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): May 8, 2020

 

Mohawk Group Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter) 

 

Mohawk Group Holdings, Inc.
37 East 18th Street, 7^th Floor

New York, NY 10003

(Address of Principal Executive Offices)(Zip Code)

(347) 676-1681
(Registrant’s telephone number, including area code)

N/A

(Former Name, or Former Address, if Changed Since Last Report)

 

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

 

 

 

 

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

 

 

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. ☐

 

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

On May 11, 2020, Mohawk Group Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 2.02, including the press release attached hereto as Exhibit 99.1, is intended to be furnished under Item 2.02 and Item 9.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Effective May 8, 2020, the Company terminated Peter Datos, the Company’s Chief Operating Officer, from all positions within the Company.

On March 12, 2020, the Company appointed Pramod K C, age 43, as the Company’s Chief Operating Officer, effective June 1, 2020. Upon commencement of his appointment, Mr. K C will assume the duties of the Company’s principal operating officer until such time as his successor is appointed, or until his earlier resignation or removal. There are no reportable family relationships or related party transactions (as defined in Item 404(a) of Regulation S-K) involving the Company and Mr. K C.

Prior to joining the Company, Mr. K C was head of Asia Operations for G-Lab GmbH, a Swiss consumer electronics company, from April 2014 to May 2020. Mr. K C previously held various General Manager positions at PassageMaker Solutions, a supply chain management company in Asia, from July 2007 to March 2014 and was involved in development, procurement, production management, quality control and export logistics within the supply chain for a variety of clients, including Hewlett-Packard, DELL, Harley Davidson and Home Depot. Mr. K C started his career as a product development engineer, performing embedded software programming for consumer electronics products. He then began handling and managing integrated supply chains and operations for companies operating in the Asia-Pacific region. He holds a Bachelor in Engineering with a focus in Applied Electronics Technology from Shanghai University.

On March 12, 2020, the Company entered into an offer letter and an assignment agreement with Mr. K C (together, the “Offer Letter”). Pursuant to the Offer Letter, Mr. K C’s annualized salary is $307,000. In addition, the Company shall also provide Mr. K C with an annual housing stipend of $35,000 and health insurance stipend of $12,451. Mr. K C is also eligible for an annual 20% performance bonus, subject to approval by the Compensation Committee of the Board of Directors of the Company. Mr. K C’s employment will be on an “at will” basis. Additionally, the Company will grant Mr. K C a restricted stock award for 75,000 shares of restricted common stock of the Company (the “Award”). One-third of the number of shares subject to the restricted stock award shall vest one year from the date of grant and 1/24th of the number of shares subject to the restricted stock award shall vest each one month period thereafter, subject to Mr. K C’s continuous service through such date

The foregoing description of the Offer Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Offer Letter, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

On May 11, 2020, the Company issued a press release announcing the appointment of Mr. K C as the Company’s Chief Operating Officer. A copy of the press release is filed herewith as Exhibit 99.1 and incorporated herein by reference.

 

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

Exhibit 10.1

Mohawk Group, Inc.
37 E. 18th St, 7th Fl
New York, NY 10003

Date: March 12, 2020

Dear Mr. Pramod K C,

Mohawk Group, Inc (the “Company”), is super excited to offer you employment with the Company.

Position, Salary and Bonus Target. I am pleased to offer you the position listed below. You will receive an annual salary listed below, subject to periodic review. You are eligible to participate in the Company bonus program; your annual bonus target will be the below percentage. If at any point in your employment, your position / level changes, your annual bonus target may change. Bonuses under the Company bonus program are entirely discretionary, and will not be paid out if you were to leave the Company for any reason or give notice to leave before the bonus payment date. The actual bonus amount could be larger or smaller than this amount, based on your performance and the performance of the Company. Whether a bonus will be awarded in a particular bonus period, and in what amount, is within Mohawk’s sole discretion. Please note that both your salary and bonus eligibility are subject to periodic review and may be modified in Mohawk’s discretion.

Title: Chief Operating Officer

Salary: $307,000.00 (gross) - it being understood and agreed that the portion of salary allocated to your assignment in Shenzhen shall be based on 1,100,000 RMB ($157,500) per year notwithstanding any currency exchange rate fluctuations between USD/RMB and the remaining 149.500 USD be paid by the US entity

Annual Bonus Target: 20% of Salary

Location: Primarily Shenzhen, with occasional periodic travel to headquarters in NYC. You will be required to sign an assignment agreement to be assigned to work in Shenzhen, which will govern the terms and conditions of your work there.

By signing this letter, you confirm with the Company that you are under no contractual or other legal obligations that would prohibit you from performing your duties with the Company. As a regular employee of the Company you will be eligible to participate in a number of Company-sponsored benefits, which are described in the employee benefit summary that I have enclosed with this letter.

 

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Equity Award. Subject to the approval of the Board of Directors of Mohawk Group Holdings, Inc. (“MGHI”), you will be granted 75,000 shares of restricted common stock or restricted stock units, of MGHI, at MGHI’s discretion. The award will be subject to the terms and conditions applicable to restricted stock granted under MGHI’s 2018 Equity Incentive Plan, as described in that plan and the applicable stock option agreement, which you will be required to sign. You will vest in 33.3% of the shares on the 12-month anniversary of your vesting commencement date and 1/24^th of the remaining shares will vest in monthly installments thereafter during continuous service, as described in the applicable award agreement. You should consult with your own tax advisor concerning the tax risks associated with accepting an award of MGHI’s restricted common stock.

Additional Benefits: In addition to the base, bonus, and equity, the Company will offer additional benefits to support you in your role as follows:

If you leave the Company within a year of distribution of these funds, you will be expected to repay the amount prorated for the time employed. If additional compensation is required to be paid to you locally as part of your visa and you continue to receive compensation from other MGHI subsidiaries, your total annual compensation will be adjusted to match your agreed to Salary (i.e. $307,000 stated above).

Proprietary Information and Inventions Agreement. Like all Company employees, you will be required, as a condition of your employment with the Company, to sign the Company’s enclosed standard Proprietary Information and Inventions Agreement.

Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations which may have been made to you are superseded by this offer. This is the full and complete agreement between you and the Company on this term, notwithstanding any other agreements to the contrary including agreements required in connection with procuring an appropriate visa. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and the Company’s Chief Executive Officer. You agree and acknowledge that your assignment to work in Shenzhen and the fact that your work permit is sponsored by the Company’s Shenzhen entity will not create any employment relationship whatsoever with the Shenzhen entity at any time; rather, your employment relationship is established with the Company in the US and governed by the applicable US law.

Outside Activities. While you render services to the Company, you agree that you will not engage in any other employment, consulting or other business activity, including selling on Amazon, eBay, or other ecommerce platforms, without the written consent of the Company. In addition, while you render services to the Company, you will not assist any person or entity in

 

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competing with the Company, in preparing to compete with the Company or in hiring any employees or consultants of the Company.

No Conflicts. It is the policy of the Company that employees neither disclose nor use any confidential information from prior employment while employed by the Company. If you have entered into specific non-disclosure agreements, non-compete agreements, non-solicitation agreements, or any other agreements with any previous employer that might affect your eligibility to be employed by us, restrict your freedom to lawfully recruit others to join our team, or otherwise limit the manner in which you may be employed, please provide us with a copy so that we can ensure that both you and the Company will be able to abide by the terms thereof if you are employed by the Company. It is the Company’s understanding that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. This offer is expressly contingent upon your providing us with these agreements prior to accepting this offer, or the Company waiving this contingency, in its sole discretion.

Withholding Taxes. All forms of compensation referred to in this letter are subject to applicable withholding and payroll taxes.

Entire Agreement. This letter supersedes and replaces any prior understandings or agreements, whether oral, written or implied, between you and the Company regarding the matters described in this letter.

[Signature Page Follows]

 

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If you wish to accept this offer, please sign and date both the enclosed duplicate original of this letter and the enclosed Proprietary Information and Inventions Agreement and return them to me. As required, by law, your employment with the Company is also contingent upon your providing legal proof of your identity and authorization to work in the United States as well as your securing a valid work and residence permits to work and reside in Shenzhen. We look forward to having you join the team!

Sincerely,

 

/s/ Pramod KC________________________

Name: Pramod K C                                         

Date: 3/12/2020                                               

Anticipated Start Date: 3/12/2020                   

Attachment A: Proprietary Information and Inventions Agreement

 

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ATTACHMENT A

PROPRIETARY INFORMATION AND
INVENTIONS AGREEMENT

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

In consideration of my employment or consulting (including independent contracting) relationship with Mohawk Group, Inc., a Delaware corporation (the “Company”), the training, contacts and experience that I may receive in connection with such relationship, the compensation paid to me by the Company, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, I agree as follows:

Section 1.Definitions

The following terms have the following specified meanings:

“Competing Business” means any business who offers products or services that are directly or indirectly competitive with the products or services of the Company. A Competing Business includes any business pursuing research and development and/or offering products or services in competition with products or services which are, during and at the end of the Term, either (a) produced, marketed, distributed, sourced or otherwise commercially exploited by the Company or (b) in actual or demonstrably anticipated research or development by the Company.

“Confidential Information” means any information related to the business or other affairs of the Company or its affiliates that is not generally available to the public, and that: (a) is conceived, compiled, developed, or discovered by me whether solely or jointly with others, during the Term or (b) is or has been received or otherwise becomes known to me in connection with my employment or consulting relationship. Without limiting the generality of the foregoing, Confidential Information includes information, both written and oral, relating to Inventions and Works, trade secrets and other proprietary information, technical data, products, services, finances, business plans, marketing plans, legal affairs, suppliers, clients, potential clients, prospects, opportunities, contracts or assets of the Company or its affiliates. Confidential Information also includes any information that has been made available to the Company by its clients or other third parties and which the Company is obligated to keep confidential.

“Inventions and Works” means any composition, work of authorship, computer program, product, device, technique, know-how, algorithm, method, design, process, procedure, improvement, discovery or invention, whether or not patentable or copyrightable and whether or not reduced to practice, that is (a) within the scope of the Company’s business, research or investigations, or results from or is suggested by any work performed by me for the Company, and (b) created, conceived, reduced to practice, developed, discovered, invented or made by me during the Term, whether solely or jointly with others, and whether or not while employed by, or in a consulting relationship with, the Company.

 

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“Materials” means any product, prototype, sample, model, document, diskette, tape, picture, drawing, design, recording, report, proposal, paper, note, writing or other tangible item which in whole or in part contains, embodies or manifests, whether in printed, handwritten, coded, magnetic or other form, any Confidential Information or Inventions and Works.

“Person” means any corporation, limited liability company, partnership, trust, association, governmental authority, educational institution, individual or other entity.

“Proprietary Right” means any patent, copyright, trade secret, trademark, trade name, service mark or other protected intellectual property right in any Confidential Information, Inventions and Works, or Material.

“Restricted Period” means the period commencing at the beginning of the Term and ending one (1) year after expiration of the Term.

“Term” means the period from the beginning of my employment or consulting relationship with the Company, whether on a full-time, part-time or consulting basis, through the last day of such employment or consulting relationship.

Section 2.Confidential Information, Inventions and Works, and Materials

2.1Ownership. As between the Company and me, the Company is and will be the sole owner of all Confidential Information, Inventions and Works, Materials and Proprietary Rights. To the extent eligible for such treatment, all Inventions and Works will constitute “works made for hire” under applicable copyright laws.

2.2Assignment. I hereby irrevocably assign and transfer to the Company all right, title and interest that I may now or hereafter have in the Confidential Information, Inventions and Works, Materials and Proprietary Rights, subject to the limitations set forth in the notice below. This assignment and transfer is independent of any obligation or commitment made to me by the Company. Further, I hereby waive any moral rights that I may have in or to any Confidential Information, Inventions and Works, Materials and Proprietary Rights. I will take such action (including, but not limited to, the execution, acknowledgment, delivery and assistance in preparation of documents or the giving of testimony) as may be requested by the Company to evidence, transfer, vest or confirm the Company’s right, title and interest in the Confidential Information, Inventions and Works, Materials and Proprietary Rights, and the license rights described in Section 2.6 below. I agree to keep and maintain adequate and current written records of all Inventions and Proprietary Rights during the Term. The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records will be available to and remain the sole property of the Company at all times. I will not contest the validity of any Proprietary Rights or aid or encourage any third party to contest the validity of any Proprietary Right of the Company. If I have any question as to whether any information, an invention, a work, a material or a right qualifies, respectively, as Confidential Information, an Invention, a Work, a Material or a Proprietary Right, I will inform the Company of the nature of such information, invention, work, material or right for the Company’s determination as to whether such information, invention, work, material or right is, respectively, Confidential Information, an Invention, a Work, a Material or a Proprietary Right.

 

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NOTICE: Notwithstanding any other provision of this Agreement to the contrary, this Agreement does not obligate me to assign or offer to assign to the Company any of my rights in an invention for which no equipment, supplies, facilities or trade secret information of the Company was used and which was developed entirely on my own time, unless (a) the invention relates (i) directly to the business of the Company or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by me for the Company. This satisfies the written notice and other requirements of California Labor Code Section 2870 or any other similar state statute that may be applicable in my case.

2.3Company Authority. If the Company is unable for any reason to secure my signature to fulfill the intent of the foregoing paragraph or to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions and Works assigned to the Company above, then I irrevocably appoint the Company and its authorized agents as my agent and attorney in fact, to transfer, vest or confirm the Company’s rights and to execute and file any such applications and to do all other lawful acts to further the prosecution and issuance of letters patent or copyright registrations with the same legal force as if done by me.

2.4Use Restrictions. Except as required for performance of my work for the Company or as authorized in writing by the Company, I will not (a) use, disclose, publish or distribute any Confidential Information, Inventions and Works or Materials or (b) remove any Materials from the Company’s premises. I will hold all Materials in trust for the Company and I will deliver them to the Company upon request and in any event at the end of the Term. I will take all action necessary to protect the confidentiality of the Confidential Information, Inventions and Works or Materials including, without limitation, implementing and enforcing operating procedures to minimize the possibility of unauthorized use or copying thereof.

2.5Disclosure Obligations. I will promptly disclose to the Company all Confidential Information, Inventions and Works, and Materials, as well as any business opportunity that comes to my attention during the Term and which relates to the business of the Company or which arises as a result of my employment or consulting relationship with the Company. I will not take advantage of or divert any such opportunity for the benefit of myself or anyone else either during or after the Term without the prior written consent of the Company. I agree that at the end of the Term I will deliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all Inventions and Works, Materials and other property belonging to the Company, its successors or assigns.

2.6Prior Inventions. I have attached as Exhibit A a list describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by me prior to the Term (collectively referred to as “Prior Inventions”), which belong to me or in which I have an interest, which relate to the Company’s current or proposed business, products or research and development, and which are not assigned to the Company. I represent and warrant that this list is complete and accurate. If no such Prior Inventions exist, then I have written “none” on Exhibit A or left it blank. If Exhibit A is left blank or reads “none,” then I represent that there are no Prior Inventions. Notwithstanding the notice in Section 2.2, if, during the Term, I use any Prior Inventions with or incorporate any Prior Invention in any Confidential

 

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Information, Inventions and Works or Materials into a Company product, process or machine, I hereby irrevocably grant to the Company, to the full extent of my rights in and to the same, a fully paid-up, perpetual, worldwide right and license to sublicense, disclose, offer, copy, distribute, import, make, have made, make derivative works of, use and otherwise exploit any trade secrets, copyrights, patents or other proprietary rights to the Prior Inventions belonging to me or a third party with such Confidential Information, Inventions and Works, or Materials.

Section 3.Nonsolicitation, Noncompetition, Etc.

3.1No Solicitation. During the Restricted Period, I will not induce, or attempt to induce, any employee or consultant of the Company to leave such employment or relationship to engage in, be employed by, perform services for, participate in or otherwise be connected with, either directly or indirectly, me or any enterprise with which I am in any way associated.

3.2No Breaches. My execution, delivery and performance of this Agreement and the performance of my other obligations and duties to the Company will not cause any breach, default or violation of any other employment, nondisclosure, confidentiality, consulting or other agreement to which I am a party or by which I may be bound. Attached as Exhibit B is a list of all prior agreements now in effect under which I have agreed to keep information confidential or not to compete or solicit employees of any Person. I will not use in performance of my work for the Company or disclose to the Company any trade secret, confidential or proprietary information of any prior employer or other person or entity if and to the extent that such use or disclosure may cause any breach, default or violation of any obligation or duty that I owe to such other person or entity (e.g., under any agreement or applicable law). My compliance with this Section 3.2 will not prohibit, restrict or impair the performance of my work, obligations and duties to the Company.

3.3Nondisparagement. During the Restricted Period, I will not (a) make any false, misleading or disparaging representations or statements with regard to the Company or the products or services of the Company to any third party or (b) make any statement to any third party that may impair or otherwise adversely affect the goodwill or reputation of the Company.

3.4Noncompetition. During the Restricted Period, I will not engage in, be employed by, perform services for, participate in the non-passive ownership, management, control or operation of, or otherwise be connected with or participate in any Competing Business or activity that is in any way competitive with the business or proposed business of the Company, including but not limited to businesses that engage in the development, design, manufacturing, and/or sale of functionally similar products and technologies to those of the Company. I agree that this restriction is reasonable for my employment with the Company, but further agree that should a court exercising jurisdiction with respect to this Agreement find any such restriction invalid or unenforceable due to unreasonableness, either in period of time, geographical area, or otherwise, then in that event, such restriction is to be interpreted and enforced to the maximum extent which such court deems reasonable. The Company, in its sole discretion, may determine to waive the noncompetition provisions of this Section 3.4. Any such waiver shall not constitute a waiver of any noncompetition or forfeiture provisions of any other agreement between the Company and me.

 

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3.5Diversion of Company Business. During the Restricted Period, I will not divert or attempt to divert from the Company any business the Company enjoyed or solicited from its customers during the twelve (12) months prior to the end of the Term, nor will I solicit or attempt to induce any customer, supplier, partner or other person or entity with whom the Company has, or is attempting to establish, a commercial relationship to cease or refrain from doing business with the Company or to alter its relationship with the Company in any way adverse to the Company.

Section 4.Termination of Relationship

4.1Return of Company Property. I hereby authorize and specifically agree to allow the Company to deduct from my wages or other payments due me, the value of any property (including equipment, goods, or other items provided to me by the Company during my employment or consulting relationship) which I fail to return when requested to do so by the Company, provided that such deduction (a) does not exceed the cost of the item, (b) does not reduce my wages below minimum wage or overtime compensation below time and a half, (c) is not made for normal wear and tear on or nonwillful loss or breakage of the provided item(s), and (d) is accompanied with a list of all items for which deductions are being made. I agree that at the end of the Term I will deliver to the Company (and will not keep in my possession, re-create or deliver to anyone else) any and all Materials and other property belonging to the Company, its successors or assigns. I agree to sign and deliver a certificate to the Company as to my compliance with this paragraph.

4.2New Employer Information. At the end of the Term or at any time within six (6) months thereafter, if requested by the Company, I agree to provide the name of my new employer, if any, and I consent to notification by the Company to my new employer about my rights and obligations under this Agreement.

Section 5.General Provisions

5.1At-Will Employment. This Agreement is not a contract of employment and no rights of employment are hereby created. Unless otherwise set forth in a written agreement signed by me and the Company, my employment with the Company (if I am an employee) is “at will” and may be terminated at any time, with or without cause, by me or the Company.

5.2Survival. The following provisions will survive the termination or expiration of this Agreement: Sections 1, 2, 3.1, 3.3, 3.4, 3.5 and 5.

5.3Specific Performance. In the event of any breach of or default under this Agreement by me, the Company may suffer irreparable harm and damages may not be an adequate remedy. In the event of any such breach or default, or any threat of such breach or default, the Company will be entitled to injunctive relief and specific performance. Further, in any legal action or other proceeding in connection with this Agreement (e.g., to recover damages or other relief), the prevailing party will be entitled to recover, in addition to any other relief to which it may be entitled, its reasonable attorneys’ fees and other costs incurred in that action or proceeding. The rights and remedies of the Company under this Section 5.3 are in addition to, and not in lieu of,

 

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any other right or remedy afforded to the Company under any other provision of this Agreement, by law or otherwise.

5.4Severability. This Agreement will be enforced to the fullest extent permitted by applicable law. If for any reason any provision of this Agreement is held to be invalid or unenforceable to any extent, then (a) such provision will be interpreted, construed or reformed to the extent reasonably required to render the same valid, enforceable and consistent with the original intent underlying such provision and (b) such invalidity or unenforceability will not affect any other provision of this Agreement or any other agreement between the Company and me. If the invalidity or unenforceability is due to the unreasonableness of the scope or duration of the provision, the provision will remain effective for such scope and duration as may be determined to be reasonable.

5.5No Waiver. The failure of the Company to insist upon or enforce strict performance of any other provisions of this Agreement or to exercise any of its rights or remedies under this Agreement will not be construed as a waiver or a relinquishment to any extent of the Company’s rights to assert or rely on any such provision, right or remedy in that or any instance; rather, the same will be and remain in full force and effect.

5.6Entire Agreement. This Agreement shall be effective as of the date I execute the Agreement and shall be binding upon me, my heirs, executors, assigns and administrators. This Agreement sets forth the entire Agreement, and supersedes any and all prior agreements, between me and the Company with regard to the Confidential Information, Inventions and Works, Materials and Proprietary Rights of the Company. This Agreement is independent of any other written agreements between me and the Company regarding other aspects of my employment. This Agreement may not be amended, except in a writing signed by me and an authorized representative of the Company.

5.7Governing Law and Venue. This Agreement will be governed by the laws of the State of New York without regard to its choice of law principles to the contrary. I irrevocably consent to the jurisdiction and venue of the state and federal courts located in New York County, New York, in connection with any action relating to this Agreement. Further, I will not bring any action relating to this Agreement in any other court.

5.8Acknowledgement. I have carefully read all of the provisions of this Agreement and agree that (a) the same are necessary for the reasonable and proper protection of the Company’s business, (b) the Company has been induced to enter into and continue its relationship with me in reliance upon my compliance with the provisions of this Agreement, (c) every provision of this Agreement is reasonable with respect to its scope and duration and (d) I have received a copy of this Agreement.

 

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This Agreement shall be effective as of 3/12/2020             .

 

 

 

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_____________________________________________________



ASSIGNMENT AGREEMENT


_____________________________________________________



among


Mohawk Group, Inc.


and


Pramod K C


and



Shenzhen Mohawk Technology Ltd. Co

 

 

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THIS ASSIGNMENT AGREEMENT (Agreement) is made on March 12, 2020 in United States of America (USA)

among

and

and

WHEREAS

NOW, THEREFORE, the parties hereby agree as follows:

The term of the Assignee’s assignment by the Company to the Local Entity is two years and shall commence on June 1, 2020 and expire on June 1, 2022.  The term may be terminated by either party in accordance with the provisions hereof.

 

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The Assignee acknowledges and agrees that:

 

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The Assignee acknowledges and agrees that the possession of a valid work visa and/or work permit issued by the relevant PRC authorities is a precondition to the validity of this Agreement.  If the work visa and/or work permit could not be secured from the relevant PRC authorities for any reason whatsoever, the Assignee will not be able to work for Local Entity and this Agreement may be terminated by the Company in accordance with Clause 9.2.8 below.

Subject to the Local Entity’s rules and policies, the Local Entity shall reimburse the Assignee for all business-related expenses incurred by him, in a proper and reasonable manner, during the course of his duties under this Agreement.  Reimbursement is subject to the prior written consent of the Company’s Chief

 

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Executive Officer and contingent upon the delivery of relevant original receipts confirming the expense claims.

 

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Any termination that is not for any reason set forth in Clause 9.2 shall be automatically deemed a termination pursuant to Clause 9.1.

 

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In this Agreement, “Group Company” shall mean any affiliates, subsidiary or holding company of the Company or any subsidiary or affiliates of such holding company, and the Local Entity.

 

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The Assignee shall abide by the internal rules and regulations (Handbook) of the Local Entity, which may be adopted or amended by the Local Entity periodically (for the avoidance, unless otherwise provided, the Assignee will not be entitled to those benefits and other provisions in the Handbook which are only applicable to employees of the Local Entity).  All policy changes shall be communicated to the staff via internal notices or other written correspondence.

 

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The Company or the Local Entity may withhold from the Assignee any amount of money payable to the Assignee hereunder, or other amounts that the Company or the Local Entity may reasonably determine are required to be withheld pursuant to any applicable law or regulation.

This Agreement is subject to the laws of the state of New York, USA and the parties hereby agree to submit to the non-exclusive jurisdiction of the courts in the laws of the state of New York, USA.

If any provision of this Agreement is held by any court of competent jurisdiction to be invalid or unenforceable in whole or in part, but would be enforceable if some

 

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of its wording were deleted, it shall apply with such deletions as are necessary to make it enforceable.  In the event that such provision is nonetheless still unenforceable, the remaining provisions of this Agreement shall continue in full force and effect.

This Agreement constitutes the entire agreement between the parties with respect to the Assignee’s assignment to the Local Entity and supersedes any prior understandings, discussions, negotiations or agreements.  This Agreement may not be amended or supplemented except by written agreement signed by the duly authorized representatives of both the Assignee and the Company or the Local Entity.

This Agreement is prepared in in English.

 

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IN WITNESS WHEREOF this Agreement has been signed by the parties on the date first specified above.

For and on behalf of
Mohawk Group, Inc.

Signature:/s/ Yaniv Sarig

Name:Yaniv Sarig

Title:Chief Executive Officer

Pramod K C

Signature:/s/ Pramod K C

Name:Pramod K C

For and on behalf of
Shenzhen Mohawk Technology Ltd. Co

Signature:/s/ Yaniv Sarig

Name:Yaniv Sarig

Title:Director and Chief Executive Officer

 

 

Exhibit 99.1

 

 

 

Mohawk Group Reports First Quarter 2020 Results - Net Revenue Grew 43.6% to $25.6 Million;

April Net Revenue Grew 75% From Continued Ecommerce Acceleration

 

 

Raises Net Revenue Guidance for Full Year 2020  

Expects Positive Adjusted EBITDA in the Third & Fourth Quarters of 2020

 

 

NEW YORK, May 11, 2020 – Mohawk Group Holdings, Inc. (NASDAQ: MWK) (“Mohawk”) today announced results for the first quarter ended March 31, 2020. 

 

First Quarter Highlights

 

Yaniv Sarig, Co-Founder and Chief Executive Officer, commented, “As we navigate the current environment, our thoughts are with the healthcare professionals, first responders and other essential workers around the world on the frontlines of the global COVID-19 pandemic. I am so proud of the resiliency of our team members and business partners who have gone above and beyond to ensure our business and operations are running smoothly to meet the heightened needs of online consumers during these unprecedented times.”

Mr. Sarig continued, “Our strong first quarter results are reflective of our ability to continue leveraging our tech enabled business model driven by data, automation and artificial intelligence to expand our market share. Importantly, as consumers are spending more time at home, we are experiencing an increase in demand for our products across categories. Balancing liquidity and growth remains a top priority, and we are managing all expenses, working capital and capital expenditures efficiently. These efforts, combined with our AIMEE software, and new product pipeline, have us well positioned to capitalize as purchasing behavior further shifts towards ecommerce.”

Outlook

For full year 2020, the Company increases its net revenue expectation to be in the range of $165.0 million to $175.0 million driven primarily by continued growth of its existing product portfolio and the positive contribution from new products launched in 2020. The Company expects to generate positive Adjusted EBITDA for the three months ended September 30, 2020 and also for the three months ended December 31, 2020.

 

Appointment of New COO

 

The Company announced today the appointment of Pramod K C as Chief Operating Officer, effective June 1, 2020.  Mr. K C will oversee operations of the Company’s Asia supply chain and will be based in the Company’s

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Shenzhen offices. In conjunction with this announcement, the Company also announced that Peter Datos will step down from his position as Chief Operating Officer and depart the Company.

 

Yaniv Sarig, Co-Founder and Chief Executive Officer of Mohawk Group, stated, “We are very pleased to welcome Pramod to Mohawk Group. He is a seasoned leader with significant integrated supply chain management and quality control experience in Asia, working with several well-known companies during his career. We believe his strong track record in operational management will be a great addition to our executive team. This strategic decision to shift the COO role to China highlights our increased focus on optimizing our supply chain and our commitment to accelerating the number of products we can launch while maintaining high quality and competitive pricing.”

 

Mr. Sarig continued, “I want to thank Pete for his many contributions, especially in helping us grow our product portfolio. Pete is an accomplished leader and we wish him the best in his future endeavors.”

 

Prior to joining the Company, Mr. K C was head of Asia Operations for G-Lab GmbH, a Swiss consumer electronics company, since April 2014. Mr. K C previously held various General Manager positions at PassageMaker Solutions, a supply chain management company in Asia, from July 2007 to March 2014 and was involved in development, procurement, production management, quality control and export logistics within the supply chain for a variety of clients, including Hewlett-Packard, DELL, Harley Davidson and Home Depot. Mr. K C started his career as a product development engineer, performing embedded software programming for consumer electronics products. He then began handling and managing integrated supply chains and operations for companies operating in the Asia-Pacific region. He holds a Bachelor in Engineering with a focus in Applied Electronics Technology from Shanghai University.

 

Non-GAAP Financial Measures

For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the “Non-GAAP Financial Measures and Reconciliations” section below.

Webcast and Conference Call Information

 

Mohawk will host a live conference call to discuss financial results today, May 11, 2020, at 5:00 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 295-1077 (domestic) or (470) 495-9485 (international) at 5:00 p.m. ET and provide the Conference ID: 7123909. The conference call will also be available to interested parties through a live webcast https://ir.mohawkgp.com/investor-relations. Please visit the website at least 15 minutes prior to the start of the call to register and download any necessary software.

About Mohawk Group Holdings, Inc.

Mohawk Group Holdings, Inc. and subsidiaries (“Mohawk”) is a rapidly growing technology-enabled consumer products company that uses machine learning, natural language processing, and data analytics to design, develop, market and sell products. Mohawk predominantly operates through online retail channels such as Amazon and Walmart. Mohawk has six owned and operated brands: hOmeLabs, Vremi, Xtava, RIF6, Holonix Health, and Aussie Health Co. Mohawk sells products in multiple categories, including home and kitchen appliances, kitchenware, environmental appliances (i.e., dehumidifiers and air conditioners), beauty related products and, to a lesser extent, consumer electronics. Mohawk was founded on the premise that if a company selling consumer packaged goods was founded today, it would apply artificial intelligence and machine learning, the synthesis of massive quantities of data and the use of social proof to validate high caliber product offerings as opposed to over-reliance on brand value and other traditional marketing tactics.

Forward Looking Statements

All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our expected 2020 net revenue and Adjusted EBITDA, the statements pertaining to our expected April 2020 net revenue which is subject to review by our external

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auditors in connection with the filing of our Form 10-Q for the period ended June 30, 2020, our ability to manage expenses, working capital and capital expenditures efficiently, our business model and our technology platform, including our ability to disrupt the consumer products industry, our ability to grow market share in existing and new product categories; and our ability to generate profitability and shareholder value. These forward-looking statements are based on management’s current expectations and beliefs and are subject to uncertainties and factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to the impact of COVID-19 including on consumer demand, our cash flows, financial condition and revenue growth rate; our supply chain, sourcing, manufacturing, warehousing and fulfillment; international tariffs and trade measures; inventory management, product liability claims, recalls or other safety concerns, reliance on third party online marketplaces, seasonal and quarterly variations in our revenue; acquisitions of other companies and technologies and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), all of which you may obtain for free on the SEC’s website at www.sec.gov. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Investor Contacts:

Ilya Grozovsky, Mohawk Group

ilya@mohawkgp.com

917-905-1699

 

Brendon Frey, ICR

brendon.frey@icrinc.com

203-682-8200

 

Media Contact:

Jessica Liddell, ICR

203-682-8200

MohawkPR@icrinc.com

 

 

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MOHAWK GROUP HOLDINGS, INC.

 

 

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

 

 

 

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MOHAWK GROUP HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(Unaudited) (in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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MOHAWK GROUP HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited) (in thousands)

 

 

 

 

 

 

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Non-GAAP Financial Measures and Reconciliations

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the press release and accompanying tables include certain non-GAAP financial measures. The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with U.S. GAAP. The non-GAAP financial measures presented exclude the items described below. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results. Furthermore, management also believes that these items are not indicative of the Company’s on-going core operating performance. These non-GAAP financial measures have certain limitations in that they do not reflect all of the costs associated with the operations of the Company’s business as determined in accordance with GAAP.

Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies.

The Company has presented the following non-GAAP measures to assist investors in understanding the Company’s core net operating results on an on-going basis: (i) Contribution margin; (ii) Contribution margin as a percentage of net revenue; (iii) Adjusted EBITDA; and (iv) Adjusted EBITDA as a percentage of net revenue and (v) cash burn. These non-GAAP financial measures may also assist investors in making comparisons of the Company’s core operating results with those of other companies.

As used herein, Contribution margin represents operating loss plus general and administrative expenses, research and development expenses and fixed sales and distribution expenses including stock-based compensation. As used herein, Contribution margin as a percentage of net revenue represents Contribution margin divided by net revenue. As used herein, EBITDA represents net loss plus depreciation and amortization, interest expense, net and income tax expense. As used herein, Adjusted EBITDA represents EBITDA plus stock-based compensation expense and other expense, net.  As used herein, Adjusted EBITDA as a percentage of net revenue represents Adjusted EBITDA divided by net revenue. Contribution margin, EBITDA and Adjusted EBITDA do not represent and should not be considered as alternatives to loss from operations or net loss, as determined under GAAP.

We present Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue because we believe each of these measures provides an additional metric to evaluate our operations and, when considered with both our GAAP results and the reconciliation to net loss, provides useful supplemental information for investors. We use Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue, together with financial measures prepared in accordance with GAAP, such as sales and gross margins, to assess our historical and prospective operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our operating performance and to compare our performance to that of our peers and competitors.

We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue are useful to investors in assessing the operating performance of our business without the effect of non-cash items, while Contribution margin and Contribution margin as a percentage of net revenue are useful to investors in assessing the operating performance of our products as they represent our operating results without the effects of fixed costs and non-cash items.  Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue, should not be considered in isolation or as alternatives to net loss, loss from operations or any other measure of financial performance calculated and prescribed in accordance with GAAP. Neither EBITDA, Adjusted EBITDA nor Adjusted EBITDA as a percentage of net revenue should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue may not be comparable to similar titled measures in other organizations because other organizations may not calculate Contribution margin, EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue in the same manner as we do. Our presentation of Contribution margin and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from such terms or by unusual or non-recurring items.

We recognize that both EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue, have limitations as analytical financial measures. For example, neither EBITDA nor Adjusted EBITDA reflects:

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Additionally, Adjusted EBITDA excludes non-cash expense for stock-based compensation, which is and will remain a key element of our overall long-term incentive compensation package.

The following table represents a reconciliation of EBITDA and Adjusted EBITDA to net loss, which is the most directly comparable financial measure presented in accordance with GAAP (in thousands):

 

 

We also recognize that Contribution margin and Contribution margin as a percentage of net revenue have limitations as analytical financial measures. For example, Contribution margin does not reflect:

The following table provides a reconciliation of Contribution Margin to operating loss, which is the most directly comparable financial measure presented in accordance with GAAP (in thousands):

 

 

  We believe each of our products goes through three core phases as follows:

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The following table breaks out our quarterly results of operations by our product phases including our SaaS business line:

 

 

 

As used herein, cash burn represents the change of the net change in cash balance at each of the balance sheet periods adjusted for certain one-time items like the initial public offering and excluding changes in restricted cash. We use cash burn to provide an additional metric to evaluate our cash flows from our business operations. We believe cash burn is useful to investors to evaluate the cash operating performance of our business without the effect of certain one-time items (i.e., the initial public offering).   Our method for calculating cash burn may not be used by other organizations and therefore our cash burn amount may not be directly comparable to the cash burn disclosed by other organizations. The following table provides a reconciliation of cash burn to the net change in cash and restricted cash for period, which is the most directly comparable financial measure presented in accordance with GAAP:

 

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