The following table summarizes our obligations and commitments to make future payments under our contractual obligations:
On June 18, 2014, the Company executed a promissory note (the “Note 1”) with a stockholder third party lender in the principal amount of $40,000. The terms of the Note 1 require the Company to make (a) monthly interest only payments (5% annual rate) starting on September 18, 2014; (b) twenty-four (24) payments of $3,290 each, including principal and interest, beginning May 18, 2015 through April 18, 2017, at which time the entire principal amount, plus any and all accrued interest shall be due and payable; and (c) in the event of an investment or series of related investments of at least $5,000,000 before April 18, 2017, then the entire principal balance and all accrued and unpaid interest shall be due in full in addition to a $5,000 prepayment penalty.
On May 23, 2013, the Company executed a promissory note (the “Note 2”) with a stockholder third party lender in the principal amount of $53,000. The terms of the Note 2 required us to make (a) a principal payment of $3,000 on or before June 6, 2013, and (b) fifteen (15) monthly payments of $3,790 each, including principal and interest, beginning February 2014 through April 2015, at which time the entire principal amount, plus any and all accrued interest shall be due and payable. On March 30, 2015, the Company and the stockholder mutually agreed to extend the due date of payment of Note 2 to April 1, 2016, at which time, the entire principal amount plus and all accrued interest shall be due and payable.
The following table shows our contractual obligation to make the payments in accordance with the terms of the Notes.
Contractual Obligations for the year ended December 31: | |
| | | | | | | | | |
| | Note 1 | | | Note 2 | | | Total | |
2014 | | $ | 667 | | | $ | 30,321 | | | $ | 30,988 | |
2015 | | | 26,989 | | | | 11,370 | | | | 38,359 | |
2016 | | | 39,484 | | | | - | | | | 39,484 | |
2017 | | | 13,161 | | | | - | | | | 13,161 | |
Total | | $ | 80,301 | | | $ | 41,691 | | | $ | 121,992 | |
Contractual obligations at June 30, 2015:
| | Note 1 | | | Note 2 | | | Total | |
For the year ended December 31, 2015 | | $ | 27,657 | | | $ | 26,530 | | | $ | 54,187 | |
For the year ended December 31, 2016 | | | 39,484 | | | | - | | | | 39,484 | |
For the year ended December 31, 2017 | | | 13,161 | | | | - | | | | 13,161 | |
Total | | $ | 80,302 | | | $ | 26,530 | | | $ | 106,832 | |
Other Obligations
In October 2013, we entered into a settlement agreement with a creditor to pay $15,000 of which we paid $3,000 in November 2013 and agreed to pay twelve monthly installments of $1,000 each starting December 2013. As of June 30, 2014,2015, we hadhave made payments in the amount of $5,000 covering the eight months ended April 30, 2014, and the remaining liability on the settlement was $7,000. Subsequent to June 30, 2014, we planThe Company plans to make a payment of $3,000$7,000 for the three months covering May June and July2014 through November 2014. Demand for payment of the $3,000delinquent balance has not yet been received by the Company.
JOBS Act Accounting Election
We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements which we have prepared in accordance with U.S. generally accepted accounting principles. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We have identified the following accounting policies that we believe require application of management’s most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our actual results could differ from these estimates and such differences could be material.
While our significant accounting policies are described in more detail in Note 2 of our annual consolidated financial statements included in the 20132014 Annual Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Accounts and Advances Receivable
Accounts receivable represent income earned from sale of products for which the Company has not yet received payment. Accounts receivable are recorded at the invoiced amount and stated at the amount management expect to collect from balances outstanding at period-end. Management estimates the allowance for doubtful accounts based on an analysis of specific accounts and an assessment of the customer’s ability to pay.
The Company reviews its advances receivable for impairment whenever events or changes in circumstances indicate that the carrying amount of the receivable may not be recovered. If such receivables are considered to be impaired, the impairment loss recognized in operations is the amount by which the carrying value exceeds the fair value of the receivables.
Revenue Recognition
The Company recognizes revenues when persuasive evidence of an arrangement exists; delivery has occurred; price is fixed or determinable; and collectability of the related receivable is reasonably assured. The Company closely follows the provisions of ASC 605, “Revenue Recognition”“Revenue Recognition”, which includes the guidelines of Staff Accounting Bulletin No. 104.
Development Stage Risk
The Company has earned minimal revenues from operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Enterprise” as set forth in Accounting Standards Codification (“ASC”) 915, “Development Stage Entities”. Among the disclosures required by ASC 915 are that the Company’s financial statements be identified as those of a development stage company, and that the statements of operations, shareholders’ equity (deficit) and cash flows disclose activity since the date of the Company’s inception.
Stock-Based Compensation
In accordance with ASC 718, Compensation – Stock Compensation, the Company accounts for share-based payments to employees using the fair value method. All transactions in which goods or services are received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The Company generally uses the Black-Scholes option pricing method to compute the fair value of options or warrants granted for goods or services.
Share based payments to non-employees are accounted for under the measurement and recognition criteria of ASC 505-50 “Equity Based Payments to Non-Employees”.
Equity Instruments Issued to Non-Employees for Acquiring Goods or Services
Issuances of the Company’s common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. However, situations may arise in which counter performance may be required over a period of time but the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation S-K. We did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special-purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Newly adopted accounting pronouncements
On June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (“ASU 2014-10”). ASU 2014-10 eliminates the requirement to present inception-to-date information about income statement line items, cash flows, and equity transactions, and clarifies how entities should disclose the risks and uncertainties related to their activities. ASU 2014-10 also eliminates an exception provided to development stage entities in Consolidations (ASC Topic 810) for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The presentation and disclosure requirements in Topic 915 are no longer required for interim and annual reporting periods beginning after December 15, 2014, however, early adoption is permitted. The Company adopted the provisions of ASU 2014-10 for this quarterly report on Form 10-Q for the period ended June 30, 2014.
In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update No. 2013-02 or ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-02 requires reporting and disclosure about changes in accumulated other comprehensive income balances and reclassifications out of accumulated other comprehensive income.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), and as provided in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and, therefore, are not required to provide the information requested by this Item.
Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
We maintainOur Chief Executive Officer (who is also our Chief Financial Officer), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2015. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in ourthe reports that it files or submits under the Exchange Act reports is recorded, processed, summarized and reported, within the time periods specified byin the SEC's rules and forms of the Securities and Exchange Commission, or SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, managementforms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the desiredcost benefit relationship of possible controls and procedures. Based on their evaluation, management concluded as of June 30, 2015 that our disclosure controls and procedures were not effective because of material weaknesses in our internal control objectives.over financial reporting, described below in Management’s Report on Internal Control Over Financial Reporting. Notwithstanding the identified material weaknesses, management believes the consolidated financial statements included in this quarterly report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
As required byManagement’s Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(b)13a-15(f) under the Exchange Act, our management conducted an evaluation, underAct. Under the supervision and with the participation of our Chief Executive OfficerCompany management, including the CEO and our Chief Financial Officer,the CFO, an evaluation was performed of the effectiveness of the design and operationCompany’s internal control over financial reporting. The evaluation was based on the framework in Internal Control — Integrated Framework (1992) issued by the Committee of our disclosure controls and procedures asSponsoring Organizations of the endTreadway Commission (“COSO”). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the period covered by this Quarterly Report. risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on our evaluation under the foregoing evaluation,criteria set forth in Internal Control — Integrated Framework (1992), our principal executive officer and principal financial officermanagement concluded that, as of the end of the period covered by this report our disclosure controls and procedures were effective.
Changes in Our Controls
There were no changes inJune 30, 2015, our internal controlscontrol over financial reporting duringwas not effective because of the six months ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.identification of material weaknesses described as follows:
• | We did not have controls designed to validate the completeness and accuracy of underlying data used in the determination of accounting transactions. As a result, errors were identified in the underlying data used to support accounting transactions. Accordingly, we believe we have a material weakness because there is a reasonable possibility that a material misstatement to the interim or annual financial statements would not be prevented or detected on a timely basis. |
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• | We did not have an adequate process or appropriate controls in place to support the accurate and timely reporting of our financial results and disclosures in our Form 10-Q. As a result, errors were identified primarily related to stock issuances and their accounting treatment. Accordingly, we believe we have a material weakness because there is a reasonable possibility that a material misstatement to the interim or annual financial statements would not be prevented or detected on a timely basis. |
Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting
With the oversight of senior management, the Company has begun taking steps and plans to take additional measures to remediate the underlying causes of the material weaknesses.
With respect to validation of the completeness and accuracy of underlying data used in the determination of stock issuance and accounting transactions, management intends to:
• | Timely issue all stock certificates contemporaneous with the closing of transactions resulting in a stock issuance. |
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• | Have the Company’s independent transfer agent issue all stock certificates to stockholders listed on the Company’s stock ledger. |
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• | As soon as the Company can afford it, hire an employee who will be dedicated to overseeing all stock issuance and related matters. |
With respect to timely and accurate filing of our financial results, management intends to:
• | As soon as the Company can afford to do so, engage consultants to identify efficiencies and enhance reporting capabilities as well as opportunities to reduce the incidence of errors. |
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• | Implement more robust accounting policies and work with consultants to streamline activities and implement best practices. |
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• | As soon as we can afford to do, hire a Chief Financial Officer so the same person is not serving as both Chief Executive Officer and Chief Financial Officer. |
Additionally, as soon as we can afford to do so we plan on creating a new position to oversee accounting systems, designing internal controls and ensuring compliance, implementing accounting policies and procedures, and implementing process improvements.
While senior management is closely monitoring the implementation of these remediation plans, there is no assurance that the aforementioned plans will be sufficient and that additional steps may not be necessary. There is also no assurance that we will be able to afford to implementation of these improvements during the current fiscal year.
PART II - OTHER INFORMATION
Item 1. | Legal Proceedings. |
From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of our business. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and any adverse result in these or other matters may arise from time to time that could harm our business. The Company’s officers and directors are not aware of any threatened or pending litigation to which the Company is a party or which any of its property is the subject and which would have any material, adverse effect on the Company.
The section entitled “Risk Factors” in in the 20132014 Annual Report filed with the Securities and Exchange Commission on April 15, 201423, 2015 is hereby incorporated by reference in this report as if set forth herein in its entirety.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
During the three months ended June 30, 2014 we completed closing of2015, pursuant to private placements pursuant to which we sold a total of 168,00041,000 shares of our common stock. The shares of common stock issued in this offering were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) (previously 4(2)) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of the investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. The shares were sold at a per share purchase price of $0.50 per share, resulting in $84,000$20,500 in aggregate proceeds to the Company.
Subsequent to our fiscal quarter ended June 30, 2015 and prior to August 10, 2015 we sold a total of 91,600 shares of our common stock, as follows: (a) 60,000 shares of our common stock to an accredited investor pursuant to a Private Placement in which we received a total cash consideration of $30,000; and, (b) 31,600 shares of our common stock to three existing stockholders pursuant to a Private Placement in which we received a total cash consideration of $15,800. All of the shares of common stock issued in these offerings were offered and sold without registration under the Securities Act, or state securities laws, in reliance on the exemptions provided by Section 4(a)(2) (previously 4(2)) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws, based on the lack of any general solicitation or advertising in connection with the sale of the securities; the representation of each investor to the Company that it is an accredited investor (as that term is defined in Rule 501 of Regulation D) and that it was purchasing the securities for its own account and without a view to distribute them. All of the shares were sold at a per share purchase price of $0.50 per share, resulting in $45,800 in aggregate proceeds to the Company.
Item 3. | Defaults Upon Senior Securities. |
None.
Item 4. | Mine Safety Disclosures. |
None.
Item 5. | Other Information. |
None.
| The following Exhibits are filed as part of this Quarterly Report pursuant to Item 601 of Regulation S-K: |
Exhibit Number | | Description |
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2.1.1 | | Agreement and Plan of Merger dated December 5, 2007(1) |
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2.1.2 | | Certificate of Merger - Delaware - dated December 5, 2007(1) |
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2.1.3 | | Articles of Merger - Florida - dated December 7, 2007(1) |
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2.1.4 | | Certificate of Merger – Delaware - dated September 20, 2011 (2) |
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2.1.5 | | Agreement and Plan Of Merger Dated December 27, 2013 By and Among EMAV Holdings, Inc., Electric Motors and Vehicles Company, and EV Pop Acquisition Company (3) |
31.13.1.1 | | Certificate of Incorporation dated May 14, 1987(1) |
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3.1.2 | | Articles of Amendment dated June 30, 1998(1) |
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3.1.3 | | Articles of Amendment dated November 12, 1998(1) |
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3.1.4 | | Articles of Amendment dated June 22, 2006(1) |
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3.1.5 | | Certificate of Incorporation of Delaware entity dated October 11, 2007(1) |
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3.1.6 | | Articles of Amendment dated October 18, 2007(1) |
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3.1.7 | | Certificate of Amendment dated August 27, 2008(1) |
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3.1.8 | | Amendment to Certificate of Incorporation dated December 27, 2013 (3) |
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3.1.9 | | Certificate of Merger dated December 27,2013 (3) |
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3.2.1 | | Florida Amended and Restated By-Laws(1) |
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3.2.2 | | Delaware Amended and Restated By-Laws(1) |
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10.1 | | Stock Purchase Agreement dated March 31, 2010 by and between the Company and BedrockVentures,Bedrock Ventures, Inc. (4) |
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10.2 | | Repurchase Agreement dated April 1, 2010 by and among the Company and CENTURYCAPITAL PARTNERS, LLC, and CORPORATE SERVICES INTERNATIONAL, INC. (4) |
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31.1 | | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section302Section 302 of the Sarbanes-Oxley Act of 2002(*) |
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31.2 | | Certification of the Chief Financial Officer and Chief Operating Officer pursuant to Section302Section 302 of the Sarbanes-Oxley Act of 2002(*) |
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32.1 | | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section906Section 906 of the Sarbanes Oxley Act of 2002(*) |
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32.2 | | Certification of the Chief Financial Officer and Chief Operating Officer pursuant to Section906Section 906 of the Sarbanes Oxley Act of 2002(*) |
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101*+ | | The following materials from the Company’s Annual Report on Form 10-K for the annualperiod ended December 31, 2013,2014, formatted in XBRL (eXtensible Business ReportingLanguage): (i) Consolidated Balance Sheets as at December 31, 20132014 and 2012;2013;(ii) Consolidated Statements of Operations for the years ended December 31, 20132014 and 2012; 2013;(iii) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 20132014 and 2012;2013; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 20132014 and 2012;2013; and (iv) Notes to Consolidated Financial Statements. |
101 INS | XBRL Instance Document* |
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101 SCH | XBRL Schema Document* |
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101 CAL | XBRL Calculation Linkbase Document* |
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101 DEF | XBRL Definition Linkbase Document* |
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101 LAB | XBRL Labels Linkbase Document* |
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101 PRE | XBRL Presentation Linkbase Document* |
| * The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document. |
(1) | | Previously filed with the Company's Form 10 filed with the SEC on November 12, 2008 and incorporated herein by reference. |
(2) | | Incorporated by reference to Exhibit 2.1.4 to the Annual Report on Form 10-K filed with the SEC on 30 January 2012. |
(3) | | Previously filed with the Company’s Form 8-K filed on December 31, 2013 and incorporated herein by reference. |
(4) | | Previously filed with the Company’s Form 8-K filed on April 7, 2010 and incorporated herein by reference. |
(*) | | Filed herewith. |
+ | | Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto shall not be deemed “filed” or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act, Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections, and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document. |
SIGNATURES
Pursuant to the requirement 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.
Date: August 13, 201411, 2015 | EMAV Holdings, Inc. |
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By: | By:/s/ Keith A. Rosenbaum |
| KEITH A. ROSENBAUM, |
| Chief Executive Officer and Chief Financial Officer |
| (Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer) |
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