UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
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Indicate
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TABLE OF CONTENTS
| ii |
EVmo, Inc.
Consolidated Financial Statements
For the Three Months Ended March 31, 2022 and 2021 (unaudited)
Contents
| 1 |
EVmo, Inc.
Condensed Consolidated Balance Sheets
As of March 31, 2022 and December 31, 2021
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Deferred offering costs | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Rental vehicles, net | ||||||||
| Right of use asset | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable (including $ | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payables, current (net of discount of $ | ||||||||
| Customer deposit - related party | ||||||||
| Advance from related parties | ||||||||
| Finance lease obligations, current | ||||||||
| Operating lease obligations, current | ||||||||
| Total current liabilities | ||||||||
| Note payable, net of current portion (net of discount of $ | ||||||||
| Finance lease obligations, net of current portion | ||||||||
| Operating lease obligations, net of current portion | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| Series B Preferred stock, $ par value; shares authorized; and shares issued and outstanding | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common stock, $par value; shares authorized; and shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
EVmo, Inc.
Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 2022 and 2021 (unaudited)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing expenses | ||||||||
| Product development | ||||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest and financing costs | ( | ) | ( | ) | ||||
| Other income | - | - | ||||||
| Gain on forgiveness of debt | - | |||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding : | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Loss per share | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
EVmo, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2022 and 2021 (unaudited)
| Additional | Total Stockholders’ | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| - | ||||||||||||||||||||
| Issuance of common stock for cash | ||||||||||||||||||||
| Issuance of common stock for exercise of stock options | ||||||||||||||||||||
| Issuance of common stock for conversion of convertible debt | ||||||||||||||||||||
| Issuance of common stock for financing cost | - | |||||||||||||||||||
| Stock option expense | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock for cash | - | - | ||||||||||||||||||
| Issuance of common stock for exercise of stock options | - | - | ||||||||||||||||||
| Issuance of common stock for cashless exercise of stock options | ( | ) | - | - | ||||||||||||||||
| Issuance of common stock for settlement of litigation | - | - | ||||||||||||||||||
| Issuance of common stock for conversion of convertible debt | - | |||||||||||||||||||
| Issuance of common stock for settlement agreement | - | |||||||||||||||||||
| Issuance of common stock for financing cost | - | - | ||||||||||||||||||
| Beneficial conversion feature associated with convertible debt | - | - | - | |||||||||||||||||
| Stock option expense | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, March 31, 2021 | ( | ) | ||||||||||||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
EVmo, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2022 and 2021 (unaudited)
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock option expense | ||||||||
| Amortization of debt discounts | - | |||||||
| Common stock issued for financing costs | ||||||||
| Common stock issued for settlement agreement | - | |||||||
| Gain on forgiveness of debt | - | ( | ) | |||||
| Fair value of warrants issued for financing costs | - | - | ||||||
| Leased Vehicles | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Other Assets | - | |||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Customer deposit - related party | - | |||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | - | ( | ) | |||||
| Net cash used in investing activities | - | ( | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from exercise of stock options | - | |||||||
| Proceeds from advance from related parties | - | |||||||
| Repayment of advance from related parties | - | ( | ) | |||||
| Proceeds from convertible note payable | - | |||||||
| Proceeds from notes payable, net | - | ( | ) | |||||
| Repayment of notes payable | - | - | ||||||
| Redemption of Preferred Stock | ( | ) | - | |||||
| Repayment of finance lease obligations | ( | ) | ( | ) | ||||
| Payment of deferred offering costs | - | |||||||
| Net cash provided by (used in) financing activities | ||||||||
| NET INCREASE (DECREASE) IN CASH | ||||||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| CASH PAID FOR: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Payment of accounts payable/accrued expenses with common stock | $ | $ | ||||||
| Finance lease obligations | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Note 1 - Organization and Basis of Presentation
Organization and Line of Business
EVmo,
Inc. (“EVmo” or the “Company”) was incorporated on
EVmo is a holding company operating principally through two wholly-owned subsidiaries: (i) Rideshare Car Rentals LLC, a Delaware limited liability company (“Rideshare”), and (ii) Distinct Cars, LLC, a Delaware limited liability company (“Distinct Cars”). Rideshare offers an online bookings platform (the “Rideshare Platform”) while Distinct Cars maintains a fleet of passenger vehicles and transit vans for use in the last-mile logistical space for rent to our customers who are drivers in the ridesharing and delivery gig industries, while also providing them with insurance coverage and issuing them insurance cards in their own names. This enables such drivers to meet the vehicle suitability and other requirements of rideshare and delivery gig companies such as Uber, Lyft, DoorDash and Grubhub. Through Rideshare and Distinct Cars, we seek to become a leading provider of rental vehicles to drivers in the ridesharing and delivery gig spaces, and an industry leader in supplying transit vans for last-mile logistics. “Gig” generally refers to a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP).
Impact of COVID-19 on our Business
On January 30, 2020, the World Health
Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,”
and on March 11, 2020, it characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their
residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by
the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were
severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half
of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half
of 2020, which continued through fiscal 2021. This was consistent with the experience of the TNCs whose drivers we service. According
to Bloomberg Second Measure, Uber and Lyft
Given the current prevalence of FDA-approved eligible vaccines across most age groups, the marked decrease in the number of COVID-19 infections, hospitalizations and deaths in the first quarter of 2022, and the resulting easement of pandemic restrictions in our active markets, we are optimistic that COVID-19 will not have a material impact on our operations in the current fiscal year. However, certain factors- including, for example, a new, more aggressive and deadly variant that is resistant to the vaccines- could reverse the positive trends of recent months and alter our prediction.
Interim financial statements
The unaudited condensed financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such results and regulations. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the year ending December 31, 2022.
Note 2 – Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Distinct Cars and RideShare, and a third subsidiary, EV Vehicles, LLC, a Delaware limited liability company that is not yet operational. All significant intercompany transactions and balances have been eliminated.
| 6 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.
Cash Equivalents
For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less.
Property and Equipment and Rental Vehicles
Property and Equipment and Rental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment and rental vehicles is provided using the straight-line method for substantially all assets with estimated lives as follows:
| Computer equipment | ||
| Officer furniture | ||
| Leasehold improvements | ||
| Vehicles |
Long-Lived Assets
The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at March 31, 2022 the Company determined that no impairment charge was necessary.
Revenue Recognition
The Company recognizes all of its material revenue from renting its fleet of cars to TNC drivers. Revenue is recognized generally on a weekly basis based on the rental agreements. The Company recognizes revenue in accordance with FASB ASC 606, Revenue From Contracts with Customers.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
| 7 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Under
ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination, with a
Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. There were warrants and options outstanding as of March 31, 2022 and warrants and options outstanding as of March 31, 2021.
Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase shares of the Company’s common stock, par value $ (the “Common Stock”) at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. There were and potentially dilutive options and warrants outstanding at March 31, 2022 and 2021, respectively.
Advertising Costs
The
Company expenses the cost of advertising as incurred. Advertising costs for the three months ended March 31, 2022 and 2021 were $
Fair Value Measurements
The Company applies the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 inputs to the valuation methodology are quoted, unadjusted prices for identical assets or liabilities in active markets. | |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, as well as other than quoted prices for identical assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
| 8 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
At March 1, 2022 and 2021, the Company did not identify any liabilities that are required to be presented on the balance sheet at fair value.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in an entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, which includes the Company, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note 3 – Property and Equipment
At March 31, 2022 and December 31, 2021 equipment consisted of the following:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Computer equipment | $ | $ | ||||||
| Office furniture | ||||||||
| Leasehold improvement | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Equipment, net | $ | $ | ||||||
Depreciation
expense for equipment for the three months ended March 31, 2022 and 2021 was $
| 9 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Note 4 – Rental Vehicles
At March 31, 2022 and December 31, 2021 all of the Company’s rental vehicles consisted of the following:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Rental vehicles | $ | $ | ||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Rental vehicles, net | $ | $ | ||||||
The
Company’s rental vehicles are depreciated over their estimated useful life of
Note 5 – Notes Payable
Notes payable at March 31, 2022 and December 31, 2021 consisted of the following:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Notes payable to individual investors; accrue interest at | $ | $ | ||||||
| Note payable to the Small Business Administration. The note bears interest at | ||||||||
| Note payable issued under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in the amount of $ | ||||||||
| Notes payable to a finance company, default interest at | ||||||||
| Notes payable to a finance company, interest at LIBOR plus | ||||||||
| Total notes payable | ||||||||
| Unamortized debt discount | ( | ) | ( | ) | ||||
| Notes payable, net discount | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long-term portion | $ | $ | ||||||
| (A) |
| 10 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
In
connection with the Company’s entry into the Term Loan Agreement, the Company entered into an exchange agreement, dated as of
July 8, 2021 (the “Exchange Agreement”), with the holder (the “Holder”) of the Company’s
A rollforward of notes payable from December 31, 2021 to March 31, 2022 is below:
| Notes payable, December 31, 2021 | $ | |||
| Issued for cash | ||||
| Lease obligation converted to note payable | ||||
| Forgiveness of note payable | ||||
| Repayments | ||||
| Amortization of debt discounts | ||||
| Notes payable, March 31, 2022 |
Future payments under note payable obligations are as follows:
| Years ending December 31, | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| $ | ||||
Note 6 – Convertible Notes
On
April 12, 2021, the Company, entered into a securities purchase agreement with a certain investor in connection with the issuance, as
of that same date, of a
As
described in Note 5, in
connection with the Company’s entry into the Term Loan Agreement, the Company also entered into the Exchange Agreement.
This Exchange Agreement resulted in the issuance of preferred stock that was later either converted to common stock or redeemed
after completion of the equity capital raise in January 2022. On January 22, 2022, of
Series B preferred stock was converted to of common
stock at $0
| 11 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
A roll forward of convertible notes from March 31, 2022 to December 31, 2021 is below:
| Convertible notes, December 31, 2021 | $ | |||
| Issued for cash | ||||
| Issued for original issue discount | ||||
| Debt discount related to convertible notes | ||||
| Conversion to common stock | ||||
| Conversion to preferred stock | ||||
| Amortization of debt discounts | ||||
| Convertible notes, March 31, 2022 | $ |
Note 7 – Financing Lease Obligations
Lease obligations at March 31, 2022 and December 31, 2021 consisted of the following:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Lease obligations | $ | $ | ||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long-term portion | $ | $ | ||||||
A rollforward of lease obligations from December 31, 2021 to March 31, 2022 is below:
| Lease obligations, December 31, 2021 | $ | |||
| New lease obligations | ||||
| Disposal of leased vehicles | ( | ) | ||
| Lease obligation converted to note payable | ||||
| Payments on lease obligations | ( | ) | ||
| Lease obligations, March 31, 2022 | $ |
Future payments under lease obligations are as follows:
| Years Ending December 31, | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total payments | ||||
| Amount representing interest | ( | ) | ||
| Lease obligation, net | $ | |||
| 12 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Note 8 – Operating Lease Obligations
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate.
The Company leases its corporate office space under an operating lease that expires in 2023. The Company accounts for this lease under the provisions of ASC 842 Leases.
The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of March 31, 2022:
| Classification on Balance Sheet | March 31, 2021 | |||||
| Assets | ||||||
| Operating lease assets | Operating lease right of use assets | $ | ||||
| Total lease assets | $ | |||||
| Liabilities | ||||||
| Current liabilities | ||||||
| Operating lease liability | Current operating lease liability | $ | ||||
| Noncurrent liabilities | ||||||
| Operating lease liability | Long-term operating lease liability | |||||
| Total lease liability | $ | |||||
Lease obligations at March 31, 2022 consisted of the following:
| Years Ending December 31, | ||||
| 2022 | $ | |||
| 2023 | ||||
| Total payments | ||||
| Total obligation | ||||
| Less: current portion | ( | ) | ||
| Non-current capital leases obligations | $ | |||
The
lease expense for the three months ended March 31, 2022 was $
| 13 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Note 9 – Stockholders’ Equity
The
Company has authorized
Series B Preferred Stock
Pursuant
to the Exchange Agreement (see Note 5), the Holder agreed to exchange the Prior Notes for shares of Series B convertible preferred stock,
par value $per share (the “Series B Preferred Stock”),
and a warrant (the “Exchange Warrant”). The Exchange Warrant granted the Holder the right to purchase
Pursuant to its Certificate of Designation and the Exchange Agreement, as applicable, the Series B Preferred Stock had the following features:
| ● | The
Series B Preferred Stock was convertible
at any time at the option of the holder thereof into shares of Common Stock at an initial conversion price of $ |
| ● | The Series B Preferred Stock
was subject to mandatory redemption in full at a redemption price initially equal to $per share, within 15 business days after the
date on which the Company completed an equity financing resulting in total proceeds of at least $ |
| ● | If, at any time while the
Series B Preferred Stock is outstanding, the Company completed any single public offering or private placement of its equity,
equity-linked or debt securities (each, a “Future Transaction”), the Holder could, in its sole discretion,
elect to apply all, or any portion, of the then outstanding Preferred Stock and any accrued but unpaid dividends, as purchase consideration
for such Future Transaction. The conversion price applicable to such conversion would equal seventy percent ( |
On January 22, 2022,
of Series B preferred stock was converted to of common stock at $
Common Stock
During the three months ended March 31, 2022, the Company:
| ● | issued shares of common stock through an equity capital raise at $ per share; | |
| ● | issued shares of common stock at $ per share to redeem shares of Series B Preferred Stock; | |
| ● | issued shares of common stock at $ per share to redeem shares of Series B Preferred Stock; |
| 14 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Stock Options
| Options Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
| Outstanding, December 31, 2021 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Exercised | ||||||||||||||||
| Outstanding, March 31, 2022 | $ | $ | ||||||||||||||
| Exercisable, March 31, 2022 | $ | $ | ||||||||||||||
| Outstanding | Exercisable | |||||||||||||
| Number of | Exercise | Number of | Exercise | |||||||||||
| Options | Price | Options | Price | |||||||||||
| $ | $ | |||||||||||||
For options granted during the three months ended March 31, 2022 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $ and the weighted-average exercise price of such options was $. No options were granted during the three months ended March 31, 2022 where the exercise price was less than the stock price at the date of grant or the exercise price was greater than the stock price at the date of grant.
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EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
The
fair value of the stock options is being amortized to stock option expense over the vesting period. The Company recorded stock option
expense of $
Warrants
The following is a summary of warrant activity:
| Warrants Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
| Outstanding, December 31, 2021 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Exercised | ||||||||||||||||
| Outstanding, March 31, 2022 | $ | $ | ||||||||||||||
| Exercisable, March 31, 2022 | $ | $ | ||||||||||||||
The exercise price for warrants outstanding at March 31, 2022:
| Outstanding and Exercisable | ||||||
| Number of | Exercise | |||||
| Warrants | Price | |||||
| $ | ||||||
| 16 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Note 10 – Related Party Transactions
During
the three months ended March 31, 2022 and 2021, the Company expensed $
Note 11 – Contingencies
Legal Proceedings
From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. The Company is currently not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows, other than those described below.
Anthony Davis v. YayYo, Inc., and Ramy El-Batrawi
A complaint was filed on March 5, 2020, in the Los Angeles Superior Court by plaintiff Anthony Davis, who was hired by the Company as its CEO and as a director on or about December 2016. Mr. Davis’s employment with the Company ended after several months. As part of his compensation, Mr. Davis alleges that he expected to receive stock options in the Company. In his pleadings, Mr. Davis admits that he resigned from his executive officer and director positions, but asserts that he did not receive certain compensation in the form of stock options (he has also included a claim for wage and hour violations). The Company denies liability and has asserted that it has paid Mr. Davis all amounts due to him under his employment agreement, while also asserting that Mr. Davis failed to exercise his stock options before they expired on December 31, 2018. The Company filed a demurrer to the first amended complaint, which the Superior Court granted in part and denied in part on September 8, 2021. The Plaintiff since filed a second amended complaint, to which the Company has filed an answer. The Company’s position is that the lawsuit entirely lacks merit, and the Company intends to defend it vigorously.
Ivan Rung v. YayYo, Inc., Ramy El-Batrawi, et al., 20STCV27876 and Michael Vanbecelaere v. YayYo, Inc., Ramy El-Batrawi, et al., 20STCV28066 (Vanbecelaere)(hereafter the “State Cases”)
On July 22 and July 23, 2020, respectively, two actions were filed in the Los Angeles Superior Court. The complaints underlying the State Cases differ only by a few words and some random punctuation marks, and are therefore virtually identical. Plaintiffs Ivan Rung and Michael Vanbecelaere each claimed to have purchased the Common Stock as part of the Company’s initial public offering (the “IPO”); they purport to bring a securities class action on behalf of all purchasers of the Common Stock pursuant to the registration statement and prospectus filed with the SEC and distributed in connection with the Company’s IPO, which was launched on November 14, 2019. The State Case complaints allege misrepresentations and material omissions in the SEC filings in violation of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”). The Company has and continues to vigorously deny any and all liability and asserts that the State Cases are baseless. It is the Company’s firm position that it accurately and completely disclosed all material facts and circumstances in its SEC filings relating to the IPO, and subsequently in its periodic SEC reports, including those that were potentially adverse to the Company’s operations and business prospects. The State Cases litigation is presently stayed pending the outcome of the federal securities case discussed below (Hamlin v. YayYo, Inc.), as to which, as noted below, the parties have announced a “settlement in principle,” which is subject to court approval in the district court. The Company anticipates filing motions to dismiss the purported class actions in Superior Court on the basis of the anticipated approval of the federal settlement.
Jason Hamlin v. YayYo, Inc., Ramy El-Batrawi, et al., 20-cv-8235 (SVW) and William Koch v. YayYo, Inc., Ramy El-Batrawi, et al., 20-cv-8591 (SVW)(now consolidated as “In re YayYo Securities Litigation”)
These two actions were filed on September 9,
2020 and September 18, 2020, respectively, in the United States District Court for the Central District of California. Plaintiffs Jason
Hamlin and William Koch each claim to have purchased the Common Stock as part of the IPO and, like the plaintiffs in the State Cases,
purport to bring a securities class action pursuant to Sections 11 and 15 of the Securities Act, as well as and Section 17(a) and 10(b)(5)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on behalf of all purchasers of the Common Stock in
the IPO. The first amended complaint, like the State Cases, alleges false statements and material omissions of material fact in connection
with the SEC filings distributed in connection with the IPO. The defendants include directors of the Company and the underwriters of
the IPO, WestPark Capital, Inc. (“WestPark”) and Aegis Capital Corp. The federal court consolidated the two matters for all
practical purposes. As with the State Cases, the Company denied liability and asserted that it accurately and completely disclosed all
material facts and circumstances in its SEC filings, and that the complaint’s alleged violations of securities laws are baseless.
The parties to the federal court litigation announced on October 21, 2021 that they had reached a settlement, which received preliminary
approval by the district court on January 13, 2022, allowing the notice of the proposed settlement to be distributed to all class members,
who unless they object or drop out, will be bound by the multi-million dollar settlement. The Company’s portion of the settlement
was $
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EVmo, Inc.
Notes to Consolidated Financial Statements
For Year Three Months Ended March 31, 2022 and 2021 (unaudited)
Konop v. El-Batrawi, et al., 1:20-cv-1379- MN (Filed in Del. District Court)
On October 12, 2020 a complaint was filed in Delaware District Court, which has since been transferred to the U.S. District Court for the Central District of California, and assigned as a related case to the judge in the pending federal securities action described immediately above. This case is a purported shareholder derivative action, in which the Company is a nominal defendant, alleging that the Company’s executive officers and directors at the time of its IPO made false and misleading statements relating to the Company’s business, operations, and future prospects and that the directors breached their fiduciary duties in doing so. The Company believes that the allegations of the complaint are spurious and will vigorously defend the case at trial.
Bellridge Capital, LP, v. EVmo, Inc., 1:21-cv-07091-PGG (Filed in Southern District of New York)
In
the first half of 2021 a warrant holder, Bellridge Capital, LP, sought to exercise a warrant for
shares for a nominal amount, claiming that an anti-dilution adjustment had been triggered in 2020, which had reduced the exercise
price to such amount. The Company rejected the exercise, on the basis that the warrant had previously been amended to remove
the anti-dilution adjustment provisions and fix the exercise price at $
Note 12 – Settlements
Settlement of In re YayYo Securities Litigation and the State Cases
Please see a description of the preliminary collective settlement the Company has reached in connection with both the In re YayYo Securities Litigation and the State Cases in “Note 11- Contingencies” above. The Company expects that the district court will grant final approval to this omnibus settlement on or around June 6, 2022, and, in anticipation of such approval, has been making settlement payments to the plaintiffs during the first quarter of 2022.
Note 13 – Subsequent Events
There are no material subsequent events to report.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
Certain statements made herein, as well as in other filings we make with the SEC and other written and oral information we release, regarding our future performance constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” and similar references to future periods. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the continued expansion of business, which assumptions involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate, and, therefore, there can be no assurance the forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described elsewhere in this report and as also may be described from time to time in future reports we file with the SEC. You should read such information in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations.
Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the SEC.
Our Corporate History and Background
EVmo was initially formed on June 21, 2016 as a Delaware limited liability company under the name “YayYo, LLC.” The Company was subsequently converted into a Delaware corporation pursuant to Section 265 of the Delaware General Corporation Law (the “DGCL”). The Company now operates as a “C” corporation formed under the laws of the State of Delaware.
We became a reporting company when, on March 17, 2017, an offering circular on Form 1-A relating to a best-efforts offering of our common stock pursuant to “Regulation A+” of the Securities Act of 1933, as amended (the “Securities Act”), was qualified by the Securities and Exchange Commission (the “SEC”). Then, on November 15, 2019, we completed an initial public offering of 2,625,000 shares of Common Stock, at $4.00 per share, for gross proceeds, before underwriting discounts and commissions and expenses, of $10.5 million and our common stock was listed on the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “YAYO.”
On February 10, 2020, after being advised by Nasdaq that it believed we no longer met the conditions for continued listing, the Company announced its intent to voluntarily delist its common stock. Since delisting from Nasdaq, our common stock has been quoted and traded on the Pink Open Market, which is operated by OTC Markets Group, under the same ticker symbol. The delisting was effective on March 1, 2020.
In September 2020, we changed our name from YayYo, Inc. to Rideshare Rental, Inc., in order for our corporate brand to better reflect our principal businesses, ridesharing and vehicle rentals. In February 2021, we again changed our name to EVmo, Inc., to underscore our commitment to making a full transition to electric vehicles by the end of 2024.
We are a holding company operating principally through two wholly-owned subsidiaries: Rideshare Car Rentals, LLC and Distinct Cars, LLC. Our proprietary Rideshare Platform provides TNC drivers with an online booking platform, while Distinct Cars maintains a fleet of passenger vehicles and transit vans for use in the last-mile logistical space for rent to our TNC driver customers, enabling such drivers to meet the vehicle suitability and other requirements of rideshare and delivery gig companies such as Uber, Lyft, DoorDash and Grubhub. Through Rideshare and Distinct Cars, we seek to become a leading provider of rental vehicles to drivers in the ridesharing and delivery gig spaces, and an industry leader in supplying transit vans for last-mile logistics.
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Impact of COVID-19 on our business
On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, it characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half of 2020, which continued through fiscal 2021. This was consistent with the experience of the TNCs whose drivers we service. According to Bloomberg Second Measure, Uber and Lyft sales were up 104% and 84% year-over-year, respectively, in February 2022 from one year earlier, even in spite of the Delta and Omicron variants that resulted in spikes of infections through periods of 2021.
Given the current prevalence of FDA-approved eligible vaccines across most age groups, the marked decrease in the number of COVID-19 infections, hospitalizations and deaths in the first quarter of 2022, and the resulting easement of pandemic restrictions in our active markets, we are optimistic that COVID-19 will not have a material impact on our operations in the current fiscal year. However, certain factors- including, for example, a new, more aggressive and deadly variant that is resistant to the vaccines- could reverse the positive trends of recent months and alter our prediction.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Distinct Cars, LLC and RideShare Car Rentals, LLC. All significant intercompany transactions and balances have been eliminated.
Consolidated Results of Operations—Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021
Total Revenues.
Revenue for the three months ended March 31, 2022 was $2,459,709, an increase of $165,177 or 6.7% compared to revenue for the three months ended March 31, 2021 of $2,294,532. The increase is principally due to an increase in our rental fleet and increase in our daily rental rate.
Cost of Revenues.
The principal components of costs of revenue are depreciation of the vehicles, vehicle insurance and maintenance.
Cost of revenues for the three months ended March 31, 2022 were $1,972,063, an increase of $191,160 or 9.6% compared to cost of revenues for the three months ended March 31, 2021 of $1,780,903. The increase is due to higher depreciation expense, insurance expense and vehicle repairs due to an increase in fleet size. For the three months ended March 31, 2022 and 2021 our cost of revenue was 80.1% and 77.6% of our revenue, respectively including vehicle depreciation. The increase in the cost of revenue as a percentage of revenue is due to increase insurance and body shop costs.
Selling and Marketing Expenses.
Selling and marketing expenses for the three months ended March 31, 2022 were $64,336, representing a decrease of $101,412 or 61.2% over the three months ended March 31, 2021, of $165,748. The decrease is due to an effective focused advertising campaign and high demand for vehicle reducing our cost of client acquisition.
General and Administrative Expenses.
General and administrative expenses for the three months ended March 31, 2022, were $1,462,325, representing an increase of $23,557 or 1.6% over the three months ended March 31, 2021 of $1,439,101.
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Total Operating Expenses
Total operating expenses for the three months ended March 31, 2022 were $1,545,661, representing a decrease of $68,688 or 4.4% compared to the three months ended March 31, 2021 of $1,614,349. The decrease is due to the reduction in professional fees.
Interest expense and financing cost
Interest and financing expenses for the three months ended March 31, 2022 were $452,032 compared to $3,324,943 for the three months ended Mach 31, 2021. The interest expense was for redemption and conversion of the Preferred Series B Stock, Energy Impact Partners note interest expense and vehicle lease financing interest expense. The decrease from March 31, 2021 was due the non-recurring the issuance of 825,000 shares of common stock to Acuitas Group Holdings, LLC, (“Acuitas”) which is now the Company’s largest shareholder, in connection with a settlement agreement between Acuitas and X, LLC, a company owned by the Company’s former chief executive officer. The board of directors deemed it was in the best interest of the Company to issue the shares to Acuitas. The value of the shares was $3,240,600 which is based on the market price of the Company’s common stock at the grant date. The $3,240,600 was expensed as financing costs as the dispute underlying the settlement agreement related to an anti-dilution of a prior investment in the Company by Acuitas.
Net Loss
The net loss for the three months ended March 31, 2022 was $1,510,052, representing an increase of $2,907,611 or 65.8% compared to net loss from the three months ended March 31, 2021 of $4,417,663. The increase is due to the reasons described above.
Liquidity, Capital Resources and Plan of Operations
On November 15, 2019, we closed our initial public offering of common stock registered on an S-1 Registration Statement under the Securities Act, which was declared effective on November 13, 2019. We sold a total of 2,625,000 common shares at a price of $4.00 per share. Total gross proceeds from the offering were $10,500,000, before deducting underwriting discounts and commissions and other offering expenses.
On January 6, 2022, we closed a follow-on offering of 27,400,000 shares of common stock for $0.50 per share, for gross proceeds of $13,700,000.
Subsequently, we issued 6,310,000 shares of common stock for the conversion of 220,850 shares of Series B preferred stock. The remaining 9,525 outstanding shares of Series B preferred stock were redeemed by the Company
In addition, after the recent public offering and conversion of most of the Series B preferred stock, the two warrants issued to Energy Impact Credit Fund I, LP in 2021 for 450,000 shares and 900,000 shares of common stock, respectively, were subject to adjustment according to their terms. The warrant for 450,000 common shares has been adjusted to one for 711,656 common shares at an exercise price of $1.33 and the warrant for 900,000 common shares has been adjusted to one for 1,174,311 common shares at an exercise price of $0.71 per share.
Current Assets, Liabilities and Working Capital.
At March 31, 2022, the Company’s current assets totaled $12,025,005, current liabilities totaled $4,555,595, and working capital was $7,469,410. At December 31, 2021, the Company’s current assets totaled $4,077,934, current liabilities totaled $7,051,073, and working capital was a deficit of $2,973,139.
Regarding current liabilities, the amounts categorized as accounts payable and accrued expenses totaled $2,509,077 and $4,940,580 as of March 31, 2022 and December 31, 2021, respectively, a decrease of $2,431,503 or 49.2%, due to common stock issued for legal settlements that were previously included in accrued expenses.
Since inception, our principal sources of operating funds have been proceeds from equity financing including the sale of our common stock to initial investors known to management and principal shareholders of the Company. We do expect that our current cash on hand to fund operations for the balance of 2022. As of March 31, 2022, the Company had $10,949,709 in cash. The Company generated $(2,992,530) in cash from operating activities for the three months ended March 31, 2022.
Capital Expenditures
During the three months ended March 31, 2022, the Company had capital expenditures of $1,303,487 in leased vehicles. At March 31, 2022, approximately 50% of the Company’s vehicles were financed with leases. At March 31, 2022 the Company had $13,132,629 of rental vehicles, net of accumulated depreciation in the amount of $4,840,062, totaling $8,292,597 in net rental vehicles. At December 31, 2021 the Company had $13,514,619 of rental vehicles, net of accumulated depreciation in the amount of $4,627,299, totaling $8,887,320 in net rental vehicles. The Company’s rental vehicles are depreciated over their estimated useful life of five years. The lease terms for those rental vehicles that are leased are generally for three years and the Company has the right to purchase the leased assets at the end of the lease terms.
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Statement of Cash Flows
Cash Flows from Operating Activities
Net cash used in operating activities for the three months ended March 31, 2022 totaled $(2,992,530), which was an decrease of $3,069,742 from the net cash provided by operating activities of $77,212 for the same period in 2021. The decrease is principally due to the reduction in accounts payable following the equity capital raise in January 2022 and accrued expenses.
Cash Flows from Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2022 totaled $12,088,311, which was an increase of $12,035,886 from $52,425 for the same period in 2021. The change is principally due to the equity capital raise completed on January 6, 2022.
Current Plan of Operations
Our plan of operations is currently focused on the growth and ongoing development of our operating businesses: (i) the Rideshare Platform, offered through Rideshare, and (ii) our vehicle fleet, which is commercially available through Distinct Cars. We expect to incur substantial expenditures in the foreseeable future for the continuing operations of our businesses. Moreover, we have embarked on our EV strategy, in which we intend to replace our entire fleet of vehicles with all electric vehicles by 2024. At this time, we cannot reliably estimate the timing or aggregate amount of all of the costs associated with these efforts.
Although, as we state above, we believe we have sufficient working capital to finance our operations in fiscal 2022 and to execute the 2022 phase of our EV strategy, it is possible that our expansion plan may require us to raise significant additional capital within a short period of time.
We continually reevaluate our plan of operations to determine how we can most effectively utilize our resources. The completion of any aspect of our plan of operations is highly dependent upon the ready availability of cash to implement that aspect of the plan and other factors, several of which are beyond our control. There can be no assurance that our current capital resources will be adequate to continue to fund our ongoing operations, nor can there be any assurance that, should we require additional capital, we will successfully obtain it on favorable terms, or at all. The potential inadequacy of our existing capital or the inability to secure additional capital could have a material adverse effect on us, including the possibility that we would have to sell or forego a portion or all of our assets or cease operations. If we discontinue our operations, we may not have sufficient funds to pay any amounts to our stockholders.
If our operating businesses fail to achieve anticipated financial results, our existing capital will likely be depleted more quickly than we anticipate and our ability to raise additional capital in the future to fund our operations would likely be seriously impaired. If in the future we are not able to demonstrate favorable financial results or projections from our operating businesses, we may not be able to raise the capital we need to continue operations.
Similarly, because our working capital requirements depend upon numerous factors there can be no assurance that our current cash resources will be sufficient to fund our operations.
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Because our working capital requirements depend upon numerous factors there can be no assurance that our current cash resources will be sufficient to fund our operations. At present, we have no committed external sources of capital, and do not expect any significant product revenues for the foreseeable future. Thus, we will require immediate additional financing to fund future operations. There can be no assurance, however, that we will be able to obtain funds on acceptable terms, if at all.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Quantitative and Qualitative Disclosures about Market Risk
In the ordinary course of our business, we are not exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. In many instances, we could have reasonably used different accounting estimates and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. This applies in particular to useful lives of non-current assets and valuation allowance for deferred tax assets. Actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving our judgments and estimates.
Property and Equipment and Rental Vehicles
Property and Equipment and Rental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment and rental vehicles is provided using the straight-line method for substantially all assets with estimated lives as follows:
| Computer equipment | 5 years | |
| Officer furniture | 7 years | |
| Leasehold improvements | 15 years or term of lease whichever is less | |
| Vehicles | 5 years |
The Company has not changed its estimate for the useful lives of its equipment and rental vehicles, but would expect that a decrease in the estimated useful lives of equipment and rental vehicles of one year would result in an annual increase to depreciation expense of approximately $600,000, and an increase in the estimated useful lives of equipment and rental vehicles of one year would result in an annual decrease to depreciation expense of approximately $400,000.
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Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has not changed it methodology for estimating the valuation allowance. A change in valuation allowance affect earnings in the period the adjustments are made and could be significant due to the large valuation allowance currently established.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.
Revenue Recognition
The Company recognizes revenue primarily from renting its fleet of cars to drivers for TNC companies, such as Uber and Lyft, based on their rental agreements which are generally administered on a weekly basis. The Company recognizes revenue in accordance with FASB ASC 606, Revenue From Contracts with Customers.
We consider a signed contract or other similar documentation reflecting the terms and conditions under which products will be provided to be persuasive evidence of an arrangement. Collectability is assessed based on a number of factors, including payment history and the creditworthiness of a customer. If it is determined that collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash.
Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for “smaller reporting companies.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC.
In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to assess the effectiveness of our disclosure controls and procedures as of March 31, 2022. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure due to a material weakness.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
To address this material weakness, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
For a description of the pending legal proceedings that could be material to the Company, please see Note 11- Contingencies.
Item 1A. Risk Factors.
Not required under Regulation S-K for “smaller reporting companies.”
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits.
| Exhibit | Description | |
| 31.1 | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) | |
| 31.2 | Certification of the Chief Financial Officer and Secretary pursuant to Rule 13a-14(a) | |
| 32.1 | Certification of the Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of the Chief Financial Officer and Secretary furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Schema | |
| 101.CAL* | Inline XBRL Taxonomy Calculation Linkbase | |
| 101.DEF* | Inline XBRL Taxonomy Definition Linkbase | |
| 101.LAB* | Inline XBRL Taxonomy Label Linkbase | |
| 101.PRE* | Inline XBRL Taxonomy Presentation Linkbase | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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 thereunto duly authorized.
| EVMO, INC. | ||
| (Registrant) | ||
| By: | /s/ Stephen Sanchez | |
| Stephen Sanchez, Chief Executive Officer | ||
| /s/ Ryan Saathoff | ||
| Ryan Saathoff, Chief Financial Officer | ||
| Date: | May 16, 2022 | |
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