vote on such matters shall elect those directors of the Corporation to fill any term of a directorship that expires on the date of such annual meeting and may transact any other business as may properly be brought before the meeting in accordance with Section 2.4. The Board may postpone, reschedule or cancel any previously scheduled annual meeting of stockholders.
Section 2.3 Special Meeting.
(a) Special meetings of the stockholders may be called only by such persons and only in such manner as set forth in the Certificate of Incorporation.
(b) No business may be transacted at any special meeting of stockholders other than the business specified in the notice of such meeting. The Board may postpone, reschedule or cancel any previously scheduled special meeting of stockholders.
Section 2.4 Notice of Business to be Brought before a Meeting.
(a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) if not specified in a notice of meeting, otherwise brought before the meeting by or at the direction of the Board or the Chairman of the Board or (iii) otherwise properly brought before the meeting by a stockholder present in person who (A)(1) was a record owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.4 in all applicable respects or (B) properly made such proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”). The foregoing clause (iii) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. The only matters that may be brought before a special meeting are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3, and stockholders shall not be
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permitted to propose business to be brought before a special meeting of the stockholders. For purposes of this Section 2.4, “present in person” shall mean that the stockholder proposing that the business be brought before the annual meeting of the Corporation, or a qualified representative of such proposing stockholder, appear at such annual meeting. A “qualified representative” of such proposing stockholder shall be a duly authorized officer, manager or partner of such stockholder or any other person authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders. Stockholders seeking to nominate persons for election to the Board must comply with Section 2.5, and this Section 2.4 shall not be applicable to nominations except as expressly provided in Section 2.5.
(b) For business to be properly brought before an annual meeting by a stockholder, the stockholder must (i) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding year’s annual meeting; provided, however, that if no annual meeting was held in the preceding year, to be timely, a stockholder’s notice must be so delivered, or mailed and received, not earlier than the close of business on the one hundred and twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made by the Corporation; provided, further, that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, to be timely, a stockholder’s notice must be so delivered, or mailed and received, not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made by the Corporation (such notice within such time periods, “Timely Notice”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.
(c) To be in proper form for purposes of this Section 2.4, a stockholder’s notice to the Secretary of the Corporation shall set forth:
(i) As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporation’s books and records); and (B) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (A) and (B) are referred to as “Stockholder Information”);
(ii) As to each Proposing Person, (A) the full notional amount of any securities that, directly or indirectly, underlie any “derivative security” (as such term is defined in Rule 16a-1(c) under the Exchange Act) that constitutes a “call equivalent position” (as such term is defined in Rule 16a-1(b) under the Exchange Act) (“Synthetic Equity Position”) and that is, directly or indirectly, held or maintained by such Proposing Person with respect to any shares of any class or series of shares of the Corporation; provided that, for the purposes of the definition of “Synthetic Equity Position,” the term “derivative security” shall also include any security or instrument that would not otherwise constitute a “derivative security” as a result of any feature that would make any conversion, exercise or similar right or privilege of such security or instrument becoming determinable only at some future date or upon the happening of a future occurrence, in which case the determination of the amount of securities into which such security or instrument would be convertible or exercisable shall be made assuming that such security or instrument is immediately convertible or exercisable at the time of such determination; and, provided, further, that any Proposing Person satisfying the requirements of Rule 13d-1(b)(1) under the Exchange Act (other than a Proposing Person that so satisfies Rule 13d-1(b)(1) under the Exchange Act solely by reason of Rule 13d-1(b)(1)(ii)(E)) shall not be deemed to hold or maintain the notional amount of any securities that underlie a Synthetic Equity Position held by such Proposing Person as a hedge with respect to a bona fide derivatives trade or position of such Proposing Person arising in the ordinary course of such Proposing Person’s business as a
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derivatives dealer, (B) any rights to dividends on the shares of any class or series of shares of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (C) any material pending or threatened legal proceeding in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (D) any other material relationship between such Proposing Person, on the one hand, and the Corporation or any affiliate of the Corporation, on the other hand, (E) any direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation or any affiliate of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (F) a representation that such Proposing Person intends or is part of a group that intends to deliver a proxy statement or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or otherwise solicit proxies from stockholders in support of such proposal and (G) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (G) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and
(iii) As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the bylaws, the language of the proposed amendment), and (C) a reasonably detailed description of all agreements, arrangements and understandings (1) between or among any of the Proposing Persons or (2) between or among any Proposing Person and any other person or entity (including their names) in connection with the proposal of such business by such stockholder; and (D) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act; provided, however, that the disclosures required by this Section 2.4(c)(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner.
For purposes of this Section 2.4, the term “Proposing Person” shall mean (i) the stockholder providing the notice of business proposed to be brought before an annual meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, and (iii) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A) with such stockholder in such solicitation.
(d) A Proposing Person shall update and supplement its notice to the Corporation of its intent to propose business at an annual meeting, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof). For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other Section of these bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or to submit any new proposal, including by changing or adding matters, business or resolutions proposed to be brought before a meeting of the stockholders.
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(e) Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting that is not properly brought before the meeting in accordance with this Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
(f) This Section 2.4 is expressly intended to apply to any business proposed to be brought before an annual meeting of stockholders other than any proposal made in accordance with Rule 14a-8 under the Exchange Act and included in the Corporation’s proxy statement. In addition to the requirements of this Section 2.4 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.
(g) For purposes of these bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
Section 2.5 Notice of Nominations for Election to the Board.
(a) Nominations of any person for election to the Board at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the Board, including by any committee or persons authorized to do so by the Board or these bylaws, or (ii) by a stockholder present in person (A) who was a record owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (B) is entitled to vote at the meeting, and (C) has complied with this Section 2.5 as to such notice and nomination. For purposes of this Section 2.5, “present in person” shall mean that the stockholder proposing that the business be brought before the meeting of the Corporation, or a qualified representative of such stockholder, appear at such meeting. A “qualified representative” of such proposing stockholder shall be a duly authorized officer, manager or partner of such stockholder or any other person authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders. The foregoing clause (ii) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting or special meeting.
(b) (i) Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (A) provide Timely Notice (as defined in Section 2.4) thereof in writing and in proper form to the Secretary of the Corporation, (B) provide the information, agreements and questionnaires with respect to such stockholder and its candidate for nomination as required to be set forth by this Section 2.5 and (C) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5.
(ii) Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling a special meeting, then for a stockholder to make any nomination of a person or persons for election to the Board at a special meeting, the stockholder must (i) provide Timely Notice thereof in writing and in proper form to the Secretary of the Corporation at the principal executive offices of the Corporation, (ii) provide the information with respect to such stockholder and its candidate for nomination as required by this Section 2.5 and (iii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. To be timely, a stockholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the ninetieth (90th) day prior to such special meeting or, if later, the tenth (10th) day following the day on which public disclosure (as defined in Section 2.4) of the date of such special meeting was first made.
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(iii) In no event shall any adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.
(iv) In no event may a Nominating Person provide Timely Notice with respect to a greater number of director candidates than are subject to election by shareholders at the applicable meeting. If the Corporation shall, subsequent to such notice, increase the number of directors subject to election at the meeting, such notice as to any additional nominees shall be due on the later of (i) the conclusion of the time period for Timely Notice, (ii) the date set forth in Section 2.5(b)(ii) or (iii) the tenth day following the date of public disclosure (as defined in Section 2.4) of such increase.
(c) To be in proper form for purposes of this Section 2.5, a stockholder’s notice to the Secretary of the Corporation shall set forth:
(i) As to each Nominating Person (as defined below), the Stockholder Information (as defined in Section 2.4(c)(i), except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(c)(i));
(ii) As to each Nominating Person, any Disclosable Interests (as defined in Section 2.4(c)(ii), except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(c)(ii) and the disclosure with respect to the business to be brought before the meeting in Section 2.4(c)(ii) shall be made with respect to the election of directors at the meeting); and
(iii) As to each candidate whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such candidate for nomination that would be required to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such candidate for nomination were a Nominating Person, (B) all information relating to such candidate for nomination that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such candidate’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (C) a description of any direct or indirect material interest in any material contract or agreement between or among any Nominating Person, on the one hand, and each candidate for nomination or his or her respective associates or any other participants in such solicitation, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant” for purposes of such rule and the candidate for nomination were a director or executive officer of such registrant and (D) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(f).
For purposes of this Section 2.5, the term “Nominating Person” shall mean (i) the stockholder providing the notice of the nomination proposed to be made at the meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, and (iii) any other participant in such solicitation.
(d) A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof). For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other Section of these bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any nomination or to submit any new nomination.
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(e) In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Nominating Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.
(f) To be eligible to be a candidate for election as a director of the Corporation at an annual or special meeting, a candidate must be nominated in the manner prescribed in Section 2.5 and the candidate for nomination, whether nominated by the Board or by a stockholder of record, must have previously delivered (in accordance with the time period prescribed for delivery in a notice to such candidate given by or on behalf of the Board), to the Secretary of the Corporation at the principal executive offices of the Corporation, (i) a completed written questionnaire (in a form provided by the Corporation) with respect to the background, qualifications, stock ownership and independence of such proposed nominee and (ii) a written representation and agreement (in form provided by the Corporation) that such candidate for nomination (A) is not and, if elected as a director during his or her term of office, will not become a party to (1) any agreement, arrangement or understanding with, and has not given and will not give any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) or (2) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the Corporation, with such proposed nominee’s fiduciary duties under applicable law, (B) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a director that has not been disclosed to the Corporation and (C) if elected as a director of the Corporation, will comply with all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to directors and in effect during such person’s term in office as a director (and, if requested by any candidate for nomination, the Secretary of the Corporation shall provide to such candidate for nomination all such policies and guidelines then in effect).
(g) The Board may also require any proposed candidate for nomination as a Director to furnish such other information as may reasonably be requested by the Board in writing prior to the meeting of stockholders at which such candidate’s nomination is to be acted upon in order for the Board to determine the eligibility of such candidate for nomination to be an independent director of the Corporation in accordance with the Corporation’s corporate governance guidelines.
(h) A candidate for nomination as a director shall further update and supplement the materials delivered pursuant to this Section 2.5, if necessary, so that the information provided or required to be provided pursuant to this Section 2.5 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation (or any other office specified by the Corporation in any public announcement) not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof). For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other Section of these bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business or resolutions proposed to be brought before a meeting of the stockholders.
(i) No candidate shall be eligible for nomination as a director of the Corporation unless such candidate for nomination and the Nominating Person seeking to place such candidate’s name in nomination has complied with this Section 2.5. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with Section 2.5, and if he or she should so determine, he or she shall so declare such determination to the meeting, the defective nomination shall be disregarded and any ballots cast for the candidate in question (but in the case of any form of ballot listing other qualified nominees, only the ballots cast for the nominee in question) shall be void and of no force or effect.
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(j) Notwithstanding anything in these bylaws to the contrary, no candidate for nomination shall be eligible to be seated as a director of the Corporation unless nominated and elected in accordance with Section 2.5.
Section 2.6 Notice of Stockholders’ Meetings. Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with Section 8.1 not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and time of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
Section 2.7 Quorum. Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, a quorum is not present or represented at any meeting of the stockholders, then either (a) the person presiding over the meeting or (b) a majority in voting power of the stockholders entitled to vote at the meeting, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to recess the meeting or adjourn the meeting from time to time in the manner provided in Section 2.8 until a quorum is present or represented. At any recessed or adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
Section 2.8 Adjourned Meeting; Notice. When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At any adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such meeting as of the record date so fixed for notice of such adjourned meeting.
Section 2.9 Conduct of Business. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures (which need not be in writing) and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the person presiding over the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present (including, without limitation, rules and procedures for removal of disruptive persons from the meeting); (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the person presiding over the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be
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appropriate to the conduct of the meeting (including, without limitation, determinations with respect to the administration and/or interpretation of any of the rules, regulations or procedures of the meeting, whether adopted by the Board or prescribed by the person presiding over the meeting), shall, if the facts warrant, determine and declare to the meeting that a matter of business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
Section 2.10 Voting.
(a) Except as may be otherwise provided in the Certificate of Incorporation, these bylaws or the DGCL, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder.
(b) Except as otherwise provided by the Certificate of Incorporation, at all duly called or convened meetings of stockholders at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director. Except as otherwise provided by the Certificate of Incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, each other matter presented to the stockholders at a duly called or convened meeting at which a quorum is present shall be decided by the affirmative vote of the holders of a majority in voting power of the votes cast (excluding abstentions and broker non-votes) on such matter.
Section 2.11 Record Date for Stockholder Meetings and Other Purposes.
(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) days nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting; and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of capital stock, or for the purposes of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
Section 2.12 Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A proxy may be in the form of an electronic transmission which sets forth or is submitted with information from which it can be determined that the transmission was authorized by the stockholder.
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Section 2.13 List of Stockholders Entitled to Vote. The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, that if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the Corporation’s principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 2.13 or to vote in person or by proxy at any meeting of stockholders.
Section 2.14 Inspectors of Election.
(a) Before any meeting of stockholders, the Corporation shall appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If any person appointed as inspector or any alternate fails to appear or fails or refuses to act, then the person presiding over the meeting shall appoint a person to fill that vacancy.
(b) Such inspectors shall: (i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting and the validity of any proxies and ballots; (ii) count all votes or ballots; (iii) count and tabulate all votes; (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspector(s); and (v) certify its or their determination of the number of shares represented at the meeting and its or their count of all votes and ballots.
(c) Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspection with strict impartiality and according to the best of such inspector’s ability. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. The inspectors of election may appoint such persons to assist them in performing their duties as they determine.
Section 2.15 Delivery to the Corporation. Whenever this Article II requires one or more persons (including a record or beneficial owner of stock) to deliver a document or information to the Corporation or any officer, employee or agent thereof (including any notice, request, questionnaire, revocation, representation or other document or agreement), such document or information shall be in writing exclusively (and not in an electronic transmission) and shall be delivered exclusively by hand (including, without limitation, overnight courier service) or by certified or registered mail, return receipt requested, and the Corporation shall not be required to accept delivery of any document not in such written form or so delivered.
ARTICLE III
DIRECTORS
Section 3.1 Powers. Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.
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Section 3.2 Number of Directors. Subject to the Certificate of Incorporation, the total number of directors constituting the Board shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
Section 3.3 Election, Qualification and Term of Office of Directors. Except as provided in Section 3.4, and subject to the Certificate of Incorporation, each director, including a director elected to fill a vacancy or newly created directorship, shall hold office until the expiration of the term of the class, if any, for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification or removal. Directors need not be stockholders or residents of the State of Delaware. The Certificate of Incorporation or these bylaws may prescribe qualifications for directors.
Section 3.4 Resignation and Vacancies.
(a) Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. The resignation shall take effect at the time specified therein or upon the happening of an event specified therein, and if no time or event is specified, at the time of its receipt. When one or more directors so resigns and the resignation is effective at a future date or upon the happening of an event to occur on a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in Section 3.3.
(b) Unless otherwise provided in the Certificate of Incorporation or these bylaws, vacancies resulting from the death, resignation, disqualification or removal of any director, and newly created directorships resulting from any increase in the authorized number of directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
Section 3.5 Place of Meetings; Meetings by Telephone.
(a) The Board may hold meetings, both regular and special, either within or outside the State of Delaware.
(b) Unless otherwise restricted by the Certificate of Incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence in person at the meeting.
Section 3.6 Regular Meetings. Regular meetings of the Board may be held within or outside the State of Delaware and at such time and at such place as which has been designated by the Board and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other means of electronic transmission. No further notice shall be required for regular meetings of the Board.
Section 3.7 Special Meetings; Notice.
(a) Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the Chief Executive Officer, the President or the Secretary of the Corporation or a majority of the total number of directors constituting the Board.
(b) Notice of the time and place of special meetings shall be: (i) delivered personally by hand, by courier or by telephone; (ii) sent by United States first-class mail, postage prepaid; (iii) sent by facsimile or electronic mail; or (iv) sent by other means of electronic transmission, directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, or other address for electronic transmission, as the case may be, as shown on the Corporation’s records.
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(c) If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or electronic mail, or (iii) sent by other means of electronic transmission, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by U.S. mail, it shall be deposited in the U.S. mail at least four (4) days before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting.
Section 3.8 Quorum. At all meetings of the Board, unless otherwise provided by the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
Section 3.9 Board Action without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of the proceedings of the Board, or the committee thereof, in the same paper or electronic form as the minutes are maintained. Such action by written consent or consent by electronic transmission shall have the same force and effect as a unanimous vote of the Board.
Section 3.10 Fees and Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, the Board shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.
ARTICLE IV
COMMITTEES
Section 4.1 Committees of Directors. The Board may designate one (1) or more committees, each committee to consist, of one (1) or more of the directors of the Corporation. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (a) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (b) adopt, amend or repeal any bylaw of the Corporation.
Section 4.2 Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.
Section 4.3 Meetings and Actions of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of: (a) Section 3.5 (Place of Meetings; Meetings by Telephone); (b) Section 3.6 (Regular Meetings); (c) Section 3.7 (Special Meetings; Notice); (d) Section 3.9 (Board Action without a Meeting); and (e) Section 7.13 (Waiver of Notice), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members; provided, however, that: (i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee; (ii) special meetings of committees may also be called by resolution of the Board or the chairperson of the applicable committee; and (iii) the Board may adopt rules for the governance of any committee to override the provisions that would otherwise apply to the committee pursuant to this Section 4.3, provided that such rules do not violate the provisions of the Certificate of Incorporation or applicable law.
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Section 4.4 Subcommittees. Unless otherwise provided in the Certificate of Incorporation, these bylaws or the resolutions of the Board designating the committee, a committee may create one (1) or more subcommittees, each subcommittee to consist of one (1) or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
ARTICLE V
OFFICERS
Section 5.1 Officers. The officers of the Corporation shall include a Chief Executive Officer, a President and a Secretary. The Corporation may also have, at the discretion of the Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Financial Officer, a Chief Operating Officer, a Chief Product Officer, a Chief Revenue Officer, a Chief Technology Officer, a Treasurer, one (1) or more Vice Presidents, one (1) or more Assistant Vice Presidents, one (1) or more Assistant Treasurers, one (1) or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person. No officer need be a stockholder or director of the Corporation.
Section 5.2 Appointment of Officers. The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3.
Section 5.3 Subordinate Officers. The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.
Section 5.4 Removal and Resignation of Officers.
(a) Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.
(b) Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.
Section 5.5 Vacancies in Offices. Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Section 5.2.
Section 5.6 Representation of Shares of Other Corporations. The Chairperson of the Board, the Chief Executive Officer, or the President of this Corporation, or any other person authorized by the Board, the Chief Executive Officer or the President, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares or voting securities of any other corporation or other person standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
Section 5.7 Authority and Duties of Officers. All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be provided herein or designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.
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Section 5.8 Compensation. The compensation of the officers of the Corporation for their services as such shall be fixed from time to time by or at the direction of the Board. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that he or she is also a director of the Corporation.
ARTICLE VI
RECORDS
A stock ledger consisting of one or more records in which the names of all of the Corporation’s stockholders of record, the address and number of shares registered in the name of each such stockholder, and all issuances and transfers of stock of the corporation are recorded in accordance with Section 224 of the DGCL shall be administered by or on behalf of the Corporation. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method, or one or more electronic networks or databases (including one or more distributed electronic networks or databases), provided that the records so kept can be converted into clearly legible paper form within a reasonable time and, with respect to the stock ledger, that the records so kept (i) can be used to prepare the list of stockholders specified in Sections 219 and 220 of the DGCL, (ii) record the information specified in Sections 156, 159, 217(a) and 218 of the DGCL, and (iii) record transfers of stock as governed by Article 8 of the Uniform Commercial Code as adopted in the State of Delaware.
ARTICLE VII
GENERAL MATTERS
Section 7.1 Execution of Corporate Contracts and Instruments. The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances.
Section 7.2 Stock Certificates.
(a) The shares of the Corporation shall be represented by certificates or shall be uncertificated. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by, any two officers authorized to sign stock certificates representing the number of shares registered in certificate form. The Chairperson or Vice Chairperson of the Board, the Chief Executive Officer, the President, Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Corporation shall be specifically authorized to sign stock certificates. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
(b) The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
Section 7.3 Special Designation of Certificates. If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or on the back of the certificate that the Corporation shall issue to represent such class or series of stock (or, in the case of uncertificated shares, set forth in a notice provided pursuant to Section 151 of the DGCL); provided, however, that except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of
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stock (or, in the case of any uncertificated shares, included in the aforementioned notice) a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Section 7.4 Lost Certificates. Except as provided in this Section 7.4, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
Section 7.5 Shares Without Certificates. The Corporation may adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates, provided the use of such system by the Corporation is permitted in accordance with applicable law.
Section 7.6 Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural and the plural number includes the singular.
Section 7.7 Dividends.
(a) The Board, subject to any restrictions contained in either (i) the DGCL or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.
(b) The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.
Section 7.8 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.
Section 7.9 Seal. The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
Section 7.10 Transfer of Stock. Shares of the stock of the Corporation shall be transferable in the manner prescribed by law and in these bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.
Section 7.11 Stock Transfer Agreements. The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes or series of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
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Section 7.12 Registered Stockholders. The Corporation: (i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner; and (ii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
Section 7.13 Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these bylaws.
ARTICLE VIII
NOTICE
Section 8.1 Delivery of Notice; Notice by Electronic Transmission.
(a) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provisions of the DGCL, the Certificate of Incorporation, or these bylaws may be given in writing directed to the stockholder’s mailing address (or by electronic transmission directed to the stockholder’s electronic mail address, as applicable) as it appears on the records of the Corporation and shall be given (i) if mailed, when the notice is deposited in the U.S. mail, postage prepaid, (ii) if delivered by courier service, the earlier of when the notice is received or left at such stockholder’s address or (iii) if given by electronic mail, when directed to such stockholder’s electronic mail address unless the stockholder has notified the Corporation in writing or by electronic transmission of an objection to receiving notice by electronic mail. A notice by electronic mail must include a prominent legend that the communication is an important notice regarding the Corporation.
(b) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice or electronic transmission to the Corporation. Notwithstanding the provisions of this paragraph, the Corporation may give a notice by electronic mail in accordance with the first paragraph of this section without obtaining the consent required by this paragraph.
(c) Any notice given pursuant to the preceding paragraph shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iii) if by any other form of electronic transmission, when directed to the stockholder.
(d) Notwithstanding the foregoing, a notice may not be given by an electronic transmission from and after the time that (i) the Corporation is unable to deliver by such electronic transmission two (2) consecutive notices given by the Corporation and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, that the inadvertent failure to discover such inability shall not invalidate any meeting or other action.
(e) An affidavit of the Secretary or an Assistant Secretary of the Corporation or of the transfer agent or other agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
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ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification of Directors and Officers. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL or any other applicable law, as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or non-profit entity, including service with respect to employee benefit plans (hereinafter, an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as director, officer, employee, or agent, or in any other capacity while serving as director, officer, employee or agent, against all liability and loss suffered and expenses (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with any such Proceeding; provided that such indemnitee acted in good faith and in a manner such indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such indemnitee’s conduct was unlawful. Notwithstanding the preceding sentence, except as otherwise provided in Section 9.4, the Corporation shall be required to indemnify a person in connection with a Proceeding initiated by such indemnitee only if the Proceeding was authorized in the specific case by the Board.
Section 9.2 Indemnification of Others. The Corporation shall have the power to indemnify and hold harmless, to the fullest extent permitted by the DGCL or any other applicable law, as it presently exists or may hereafter be amended, any employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding.
Section 9.3 Prepayment of Expenses. In addition to the obligation to indemnify conferred in Section 9.1, the Corporation shall to the fullest extent not prohibited by the DGCL or any other applicable law pay the expenses (including attorneys’ fees) incurred by any indemnitee, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance of its final disposition; provided, however, that such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by or on behalf of the person to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified under this Article IX or otherwise.
Section 9.4 Determination; Claim. If a claim for indemnification (following the final disposition of such Proceeding) under this Article IX is not paid in full within sixty (60) days, or a claim for advancement of expenses under this Article IX is not paid in full within twenty (20) days, after a written claim therefor has been received by the Corporation the indemnitee may thereafter (but not before) file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.
Section 9.5 Non-Exclusivity of Rights. The rights conferred on any person by this Article IX shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
Section 9.6 Insurance. The Corporation shall purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust enterprise or non-profit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.
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Section 9.7 Other Indemnification. The Corporation’s obligation, if any, to indemnify or advance expenses to any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.
Section 9.8 Continuation of Indemnification. The rights to indemnification and to prepayment of expenses provided by, or granted pursuant to, this Article IX shall continue notwithstanding that the person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators, legatees and distributees of such person.
Section 9.9 Amendment or Repeal; Interpretation.
(a) The provisions of this Article IX shall constitute a contract between the Corporation, on the one hand, and, on the other hand, each individual who serves or has served as a director or officer of the Corporation (whether before or after the adoption of these bylaws), in consideration of such person’s performance of such services, and pursuant to this Article IX the Corporation intends to be legally bound to each such current or former director or officer of the Corporation. With respect to current and former directors and officers of the Corporation, the rights conferred under this Article IX are present contractual rights and such rights are fully vested, and shall be deemed to have vested fully, immediately upon adoption of theses bylaws. With respect to any directors or officers of the Corporation who commence service following adoption of these bylaws, the rights conferred under this provision shall be present contractual rights and such rights shall fully vest, and be deemed to have vested fully, immediately upon such director or officer commencing service as a director or officer of the Corporation. Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection (i) hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification or (ii) under any agreement providing for indemnification or advancement of expenses to an officer or director of the Corporation in effect prior to the time of such repeal or modification.
(b) Any reference to an officer of the Corporation in this Article IX shall be deemed to refer exclusively to the Chief Executive Officer, the President and the Secretary of the Corporation, or other officer of the Corporation appointed by (i) the Board pursuant to Article V or (ii) an officer to whom the Board has delegated the power to appoint officers pursuant to Article V, and any reference to an officer of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be deemed to refer exclusively to an officer appointed by the board of directors (or equivalent governing body) of such other entity pursuant to the certificate of incorporation and bylaws (or equivalent organizational documents) of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The fact that any person who is or was an employee of the Corporation or an employee of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise has been given or has used the title of “Vice President” or any other title that could be construed to suggest or imply that such person is or may be an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall not result in such person being constituted as, or being deemed to be, an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for purposes of this Article IX.
ARTICLE X
AMENDMENTS
The Board is expressly empowered to adopt, amend or repeal the bylaws of the Corporation. The stockholders also shall have power to adopt, amend or repeal the bylaws of the Corporation; provided, however, that such action by stockholders shall require, in addition to any other vote required by the Certificate of Incorporation or applicable law, the affirmative vote of the holders of at least two-thirds of the voting power of all the then-outstanding shares of voting stock of the Corporation with the power to vote generally in an election of directors, voting together as a single class.
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ARTICLE XI
FORUM SELECTION
Unless the Corporation consents in writing to the selection of an alternative forum, (a) the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative Proceeding brought on behalf of the Corporation, (ii) any Proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any Proceeding arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these bylaws (as either may be amended from time to time) or (iv) any Proceeding asserting a claim against the Corporation governed by the internal affairs doctrine; and (b) subject to the preceding provisions of this Article XI, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. If any action the subject matter of which is within the scope of clause (a) of the immediately preceding sentence is filed in a court other than the courts in the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (A) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action brought in any such court to enforce the provisions of clause (a) of the immediately preceding sentence and (B) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article XI. Notwithstanding the foregoing, the provisions of this Article XI shall not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts of the United States have exclusive jurisdiction.
ARTICLE XII
DEFINITIONS
As used in these bylaws, unless the context otherwise requires, the following terms shall have the following meanings:
An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
An “electronic mail” means an electronic transmission directed to a unique electronic mail address (which electronic mail shall be deemed to include any files attached thereto and any information hyperlinked to a website if such electronic mail includes the contact information of an officer or agent of the Corporation who is available to assist with accessing such files and information).
An “electronic mail address” means a destination, commonly expressed as a string of characters, consisting of a unique user name or mailbox (commonly referred to as the “local part” of the address) and a reference to an internet domain (commonly referred to as the “domain part” of the address), whether or not displayed, to which electronic mail can be sent or delivered.
The term “person” means any individual, general partnership, limited partnership, limited liability company, corporation, trust, business trust, joint stock company, joint venture, unincorporated association, cooperative or association or any other legal entity or organization of whatever nature, and shall include any successor (by merger or otherwise) of such entity.
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Exhibit 4.1
| NUMBER C- |
SHARES | |
| SEE REVERSE FOR CERTAIN DEFINITIONS |
||
| CUSIP [ ] | ||
SMARTRENT, INC.
CLASS A COMMON STOCK
THIS CERTIFIES THAT is the owner of fully paid and non-assessable shares of Class A common stock, par value $0.0001 per share (the “Common Stock”), of SmartRent, Inc., a Delaware corporation (the “Company”), transferable on the books of the Company in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar of the Company.
Witness the facsimile signature of the duly authorized officers of the Company.
| Dated: | Countersigned: | |||||
| By: | ||||||
| [ ], Transfer Agent | ||||||
| [TITLE] | [TITLE] |
SMARTRENT, INC.
The Company will furnish without charge to each stockholder who so requests, a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of equity or series thereof of the Company and the qualifications, limitations, or restrictions of such preferences and/or rights. This certificate and the shares represented thereby are issued and shall be held subject to all the provisions of the Company’s Third Amended and Restated Certificate of Incorporation and all amendments thereto and resolutions of the Board of Directors providing for the issue of securities (copies of which may be obtained from the secretary of the Company), to all of which the holder of this certificate by acceptance hereof assents.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
| TEN COM |
— | as tenants in common |
UNIF GIFT MIN ACT |
— | Custodian |
|||||||||
| TEN ENT |
— | as tenants by the entireties |
(Cust) | (Minor) | ||||||||||
| JT TEN |
— | as joint tenants with right of survivorship and not as tenants in common |
under Uniform Gifts to |
|||||||||||
| (State) | ||||||||||||||
Additional abbreviations may also be used though not in the above list.
For value received, hereby sells, assigns and transfers unto
(PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER(S) OF ASSIGNEE(S))
(PLEASE PRINT OR TYPEWRITE NAME(S) AND ADDRESS(ES), INCLUDING ZIP CODE, OF ASSIGNEE(S))
shares of Common Stock represented by the Certificate, and hereby irrevocably constitutes and appoints
Attorney to transfer the said shares of Common Stock on the books of the within named Company with full power of substitution in the premises.
Dated:
|
Notice: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatever. |
| Signature(s) Guaranteed:
|
| THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (OR ANY SUCCESSOR RULE). |
Exhibit 10.1
Execution Version
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (this “Agreement”) is entered into as of August 24, 2021 (the “Effective Date”) by and among: SmartRent, Inc., a Delaware corporation f/k/a Fifth Wall Acquisition Corp. I, a Delaware corporation (the “Company”), the equityholders designated as Sponsor Equityholders on Schedule A hereto (collectively, the “Sponsor Equityholders”), and the equityholders designated as Legacy SmartRent Equityholders on Schedule B hereto (collectively, the “Legacy SmartRent Equityholders” and, together with the Sponsor Equityholders and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.3 of this Agreement, the “Holders” and each individually a “Holder”).
RECITALS
WHEREAS, the Company, Einstein Merger Corp. I, a Delaware corporation (“Merger Sub”), and SmartRent Technologies, Inc., a Delaware corporation (“Legacy SmartRent”), are parties to that certain Merger Agreement, dated as of April 21, 2021 (the “Merger Agreement”), pursuant to which, on the Effective Date, Merger Sub merged with and into Legacy SmartRent (the “Merger”), with Legacy SmartRent surviving the Merger as a wholly owned subsidiary of the Company;
WHEREAS, the Legacy SmartRent Equityholders are receiving shares of Common Stock (as defined below) (the “Merger Shares”) on or about the Effective Date, pursuant to the Merger Agreement;
WHEREAS, the Sponsor Equityholders held an aggregate of 8,625,000 of Class B common stock of the Company, par value $0.0001 per share, immediately prior to the consummation of the Merger, which, upon the consummation of the Merger, have automatically been converted into 8,625,000 shares of Common Stock (the “Sponsor Shares”);
WHEREAS, Fifth Wall Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), acquired 1,047,500 shares of Common Stock (the “Private Placement Shares”) pursuant to the terms of that certain Private Placement Share Purchase Agreement, dated as of February 4, 2021 (the “Private Placement Share Purchase Agreement”);
WHEREAS, the Company, the Sponsor, and the parties listed under Holder on the signature page thereto, are parties to that certain Registration and Stockholder Rights Agreement, dated as of February 4, 2021 (the “Prior Agreement”); and
WHEREAS, in connection with the consummation of the Merger, the parties to the Prior Agreement desire to amend and restate the Prior Agreement in its entirety as set forth herein, and the parties hereto desire to enter into this Agreement pursuant to which the Company shall grant the Holders certain registration rights with respect to the Registrable Securities (as defined below) on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
The following capitalized terms used herein have the following meanings:
“Adverse Disclosure” means any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Chief Executive Officer of the Company or principal financial officer of the Company, after consultation with counsel to the Company, (a) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (b) would not be required to be made at such time if the Registration Statement were not being filed, declared effective or used, as the case may be, and (c) the Company has a bona fide business purpose for not making such information public.
“Agreement” is defined in the preamble to this Agreement.
“Blackout Period” is defined in Section 3.4(b).
“Block Trade” means an offering and/or sale of Registrable Securities by any Holder on a block trade or underwritten basis (whether firm commitment or otherwise) without substantial marketing efforts prior to pricing, including, without limitation, a same day trade, overnight trade or similar transaction.
“Board” means the board of directors of the Company.
“Commission” means the Securities and Exchange Commission, or any other Federal agency then administering the Securities Act or the Exchange Act.
“Common Stock” means the common stock, par value $0.0001 per share, of the Company.
“Company” is defined in the preamble to this Agreement.
“Demanding Holder” is defined in Section 2.1(d).
“Effective Date” is defined in the preamble to this Agreement.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.
“FINRA” means the Financial Industry Regulatory Authority Inc.
“Form S-1 Shelf” is defined in Section 2.1(a).
“Form S-3 Shelf” is defined in Section 2.1(a).
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“Governmental Authority” means any federal, state, provincial, municipal, local or foreign government, governmental authority, regulatory or administrative agency (which for the purposes of this Agreement shall include FINRA and the Commission), governmental commission, department, board, bureau, agency or instrumentality, court or tribunal.
“Governmental Order” means any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any Governmental Authority.
“Holder” is defined in the preamble to this Agreement.
“Holder Indemnified Party” is defined in Section 4.1.
“Indemnified Party” is defined in Section 4.3.
“Indemnifying Party” is defined in Section 4.3.
“Law” means any statute, law, ordinance, rule, regulation or Governmental Order, in each case, of any Governmental Authority.
“Legacy SmartRent” is defined in the recitals to this Agreement.
“Legacy SmartRent Equityholders” is defined in the preamble to this Agreement.
“Maximum Number of Securities” is defined in Section 2.1(e).
“Merger” is defined in the recitals to this Agreement.
“Merger Agreement” is defined in the recitals to this Agreement.
“Merger Shares” is defined in the recitals to this Agreement.
“Merger Sub” is defined in the recitals to this Agreement.
“Minimum Takedown Threshold” is defined in Section 2.1(d).
“Misstatement” means an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus or necessary to make the statements in a Registration Statement or Prospectus (in the case of a Prospectus, in the light of the circumstances under which they were made) not misleading.
“New Registration Statement” is defined in Section 2.1(g).
“Notices” is defined in Section 5.4.
“Other Coordinated Offering” is defined in Section 2.4(a).
“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
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“Piggyback Registration” is defined in Section 2.2(a).
“Prior Agreement” is defined in the recitals to this Agreement.
“Private Placement Shares” is defined in the recitals to this Agreement.
“Private Placement Share Purchase Agreement” is defined in the recitals to this Agreement.
“Prospectus” means the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Register,” “Registered” and “Registration” mean a registration, including any related Shelf Takedown but excluding a registration on Form S-4 or Form S-8, or their successors, or any registration covering only securities proposed to be issued in exchange for securities or assets of another entity), effected by preparing and filing a registration statement, prospectus or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
“Registrable Securities” means (a) the Sponsor Shares and the shares of Common Stock issued upon the conversion of the Sponsor Shares, (b) the Private Placement Shares, (c) any outstanding shares of Common Stock held by a Holder as of the Effective Date (including the Merger Shares), (d) any shares of Common Stock of the Company (including any shares of Common Stock issued or issuable upon the exercise of any outstanding Warrants held by a Holder as of the Effective Date) otherwise acquired or owned by a Holder following the date hereof to the extent such securities are “restricted securities” (as defined in Rule 144) or are otherwise held by an “affiliate” (as defined in Rule 144) of the Company, and (e) any other equity security of the Company issued or issuable with respect to any such share of Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, spin off, reorganization or similar transaction; provided, however, that, as to any particular Registrable Securities, such securities shall cease to be Registrable Securities upon the earliest to occur of: (i) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (ii) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (iii) such securities shall have ceased to be outstanding; (iv) such securities may be sold without registration pursuant to Rule 144 or any successor rule promulgated under the Securities Act (but with no volume or other restrictions or limitations including as to manner or timing of sale); or (v) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
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“Registration Expenses” shall mean the expenses of a Registration, including, without limitation, the following:
(a) all registration and filing fees (including fees with respect to filings required to be made with FINRA) and any national securities exchange on which the Common Stock is then listed;
(b) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of outside counsel for the Underwriters, placement agent or sales agent in connection with blue sky qualifications of Registrable Securities);
(c) printing, messenger, telephone and delivery expenses;
(d) reasonable fees and disbursements of counsel for the Company;
(e) reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration; and
(f) reasonable fees and expenses of one (1) legal counsel selected by the majority-in-interest of the Demanding Holders in an Underwritten Offering or Other Coordinated Offering.
“Registration Statement” means any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Requesting Holder” is defined in Section 2.1(e).
“SEC Guidance” is defined in Section 2.1(g).
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.
“Shelf” means the Form S-1 Shelf, the Form S-3 Shelf or any Subsequent Shelf Registration, as the case may be.
“Shelf Registration” means a registration of securities pursuant to a registration statement filed with the Commission in accordance with and pursuant to Rule 415 promulgated under the Securities Act (or any successor rule then in effect).
“Shelf Takedown” means an Underwritten Shelf Takedown or any proposed transfer or sale using a Registration Statement, including a Piggyback Registration.
“Sponsor Equityholders” is defined in the preamble to this Agreement.
“Sponsor Shares” is defined in the recitals to this Agreement.
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“Subscription Agreements” means those certain subscription agreements the Company entered into with certain investors pursuant to which such investors purchased shares of Common Stock in connection with the consummation of the transactions contemplated in the Merger Agreement.
“Subsequent Shelf Registration” is defined in Section 2.1(b).
“Suspension Period” is defined in Section 3.4(a).
“Transfer” shall mean the (a) sale of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of any option to purchase or otherwise dispose of or agreement to dispose of, directly or indirectly, or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any security, (b) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (c) public announcement of any intention to effect any transaction specified in clause (a) or (b).
“Underwriter” means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer’s market-making activities.
“Underwritten Offering” means a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.
“Underwritten Shelf Takedown” is defined in Section 2.1(d).
“Warrants” means the warrants of the Company, with each whole warrant entitling the holder to purchase one share of Common Stock, held by any Holder.
“Withdrawal Notice” is defined in Section 2.1(f).
ARTICLE II
REGISTRATION RIGHTS.
Section 2.1. Shelf Registration.
(a) Filing. Subject to Section 3.3, the Company shall file within 45 days after the date of this Agreement, and use commercially reasonable efforts to cause to be declared effective as soon as practicable thereafter, a Registration Statement for a Shelf Registration on Form S-1 (the “Form S-1 Shelf”) covering the resale of all the Registrable Securities (determined as of two (2) business days prior to such filing) on a delayed or continuous basis. Such Shelf shall provide for the resale of the Registrable Securities included therein pursuant to any method or combination of methods legally available to, and requested by, any Holder named therein. The Company shall maintain a Shelf in accordance with the terms hereof, and shall prepare and file with the SEC such amendments, including post-effective amendments, and supplements as may be necessary to keep a Shelf continuously effective, available for use and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities.
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Following the filing of the Form S-1 Shelf, the Company shall use its commercially reasonable efforts to convert the Form S-1 Shelf (and any Subsequent Shelf Registration) to a Registration Statement on Form S-3 (the “Form S-3 Shelf”) as soon as practicable after the Company is eligible to use Form S-3.
(b) Subsequent Shelf Registration. If any Shelf ceases to be effective under the Securities Act for any reason at any time while Registrable Securities are still outstanding, the Company shall, subject to Section 3.4, use its commercially reasonable efforts to as promptly as is reasonably practicable cause such Shelf to again become effective under the Securities Act (including obtaining the prompt withdrawal of any order suspending the effectiveness of such Shelf), and shall use its commercially reasonable efforts to as promptly as is reasonably practicable amend such Shelf in a manner reasonably expected to result in the withdrawal of any order suspending the effectiveness of such Shelf or file an additional registration statement as a Shelf Registration (a “Subsequent Shelf Registration”) registering the resale of all Registrable Securities (determined as of two (2) business days prior to such filing), and pursuant to any method or combination of methods legally available to, and requested by, any Holder named therein. If a Subsequent Shelf Registration is filed, the Company shall use its commercially reasonable efforts to (i) cause such Subsequent Shelf Registration to become effective under the Securities Act as promptly as is reasonably practicable after the filing thereof (it being agreed that the Subsequent Shelf Registration shall be an automatic shelf registration statement (as defined in Rule 405 promulgated under the Securities Act) if the Company is a well-known seasoned issuer (as defined in Rule 405 promulgated under the Securities Act) at the most recent applicable eligibility determination date) and (ii) keep such Subsequent Shelf Registration continuously effective, available for use and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities. Any such Subsequent Shelf Registration shall be on Form S-3 to the extent that the Company is eligible to use such form. Otherwise, such Subsequent Shelf Registration shall be on another appropriate form.
(c) Additional Registrable Securities. In the event that any Holder holds Registrable Securities that are not registered for resale on a delayed or continuous basis, the Company, upon request of a Legacy SmartRent Equityholder or a Sponsor Equityholder that holds at least five percent (5.0%) of the Registrable Securities, shall promptly use its commercially reasonable efforts to cause the resale of such Registrable Securities to be covered by either, at the Company’s option, the Shelf (including by means of a post-effective amendment) or a Subsequent Shelf Registration and cause the same to become effective as soon as practicable after such filing and such Shelf or Subsequent Shelf Registration shall be subject to the terms hereof; provided, however, that the Company shall only be required to cause such Registrable Securities to be so covered twice in any twelve (12) month period for the Legacy SmartRent Equityholders, on the one hand, and the Sponsor Equityholders, on the other hand.
(d) Requests for Underwritten Shelf Takedowns. At any time and from time to time when an effective Shelf is on file with the Commission, any one or more Legacy SmartRent Equityholders or one or more Sponsor Equityholders (any of the Legacy SmartRent Equityholders or the Sponsor Equityholders being, in such case, a “Demanding Holder”) may request to sell all or any portion of its Registrable Securities in an Underwritten Offering that is registered pursuant to the Shelf (each, an “Underwritten Shelf Takedown”); provided in each case that the Company shall only be obligated to effect an Underwritten Offering if such offering shall include Registrable
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Securities proposed to be sold by the Demanding Holder(s) with a total offering price reasonably expected to exceed, in the aggregate, fifty million dollars ($50,000,000) (the “Minimum Takedown Threshold”). All requests for Underwritten Shelf Takedowns shall be made by giving written notice to the Company, which shall specify the approximate number of Registrable Securities proposed to be sold in the Underwritten Shelf Takedown. Promptly (but in any event within ten (10) days) after receipt of a request for Underwritten Shelf Takedown, the Company shall give written notice of the Underwritten Shelf Takedown to all other Holders. Subject to Section 2.4(d), the Company shall have the right to select the Underwriters for such offering (which shall consist of one or more reputable nationally recognized investment banks), subject to the initial Demanding Holder’s prior approval (which shall not be unreasonably withheld, conditioned or delayed). The Legacy SmartRent Equityholders, on the one hand, and the Sponsor Equityholders, on the other hand, may each demand not more than two (2) Underwritten Shelf Takedowns pursuant to this Section 2.1(d) in any twelve (12) month period. Notwithstanding anything to the contrary in this Agreement, the Company may effect any Underwritten Shelf Takedown pursuant to any then effective Registration Statement, including the Form S-3 Shelf, that is then available for such offering.
(e) Reduction of Underwritten Shelf Takedown. If the managing Underwriter or Underwriters in an Underwritten Shelf Takedown advises the Company, the Demanding Holders and the Holders requesting piggy-back rights pursuant to this Agreement with respect to such Underwritten Shelf Takedown (the “Requesting Holders”) (if any) in writing that the dollar amount or number of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other shares of Common Stock or other equity securities that the Company desires to sell and all other shares of Common Stock or other equity securities, if any, that have been requested to be sold in such Underwritten Shelf Takedown pursuant to separate written contractual piggy-back registration rights held by any other stockholders, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in the Underwritten Shelf Takedown without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Shelf Takedown, before including any shares of Common Stock or other equity securities proposed to be sold by Company or by other holders of Common Stock or other equity securities of the Company that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata, as nearly as practicable, based on the respective number of Registrable Securities that each Demanding Holder and Requesting Holder (if any) has requested be included in such Underwritten Shelf Takedown and the aggregate number of Registrable Securities that the Demanding Holders and Requesting Holders have requested be included in such Underwritten Shelf Takedown, or in such other proportion as shall mutually be agreed to by all such Demanding Holders and Requesting Holders) that can be sold without exceeding the Maximum Number of Securities; provided, however, that the number of Registrable Securities held by the Holders to be included in such Underwritten Shelf Takedown shall not be reduced unless all other securities are first entirely excluded from the Underwritten Shelf Takedown. To facilitate the allocation of Registrable Securities in accordance with the above provisions, the Company or the Underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. The inclusion of any Holder’s Registrable Securities in an Underwritten Shelf Takedown shall be subject to such Holder’s agreement to enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.
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(f) Withdrawal. Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used for marketing such Underwritten Shelf Takedown, a majority-in-interest of the Demanding Holders initiating an Underwritten Shelf Takedown shall have the right to withdraw from such Underwritten Shelf Takedown for any or no reason whatsoever upon written notification (a “Withdrawal Notice”) to the Company and the Underwriter or Underwriters (if any) of their intention to withdraw from such Underwritten Shelf Takedown; provided that any Legacy SmartRent Equityholder or Sponsor Equityholder may elect to have the Company continue an Underwritten Shelf Takedown if the Minimum Takedown Threshold would still be satisfied by the Registrable Securities proposed to be sold in the Underwritten Shelf Takedown by such Holder. If withdrawn, a demand for an Underwritten Shelf Takedown shall constitute a demand for an Underwritten Shelf Takedown for purposes of Section 2.1(d), unless either (i) the Demanding Holder has not previously withdrawn any Underwritten Offering or (ii) the Holder reimburses the Company for all Registration Expenses with respect to such Underwritten Shelf Takedown; provided that, if a Legacy SmartRent Equityholder or a Sponsor Equityholder elects to continue an Underwritten Shelf Takedown pursuant to the proviso in the immediately preceding sentence, such Underwritten Shelf Takedown shall instead count as an Underwritten Shelf Takedown demanded by the Legacy SmartRent Equityholders or the Sponsor Equityholders, as applicable, for purposes of Section 2.1(d). Following the receipt of any Withdrawal Notice, the Company shall promptly forward such Withdrawal Notice to any other Holders that had elected to participate in such Underwritten Shelf Takedown. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with an Underwritten Shelf Takedown prior to its withdrawal under this Section 2.1(f), other than if a Demanding Holder elects to pay such Registration Expenses pursuant to the second sentence of this Section 2.1(f).
(g) New Registration Statement. Notwithstanding the registration obligations set forth in this Section 2.1, in the event the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the holders thereof and use its commercially reasonable efforts to file amendments to the Shelf Registration as required by the Commission and/or (ii) withdraw the Shelf Registration and file a new registration statement (a “New Registration Statement”), on Form S-3, or if Form S-3 is not then available to the Company for such registration statement, on such other form available to register for resale of the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, the Company shall use its commercially reasonable efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff (the “SEC Guidance”), including without limitation, the Manual of Publicly Available Telephone Interpretations D.29. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used commercially reasonable efforts to advocate with the Commission for the registration of all or a greater number of Registrable Securities), unless otherwise directed in writing by a Holder as to
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its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a pro rata basis based on the total number of Registrable Securities held by the Holders, subject to a determination by the Commission that certain Holders must be reduced first based on the number of Registrable Securities held by such Holders. In the event the Company amends the Shelf Registration or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Shelf Registration, as amended, or the New Registration Statement.
(h) Effective Registration. Notwithstanding the provisions of Section 2.1(c) or Section 2.1(d) above or any other part of this Agreement, a Registration shall not count as a Registration unless and until (i) the Registration Statement has been declared effective by the Commission and (ii) the Company has complied with all of its obligations under this Agreement with respect thereto; provided, further, that if, after such Registration Statement has been declared effective, an offering of Registrable Securities is subsequently interfered with by any stop order or injunction of the Commission, federal or state court or any other governmental agency the Registration Statement with respect to such Registration shall be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders initiating such Registration thereafter affirmatively elect to continue with such Registration and accordingly notify the Company in writing, but in no event later than five (5) days, of such election; provided, further, that the Company shall not be obligated or required to file another Registration Statement until the Registration Statement that has been previously filed with respect to a Registration pursuant to an Underwritten Shelf Takedown becomes effective or is subsequently terminated.
Section 2.2. Piggyback Registration.
(a) Piggyback Rights. Subject to Section 2.4(c), if the Company or any Holder proposes to conduct a registered offering of, or if the Company proposes to file a Registration Statement under the Securities Act with respect to the Registration of, equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company including, without limitation, an Underwritten Shelf Takedown pursuant to Section 2.1 hereof), other than a Registration Statement (or any registered offering with respect thereto) (i) filed in connection with any employee stock option or other benefit plan, (ii) pursuant to a Registration Statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule thereto), (iii) for an offering of debt that is convertible into equity securities of the Company, (iv) for a dividend reinvestment plan or (v) for a rights offering, then the Company shall give written notice of such proposed offering to all of the Holders of Registrable Securities as soon as practicable but not less than ten (10) days before the anticipated filing date of such Registration Statement or, in the case of an Underwritten Offering pursuant to a Shelf Registration, the applicable “red herring” prospectus or prospectus supplement used for marketing such offering, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name
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of the proposed managing Underwriter or Underwriters, if any, in such offering, and (B) offer to all of the Holders of Registrable Securities the opportunity to include in such registered offering such number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice (such Registration, a “Piggyback Registration”). Subject to Section 2.2(b), the Company shall cause such Registrable Securities to be included in such Piggyback Registration and, if applicable, shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of such Piggyback Registration to permit the Registrable Securities requested by the Holders pursuant to this Section 2.2(a) to be included therein on the same terms and conditions as any similar securities of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. The inclusion of any Holder’s Registrable Securities in a Piggyback Registration shall be subject to such Holder’s agreement to enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.
(b) Reduction of Offering. If the managing Underwriter or Underwriters in an Underwritten Offering that is to be a Piggyback Registration, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration in writing that the dollar amount or number of shares of Common Stock or other equity securities that the Company desires to sell, taken together with (i) the shares of Common Stock or other equity securities, if any, as to which Registration or a registered offering has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder, (ii) the Registrable Securities as to which registration has been requested pursuant to Section 2.2 hereof, and (iii) the shares of Common Stock or other equity securities, if any, as to which Registration or a registered offering has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:
(i) If the Registration or registered offering is undertaken for the Company’s account, the Company shall include in any such Registration or registered offering: (A) first, the shares of Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 2.2(a), pro rata (as nearly as practicable), based on the respective number of Registrable Securities that each Holder has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Holders have requested to be included in such Underwritten Offering or in such other proportions as shall mutually be agreed to by all such selling Holders, which can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the shares of Common Stock or other equity securities, if any, as to which Registration or a registered offering has been requested pursuant to written contractual piggy-back registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities;
(ii) If the Registration or registered offering is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall include
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in any such Registration or registered offering: (A) first, the shares of Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 2.2(a), pro rata (as nearly as practicable), based on the respective number of Registrable Securities that each Holder has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Holders have requested to be included in such Underwritten Offering or in such other proportions as shall mutually be agreed to by all such selling Holders, which can be sold without exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the shares of Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), the shares of Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities; and
(iii) If the Registration or registered offering is pursuant to a request by Holder(s) of Registrable Securities pursuant to Section 2.1 hereof, then the Company shall include in any such Registration or registered offering securities pursuant to Section 2.1(e).
(c) Piggyback Withdrawal. Any Holder of Registrable Securities (other than a Demanding Holder, whose right to withdrawal from an Underwritten Shelf Takedown, and related obligations, shall be governed by Section 2.1(f)) shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw from such Piggyback Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Piggyback Registration or, in the case of a Piggyback Registration pursuant to a Shelf Registration, the filing of the applicable “red herring” prospectus or prospectus supplement with respect to such Piggyback Registration used for marketing such transaction. The Company (whether on its own good faith determination or as the result of a request for withdrawal by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration (which, in no circumstance, shall include the Shelf) at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary in this Agreement (other than Section 2.1(f)), the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this Section 2.2(c).
(d) Unlimited Piggyback Registration Rights. For purposes of clarity, any Piggyback Registration effected pursuant to Section 2.2 hereof shall not be counted as a demand for an Underwritten Shelf Takedown under Section 2.1(d) hereof.
Section 2.3. Market Stand-Off. In connection with any Underwritten Offering of equity securities of the Company (other than a Block Trade or Other Coordinated Offering), each Holder given an opportunity to participate in the Underwritten Offering pursuant to the terms of this
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Agreement agrees that it shall not Transfer any shares of Common Stock or other equity securities of the Company (other than those included in such offering pursuant to this Agreement), without the prior written consent of the Company, during the ninety (90) day period beginning on the date of pricing of such offering or such shorter period during which the Company agrees not to conduct an underwritten primary offering of Common Stock, except in the event the Underwriters managing the offering otherwise agree by written consent. Each Holder agrees to execute a customary lock-up agreement in favor of the Underwriters to such effect (in each case on substantially the same terms and conditions as all such Holders).
Section 2.4. Block Trades; Other Coordinated Offerings.
(a) Notwithstanding the foregoing, at any time and from time to time when an effective Shelf is on file with the Commission and effective, if a Demanding Holder wishes to engage in (i) a Block Trade or (ii) an “at the market” or similar registered offering through a broker, sales agent or distribution agent, whether as agent or principal (an “Other Coordinated Offering”), in each case with a total offering price reasonably expected to exceed, in the aggregate, either (A) fifty million dollars ($50,000,000) or (B) all remaining Registrable Securities held by the Demanding Holder, then notwithstanding the time periods provided for in Section 2.1(d), such Demanding Holder shall notify the Company of the Block Trade or Other Coordinated Offering at least five (5) business days prior to the day such offering is to commence, and the Company shall use its commercially reasonable efforts to facilitate such Block Trade or Other Coordinated Offering; provided that the Demanding Holders representing a majority of the Registrable Securities wishing to engage in the Block Trade or Other Coordinated Offering shall use commercially reasonable efforts to work with the Company and any Underwriters or placement agents or sales agents prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the Block Trade or Other Coordinated Offering.
(b) Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used in connection with a Block Trade or Other Coordinated Offering, a majority-in-interest of the Demanding Holders initiating such Block Trade or Other Coordinated Offering shall have the right to submit a Withdrawal Notice to the Company and the Underwriter or Underwriters or placement agents or sales agents (if any) of their intention to withdraw from such Block Trade or Other Coordinated Offering. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with a Block Trade or Other Coordinated Offering prior to its withdrawal under this Section 2.4(b).
(c) Notwithstanding anything to the contrary in this Agreement, Section 2.2 hereof shall not apply to a Block Trade or Other Coordinated Offering initiated by a Demanding Holder pursuant to this Agreement.
(d) The Demanding Holder in a Block Trade shall have the right to select the Underwriters and any sale agents or placement agents (if any) for such Block Trade or Other Coordinated Offering (in each case, which shall consist of one or more reputable nationally recognized investment banks).
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ARTICLE III
REGISTRATION PROCEDURES
Section 3.1. Filings; Information. In connection with any Shelf and/or Shelf Takedown, the Company shall use its commercially reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as practicable, and in connection therewith:
(a) Filing Registration Statement. The Company shall prepare and file with the Commission as soon as practicable a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its commercially reasonable efforts to cause such Registration Statement to become effective and use its commercially reasonable efforts to keep it effective for the period required by Section 3.1(c).
(b) Copies. The Company shall, prior to filing a Registration Statement or Prospectus, or any amendment or supplement thereto, furnish without charge to the Holders of Registrable Securities included in such Registration, and such Holders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as the Holders of Registrable Securities included in such Registration or legal counsel for any such Holders may request in order to facilitate the disposition of the Registrable Securities owned by such Holders.
(c) Amendments and Supplements. The Company shall prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement or such securities have been withdrawn.
(d) Notification. After the filing of a Registration Statement, the Company shall promptly, and in no event more than two (2) business days after such filing, notify the Holders of Registrable Securities included in such Registration Statement of such filing, and shall further notify such Holders promptly and confirm such advice in writing in all events within two (2) business days of the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the Commission of any stop order (and the Company shall take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the Commission for any amendment or supplement to such Registration Statement or any Prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such Prospectus will not contain a Misstatement, and promptly make
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available to the Holders of Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the Commission a Registration Statement or Prospectus or any amendment or supplement thereto, including documents incorporated by reference, the Company shall furnish to the holders of Registrable Securities included in such Registration Statement and to the legal counsel for any such holders, copies of all such documents proposed to be filed sufficiently in advance of filing to provide such holders and legal counsel with a reasonable opportunity to review such documents and comment thereon, and the Company shall consider such comments in good faith before filing any Registration Statement or Prospectus or amendment or supplement thereto, including documents incorporated by reference.
(e) State Securities Laws Compliance. The Company shall use its commercially reasonable efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request (or provide evidence satisfactory to such Holders that the Registrable Securities are exempt from such registration or qualification) and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph or take any action to which it would be subject to general service of process or taxation in any such jurisdiction.
(f) Agreements for Disposition. The Company shall enter into customary agreements (including, if applicable, an underwriting agreement or other sales or distribution agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. The representations, warranties and covenants of the Company in any such agreement which are made to or for the benefit of any Underwriters or other placement agent or sales agent, to the extent applicable, shall also be made to and for the benefit of the Holders of Registrable Securities included in such registration statement. No Holder included in a Registration Statement to which such underwriting agreement relates shall be required to make any representations or warranties in the underwriting agreement except, if applicable, with respect to such Holder’s organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with such Holder’s material agreements and organizational documents, and with respect to written information relating to such Holder that such Holder has furnished in writing expressly for inclusion in such Registration Statement.
(g) Cooperation. The principal executive officer, principal financial officer and principal accounting officer of the Company and all other officers and members of the management of the Company shall reasonably cooperate in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.
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(h) Records. The Company shall make available for inspection by the Holders of Registrable Securities included in such Registration Statement, any Underwriter or placement agent or sales agent participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any Holder of Registrable Securities included in such Registration Statement or any Underwriter or placement agent or sales agent, all financial and other records, pertinent corporate documents and properties of the Company, as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply and be available to discuss any information reasonably requested by any of them in connection with such Registration Statement; provided, however, that such Underwriter, placement agent, sales agent or other representatives enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information.
(i) Opinions and Comfort Letters. The Company shall use commercially reasonable efforts to obtain (i) a “comfort” letter (including a bring-down letter dated as of the date the Registrable Securities are delivered for sale pursuant to such Registration) from the Company’s independent registered public accountants in the event of an Underwritten Offering, Block Trade or Other Coordinated Offering, in customary form and covering such matters of the type customarily covered by “comfort” letters as the managing Underwriter or placement agent or sales agent may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders, and (ii) an opinion and negative assurance letter, to be delivered on the date the Registrable Securities are delivered for sale pursuant to such Registration Statement, of counsel representing the Company for the purposes of such Registration, addressed to the Holders, the placement agent or sale agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the Holders, placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions and negative assurance letters, and reasonably satisfactory to a majority in interest of the participating Holders; provided, however, that counsel for the Company shall not be required to provide any opinions with respect to any Holder.
(j) Earnings Statement. The Company shall comply in all material respects with all applicable rules and regulations of the Commission and the Securities Act and make available to its shareholders, as soon as reasonably practicable, an earnings statement covering a period of twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
(k) Listing. The Company shall use its commercially reasonable efforts to cause all Registrable Securities included in any registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by the Company are then listed or designated or, if no such similar securities are then listed or designated, in a manner satisfactory to the holders of a majority of the Registrable Securities included in such registration.
(l) Road Show. If the Registration involves an Underwritten Offering of Registrable Securities for gross proceeds in excess of fifty million dollars ($50,000,000), the Company shall use its reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any Underwritten Offering.
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Section 3.2. Registration Expenses. The Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holders that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ or agents’ commissions and discounts, brokerage fees, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders.
Section 3.3. Information. The Holders of Registrable Securities shall provide such information as may reasonably be requested by the Company, or the managing Underwriter or placement agent or sales agent, if any, in connection with the preparation of any Registration Statement or Prospectus, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Article II and in connection with the Company’s obligation to comply with federal and applicable state securities laws. Notwithstanding anything in this Agreement to the contrary, if any Holder does not provide such information, the Company may exclude such Holder’s Registrable Securities from the applicable Registration Statement or Prospectus if the Company determines, based on the advice of counsel, that such information is necessary to effect the Registration and such Holder continues thereafter to withhold such information. No person may participate in any Underwritten Offering or other coordinated offering for equity securities of the Company pursuant to a Registration initiated by the Company hereunder unless such person (i) agrees to sell such person’s securities on the basis provided in any arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting or other agreements and other customary documents as may be reasonably required under the terms of such arrangements. The exclusion of a Holder’s Registrable Securities as a result of this Section 3.3 shall not affect the registration of the other Registrable Securities to be included in such Registration.
Section 3.4. Suspension of Sales; Adverse Disclosure; Restrictions on Registration Rights.
(a) Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company that the use of the Prospectus may be resumed (any such period, a “Suspension Period”).
(b) If the filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration at any time would (i) require the Company to make an Adverse Disclosure, (ii) require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, or (iii) in the good faith judgment of the majority of the Board, be seriously detrimental to the Company and the majority of the Board concludes as a result that it is essential to defer such filing,
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initial effectiveness or continued use at such time, the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement for the shortest period of time, but in no event more than sixty (60) consecutive days, determined in good faith by the Company necessary for such purpose after the request of the Holders is given; provided, however, that the Company may not invoke this right more than twice in any twelve (12) month period (any such period, a “Blackout Period”). In the event the Company exercises its rights under this Section 3.4(b), the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities. The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.4. Notwithstanding anything to the contrary in this Section 3.4, in no event shall any Suspension Period or any Blackout Period continue for more than one hundred twenty (120) days in the aggregate during any three hundred and sixty-five (365) day period.
(c) (i) During the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of, and ending on a date one hundred and eighty (180) days after the effective date of, a Company-initiated Registration and provided that the Company continues to actively employ, in good faith, all reasonable efforts to maintain the effectiveness of the applicable Shelf, or (ii) if, pursuant to Section 2.1(d), Holders have requested an Underwritten Shelf Takedown and the Company and such Holders are unable to obtain the commitment of underwriters to firmly underwrite such offering, the Company may, upon giving prompt written notice of such action to the Holders, delay any other registered offering pursuant to Section 2.1(d) or Section 2.4. In such event, the Company shall have the right to defer such filing for a period of not more than sixty (60) days.
(d) The Company shall not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the Holders of Registrable Securities in this Agreement and in the event of any conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.
Section 3.5. Reporting Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings; provided that any documents publicly filed or furnished with the Commission pursuant to the Electronic Data Gathering, Analysis and Retrieval System shall be deemed to have been furnished or delivered to the Holders pursuant to this Section 3.5. The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Common Stock held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission), including providing any legal opinions. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.
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ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION.
Section 4.1. Indemnification by the Company. To the extent permitted by law and subject to the limitations set forth in Section 4.4(c) hereof, the Company agrees to indemnify and hold harmless each Holder of Registrable Securities, and each of their respective officers, employees, affiliates, directors, partners, members, attorneys and agents, and each person, if any, who controls a Holder of Registrable Securities (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an “Holder Indemnified Party”), from and against all losses, judgments, claims, damages, liabilities and out-of-pocket expenses, whether joint or several, arising out of or based upon any Misstatement or alleged Misstatement contained in any Registration Statement or Prospectus; provided, however, that the indemnity agreement contained in this Section 4.1 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, and the Company will not be liable in any such case to the extent that any such losses, judgments, claims, damages, liabilities or out-of-pocket expenses arises out of or is based upon any Misstatement or alleged Misstatement made in such Registration Statement or Prospectus in reliance upon and in conformity with information furnished to the Company, in writing, by a Holder Indemnified Party expressly for use therein.
Section 4.2. Indemnification by Holders of Registrable Securities. In connection with any Registration Statement in which the Holder of Registrable Securities is participating, to the extent permitted by law and subject to the limitations set forth in Section 4.4(c) hereof, each selling Holder of Registrable Securities will, in the event that any Registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such selling Holder, indemnify and hold harmless the Company, each of its directors and officers, legal counsel and accountants for the Company and each Underwriter or placement agent or sales agent (if any), and each other selling Holder and each other person, if any, who controls the Company, another selling Holder or such Underwriter or placement agent or sales agent within the meaning of the Securities Act, against any losses, claims, judgments, damages, liabilities and out-of-pocket expenses, whether joint or several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon any Misstatement or alleged Misstatement contained in any Registration Statement, if the Misstatement or Alleged Misstatement was made in reliance upon and in conformity with information furnished in writing to the Company by such selling Holder expressly for use therein, and shall reimburse the Company, its directors and officers, and each other selling Holder or controlling person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending; provided, however, that the indemnity agreement contained in this Section 4.2 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld. Each selling Holder’s indemnification obligations hereunder shall be several and not joint and several and shall be limited to the amount of any net proceeds actually received by such selling Holder, except in the case of fraud or willful misconduct by such Holder.
Section 4.3. Conduct of Indemnification Proceedings. Promptly after receipt by any person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Section 4.1 or Section 4.2, such person (the “Indemnified
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Party”) shall, if a claim in respect thereof is to be made against any other person for indemnification hereunder, notify such other person (the “Indemnifying Party”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written advice of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.
Section 4.4. Contribution.
(a) If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the Misstatement or alleged Misstatement relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such Misstatement or alleged Misstatement.
(b) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4(a).
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(c) The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no Holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such Holder from the sale of Registrable Securities which gave rise to such contribution obligation. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) with respect to any action shall be entitled to contribution in such action from any person who was not guilty of such fraudulent misrepresentation.
ARTICLE V
MISCELLANEOUS.
Section 5.1. Other Registration Rights. Except as provided in the Subscription Agreements, the Company represents and warrants that no person, other than the Holders, has any right to require the Company to register any shares of the Company’s capital stock for sale or to include shares of the Company’s capital stock in any registration filed by the Company for the sale of shares of capital stock for its own account or for the account of any other person.
Section 5.2. Acknowledgment. The Holders hereby agree and acknowledge that their respective Registrable Securities (other than their respective Registrable Securities acquired in the public market or pursuant to a transaction exempt from registration under the Securities Act of 1933, as amended, pursuant to a subscription agreement where the issuance of Registrable Securities occurs on or after the closing of the Merger) are subject to the lock-up provisions set forth in Section 1 of the Lock-Up Agreements, dated as of April 21, 2021, by and among the Legacy SmartRent Equityholders and the Company, or Section 3 of that certain Sponsor Agreement, dated as of April 21, 2021, by and among the Sponsor and the other parties thereto.
Section 5.3. Assignment; No Third-Party Beneficiaries. This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part. This Agreement and the rights, duties and obligations of any Holder hereunder may be freely assigned or delegated by such Holder in conjunction with and to the extent of any transfer of Registrable Securities by any such Holder. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties or of any assignee of the Holders. This Agreement is not intended to confer any rights or benefits on any persons that are not party hereto other than as expressly set forth in Article IV and this Section 5.3.
Section 5.4. Notices. All notices, demands, requests, consents, approvals or other communications (collectively, “Notices”) required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served, delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, electronic transmission with receipt verified by electronic confirmation, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by electronic transmission; provided, that if such service or transmission is not on a
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business day or is after normal business hours, then such notice shall be deemed given on the next business day. Notice otherwise sent as provided herein shall be deemed given on the next business day following timely delivery of such notice to a reputable air courier service with an order for next-day delivery.
If to the Company, to:
SmartRent, Inc.
18835 N. Thompson Peak Parkway
Scottsdale, AZ 85255
Attention: Lucas Haldeman
Email: lucas@smartrent.com
with a copy (which will not constitute notice) to:
DLA Piper LLP
2525 East Camelback Road
Esplanade II, Suite 1000
Phoenix, AZ 85016
| Attention: | David Lewis |
| Kevin Criddle |
| Email: | david.lewis@dlapiper.com |
| kevin.criddle@dlapiper.com |
To a Holder, to the address or contact information set forth in the Company’s books and records.
Section 5.5. Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.
Section 5.6. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.
Section 5.7. Entire Agreement. This Agreement (including Schedule A and Schedule B and all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written.
Section 5.8. Modifications, Amendments and Waivers. Upon the written consent of (a) the Company and (b) the Holders of a majority of the total Registrable Securities, compliance
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with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, however, that in the event any such waiver, amendment or modification would be adverse in any material respect to the material rights or obligations hereunder of a Holder, the written consent of such Holder will also be required; provided further that in the event any such waiver, amendment or modification would be disproportionate and adverse in any material respect to the material rights or obligations hereunder of a Holder, the written consent of such Holder will also be required. No course of dealing between any Holder or the Company and any other party hereto or any failure or delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.
Section 5.9. Termination of Existing Registration Rights. The registration rights granted under this Agreement shall supersede any registration, qualification or similar rights of the Holders with respect to any shares or securities of the Company or Legacy SmartRent granted under any other agreement, including, but not limited to, the Prior Agreement and the Second Amended and Restated Investors Rights Agreement, dated as of February 2, 2021, by and among Legacy SmartRent and the other parties thereto, any of such preexisting registration, qualification or similar rights and such agreements shall be terminated and of no further force and effect.
Section 5.10. Term. This Agreement shall terminate with respect to any Holder on the date that such Holder no longer holds any Registrable Securities. The provisions of Article IV shall survive any termination.
Section 5.11. Titles and Headings. Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement.
Section 5.12. Remedies Cumulative. In the event that the Company fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the Holder may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.
Section 5.13. Governing Law. THIS AGREEMENT, AND ALL CLAIMS OR CAUSES OF ACTION BASED UPON, ARISING OUT OF, OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF LAWS OF ANOTHER JURISDICTION.
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Section 5.14. Jurisdiction; Waiver of Trial by Jury.
(a) Any action based upon, arising out of or related to this Agreement, or the transactions contemplated hereby, shall be brought in the Court of Chancery of the State of Delaware or, if such court declines to exercise jurisdiction, any federal or state court located in Delaware, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the action shall be heard and determined only in any such court, and agrees not to bring any action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by Law, or to commence legal proceedings or otherwise proceed against any other party in any other jurisdiction, in each case, to enforce judgments obtained in any action brought pursuant to this Section 5.14(a).
(b) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE INVESTOR IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| COMPANY: | ||
| SMARTRENT, INC. | ||
| By: | /s/ Lucas Haldeman | |
| Name: | Lucas Haldeman | |
| Title: | Chief Executive Officer | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| AMAZON.COM NV INVESTMENT HOLDINGS LLC | ||
| By: | /s/ Paul Bernard | |
| Name: | Paul Bernard | |
| Title: | Director, Corporate Development | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| AMERICAN BANKERS INSURANCE GROUP, INC. | ||
| By: | /s/ Paul Meggs | |
| Name: | Paul Meggs | |
| Title: | Vice President | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| BAIN CAPITAL VENTURE FUND 2019, L.P. | ||
| By: | Bain Capital Venture Investors 2019, LLC, | |
| its general partner | ||
| By: | Bain Capital Venture Investors, LLC, | |
| its manager | ||
| By: | /s/ Matthew Harris | |
| Name: Matthew Harris | ||
| Title: Managing Director | ||
| BCIP VENTURE ASSOCIATES II, LP | ||
| By: | Boylston Coinvestors, LLC, | |
| its general partner | ||
| By: | /s/ Matthew Harris | |
| Name: Matthew Harris | ||
| Title: Authorized Signatory | ||
| BCIP VENTURE ASSOCIATES II-B, LP | ||
| By: | Boylston Coinvestors, LLC | |
| its general partner | ||
| By: | /s/ Matthew Harris | |
| Name: Matthew Harris | ||
| Title: Authorized Signatory | ||
| BCV 2019-MD PRIMARY, L.P. | ||
| By: | Bain Capital Venture Investors 2019, LLC | |
| its general partner | ||
| By: | Bain Capital Venture Investors, LLC, | |
| its manager | ||
| By: | /s/ Matthew Harris | |
| Name: Matthew Harris | ||
| Title: Managing Director | ||
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| BEST FAMILY TRUST, ESTABLISHED OCTOBER 2, 2001 | ||
| By: | /s/ Robert T Best | |
| Name: | Robert T Best | |
| Title: | Trustee | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| /s/ Brett Barrack |
| Brett Barrack |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| /s/ Cameron B. Doering |
| Cameron B. Doering |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| /s/ Colin P. Best |
| Colin P. Best |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| /s/ Connor N. Best |
| Connor N. Best |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| ENERGY IMPACT FUND II LP | ||
| By: Energy Impact Partners II GP LLC | ||
| Its General Partner | ||
| By: | /s/ Joshua J. Feldman | |
| Name: | Joshua J. Feldman | |
| Title: | Authorized Signatory | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| ESSEX PORTFOLIO, L.P. | ||
| By: | /s/ Anne Morrison | |
| Name: | Anne Morrison | |
| Title: | Senior Vice President/General Counsel | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| FCT FUND, LTD | ||
| By: | /s/ Fred Tuomi | |
| Name: | Fred Tuomi | |
| Title: | President FCT Management LLC, GP | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| INVITATION HOMES OPERATING PARTNERSHIP L.P. | ||
| By: | /s/ John M. Gibson | |
| Name: | John M. Gibson | |
| Title: | Executive Vice President and Chief Investment Officer | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| JAWS EQUITY OWNER 53, LLC | ||
| By: | /s/ Michael Racich | |
| Name: | Michael Racich | |
| Title: | VP | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| JODI B. PITTS LIVING TRUST DATED JANUARY 27, 2009 | ||
| By: | /s/ Jodi B. Pitts | |
| Name: | Jodi B. Pitts | |
| Title: | Trustee | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| LEN FW INVESTOR, LLC | ||
| By: | /s/ Eric Feder | |
| Name: | Eric Feder | |
| Title: | Manager | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| LG ELECTRONICS INC. | ||
| By: | /s/ Doo Yong Bae | |
| Name: | Doo Yong Bae | |
| Title: | Executive Vice President | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| LUCAS HALDEMAN | ||
| By: | /s/ Lucas Haldeman | |
| Name: | Lucas Haldeman | |
| Title: | ||
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| NINE FOUR VENTURES, LP | ||
| By: | /s/ Jeffrey Elowe | |
| Name: | Jeffrey Elowe | |
| Title: | General Partner | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| OPENDOOR LABS INC. | ||
| By: | /s/ Carrie Wheeler | |
| Name: | Carrie Wheeler | |
| Title: | Chief Financial Officer | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| REAL ESTATE TECHNOLOGY VENTURES ASSOCIATES, L.P. | ||
| By: | /s/ John H Helm | |
| Name: | John H Helm | |
| Title: | Managing Director | |
| REAL ESTATE TECHNOLOGY VENTURES II, L.P. | ||
| By: | /s/ John H Helm | |
| Name: | John H Helm | |
| Title: | Managing Director | |
| REAL ESTATE TECHNOLOGY VENTURES, L.P. | ||
| By: | /s/ John H Helm | |
| Name: | John H Helm | |
| Title: | Managing Director | |
| REAL ESTATE TECHNOLOGY VENTURES-A, L.P. | ||
| By: | /s/ John H Helm | |
| Name: | John H Helm | |
| Title: | Managing Director | |
[Signature Page to Registration Rights Agreement]
| RET VENTURES SPV I, L.P | ||
| By: | /s/ John H Helm | |
| Name: | John H Helm | |
| Title: | Managing Director | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| /s/ Ryan C. Best |
| Ryan C. Best |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| SM FUND I, A SERIES OF HACK VC, LP | ||
| By: | /s/ Kai Gill | |
| Name: | Kai Gill | |
| Title: | Authorized Person | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| SPARK CAPITAL GROWTH FOUNDERS’ FUND II, L.P. | ||
| By: | /s/ Paul J Conway | |
| Name: | Paul J Conway | |
| Title: | Managing Member | |
| SPARK CAPITAL GROWTH FUND II, L.P. | ||
| By: | /s/ Paul J Conway | |
| Name: | Paul J Conway | |
| Title: | Managing Member | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| THE ALAIA JOY BARRACK 2015 TRUST | ||
| By: | /s/ Thomas J. Barrack, Jr. | |
| Name: | Thomas J. Barrack, Jr. | |
| Title: | Trustee | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| THE JADEN THOMAS BARRACK 2012 TRUST | ||
| By: | /s/ Thomas J. Barrack, Jr. | |
| Name: | Thomas J. Barrack, Jr. | |
| Title: | Trustee | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| UDR, INC. | ||
| By: | /s/ David G. Thatcher | |
| Name: | David G. Thatcher | |
| Title: | Senior Vice President – General Counsel | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| VALLEY NATIONAL BANCORP | ||
| By: | /s/ Jeffrey Elowe | |
| Name: | Jeffrey Elowe | |
| Title: | General Partner | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| /s/ David Zelman |
|
David Zelman |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| RETV GRAND AVENUE PARTNERS, LLC | ||
| By: | /s/ Taejo Kim | |
| Name: | Taejo Kim | |
| Title: | Authorized Signatory | |
| By: | /s/ Derek Smith | |
| Name: | Derek Smith | |
| Title: | Authorized Signatory | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| HOLDERS: | ||
| FIFTH WALL VENTURES II, L.P. | ||
| BY: FIFTH WALL VENTURES GP II, L.P., its general partner | ||
| BY: FIFTH WALL VENTURES UGP II, LLC, its general partner | ||
| By: | /s/ Andriy Mykhaylovskyy | |
| Name: |
Andriy Mykhaylovskyy | |
| Title: | Authorized Representative | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| HOLDERS: | ||
| FIFTH WALL ACQUISITION SPONSOR, LLC | ||
| By: | /s/ Andriy Mykhaylovskyy | |
| Name: |
Andriy Mykhaylovskyy | |
| Title: | Manager | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| HOLDERS: | ||
| By: | /s/ Alana Beard | |
| Name: |
Alana Beard | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| HOLDERS: | ||
| By: | /s/ Victor Coleman | |
| Name: |
Victor Coleman | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| HOLDERS: | ||
| By: | /s/ Angela Huang | |
| Name: |
Angela Huang | |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| HOLDERS: | ||
| By: | /s/ Wisdom Lu | |
| Name: |
Wisdom Lu | |
[Signature Page to Registration Rights Agreement]
SCHEDULE A
Sponsor Equityholders
| 1. | Fifth Wall Acquisition Sponsor, LLC |
| 2. | Victor Coleman |
| 3. | Alana Beard |
| 4. | Wisdom Lu |
| 5. | Angela Huang |
SCHEDULE B
Legacy SmartRent Equityholders
| 1. | Spark Capital Growth Fund II, L.P. |
| 2. | Spark Capital Growth Founders’ Fund II, L.P. |
| 3. | American Bankers Insurance Group, Inc. |
| 4. | Bain Capital Venture Fund 2019, L.P. |
| 5. | BCIP Venture Associates II, L.P. |
| 6. | BCIP Venture Associates II-B, L.P. |
| 7. | BCV 2019-MD Primary, L.P. |
| 8. | Real Estate Technology Ventures, L.P. |
| 9. | Real Estate Technology Ventures-A, L.P. |
| 10. | Real Estate Technology Ventures Associates, L.P. |
| 11. | RET VENTURES SPV I, L.P. |
| 12. | Real Estate Technology Ventures II, L.P. |
| 13. | Fifth Wall Ventures II, L.P. |
| 14. | Energy Impact Fund II LP |
| 15. | Lucas Haldeman |
| 16. | RETV Grand Avenue Partners, LLC |
| 17. | UDR, Inc. |
| 18. | Essex Portfolio, L.P. |
| 19. | Fred Tuomi |
| 20. | JAWS Equity Owner 117, LLC |
| 21. | SM Fund I, a Series of Hack VC, LP |
| 22. | Best Family Trust, established October 2, 2001 |
| 23. | Amazon.com NV Investment Holdings LLC |
| 24. | David Zelman |
| 25. | Nine Four Ventures, LP |
| 26. | Valley National Bancorp |
| 27. | Invitation Homes Operating Partnership L.P. |
| 28. | LEN FW Investor, LLC |
| 29. | Opendoor Labs Inc. |
| 30. | LG Electronics Inc. |
| 31. | The Alaia Joy Barrack 2015 Trust |
| 32. | The Jaden Thomas Barrack 2012 Trust |
| 33. | Jodi B. Pitts Living Trust Dated January 27, 2009 |
| 34. | Brett Barrack |
| 35. | Colin P. Best |
| 36. | Ryan C. Best |
| 37. | Connor N. Best |
| 38. | Cameron B. Doering |
Exhibit 10.11
SMARTRENT, INC.
RESTRICTED STOCK UNITS AGREEMENT
(U.S. Participants)
SmartRent, Inc., a Delaware corporation (the “Company”), has granted to the Participant named in the Notice of Grant of Restricted Stock Units (the “Grant Notice”) to which this Restricted Stock Units Agreement (the “Agreement”) is attached an Award consisting of Restricted Stock Units (each a “Unit”) subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the SmartRent, Inc. 2021 Equity Incentive Plan (the “Plan”), as amended, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares issuable pursuant to the Award (the “Plan Prospectus”), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Agreement or the Plan.
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
2. ADMINISTRATION.
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
3. THE AWARD.
3.1 Grant of Units. On the Date of Grant, the Participant shall acquire, subject to the provisions of this Agreement, the Total Number of Units set forth in the Grant Notice, subject to adjustment as provided in Section 9. Each Unit represents a right to receive on a date determined in accordance with the Grant Notice and this Agreement one (1) share of Stock.
3.2 No Monetary Payment Required. The Participant is not required to make any monetary payment (other than applicable tax withholding, if any) as a condition to receiving the Units or shares of Stock issued upon settlement of the Units, the consideration for which shall be past services actually rendered or future services to be rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Units.
4. VESTING OF UNITS.
Units acquired pursuant to this Agreement shall become Vested Units as provided in the Grant Notice.
5. COMPANY REACQUISITION RIGHT.
5.1 Grant of Company Reacquisition Right. Except to the extent otherwise provided by the Superseding Agreement, if any, in the event that the Participant’s Service terminates for any reason or no reason, with or without cause, the Participant shall forfeit and the Company shall automatically reacquire all Units which are not, as of the time of such termination, Vested Units (“Unvested Units”), and the Participant shall not be entitled to any payment therefor (the “Company Reacquisition Right”).
5.2 Ownership Change Event, Non-Cash Dividends, Distributions and Adjustments. Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 9, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Company’s dividend policy) to which the Participant is entitled by reason of the Participant’s ownership of Unvested Units shall be immediately subject to the Company Reacquisition Right and included in the terms “Units” and “Unvested Units” for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Units immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Units following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.
6. SETTLEMENT OF THE AWARD.
6.1 Issuance of Shares of Stock. Subject to the provisions of Section 6.3, the Company shall issue to the Participant within 30 days of the Settlement Date with respect to each Vested Unit to be settled on such date one (1) share of Stock. The Settlement Date with respect to a Unit shall be the date on which such Unit becomes a Vested Unit as provided by the Grant Notice (an “Original Settlement Date”); provided, however, that if the tax withholding obligations of a Participating Company, if any, will not be satisfied by the share withholding method described in Section 7.3 and the Original Settlement Date would occur on a date on which a sale by the Participant of the shares to be issued in settlement of the Vested Units would violate the Trading Compliance Policy of the Company, then the Settlement Date for such Vested Units shall be deferred until the next day on which the sale of such shares would not violate the Trading Compliance Policy, but in any event on or before the 15th day of the third calendar month following calendar year of the Original Settlement Date. Shares of Stock issued in settlement of Units shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 6.3, Section 7 or the Company’s Trading Compliance Policy.
6.2 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all shares acquired by the Participant pursuant to the settlement of the Award with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such shares for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice. Except as provided by the foregoing, a certificate for the shares acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
6.3 Restrictions on Grant of the Award and Issuance of Shares. The grant of the Award and issuance of shares of Stock upon settlement of the Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any shares subject to the Award shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained. As a condition to the settlement of the Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
6.4 Fractional Shares. The Company shall not be required to issue fractional shares upon the settlement of the Award.
7. TAX WITHHOLDING.
7.1 In General. At the time the Grant Notice is executed, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, the vesting of Units or the issuance of shares of Stock in settlement thereof. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company have been satisfied by the Participant.
7.2 Assignment of Sale Proceeds. Subject to compliance with applicable law and the Company’s Trading Compliance Policy, if permitted by the Company, the Participant may satisfy the Participating Company’s tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares being acquired upon settlement of Units.
7.3 Withholding in Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations by deducting from the shares of Stock otherwise deliverable to the Participant in settlement of the Award a number of whole shares having a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates if required to avoid liability classification of the Award under generally accepted accounting principles in the United States. Any determination by the Company with respect to whether to permit the withholding of shares of Stock to satisfy the tax withholding obligation shall be made by the Committee if the Participant is subject to Section 16 of the Exchange Act.
8. EFFECT OF CHANGE IN CONTROL.
In the event of a Change in Control, the Award shall be subject to and treated as set forth in Section 13 of the Plan.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
The Award shall be subject to and treated as set forth in Section 4.3 of the Plan.
10. RIGHTS AS A STOCKHOLDER, DIRECTOR, EMPLOYEE OR CONSULTANT.
The Participant shall have no rights as a stockholder with respect to any shares which may be issued in settlement of this Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service at any time.
11. LEGENDS.
The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section.
12. COMPLIANCE WITH SECTION 409A.
It is intended that any election, payment or benefit which is made or provided pursuant to or in connection with this Award that may result in Section 409A Deferred Compensation shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Committee in good faith) to avoid the unfavorable tax consequences provided therein for non-compliance. In connection with effecting compliance with or an exemption from Section 409A, the following shall apply:
12.1 Separation from Service; Required Delay in Payment to Specified Employee. Notwithstanding anything set forth herein to the contrary, no amount payable pursuant to this Agreement on account of the Participant’s termination of Service which constitutes Section 409A Deferred Compensation shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”). Furthermore, to the extent that the Participant is a “specified employee” within the meaning of the Section 409A Regulations as of the date of the Participant’s separation from service, no Section 409A Deferred Compensation which is payable on account of the Participant’s separation from service shall be paid to the Participant before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.
12.2 Other Changes in Time of Payment. Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Agreement in any manner which would not be in compliance with the Section 409A Regulations.
12.3 Installment Payments. It is the intent that any right of Participant to receive installment payments (within the meaning of Section 409A) with respect to the Units subject to this Agreement shall, for all purposes of Section 409A, be treated as a right to a series of separate payments.
12.4 Amendments to Comply with Section 409A; Indemnification. Notwithstanding any other provision of this Agreement to the contrary, the Company is authorized to amend this Agreement, to void or amend any election made by the Participant under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with or be exempt from the Section 409A Regulations without prior notice to or consent of the Participant. The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.
12.5 Advice of Independent Tax Advisor. The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award. The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Agreement and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Agreement.
13. MISCELLANEOUS PROVISIONS.
13.1 Termination or Amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may have a materially adverse effect on the Participant’s rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, including, but not limited to, Section 409A. No amendment or addition to this Agreement shall be effective unless in writing.
13.2 Nontransferability of the Award. Prior to the issuance of shares of Stock on the applicable Settlement Date, neither this Award nor any Units subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.
13.3 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
13.4 Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
13.5 Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a) Description of Electronic Delivery and Signature. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company. Any and all such documents and notices may be electronically signed.
(b) Consent to Electronic Delivery and Signature. The Participant acknowledges that the Participant has read Section 13.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 13.5(a). The Participant agrees that any and all such documents requiring a signature may be electronically signed and that such electronic signature shall have the same effect as handwritten signature for the purposes of validity, enforceability and admissibility. The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.5(a).
13.6 Integrated Agreement. The Grant Notice, this Agreement and the Plan, together with the Superseding Agreement, if any, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
13.7 Applicable Law. This Agreement shall be governed by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within the State of Delaware.
13.8 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Exhibit 10.12
SMARTRENT, INC.
STOCK OPTION AGREEMENT
(U.S. Participants)
SmartRent, Inc., a Delaware corporation (the “Company”), has granted to the Participant named in the Notice of Grant of Stock Option (the “Grant Notice”) to which this Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”) to purchase a number of shares of Stock upon the terms and conditions set forth in the Grant Notice and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms and conditions of the SmartRent, Inc. 2021 Equity Incentive Plan (the “Plan”), as amended, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, the Grant Notice, this Option Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of shares issuable pursuant to the Option (the “Plan Prospectus”), (b) accepts the Option subject to all of the terms and conditions of the Grant Notice, this Option Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Option Agreement or the Plan.
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
2. TAX CONSEQUENCES.
2.1 Tax Status of Option. This Option is intended to have the tax status designated in the Grant Notice.
(a) Incentive Stock Option. If the Grant Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Participant should consult with the Participant’s own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. (NOTE TO PARTICIPANT: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.)
(b) Nonstatutory Stock Option. If the Grant Notice so designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code.
2.2 ISO Fair Market Value Limitation. If the Grant Notice designates this Option as an Incentive Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Participant under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options designated as Incentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO PARTICIPANT: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the Participating Company Group) is greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.)
3. ADMINISTRATION.
All questions of interpretation concerning the Grant Notice, this Option Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Option shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Option, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Option or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Option. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
4. EXERCISE OF THE OPTION.
4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Vesting Date and prior to the termination of the Option (as provided in Section 6) in an amount not to exceed the number of Vested Shares less the number of shares previously acquired upon exercise of the Option. In no event shall the Option be exercisable for more shares than the Number of Option Shares, as adjusted pursuant to Section 9.
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4.2 Method of Exercise. Exercise of the Option shall be by means of electronic or written notice (the “Exercise Notice”) in a form authorized by the Company. An electronic Exercise Notice must be digitally signed or authenticated by the Participant in such manner as required by the notice and transmitted to the Company or an authorized representative of the Company (including a third-party administrator designated by the Company). In the event that the Participant is not authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by a written Exercise Notice addressed to the Company, which shall be signed by the Participant and delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Company, or an authorized representative of the Company (including a third-party administrator designated by the Company). Each Exercise Notice, whether electronic or written, must state the Participant’s election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Participant’s investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. Further, each Exercise Notice must be received by the Company prior to the termination of the Option as set forth in Section 6 and must be accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such electronic or written Exercise Notice and the aggregate Exercise Price.
4.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Company and subject to the limitations contained in Section 4.3(b), by means of (1) a Cashless Exercise, (2) a Net-Exercise, or (3) a Stock Tender Exercise; or (iii) by any combination of the foregoing.
(b) Limitations on Forms of Consideration. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedure providing for payment of the Exercise Price through any of the means described below, including with respect to the Participant notwithstanding that such program or procedures may be available to others. Any determination by the Company with respect to whether to permit the withholding or tendering of shares of Stock to satisfy the Exercise Price shall be made by the Committee if the Participant is subject to Section 16 of the Exchange Act.
(i) Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed Exercise Notice together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to shares of Stock acquired upon the exercise of the Option in an amount not less than the aggregate Exercise Price for such shares (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).
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(ii) Net-Exercise. A “Net-Exercise” means the delivery of a properly executed Exercise Notice electing a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to the Participant upon the exercise of the Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate Exercise Price not satisfied by such reduction in the number of whole shares to be issued. Following a Net-Exercise, the number of shares remaining subject to the Option, if any, shall be reduced by the sum of (1) the net number of shares issued to the Participant upon such exercise, and (2) the number of shares deducted by the Company for payment of the aggregate Exercise Price.
(iii) Stock Tender Exercise. A “Stock Tender Exercise” means the delivery of a properly executed Exercise Notice accompanied by (1) the Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant’s payment to the Company in cash of the remaining balance of such aggregate Exercise Price not satisfied by such shares’ Fair Market Value. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. If required by the Company, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
4.4 Tax Withholding.
(a) In General. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company Group, if any, which arise in connection with the Option. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company Group have been satisfied by the Participant.
(b) Withholding in Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations upon exercise of the Option by deducting from the shares of Stock otherwise issuable to the Participant upon such exercise a number of whole shares having a fair market value, as determined by the Company as of the date of exercise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates if required to avoid liability classification of the Option under generally accepted accounting principles in the United States. Any determination by the Company with respect to whether to permit the withholding of shares of Stock to satisfy the tax withholding obligations shall be made by the Committee if the Participant is subject to Section 16 of the Exchange Act.
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4.5 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice any or all shares acquired by the Participant pursuant to the exercise of the Option. Except as provided by the preceding sentence, a certificate for the shares as to which the Option is exercised shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION.
During the lifetime of the Participant, the Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. The Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Participant, the Option, to the extent provided in Section 7, may be exercised by the Participant’s legal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
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6. TERMINATION OF THE OPTION.
The Option shall terminate and may no longer be exercised after the first to occur of (a) the close of business on the Option Expiration Date, (b) the close of business on the last date for exercising the Option following termination of the Participant’s Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 Option Exercisability. The Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period as determined below and thereafter shall terminate.
(a) Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
(b) Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant’s termination of Service other than for Cause.
(c) Termination for Cause. Notwithstanding any other provision of this Option Agreement to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(d) Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for Vested Shares by the Participant on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
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7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of the Participant’s Service for Cause, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until the later of (a) thirty (30) days after the date such exercise first would no longer be prevented by such provisions, or (b) the end of the applicable time period under Section 7.1, but in any event no later than the Option Expiration Date.
8. EFFECT OF CHANGE IN CONTROL.
In the event of a Change in Control, the Option shall be subject to and treated as set forth in Section 13 of the Plan.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
The Option shall be subject to and treated as set forth in Section 4.3 of the Plan.
10. RIGHTS AS A STOCKHOLDER, DIRECTOR, EMPLOYEE OR CONSULTANT.
The Participant shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service as a Director, an Employee or Consultant, as the case may be, at any time.
11. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.
The Participant shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Grant Notice designates this Option as an Incentive Stock Option, the Participant shall (a) promptly notify the Chief Financial Officer of the Company if the Participant disposes of any of the shares acquired pursuant to the Option within one (1) year after the date the Participant exercises all or part of the Option or within two (2) years after the Date of Grant and (b) provide the Company with a description of the circumstances of such disposition. Until such time as the Participant disposes of such shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Participant shall hold all shares acquired pursuant to the Option in the Participant’s name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Company’s stock to notify the Company of any such transfers. The obligation of the Participant to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence.
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12. LEGENDS.
The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
“THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO EITHER THE TWO-YEAR ANNIVERSARY OF THE DATE OF GRANT OR THE ONE-YEAR ANNIVERSARY OF THE DATE OF EXERCISE. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”
13. MISCELLANEOUS PROVISIONS.
13.1 Termination or Amendment. The Committee may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may have a materially adverse effect on the Option or any unexercised portion thereof without the consent of the Participant unless such termination or amendment is necessary to comply with any applicable law or government regulation. No amendment or addition to this Option Agreement shall be effective unless in writing.
13.2 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Option Agreement.
13.3 Binding Effect. This Option Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
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13.4 Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a) Description of Electronic Delivery and Signature. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Option Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice and Exercise Notice called for by Section 4.2 to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company. Any and all such documents and notices may be electronically signed.
(b) Consent to Electronic Delivery and Signature. The Participant acknowledges that the Participant has read Section 13.4(a) of this Option Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and Exercise Notice, as described in Section 13.4(a). The Participant agrees that any and all such documents requiring a signature may be electronically signed and that such electronic signature shall have the same effect as handwritten signature for the purposes of validity, enforceability and admissibility. The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.4(a) or may change the electronic mail address to which such documents are to be delivered (if the Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.4(a).
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13.5 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan, together with the Superseding Agreement, if any, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.
13.6 Applicable Law. This Option Agreement shall be governed by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within the State of Delaware.
13.7 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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Exhibit 10.13
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
SMARTRENT.COM, INC.
STOCK OPTION AGREEMENT
SmartRent.com, Inc. has granted to the Participant named in the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”) to purchase certain shares of Stock upon the terms and conditions set forth in the Grant Notice and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms and conditions of the SmartRent.com, Inc. 2018 Stock Plan (the “Plan”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice or accepting the Option electronically, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, the Grant Notice, this Option Agreement and the Plan, (b) accepts the Option subject to all of the terms and conditions of the Grant Notice, this Option Agreement and the Plan, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Grant Notice, this Option Agreement or the Plan.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
2. Tax Consequences.
2.1 Tax Status of Option. This Option is intended to have the tax status designated in the Grant Notice.
(a) Incentive Stock Option. If the Grant Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Participant should consult with the Participant’s own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. (NOTE TO PARTICIPANT: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.)
(b) Nonstatutory Stock Option. If the Grant Notice so designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code.
2.2 ISO Fair Market Value Limitation. If the Grant Notice designates this Option as an Incentive Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Participant under all stock option plans of the Company, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO PARTICIPANT: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the Company) is greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.)
3. Administration.
All questions of interpretation concerning the Grant Notice, this Option Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Option shall be determined by the Board. All such determinations by the Board shall be final, binding and conclusive upon all persons having an interest in the Option, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Board in the exercise of its discretion pursuant to the Plan or the Option or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Option. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
4. Exercise of the Option.
4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Vesting Date and prior to the termination of the Option (as provided in Section 6) in an amount not to exceed the number of Vested Shares less the number of shares previously acquired upon exercise of the Option, subject to the Company’s repurchase rights set forth in Section 11. In no event shall the Option be exercisable for more shares than the Number of Option Shares, as adjusted pursuant to Section 9.
4.2 Method of Exercise. Exercise of the Option shall be by means of electronic or written notice (the “Notice of Exercise”) in a form authorized by the Company. An electronic Notice of Exercise must be digitally signed or authenticated by the Participant in such manner as required by the notice and transmitted to the Company or an authorized representative of the Company (including a third-party administrator designated by the Company). In the event that the Participant is not authorized or is unable to provide an electronic Notice of Exercise, the Option shall be exercised by a written Notice of Exercise addressed to the Company, which shall be signed by the Participant and delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Company, or an authorized representative of the Company (including a third-party administrator designated by the Company). Each Notice of Exercise, whether electronic or written, must state the Participant’s election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Participant’s investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. Further, each Notice of Exercise must be received by the Company prior to the termination of the Option as set forth in Section 6 and must be accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such electronic or written Notice of Exercise and the aggregate Exercise Price.
4.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check or in cash equivalent, (ii) if permitted by the Company and subject to the limitations contained in Section 4.3(b), by means of (1) a Stock Tender Exercise, (2) a Cashless Exercise or (3) a Net-Exercise; or (iii) by any combination of the foregoing.
(b) Limitations on Forms of Consideration. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedure providing for payment of the Exercise Price through any of the means described below, including with respect to the Participant notwithstanding that such program or procedures may be available to others.
(i) Stock Tender Exercise. A “Stock Tender Exercise” means the delivery of a properly executed Notice of Exercise accompanied by (1) the Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant’s payment to the Company in cash of the remaining balance of such aggregate Exercise Price not satisfied by such shares’ Fair Market Value. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. If required by the Company, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
(ii) Cashless Exercise. A Cashless Exercise shall be permitted only upon the class of shares subject to the Option becoming publicly traded in an established securities market. A “Cashless Exercise” means the delivery of a properly executed Notice of Exercise together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to shares of Stock acquired upon the exercise of the Option in an amount not less than the aggregate Exercise Price for such shares (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).
(iii) Net-Exercise. A “Net-Exercise” means the delivery of a properly executed Notice of Exercise electing a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to the Participant upon the exercise of the Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate Exercise Price not satisfied by such reduction in the number of whole shares to be issued. Following a Net-Exercise, the number of shares remaining subject to the Option, if any, shall be reduced by the sum of (1) the net number of shares issued to the Participant upon such exercise, and (2) the number of shares deducted by the Company for payment of the aggregate Exercise Price.
4.4 Tax Withholding.
(a) In General. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Company, if any, which arise in connection with the Option. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Company have been satisfied by the Participant.
(b) Withholding in or Directed Sale of Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of the Company’s tax withholding obligations upon exercise of the Option by deducting from the shares of Stock otherwise issuable to the Participant upon such exercise a number of whole shares having a fair market value, as determined by the Company as of the date of exercise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates. The Company may require the Participant to direct a broker, upon the exercise of the Option, to sell a portion of the shares subject to the Option determined by the Company in its discretion to be sufficient to cover the tax withholding obligations of the Company and to remit an amount equal to such tax withholding obligations to the Company in cash.
4.5 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice any or all shares acquired by the Participant pursuant to the exercise of the Option. Except as provided by the preceding sentence, a certificate for the shares as to which the Option is exercised shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option.
5. Nontransferability of the Option.
During the lifetime of the Participant, the Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. The Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Participant, the Option, to the extent provided in Section 7, may be exercised by the Participant’s legal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution. Notwithstanding the foregoing, for so long as the Company is relying on the exemption provided by Rule 12h-1(f) under the Exchange Act, the Option and, prior to its exercise, the shares to be issued upon the exercise of the Option, shall not be transferred except in compliance with the restrictions on transfer under Rule 12h-1(f) (including the requirement under such rule that any permitted transferee may not further transfer the Option) or be made subject to any short position, “put equivalent position” or “call equivalent position” by the Participant, as such terms are defined in Rule 16a-1 of the Exchange Act.
6. Termination of the Option.
The Option shall terminate and may no longer be exercised after the first to occur of (a) the close of business on the Option Expiration Date, (b) the close of business on the last date for exercising the Option following termination of the Participant’s Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability. The Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period as determined below and thereafter shall terminate.
(a) Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
(b) Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant’s termination of Service.
(c) Termination for Cause. Notwithstanding any other provision of this Option Agreement, if the Participant’s Service is terminated for Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service.
(d) Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for Vested Shares by the Participant on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing other than termination of the Participant’s Service for Cause, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until the later of (a) thirty (30) days after the date such exercise first would no longer be prevented by such provisions or (b) the end of the applicable time period under Section 7.1, but in any event no later than the Option Expiration Date.
8. Effect of Change in Control.
In the event of a Change in Control, except to the extent that the Board determines to settle the Option in accordance with Section 9.1(c) of the Plan, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under all or any portion of the Option or substitute for all or any portion of the Option a substantially equivalent option for the Acquiror’s stock. For purposes of this Section, the Option or any portion thereof shall be deemed assumed if, following the Change in Control, the Option confers the right to receive, subject to the terms and conditions of the Plan and this Option Agreement, for each share of Stock subject to such portion of the Option immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Board may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise of the Option for each share of Stock to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. If any portion of such consideration may be received by holders of Stock pursuant to the Change in Control on a contingent or delayed basis, the Board may, in its discretion, determine such Fair Market Value per share as of the time of the Change in Control on the basis of the Board’s good faith estimate of the present value of the probable future payment of such consideration. The Option shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control to the extent that the Option is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised as of the time of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of the Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of this Option Agreement except as otherwise provided herein.
9. Adjustments for Changes in Capital Structure.
Subject to any required action by the stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number, Exercise Price and kind of shares subject to the Option, in order to prevent dilution or enlargement of the Participant’s rights under the Option. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and the Exercise Price shall be rounded up to the nearest whole cent. In no event may the Exercise Price be decreased to an amount less than the par value, if any, of the stock subject to the Option. Such adjustments shall be determined by the Board, and its determination shall be final, binding and conclusive.
10. Rights as a Stockholder, Director, Employee or Consultant.
The Participant shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between the Company and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Participant any right to continue in the Service of the Company or interfere in any way with any right of the Company to terminate the Participant’s Service as a Director, an Employee or Consultant, as the case may be, at any time.
11. Right of First Refusal.
11.1 Grant of Right of First Refusal. Except as provided in Section 11.7 and Section 16 below, in the event the Participant, the Participant’s legal representative, or other holder of shares acquired upon exercise of the Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested Shares (the “Transfer Shares”) to any person or entity, including, without limitation, any stockholder of the Company, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section 11 (the “Right of First Refusal”).
11.2 Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the Participant shall deliver written notice (the “Transfer Notice”) to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the “Proposed Transferee”) and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith. If the Participant proposes to transfer any Transfer Shares to more than one Proposed Transferee, the Participant shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Participant and the Proposed Transferee and must constitute a binding commitment of the Participant and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal.
11.3 Bona Fide Transfer. If the Company determines that the information provided by the Participant in the Transfer Notice is insufficient to establish the bona fide nature of a proposed voluntary transfer, the Company shall give the Participant written notice of the Participant’s failure to comply with the procedure described in this Section 11, and the Participant shall have no right to transfer the Transfer Shares without first complying with the procedure described in this Section 11. The Participant shall not be permitted to transfer the Transfer Shares if the proposed transfer is not bona fide.
11.4 Exercise of Right of First Refusal. If the Company determines the proposed transfer to be bona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Participant otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Participant of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company’s exercise or failure to exercise the Right of First Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Company’s right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Participant or issued by a person other than the Participant with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the Participant shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Participant to the Company shall be treated as payment to the Participant in cash to the extent of the unpaid principal and any accrued interest canceled. Notwithstanding anything contained in this Section to the contrary, the period during which the Company may exercise the Right of First Refusal and consummate the purchase of the Transfer Shares from the Participant shall terminate no sooner than the completion of a period of eight (8) months following the date on which the Participant acquired the Transfer Shares upon exercise of the Option.
11.5 Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right of First Refusal in full (or to such lesser extent as the Company and the Participant otherwise agree) within the period specified in Section 11.4 above, the Participant may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice or, if applicable, following the end of the period described in the last sentence of Section 11.4. The Company shall have the right to demand further assurances from the Participant and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Participant, shall again be subject to the Right of First Refusal and shall require compliance by the Participant with the procedure described in this Section 11.
11.6 Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interest therein subject to all of the terms and conditions of this Option Agreement, including this Section 11 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall be void unless the provisions of this Section 11 are met.
11.7 Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not apply to any transfer or exchange of the shares acquired upon exercise of the Option if such transfer or exchange is in connection with an Ownership Change Event. If the consideration received pursuant to such transfer or exchange consists of stock of the Company, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 11.9 result in a termination of the Right of First Refusal.
11.8 Assignment of Right of First Refusal. The Company shall have the right to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by the Company.
11.9 Early Termination of Right of First Refusal. The other provisions of this Option Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force and effect upon (a) the occurrence of a Change in Control, unless the Acquiror assumes the Company’s rights and obligations under the Option or substitutes a substantially equivalent option for the Acquiror’s stock for the Option, or (b) the existence of a public market for the class of shares subject to the Right of First Refusal. A “public market” shall be deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such stock is traded on the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal.
12. Stock Distributions Subject to Option Agreement.
If, from time to time, there is any stock dividend, stock split or other change, as described in Section 9, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new, substituted or additional securities to which the Participant is entitled by reason of the Participant’s ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Right of First Refusal with the same force and effect as the shares subject to the Right of First Refusal immediately before such event.
13. Notice of Sales Upon Disqualifying Disposition.
The Participant shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Grant Notice designates this Option as an Incentive Stock Option, the Participant shall (a) promptly notify the Chief Financial Officer of the Company if the Participant disposes of any of the shares acquired pursuant to the Option within one (1) year after the date the Participant exercises all or part of the Option or within two (2) years after the Date of Grant and (b) provide the Company with a description of the circumstances of such disposition. Until such time as the Participant disposes of such shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Participant shall hold all shares acquired pursuant to the Option in the Participant’s name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Company’s stock to notify the Company of any such transfers. The obligation of the Participant to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence.
14. Legends.
The Company may at any time place legends referencing the Right of First Refusal and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
14.1 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”
14.2 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND REPURCHASE OPTIONS IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
14.3 “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION DATE HERE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”
15. Lock-Up Agreement.
The Participant hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering; provided, further, however, that such one hundred eighty (180) day period may be extended for an additional period, not to exceed twenty (20) days, upon the request of the Company or the underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto). The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act. The Participant hereby agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing within a reasonable timeframe if so requested by the Company.
16. Restrictions on Transfer of Shares.
At any time prior to the existence of a public market for the Stock, the Board may prohibit the Participant and any transferee of such Participant from selling, transferring, assigning, pledging, or otherwise disposing of or encumbering any shares acquired pursuant to the Option (each, a “Transfer”) without the prior written consent of the Board. The Board may withhold consent for any reason, including without limitation any Transfer (i) to any individual or entity identified by the Company as a potential competitor or considered by the Company to be unfriendly, or (ii) if such Transfer increases the risk of the Company having a class of security held of record by such number of persons as would require the Company to register any class of securities under the Exchange Act; or (iii) if such Transfer would result in the loss of any federal or state securities law exemption relied upon by the Company in connection with the initial issuance of such shares or the issuance of any other securities; or (iv) if such Transfer is facilitated in any manner by any public posting, message board, trading portal, Internet site, or similar method of communication, including without limitation any trading portal or Internet site intended to facilitate secondary transfers of securities; or (v) if such Transfer is to be effected in a brokered transaction; or (vi) if such Transfer would be of less than all of the shares of Stock then held by the stockholder and its affiliates or is to be made to more than a single transferee. No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee or agent of the Participant), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law in any manner which violates any of the provisions of this Option Agreement, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any shares which will have been transferred in violation of any of the provisions set forth in this Option Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares will have been so transferred.
17. Miscellaneous Provisions.
17.1 Termination or Amendment. The Board may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Participant unless such termination or amendment is necessary to comply with any applicable law or government regulation, including, but not limited to Section 409A of the Code. No amendment or addition to this Option Agreement shall be effective unless in writing.
17.2 Compliance with Section 409A. The Company intends that income realized by the Participant pursuant to the Plan and this Option Agreement will not be subject to taxation under Section 409A of the Code. The provisions of the Plan and this Option Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. The Company, in its reasonable discretion, may amend (including retroactively) the Plan and this Agreement in order to conform to the applicable requirements of Section 409A of the Code, including amendments to facilitate the Participant’s ability to avoid taxation under Section 409A of the Code. However, the preceding provisions shall not be construed as a guarantee by the Company of any particular tax result for income realized by the Participant pursuant to the Plan or this Option Agreement. In any event, and except for the responsibilities of the Company set forth in Section 4.4, the Company shall not be responsible for the payment of any applicable taxes incurred by the Participant on income realized by the Participant pursuant to the Plan or this Option Agreement.
17.3 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Option Agreement.
17.4 Binding Effect. This Option Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
17.5 Delivery of Documents and Notices. Any document relating to participation in the Plan, or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by the Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a) Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Option Agreement, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice and Notice of Exercise called for by Section 4.2 to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b) Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 17.5(a) of this Option Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and Notice of Exercise, as described in Section 17.5(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 17.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 17.5(a).
17.6 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan, together with any employment, service or other agreement between the Participant the Company referring to the Option, shall constitute the entire understanding and agreement of the Participant and the Company with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Company with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.
17.7 Applicable Law. This Option Agreement shall be governed by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within the State of Delaware.
17.8 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
| ☐ Incentive Stock Option | Participant: | |||
| ☐ Nonstatutory Stock Option | ||||
| Date: |
STOCK OPTION NOTICE OF EXERCISE
SmartRent.com, Inc.
Attention: President
[ADDRESS]
Ladies and Gentlemen:
1. Option. I was granted an option (the “Option”) to purchase shares of the Common Stock (the “Shares”) of SmartRent.com, Inc. (the “Company”) pursuant to the SmartRent.com, Inc. 2018 Stock Plan (the “Plan”), my Stock Option Grant Notice (the “Grant Notice”) and my Stock Option Agreement (the “Option Agreement”) as follows:
| Date of Grant: |
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| Number of Option Shares: |
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| Exercise Price per Share: |
$ |
2. Exercise of Option. I hereby elect to exercise the Option to purchase the following number of Shares, all of which are Vested Shares, in accordance with the Grant Notice and the Option Agreement:
| Total Shares Purchased: |
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| Total Exercise Price (Total Shares X Price per Share) |
$ |
3. Payments. I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement:
| ☐ Cash: |
$ | |||||
| ☐ Check: |
$ | |||||
| ☐ Stock Tender Exercise: |
Contact Plan Administrator | |||||
| ☐ Cashless Exercise: |
Contact Plan Administrator | |||||
| ☐ Net Exercise: |
Contact Plan Administrator |
4. Tax Withholding. I authorize payroll withholding and otherwise will make adequate provision for the federal, state, local and foreign tax withholding obligations of the Company, if any, in connection with the Option. If I am exercising a Nonstatutory Stock Option, I enclose payment in full of my withholding taxes, if any, as follows:
(Contact Plan Administrator for amount of tax due.)
| ☐ Cash: |
$ | |||||
| ☐ Check: |
$ |
5. Participant Information.
| My address is: |
| My Social Security Number is: |
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6. Notice of Disqualifying Disposition. If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Executive Officer or Chief Financial Officer of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part of the Option or within two (2) years of the Date of Grant.
7. Binding Effect. I agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Grant Notice, the Option Agreement, including the Right of First Refusal set forth therein, and the Plan, to all of which I hereby expressly assent. This Agreement shall inure to the benefit of and be binding upon my heirs, executors, administrators, successors and assigns.
8. Transfer. I understand and acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and that consequently the Shares must be held indefinitely unless they are subsequently registered under the Securities Act, an exemption from such registration is available, or they are sold in accordance with Rule 144 or Rule 701 under the Securities Act. I further understand and acknowledge that the Company is under no obligation to register the Shares. I understand that the certificate or certificates evidencing the Shares will be imprinted with legends which prohibit the transfer of the Shares unless they are registered or such registration is not required in the opinion of legal counsel satisfactory to the Company.
I am aware that Rule 144 under the Securities Act, which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to the Shares and, in any event, is available only if certain conditions are satisfied. I understand that any sale of the Shares that might be made in reliance upon Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon request.
I understand that I am purchasing the Shares pursuant to the terms of the Plan, the Grant Notice and my Option Agreement, copies of which I have received and carefully read and understand.
| Very truly yours, |
| (Signature) |
| Receipt of the above is hereby acknowledged. | ||
| SmartRent.com, Inc. | ||
| By: |
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| Title: |
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| Dated: |
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Exhibit 10.14
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AWARD AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
SMARTRENT.COM, INC.
RESTRICTED STOCK UNITS AGREEMENT
SmartRent.com, Inc. has granted to the Participant named in the Notice of Grant of Restricted Stock Units (the “Grant Notice”) to which this Restricted Stock Units Agreement (the “Award Agreement”) is attached an Award consisting of Restricted Stock Units subject to the terms and conditions set forth in the Grant Notice and this Award Agreement. The Award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the SmartRent.com, Inc. Amended and Restated 2018 Stock Plan (the “Plan”), the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Award Agreement and the Plan, (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Award Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Grant Notice, this Award Agreement or the Plan.
| 1. | DEFINITIONS AND CONSTRUCTION. |
1.1 Definitions. Capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan, unless otherwise defined herein or as follows:
(a) “Change in Control” means a “Change in Control as defined by the Plan, provided that such Change in Control (i) is also a “change in control event” as described in Treasury Regulation Section 1.409A-3(i)(5)(i) and (ii) is not an Initial Public Offering described in Section 1.1(b)(ii) below.
(b) “Initial Public Offering” means either (i) the closing of the initial underwritten public offering of securities of the class of equity securities then subject to the Award pursuant to an effective registration statement filed under the Securities Act or (ii) the closing of an acquisition of the Company by a special purpose acquisition company whose shares are publicly traded on a national stock exchange.
(c) “Liquidity Event Date” means the date of satisfaction of the Liquidity Event Condition (as defined in the Grant Notice).
(d) “Units” mean the Restricted Stock Units granted pursuant to the Award, as adjusted from time to time pursuant to Section 9.
1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Award Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
| 2. | ADMINISTRATION. |
All questions of interpretation concerning the Grant Notice, this Award Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Board. All such determinations by the Board shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Board in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
| 3. | THE AWARD. |
3.1 Grant of Units. On the Date of Grant (as set forth in the Grant Notice), the Participant shall acquire, subject to the provisions of this Award Agreement, the Total Number of Units set forth in the Grant Notice, subject to adjustment as provided in Section 9. Each Unit represents a right to receive one (1) share of Stock (each a “Share”) on a date determined in accordance with the Grant Notice and this Award Agreement.
3.2 No Monetary Payment Required. The Participant is not required to make any monetary payment (other than applicable tax withholding, if any) as a condition to receiving the Units or Shares issued upon settlement of the Units, the consideration for which shall be past services actually rendered or future services to be rendered to the Participating Company Group or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to the Participating Company Group or for its benefit having a value not less than the par value of the Shares issued upon settlement of the Units.
3.3 Termination of the Award. The Award shall terminate upon the first to occur of (a) the date of termination of the Participant’s Service for Cause prior to the Vesting Date (as set forth in the Grant Notice), (b) the Expiration Date if the Liquidity Event Date has not yet occurred on or before the Expiration Date, (c) a Change in Control to the extent provided in Section 7, or (d) the final settlement of all Vested Units in accordance with Section 5.
| 4. | VESTING OF UNITS; TERMINATION OF SERVICE. |
4.1 Normal Vesting. Units acquired pursuant to this Award Agreement shall become Vested Units as provided in the Grant Notice. For purposes of determining the number of Vested Units following an Ownership Change Event, credited Service shall include all service with any entity which is a member of the Participating Company Group at the time service is rendered, whether or not such entity is a member of the Participating Company Group both before and after such Ownership Change Event.
4.2 Effect of Termination of Service. The effect of the Participant’s termination of Service prior to the Vesting Date will be as follows:
(a) Termination of Service for Cause. If the Participant’s Service is terminated for Cause at any time prior to a Vesting Date, then all Units (whether or not vested) subject to the Award shall be forfeited and automatically canceled immediately upon the Participant’s termination of Service, notwithstanding that the Participant may have satisfied the Service Condition with respect to all or a portion of the Units.
(b) Termination of Service for any Reason other than Cause before Liquidity Event Date. If the Participant’s Service terminates for any reason other than Cause prior to the Liquidity Event Date, then:
(i) all Units for which the Service Condition as set forth in the Grant Notice has not been satisfied as of the date of such termination of Service shall be forfeited and automatically canceled immediately upon the Participant’s termination of Service; and
(ii) all Units for which the Service Condition as set forth in the Grant Notice has been satisfied as of the date of such termination of Service shall not then be forfeited and automatically canceled, but instead shall become Vested Units, if at all, upon the subsequent occurrence of a Change in Control (but not an Initial Public Offering) prior to the Expiration Date. For the avoidance of doubt, no Units will become Vested Units upon an Initial Public Offering unless the Participant’s Service has not terminated prior to the date of the Initial Public Offering.
(c) Effect of Termination of Service on or after Liquidity Event Date. If the Participant’s Service terminates for any reason on or after the Liquidity Event Date, then all Units that are not then Vested Units shall be forfeited and automatically canceled immediately upon the Participant’s termination of Service.
| 5. | SETTLEMENT OF THE AWARD. |
5.1 Issuance of Shares. Subject to the provisions of Section 5.3 below, the Company shall issue one (1) Share to the Participant on the Settlement Date for each Vested Unit to be settled on such date. Shares issued in settlement of Units shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 5.3, Section 6 or the Company’s Trading Compliance Policy.
5.2 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all Shares acquired by the Participant pursuant to the settlement of the Award with the Company’s transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such Shares for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice. Except as provided by the foregoing, a certificate for the Shares acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
5.3 Restrictions on Grant of the Award and Issuance of Shares. The grant of the Award and issuance of Shares upon settlement of the Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No Shares may be issued hereunder if the issuance of such Shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Shares may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any securities subject to the Award shall relieve the Company of any liability in respect of the failure to issue such securities as to which such requisite authority shall not have been obtained. As a condition to the settlement of the Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
5.4 Fractional Shares. The Company shall not be required to issue fractional Shares upon the settlement of the Award.
| 6. | TAX WITHHOLDING. |
6.1 In General. At the time the Grant Notice is executed, or at any time thereafter as requested by a member of the Participating Company Group, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company Group, if any, which arise in connection with the Award, the vesting of Units or the issuance of Shares in settlement thereof. The Company shall have no obligation to deliver Shares until the tax withholding obligations of the Participating Company Group have been satisfied by the Participant.
6.2 Assignment of Sale Proceeds. Subject to compliance with applicable law and the Company’s Trading Compliance Policy, if permitted by the Company, the Participant may satisfy the Participating Company Group’s tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the Shares being acquired upon settlement of Units.
6.3 Withholding in Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of the Participating Company Group’s tax withholding obligations by deducting from the Shares otherwise deliverable to the Participant in settlement of the Award a number of whole Shares having a Fair Market Value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates.
| 7. | EFFECT OF CHANGE IN CONTROL. |
In the event of a Change in Control, the treatment of the Award will be governed by Section 10 of the Plan and any applicable provisions of the Grant Notice.
| 8. | RIGHT OF FIRST REFUSAL. |
8.1 Grant of Right of First Refusal. Except as provided in Section 8.7, in the event the Participant, the Participant’s legal representative, or other holder of Shares acquired upon settlement of the Award proposes to sell, exchange, transfer, pledge, or otherwise dispose of any such Shares (the “Transfer Shares”) to any person or entity, including, without limitation, any stockholder of a Participating Company, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section (the “Right of First Refusal”).
8.2 Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the Participant shall deliver written notice (the “Transfer Notice”) to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the “Proposed Transferee”) and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith. If the Participant proposes to transfer any Transfer Shares to more than one Proposed Transferee, the Participant shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Participant and the Proposed Transferee and must constitute a binding commitment of the Participant and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal.
8.3 Bona Fide Transfer. If the Company determines that the information provided by the Participant in the Transfer Notice is insufficient to establish the bona fide nature of a proposed voluntary transfer, the Company shall give the Participant written notice of the Participant’s failure to comply with the procedure described in this Section 8, and the Participant shall have no right to transfer the Transfer Shares without first complying with the procedure described in this Section 8. The Participant shall not be permitted to transfer the Transfer Shares if the proposed transfer is not bona fide.
8.4 Exercise of Right of First Refusal. If the Company determines the proposed transfer to be bona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Participant otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Participant of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company’s exercise or failure to exercise the Right of First Refusal with respect
to any proposed transfer described in a Transfer Notice shall not affect the Company’s right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Participant or issued by a person other than the Participant with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the Participant shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Participant to any member of the Participating Company Group shall be treated as payment to the Participant in cash to the extent of the unpaid principal and any accrued interest canceled. Notwithstanding anything contained in this Section to the contrary, the period during which the Company may exercise the Right of First Refusal and consummate the purchase of the Transfer Shares from the Participant shall terminate no sooner than the completion of a period of eight (8) months following the date on which the Participant acquired the Transfer Shares.
8.5 Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right of First Refusal in full (or to such lesser extent as the Company and the Participant otherwise agree) within the period specified in Section 8.4, the Participant may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice or, if applicable, following the end of the period described in the last sentence of Section 8.4. The Company shall have the right to demand further assurances from the Participant and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Participant, shall again be subject to the Right of First Refusal and shall require compliance by the Participant with the procedure described in this Section.
8.6 Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interest therein subject to all of the terms and conditions of this Award Agreement, including this Section 8 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any Shares shall be void unless the provisions of this Section are met.
8.7 Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not apply to any transfer or exchange of the Shares if such transfer or exchange is in connection with an Ownership Change Event. If the consideration received pursuant to such transfer or exchange consists of Shares of a member of the Participating Company Group, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 8.9 result in a termination of the Right of First Refusal.
8.8 Assignment of Right of First Refusal. The Company shall have the right to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by the Company.
8.9 Early Termination of Right of First Refusal. The other provisions of this Award Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force and effect upon the existence of a public market for the class of shares subject to the Right of First Refusal. A “public market” shall be deemed to exist if (i) such shares are listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such shares are traded on the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal.
| 9. | ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. |
In the event of a change in the capital structure of the Company, this Section 9 will be governed by Sections 4.3 of the Plan.
| 10. | RIGHTS AS A STOCKHOLDER, DIRECTOR, EMPLOYEE OR CONSULTANT. |
The Participant shall have no rights as a stockholder with respect to any Shares which may be issued in settlement of this Award until the date of the issuance of such Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a member of the Participating Company Group and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Award Agreement shall confer upon the Participant any right to continue in the Service of a member of the Participating Company Group or interfere in any way with any right of a member of the Participating Company Group to terminate the Participant’s Service at any time.
| 11. | LEGENDS. |
The Company may at any time place legends referencing the Right of First Refusal and any applicable federal, state or foreign securities law restrictions on all certificates representing Shares issued pursuant to this Award Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing Shares acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
11.1 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”
11.2 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND REPURCHASE OPTIONS IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
| 12. | COMPLIANCE WITH CODE SECTION 409A. |
It is intended that any election, payment or benefit which is made or provided pursuant to or in connection with this Award that may result in nonqualified deferred compensation within the meaning of Section 409A of the Code (“Section 409A”) shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Board in good faith) to avoid the unfavorable tax consequences provided therein for non-compliance and the Award shall be so construed. In connection with effecting such compliance with Section 409A, the following shall apply:
12.1 Separation from Service; Required Delay in Payment to Specified Employee. Notwithstanding anything set forth herein to the contrary, no amount payable pursuant to this Award Agreement on account of the Participant’s termination of Service which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A (the “Section 409A Regulations”) shall be paid unless and until the Participant has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that the Participant is a “specified employee” within the meaning of the Section 409A Regulations as of the date of the Participant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participant’s separation from service shall be paid to the Participant before the date (the “Delayed Payment Date”) which is the first day of the seventh month after the date of the Participant’s separation from service or, if earlier, the date of the Participant’s death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.
12.2 Other Changes in Time of Payment. Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Award Agreement in any manner which would not be in compliance with the Section 409A Regulations.
12.3 Amendments to Comply with Section 409A; Indemnification. Notwithstanding any other provision of this Award Agreement to the contrary, the Company is authorized to amend this Award Agreement, to void or amend any election made by the Participant under this Award Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with the Section 409A Regulations without prior notice to or consent of the Participant. The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.
12.4 Advice of Independent Tax Advisor. The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Award Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award. The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Award Agreement and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Award Agreement.
| 13. | LOCK-UP AGREEMENT. |
The Participant hereby agrees that in the event of any underwritten public offering of Shares, including an initial public offering of Shares, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any Shares of the Company or any rights to acquire Shares of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time may not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering; or, upon the request of the Company or the underwriter, such longer period as necessary to permit compliance with FINRA Rule 2241 or any successor provisions or amendments thereto. The foregoing limitation will not apply to Shares registered in the public offering under the Securities Act. The Participant hereby agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing within a reasonable timeframe if so requested by the Company.
| 14. | RESTRICTIONS ON TRANSFER OF SHARES. |
At any time prior to the existence of a public market for the Shares, the Board may prohibit the Participant and any transferee of such Participant from selling, transferring, assigning, pledging, or otherwise disposing of or encumbering any Shares acquired pursuant to the Award (each, a “Transfer”) without the prior written consent of the Board. The Board may withhold consent for any reason, including without limitation any Transfer (i) to any individual or entity identified by the Company as a potential competitor or considered by the Company to be unfriendly, or (ii) if such Transfer
increases the risk of the Company having a class of security held of record by such number of persons as would require the Company to register any class of securities under the Exchange Act; or (iii) if such Transfer would result in the loss of any federal or state securities law exemption relied upon by the Company in connection with the initial issuance of such Shares or the issuance of any other securities; or (iv) if such Transfer is facilitated in any manner by any public posting, message board, trading portal, Internet site, or similar method of communication, including without limitation any trading portal or Internet site intended to facilitate secondary transfers of securities; or (v) if such Transfer is to be effected in a brokered transaction; or (vi) if such Transfer would be of less than all of the Shares then held by the stockholder and its affiliates or is to be made to more than a single transferee. No Shares acquired pursuant to this Award may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee or agent of the Participant), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law in any manner which violates any of the provisions of this Award Agreement, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any Shares which will have been transferred in violation of any of the provisions set forth in this Award Agreement or (b) to treat as owner of such Shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such Shares will have been so transferred.
| 15. | MISCELLANEOUS PROVISIONS. |
15.1 Termination or Amendment. The Board may terminate or amend the Plan or this Award Agreement at any time; provided, however, that except as provided in Section 7 in connection with a Change in Control, no such termination or amendment may have a materially adverse effect on the Participant’s rights under this Award Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, including, but not limited to, Section 409A. No amendment or addition to this Award Agreement shall be effective unless in writing.
15.2 Nontransferability of the Award. Prior to the issuance of Shares on the applicable Settlement Date, neither this Award nor any Units subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution and, for so long as the Company is relying on an order of the Securities and Exchange Commission (the “SEC”) under Section 12(h) of the Exchange Act or a no-action position of the Staff of the SEC relieving the Company from registration under Section 12(g) of the Exchange Act of the Units and the Shares subject thereto, the restrictions on transfer provided by Rule 12h-1(f) under the Exchange Act that would apply were the Units subject to such rule (including the requirement under such rule that any permitted transferee may not further transfer the Units). No Units subject to this Award, or the Shares underlying such Units, shall, prior to the settlement of the Units, be subject to any short position, “put equivalent position” or “call equivalent position” by the Participant, as such terms are defined in Rule 16a-1 under the Exchange Act, until the Company becomes subject to Section 13 or Section 15(d) of the Exchange Act or is no longer relying on such SEC order or SEC Staff no action position. All rights with respect to the Award shall be exercisable during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative.
15.3 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Award Agreement.
15.4 Binding Effect. This Award Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.
15.5 Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Award Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a member of the Participating Company Group, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a) Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Award Agreement, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.
(b) Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 15.5(a) of this Award Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 15.5(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 15.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 15.5(a).
15.6 Integrated Agreement. The Grant Notice, this Award Agreement and the Plan shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Award Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
15.7 Governing Law. This Award Agreement shall be governed by the laws of the State of Delaware, without regard to its conflict of law rules.
15.8 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Exhibit 16.1
August 27, 2021
Office of the Chief Accountant
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Ladies and Gentlemen:
We have read SmartRent, Inc. (formerly known as Fifth Wall Acquisition Corp. I) statements included under Item 4.01 of its Form 8-K dated August 24, 2021. We agree with the statements concerning our Firm under Item 4.01, in which we were informed of our dismissal on August 24, 2021. We are not in a position to agree or disagree with other statements contained therein.
Very truly yours,
/s/ WithumSmith+Brown, PC
New York, New York
Exhibit 21.1
Subsidiaries of SmartRent, Inc.
| Subsidiary | Jurisdiction of Incorporation | |
| SmartRent Technologies, Inc. | Delaware | |
| Alloy Home, LLC | Delaware | |
| Zipato Ltd. | United Kingdom | |
| TRI PLUS GRUPA d.o.o | Croatia |
Exhibit 99.1
SMARTRENT.COM, INC.
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 |
3 | |||
| Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021 and 2020 |
4 | |||
| Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit for the three and six months ended June 30, 2021 and 2020 |
5 | |||
| Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 |
7 | |||
| Notes to the Unaudited Consolidated Financial Statements |
9 |
SMARTRENT.COM, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share amounts)
| June 30, 2021 |
December 31, 2020 |
|||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 53,534 | $ | 38,618 | ||||
| Accounts receivable, net |
27,028 | 20,787 | ||||||
| Inventory |
21,701 | 17,628 | ||||||
| Deferred cost of revenue, current portion |
7,645 | 6,782 | ||||||
| Prepaid expenses and other current assets |
11,220 | 3,840 | ||||||
|
|
|
|
|
|||||
| Total current assets |
121,128 | 87,655 | ||||||
| Property and equipment, net |
1,292 | 847 | ||||||
| Deferred cost of revenue |
13,394 | 10,072 | ||||||
| Goodwill |
4,162 | 4,162 | ||||||
| Other long-term assets |
1,281 | 1,113 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 141,257 | $ | 103,849 | ||||
|
|
|
|
|
|||||
| LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 4,864 | $ | 2,275 | ||||
| Accrued expenses and other current liabilities |
7,769 | 9,555 | ||||||
| Deferred revenue, current portion |
35,066 | 19,348 | ||||||
| Current portion of long-term debt |
1,652 | 1,651 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
49,351 | 32,829 | ||||||
| Long-term debt, net |
2,343 | 3,169 | ||||||
| Deferred revenue |
39,439 | 34,153 | ||||||
| Other long-term liabilities |
273 | 516 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
91,406 | 70,667 | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies (Note 12) |
||||||||
| Convertible preferred stock, $0.00001 par value; 24,816 and 21,698 shares authorized as of June 30, 2021 and December 31, 2020; 24,816 and 21,458 shares issued and outstanding as of June 30, 2021 and December 31, 2020 |
146,225 | 111,432 | ||||||
| Stockholders’ deficit |
||||||||
| Common stock, $0.00001 par value; 33,700 and 28,781 shares authorized as of June 30, 2021 and December 31, 2020; 2,627 and 2,124 shares issued and outstanding as of June 30, 2021 and December 31, 2020 |
— | — | ||||||
| Additional paid-in capital |
5,416 | 4,157 | ||||||
| Accumulated deficit |
(101,960 | ) | (82,642 | ) | ||||
| Accumulated other comprehensive income |
170 | 235 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ deficit |
(96,374 | ) | (78,250 | ) | ||||
|
|
|
|
|
|||||
| Total liabilities, convertible preferred stock and stockholders’ deficit |
$ | 141,257 | $ | 103,849 | ||||
|
|
|
|
|
|||||
See accompanying Notes to Consolidated Financial Statements
2
SMARTRENT.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except per share amounts)
| For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue |
||||||||||||||||
| Hardware |
$ | 14,029 | $ | 2,881 | $ | 26,427 | $ | 14,174 | ||||||||
| Professional services |
3,564 | 1,210 | 7,165 | 4,841 | ||||||||||||
| Hosted services |
4,084 | 1,700 | 7,245 | 3,330 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenue |
21,677 | 5,791 | 40,837 | 22,345 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cost of revenue |
||||||||||||||||
| Hardware |
12,514 | 4,410 | 24,657 | 14,563 | ||||||||||||
| Professional services |
6,274 | 2,218 | 11,734 | 6,749 | ||||||||||||
| Hosted services |
2,606 | 1,226 | 4,577 | 2,384 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total cost of revenue |
21,394 | 7,854 | 40,968 | 23,696 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating expense |
||||||||||||||||
| Research and development |
4,083 | 2,134 | 7,176 | 4,004 | ||||||||||||
| Sales and marketing |
2,392 | 1,183 | 4,146 | 2,720 | ||||||||||||
| General and administrative |
3,806 | 4,642 | 7,763 | 8,655 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expense |
10,281 | 7,959 | 19,085 | 15,379 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
(9,998 | ) | (10,022 | ) | (19,216 | ) | (16,730 | ) | ||||||||
| Interest expense, net |
(64 | ) | (170 | ) | (142 | ) | (380 | ) | ||||||||
| Other income (expense), net |
52 | (212 | ) | 127 | (492 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss before income taxes |
(10,010 | ) | (10,404 | ) | (19,231 | ) | (17,602 | ) | ||||||||
| Provision for income taxes |
41 | 44 | 87 | 122 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
(10,051 | ) | (10,448 | ) | (19,318 | ) | (17,724 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other comprehensive loss |
||||||||||||||||
| Foreign currency translation adjustment |
63 | 46 | (65 | ) | 32 | |||||||||||
| Comprehensive loss |
$ | (9,988 | ) | $ | (10,402 | ) | $ | (19,383 | ) | $ | (17,692 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss per common share |
||||||||||||||||
| Basic and diluted |
$ | (4.87 | ) | $ | (6.82 | ) | $ | (9.71 | ) | $ | (12.92 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average number of shares used in computing net loss per share |
||||||||||||||||
| Basic and diluted |
2,064 | 1,531 | 1,990 | 1,372 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See accompanying Notes to Consolidated Financial Statements
3
SMARTRENT.COM, INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except per share amounts)
| For the six months ended June 30, 2021 | ||||||||||||||||||||||||||||||||
| Convertible Preferred Stock |
Common Stock | |||||||||||||||||||||||||||||||
| Shares | Amount (Par Value $0.00001) |
Shares | Amount (Par Value $0.00001) |
Additional Paid In Capital |
Accumulated Deficit |
Accumulated other comprehensive income |
Total Stockholder’s Deficit |
|||||||||||||||||||||||||
| Balance, December 31, 2020 |
21,458 | $ | 111,432 | 2,124 | $ | — | $ | 4,157 | $ | (82,642 | ) | $ | 235 | $ | (78,250 | ) | ||||||||||||||||
| Stock-based compensation |
227 | 227 | ||||||||||||||||||||||||||||||
| Stock-based compensation related to acquisition |
200 | 200 | ||||||||||||||||||||||||||||||
| Issuance of Series C Convertible Preferred Stock |
3,358 | 34,793 | ||||||||||||||||||||||||||||||
| Common stock warrants issued to customers as consideration |
22 | 22 | ||||||||||||||||||||||||||||||
| Common stock warrants related to marketing expense |
210 | 210 | ||||||||||||||||||||||||||||||
| Exercise of warrants |
503 | 5 | 5 | |||||||||||||||||||||||||||||
| Net loss |
(9,267 | ) | (9,267 | ) | ||||||||||||||||||||||||||||
| Other comprehensive loss |
(128 | ) | (128 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance, March 31, 2021 |
24,816 | $ | 146,225 | 2,627 | $ | — | $ | 4,821 | $ | (91,909 | ) | $ | 107 | $ | (86,981 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Stock-based compensation |
226 | 226 | ||||||||||||||||||||||||||||||
| Stock-based compensation related to acquisition |
202 | 202 | ||||||||||||||||||||||||||||||
| Common stock warrants issued to customers as consideration |
18 | 18 | ||||||||||||||||||||||||||||||
| Common stock warrants related to marketing expense |
149 | 149 | ||||||||||||||||||||||||||||||
| Net loss |
(10,051 | ) | (10,051 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income |
63 | 63 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance, June 30, 2021 |
24,816 | $ | 146,225 | 2,627 | $ | — | $ | 5,416 | $ | (101,960 | ) | $ | 170 | $ | (96,374 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
See accompanying Notes to Consolidated Financial Statements
4
SMARTRENT.COM, INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY—CONTINUED
(Unaudited)
(in thousands, except per share amounts)
| For the six months ended June 30, 2020 | ||||||||||||||||||||||||||||||||
| Convertible Preferred Stock |
Common Stock | |||||||||||||||||||||||||||||||
| Shares | Amount (Par Value $0.00001) |
Shares | Amount (Par Value $0.00001) |
Additional Paid In Capital |
Accumulated Deficit |
Accumulated other comprehensive income |
Total Stockholder’s Deficit |
|||||||||||||||||||||||||
| Balance, December 31, 2019 |
15,181 | $ | 46,206 | 996 | $ | — | $ | 1,104 | $ | (45,533 | ) | $ | — | $ | (44,429 | ) | ||||||||||||||||
| Stock-based compensation |
165 | 165 | ||||||||||||||||||||||||||||||
| Stock-based compensation related to acquisition |
844 | 96 | 96 | |||||||||||||||||||||||||||||
| Issuance of Series C Preferred Stock for cash, net of offering costs |
4,317 | 44,950 | ||||||||||||||||||||||||||||||
| Conversion of Convertible Note to Series C-1 Preferred Stock |
761 | 7,787 | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with acquisition |
281 | 813 | 813 | |||||||||||||||||||||||||||||
| Common stock warrants related to marketing expense |
146 | 146 | ||||||||||||||||||||||||||||||
| Net loss |
(7,276 | ) | (7,276 | ) | ||||||||||||||||||||||||||||
| Other comprehensive loss |
(14 | ) | (14 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance, March 31, 2020 |
20,259 | $ | 98,943 | 2,121 | $ | — | $ | 2,324 | $ | (52,809 | ) | $ | (14 | ) | $ | (50,499 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Stock-based compensation |
439 | 439 | ||||||||||||||||||||||||||||||
| Stock-based compensation related to acquisition |
202 | 202 | ||||||||||||||||||||||||||||||
| Issuance of Series C Preferred Stock for cash, net of offering costs |
1,199 | 12,489 | — | |||||||||||||||||||||||||||||
| Common stock warrants related to marketing expense |
36 | 36 | ||||||||||||||||||||||||||||||
| Exercise of warrants |
3 | — | ||||||||||||||||||||||||||||||
| Net loss |
(10,448 | ) | (10,448 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income |
46 | 46 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance, June 30, 2020 |
21,458 | $ | 111,432 | 2,124 | $ | — | $ | 3,001 | $ | (63,257 | ) | $ | 32 | $ | (60,224 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
See accompanying Notes to Consolidated Financial Statements
5
SMARTRENT.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands, except per share amounts)
| For the six months ended June 30, |
||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net loss |
$ | (19,318 | ) | $ | (17,724 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities |
||||||||
| Depreciation and amortization |
173 | 121 | ||||||
| Amortization of debt discount |
4 | 3 | ||||||
| Non-employee warrant expense |
399 | 182 | ||||||
| Provision for warranty expense |
170 | — | ||||||
| Loss on extinguishment of debt |
— | 164 | ||||||
| Non-cash lease expense |
218 | 218 | ||||||
| Stock-based compensation related to acquisition |
402 | 298 | ||||||
| Non-cash compensation expense related to acquisition |
— | 2,593 | ||||||
| Stock-based compensation |
453 | 604 | ||||||
| Non-cash interest expense |
— | 118 | ||||||
| Provision for excess and obsolete inventory |
115 | — | ||||||
| Provision for doubtful accounts |
(27 | ) | — | |||||
| Change in operating assets and liabilities |
||||||||
| Accounts receivable |
(6,215 | ) | (9,697 | ) | ||||
| Inventory |
(4,294 | ) | (6,228 | ) | ||||
| Deferred cost of revenue |
(4,185 | ) | (1,310 | ) | ||||
| Prepaid expenses and other assets |
(7,826 | ) | (5,667 | ) | ||||
| Accounts payable |
2,436 | (1,351 | ) | |||||
| Accrued expenses and other liabilities |
(2,114 | ) | 999 | |||||
| Deferred revenue |
21,158 | 11,509 | ||||||
| Lease liabilities |
(233 | ) | (597 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in operating activities |
(18,684 | ) | (25,765 | ) | ||||
|
|
|
|
|
|||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Zenith acquisition, net of cash acquired |
— | (2,382 | ) | |||||
| Purchase of property and equipment |
(340 | ) | (158 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(340 | ) | (2,540 | ) | ||||
|
|
|
|
|
|||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Proceeds from revolving line of credit |
— | 7,179 | ||||||
| Payments on revolving line of credit |
— | (11,981 | ) | |||||
| Payments on term loan |
(834 | ) | — | |||||
| Proceeds from warrant exercise |
5 | — | ||||||
| Proceeds from convertible notes |
— | 50 | ||||||
| Convertible preferred stock issued, net of expenses |
34,793 | 57,439 | ||||||
|
|
|
|
|
|||||
| Net cash provided by financing activities |
33,964 | 52,687 | ||||||
|
|
|
|
|
|||||
| Effect of exchange rate changes on cash and cash equivalents |
(24 | ) | 77 | |||||
| Net increase in cash and cash equivalents |
14,916 | 24,459 | ||||||
| Cash and cash equivalents- beginning of period |
38,618 | 21,424 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents—end of period |
$ | 53,534 | $ | 45,883 | ||||
|
|
|
|
|
|||||
See accompanying Notes to Consolidated Financial Statements
6
SMARTRENT.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS—CONTINUED
(Unaudited)
(in thousands, except per share amounts)
| For the six months ended June 30, |
||||||||
| 2021 | 2020 | |||||||
| Supplemental disclosure of cash flow information |
||||||||
| Interest paid |
$ | 137 | $ | 204 | ||||
| Cash paid for income taxes |
$ | 65 | $ | 26 | ||||
| Schedule of non-cash investing and financing activities |
||||||||
| Accrued property and equipment at period end |
$ | 278 | $ | 14 | ||||
| Conversion of convertible debt to preferred stock |
$ | — | $ | 7,787 | ||||
| Common stock issued as consideration for acquisition |
$ | — | $ | 813 | ||||
See accompanying Notes to Consolidated Financial Statements
7
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 1. DESCRIPTION OF BUSINESS
SmartRent.com, Inc., and its wholly owned subsidiaries, (collectively the “Company”) is an enterprise software company that provides a fully integrated, brand-agnostic smart home operating system to residential property owners and operators, as well as homebuilders, “iBuyers,” developers, and residents. SmartRent’s solutions are designed to provide communities with visibility and control over assets while providing additional revenue opportunities through all-in-one home control offerings for residents. The Company was founded in November 2016 in Delaware as a limited liability company (“LLC”) and converted to a corporation in March 2018. The Company is headquartered in Scottsdale, Arizona.
Acquisition of Zenith
In February 2020, the Company completed its acquisition of Zenith Highpoint, Inc. (“Zenith”), and its wholly-owned subsidiary, Zipato, Ltd. (“Zipato”). Zipato manufactures the Company’s proprietary device products and sells smart home technology consisting of security, energy and home automation systems.
Merger with Fifth Wall Acquisition Corporation
In April 2021, the Company entered into a definitive business combination agreement with Fifth Wall Acquisition Corp. (NASDAQ: FWAA), a special purpose acquisition company sponsored by an affiliate of Fifth Wall, a venture capital firm focused on the global real estate industry and property technology. The transaction closed on August 24, 2021 and the Company will account for this transaction as a reverse merger. Upon closing of the transaction, the combined company is publicly traded on the New York Stock Exchange.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the consolidated accounts of the Company and its wholly-owned subsidiaries. The Consolidated Balance Sheet at December 31, 2020 has been derived from the audited consolidated financial statements of the Company at that date. Certain notes and other information have been condensed or omitted from the interim financial statements presented herein. The financial data and other information disclosed in these Notes to Consolidated Financial Statements related to the three and six months ended June 30, 2021 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual consolidated statements and, in the opinion of management, reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the Company’s financial condition and results of operations and cash flows for the interim period presented. The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or any future period.
Liquidity
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. To date, the Company has been funded primarily by preferred stock financings, cash from operations, and debt proceeds.
Management believes that currently available resources will provide sufficient funds to enable the Company to meet its obligations for at least one year past the issuance date of these financial statements. The Company may need to raise additional capital through equity or debt financing to fund future operations until it generates positive operating cash flows. There can be no assurance that such additional equity or debt financing will be available on terms acceptable to the Company, or at all.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expense during the reporting period. These estimates made by management include the determination of allowance balances for the Company’s inventories on hand, allowance for doubtful accounts, warranty liabilities and certain assumptions used in the valuation of equity awards, including the estimated fair value of convertible preferred stock, the estimated fair value of common stock warrants and assumptions used to estimate the fair value of stock-based compensation expense. Actual results could differ materially from those estimates.
8
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Impact of COVID-19
The extensive impact caused by the COVID-19 pandemic has resulted and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. In an effort to halt the outbreak of COVID-19, a number of countries, states, counties and other jurisdictions have imposed, and may impose in the future, various measures, including, but not limited to, voluntary and mandatory quarantines, stay-at-home orders, travel restrictions, limitations on gatherings of people, reduced operations and extended closures of businesses.
The timing of customer orders and the Company’s ability to fulfill orders received was impacted by various COVID-19-related government mandates, resulting in a reduction in units sold. The Company has also witnessed certain current and prospective customers delaying purchases based on budget constraints or project delays related to COVID-19. The broader and long-term implications of the COVID-19 pandemic on the Company’s workforce, operations and supply chain, customer demand, results of operations and overall financial performance remain uncertain.
The impact of COVID-19 and measures to prevent its spread have been impactful and continue to affect business in the following ways.
| • | Our workforce |
Employee health and safety is a priority. In response to COVID-19, the Company established new protocols to help protect the health and safety of its workforce, including restricting employee travel, recommending that all non-essential personnel work from home and cancelled or reduced physical participation in sales activities, meetings, events and conferences and implemented additional safety protocols for essential workers.
| • | Operations and supply chain |
The Company has experienced some production delays as a result of COVID-19, including impacts to our sourcing, manufacturing, and logistics channels.
| • | Demand for our products |
The Company continues to engage with current and potential customers and believes some customers may continue to delay purchases because their development programs may also be delayed as a result of COVID-19.
Business Combination
In February 2020, the Company purchased all of the outstanding equity interests of Zenith in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used, see Note 13 of these Consolidated Financial Statements. The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date and the acquisition-related costs, such as professional fees, were excluded from the consideration transferred and were recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed.
Net Loss Per Share Attributable to Common Stockholders
The Company follows the two-class method to include the dilutive effect of securities that participated in dividends, if and when declared, when computing net income per common share. The two-class method determines net income per common share for each class of common stock and participating securities according to dividends, if and when declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The anti-dilutive effect of potentially dilutive securities is excluded from the computation of net loss per share because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive.
10
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
The Company’s participating securities include convertible preferred stock, as the holders are entitled to receive noncumulative dividends on a pari passu basis in the event that a dividend is paid on common stock. The Company also considers any unvested common shares subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of convertible preferred stock, as well as the holders of unvested common shares subject to repurchase, do not have a contractual obligation to share in losses.
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase and any shares issuable by the exercise of warrants for nominal consideration.
Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports a net loss, the diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive.
Accounts Receivable, net
Accounts receivable consist of balances due from customers for hardware, professional services and hosted services. Accounts receivable are recorded at invoiced amounts, are non-interest bearing and are presented net of the associated allowance for doubtful accounts on the Consolidated Balance Sheets. The allowance for doubtful accounts totaled $104 and $131 as of June 30, 2021 and December 31, 2020, respectively. The provision for doubtful accounts is recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss and totaled $(42) and $(27) for the three and six months ended June 30, 2021, respectively. There was no provision for doubtful accounts for the three or six months ended June 30, 2020. No write-offs of accounts receivable deemed uncollectable occurred during the three and six months ended June 30, 2021 and 2020. The Company evaluates the collectability of the accounts receivable balances and has determined the allowance for doubtful accounts based on a combination of factors, which include the nature of relationship and the prior experience the Company has with the account and an evaluation for current and projected economic conditions as of the Consolidated Balance Sheets date. Accounts receivable determined to be uncollectible are charged against the allowance for doubtful accounts. Actual collections of accounts receivable could differ from management’s estimates.
Significant Customers
A significant customer represents 10% or more of the Company’s total revenue or net accounts receivable balance at each respective Consolidated Balance Sheet date. The significant customers of the Company are also limited partners of an investor in the Company with approximately 29% and 32% ownership as of June 30, 2021 and December 31, 2020, respectively. The investor does not exert control or influence on these limited partners and, as such these limited partners do not meet the definition of related parties. Revenue as a percentage of total revenue and net accounts receivable as a percentage of total net accounts receivable for each significant customer follows.
| Accounts Receivable | Revenue | |||||||||||||||||||||||
| As of | For the three months ended June 30, |
For the six months ended June 30, |
||||||||||||||||||||||
| June 30, 2021 |
December 31, 2020 |
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Customer A |
13 | % | 30 | % | 18 | % | * | 27 | % | 17 | % | |||||||||||||
| Customer B |
20 | % | 30 | % | * | * | * | * | ||||||||||||||||
| Customer C |
* | * | * | 15 | % | * | 27 | % | ||||||||||||||||
| Customer D |
* | * | * | 12 | % | * | * | |||||||||||||||||
| Customer E |
* | * | * | 10 | % | * | * | |||||||||||||||||
| Customer F |
* | * | * | 42 | % | * | * | |||||||||||||||||
| * | Total less than 10% for the respective period |
11
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Warranty Allowance
The Company provides its customers with limited service warranties associated with product replacement and related services. The warranty typically lasts one year following the installation of the product. The estimated warranty costs, which are expensed at the time of sale and included in cost of revenue, are based on the results of product testing, industry and historical trends and warranty claim rates incurred and are adjusted for identified current or anticipated future trends as appropriate. Actual warranty claim costs could differ from these estimates. For the three months ended June 30, 2021 and 2020 warranty expense included in cost of revenue was $80 and $164, respectively. Warranty expense included in cost of revenue for the six months ended June 30, 2021 and 2020, was $388 and $225, respectively. As of June 30, 2021 and December 31, 2020, the Company’s warranty allowance was $792 and $3,336, respectively.
During the year ended December 31, 2020, the Company identified a deficiency with batteries contained in certain hardware sold and has included the expected cost of repair and replacement for these batteries in its warranty allowance. As of June 30, 2021 and December 31, 2020, $528 and $3,166 is included in the Company’s warranty allowance related to the cost of remaining repairs for this identified deficiency, respectively.
Convertible Preferred Stock
The Company assessed the provisions of its convertible preferred stock including redemption rights, dividends and voting rights to determine the appropriate classification. The Company determined that its shares of convertible preferred stock are appropriately classified as mezzanine equity because they are contingently redeemable into cash upon the occurrence of an event not solely within the Company’s control. When it is probable that a convertible preferred share will become redeemable, adjustments are recorded to adjust the carrying values. No adjustments have been recorded during the six months ended June 30, 2021 or year ended December 31, 2020. Refer to Note 7 for more information on the rights, preferences, privileges and restrictions associated with the convertible preferred stock.
Fair Value of Financial Instruments
Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities subject to on-going fair value measurement are categorized and disclosed into one of three categories depending on observable or unobservable inputs employed in the measurement. These two types of inputs have created the following fair value hierarchy.
Level 1: Quoted prices in active markets that are accessible at the measurement date for assets and liabilities.
Level 2: Observable prices that are based on inputs not quoted in active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available.
This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial measurements at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2021 or year ended December 31, 2020 , respectively. The carrying amounts of the Company’s accounts receivable, accounts payable and accrued and other liabilities approximate their fair values due to their short maturities.
Revenue Recognition
The Company derives its revenue primarily from sales of systems that consist of hardware devices, professional installation services and hosted services to assist property owners and property managers with visibility and control over assets, while providing all-in-one home control offerings for residents. Revenue is recognized when control of these products and services are transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those products and services.
The Company may enter into contracts that may contain multiple distinct performance obligations. The transaction price for a typical arrangement includes the price for the smart device hardware, installation services, a hardware hub device, and a subscription to our proprietary software. The subscription is for the hub device only and there is no support or ongoing subscription for other smart device hardware. The Company considers
12
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
the hardware, installation services and the combination of the hardware hub device and proprietary software (the “hosted services”) to be separate performance obligations. The hardware hub device and the subscription are not sold separately. The hardware performance obligation includes the delivery of hardware, the installation services performance obligation includes the services to install the hardware and the hosted services performance obligation allows the customer access to software during the contracted-use term when the promised service is transferred to the customer. The Company partners with several manufactures to offer a range of compatible hardware products for its customers. The Company maintains control of the hardware purchased from manufacturers prior to it being transferred to the customer. The company has discretion in establishing the price the customer will pay for the good or service. Consequently, the Company is primarily responsible for fulfilling the promise to provide the product and the Company is considered the principal in these arrangements.
For each performance obligation identified, the Company estimates the standalone selling price, which represents the price at which the Company would sell the good or service separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price, considering available information such as market conditions, review of historical pricing data, and internal pricing guidelines related to the performance obligations. The Company then allocates the transaction price among those obligations based on the estimation of the standalone selling price.
Payments are received by the Company by credit card, check or automated clearing house (“ACH”) payments and payment terms are determined by individual contracts and generally range from due upon receipt to net 30 days. Taxes collected from customers and remitted to governmental authorities are not included in reported revenue. Payments received from customers in advance of revenue recognition are reported as deferred revenue.
The Company applies the practical expedient that allows for inclusion of the future auto-renewals in the initial measurement of the transaction price. The Company only applies these steps when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to a customer.
Timing of Revenue Recognition is as follows.
| • | Hardware Revenue |
Hardware revenue includes the smart home devices which connect to the hardware hub device which is separately discussed in Hosted Services Revenue below. The Company’s performance obligation for hardware revenue is considered satisfied, and revenue is recognized, at a point in time when the hardware device is shipped to the customer. The Company generally provides a one year warranty period on hardware devices. Warranty costs are recognized as a component of cost of revenue in the accompanying Consolidated Statements of Operations and Comprehensive Loss.
| • | Professional Services Revenue |
Professional services consist of installations, do not result in significant customization of the product and are generally performed from two to four weeks in duration. Installations can be performed by the Company, contracted out to a third-party or the customer can perform the installation themselves. The Company’s professional services contracts are generally arranged on a fixed price basis and revenue is recognized over time as installations are completed.
| • | Hosted Services Revenue |
Hosted services include recurring monthly subscription revenue generated from fees that provide customers access to one or more of the Company’s software applications including access controls, asset monitoring and related services. These arrangements have contractual terms typically ranging from one-month to seven-years and include recurring fixed plan subscription fees. Arrangements with customers do not provide the customer with the right to take possession of the Company’s software at any time. Customers are granted continuous access to the services over the contractual period. Accordingly, any fixed consideration related to subscription service is recognized on a straight-line basis over the contract term beginning on the date the subscription service is made available to the customer. Variable consideration is immaterial.
The Company also sells the hardware hub device, which only functions with the subscription to the Company’s proprietary software applications and related hosting services and is sold only on an integrated basis. The Company considers the hub device and hosting services subscription a single performance obligation and therefore defers the recognition of revenue for the hub devices. The estimated average in-service life of the hub device is four years. When a hub device is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal. If a contract contains a material right, proceeds are allocated to the material right and recognized over the period of benefit, which is generally four years.
13
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Cost of Revenue
Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of customer care and support over the life of the service arrangement.
| • | Hardware |
Cost of hardware revenue consists primarily of direct costs of proprietary products, hardware devices, supplies purchased from third-party providers, shipping costs, indirect costs related to warehouse facilities (including depreciation and amortization of capitalized assets and right-of-use assets), infrastructure costs, personnel-related costs associated with the procurement and distribution of products and warranty expenses together with the indirect cost of customer care and support.
| • | Professional Services |
Cost of professional services revenue consists primarily of direct costs related to personnel-related expenses for installation and supervision of installation services, general contractor expenses and travel expenses associated with the installation of products and indirect costs that are also primarily personnel-related expenses in connection with training of and ongoing support for customers and residents.
| • | Hosted Services |
Cost of hosted services revenue consists primarily of the amortization of the direct costs of the hardware hub device consistent with the revenue recognition period noted above in Hosted Services Revenue, warehouse facility (including depreciation and amortization of capitalized assets and right-of-use assets) and infrastructure costs associated with providing software applications together with the indirect cost of customer care and support over the life of the service arrangement.
Deferred Cost of Revenue
Deferred cost of revenue includes all direct costs included in cost of revenue for hosted services and the hub device that have been deferred to future periods.
Research and Development
These expenses relate to the research and development of new products and services and enhancements to the Company’s existing product offerings. Costs related to preliminary project activities and post-implementation activities are expensed as incurred.
Advertising
Advertising costs are expensed as incurred and recorded as a component of sales and marketing expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss. The Company incurred $244 and $163 of advertising costs for the three months ended June 30, 2021 and 2020, respectively, and incurred $400 and $364 of advertising costs during the six months ended June 30, 2021 and 2020 respectively.
Segments
The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Chief Executive Officer, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s principal operations are in the United States and the Company’s long-lived assets are located primarily within the United States. The Company held $7,041 and $7,941 of assets outside the United States at June 30, 2021 and December 31, 2020, respectively.
14
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Recent Accounting Guidance Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326)” which modifies the measurement of expected credit losses of certain financial instruments. This update is effective for fiscal years beginning after December 15, 2022 and must be applied using a modified-retrospective approach, with early adoption permitted. The adoption of ASU 2016-13 may have an impact on the Company’s accounting for accounts receivable and bad debt expense included in the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss. The Company is evaluating the extent of such impact.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740)”, which simplifies the accounting for income taxes, primarily by eliminating certain exceptions found in the Accounting Standards Codification, section 740. This standard is effective for fiscal periods beginning after December 15, 2021. The Company does not plan to early adopt this standard and is currently evaluating the impact of this guidance on its Consolidated Financial Statements.
NOTE 3. FAIR VALUE MEASUREMENTS AND FAIR VALUE OF INSTRUMENTS
The following tables display the carrying values and fair values of financial instruments.
| As of June 30, 2021 | As of December 31, 2020 | |||||||||||||||||||||||||||
| Assets on the Consolidated Balance Sheets | Carrying Value |
Unrealized Losses |
Fair Value |
Carrying Value |
Unrealized Losses |
Fair Value |
||||||||||||||||||||||
| Cash |
Level 1 | $ | 13,530 | $ | — | $ | 13,530 | 32,723 | $ | — | $ | 32,723 | ||||||||||||||||
| Money market funds |
Level 1 | 40,004 | — | 40,004 | 5,895 | — | 5,895 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 53,534 | $ | — | $ | 53,534 | $ | 38,618 | $ | — | $ | 38,618 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| As of June 30, 2021 | As of December 31, 2020 | |||||||||||||||||||
| Liabilities on the Consolidated Balance Sheets | Carrying Value(1) |
Fair Value |
Carrying Value(1) |
Fair Value |
||||||||||||||||
| Term loan |
Level 2 | $ | 4,027 | $ | 4,061 | $ | 4,820 | $ | 4,913 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities |
$ | 4,027 | $ | 4,061 | $ | 4,820 | $ | 4,913 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | The carrying values are shown exclusive of discounts and other offsets. |
The fair values of the revolving line of credit and term loan, which are classified as Level 2 in the fair value hierarchy, are estimated using a discounted cash flow methodology based on market interest rate data and other market factors available at the end of the period. The fair values of convertible notes are estimated by discounting contractual cash flows at the interest rate we estimate the notes would bear if sold in the current market. The input used to develop our fair value measurements as of June 30, 2021 and December 31, 2020 was an effective interest rate of five percent (5%). The Company had no outstanding balances on the revolving line of credit as of June 30, 2021 and December 31, 2020.
14
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 4. REVENUE AND DEFERRED REVENUE
Disaggregation of Revenue
In the following tables, revenue is disaggregated by primary geographical market and type of revenue.
| For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue by geography |
||||||||||||||||
| United States |
$ | 21,112 | $ | 4,605 | $ | 39,861 | $ | 20,787 | ||||||||
| International |
565 | 1,186 | 976 | 1,558 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenue |
$ | 21,677 | $ | 5,791 | $ | 40,837 | $ | 22,345 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue by type |
||||||||||||||||
| Hardware |
$ | 14,029 | $ | 2,881 | $ | 26,427 | $ | 14,174 | ||||||||
| Professional services |
3,564 | 1,210 | 7,165 | 4,841 | ||||||||||||
| Hosted services |
4,084 | 1,700 | 7,245 | 3,330 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenue |
$ | 21,677 | $ | 5,791 | $ | 40,837 | $ | 22,345 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Remaining Performance Obligations
Advance payments received from customers are recorded as deferred revenue and are recognized upon the completion of related performance obligations over the period of service. Advance payments for the hardware hub device are recorded as deferred revenue and recognized over the average in-service life of the hub. Advance payments received from customers for subscription services are recorded as deferred revenue and recognized over the term of the subscription. A summary of the change in deferred revenue is as follows.
| For the six months ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Deferred revenue balance as of January 1 |
$ | 53,501 | $ | 19,083 | ||||
| Revenue recognized from balance of deferred revenue at the beginning of the period |
(3,992 | ) | (1,349 | ) | ||||
| Revenue deferred during the period |
18,420 | 12,904 | ||||||
| Revenue recognized from revenue originated and deferred during the period |
(3,922 | ) | (2,851 | ) | ||||
|
|
|
|
|
|||||
| Deferred revenue balance as of March 31 |
64,007 | 27,787 | ||||||
|
|
|
|
|
|||||
| Revenue recognized from balance of deferred revenue at the beginning of the period |
(3,270 | ) | (1,483 | ) | ||||
| Revenue deferred during the period |
17,346 | 6,469 | ||||||
| Revenue recognized from revenue originated and deferred during the period |
(3,578 | ) | (860 | ) | ||||
|
|
|
|
|
|||||
| Deferred revenue balance as of June 30 |
$ | 74,505 | $ | 31,913 | ||||
|
|
|
|
|
|||||
As of June 30, 2021, the Company expects to recognize 47% of its total deferred revenues within the next 12 months, 28% of its total deferred revenues between 13 and 36 months and 24% between 37 and 60 months. Any deferred revenues expected to be recognized beyond five years is immaterial.
Deferred cost of revenue includes all direct costs included in cost of revenue that have been deferred to future periods.
15
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 5. OTHER FINANCIAL STATEMENT INFORMATION
Prepaid expenses and other current assets consisted of the following.
| June 30, 2021 | December 31, 2020 | |||||||
| Prepaid expenses |
$ | 6,346 | $ | 3,276 | ||||
| Other current assets |
4,874 | 564 | ||||||
|
|
|
|
|
|||||
| Total prepaid expenses and other current assets |
$ | 11,220 | $ | 3,840 | ||||
|
|
|
|
|
|||||
Property and equipment, net consisted of the following.
| June 30, 2021 | December 31, 2020 | |||||||
| Computer hardware and software |
$ | 1,211 | $ | 868 | ||||
| Furniture and fixtures |
161 | 109 | ||||||
| Leasehold improvements |
109 | 103 | ||||||
| Warehouse and other equipment |
341 | 124 | ||||||
|
|
|
|
|
|||||
| Property and equipment, gross |
1,822 | 1,204 | ||||||
| Less: Accumulated depreciation and amortization |
(530 | ) | (357 | ) | ||||
|
|
|
|
|
|||||
| Total property and equipment, net |
$ | 1,292 | $ | 847 | ||||
|
|
|
|
|
|||||
Accrued expenses and other current liabilities consisted of the following.
| June 30, 2021 | December 31, 2020 | |||||||
| Accrued compensation costs |
$ | 4,439 | $ | 3,234 | ||||
| Sales tax payable |
1,290 | 1,282 | ||||||
| Warranty allowance |
792 | 3,336 | ||||||
| Lease liabilities, current |
496 | 485 | ||||||
| Accrued expenses |
305 | 764 | ||||||
| Other |
447 | 454 | ||||||
|
|
|
|
|
|||||
| Total accrued expenses and other current liabilities |
$ | 7,769 | $ | 9,555 | ||||
|
|
|
|
|
|||||
NOTE 6. DEBT
Term Loan and Revolving Line of Credit Facility
In August 2019, the Company entered into a loan and security agreement for a credit facility (the “Credit Facility”). The Credit Facility provides $15,000 of borrowing capacity and consists of a $10,000 revolving line of credit (the “Revolving Facility”), which will mature in August 2021 and a $5,000 term loan (the “Term Loan Facility”), which will mature in November 2023. The Revolving Facility is subject to an availability sublimit in accordance with the terms and conditions of the Credit Facility (the “Sublimit”). The Sublimit is derived by multiplying eligible accounts receivable by 85%. The amount available to the Company for additional borrowings on the Revolving Facility was $10,000 as of June 30, 2021 and December 31, 2020. Amounts borrowed under the Revolving Facility may be repaid and, prior to the Revolving Facility maturity date, reborrowed. The Revolving Facility terminates on the Revolving Facility maturity date, when the principal amount of all advances, the unpaid interest thereon, and all other obligations relating to the Revolving Facility shall be immediately due and payable. The Term Loan Facility was subject to monthly payments of interest, in arrears, accrued on the principal balance of the Term Loan Facility through November 2020. Thereafter, and continuing through the Term Loan Facility maturity date, the Term Loan Facility is subject to equal monthly payments of principal plus accrued interest. The Company has the option to prepay all, but not less than all, of the Term Loan Facility, subject to certain terms and conditions. After repayment, the Term Loan Facility (or any portion thereof) may not be reborrowed. Proceeds from the Credit Facility are used for general corporate purposes. In connection with the Credit Facility, the Company issued warrants (Note 7) to purchase the Company’s common stock. The fair value of the warrants has been recorded as additional paid-in capital with a reduction to the carrying value of the Term Loan Facility in the accompanying Consolidated Balance Sheets. The resulting discount from outstanding principal balance of the Term Loan Facility is being amortized using the effective interest rate method over the periods to maturity. Amortization of this discount is recorded as interest expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss and Comprehensive Loss.
16
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
The following table sets forth a summary of the outstanding principal amounts under the Credit Facility as of June 30, 2021 and December 31, 2020.
| Maturity Date | Interest Rate(1) | June 30, 2021 | December 31, 2020 | |||||||||||||
| Term loan facility |
November 2023 | 6.00 | % | $ | 4,027 | $ | 4,861 | |||||||||
| Debt discount, net |
(32 | ) | (41 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Term loan facility - carrying value |
$ | 3,995 | $ | 4,820 | ||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | Interest rates for the Term Loan Facility and the Revolving Facility are based upon the prime rate as published by the Wall Street Journal (Prime Rate) plus an applicable margin, subject to floors as described below. As of June 30, 2021 and December 31, 2020, the applicable margins for the Revolving Facility and Term Loan Facility was 0.25% and the Prime Rate as of June 30, 2021 and December 31, 2020 was 3.25%. In accordance with the Credit Facility, the applicable interest rates are as stated above. |
The principal amount outstanding under the Revolving Facility shall accrue interest at a floating per annum rate equal to (i) when our unrestricted cash maintained with the lender minus all obligations under the Revolving Facility is at least one dollar ($1.00) (we are a Net Depositor), the greater of (x) one quarter of one percent (0.25%) above the Prime Rate, or (y) five and one half of one percent (5.50%), and (ii) when we are not a Net Depositor, the greater of (x) three quarters of one percent (0.75%) above the Prime Rate, or (y) six percent (6.00%), which interest shall be payable monthly. The principal amount outstanding under the Term Loan Facility shall accrue interest at a floating per annum rate equal to the greater of (A) one percent (1.00%) above the Prime Rate and (B) six percent (6.00%), which interest was payable monthly through November 2020.
In addition to paying interest on outstanding principal under the Credit Facility, the Company is required to pay a facility fee to the lender under the Revolving Facility in respect of the unused commitments thereunder. The facility fee rate is based on the daily unused amount of the Revolving Facility and is one eighth of one percent (0.125%) per annum based on the unused facility amount.
The Credit Facility contains certain customary affirmative and negative covenants and events of default. Such covenants will, among other things, restrict, subject to certain exceptions, the Company’s ability to (i) engage in certain mergers or consolidations, (ii) sell, lease or transfer all or substantially all of the Company’s assets, (iii) engage in certain transactions with affiliates, (iv) make changes in the nature of the Company’s business and our subsidiaries, and (v) incur additional indebtedness that is secured on a pari passu basis with the Credit Facility.
The Credit Facility also requires the Company, on a consolidated basis with its subsidiaries, to maintain a minimum liquidity ratio. If an event of default occurs, the lender is entitled to take various actions, including the acceleration of amounts due under the Credit Facility and all actions permitted to be taken by a secured creditor. As of June 30, 2021, and through the date these consolidated financial statements were issued, the Company believes it was in compliance with all financial covenants.
The Credit Facility is collateralized by first priority or equivalent security interests in substantially all the property, rights and assets of the Company.
Convertible Note
In February 2020, the Company issued a $50 principal, 5% per annum subordinated convertible note pursuant to a note purchase agreement (the “February 2020 Convertible Note”). Interest on the February 2020 Convertible Note accrued at the coupon rate, compounded annually.
In December 2019, the Company issued a $7,500 principal amount, 5% per annum subordinated convertible note pursuant to a note purchase agreement (the “December 2019 Convertible Note”). Interest on the December 2019 Convertible Note accrued at the coupon rate, compounded annually.
17
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Conversion of Convertible Notes
In March 2020, in conjunction with the Series C-1 preferred stock issuance, the December 2019 and February 2020 Convertible Notes, along with the respective accrued interest thereon, were automatically converted into shares of Series C-1 preferred stock at conversion prices of $10.02 and $10.01, respectively. As such, the convertible noteholders received an aggregate of 756 shares and 5 shares, respectively, of Series C-1 convertible preferred stock for the conversion of the Convertible Notes. The redemptions of the notes are considered early extinguishments of debt. The difference between the reacquisition price of the Convertible Notes and the net carrying amount of the extinguished Convertible Notes should be recognized currently in income as a loss or gain. Because the reacquisition price of the December 2019 Convertible Note was higher than the carrying value of the same on the date of extinguishment, the redemption of the December 2019 Convertible Note was recorded as a loss on conversion in the amount of $164 and included in other expense, net in the accompanying Consolidated Statements of Operations and Comprehensive Loss for the six months ended June 30, 2020. No expenses were recorded in connection with this transaction during the six months ended June 30, 2021.
The following table summarizes the contractual maturities of the Company’s term loan facility which comprises all of the Company’s outstanding debt as of June 30, 2021.
| Year |
Term Loan Facility |
|||
| Remainder of 2021 |
$ | 833 | ||
| 2022 |
1,667 | |||
| 2023 |
1,527 | |||
| 2024 and thereafter |
— | |||
|
|
|
|||
| Total |
4,027 | |||
| Less: unamortized debt discount |
(32 | ) | ||
|
|
|
|||
| Total carrying value |
$ | 3,995 | ||
|
|
|
|||
NOTE 7. CONVERTIBLE PREFERRED STOCK AND EQUITY
Preferred Stock
The Company is authorized to issue 24,816 shares of $0.00001 par value preferred stock. There were 24,816 and 21,458 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.
The authorized, issued and outstanding shares, original issuance price per share of the Company’s preferred stock are as follows as of June 30, 2021.
| Issue Date |
Series | Shares Authorized |
Shares Issued and Outstanding |
Original Issue Price per Share |
Liquidation Preference |
|||||||||||||
| March 2018 |
Seed | 4,707 | 4,707 | $ | 1.0000 | $ | 4,707 | |||||||||||
| September 2018 |
A | 4,541 | 4,541 | $ | 1.1011 | $ | 5,000 | |||||||||||
| May 2019 |
B-1 | 508 | 508 | $ | 4.9767 | $ | 2,527 | |||||||||||
| May 2019 |
B | 5,425 | 5,425 | $ | 6.2209 | $ | 33,750 | |||||||||||
| March 2020 |
C-1 | 761 | 761 | $ | 10.0223 | $ | 7,624 | |||||||||||
| March - May 2020; March 2021 |
C | 8,874 | 8,874 | $ | 10.4236 | $ | 92,468 | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
| 24,816 | 24,816 | $ | 146,076 | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||
18
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
The authorized, issued and outstanding shares, original issuance price per share of the Company’s preferred stock are as follows as of December 31, 2020.
| Issue Date |
Series | Shares Authorized |
Shares Issued and Outstanding |
Original Issue Price per Share |
Liquidation Preference |
|||||||||||||||
| March 2018 |
Seed | 4,707 | 4,707 | $ | 1.0000 | $ | 4,707 | |||||||||||||
| September 2018 |
A | 4,541 | 4,541 | $ | 1.1011 | $ | 5,000 | |||||||||||||
| May 2019 |
B-1 | 508 | 508 | $ | 4.9767 | $ | 2,527 | |||||||||||||
| May 2019 |
B | 5,425 | 5,425 | $ | 6.2209 | $ | 33,750 | |||||||||||||
| March 2020 |
C-1 | 761 | 761 | $ | 10.0223 | $ | 7,624 | |||||||||||||
| March - May 2020 |
C | 5,756 | 5,516 | $ | 10.4236 | $ | 57,500 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| 21,698 | 21,458 | $ | 111,108 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
During the six months ended June 30, 2021, the Company issued an additional 3,358 shares of Series C preferred stock through two tranches that closed in February and March 2021. The Series C preferred stock was issued in exchange for $35,000 gross cash proceeds. Expenses in connection with the issuance of the Series C preferred stock were $207, resulting in net cash proceeds of $34,793.
During the year ended December 31, 2020, the Company issued 5,516 shares of Series C preferred stock through three tranches that closed in March, April and May 2020. The Series C preferred stock was issued in exchange for $57,500 gross cash proceeds. Expenses in connection with the issuance of the Series C preferred stock were $61, resulting in net cash proceeds of $57,439. During the year ended December 31, 2020, the Company also issued 761 shares of Series C-1 preferred stock by redeeming two subordinated convertible notes originally issued in December 2019 and February 2020.
In March 2018, in connection with the Company’s conversion from an LLC to corporation, the founders of the Company exchanged their member interests for aggregate total of 1,800 shares of common stock and 4,252 shares of Series Seed preferred stock. After conversion to a corporation in March 2018, in connection with the Series Seed preferred stock financing, the Company and its chief executive officer (CEO) entered into a stock restriction agreement, whereby certain restrictions and vesting conditions were placed on 1,080 of the CEO’s common stock shares to vest in 30 equal monthly installments, on each monthly anniversary from the effective date of the stock restriction agreement. As of December 31, 2020, no amounts related to this agreement remained unamortized. During the three and six months ended June 30, 2020 stock-based compensation in the amount of $108 and $216 was recognized, respectively, and included as a component of general and administrative expense in the accompanying Consolidated Statement of Operations and Comprehensive Loss. As of June 30, 2021 and December 31, 2020, the CEO owned 996 shares of common stock related to this transaction which were vested and owned outright.
Warrants
In March 2019, the Company issued a warrant to purchase common stock to the purchaser of a $2,500 convertible note. The warrant represented compensation paid for marketing services to be provided and was accounted for using stock-based compensation guidance. The warrant vested based on the number of installed units attained over a measurement period, which expired in March 2021. The variability in the units earned was determined to be a performance condition and did not require classification of the warrant as a liability. Upon vesting, the warrant holder is entitled to purchase up to 503 fully paid and non-assessable shares of the Company’s common stock at $0.01 per share, subject to adjustment pursuant to the warrant. The Company measured the fair value of the warrant using the Black-Scholes-Merton model. The Company recorded the associated marketing expense over the service period as the units were installed with an offset to additional paid-in-capital. During the three and six months ended June 30, 2021, the Company recognized no expenses related to these warrants. During the three and six months ended June 30, 2020, the Company recognized $36 and$182 of sales and marketing expense related to these warrants in the accompanying Consolidated Statements of Operations and Comprehensive Loss. These warrants were exercised by the holder in March 2021, which resulted in 503 shares of common stock being issued by the Company.
In August 2019, in connection with the Credit Facility (Note 6), the Company issued warrants to purchase the Company’s common stock to the lender. The warrants are exercisable upon issuance until their expiration in August 2029 or earlier upon redemption. The holder of the warrants, together with any successor or permitted assignee or transferee, is entitled to purchase 33 fully paid and non-assessable shares of the Company’s common stock at $2.30 per share, subject to adjustment pursuant to the warrant. The fair value of the warrants has been recorded as additional paid in capital and a reduction to the carrying value of the Term Loan Facility on the accompanying Consolidated Balance Sheets. The resulting discount from outstanding principal balance of the Term Loan Facility is being amortized using the effective interest rate method over the periods to maturity. Amortization of this discount is recorded as interest expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss.
19
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
In April 2020, in connection with the closing of the second tranche of the Series C preferred stock, the Company issued a warrant to purchase common stock to an investor who participated in the second tranche closing. The warrant represents compensation paid for marketing services to be provided and was accounted for using stock-based compensation guidance. The warrant vests based on the number of installed units attained over a measurement period, which expires in April 2023. The variability in the units earned was determined to be a performance condition and did not require classification of the warrant as a liability. Upon vesting, the warrant holder is entitled to purchase 384 fully paid and non-assessable shares of the Company’s common stock at $0.01 per share, subject to adjustment pursuant to the warrant. The Company measured the fair value of the warrants using the Black-Scholes-Merton model. The Company records the associated marketing expense over the service period as the units are installed with an offset to additional paid-in-capital. During the three and six months ended June 30, 2021, the Company recognized $149 and $359 of sales and marketing expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss related to these warrants. No expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss related to these warrants were recognized during the three and six months ended June 30, 2020.
In February 2021, the Company issued warrants to purchase the Company’s common stock as consideration to certain customers. The warrants are exercisable upon issuance until their expiration in February 2031 or earlier upon redemption. The number of warrants issued to these customers is dependent on the number of installed units, as defined by the warrant agreements, purchased by the customer. The fair value of the vested portion of the warrants has been recorded as additional paid in capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations, respectively. For the three and six months ended June 30, 2021 the Company recorded $18 and $40, respectively, as contra-revenue in the Consolidated Statement of Operations related to these warrants. No amounts related to these warrants were recorded as contra-revenue in the Consolidated Statement of Operations for the six months ended June 30, 2020.
NOTE 8. STOCK-BASED COMPENSATION
2018 Stock Plan
The Company’s board of directors adopted, and the stockholders approved, the SmartRent.com, Inc. 2018 Stock Plan (the “2018 Stock Plan”), effective March 2018. The purpose of the 2018 Stock Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The 2018 Stock Plan seeks to achieve this purpose by providing for awards in the form of options, restricted stock purchase rights or restricted stock bonuses. Under the 2018 Stock Plan as of June 30, 2021, the Company may issue up to 4,040 shares. Awards granted under the 2018 Stock Plan generally expire ten years from the date of grant and become vested and exercisable over a four-year period. All options are subject to certain provisions that may impact these vesting schedules.
Summaries of the Company’s 2018 Stock Plan activity for the six months ended June 30, 2021 is presented below.
| Options Outstanding | ||||||||||||||||
| Number of Options |
Weighted- Average Exercise Price ($ per share) |
Weighted Average Remaining Contractual Life (years) |
Aggregate Intrinsic Value |
|||||||||||||
| December 31, 2020 |
2,255 | $ | 2.49 | 8.96 | $ | — | ||||||||||
| Granted |
— | |||||||||||||||
| Cancelled |
— | |||||||||||||||
|
|
|
|||||||||||||||
| June 30, 2021 |
2,255 | $ | 2.49 | 8.46 | $ | — | ||||||||||
|
|
|
|||||||||||||||
Amendment to the 2018 Stock Plan
In April 2021, the Board of Directors executed an unanimous written consent to provide an additional incentive to certain employees of the Company by amending the 2018 Stock Plan to allow for the issuance of restricted stock units (RSUs) and the Company granted a total of 1,533 RSUs to certain employees which vest over four years. The issued RSUs also contain a liquidity event vesting condition which the Company expects to be satisfied upon closing of the Company’s acquisition by FWAA. Upon satisfaction of the liquidation event, the Company will record a one-time, catch-up charge of stock-based compensation related to these RSUs vested to date. The estimated fair value for each RSU issued is approximately $21.55 per share and the total stock-based compensation expense to be amortized over the vesting period is $33,033. As of June 30, 2021, both vesting conditions remain unsatisfied and the Company has not recognized any stock-based compensation expense related to the RSUs and 1,533 RSUs remain outstanding and unvested.
20
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Stock-Based Compensation
The Company recorded stock-based compensation expense in the Consolidated Statement of Operations and Comprehensive Loss as follows.
| For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Research and development |
$ | 52 | $ | 78 | $ | 107 | $ | 128 | ||||||||
| Sales and marketing |
16 | 17 | 32 | 43 | ||||||||||||
| General and administrative |
560 | 642 | 716 | 731 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 628 | $ | 737 | $ | 855 | $ | 902 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
During the three and six months ended June 30, 2021 stock-based compensation expense of $202 and $402, respectively, was recognized for 844 shares granted in connection with the Zenith acquisition and are recorded as a component of general and administrative expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss. During the three and six months ended June 30, 2020, $202 and $298, respectively, of stock-based compensation expense related to these shares was recognized and are recorded as a component of general and administrative expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss.
During the three and six months ended June 30, 2020 stock-based compensation in the amount of $108 and $216 was recognized, respectively, in connection with the vesting of common stock that had been converted from Series Seed preferred shares and was recorded as a component of general and administrative expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss. These shares were fully vested at December 31, 2020 and no expense was recognized during the six months ended June 30, 2021 in connection with these shares.
NOTE 9. INCOME TAXES
The Company’s effective tax rate (ETR) from continuing operations was (0.45%) for the six months ended June 30, 2021 and (0.70)% for the six months ended June 30, 2020, The Company’s ETR during the three months ended June 30, 2021 differed from the federal statutory rate of 21% primarily due to changes in the federal and state valuation allowance and foreign taxes. The valuation allowance recorded against the Company’s federal and state net deferred tax assets was $23,731 as of June 30, 2021.
As of June 30, 2021, the Company continues to have a full valuation allowance recorded against all federal and state deferred tax assets and will continue to evaluate the valuation allowance in future periods for any change in circumstances that causes a change in judgment about the realizability of the deferred tax assets. The amount of the deferred tax assets considered realizable; however, could be adjusted in future periods if estimates of future taxable income during the carryforward period are increased, if objective negative evidence in the form of cumulative losses is no longer present, and if we employ tax planning strategies in the future.
21
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 10. NET LOSS PER SHARE
The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because inclusion of the shares on an as-converted basis would have been anti-dilutive.
| For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Convertible preferred stock |
24,816 | 21,458 | 24,816 | 21,458 | ||||||||||||
| Common stock options |
3,789 | 2,001 | 3,789 | 2,001 | ||||||||||||
| Common stock warrants |
33 | 33 | 33 | 33 | ||||||||||||
| Shares subject to repurchase |
563 | 952 | 563 | 952 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
29,201 | 24,444 | 29,201 | 24,444 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
NOTE 11. RELATED-PARTY TRANSACTIONS
During the three and six months ended June 30, 2021, the Company incurred marketing expense of $149 and $359, respectively, included in sales and marketing expense on the Consolidated Statements of Operations and Comprehensive Loss in connection with the vesting of warrants held by an investor. During the three and six months ended June 30, 2020, $36 and $182 are included in sales and marketing expense on the Consolidated Statements of Operations and Comprehensive Loss in connection with the vesting of warrants held by an investor.
The Company incurred consulting expense of $23 and $38 included in research and development expenses for the three and six months ended June 30, 2021, respectively, related to services provided by companies in which two of the Company’s executives have control or significant influence. During the three and six months ended June 30, 2020, the Company incurred consulting expense of $23 and $24, respectively.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Sales Taxes
The Company determined that it was required to pay sales and use tax in various jurisdictions. Accordingly, the Company has recorded a liability of $1,290 and $1,282 as of June 30, 2021 and December 31, 2020, respectively, which includes estimated penalties and interest of $145 at December 31, 2020. There are no penalties and interest included in the balance at June 30, 2021.
Supplier Commitment
Effective August 2020, the Company had a commitment with a supplier to place monthly product orders over an annual period based on agreed-upon minimum monthly volumes. As of December 31, 2020, the remaining purchase commitment had a value of $12,601. In March 2021 this agreement was amended and the term of the agreement was extended to August 2022 resulting in the total remaining commitment amount as of June 30, 2021, increasing to $22,856.
Legal Matters
The Company is subject to various legal proceedings and claims that arise in the ordinary course of our business. Liabilities are accrued when it is believed that it is both probable that a liability has been incurred and that the Company can reasonably estimate the amount of the potential loss. The Company does not believe that the outcome of these proceedings or matters will have a material effect on the consolidated financial statements.
NOTE 13. BUSINESS COMBINATIONS
In February 2020, the Company purchased all of the outstanding equity interests of Zenith which had previously been a vendor for the Company.
22
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
The Company accounted for the Zenith acquisition as a business combination. The purchase price consisted of $6,909 cash, $974 promissory note consideration, $813 common stock consideration, and $1,158 related to settlement of preexisting relationships for a total purchase price of $9,854. The preexisting relationship related to prepaid inventory owned by the Company, with a corresponding deferred revenue balance recorded by Zenith. This preexisting relationship was settled on the acquisition date as an adjustment to the purchase price.
The aggregate purchase price exceeded the fair value of the net tangible and intangible assets acquired, and accordingly the Company recorded goodwill of $4,162. Furthermore, the Company issued 844 common stock shares that vest annually over three years and $3,353 of promissory notes to certain employees, contingent upon continued employment. These costs are recognized as post-combination compensation expenses. In connection with the common stock issued with this transaction, the Company recorded $ 402 and $ 298 of stock-based compensation expense during the six months ended June 30, 2021 and 2020, respectively. The company recorded $202 of stock-based compensation related to these shares for both three month periods ended June 30, 2021 and 2020.
The total purchase consideration and the fair values and liabilities at the acquisition date were as follows.
| Consideration |
||||||||
| Cash Consideration |
$ | 6,909 | ||||||
| Promissory Note Consideration |
974 | |||||||
| Stock Consideration |
813 | |||||||
| Settlement of Preexisting Relationships |
1,158 | |||||||
|
|
|
|||||||
| Fair Value of Total Consideration Transferred |
9,854 | |||||||
| Recognized amounts of identifiable assets acquired and liabilities assumed |
||||||||
| Cash |
$ | 4,527 | ||||||
| Accounts receivable |
518 | |||||||
| Inventory |
692 | |||||||
| Prepaid expenses and other current assets |
632 | |||||||
| Property and equipment, net |
61 | |||||||
|
|
|
|||||||
| Total identifiable assets acquired |
6,430 | |||||||
|
|
|
|||||||
| Accounts payable |
490 | |||||||
| Accrued expenses and other current liabilities |
248 | |||||||
|
|
|
|||||||
| Total liabilities assumed |
738 | |||||||
|
|
|
|||||||
| Total identifiable net assets |
5,692 | |||||||
|
|
|
|||||||
|
|
|
|||||||
| Goodwill |
$ | 4,162 | ||||||
|
|
|
The Company recognized approximately $21 of acquisition related costs that were expensed during the three months ended March 31, 2020 and are included in general and administrative expenses. None of these costs were expensed during the three months ended June 30, 2020.
The excess of the purchase price over the tangible and intangible assets acquired has been recorded as Goodwill. The Company determined the intangible assets held by Zenith were not material to the acquisition and did not include them in the acquisition. The goodwill is attributable primarily to the workforce of the acquired business and expected synergies with the Company’s existing operations and is not deductible for income tax purposes.
The Company’s consolidated balance sheet for the year ended December 31, 2020, and other financial statements presented herein for the three and six months ended June 30, 2021 and 2020 include the results of operations of Zenith since the acquisition date. Revenue related to Zenith and included in amounts presented on the Company’s Consolidated Statement of Operations and Comprehensive Loss are $1,186 and $1,558 for the three and six months ended June 30, 2020, respectively. Net income related to Zenith and included in amounts presented on the Company’s Consolidated Statement of Operations and Comprehensive Loss are $126 and $345 for the three and six months ended June 30, 2020, respectively. Pro forma disclosures have not been provided since the acquisition did not have, and is not expected to have, a material impact on the Company’s results of operations.
23
SMARTRENT.COM, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 14. SUBSEQUENT EVENTS
In connection with the preparation of the accompanying consolidated financial statements, the Company has evaluated events and transactions occurring after June 30, 2021 and through August 30, 2021, the date these financial statements were issued, for potential recognition or disclosure and has determined that there are no additional items to disclose except as disclosed below.
Revolving Facility
In August 2021, the Company extended the maturity date of its Revolving Facility to November 2021.
24
25
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
References in this section to “we,” “our,” “us,” “the Company” and “SmartRent” generally refer to SmartRent.com, Inc. (now known as SmartRent Technologies, Inc.) and its consolidated subsidiaries prior to the business combination pursuant to the Merger Agreement dated April 21, 2021 (as amended by Amendment No. 1 to Merger Agreement, dated July 23, 2021), among FWAA, Merger Sub, and SmartRent.com, Inc. and to SmartRent, Inc. and its consolidated subsidiaries after giving effect to the Business Combination.
Capitalized terms used but not defined in this exhibit shall have the meanings ascribed to them in the Current Report on Form 8-K (the “Report”) filed with the Securities and Exchange Commission (the “SEC”) on August 30, 2021 of which this is a part and, if not defined in the Report, the Proxy Statement/Prospectus.
Introduction
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”
FWAA is a blank check company formed under the laws of the State of Delaware on November 23, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
SmartRent is an enterprise software company that provides a fully integrated, brand-agnostic smart home operating system to residential property owners and operators, as well as homebuilders, home buyers, developers and residents. SmartRent’s operating system is designed to enable owners and operators to streamline property management and operations, lower operating costs, increase revenues, protect their assets through improved visibility and control over their properties and communities, and provide an elevated living experience for residents.
The unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2021 combines the historical balance sheet of FWAA as of June 30, 2021 with the historical balance sheet of SmartRent as of June 30, 2021 on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on June 30, 2021. The unaudited Pro Forma Condensed Combined Statements of Operation for the six months ended June 30, 2021 and for the year ended December 31, 2020 combines the historical statements of operations of FWAA and SmartRent for such periods on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on January 1, 2020, the beginning of the earliest period presented:
| • | the merger of Merger Sub, the wholly owned subsidiary of FWAA, with and into SmartRent, with SmartRent as the surviving company; |
| • | the conversion of all outstanding shares of SmartRent preferred stock into SmartRent common stock that will roll over into the Post-Combination Company; |
| • | the conversion of all outstanding FWAA shares into FWAA common stock that will roll over into the Post-Combination Company common stock; |
| • | the rollover of SmartRent’s options, warrants, and RSUs into options, warrants, and RSUs in the Post-Combination Company; and |
| • | the issuance of the Post-Combination Company’s shares valued at $10.00 per share as follows: 157,678,300 shares SmartRent, 34,499,754 shares to FWAA, 15,500,000 shares to the Subscribers, 9,672,500 shares to the Sponsor. |
The historical financial information of FWAA was derived from the unaudited financial statements of FWAA as of and for the six months ended June 30, 2021 (incorporated by reference to FWAA’s Quarterly Report on Form 10-Q filed on August 13, 2021) and from the audited financial statements for the year ended December 31, 2020, beginning on page F-2 of the Proxy Statement/Prospectus and incorporated herein by reference. The
1
historical financial information of SmartRent was derived from the unaudited consolidated financial statements of SmartRent as of and for the six months ended June 30, 2021 (set forth in Exhibit 99.1 hereto and incorporated herein by reference) and from the audited consolidated financial statements for the year ended December 31, 2020, included in the Proxy Statement/Prospectus beginning on page F-29, which is incorporated herein by reference. This information should be read together with FWAA’s and SmartRent’s audited and unaudited financial statements and related notes, the sections titled “Other Information Related to FWAA—FWAA’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “SmartRent’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this Report and in the Proxy Statement/Prospectus which is incorporated herein by reference.
The pro forma combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the Post-Combination Company’s financial condition or results of operations would have been had the Business Combination occurred on the dates indicated. The pro forma combined financial information also may not be useful in predicting the future financial condition and results of operations of the Post-Combination Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
Accounting for the Business Combination
The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, FWAA, who was the legal acquirer, was treated as the “acquired” company for financial reporting purposes and SmartRent was treated as the accounting acquirer. SmartRent was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
| • | SmartRent’s existing stockholders have more than 70% of the voting interest of the Post-Combination Company |
| • | SmartRent’s senior management comprise the senior management of the Post-Combination Company |
| • | the directors nominated by SmartRent represent the majority of the board of directors of the Post-Combination Company |
| • | SmartRent is the larger entity based on historical revenues and business operations |
| • | SmartRent’s operations comprise the ongoing operations of the Post-Combination Company |
| • | The Post-Combination Company assumed SmartRent’s name. |
Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of a capital transaction in which SmartRent is issuing stock for the net assets of FWAA. The net assets of FWAA were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of SmartRent.
Description of the Business Combination
Pursuant to the Merger Agreement, the aggregate stock consideration issued by the Post-Combination Company in the Business Combination was $2.174 billion, consisting of 217,350,554 newly issued shares, of the Post-Combination Company valued at $10.00 per share. SmartRent received $1.58 billion in the form of 157,678,300 newly issued shares of the Post-Combination Company. FWAA public shareholders received $345.0 million in the form of 34,499,754 newly issued shares, the Subscribers received $155.0 million in the form of 15,500,000 newly issued shares, and the Sponsor received $96.7 million in the form of 9,672,500 newly issued shares in exchange for FWAA’s existing Class B common stock. The following represents the consideration at closing of the Business Combination:
2
| (in millions) | ||||
| Share issuance to FWAA shareholders |
$ | 345.0 | ||
| Share issuance to Sponsor |
96.7 | |||
| Share issuance to SmartRent shareholders |
1,576.8 | |||
| Share issuance to Subscribers |
155.0 | |||
|
|
|
|||
| Share Consideration at Closing |
$ | 2,173.5 | ||
|
|
|
|||
The value of share consideration issuable at the Closing was determined by application of the Exchange Ratio of 4.88, which is based on the implied value of $10.00 per share prior to the Business Combination.
Basis of Pro Forma Presentation
The following summarizes the pro forma Post-Combination Company shares outstanding taking into consideration actual redemptions:
| Shares | % Owned | |||||||
| Post-Combination Company shares issued to FWAA public stockholders |
34,499,754 | 16 | % | |||||
| Post-Combination Company shares issued to Sponsor and certain FWAA’s directors |
9,672,500 | 4 | % | |||||
| Post-Combination Company shares issued in the Business Combination |
157,678,300 | 73 | % | |||||
| Post-Combination Company shares issued to Subscribers |
15,500,000 | 7 | % | |||||
|
|
|
|
|
|||||
| Pro Forma Common Stock at June 30, 2021 |
217,350,554 | 100 | % | |||||
|
|
|
|
|
|||||
The following unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statements of operation for the six months ended June 30, 2021 and for the year ended December 31, 2020 are based on the historical financial statements of FWAA and SmartRent. The unaudited pro forma adjustments are based on information currently available. The assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information as additional information becomes available and analyses are performed. Certain amounts that appear in this section may not sum due to rounding.
3
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2021
(In thousands)
| SmartRent (Historical) |
FWAA (Historical) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||
| Assets |
||||||||||||||||||
| Current assets: |
||||||||||||||||||
| Cash and cash equivalents |
$ | 53,534 | $ | 655 | $ | 345,017 | (1) | $ | 503,704 | |||||||||
| (12,075 | ) | (2) | ||||||||||||||||
| (27,100 | ) | (3) | ||||||||||||||||
| 155,000 | (4) | |||||||||||||||||
| (11,325 | ) | (4) | ||||||||||||||||
| (2 | ) | (5) | ||||||||||||||||
| Accounts receivable, net |
27,028 | — | 27,028 | |||||||||||||||
| Inventory |
21,701 | — | 21,701 | |||||||||||||||
| Deferred cost of revenues, current portion |
7,645 | — | 7,645 | |||||||||||||||
| Prepaid expenses and other current assets |
11,220 | 1,353 | (2,783 | ) | (3) | 9,790 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total current assets |
121,128 | 2,008 | 446,732 | 569,868 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Cash held in trust account |
— | 345,017 | (345,017 | ) | (1) | — | ||||||||||||
| Property and equipment, net |
1,292 | — | 1,292 | |||||||||||||||
| Deferred cost of revenues |
13,394 | — | 13,394 | |||||||||||||||
| Goodwill |
4,162 | — | 4,162 | |||||||||||||||
| Other long-term assets |
1,281 | — | 1,281 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total assets |
$ | 141,257 | $ | 347,025 | $ | 101,715 | $ | 589,997 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Current liabilities |
||||||||||||||||||
| Accounts payable |
4,864 | 337 | (1,085 | ) | (3) | 4,116 | ||||||||||||
| Accrued expenses and other current liabilities |
7,769 | 2,119 | (2,954 | ) | (3) | 6,934 | ||||||||||||
| Due to related party |
— | 15 | 15 | |||||||||||||||
| Franchise tax payable |
— | 98 | 98 | |||||||||||||||
| Deferred revenues, current portion |
35,066 | — | 35,066 | |||||||||||||||
| Current portion of long-term debt |
1,652 | — | 1,652 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total current liabilities |
49,351 | 2,569 | (4,039 | ) | 47,881 | |||||||||||||
| Long-term debt, net |
2,343 | — | 2,343 | |||||||||||||||
| Deferred revenues |
39,439 | — | 39,439 | |||||||||||||||
| Other long-term liabilities |
273 | — | 273 | |||||||||||||||
| Deferred underwriting commissions in connection with the initial public offering |
— | 12,075 | (12,075 | ) | (2) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total liabilities |
91,406 | 14,644 | (16,114 | ) | 89,936 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Convertible preferred stock |
146,225 | — | (146,225 | ) | (9) | — | ||||||||||||
| Common stock subject to redemption |
— | 327,380 | (327,380 | ) | (10) | — | ||||||||||||
| Common stock |
— | — | — | |||||||||||||||
| Class A common stock |
— | — | 2 | (4) | 20 | |||||||||||||
| — | (5) | |||||||||||||||||
| 15 | (6) | |||||||||||||||||
| 2 | (9) | |||||||||||||||||
| 1 | (7) | |||||||||||||||||
| Class B common stock |
— | 1 | (1 | ) | (7) | — | ||||||||||||
| Additional paid-in capital |
5,416 | 8,272 | 154,998 | (4) | 607,865 | |||||||||||||
| (11,325 | ) | (4) | ||||||||||||||||
| (19,809 | ) | (3) | ||||||||||||||||
| (2 | ) | (5) | ||||||||||||||||
| (15 | ) | (6) | ||||||||||||||||
| (3,273 | ) | (8) | ||||||||||||||||
| 146,223 | (9) | |||||||||||||||||
| 327,380 | (10) | |||||||||||||||||
| Accumulated other comprehensive income (loss) |
170 | — | 170 | |||||||||||||||
| Accumulated deficit |
(101,960 | ) | (3,273 | ) | 3,273 | (8) | (107,995 | ) | ||||||||||
| (6,035 | ) | (3) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total stockholders’ (deficit) equity |
(96,374 | ) | 5,000 | 591,434 | 500,061 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Total liabilities, convertible preferred stock, and stockholders’ (deficit) equity |
$ | 141,257 | $ | 347,025 | $ | 101,715 | $ | 589,997 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information.
4
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(In thousands, except per share amounts)
| SmartRent (Historical) |
FWAA (Historical) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||
| Revenue |
||||||||||||||||
| Hardware |
$ | 26,427 | $ | — | $ | — | $ | 26,427 | ||||||||
| Professional services |
7,165 | — | — | 7,165 | ||||||||||||
| Hosted services |
7,245 | — | — | 7,245 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenue |
40,837 | — | — | 40,837 | ||||||||||||
| Cost of Revenue |
||||||||||||||||
| Hardware |
24,657 | — | — | 24,657 | ||||||||||||
| Professional services |
11,734 | — | — | 11,734 | ||||||||||||
| Hosted services |
4,577 | — | — | 4,577 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total cost of revenue |
40,968 | — | — | 40,968 | ||||||||||||
| Operating expenses |
||||||||||||||||
| Research and development |
7,176 | — | — | 7,176 | ||||||||||||
| Sales and marketing |
4,146 | — | — | 4,146 | ||||||||||||
| General and administrative |
7,763 | 3,186 | (2,970 | )(A) | 7,979 | |||||||||||
| Franchise tax expense |
— | 98 | — | 98 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
19,085 | 3,284 | (2,970 | ) | 19,399 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
(19,216 | ) | (3,284 | ) | 2,970 | (19,530 | ) | |||||||||
| Income from investments held in Trust Account |
17 | (17 | )(B) | — | ||||||||||||
| Other expense: |
||||||||||||||||
| Interest expense |
(142 | ) | — | — | (142 | ) | ||||||||||
| Other income (expense), net |
127 | — | — | 127 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss before income taxes |
(19,231 | ) | (3,267 | ) | 2,953 | (19,545 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Provision for income taxes |
87 | — | — | 87 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net (loss) income |
(19,318 | ) | $ | (3,267 | ) | $ | 2,953 | $ | (19,632 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Foreign currency translation adjustment |
(65 | ) | — | — | (65 | ) | ||||||||||
| Comprehensive loss |
$ | (19,383 | ) | $ | (3,267 | ) | $ | 2,953 | $ | (19,697 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to common stockholders |
$ | (19,318 | ) | $ | (19,632 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average redeemable common shares outstanding, basic and diluted |
32,738,037 | 193,716,196 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Basic and diluted net income (loss) per share |
$ | (0.10 | ) | $ | (0.10 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average non-redeemable common shares outstanding, basic and diluted |
1,990,000 | 11,434,463 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Basic and diluted net income (loss) per share |
$ | (9.71 | ) | $ | (0.29 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| (A) | Reflects the reversal of transaction costs incurred by FWAA during the six months ends June 30, 2021 that were reflected in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020, including, but not limited to, advisory fees, legal fees, and registration fees. This is a non-recurring item. |
| (B) | Reflects the elimination of investment income from the Trust Account. |
See accompanying notes to unaudited pro forma condensed combined financial information.
5
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
(In thousands, except per share amounts)
| SmartRent (Historical) |
FWAA (Historical) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||
| Revenue |
||||||||||||||||
| Hardware |
$ | 31,978 | $ | — | $ | — | $ | 31,978 | ||||||||
| Professional services |
12,304 | — | — | 12,304 | ||||||||||||
| Hosted services |
8,252 | — | — | 8,252 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenue |
52,534 | — | — | 52,534 | ||||||||||||
| Cost of Revenue |
||||||||||||||||
| Hardware |
$ | 35,225 | $ | — | $ | — | $ | 35,225 | ||||||||
| Professional services |
16,176 | — | — | 16,176 | ||||||||||||
| Hosted services |
5,430 | — | — | 5,430 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total cost of revenue |
56,831 | — | — | 56,831 | ||||||||||||
| Operating expenses |
||||||||||||||||
| Research and development |
9,406 | — | — | 9,406 | ||||||||||||
| Sales and marketing |
5,429 | — | — | 5,429 | ||||||||||||
| General and administrative |
16,584 | 6 | 9,004 | (A) | 25,594 | |||||||||||
| Franchise tax expense |
— | 1 | — | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
31,419 | 7 | 9,004 | 40,430 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
(35,716 | ) | (7 | ) | (9,004 | ) | (44,727 | ) | ||||||||
| Other expense: |
||||||||||||||||
| Interest expense |
559 | — | — | 559 | ||||||||||||
| Other expense, net |
685 | — | — | 685 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss before income taxes |
(36,960 | ) | (7 | ) | (9,004 | ) | (45,971 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Provision for income taxes |
149 | — | — | 149 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net (loss) income |
$ | (37,109 | ) | $ | (7 | ) | $ | (9,004 | ) | $ | (46,120 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Foreign currency translation adjustment |
235 | — | — | 235 | ||||||||||||
| Comprehensive loss |
$ | (36,874 | ) | $ | (7 | ) | $ | (9,004 | ) | $ | (45,885 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss attributable to common stockholders |
$ | (37,109 | ) | $ | (46,120 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average redeemable common shares outstanding, basic and diluted |
33,066,841 | 193,716,196 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Basic and diluted net income loss) per share |
$ | 0.00 | $ | (0.24 | ) | |||||||||||
|
|
|
|
|
|||||||||||||
| Weighted average non-redeemable common shares outstanding, basic and diluted |
1,550,000 | 11,105,659 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Basic and diluted net income (loss) per share |
$ | (23.94 | ) | $ | 0.00 | |||||||||||
|
|
|
|
|
|||||||||||||
| (A) | Reflects the transaction costs incurred by FWAA in 2021 including, but not limited to, advisory fees, legal fees, and registration fees. This is a non-recurring item. |
See accompanying notes to unaudited pro forma condensed combined financial information.
6
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
| 1. | Basis of Presentation |
The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, FWAA, who was the legal acquirer, was treated as the “acquired” company for financial reporting purposes and SmartRent was treated as the accounting acquirer. This determination was primarily based on the following facts and circumstances: (i) SmartRent’s existing stockholders have more than 70% of the voting interest of the Post-Combination Company; (ii) SmartRent’s senior management comprise the senior management of the Post-Combination Company; (iii) the directors nominated by SmartRent represent the majority of the board of directors of the Post-Combination Company; (iv) SmartRent is the larger entity based on historical revenues and business operations; and (v) SmartRent’s operations comprise the ongoing operations of the Post-Combination Company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of a capital transaction in which SmartRent is issuing stock for the net assets of FWAA. The net assets of FWAA were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of SmartRent. The unaudited pro forma condensed combined balance sheet as of June 30, 2021 assumes the Business Combination occurred on June 30, 2021. The unaudited pro forma condensed combined statements of operation for the six months ended June 30, 2021 and for the year ended December 31, 2020 present the pro forma effect of the Business Combination as if it had been completed on January 1, 2020. These periods are presented on the basis of SmartRent as the accounting acquirer.
The unaudited pro forma condensed combined balance sheet as of June 30, 2021 has been prepared using, and should be read in conjunction with, the following:
| • | FWAA’s unaudited Balance Sheet as of June 30, 2021 and the related notes for the period ended June 30, 2021, incorporated by reference to FWAA’s Quarterly Report on Form 10-Q filed on August 13, 2021; and |
| • | SmartRent’s unaudited Consolidated Balance Sheet as of June 30, 2021 and the related notes for the six months ended June 30, 2021, set forth in Exhibit 99.1 hereto and incorporated herein by reference. |
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020 have been prepared using, and should be read in conjunction, with the following:
| • | FWAA’s unaudited and audited Statement of Operations for the six months ended June 30, 2021 and the year ended December 31, 2020, beginning on page F-2 of the Proxy Statement/Prospectus and incorporated herein by reference; and |
| • | SmartRent’s unaudited and audited Consolidated Statement of Operations and Comprehensive Loss for the six months ended June 30, 2021 and for the year ended December 31, 2020, and the related notes included in the Proxy Statement/Prospectus beginning on page F-29, which is incorporated herein by reference. |
Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Business Combination. The pro forma adjustments reflecting the consummation of the Business Combination are based on certain available information as of the date of these unaudited pro forma combined financial statements and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
7
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the Post-Combination Company. They should be read in conjunction with the historical financial statements and notes thereto of FWAA and SmartRent, which are incorporated herein by reference.
| 2. | Accounting Policies |
Upon consummation of the Business Combination, management will perform a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the Post-Combination Company.
| 3. | Adjustments to Unaudited Pro Forma Condensed Combined Financial Information |
The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only.
The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are directly attributable to the Business Combination. SmartRent and FWAA have not had any historical relationship prior to the Business Combination, other than the investment by Fifth Wall Fund II (an affiliate of the Sponsor) in the SmartRent Series C Preferred Stock financing in March 2020. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the Post-Combination Company filed consolidated income tax returns during the periods presented.
The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of the Post-Combination Company’s shares outstanding, assuming the Business Combination had been completed on January 1, 2020.
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2021 are as follows:
| (1) | Reflects the reclassification of cash and cash equivalents held in the Trust Account that became available in connection with the Business Combination. |
| (2) | Reflects the settlement of deferred underwriters’ fees incurred during the FWAA IPO that were due upon completion of the Business Combination. |
| (3) | Reflects the transaction costs incurred by SmartRent and FWAA subsequent to June 30, 2021 including, but not limited to, advisory fees, legal fees, and registration fees that were paid in connection with the consummation of the Business Combination. This adjustment includes the reclassification of $2.8 million of deferred transaction costs incurred by SmartRent for accounting, legal, and advisory fees that are included in the $19.8 million reduction of additional paid-in capital since they are direct and incremental costs associated with the Business Combination. These amounts are excluded from cash as the costs were previously reflected in the historical cash balance of SmartRent. This adjustment also includes the write-off of $4.0 million of accounts payable and accrued expenses recognized by FWAA and SmartRent for accounting, legal, and advisory fees. Approximately $1.1 million of the amount is included in the $19.8 million reduction of additional paid-in capital since the amounts are direct and incremental costs associated with the Business Combination. The remaining $2.9 million is included in accumulated deficit as the costs are not direct and incremental to the Business Combination. The total increase to accumulated deficit of $6.0 million is related to the transaction costs incurred by FWAA in 2021 including, but not limited to, advisory fees, legal fees and registration fees. These transaction costs are also reflected in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 as an adjustment to general and administrative expense. |
8
| (4) | Represents the proceeds from the issuance of 15,500,000 shares of the Post-Combination Company at $10.00 per share to the Subscribers, offset by the PIPE placement fees of $11.3 million. The costs related to the issuance of the PIPE investment are adjusted against additional paid-in capital. |
| (5) | Reflects the actual redemptions of 246 public shares for aggregate redemption payments of $2,460 allocated to Class A Common Stock and additional paid-in capital using par value $0.0001 per share and at a redemption price of $10.00 per share. |
| (6) | Reflects the recapitalization of SmartRent through (a) the contribution of all the share capital in SmartRent to FWAA in the amount of $5.4 million and (b) the issuance of 157,678,300 shares of FWAA Class A common stock at par value of $0.0001. |
| (7) | Reflects the conversion of FWAA Class B common stock held by the initial stockholders to shares of FWAA Class A common stock. |
| (8) | Reflects the elimination of the historical accumulated deficit of FWAA, the legal acquirer, in the amount of $3.3 million. |
| (9) | Represents the conversion of SmartRent’s convertible preferred stock immediately prior to the consummation of the Business Combination into SmartRent common stock. |
| (10) | Represents the reclassification of historical FWAA’s Class A common stock previously subject to possible redemption from temporary equity into permanent equity immediately prior to the consummation of the Business Combination. |
| 4. | Net loss per Share |
Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2020. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire period presented.
The unaudited pro forma condensed combined financial information has been prepared taking into consideration actual redemptions:
| (Net loss presented in thousands of dollars) | ||||||||
| Six Months Ended June 30, 2021 |
Twelve Months Ended December 31, 2020 |
|||||||
| Pro forma net loss |
$ | (19,632 | ) | $ | (46,120 | ) | ||
| Weighted average shares outstanding, basic and diluted |
193,716,196 | 193,716,196 | ||||||
| Net loss per share - Basic and Diluted |
$ | (0.10 | ) | $ | (0.24 | ) | ||
| Basic weighted average shares outstanding |
||||||||
| Post-Combination Company shares issued to SmartRent |
134,043,942 | 134,043,942 | ||||||
| Post-Combination Company shares issued to FWAA public shareholders |
34,499,754 | 34,499,754 | ||||||
| Post-Combination Company shares issued to Subscribers |
15,500,000 | 15,500,000 | ||||||
| Post-Combination Company shares issued to Sponsor and certain FWAA directors |
9,672,500 | 9,672,500 | ||||||
|
|
|
|
|
|||||
| 193,716,196 | 193,716,196 | |||||||
|
|
|
|
|
|||||
9
As a result of the pro forma net loss, the net loss per share amounts exclude the anti-dilutive impact from the following securities:
| • | The 10,457,305 rollover options outstanding, of which 7,089,184 are vested and 3,368,121 are unvested. |
| • | The 5,689,731 rollover warrants outstanding, of which 153,027 are vested and 5,536,704 are unvested. |
| • | The 7,487,299 rollover RSUs outstanding, of which all are unvested. |
10
Exhibit 99.3
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this section to “we,” “our,” “us,” “the Company” and “SmartRent” generally refer to SmartRent.com, Inc. (now known as SmartRent Technologies, Inc.) and its consolidated subsidiaries prior to the business combination effected pursuant to the Merger Agreement dated April 21, 2021 (as amended by Amendment No. 1 to Merger Agreement, dated July 23, 2021), among FWAA, Merger Sub, and SmartRent.com, Inc. and to SmartRent, Inc. and its consolidated subsidiaries after giving effect to the Business Combination.
Capitalized terms used but not defined in this exhibit shall have the meanings ascribed to them in the Current Report on Form 8-K (the “Report”) filed with the Securities and Exchange Commission (the “SEC”) on August 30, 2021 of which this is a part and, if not defined in the Report, the Proxy Statement/Prospectus.
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read this discussion and analysis in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Report and our unaudited pro forma financial information as of and for the three and six months ended June 30, 2021 included elsewhere in this Report, of which this Management’s Discussion and Analysis of Financial Condition and Results of Operations forms a part. Certain amounts may not foot due to rounding. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Report and in the Proxy Statement/Prospectus. We assume no obligation to update any of these forward-looking statements. Actual results may differ materially from those contained in any forward-looking statements.
Overview
SmartRent is an enterprise software company that provides a fully integrated, brand-agnostic smart home operating system to residential property owners and operators, as well as homebuilders, iBuyers, developers, and residents. We started SmartRent with the vision of transforming residential real estate into the next generation of connected communities. Our smart home operating system is designed to enable owners and operators to streamline property management and operations, lower operating costs, increase revenues, and protect their assets through improved visibility and control, while providing a differentiated, elevated living experience for residents. Through our central connected device, called SmartHub, we integrate our proprietary enterprise software with third-party smart devices and other technology interfaces through an open-architecture, brand-agnostic approach, which allows owners, operators, and residents to manage their smart home systems through a single connected interface. Our products and solutions include smart apartments and homes, access control for buildings, common areas, and rental units, asset protection and monitoring, parking management, self-guided tours, and community and resident Wi-Fi. We also have a professional services team of approximately 200 employees in 31 states across the United States through which we provide customers with training, installation, and support services.
We believe SmartRent is the category leader in the enterprise smart home solutions industry. As of June 30, 2021, our customers owned an aggregate of approximately 3.5 million rental units, representing approximately 8% of the U.S. market for institutionally owned multifamily rental units and single-family rental homes, and included 15 of the top 20 multifamily residential owners in the United States. We have developed a loyal customer base and, to date, have not experienced any customer churn (meaning that no customer has removed an installed SmartHub). In addition to multifamily residential owners, our customers include some of the leading homebuilders, single-family rental homeowners, and iBuyers in the United States. Since beginning operations in 2017, we have installed more than 1,000,000 SmartHubs and other smart home devices in approximately 3,600 communities with more than 409,000 users located in more than 1,000 cities in 45 states across the United States.
We estimate that the U.S. market for residential real estate has approximately 43 million institutionally owned multifamily rental units and single-family rental homes as of June 30, 2021. While several of the top multifamily residential owners are current SmartRent customers, we believe that we have only begun to take advantage of the full market opportunity in residential and commercial real estate sectors and in domestic and international markets. For example, we recently adapted our software and applications to target new opportunities in other residential real estate sectors, including single-family rental homes, student housing, senior housing, and new construction homes.
In addition, we believe there is significant potential for growth beyond residential real estate to other commercial real estate asset classes, including, among others, office, hotels, retail, industrial, and self-storage. Furthermore, we believe there is an attractive opportunity to expand our smart home solutions into other markets globally and have started pilot programs and/or developed partner relationships in the United Kingdom, Canada, the Netherlands, and Ireland.
We have designed our open-architecture, brand-agnostic smart home operating system to help the residential real estate industry become more efficient and effective. Importantly, our enterprise software integrates into most existing property management systems used by residential property owners and operators. With features specifically designed to increase productivity, while decreasing operating costs, we estimate that owners and operators can realize a 50% return on investment over a three-year period after installation of our smart home operating system.
The Business Combination
On August 24, 2021, we consummated the Business Combination contemplated by the Merger Agreement Upon the closing of the Business Combination, Merger Sub merged with and into SmartRent, with SmartRent surviving as the surviving company pursuant to the provisions of the DGCL. Upon the consummation of the transactions contemplated by the Merger Agreement, the surviving company was renamed “SmartRent Technologies, Inc.” and FWAA was renamed “SmartRent, Inc.”
The Business Combination is accounted for as a reverse capitalization in accordance with GAAP. Under the guidance in FASB ASC 805, “Business Combinations,” FWAA is treated as the “acquired” company for financial reporting purposes. We are deemed the accounting predecessor of the combined business and the successor SEC registrant, meaning that our financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. The Business Combination will have a significant impact on our future reported financial condition and results of operations as a consequence of the reverse capitalization. The most significant change in SmartRent’s future reported financial condition and results of operations is a net increase in cash (as compared to our Consolidated Balance Sheet at March 31, 2021) of approximately $450.0 million, which includes approximately $155.0 million in proceeds from the private placement of shares of FWAA Class A common stock to the Subscribers pursuant to the Subscription Agreements, consummated substantially simultaneously with the Business Combination, offset by additional transaction costs for the Business Combination. The transaction costs for the Business Combination are approximately $55.8 million, of which $12.1 million represents deferred underwriter fees from the FWAA IPO. See “Unaudited Pro Forma Condensed Combined Financial Information.”
Our Model
Our smart home products and solutions provide an enterprise-grade holistic approach to what it means to be a connected community. A SmartRent connected community is a “curb to couch” concept where an entire property utilizes a variety of third-party smart devices from various manufacturers and features that can be remotely managed to provide efficiency, automation and ancillary revenue opportunities. Our SmartRent connected communities combine in-unit smart home technology with our Alloy Access control system and our Alloy Parking system, which are connected by our Community WiFi solution and can be managed remotely using our core smart home operating system, Community Manager.
Impact of the COVID-19 Pandemic
The extensive impact of the COVID-19 pandemic has resulted and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. In an effort to halt the spread of COVID-19, a number of countries, states, counties and other jurisdictions have imposed, and may impose in the future, various measures, including, but not limited to, voluntary and mandatory quarantines, stay-at-home orders, travel restrictions, limitations on gatherings of people, reduced operations and extended closures of businesses.
The timing of customer orders and our ability to fulfill orders were impacted by various COVID-19-related government mandates, resulting in a reduction in units sold. We have also witnessed certain current and prospective customers delaying purchases based on budget constraints or project delays related to the COVID-19 pandemic. While the broader and long-term implications of the COVID-19 pandemic on our workforce, operations and supply chain, customer demand, results of operations and overall financial performance remain uncertain, we believe that we will continue to experience disruptions to our business due to the COVID-19 pandemic through 2021.
The impact of the COVID-19 pandemic and measures to prevent its spread have affected and continue to affect our business in several ways.
| • | Our workforce. Employee health and safety is our priority. In response to the COVID-19 pandemic, we established new protocols to protect the health and safety of our workforce, including restricting employee travel, recommending that all non-essential personnel work from home and cancelled or reduced physical participation in sales activities, meetings, events and conferences and implemented additional safety protocols for essential workers. |
| • | Operations and supply chain. We have experienced some production delays as a result of the effects of the COVID-19 pandemic on our sourcing, manufacturing, and logistics channels. For example, as described below, we have experienced SmartHub production delays as a result of a global shortage of Z-wave chips, which facilitate the communication protocol used for communication between our SmartHub and all other smart devices. |
| • | Demand for our products. During the year ended December 31, 2020, demand for our products was less than we had anticipated based on our growth projections made during 2019. We believe that this decrease in customer demand was, in part, the result of the COVID-19 pandemic and customers’ delayed purchasing decisions. While we continue to engage with existing and potential customers, we believe some customers may continue to delay purchases from us because their development programs may also be delayed as a result of the COVID-19 pandemic. We believe that demand for our products remains strong, but due to the COVID-19 pandemic, a portion of the transactions expected to be completed in 2020 were delayed until early 2021 and, similarly, that transactions expected to be completed in early 2021 may be delayed until later in the year. In connection with the preparation of the unaudited projected financial information included in this proxy statement/prospectus in the section entitled “The Business Combination — Unaudited Prospective Financial Information of SmartRent,” we considered these delays. |
See “Risk Factors” beginning on page 28 of the Proxy Statement/Prospectus for further discussion of the possible impact of the COVID-19 pandemic on our business.
Comparability of Financial Information
Our future results of operations and financial position may not be comparable to historical results as a result of the Business Combination.
Factors Affecting Our Performance
We believe that our future success will be dependent on many factors, including those further discussed below. Our future operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including our ability to grow our customer base in a cost-effective manner, expand our hardware and hosted service offerings to generate increased revenue per Unit Deployed (as defined below), provide high quality hardware products and hosted service applications to maximize revenue and improve the leverage of our business model. While these areas represent opportunities for us, they also represent challenges and risks that we must successfully address in order to operate our business.
Investing in Research and Development
Our performance is significantly dependent on the investments we make in research and development, including our ability to attract and retain highly skilled research and development personnel. We must continually develop and introduce innovative new software services and hardware products, integrate with third-party products and services, mobile applications and other new offerings. If we fail to innovate and enhance our brand and our products, our market position and revenue will likely be adversely affected.
Active Supply Chain Management
We are focused on successfully navigating global supply chain disruptions. Specifically, increased demand for electronics as a result of the COVID-19 pandemic, the U.S. trade relations with China and certain other factors have led to a global shortage of semiconductors, including Z-wave chips, which are a central component of our SmartHubs. Due to this shortage, we have experienced SmartHub production delays, which have occasionally affected our ability to meet scheduled installations. We believe these supply chain disruptions may continue, with varying degrees of operational impact, through the end of the 2021 fiscal year.
New Products, Features and Functionality
We will need to expend additional resources to continue introducing new products, features and functionality to enhance the value of our smart home operating system. We have recently introduced a number of product enhancements and features, including the Building Access Control, Video Intercom, WiFi and Parking Management solutions. In the future, we intend to continue to release new products and solutions and enhance our existing products and solutions, and we expect that our operating results will be impacted by these releases.
Category Adoption and Market Growth
Our future growth depends in part on the continued consumer adoption of hardware and software products which improve resident experience and the growth of this market. We need to deliver solutions that enhance the resident experience and deliver value to our customers, rental property owners and operators, as well as homebuilders and developers, by providing products and solutions designed to enhance visibility and control over assets while providing additional revenue opportunities. In addition, our long-term growth depends in part on our ability to expand into international markets in the future.
Basis of Presentation
The consolidated financial statements and accompanying notes of SmartRent included elsewhere in this Report were prepared in accordance with GAAP.
Key Operating Metrics
We regularly monitor a number of operating and financial metrics, which include certain non-GAAP financial measures, including the following, to evaluate our operating performance, identify trends affecting our business, formulate business plans, measure our progress and make strategic decisions. Non-GAAP financial measures may not provide accurate predictions of future GAAP financial results.
The limitations our Key Operating Metrics have as an analytical tool are: (1) they might not accurately predict our future GAAP financial results, (2) we might not realize all or any part of the anticipated value reflected in Units Booked and (3) other companies, including companies in our industry, may calculate our Key Operating Metrics or similarly titled measures differently, which reduces their usefulness as a comparative measure.
Units Deployed and New Units Deployed
We define Units Deployed as the aggregate number of our SmartHubs that have been installed (including customer self-installations) as of a stated measurement date. We define New Units Deployed as the aggregate number of our SmartHubs that were installed (including customer self-installations) during a stated measurement period. We use these operating metrics to assess the general health and trajectory of our business and growth. We had 83,293, and 60,935 New Units Deployed during the years ended December 31, 2020 and 2019, respectively, and 23,834 and 6,943 New Units Deployed during the three months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and 2020, there were 56,320 and 24,883 New Units Deployed, respectively. As of June 30, 2021 and December 31, 2020, SmartRent had an aggregate of 211,425 and 155,105 Units Deployed, respectively.
Committed Units
We define Committed Units as the aggregate number of SmartHub (i) units that are subject to binding orders from customers together with (ii) units that existing customers who are parties to a SmartRent master services agreement have informed us (on a non-binding basis) that they intend to order in the future for deployment within two years of the measurement date. We track the number of Committed Units to assess the general health and trajectory of our business and to assist in our longer-term resource analysis. As of June 30, 2021, SmartRent had 606,455 Committed Units.
Units Booked
We define Units Booked as the aggregate number of SmartHub units associated with binding orders executed during a stated measurement period. We utilize the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that we will earn and record. Units Booked represent binding orders only and accordingly are a subset of Committed Units. We had 38,182 and 9,495 Units Booked during the three months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and 2020, there were 83,718 and 32,216 Units Booked, respectively.
EBITDA and Adjusted EBITDA
We define EBITDA as net income or loss computed in accordance with GAAP before the following items: interest expense, income tax expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA before the following items: stock-based compensation expense, non-employee warrant expense, loss on extinguishment of debt, change in fair value of derivatives, unrealized gains and losses in currency exchange rates and other income and expenses. Management uses EBITDA and Adjusted EBITDA to identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance, while neutralizing the impact of expenses included in our operating results which could otherwise mask underlying trends in our business. See “Non-GAAP Financial Measures” for additional information and reconciliation of these measures.
Annual Recurring Revenue
We define Annual Recurring Revenue (“ARR”) as the annualized value of our recurring SaaS services revenue earned in the current quarter. We monitor our ARR to assess the general health and trajectory of our hosted services business. Our ARR was approximately $3.4 million and $1.2 million during the years ended December 31, 2020 and 2019, respectively, and approximately $7.0 million based upon the annualized run rate for the quarter ended June 30, 2021, compared to $2.7 million for the quarter ended June 30, 2020.
Components of Results of Operations
Revenue
We generate revenue primarily from sales of systems that consist of hardware devices, professional installation services and hosted services to assist property owners and property managers have visibility and control over assets, while providing all-in-one home control offerings for residents. We record revenue as earned when control of these products and services are transferred to the customer in an amount that reflects the consideration we expect to collect for those products and services.
Hardware Revenue
We generate revenue from the direct sale to our customers of hardware smart home devices, which devices currently consist of door-locks, thermostats, sensors, and light switches. These smart home devices connect to the SmartHub, which is discussed in “—Hosted Services Revenue” below. The performance obligation for hardware revenue is considered satisfied, and revenue is recognized, when the hardware device is shipped to the customer, except for the SmartHub, which is discussed in “—Hosted Services Revenue” below. We generally provide a one-year warranty period on hardware devices that we deliver and install. We record the cost of the warranty as a component of cost of revenue in the accompanying Consolidated Statements of Operations and Comprehensive Loss.
Professional Services Revenue
We generate professional services revenue from the installation of smart home hardware devices, which do not result in significant customization of the installed products and is generally performed over a period of two to four weeks. Installations can be performed by our employees, can be contracted out to a third party with our employees managing the engagement, or can be performed by the customer with our employees managing the engagement. Professional services contracts are generally performed on a fixed-price basis and revenue is recognized over time as installations are completed.
Hosted Services Revenue
Hosted services include recurring monthly subscription revenue earned from the fees collected from customers to provide access to one or more of our software applications including access controls, asset monitoring and related services. These subscription arrangements have contractual terms typically ranging from one month to seven years and include recurring fixed plan subscription fees. Our arrangements do not provide the customer with the right to take possession of our software at any time. Customers are granted continuous access to the services over the contractual period. Accordingly, fees collected for subscription services are recognized on a straight-line basis over the contract term beginning on the date the subscription service is made available to the customer. Variable consideration is immaterial.
We also sell the hardware SmartHub device, which only functions with the subscription to our proprietary software applications and related hosting services. We consider the SmartHub device and hosting services subscription as a single performance obligation, and therefore we defer the recognition of revenue for the SmartHub devices that are sold with application subscriptions. The estimated average in-service life of the SmartHub devices is four years. When a SmartHub device is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal. If a contract contains a material right, proceeds are allocated to the material right and recognized over the period of benefit, which is generally four years.
Cost of Revenue
Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of customer care and support over the life of the service arrangement. We expect cost of revenue to increase in absolute dollars in future periods. We record any change to cost of job performance, job conditions and the resulting estimated profitability in the period during which the revision is identified.
Hardware
Cost of hardware revenue consists primarily of direct costs of proprietary products, hardware devices and supplies purchased from third-party providers, shipping costs, warehouse facility (including depreciation and amortization of capitalized assets and right-of-use assets) and infrastructure costs, personnel-related costs associated with the procurement and distribution of our products and warranty expenses together with the indirect cost of customer care and support. We expect cost of revenue to increase in absolute dollars in future periods.
In 2019, the U.S. administration imposed significant changes to U.S. trade policy with respect to China. Tariffs have subjected certain SmartRent products manufactured overseas to additional import duties. The amount of the import tariff has changed numerous times based on action by the U.S. administration. We continue to monitor the change in tariffs. If tariffs are increased, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins further in the future.
Professional Services
Cost of professional services revenue consists primarily of direct costs related to personnel-related expenses for installation and supervision of installation services, general contractor expenses and travel expenses associated with installation of our products, and indirect costs that are also primarily personnel-related expenses in connection with training of and ongoing support for customers and residents. We expect cost of revenue to increase in absolute dollars in future periods.
Hosted Services
Cost of hosted services revenue consists primarily of the amortization of the direct costs of our SmartHub device consistent with the revenue recognition period noted above in “—Hosted Services Revenue” and infrastructure costs associated with providing our software applications together with the indirect cost of customer care and support over the life of the service arrangement. We expect cost of revenue to increase in absolute dollars in future periods at a rate that is lower than the corresponding increase in hosted services revenue.
Operating Expenses
Research and Development
Research and development expenses consist primarily of personnel-related costs directly associated with our research and development. Our research and development efforts are focused on enhancing and developing additional functionality for our existing products and on new product development. We expense research and development costs as incurred. We expect our research and development expense to increase in absolute dollars as we increase our investment in product development to broaden the capabilities of our solutions and introduce new products and features.
Sales and Marketing Expenses
Our sales and marketing expenses consist of costs directly associated with our sales and marketing activities, which primarily include personnel-related costs, sales commissions, marketing programs, trade shows, and promotional materials. We expect that our sales and marketing expenses will increase over time as we hire additional sales and marketing personnel, increase our marketing activities, grow our domestic and international operations, and continue to build brand awareness.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs associated with our general and administrative organization, professional fees for legal, accounting and other consulting services, office facility and information technology costs.
We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing requirements, additional insurance expense, investor relations activities and other administrative and professional services. We also expect to increase the size of our general and administrative staff in order to support the growth of our business.
Other Expenses
Other expenses consist primarily of interest expense, foreign currency transaction gains and losses, and other income related to the operations of Zipato, a wholly owned subsidiary of Zenith Highpoint, Inc., which entities we acquired in a business combination in February 2020. The interest expense is recorded in connection with balances outstanding on our Revolving Facility (as defined below) and Term Loan Facility (as defined below). The foreign currency transaction gains and losses relate to the impact of transactions denominated in a foreign currency other than the U.S. dollar. As we have expanded our international operations, our exposure to fluctuations in foreign currencies has increased, which we expect to continue.
Provision for Income Taxes
We had no provision for U.S. federal and state income taxes for the reported periods. The provision for income taxes on the Consolidated Statement of Operations is related to foreign subsidiaries. We have established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized in future periods if we report taxable income. We believe that we have established an adequate allowance for our uncertain tax positions, although we can provide no assurance that the final outcome of these matters will not be materially different. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.
Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020
The results of operations presented below should be reviewed together with the unaudited consolidated financial statements and notes thereto included elsewhere in this Report. The following table summarizes our historical consolidated results of operations data for the periods presented. The period-to-period comparison of operating results is not necessarily indicative of results for future periods.
| Three Months Ended June 30, |
Change $ |
Change % |
Six Months Ended June 30, |
Change $ |
Change % |
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| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
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| (dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||||
| Revenue |
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| Hardware |
$ | 14,029 | $ | 2,881 | $ | 11,148 | 387 | % | $ | 26,427 | $ | 14,174 | $ | 12,253 | 86 | % | ||||||||||||||||
| Professional services |
3,564 | 1,210 | 2,354 | 195 | % | 7,165 | 4,841 | 2,324 | 48 | % | ||||||||||||||||||||||
| Hosted services |
4,084 | 1,700 | 2,384 | 140 | % | 7,245 | 3,330 | 3,915 | 118 | % | ||||||||||||||||||||||
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| Total revenue |
$ | 21,677 | $ | 5,791 | $ | 15,886 | 274 | % | $ | 40,837 | $ | 22,345 | $ | 18,492 | 83 | % | ||||||||||||||||
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| Cost of Revenue |
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| Hardware |
12,514 | 4,410 | 8,104 | 184 | % | 24,657 | 14,563 | 10,094 | 69 | % | ||||||||||||||||||||||
| Professional services |
6,274 | 2,218 | 4,056 | 183 | % | 11,734 | 6,749 | 4,985 | 74 | % | ||||||||||||||||||||||
| Hosted services |
2,606 | 1,226 | 1,380 | 113 | % | 4,577 | 2,384 | 2,193 | 92 | % | ||||||||||||||||||||||
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| Total cost of revenue |
21,394 | 7,854 | 13,540 | 172 | % | 40,968 | 23,696 | 17,272 | 73 | % | ||||||||||||||||||||||
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| Operating expense |
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| Research and development |
4,083 | 2,134 | 1,949 | 91 | % | 7,176 | 4,004 | 3,172 | 79 | % | ||||||||||||||||||||||
| Sales and marketing |
2,392 | 1,183 | 1,209 | 102 | % | 4,146 | 2,720 | 1,426 | 52 | % | ||||||||||||||||||||||
| General and administrative |
3,806 | 4,642 | (836 | ) | (18 | )% | 7,763 | 8,655 | (892 | ) | (10 | )% | ||||||||||||||||||||
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| Total operating expenses |
10,281 | 7,959 | 2,322 | 29 | % | 19,085 | 15,379 | 3,706 | 24 | % | ||||||||||||||||||||||
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| Loss from operations |
(9,998 | ) | (10,022 | ) | 24 | — | % | (19,216 | ) | (16,730 | ) | (2,486 | ) | 15 | % | |||||||||||||||||
| Other expense |
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| Interest expense |
(64 | ) | (170 | ) | 106 | (62 | %) | (142 | ) | (380 | ) | 238 | (63 | )% | ||||||||||||||||||
| Other income (expense), net |
52 | (212 | ) | 264 | (125 | )% | 127 | (492 | ) | 619 | (126 | )% | ||||||||||||||||||||
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| Loss before income taxes |
(10,010 | ) | (10,404 | ) | 394 | (4 | )% | (19,231 | ) | (17,602 | ) | (1,629 | ) | 9 | % | |||||||||||||||||
| Provision for income taxes |
41 | 44 | (3 | ) | (7 | )% | 87 | 122 | (35 | ) | (29 | )% | ||||||||||||||||||||
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| Net Loss |
$ | (10,051 | ) | $ | (10,448 | ) | $ | 397 | (4 | )% | $ | (19,318 | ) | $ | (17,724 | ) | $ | (1,594 | ) | 9 | % | |||||||||||
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Comparison of the six months ended June 30, 2021 and 2020
Revenue
| Three Months Ended June 30, |
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Six Months Ended June 30, |
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Change % |
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| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
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| (dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||||
| Revenue |
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| Hardware |
$ | 14,029 | $ | 2,881 | $ | 11,148 | 387 | % | $ | 26,427 | $ | 14,174 | $ | 12,253 | 86 | % | ||||||||||||||||
| Professional services |
3,564 | 1,210 | 2,354 | 195 | % | 7,165 | 4,841 | 2,324 | 48 | % | ||||||||||||||||||||||
| Hosted services |
4,084 | 1,700 | 2,384 | 140 | % | 7,245 | 3,330 | 3,915 | 118 | % | ||||||||||||||||||||||
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| Total |
$ | 21,677 | $ | 5,791 | $ | 15,886 | 274 | % | $ | 40,837 | $ | 22,345 | $ | 18,492 | 83 | % | ||||||||||||||||
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Total revenue increased by $15.9 million, or 274%, to $21.7 million for the three months ended June 30, 2021, from $5.8 million for the three months ended June 30, 2020. Total revenue increased by $18.5 million, or 83%, to $40.8 million for the six months ended June 30, 2021, from $22.3 million for the six months ended June 30, 2020. The increase in revenue for both periods resulted primarily from an increase in New Units Deployed during 2021 compared to 2020 and from the increased number of cumulative active subscriptions for our hosted services during 2021 compared to 2020.
We had approximately 23,834 New Units Deployed during the three months ended June 30, 2021 compared to 6,943 New Units Deployed during the same period in 2020, representing an increase of approximately 16,891 New Units Deployed, or 243%, in the volume of our installation of units during the periods. During the six months ended June 30, 2021, we had approximately 56,320 New Units Deployed compared to approximately 24,883 New Units Deployed during the same period in 2020, representing an increase of approximately 31,437 New Units Deployed, or 126%, in the volume of our installation of units during the periods. The aggregate number of Units Deployed was approximately 211,425 at June 30, 2021 compared to approximately 96,695 at June 30, 2020.
Hardware revenue increased by $11.1 million, or 387%, to $14.0 million for the three months ended June 30, 2021, from $2.9 million for the three months ended June 30, 2020. The increase in hardware revenue for the three months ended June 30, 2021 was primarily attributable to an increase in hardware sales volumes of $9.8 million resulting from the increase in units shipped, a $1.1 million increase in recognition of previously deferred hardware revenue and an increase of approximately $0.2 million related to third party sales by our subsidiary Zipato.
Hardware revenue increased by $12.3 million, or 86%, to $26.4 million for the six months ended June 30, 2021, from $14.2 million for the six months ended June 30, 2020. This increase in hardware revenue was primarily attributable to an increase in hardware sales volume of $10.5 million resulting from the increase in units shipped, a $1.1 million increase in recognition of previously deferred hardware revenue and an increase of approximately $0.7 million related to third party sales by our subsidiary Zipato.
Professional services revenue increased by $2.4 million, or 195%, to $3.6 million for the three months ended June 30, 2021, from $1.2 million for the three months ended June 30, 2020. For the six months ended June 30, 2021, professional services revenue increased by $2.3 million, or 48%, to $7.2 million from $4.8 million for the six months ended June 30, 2020. For both periods, the increases are primarily a result of increased sales volumes of our smart home devices leading to an increase in installation services provided.
Hosted services revenue increased by $2.4 million, or 140%, to $4.1 million for the three months ended June 30, 2021, from $1.7 million for the three months ended June 30, 2020, resulting from the increased aggregate number of Units Deployed from 96,695 units at June 30, 2020 to 211,425 units at June 30, 2021. Our ARR was approximately $7.0 million for the three months ended June 30, 2021, compared to $2.7 million for the three months ended June 30, 2020.
Hosted services revenue increased by $3.9 million, or 118%, to $7.2 million for the six months ended June 30, 2021, from $3.3 million for the six months ended June 30, 2020, resulting from the increased aggregate number of Units Deployed from 96,695 units at June 30, 2020 to 211,425 units at June 30, 2021.
We measure and evaluate Committed Units to assess the general health and trajectory of our business operations and growth. As of June 30, 2021, SmartRent had 606,455 Committed Units. We began tracking Committed Units in the latter part of 2020 and do not have the comparative metric as of June 30, 2020.
Cost of Revenue
| Three Months Ended June 30, |
Change $ |
Change % |
Six Months Ended June 30, |
Change $ |
Change % |
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| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
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| (dollars in thousands) | (dollars in thousands) | |||||||||||||||||||||||||||||||
| Cost of revenue |
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| Hardware |
$ | 12,514 | $ | 4,410 | $ | 8,104 | 184 | % | $ | 24,657 | $ | 14,563 | $ | 10,094 | 69 | % | ||||||||||||||||
| Professional services |
6,274 | 2,218 | 4,056 | 183 | % | 11,734 | 6,749 | 4,985 | 74 | % | ||||||||||||||||||||||
| Hosted services |
2,606 | 1,226 | 1,380 | 113 | % | 4,577 | 2,384 | 2,193 | 92 | % | ||||||||||||||||||||||
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| Total |
$ | 21,394 | $ | 7,854 | 13,540 | 172 | % | $ | 40,968 | $ | 23,696 | $ | 17,272 | 73 | % | |||||||||||||||||
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Total cost of revenue increased by $13.5 million, or 172%, to $21.4 million for the three months ended June 30, 2021, from $7.9 million for the three months ended June 30, 2020. For the six months ended June 30, 2021, total cost of revenue increased by $17.3 million, or 73%, to $41.0 million, from $23.7 million for the six months ended June 30, 2020. For both the three months and six months ended June 30, 2021, the increase in cost of revenue resulted primarily from an increase in the volume of sales and installations of our smart home hardware devices and the increased number of active subscriptions for our software service applications.
Hardware cost of revenue increased by $8.1 million, or 184%, to $12.5 million for the three months ended June 30, 2021, from $4.4 million for the three months ended June 30, 2020. This increase in hardware cost of revenue was primarily attributable to approximately $8.0 million resulting from greater sales volumes and an increase of approximately $0.5 million for inventory shrinkage and obsolescence for the three months ended June 30, 2021. These increases were partially offset by a $0.4 million decrease in cost of revenue related to third-party sales by our subsidiary Zipato for the three months ended June 30, 2021.
Hardware cost of revenue increased by $10.1 million, or 69%, to $24.7 million for the six months ended June 30, 2021, from $14.6 million for the six months ended June 30, 2020. This increase in hardware cost of revenue was primarily attributable to approximately $10.0 million resulting from greater sales volumes and an increase of approximately $0.4 million for inventory shrinkage and obsolescence for the six months ended June 30, 2021. These increases were partially offset by a $0.3 million decrease in cost of revenue related to third-party sales by our subsidiary Zipato for the six months ended June 30, 2021.
Professional services cost of revenue increased by $4.1 million, or 183%, to $6.3 million for the three months ended June 30, 2021, from $2.2 million for the three months ended June 30, 2020. For the six months ended June 30, 2021, professional services cost of revenue increased by $5.0 million, or 74%, to $11.7 million from $6.7 million for the six months ended June 30, 2020. For both periods, the increases are primarily a result of increased sales volumes of our smart home devices leading to an increase in installation services provided.
Hosted services cost of revenue increased by $1.4 million, or 113%, to $2.6 million for the three months ended June 30, 2021, from $1.2 million for the three months ended June 30, 2020. For the six months ended June 30, 2021, hosted services cost of revenue increased by $2.2 million, or 92%, to $4.6 million from $2.4 million for the six months ended June 30, 2020. For both periods, the increases are a result of the increase in Units Deployed and the resulting increase in the number of active subscriptions for our software service applications. To date, we have experienced no customer churn (meaning that no customer has removed an installed SmartHub).
Operating Expenses
| Three Months Ended June 30, |
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Six Months Ended June 30, |
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Change % |
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| Research and development |
$ | 4,083 | $ | 2,134 | $ | 1,949 | 91 | % | $ | 7,176 | $ | 4,004 | $ | 3,172 | 79 | % | ||||||||||||||||
| Sales and marketing |
2,392 | 1,183 | 1,209 | 102 | % | 4,146 | 2,720 | 1,426 | 52 | % | ||||||||||||||||||||||
| General and administrative |
3,806 | 4,642 | (836 | ) | (18 | )% | 7,763 | 8,655 | (892 | ) | (10 | )% | ||||||||||||||||||||
Research and development expenses increased by $1.9 million, or 91%, to $4.1 million for the three months ended June 30, 2021, from $2.1 million for the three months ended June 30, 2020, resulting primarily from approximately $1.3 million of personnel-related costs as we increased our research and development staff and a $0.2 million increase in expenses related to business applications and software.
Research and development expenses increased by $3.2 million, or 79%, to $7.2 million for the six months ended June 30, 2021, from $4.0 million for the six months ended June 30, 2020, resulting primarily from approximately $2.5 million of personnel-related costs, as we increased our research and development staff, and a $0.2 million increase in expenses related to business applications and software. We expect that our personnel-related costs will continue to increase in future periods as we continue to develop new applications and enhance existing products and solutions.
Sales and marketing expenses increased by $1.2 million, or 102%, to $2.4 million for the three months ended June 30, 2021, from $1.2 million for the three months ended June 30, 2020, resulting primarily from increased sales and marketing staff personnel related costs, as we increased our sales and marketing staff, which increased by $0.5 million, a $0.2 million increase in expenses related to business applications and software and a $0.1 million increase in travel related expenses.
Sales and marketing expenses increased by $1.4 million, or 52%, to $4.1 million for the six months ended June 30, 2021, from $2.7 million for the six months ended June 30, 2020, resulting primarily from increased sales and marketing staff personnel related costs as we increased our sales and marketing staff, which increased by $1.0 million, and an increase in business applications and software, which increased by $0.3 million. We expect that our personnel-related costs will continue to increase in future periods as we continue to expand our sales and marketing efforts to increase sales with existing customers and initiate business with new customers, and we expect that our conference and tradeshow costs and other sales and marketing expense will increase in future periods.
General and administrative expenses decreased by $0.8 million, or 18%, to $3.8 million for the three months ended June 30, 2021, from $4.6 million for the three months ended June 30, 2020, resulting primarily from a decrease in personnel expenses of $2.1 million which is primarily attributed to Zipato acquisition related compensation costs recorded during the three months ended June 30, 2020 that did not occur during 2021. This decrease was offset in part by an increase in consulting and legal expenses of $0.6 million, a $0.3 million increase in travel expenses, and a $0.2 million increase in business taxes and licenses.
For the six months ended June 30, 2021, general and administrative expenses decreased by $0.9 million, or 10%, to $7.8 million from $8.7 million for the six months ended June 30, 2020, resulting primarily from the decrease in personnel-related costs of $2.9 million, which is primarily attributable to Zipato acquisition related compensation costs recorded during the six months ended June 30, 2020 that did not occur during 2021. The decrease in personnel-related costs was partially offset by an increase in consulting fees of approximately $0.7 million, a $0.2 million increase in expenses related to business applications and software, a $0.2 million increase for business taxes and licenses, and increases in Zipato personnel costs of $0.2 million. We expect our general and administrative costs to increase in future periods as we incur expenses related to the growth of our business, and the significant accounting, legal, and compliance infrastructure required to operate as a public company.
Other Expenses
| Three Months Ended June 30, |
Change $ |
Change % |
Six Months Ended June 30, |
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| Interest expense, net |
$ | (64 | ) | $ | (170 | ) | $ | 106 | (62 | )% | $ | (142 | ) | $ | (380 | ) | $ | 238 | (63 | )% | ||||||||||||
| Other income (expense), net |
52 | (212 | ) | 264 | (125 | )% | 127 | (492 | ) | 619 | (126 | )% | ||||||||||||||||||||
Net interest expense decreased by $0.1 million, or 62%, to $0.1 million for the three months ended June 30, 2021, from $0.2 million for the three months ended June 30, 2020. Net interest expense decreased by $0.2 million, or 63%, to $0.1 million for the six months ended June 30, 2021, from $0.4 million for the six months ended June 30, 2020. The decrease in net interest expense for both comparison periods is due to convertible notes being outstanding during the three and six months ended June 30, 2020 that were not outstanding during 2021. There were no convertible notes outstanding in the corresponding periods during 2021.
Other expense, net decreased by $0.3 million, or 125%, to $0.1 million of other income, net for the three months ended June 30, 2021, from $0.2 million of other expense, net, primarily due to gains in foreign currency balances. Other expense, net decreased by $0.6 million, or 126%, to $0.1 million of other income, net for the six months ended June 30, 2021, from $0.4 million of other expense, net for the six months ended June 30, 2020. This change is driven by gains in foreign currency balances as well as the $0.2 million loss on the extinguishment of debt due to the conversion of convertible notes during the six months ended June 30, 2020, which did not occur during the six months ended June 30, 2021.
Income Taxes
| Three Months Ended June 30, |
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Six Months Ended June 30, |
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| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
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| Loss before income taxes |
$ | (10,010 | ) | $ | (10,404 | ) | $ | 394 | (4 | )% | $ | (19,231 | ) | $ | (17,602 | ) | $ | (1,629 | ) | 9 | % | |||||||||||
| Provision for income taxes |
41 | 44 | (3 | ) | (7 | )% | 87 | 122 | (35 | ) | (29 | )% | ||||||||||||||||||||
We provided a full valuation allowance on our net U.S federal and state deferred tax assets at June 30, 2021 and December 31, 2020. As of June 30, 2021, we had $14.4 million of U.S. federal and $2.7 million of state tax effected net operating loss carryforwards available to reduce future taxable income, which will be carried forward indefinitely for U.S. federal tax purposes and will expire on varying dates for state tax purposes. The provision for income taxes in each of the periods reported is related to foreign subsidiaries.
Non-GAAP Financial Measures
To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, we present EBITDA and Adjusted EBITDA, described below, as non-GAAP measures. We believe the presentation of both GAAP and non-GAAP financial measures provides investors with increased transparency into financial measures used by our management team, and it also improves investors’ understanding of our underlying operating performance and their ability to analyze our ongoing operating trends. All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures – these non-GAAP financial measures are not intended to supersede or replace our GAAP results.
We define EBITDA as net income or loss computed in accordance with GAAP before interest expense, income tax expense and depreciation and amortization.
We define Adjusted EBITDA as EBITDA before stock-based compensation expense, non-employee warrant expense, loss on extinguishment of debt, change in fair value of derivatives, unrealized gains and losses in currency exchange rates and other income and expenses.
Our management uses EBITDA and Adjusted EBITDA in a number of ways to assess our financial and operating performance and we believe these measures are helpful to management and external users in understanding our performance. EBITDA and Adjusted EBITDA help management identify controllable expenses and make decisions designed to help us meet our identified financial and operational goals and to optimize our financial performance, while neutralizing the impact of expenses included in our operating results caused by external influences over which management has little or no control and by non-recurring, or unusual, events that might otherwise mask trends in our performance. Accordingly, we believe these metrics measure our financial performance based on operational factors that management can impact in the short-term, namely our cost structure and expenses.
We believe that the presentation of EBITDA and Adjusted EBITDA provides information useful to investors in assessing our results of operations. The GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income or loss. EBITDA and Adjusted EBITDA are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our EBITDA and Adjusted EBITDA may not be comparable to the EBITDA and Adjusted EBITDA of other companies due to the fact that not all companies use the same definitions of EBITDA and Adjusted EBITDA. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other companies.
The following table presents a reconciliation of net loss (as determined in accordance with GAAP) to EBITDA and Adjusted EBITDA for each of the periods indicated.
| Three months ended June 30, |
Six months ended June 30, |
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| (amounts in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net loss |
$ | (10,051 | ) | $ | (10,448 | ) | $ | (19,318 | ) | $ | (17,724 | ) | ||||
| Interest expense, net |
64 | 170 | 142 | 380 | ||||||||||||
| Provision for income taxes |
41 | 44 | 87 | 122 | ||||||||||||
| Depreciation and amortization |
93 | 95 | 173 | 121 | ||||||||||||
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| EBITDA |
(9,853 | ) | (10,139 | ) | (18,916 | ) | (17,101 | ) | ||||||||
| Stock-based compensation |
428 | 641 | 855 | 902 | ||||||||||||
| Non-cash warrant expense |
167 | 36 | 399 | 182 | ||||||||||||
| Loss on extinguishment of debt |
— | — | — | 164 | ||||||||||||
| Loss on change in exchange rates |
— | 79 | — | 165 | ||||||||||||
| Compensation expense in connection with Zipato acquisition |
— | 1,745 | — | 2,593 | ||||||||||||
| Other non-operating expense, net |
4 | 31 | 4 | 14 | ||||||||||||
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| Adjusted EBITDA |
$ | (9,254 | ) | $ | (7,607 | ) | $ | (17,658 | ) | $ | (13,081 | ) | ||||
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Liquidity and Capital Resources
Sources of Liquidity
Debt Issuances
As of June 30, 2021, we had cash and cash equivalents of $53.5 million, which were held for working capital purposes. Our cash equivalents are comprised primarily of money market funds. To date, our principal sources of liquidity have been the net proceeds we received through the private issuance of our convertible SmartRent preferred stock, payments collected from sales to our customers, and proceeds from a Revolving Facility, convertible notes and Term Loan Facility. The term of our Revolving Facility matures in August 2021, and we have extended the maturity of the Revolving Facility through November 2021 in order to revise the Revolving Facility after we commence operations as a public company.
In August 2019, we entered into a loan and security agreement for a credit facility (the “Credit Facility”). The Credit Facility provides $15 million of borrowing capacity and consists of a $10 million revolving line of credit (the “Revolving Facility”), which will mature in November 2021 and a $5 million term loan (the “Term Loan Facility”), which will mature in November 2023. The Term Loan Facility is subject to monthly payments of interest, in arrears, accrued on the principal balance of the Term Loan Facility through November 2020. Thereafter, and continuing through the Term Loan Facility maturity date, the Term Loan Facility is subject to equal monthly payments of principal plus accrued interest. As of June 30, 2021, the Term Loan Facility had a balance of $4.0 million. The Revolving Facility had no balance at June 30, 2021.
In February 2020, we issued a subordinated convertible note in the principal amount of $0.1 million, bearing interest at 5% per annum, pursuant to a note purchase agreement (the “February 2020 Convertible Note”). Interest on the February 2020 Convertible Note accrued at the coupon rate, compounded annually. The February 2020 Convertible Note was converted in March 2020 into shares of SmartRent Series C-1 Preferred Stock, which automatically converted into a number of shares of Common Stock upon consummation of the Business Combination.
SmartRent Preferred Stock Issuances
During the year ended December 31, 2020, we issued a total of approximately 5.5 million shares of SmartRent Series C Preferred Stock in three tranches that closed in March, April, and May 2020. The SmartRent Series C Preferred Stock was issued in exchange for $57.5 million gross cash proceeds. Expenses in connection with the issuance of the SmartRent Series C Preferred Stock were $0.1 million, resulting in net cash proceeds of $57.4 million. During the year ended December 31, 2020, we also issued 761 shares of SmartRent Series C-1 Preferred Stock (which automatically converted into a number of shares of Common Stock upon consummation of the Business Combination) in connection with the redemption of certain convertible notes.
In February and March 2021, we issued approximately 3.4 million additional shares of SmartRent Series C Preferred Stock (which automatically converted into a number of shares of Common Stock upon consummation of the Business Combination) in exchange for $35 million gross cash proceeds. Expenses in connection with the issuance of the SmartRent Series C Preferred Stock were $0.2 million, resulting in net cash proceeds of $34.8 million.
We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $102.0 million as of June 30, 2021. We expect to continue to incur operating losses at least for the next 12 months due to the investments that we intend to make in our business and, as a result, we may require additional capital resources to continue our operations in future periods. We expect to incur expenses related to non-cancellable contractual obligations from our operating leases and the Term Loan Facility.
We believe that our current cash, cash equivalents, available borrowing capacity under the Revolving Facility, and cash raised in the Business Combination will be sufficient to fund our operations for at least the next 12 months. We intend to use a portion of the net cash proceeds from the Business Combination for payment of certain transaction expenses. Our future capital requirements, however, will depend on many factors, including our sales
volume, the expansion of sales and marketing activities, and market adoption of our new and enhanced products and features. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. From time to time, we may seek to raise additional funds through equity and debt. If we are unable to raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition may be adversely affected.
Cash Flow Summary – Six Months Ended June 30, 2021 and 2020
The following table summarizes our cash flows for the periods presented:
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| (dollars in thousands) | ||||||||
| Net cash provided by (used in): |
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| Operating activities |
$ | (18,684 | ) | $ | (25,765 | ) | ||
| Investing activities |
(340 | ) | (2,540 | ) | ||||
| Financing activities |
33,964 | 52,687 | ||||||
Operating Activities
For the six months ended June 30, 2021, our operating activities used $18.7 million in cash resulting primarily from our net loss of $19.3 million, which was partially offset by $1.9 million of non-cash expenses consisting primarily of $0.9 million for stock-based compensation, $0.4 million for non-employee warrant expense, $0.2 million for the provision for warranty expense, and $0.2 million for depreciation and amortization. For the six months ended June 30, 2021, we used $1.3 million net cash from changes in our operating assets and liabilities resulting primarily from an increase of $7.8 million in prepaid expenses and other assets, an increase of $6.2 million in accounts receivable, an increase of $4.3 million in inventory, an increase of $4.2 million in deferred cost of revenue, and a decrease of $2.1 million in accrued expenses and other liabilities. These uses were partially offset by an increase of $21.2 million in deferred revenue and an increase of $2.4 million in accounts payable.
For the six months ended June 30, 2020, our operating activities used $25.8 million in cash resulting primarily from our net loss of $17.7 million, which was partially offset by $4.3 million non-cash expenses consisting primarily of the non-cash compensation expense related to the Zipato acquisition of $2.6 million, stock-based compensation of $0.9 million, and loss on extinguishment of debt of $0.2 million. For the six months ended June 30, 2020, we used net cash of $12.3 million from changes in our operating assets and liabilities resulting primarily from an increase of $9.7 million in accounts receivable, a $6.2 million increase in inventory, a $5.7 million increase in prepaid expenses and other assets, and a $1.3 million increase in deferred cost of revenue. This was partially offset by an $11.5 million increase in deferred revenue and a $1.0 million increase in accrued expenses and other liabilities.
Investing Activities
For the six months ended June 30, 2021, we used $0.3 million of cash for investing activities, resulting primarily from the purchase of property and equipment.
For the six months ended June, 30 2020, we used $2.5 million of cash for investing activities, primarily related to the Zipato acquisition, net of cash acquired.
Financing Activities
For the six months ended June 30, 2021, our financing activities provided $34.0 million of cash consisting primarily of net proceeds from the issuance of SmartRent Series C Preferred Stock in the amount of $34.8 million. The proceeds were partially offset by payments on the Term Loan Facility of $0.8 million.
For the six months ended June 30, 2020, our financing activities provided $52.7 million of cash consisting primarily of net proceeds from the issuance of SmartRent Series C Preferred Stock in the amount of $57.4 million which were partially offset by net payments on the Revolving Facility of $4.8 million.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
We do not believe that inflation has had a material effect on our business, results of operations or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial condition.
Interest Rate Risk
As of June 30, 2021, we had cash and cash equivalents of approximately $53.5 million, which consisted primarily of institutional money market funds, which carries a degree of interest rate risk. A hypothetical 10% change in interest rates would not have a material impact on our financial condition or results of operations due to the short-term nature of our investment portfolio.
Foreign Currency Exchange Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Substantially all of our revenue is generated in U.S. dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the U.S. and to a lesser extent in Croatia and the United Kingdom. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. To date, we have not engaged in any hedging strategies. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2021.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that can significantly impact the amounts we report as assets, liabilities, revenue, costs and expenses and the related disclosures. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance as these policies involve a greater degree of judgment and complexity.
Revenue Recognition
We derive revenue primarily from sales of systems that consist of hardware devices, professional installation services and hosted services to assist property owners and property managers with visibility and control over assets, while providing all-in-one home control offerings for residents. Revenue is recognized when control of these products and services are transferred to the customer in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products and services.
Payments we receive by credit card, check, or automated clearing house payments, and payment terms are determined by individual contracts and range from due upon receipt to net 30 days. Taxes collected from customers and remitted to governmental authorities are not included in reported revenue. Payments received from customers in advance of revenue recognition are reported as deferred revenue.
We apply the practical expedient that allows for inclusion of the future auto-renewals in the initial measurement of the transaction price. We only apply these steps when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services it transfers to a customer.
Accounting for contracts recognized over time involves the use of various estimates of total contract revenue and costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation may be revised in the future as we observe the economic performance of our contracts. Changes in job performance, job conditions and estimated profitability may result in revision to our estimates of revenue and costs and are recognized in the period in which the revisions are identified.
We may enter into contracts that contain multiple distinct performance obligations including hardware and hosted services. The hardware performance obligation includes the delivery of hardware and the hosted services performance obligation allows the customer access to software during the contracted-use term. The subscription for the software and the hub device combine as one performance obligation, and there is no support or ongoing subscription for other device hardware. The Company partners with several manufacturers to offer a range of compatible hardware options for its customers. The Company maintains controls of the hardware purchased from manufacturers prior to it being transferred to the customer. The Company is considered the principal in these arrangements.
For each performance obligation identified, we estimate the standalone selling price, which represents the price at which we would sell the good or service separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, considering available information such as market conditions, historical pricing data, and internal pricing guidelines related to the performance obligations. We then allocate the transaction price among those obligations based on the estimation of the standalone selling price.
Inventory Valuation
Inventories are stated at the lower of cost or estimated net realizable value. Costs are computed under the first-in, first-out method. We adjust the inventory balance based on anticipated obsolescence, usage, and historical write-offs. Significant judgment is used in establishing our forecasts of future demand and obsolete material exposures. We consider marketability and product life cycle stage, product development plans, demand forecasts, historical revenue, and assumptions about future demand and market conditions in establishing our estimates. If the actual product demand is significantly lower than forecast, which may be caused by factors within and outside of our control, or if there were a higher incidence of inventory obsolescence because of rapidly changing technology and our customer requirements, we may be required to increase our inventory write-downs. A change in our estimates could have a significant impact on the value of our inventory and our results of operations.
Stock-Based Compensation
Our stock-based compensation relates to stock options granted to our employees and directors. Stock-based awards are measured based on the grant date fair value. We estimate the fair value of stock option awards granted to employees and directors on the grant date using the Black-Scholes option-pricing model. The fair value of stock option awards are recognized is compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest and forfeitures are recognized as they occur.
The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include the per share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield, the expected stock price volatility over the expected term and forfeitures, which are recognized as they occur. For all stock options granted, we calculated the expected term using the simplified method for “plain vanilla” stock option awards. As of June 30, 2021, our common stock was not publicly traded and therefore had no publicly available stock price information. Accordingly, for the period presented, we used the historical volatility of the stock price of identifiable publicly traded peer companies. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award.
SmartRent Common Stock Valuations
In the absence of a public trading market, the fair value of our common stock was determined by our board of directors, with input from management, taking into account our most recent valuations from an independent third-party valuation specialist. Our board of directors intended all stock options granted to have an exercise price per share not less than the per share fair value of our common stock on the date of grant. The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The assumptions we used in the valuation models were based on future expectations combined with management judgment, and considered numerous objective and subjective factors to determine the fair value of our common stock as of the date of each option grant, including the following factors:
| • | relevant precedent transactions involving our capital stock; |
| • | the liquidation preferences, rights, preferences, and privileges of our redeemable convertible preferred stock relative to the common stock; |
| • | our actual operating and financial performance; |
| • | current business conditions and projections; |
| • | our stage of development; |
| • | the likelihood and timing of achieving a liquidity event for the shares of common stock underlying the stock options, such as an initial public offering, given prevailing market conditions; |
| • | any adjustment necessary to recognize a lack of marketability of the common stock underlying the granted options; |
| • | recent secondary stock sales and tender offers; |
| • | the market performance of comparable publicly-traded companies; and |
| • | the U.S. and global capital market conditions. |
In valuing our common stock at various dates, our board of directors determined the equity value of our business using the market approach. The market approach estimates value considering an analysis of guideline public companies. The guideline public company method estimates value by applying a representative revenue multiple from a peer group of companies in similar lines of business to our forecasted revenue. To determine our peer group of companies, we considered publicly traded companies based on consideration of business descriptions, operations and geographic presence, financial size and performance, and management recommendations regarding most similar companies. This approach involves the identification of relevant transactions and determining relevant multiples to apply to our revenue.
Application of this approach involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock.
The estimates are no longer necessary to determine the fair value of new awards since our Common Stock is now trading.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included elsewhere in this Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Report.
Emerging Growth Company Status
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable.
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We expect to remain an emerging growth company at least through the end of the 2021 fiscal year and to continue to take advantage of the benefits of the extended transition period, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
We will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the FWAA IPO, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the date on we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding common equity held by non-affiliates, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.
Exhibit 99.4
SmartRent Reports Second Quarter 2021 Financial Results
Company Achieves Record Revenue for the Quarter
Recent Highlights
| • | Increased second quarter revenue by 274% to $21.7 million from $5.8 million in the prior year |
| • | Grew deferred revenue 133% year-over-year to $74.5 million |
| • | Deployed 23,834 New Units in the second quarter up 243% year-over-year |
| • | Increased Committed Units to 606,000 as of June 30, 2021 |
| • | Launched Smart Intercom and Alloy Access Solo to enhance and optimize access control systems |
| • | Initiated vertical expansion into attractive Student Housing market |
| • | Completed business combination with Fifth Wall Acquisition Corp. I |
| • | Appointed Ann Sperling to the Board of Directors |
SCOTTSDALE, AZ., August 30, 2021 — SmartRent, Inc. (NYSE:SMRT) (“SmartRent” or “the Company”), a leading provider of smart home and smart building automation for property owners, managers, developers, homebuilders and residents, today reported financial results for the second quarter ended June 30, 2021.
Lucas Haldeman, CEO of SmartRent, commented, “The significant demand for our value-enhancing open-architecture and hardware-agnostic operating system led to record revenue in the second quarter. Our pipeline is stronger than ever, as evidenced by our more than 606,000 Committed Units, and we are actively adding talent to meet the growing demand from our customers. Importantly, our large base of deferred revenue continues to grow and drive multi-year revenue visibility.”
Mr. Haldeman, continued, “We are pleased to have completed our business combination with Fifth Wall Acquisition Corp. I and could not be more excited for this next chapter of growth as a public company. We are uniquely positioned to penetrate the multibillion-dollar smart building enterprise software market on a global scale across all asset classes in both retrofit and new development, which we believe will create long-term shareholder value.”
Second Quarter Results
Total revenue increased by $15.9 million, or 274%, to $21.7 million in the second quarter of 2021, from $5.8 million in the second quarter of 2020. The year-over-year increase in revenue resulted primarily from an increase in the volume of installations of the Company’s smart home hardware devices and an increased number of active subscriptions for the Company’s software service applications.
Operating expenses increased by $2.3 million to $10.3 million in the second quarter of 2021 from $8.0 million in the second quarter of 2020, primarily resulting from an increase in research and development expenses related to product portfolio enhancements and sales and marketing expenses related to personnel-related costs to support the growth of the Company’s operations. The Company continues to invest for growth and has increased its total headcount by approximately 93% since the end of June 2020.
1
Adjusted EBITDA was $(9.3) million in the second quarter of 2021. Net loss was $(10.1) million in the second quarter of 2021, less than our net loss of $(10.4) million in the second quarter of 2020.
Total deferred revenue was $74.5 million as of June 30, 2021, up from $31.9 million as of June 30, 2020 and up from $64.0 million as of March 31, 2021.
First Six Months Results
Total revenue increased by $18.5 million, or 83%, to $40.8 million in the first six months of 2021, from $22.3 million in the prior year period. Operating expenses increased by $3.7 million to $19.1 million in the first six months of 2021 from $15.4 million in the prior year period. Adjusted EBITDA was $(17.7) million and net loss was $(19.3) million in the first six months of 2021.
Key Operating Metrics (1)
| • | New Units Deployed in the second quarter of 2021 were 23,834, up 243% compared to 6,943 in the prior year period. Year-to-date New Units Deployed were 56,320, up 126% compared to the same period last year. As of June 30, 2021, the Company has 211,425 Units Deployed, up 119% compared to one year ago. |
| • | Units Booked in the second quarter of 2021 were 38,182, up 302% compared to 9,495 in the prior year period. Year-to-date Units Booked were 83,718, up 160% compared to the same period last year. |
| • | SmartRent’s customers own an aggregate of 3.5 million rental units and include 15 of the top 20 multifamily residential owners in the United States as of June 30, 2021. To date, the Company has not experienced any customer churn (meaning that no customer has removed an installed SmartHub) and had 606,000 Committed Units as of June 30, 2021. |
| • | ARR in the second quarter of 2021 was $7.0 million, up 159% compared to $2.7 million in the prior year period. ARR represents annualized revenue based upon recurring SaaS revenue earned in the current quarter and does not contemplate revenue that could be attributed to Committed Units. |
Recent Business Highlights
| • | SmartRent completed its business combination with Fifth Wall Acquisition Corp. I on August 24, 2021 and began trading on the New York Stock Exchange under the “SMRT” ticker symbol the following day. SmartRent received approximately $450 million in cash in connection with the business combination, which provides the Company with financial flexibility to invest in initiatives that it believes will accelerate the growth of its category-leading smart home technology for the global real estate industry. |
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| • | SmartRent recently launched Smart Intercom, its proprietary in-house intercom offering, that can be installed on any building entry point, such as lobby doors or perimeter gates. Smart Intercom provides SmartRent-enabled properties an additional layer of security and accessibility to the broader apartment community. Additionally, SmartRent recently launched Alloy Access Solo, a single door access control solution that can be retrofitted on nearly any door or perimeter gate using WiFi or cellular connectivity. These products further expand SmartRent’s access control offerings and ability to transform apartments into connected communities. They complement the Company’s recently launched smart parking solution, Alloy Parking, which helps keep properties safe, limits unauthorized parking and make sure residents can readily access their designated parking spaces. |
| • | SmartRent is developing its new student housing division. The student demographic is highly responsive to technology and smart home innovations, and SmartRent is well-positioned to deliver its solutions to this attractive end market. |
| • | Ann Sperling was appointed as a new member of SmartRent’s Board of Directors following the completion of the business combination. Ms. Sperling brings extensive real estate investment and development, operations, marketing, and finance experience, spanning over three decades of real estate and management experience including leadership roles in public real estate companies. |
| • | The Company extended its revolving credit facility with Silicon Valley Bank under the precedent terms and conditions through November 13, 2021. |
Conference Call Information
SmartRent will host a conference call to discuss its second quarter 2021 financial results today, Monday, August 30, 2021, at 5:00 PM Eastern Time. To access the conference call, dial 1-877-407-3982 for the U.S. and Canada, or 1-201-493-6780 for callers outside the U.S. or Canada, with Conference ID: 13722626. A webcast of the conference call will be available on the Company’s website at investors.smartrent.com.
About SmartRent
Founded in 2017, SmartRent (NYSE: SMRT) is an enterprise smart home and smart building technology platform for property owners, managers and residents. The SmartRent solution is designed to provide property managers with seamless visibility and control over all their assets while delivering cost savings and additional revenue opportunities through all-in-one home control offerings for residents. For more information please visit smartrent.com.
(1) Key Operating Metrics Defined
SmartRent regularly monitors a number of operating and financial metrics including the following non-GAAP financial measures which the Company believes are key measures of its growth, to evaluate its operating performance, identify trends affecting its business, formulate business plans, measure its progress and make strategic decisions. The Company’s Key Operating Metrics may not provide accurate predictions of future GAAP financial results.
3
Units Deployed is defined as the aggregate number of the Company’s SmartHubs that have been installed (also including customer self-installations) as of a stated measurement date. The Company uses this operating metric to assess the general health and trajectory of its business growth.
New Units Deployed is defined as the aggregate number of SmartHubs that have been installed (also including customer self-installations) during a stated measurement period. The Company uses this operating metric to assess the general health and trajectory of its business growth.
Committed Units is defined as the aggregate number of SmartHubs that are subject to binding orders from customers together with units that existing customers who are parties to a SmartRent master services agreement have informed us (on a non-binding basis) that they intend to order in the future for deployment within two years of the measurement date. The Company tracks the number of committed units to assess the general health and trajectory of its business and to assist in its longer-term resource analysis.
Units Booked is defined as the aggregate number of SmartHubs associated with binding orders executed during a stated measurement period. The Company utilizes the concept of Units Booked to assist in assessing near-term resource demand and the resulting approximate range of post-delivery revenue that it will earn and record. Units Booked represent binding orders only and accordingly are a subset of Committed Units.
Annual Recurring Revenue (“ARR”) is defined as the annualized value of our recurring SaaS revenue earned in the current quarter.
Use of Non-GAAP Financial Measures
In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company also discloses certain non-GAAP financial information in this press release. EBITDA and Adjusted EBITDA are non-GAAP financial measures as defined by SEC rules. SmartRent’s management and board of directors use these non-GAAP measures to understand and evaluate SmartRent’s operating performance, to establish budgets, and to develop operational goals for managing its business, and they believe these measures also provide meaningful supplemental information to investors and others in understanding and evaluating SmartRent’s operating results and enhancing the overall understanding of its past performance and future prospects.
These non-GAAP financial measures are not recognized measures under GAAP and are not intended to be and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. In addition, these non-GAAP financial measures may be calculated or defined differently by other companies. Reconciliations of these non-GAAP measurements to the most directly comparable GAAP financial measurements have been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliations.
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SMARTRENT.COM, INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(Unaudited)
(in thousands)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net loss |
$ | (10,051 | ) | $ | (10,448 | ) | $ | (19,318 | ) | $ | (17,724 | ) | ||||
| Interest expense, net |
64 | 170 | 142 | 380 | ||||||||||||
| Provision for income taxes |
41 | 44 | 87 | 122 | ||||||||||||
| Depreciation and amortization |
93 | 95 | 173 | 121 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
| EBITDA |
$ | (9,853 | ) | $ | (10,139 | ) | $ | (18,916 | ) | $ | (17,101 | ) | ||||
| Stock-based compensation |
428 | 641 | 855 | 902 | ||||||||||||
| Non-cash warrant expense |
167 | 36 | 399 | 182 | ||||||||||||
| Loss on extinguishment of debt |
— | — | — | 164 | ||||||||||||
| Loss on change in exchange rates |
— | 79 | — | 165 | ||||||||||||
| Compensation expense in connection with Zipato acquisition |
— | 1,745 | — | 2,593 | ||||||||||||
| Other non-operating expense, net |
4 | 31 | 4 | 14 | ||||||||||||
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|
|
|
|
|
|
|
|
|||||||||
| Adjusted EBITDA |
$ | (9,254 | ) | $ | (7,607 | ) | $ | (17,658 | ) | $ | (13,081 | ) | ||||
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5
SMARTRENT.COM, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share amounts)
| June 30, 2021 | December 31, 2020 | |||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 53,534 | $ | 38,618 | ||||
| Accounts receivable, net |
27,028 | 20,787 | ||||||
| Inventory |
21,701 | 17,628 | ||||||
| Deferred cost of revenue, current portion |
7,645 | 6,782 | ||||||
| Prepaid expenses and other current assets |
11,220 | 3,840 | ||||||
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|
|
|
|
|||||
| Total current assets |
121,128 | 87,655 | ||||||
| Property and equipment, net |
1,292 | 847 | ||||||
| Deferred cost of revenue |
13,394 | 10,072 | ||||||
| Goodwill |
4,162 | 4,162 | ||||||
| Other long-term assets |
1,281 | 1,113 | ||||||
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|
|
|
|||||
| Total assets |
$ | 141,257 | $ | 103,849 | ||||
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|
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| LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 4,864 | $ | 2,275 | ||||
| Accrued expenses and other current liabilities |
7,769 | 9,555 | ||||||
| Deferred revenue, current portion |
35,066 | 19,348 | ||||||
| Current portion of long-term debt |
1,652 | 1,651 | ||||||
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|
|
|
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| Total current liabilities |
49,351 | 32,829 | ||||||
| Long-term debt, net |
2,343 | 3,169 | ||||||
| Deferred revenue |
39,439 | 34,153 | ||||||
| Other long-term liabilities |
273 | 516 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
91,406 | 70,667 | ||||||
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|
|
|
|||||
| Commitments and contingencies (Note 12) |
||||||||
| Convertible preferred stock, $0.00001 par value; 24,816 and 21,698 shares authorized as of June 30, 2021 and December 31, 2020; 24,816 and 21,458 shares issued and outstanding as of June 30, 2021 and December 31, 2020 |
146,225 | 111,432 | ||||||
| Stockholders’ deficit |
||||||||
| Common stock, $0.00001 par value; 33,700 and 28,781 shares authorized as of June 30, 2021 and December 31, 2020; 2,627 and 2,124 shares issued and outstanding as of June 30, 2021 and December 31, 2020 |
— | — | ||||||
| Additional paid-in capital |
5,416 | 4,157 | ||||||
| Accumulated deficit |
(101,960 | ) | (82,642 | ) | ||||
| Accumulated other comprehensive income |
170 | 235 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ deficit |
(96,374 | ) | (78,250 | ) | ||||
|
|
|
|
|
|||||
| Total liabilities, convertible preferred stock and stockholders’ deficit |
$ | 141,257 | $ | 103,849 | ||||
|
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|
|
|
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6
SMARTRENT.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except per share amounts)
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue |
||||||||||||||||
| Hardware |
$ | 14,029 | $ | 2,881 | $ | 26,427 | $ | 14,174 | ||||||||
| Professional services |
3,564 | 1,210 | 7,165 | 4,841 | ||||||||||||
| Hosted services |
4,084 | 1,700 | 7,245 | 3,330 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
| Total revenue |
21,677 | 5,791 | 40,837 | 22,345 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Cost of revenue |
||||||||||||||||
| Hardware |
12,514 | 4,410 | 24,657 | 14,563 | ||||||||||||
| Professional services |
6,274 | 2,218 | 11,734 | 6,749 | ||||||||||||
| Hosted services |
2,606 | 1,226 | 4,577 | 2,384 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total cost of revenue |
21,394 | 7,854 | 40,968 | 23,696 | ||||||||||||
|
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|
|
|
|
|
|
|
|||||||||
| Operating expense |
||||||||||||||||
| Research and development |
4,083 | 2,134 | 7,176 | 4,004 | ||||||||||||
| Sales and marketing |
2,392 | 1,183 | 4,146 | 2,720 | ||||||||||||
| General and administrative |
3,806 | 4,642 | 7,763 | 8,655 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expense |
10,281 | 7,959 | 19,085 | 15,379 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
(9,998 | ) | (10,022 | ) | (19,216 | ) | (16,730 | ) | ||||||||
| Interest expense, net |
(64 | ) | (170 | ) | (142 | ) | (380 | ) | ||||||||
| Other income (expense), net |
52 | (212 | ) | 127 | (492 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss before income taxes |
(10,010 | ) | (10,404 | ) | (19,231 | ) | (17,602 | ) | ||||||||
| Provision for income taxes |
41 | 44 | 87 | 122 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
(10,051 | ) | (10,448 | ) | (19,318 | ) | (17,724 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other comprehensive loss |
||||||||||||||||
| Foreign currency translation adjustment |
63 | 46 | (65 | ) | 32 | |||||||||||
| Comprehensive loss |
$ | (9,988 | ) | $ | (10,402 | ) | $ | (19,383 | ) | $ | (17,692 | ) | ||||
|
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|
|
|
|
|
|||||||||
| Net loss per common share |
||||||||||||||||
| Basic and diluted |
$ | (4.87 | ) | $ | (6.82 | ) | $ | (9.71 | ) | $ | (12.92 | ) | ||||
|
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|
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|
|
|||||||||
| Weighted-average number of shares used in computing net loss per share |
||||||||||||||||
| Basic and diluted |
2,064 | 1,531 | 1,990 | 1,372 | ||||||||||||
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Forward-Looking Statements
This press release contains forward-looking statements which address the Company’s expected future business and financial performance, and may contain words such as “goal,” “target,” “future,” “estimate,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “project,” “may,” “should,” “will” or similar expressions. Examples of forward-looking statements include, among others, statements regarding the benefits of the Company’s strategic acquisitions, changes in the market for our products and services, expected financial results, product portfolio enhancements, expansion plans and opportunities and expectations regarding key operational metrics. Forward-looking statements involve risks and
7
uncertainties that could cause actual results to differ materially from those currently anticipated. Factors that could cause actual results or outcomes to differ materially from expectations include, but are not limited to, our ability to: (1) execute our business strategy, including expansions in existing and into new lines of business; (2) anticipate the uncertainties inherent in the development of new business lines and business strategies; (3) realize the benefits expected from our business combination; (4) continue to develop new products and innovations to meet constantly evolving customer demands; (5) accelerate adoption of our products and services; (6) acquire or make investments in other businesses, patents, technologies, products or services to grow the business; (7) develop, design, and sell services that are differentiated from those of competitors; (8) anticipate the impact of the COVID-19 pandemic and its effect on our business operations; (9) manage risks associated with product liability, warranty, personal injury, property damage and recall matters; (10) attract, train, and retain officers, employees and directors; (11) enhance future operating and financial results; (12) comply with laws and regulations applicable to our business; (13) stay abreast of modified or new laws and regulations applicable to our business, including data security and privacy regulations; (14) anticipate the significance and timing of contractual obligations; (15) maintain key strategic relationships with partners, manufacturers and distributors; (16) respond to uncertainties associated with product and service development and market acceptance; (17) successfully defend litigation; (18) upgrade and maintain information technology systems; (19) acquire and protect intellectual property; (20) anticipate rapid technological changes; and (21) successfully deploy the proceeds from the business combination. The forward-looking statements herein represent the judgment of the Company, as of the date of this release, and SmartRent disclaims any intent or obligation to update forward-looking statements. This press release should be read in conjunction with the information included in the Company’s other press releases, reports and other filings with the SEC. Understanding the information contained in these filings is important in order to fully understand the Company’s reported financial results and our business outlook for future periods.
Investor Contact:
investors@smartrent.com
Media Contact:
SmartRent@Inkhouse.com
8