SFT Shift Technologies Inc

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 18, 2023 (July 14, 2023)

 

SHIFT TECHNOLOGIES, INC.

(Exact name of registrant as specified in charter)

 

Delaware		001-38839		82-5325852
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

290 Division Street, Suite 400, San Francisco, CA		94103
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (855) 575-6739

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock, par value $0.0001 per share		SFT		Nasdaq Capital Market

 

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. ☐

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On July 14, 2023, Shift Technologies, Inc. (the “Company”) entered into a Second Amendment to Inventory Financing and Security Agreement (the “Second Amendment”), by and among the Company, certain of the Company’s wholly owned subsidiaries (collectively, the “Borrowers” and each, a “Borrower”), Ally Bank (“Ally Bank”) and Ally Financial Inc. (“Ally Financial” and, together with Ally Bank, the “Lender”), which amends the Company’s existing Inventory Financing and Security Agreement dated as of December 9, 2021, as amended by the Amendment to Inventory Financing and Security Agreement dated as of February 7, 2023 (as so amended, the “Ally Facility”), by and among the Company, the Borrowers and the Lender.

 

The Second Amendment amends the Ally Facility to, among other things, (i) reduce the maximum available credit line (the “Credit Line”) under the Ally Facility from $75 million to $30 million, (ii) eliminate the option for a Borrower to obtain financing from the Lender for vehicles for which Dealership does not then hold a lien-free title, and (iii) eliminate the minimum liquidity financial covenant. The Second Amendment also, in conjunction with the Borrowers entering into an amended Credit Balance Agreement with the Lender, amends the Borrowers’ minimum cash balance requirement with the Lender to be an amount equal to the lesser of (i) at least 30% of the amount of the Credit Line and (ii) 100% of the total outstanding principal balance under the Ally Facility.

  

The foregoing description of the Second Amendment is qualified in its entirety by reference to the full text of the Second Amendment, which is filed hereto as Exhibit 10.1 and is incorporated herein by reference.

 

The Company entered into the Second Amendment in connection with the previously announced review of strategic alternatives by its Board of Directors, management team and advisors, which remains ongoing.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-balance Sheet Arrangement of a Registrant.

 

The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

10.1		Second Amendment to Inventory Financing and Security Agreement, dated as of July 14, 2023, by and among Shift Technologies, Inc., CarLotz, Inc., a Delaware corporation, CarLotz Group, Inc., CarLotz, Inc., an Illinois corporation, CarLotz California, LLC, Shift Operations LLC, Ally Bank and Ally Financial Inc.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

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.

 

	SHIFT TECHNOLOGIES, INC.
Dated: July 18, 2023	By:	/s/ Ayman Moussa
	Name:	Ayman Moussa
	Title:	Chief Executive Officer

 

 

2

 

Exhibit 10.1

 

SECOND AMENDMENT TO

INVENTORY FINANCING AND SECURITY AGREEMENT

 

I. THE PARTIES TO THIS AGREEMENT

 

This Second Amendment to Inventory Financing and Security Agreement (“Amendment”) is effective as of July 14, 2023 (the “Amendment Effective Date”), and is made by and among the following parties (the “Parties”):

 

A.	Ally Bank (Ally Capital in Hawaii, Mississippi, Montana and New Jersey) (together with its successors and assigns, “Bank”), a Utah state-chartered bank with a local business office currently located at 5851 Legacy Circle, Suite 200, Plano, Texas 75024;

 

B.	Ally Financial Inc., a Delaware corporation (“Ally”) with a local business office currently located at 5851 Legacy Circle, Suite 200, Plano, Texas 75024 (together with Bank, the “Ally Parties” and Bank and Ally each being, an “Ally Party”);

 

C.	Shift Operations LLC, a Delaware limited liability company, with its principal executive office currently located at 290 Division Street, Suite 400, San Francisco, California 94103;

 

D.	CarLotz, Inc., a Delaware corporation, with its principal executive office located at 290 Division Street, Suite 400, San Francisco, California 94103;

 

E.	CarLotz Group, Inc., a Delaware corporation, with its principal executive office located at 290 Division Street, Suite 400, San Francisco, California 94103;

 

F.	CarLotz, Inc., an Illinois corporation, with its principal executive office located at 290 Division Street, Suite 400, San Francisco, California 94103; and

 

G.	CarLotz California, LLC, a California limited liability company, with its principal executive office located at 290 Division Street, Suite 400, San Francisco, California 94103; and

 

H.	Shift Technologies, Inc., a Delaware corporation, with its principal executive office currently located at 290 Division Street, Suite 400, San Francisco, California 94103 (“Guarantor”).

 

Shift Operations LLC, CarLotz, Inc., a Delaware corporation, CarLotz Group, Inc., a Delaware corporation, CarLotz, Inc., an Illinois corporation, and CarLotz California, LLC, a California limited liability company, are collectively referred to herein as “Dealership.”

 

II. THE RECITALS

 

The essential facts relied on by Bank, Ally, Dealership and Guarantor as true and complete, and giving rise to this Amendment, are as follows:

 

A.

The Ally Parties, Dealership, and Guarantor are parties to an Inventory Financing and Security Agreement, effective as of December 9, 2021, as amended by the Amendment to Inventory Financing and Security Agreement, effective as of February 7, 2023 (as amended, modified, restated, or replaced, the “IFSA”).

 

B.	The Parties to this Amendment desire to amend the IFSA as outlined in this Amendment.

 

 

III. THE AGREEMENT

 

In consideration of the premises and the mutual promises in this Amendment, which are acknowledged to be sufficient, the Parties agree to the following:

 

A.	Capitalized terms used but not defined herein have the meanings given to them in the IFSA.

 

B.	Effective as of the Amendment Effective Date, Section III.A.2 of the IFSA is modified so that the maximum aggregate amount of credit available pursuant to this IFSA (the “Credit Line”) is $30,000,000.00 at any time outstanding.

 

C.	Effective as of Amendment Effective Date, Section III.A.8 of the IFSA is deleted. This eliminates the Advance Floorplan Accommodation.

 

D.	Effective as of Amendment Effective Date, Section III.G.7 of the IFSA is deleted and replaced with the following:

 

7.

Dealership will comply in all material respects with all of Dealership’s obligations under the Credit Balance Agreement in effect between Dealership and Ally Bank (and any amendments or modifications to such agreement), including, but not limited to, maintaining the Minimum Required Balance (as defined in the Credit Balance Agreement).

 

E.	Effective as of Amendment Effective Date, Section III.G.8 of the IFSA is deleted and replaced with the following:

 

8.

Financial Covenants. Dealership and Guarantor will comply with the following financial covenants, tested monthly (as of month-end) based on Guarantor’s monthly financial statements:

 

(a)

[Reserved.]

 

(b)

Inventory Equity: Dealership will maintain Vehicle inventory equity of at least 10%, calculated as follows:

 

The amount by which the value of Dealership’s Vehicle inventory exceeds Wholesale Outstandings, divided by the value of Dealership’s Vehicle inventory, must be equal to or greater than 10%, where:

 

	i.	Vehicle inventory includes all vehicles owned by Dealership and covered by the Ally Parties’ security interest, including wholesale vehicles, but excluding Vehicles held on consignment;

	ii.	Vehicle inventory value is net of unpaid lien payoffs (and excludes the value of Vehicles held on consignment); and

iii.

unrestricted cash and cash equivalents (i.e., cash maintained in the Dealership’s bank account(s), plus outstanding deposits, less outstanding checks, less bank fees, plus any amounts maintained under the Credit Balance Agreement in excess of any amounts used to establish the Minimum Required Balance under such agreement, all as of the month-end for which the covenant applies) may be used to bolster Vehicle inventory value.

 

(c)

Monthly Certification. Dealership and Guarantor will provide a monthly certificate executed by an officer affirming compliance with the Inventory Equity covenant, and providing the basis for such affirmations.

 

 

F.

Except as provided above, the IFSA and all other agreements between each of the Ally Parties and Dealership and Guarantor remain in full force and effect as written. In the event of a conflict between the terms of the IFSA and this Amendment, the terms of this Amendment prevail. The Parties hereto ratify all terms of the IFSA as amended by this Amendment.

 

G.	If any provision of this Amendment is held to be invalid or unenforceable by a court of competent jurisdiction, all other provisions remain valid and enforceable.

 

H.	This Amendment:

 

a.

May be modified only by a writing signed by all Parties.

 

b.

May be signed in counterparts, each of which is deemed an original, and all of which taken together constitute one and the same agreement. The signatures of the Parties, exchanged via fax or e-mail, shall constitute and be deemed original signatures for all purposes.

 

c.

Binds and inures to the benefit of the Parties and their respective successors and assigns.

 

d.

Constitutes the entire agreement of the Parties with respect to its subject matter.

 

Agreed to effective as of the Amendment Effective Date.

 

Ally Bank			Shift Operations LLC
			By Shift Platform, Inc., its Managing Member
By:	/s/ Mehul Desai		By:	/s/ Oded Shein
Name:	Mehul Desai		Name:	Oded Shein
Title:	Authorized Representative		Title:	Chief Financial Officer
Ally Financial Inc.			CarLotz, Inc., a Delaware corporation
By:	/s/ Mehul Desai		By:	/s/ Oded Shein
Name:	Mehul Desai		Name:	Oded Shein
Title:	Authorized Representative		Title:	Chief Financial Officer
CarLotz California, LLC,			CarLotz Group, Inc., a Delaware corporation
a California limited liability company
By:	/s/ Oded Shein		By:	/s/ Oded Shein
Name:	Oded Shein		Name:	Oded Shein
Title:	Chief Financial Officer		Title:	Chief Financial Officer
Shift Technologies, Inc.			CarLotz, Inc., an Illinois corporation
By:	/s/ Oded Shein		By:	/s/ Oded Shein
Name:	Oded Shein		Name:	Oded Shein
Title:	Chief Financial Officer		Title:	Chief Financial Officer

 

 

3

 

v3.23.2

Cover	Jul. 14, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 14, 2023
Entity File Number	001-38839
Entity Registrant Name	SHIFT TECHNOLOGIES, INC.
Entity Central Index Key	0001762322
Entity Tax Identification Number	82-5325852
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	290 Division Street
Entity Address, Address Line Two	Suite 400
Entity Address, City or Town	San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94103
City Area Code	855
Local Phone Number	575-6739
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Class A common stock, par value $0.0001 per share
Trading Symbol	SFT
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false

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