Item
1.01 Entry Into a Material Definitive Agreement
On
January 25, 2021, AYRO, Inc. (the “Company”), entered into a Securities Purchase Agreement (the “Purchase Agreement”)
with certain institutional and accredited investors (the “Purchasers”), pursuant to which the Company agreed to issue
and sell in a registered direct offering (the “Offering”) an aggregate of 3,333,334 shares (the “Shares”)
of common stock of the Company, par value $0.0001 per share (the “Common Stock”), at an offering price of $6.00 per
share, for gross proceeds of approximately $20 million before the deduction of fees and offering expenses. The Shares are being
offered by the Company pursuant to a shelf registration statement on Form S-3 (File No. 333-251001) (the “Shelf Registration
Statement”), previously filed with the Securities and Exchange Commission (the “SEC”) on November 27, 2020,
and declared effective by the SEC on December 2, 2020.
Pursuant
to the Purchase Agreement, in a concurrent private placement (the “Private Placement”), the Company agreed to issue
to the Purchasers, unregistered warrants to purchase up to 3,333,334 shares of Common Stock (the “Investor Warrants”).
The Investor Warrants are exercisable six months following issuance and terminate two and a half years following issuance and
are exercisable at an exercise price of $6.93 per share, subject to adjustment as set forth therein. A holder of the Investor
Warrants will not have the right to exercise any portion of its Investor Warrants if the holder, together with its affiliates,
would beneficially own in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the number
of shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”);
provided, however, that upon 61 days’ prior notice to the Company, the holder may increase or decrease the Beneficial Ownership
Limitation, provided that in no event shall the Beneficial Ownership Limitation exceed 9.99%. In addition, under the Purchase
Agreement, the Company agreed to prepare and file with the SEC a registration statement relating to the resale of the shares of
Common Stock underlying the Investor Warrants on or before the 75th calendar day following the date of the Purchase
Agreement.
Palladium
Capital Group, LLC (“Palladium”) is acting as the placement agent for the Offering. The Company will pay Palladium
a fee equal to 8.0% of the gross proceeds of the offering and a warrant to purchase 233,334 shares of Common Stock (which equals
7.0% of the aggregate number of shares of Common Stock placed in the Offering (the “Palladium Warrants” and together
with the Investor Warrants, the “Warrants”). The Palladium Warrants will have the same terms as the Investor Warrants.
The
Warrants and the shares of our Common Stock issuable upon the exercise of the Warrants are not being registered under the Securities
Act of 1933, as amended (the “Securities Act”), are not being offered pursuant to the Shelf Registration Statement,
and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated
thereunder.
The
closing of the Offering and Private Placement are subject to satisfaction of customary closing conditions set forth in the Purchase
Agreement and is expected to occur on or about January 26, 2021. The representations, warranties and covenants contained in the
Purchase Agreement were made solely for the benefit of the parties to the Purchase Agreement. In addition, such representations,
warranties and covenants (i) are intended as a way of allocating the risk between the parties to the Purchase Agreement and not
as statements of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material
by stockholders of, or other investors in, the Company. Accordingly, the Purchase Agreement is filed with this report only to
provide investors with information regarding the terms of transaction, and not to provide investors with any other factual information
regarding the Company. Moreover, information concerning the subject matter of the representations and warranties may change after
the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures.
The
net proceeds to the Company from the Offering, after deducting fees and expenses and the Company’s estimated offering expenses,
and excluding the proceeds, if any, from the exercise of the Warrants, are expected to be approximately $18.35 million.
The Company currently intends to use these net proceeds for working capital and general corporate purposes.
The
legal opinion of Haynes and Boone, LLP relating to the legality of the issuance and sale of the Shares in the Offering is attached
as Exhibit 5.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The
description of the terms and conditions of the Purchase Agreement, the Investor Warrants and the Palladium Warrants set forth
herein do not purport to be complete and are qualified in their entirety by the full text of the forms of Purchase Agreement,
Investor Warrant, and Palladium Warrant, copies of which are filed as Exhibits 10.1, 4.1 and 4.2, respectively, to this Current
Report on Form 8-K and are incorporated herein by reference.