EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
In April 2015, FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The guidance is not expected to have a material impact on the Company's financial statements.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this update simplify the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. These amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The guidance is not expected to have a material impact on the Company's financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 840), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for a public entity. Early adoption of the amendments in this standard is permitted for all entities and the Company must recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently in the process of evaluating the effect this guidance will have on its financial statements and related disclosures.
The Financial Accounting Standards Board issues Accounting Standard Updates to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consists of:
| | June 30, | | | December 31, | | | March 31, | | | December 31, | |
| | 2015 | | | 2014 | | | 2016 | | | 2015 | |
| | (Unaudited) | | | | | | (Unaudited) | | | | |
Property and equipment | | $ | 43,405 | | | $ | 43,405 | | | $ | 7,583 | | | $ | 7,583 | |
Less: accumulated depreciation | | | (13,342 | ) | | | (8,686 | ) | | | (4,897 | ) | | | (4,265 | ) |
Property and equipment, net | | $ | 30,063 | | | $ | 34,719 | | | $ | 2,686 | | | $ | 3,318 | |
Depreciation expense for the three months and six months ended June 30,March 31, 2016 and 2015 was $1,792$632 and $4,656,$2,864, respectively.
EMAV Holdings, Inc. and $3,327Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and $4,821 for the same comparable periods in 2014, respectively.2015
(Unaudited)
NOTE 4 – NOTES PAYABLE
| | June 30, 2015 | | | December 31, 2014 |
| | (Unaudited) | | | |
Stockholder note payable, unsecured, 5% stated annual interest, monthly interest only payments from September 2014 to April 2015, 24 fixed monthly payments of $3,290 from May 2015 to April 2017. Original discount of $33,233 applied to normalize interest to 5% will be amortized over the loan term (P/Note 1) | | $ | 73,233 | | | $ | 73,233 | |
| | | | | | | | |
Stockholder note payable, principal balance of $53,000, unsecured, interest bearing, monthly payment of $3,790 starting February 1, 2014, due April 1, 2016 (P/Note 2) | | | 22,196 | | | | 29,149 | |
| | $ | 95,429 | | | $ | 102,382 | |
Notes payable - current portion | | | 67,131 | | | | 54,506 | |
Notes payable - long term portion | | $ | 28,299 | | | $ | 47,876 | |
| | | | | | | | |
Discount – current portion | | $ | 11,729 | | | $ | 15,820 | |
Discount – long term portion | | $ | 9,774 | | | $ | 15,639 | |
| | | | | | | | |
Notes payable, current portion, net of discount | | $ | 55,402 | | | $ | 38,686 | |
Notes payable, long term portion, net of discounts | | $ | 18,524 | | | $ | 32,237 | |
Notes payable consist of:
| | March 31, 2016 | | | December 31, 2015 | |
| | (Unaudited) | | | | |
Stockholder note payable, principal balance $40,000, unsecured, 5% stated annual interest, monthly interest only payments from September 18, 2014 to April 2015, 24 fixed monthly payments of $3,290 from May 18, 2015 to April 18, 2017. Original discount of $33,233 applied to normalize interest to 5% will be amortized over the loan term (P/Note 1) | | $ | 73,233 | | | $ | 73,233 | |
| | | | | | | | |
Stockholder note payable, principal balance of $53,000, unsecured, interest bearing, monthly payment of $3,790 starting February 1, 2014, due April 1, 2016 (P/Note 2) | | | 2,454 | | | | 11,745 | |
| | | | | | | | |
Note payable, principal balance of $75,000, unsecured, bearing 10% annual interest, due in full for unpaid principal and interest on or before June 30, 2016 (P/Note 3) | | | 75,000 | | | | 75,000 | |
Total | | $ | 150,687 | | | $ | 159,978 | |
Note payable - current portion | | $ | 150,687 | | | $ | 159,978 | |
Note payable - long term portion | | $ | - | | | $ | - | |
| | | | | | | | |
Debt discount - current portion | | $ | 12,707 | | | $ | 15,639 | |
Debt discount - long term portion | | $ | - | | | $ | - | |
On June 18, 2014, the Company executed a promissory note (the “P/"P/Note 1”1") with a stockholder lender in the principal amount of $40,000. The terms of the P/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. In connection with the issuance of P/Note 1, the Company has recorded a debt discount of $33,233 applied to normalize interest to 5% which will be amortized as interest expense over the life of the P/Note 1. The Company is in default in making its note payments as of March 31, 2016 and the note holder has not made a demand for the past due payments. The Company has recognized interest expense of $2,932 and $5,865 for amortization of debt discount related to P/Note 1 for both the three months ended March 31, 2016 and six months ended June 30, 2015, and $0 and $0 for the same comparable periods in 2014, respectively. The unamortized portion of debt discount was $21,504$12,707 and $15,639 at June 30, 2015.March 31, 2016 and December 31, 2015, respectively. In addition, the Company has recorded an interest expense of $487$143 and $987$500 for the three months ended March 31, 2016 and six months ended June 30, 2015, and accrued interest on P/Note 1 was $2,775 and $0$2,632 at March 31, 2016 and $0 for the same comparable periods in 2014,December 31, 2015, respectively.
EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
On May 23, 2013, the Company executed a promissory note (the “P/"P/Note 2”2") with a stockholder in the principal amount of $53,000. The terms of the P/Note 2 required the Company 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 was due and payable.
On March 30, 2015, the Company and the shareholder mutually agreed to extend the due date of payment of the P/Note 2 to April 1, 2016. During the three months ended March 31, 2016, the Company made note payments of principal of $9,291 and interest payments of $909. The Company is delinquent in making seven (7) monthly paymentsa payment of $2,454 as of June 30, 2015,March 31, 2016, and the note holder has not made a demand for the past due payments.payment. The Company has recorded interest expense of $920 and $1,829$909 on P/Note 2 for the three months and six months ended June 30,March 31, 2016 and 2015, and accrued interest expense of $921,on P/Note 2 was $6,204 and $1,838 for the same comparable periods in 2014,$6,194 at March 31, 2016 and December 31, 2015, respectively.
As additional consideration and not as additional interest,In conjunction with the execution of P/Note 2, the Company agreed to issue 100,000 shares of restricted common stock at its fair value of $30,000 to the stockholder upon execution of P/Note 2. The Company formally issued the shares during the year ended December 31,on May 23, 2014, (Note 7).as an additional consideration and not as additional interest. In connection with the issuance of the common stock pursuant to P/Note 2, the Company recorded a debt discount in the amount of $30,000 which was being amortized to interest expense over the life of the Note. The Company recognizedrecorded interest expense of $0 and $4,091 related toas the amortization of debt discount related to P/Note 2 for the three months ended March 31, 2016 and six months ended June 30, 2015, and interest expense of $4,091 and $8,185 for the same comparable periods in 2014, respectively. The net book value of the unamortized portion of the debt discount was $0 and $4,091 at June 30, 2015both March 31, 2016 and December 31, 2014,2015, respectively.
On December 22, 2015, the Company executed a promissory note (P/Note 3) to pay a third party a commitment fee of $50,000 and legal fees of $25,000 for a total consideration of $75,000. The third party agreed to commit to purchase up to $5 million worth of common stock over a period of time terminating on the earlier of (i) 24 months from the date on which the agreement was executed and delivered by the Company and the third party, or (ii the date on which the third party has purchased the aggregate maximum purchase of $5 million. The promissory note bears an interest at the rate of 10% per annum. Payment of all amounts due under P/Note 3, principal and interest, is due on or before June 30, 2016. The Company has recorded the principal amount of the promissory note of $75,000 as a deferred asset upon execution of the promissory note and which will be offset as fee for capital raise against the additional paid in capital when capital is raised by the third party. The Company has recorded an interest expense of $1,870 for the three months ended March 31, 2016, and accrued interest on P/Note 3 was $2,055 and $185 at March 31, 2016 and December 31, 2015, respectively.
EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
The Company has recorded total interest expense includingon P/Note 1 and P/Note 2 relating to amortization of debt discount of $3,713$2,932 and $12,769$9,056 for the three months ended March 31, 2016 and six2015, respectively. The Company has recorded interest expense of $2,932 and $1,409 for the three months ended June 30,March 31, 2016 and 2015, made interest payments of $909 and $626 for the three months ended March 31, 2016 and 2015, and $5,012recorded accrued interest of $11,034 and $10,023$9,012 on P/Note 1, P/Note 2 and P/Note 3 as of March 31, 2016 and December 31, 2015, respectively.
NOTE 5 – CONVERTIBLE NOTES PAYABLE
Convertible notes payable consist of:
| | March 31, | | | December 31, | |
| | 2016 | | | 2015 | |
| | (Unaudited) | | | | |
Convertible note payable to a third party, principal balance of $50,000, secured, bearing interest of 12%, due on May 17, 2016 (CPN 1 Note) | | $ | 32,242 | | | $ | 50,000 | |
| | | | | | | | |
Convertible note payable to a third party, principal balance of $86,000, secured, bearing annual interest at 6%, due on January 28, 2017 (CPN 2 Note) | | | 86,000 | | | | - | |
| | | | | | | | |
Convertible note payable to a third party, principal balance of $86,000, secured, bearing annual interest at 6%, due on January 28, 2017 (CPN 3 Note) | | | 86,000 | | | | - | |
| | | 204,242 | | | | 50,000 | |
Less: debt discounts | | | (179,611 | ) | | | (27,426 | ) |
Convertible notes payable, net | | $ | 24,631 | | | $ | 22,574 | |
Less: current portion | | $ | (24,631 | ) | | $ | (22,574 | ) |
Convertible notes payable, non-current | | $ | - | | | $ | - | |
Convertible Promissory Note (the "CPN 1 Note")
On August 17, 2015, the Company received $45,000 from a third party investor against a $50,000 Convertible Promissory Note (the "CPN 1" Note) executed on August 17, 2015. The CPN 1 Note bears an interest rate of 10% per annum. The maturity date of the CPN 1 Note is May 17, 2016 and is the date upon which the principal sum of this promissory note, as well as any unpaid interest and other fees, shall be due and payable. The lender has the right at any time after the effective date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of fully paid and non-assessable shares of common stock of the Company as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the conversion price. The conversion price is the lessor of 55% of the lowest trade price in the 25 trading days previous to the conversion date.
EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
In connection with the issuance of the CPN 1 Note, the Company recorded an original issuance debt discount ("OID") in the amount of $5,000 which will be amortized to interest expense over the term of the draw of nine months. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $50,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $3,307 for a total initial embedded conversion option liability of $53,307. On February 17, 2016, the Company issued 108,403 shares of its common stock to the third party investor pursuant to a conversion notice under the terms of CPN 1 Note. Pursuant to the conversion notice, the investor converted $12,521 of the principal and interest of CPN 1 Note into 108,403 shares of our common stock valued at $0.1155 per share. On March 14, 2016, the Company issued 952,203 shares of its common stock to the third party investor pursuant to a conversion notice under the terms of CPN 1 Note. Pursuant to the conversion notice, the investor converted $5,237 of the principal of CPN 1 Note into 952,203 shares of our common stock valued at $0.0055 per share. As a result of the debt conversions, the Company recorded an expense of $320,810 due to change in fair value of the embedded conversion option liability for the three months ended March 31, 2016.
For the three months ended March 31, 2016, the Company has recorded interest expense of $1,100 on the CPN 1 Note, interest expense of $1,630 related to the amortization of the OID, $16,852 related to the amortization of the embedded conversion option liability discount, and $320,810 expense due the change in fair value of embedded conversion option liability due to debt conversions. The CPN 1 Note balance was $32,242 and $50,000 at March 31, 2016 and December 31, 2015, respectively, unamortized debt discount was $741 and $2,426, unamortized embedded conversion option liability discount was $8,148 and $25,000, and accrued interest of $2,924 and $1,849 at March 31, 2016 and December 31, 2015, respectively.
Convertible Promissory Note (the "CPN 2 Note")
On February 04, 2016, the Company closed and funded a financing transaction by entering into a Securities Purchase Agreement (the "Purchase Agreement") with a third party (the "Investor"). Pursuant to the Purchase Agreement, the Investor purchased from the Company a Convertible Promissory Note (the "CPN 2 Note", and together with the Purchase Agreement, the "Transaction Documents") in the aggregate principal amount of $86,000 (the "Principal Amount"), and the Company received net proceeds of $74,900 on February 4, 2016.
The Principal Amount bears interest at 6% per annum. All outstanding principal and accrued interest on the CPN 2 Note is due and payable on the maturity date, which is January 28, 2017. Any amount of principal or interest that is due under the CPN 2 Note, which is not paid by the maturity date, will bear interest at the rate of 24% per annum until it is paid. Further, the Company is obligated to reduce the Principal Amount by 50% on or before July 28, 2016. Should the Company fail to do so, then outstanding principal amount will be increased by 200%.
EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
The Note is convertible into shares of the Company's common stock at any time at the discretion of the Investor at a conversion price per share equal to the lesser of: (a) the closing price of the Common Stock on the day before the conversion; or, (b) 50% of the lowest trading price for the common stock during the 30-days of trading ending on the latest complete trading day prior to the date of conversion. The conversion price is subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the Transaction Documents. The Company agreed to reserve that number of shares of common stock equal to 70% of our authorized shares of common stock not otherwise issued.
The CPN 2 Note may be repaid in whole at any time. The repayment amount is subject to a premium on the outstanding principal balance of 150%. If the Company fails to meet its obligations under the terms of the CPN 2 Note, the promissory note shall become immediately due and payable and subject to penalties provided for in the CPN 2 Note.
In connection with the issuance of the CPN 2 Note, the Company recorded an original issuance debt discount ("OID") in the amount of $11,100 which will be amortized to interest expense over the term of the draw of 357 days. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $86,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $10,995 for a total initial embedded conversion option liability of $96,995. For the three months ended March 31, 2016, the Company has recorded interest expense of $792 on the CPN 2 Note, interest expense related to the amortization of the OID discount of $1,741, interest expense related to the amortization of the embedded conversion option liability discount of $13,490, and change in fair value of embedded conversion option liability of $898,952. At March 31, 2016, the principal balance of CPN 2 Note was $86,000, embedded conversion option liability of CPN 2 Note was $887,957, unamortized OID discount was $9,359, unamortized embedded conversion option liability discount was $72,510, and accrued interest was $792.
Convertible Promissory Note (the "CPN 3 Note")
On February 29, 2016, the Company closed and funded a financing transaction by entering into a Securities Purchase Agreement (the "Purchase Agreement") with the same comparable periodsthird party (the "Investor") who also executed CPN 2 Note. Pursuant to the Purchase Agreement, the Investor purchased from the Company a Convertible Promissory Note (the "CPN 3 Note"), and together with the Purchase Agreement, the "Transaction Documents") in 2014,the aggregate principal amount of $86,000 (the "Principal Amount"), and the Company received net proceeds of $74,900 on February 29, 2016.
The Principal Amount bears interest at 6% per annum. All outstanding principal and accrued interest on the CPN 3 Note is due and payable on the maturity date, which is March 1, 2017. Any amount of principal or interest that is due under the CPN 3 Note, which is not paid by the maturity date, will bear interest at the rate of 24% per annum until it is paid. Further, the Company is obligated to reduce the Principal Amount by 50% on or before July 28, 2016. Should the Company fail to do so, then outstanding principal amount will be increased by 200%.
EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
The Note is convertible into shares of the Company's common stock at any time at the discretion of the Investor at a conversion price per share equal to the lesser of: (a) the closing price of the Common Stock on the day before the conversion; or, (b) 50% of the lowest trading price for the common stock during the 30-days of trading ending on the latest complete trading day prior to the date of conversion. The conversion price is subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the Transaction Documents. The Company agreed to reserve that number of shares of common stock equal to 70% of our authorized shares of common stock not otherwise issued.The CPN 3 Note may be repaid in whole at any time. The repayment amount is subject to a premium on the outstanding principal balance of 150%. If the Company fails to meet its obligations under the terms of the CPN 2 Note, the promissory note shall become immediately due and payable and subject to penalties provided for in the CPN 3 Note.
In connection with the issuance of the CPN 3 Note, the Company recorded an original issuance debt discount ("OID") in the amount of $11,100 which will be amortized to interest expense over the term of the draw of one year. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $86,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $11,734 for a total initial embedded conversion option liability of $97,734. For the three months ended March 31, 2016, the Company has recorded interest expense of $438 on the CPN 3 Note, interest expense related to the amortization of the OID of $943, interest expense related to the amortization of the embedded conversion option liability discount of $7,304, and change in the fair value of embedded conversion option liability of $902,010. At March 31, 2016, the principal balance of CPN 3 Note was $86,000, embedded conversion option liability on CPN 3 Note was $890,275, unamortized original issuance debt discount was $10,157, unamortized embedded conversion option liability discount was $78,690, and accrued interest was $438.
The Company has recorded a total interest expense of $2,305 and $0, on the principal balances of CPN 1 Note, CPN 2 Note and CPN 3 Note, for the three months ended March 31, 2016 and 2015, respectively. In addition, the Company has recorded interest expense for the three months ended March 31, 2016 and 2015, relating to (i) amortization of OID discount of $4,369 and $0, and (ii) amortization of the embedded conversion option liability discount of $37,646 and $0. The Company has recorded accrued interest of $7,241$4,179 and $5,052 on P/Note 1 and P/Note 2$1,849 as of June 30, 2015March 31, 2016 and December 31, 2014,2015, respectively.
NOTE 6 - DERIVATIVE FINANCIAL INSTRUMENTS
Under the provisions of ASC 815-40, convertible instruments issued by the Company qualify for derivative treatment due to the variable conversion formula (Note 5). The embedded conversion features of the convertible note is bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the intrinsic value method.
EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
The Company calculated the estimated fair values of the liabilities for embedded conversion feature at March 31, 2016 with the Black-Scholes option pricing model using the closing price of the Company's common stock at each respective date and the ranges for volatility, expected term, and risk free interest indicated in the table below. As a result, the Company recorded a change in the fair value of the liabilities for embedded conversion option derivative instruments for the three months ended March 31, 2016 of $348,201 which was included in Other Income (Expenses) (See Note 2 Fair Value Measurements) in the accompanying Condensed Consolidated Statements of Operations.
The fair market value of the Company's common stock on February 4, 2016, February 29, 2016 and March 31, 2016 was $0.30, $0.21 and $0.04 per share, respectively.
Embedded Conversion Options
| | Black-Scholes Model Assumptions |
| | During The Three Months Ended March 31, 2016 |
Annualized volatility | | 82.58% - 328.16% |
Expected term | | 0.13 – 1.00 year |
Risk free interest rate | | 0.32% - 0.52% |
A significant factor in which impacted the fair market value of the derivative liability was the significant difference between the fair market value of the Company's common stock of $0.04 per share and the conversion price of $0.0075 per share at March 31, 2016. The conversion price is based upon the lowest trade within the previous 20 - 25 days from the fair value date. Thus, the valuation is highly dependent upon the price of these trades and the fair market value of the Company's common stock at each measurement date.
NOTE 57 – RELATED PARTY TRANSACTIONS
In April 2010, the Company entered into a verbal agreement with its executive director for providing business consulting and marketing services to the Company. No fixed compensation was agreed at the time of the verbal agreement. On November 14, 2014, the executive director resigned from his position and entered into a separation agreement which provided for, among other covenants and conditions, a mutual release of all claims between the Company and its executive director. The executive director was previously allotted 13,000,000 shares of the Company's common stock. Pursuant to the separation agreement, the executive agreed to retain 1,000,000 shares of common stock, and the Company had the sole discretion to determine the disposition of the remaining 12,000,000 shares of common stock. The Company has allocated these 12,000,000 shares of common stock as follows: (i) 6,125,000 shares of common stock have been reallocated to other persons and the Company has recorded an expense of $3,062,500 upon their issuance, (ii) 5,000,000 shares of common stock were cancelled and returned to the status of authorized and unissued shares, and (iii) the remaining 875,000 shares of common stock to remain issued and held in treasury as of March 31, 2016 (See Note 9). The Company made no cash payments to the executive director for consulting fees for the three months ended March 31, 2016 and 2015, respectively.
The Company has engaged an entity owned by the Chief Executive Officer/Director (“Officer”("Officer") of the Company to provide business advisory, consulting, and legal services. The Company has recorded and paid legal and professional fees of $2,500$38,000 and $37,000$34,500 to this entity for the three months ended March 31, 2016 and six months ended June 30, 2015, and $13,500 and $35,000 forrespectively. Payments are made to this entity as the same comparable periods in 2014, respectively.funds are available. The Company is indebted to the Officer $2,500 andthis entity $0 under this arrangement as of June 30, 2015March 31, 2016 and December 31, 2014,2015, respectively. In addition, the Company has made payments of $1,800 and $500 to the Officer's family members for performing services for the Company for the three months ended March 31, 2016, as compared to $0 for the same comparable period in 2015.
The Officer has occasionally provided short term advances to the Company for its working capital needs. The short term advances are non-interest bearing, unsecured and due on demand. The Company is indebted to the Officer $22,500 and $12,500 due and payable as of June 30, 2015March 31, 2016 and December 31, 2014,2015, respectively.
EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
NOTE
68 – COMMITMENTS AND CONTINGENCIES
Settlement of litigationLitigation
The Company entered into an agreement for public relations services (the “Agreement”"Agreement") with an unrelated third party (“DLC”("DLC") in September 2010. The Company disputed the quality of the services rendered and failed to tender final payment under the Agreement. DLC initiated legal action against the Company in January 2012 for collection under the Agreement. The Company did not have the resources to contest the action, so a default judgment was entered against the Company in favor of DLC in July 2012 in the amount of $14,425. Thereafter, DLC sought to collect on the judgment, and the total amount claimed by DLC grew to over $25,000 as DLC was entitled to collect attorney’sattorney's fees under the Agreement.
In October 2013, the entire Agreement with DLC was negotiated and settled, requiring the Company to pay DLC $3,000 in November 2013 and $1,000 per month for the next 12-month period. The Company agreed not to contest DLC’sDLC's ownership of 80,000 shares of the Company’sCompany's stock. As of June 30, 2015March 31, 2016 and December 31, 2014,2015, the remaining liability on the settlement of $7,000 is included in accounts payable in accompanying consolidated financial statements. The Company plans on paying DLC for the months of May 2014 through November 2014, which DLC has yet to demand.
Legal Costs and Contingencies
In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received.
If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable.
NOTE 7 -9 – STOCKHOLDERS' EQUITY TRANSACTIONS
The Company’sCompany's capitalization at June 30, 2015March 31, 2016 was 300,000,000 authorized common shares with a par value of $0.001, and 10,000,000 authorized preferred shares with a par value of $0.001.
Common stock
During the six months ended June 30, 2015, the Company sold 143,000 shares of its common stock at $0.50 per share and received total cash consideration of $71,500. All the common shares were sold to accredited investors pursuant to separate Private Placements.
On September 1, 2014, the Company engaged Fastnet Advisors, LLC (Fastnet) to provide corporate business advisory services to the Company. The engagement is for an initial period of six (6)-months. The Company agreed to pay Fastnet $3,000 for September 2014; $4,000 per month for October 2014, November 2014 and December 2014; and $5,000 per month for January 2015 and February, 2015. The Company made cash payments to Fastnet of $9,500 for consulting services rendered and accrued the remainder expense of $15,500 for consulting services rendered as accounts payable as of June 30, 2015. In addition, on November 14, 2014, the Company agreed to issue to Fastnet 250,000 shares of restricted common stock valued at $125,000 based upon the selling price of $0.50 per share the Company was able to obtain for sales of similar stock around the date of issuance. The total value of the engagement was estimated at $150,000, which was recorded as prepaid expense in 2014 to be amortized over the six (6) month term of the engagement. The remaining prepaid expense was $42,666 at December 31, 2014, and the Company has amortized the remaining recorded $42,666 to consulting expense for the six months ended June 30, 2015.
On November 14, 2014, pursuant to a separation agreement with an executive, the Company received 875,000 shares of returned common stock, which remain issued and not outstanding and held as treasury shares as of June 30, 2015.March 31, 2016 and December 31, 2015 (See Note 7).
Warrants
On December 1, 2014, the Company engaged a financial advisor and placement agent to raise capital for the Company for a six months term. Pursuant to the terms of the agreement, the Company paid a non-refundable retainer of $10,000 and issued 50,000 shares of its common stock valued at $25,000 based upon the selling price of $0.50 per share the Company was able to obtain for sales of similar stock around the date of issuance. The Company has recorded the offering costs of $35,000 for raising capital as consulting expense in the accompanying financial statements for the six months ended June 30, 2015.
Warrants
In April 14, 2010, the Company granted three individuals, warrants to purchase 2,500,000 shares of common stock at an exercise price of $0.25 per share as compensation in connection with the individuals providing introductions for raising capital for the Company. The warrants have a six year term and expire in April 2016. The fair value of 2,500,000 warrants at the original issue date was estimated to be $1,077,927 using a Black-Scholes option pricing model with an expected life of 6 years, a risk free interest rate of 2.96%, a dividend yield of 0%, and an expected volatility of 100%. The expected volatility was estimated to be 100% since the Company's stock is not traded and no historical volatility data is available. As these services were provided as part of the Company’sCompany's equity funding, the value of the warrants were recorded within equity as part of the accounting for the related equity transactions. There have been no other grants of warrant instruments through June 30, 2015.March 31, 2016.
EMAV Holdings, Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
March 31, 2016 and 2015
(Unaudited)
The Company has not established a stock option plan nor has issued any stock options through June 30, 2015.March 31, 2016.
As a result of all common stock issuances and cancellations, the total common shares issued at June 30, 2015March 31, 2016 were 47,564,56548,841,071 of which 46,689,56547,966,071 shares were outstanding and the remaining 875,000 shares were held in treasury.
Preferred Stock
At June 30, 2015,March 31, 2016, the Company had no shares of preferred stock issued or outstanding.
NOTE 810 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses related to this in any such accounts. The Company’sCompany's bank balances did not exceed FDIC insured amounts as of June 30, 2015March 31, 2016 and December 31, 2014,2015, respectively.
NOTE 911 – SUBSEQUENT EVENTS
From July 1, 2015Management has evaluated subsequent events and transactions that occurred through the date and time our financial statements were available to August 10, 2015,be issued, noting no items that would impact the accounting for events or transactions in the current period or require additional disclosure.
On April 14, 2010, the Company sold (a) 60,000granted three individuals, warrants to purchase 2,500,000 shares of common stock at an exercise price of $0.25 per share as compensation in connection with the individuals providing introductions for raising capital for the Company. The warrants had a six year term and expired on April 14, 2016.
On April 29, 2016, the Company issued 1,432,999 shares of its common stock to an accrediteda third party investor pursuant to a Private Placementconversion notice under the terms of CPN 1 Note. The investor converted $19,704 of the principal and received a total cash considerationinterest of $30,000; and (b) 31,600CPN 1 Note into 1,432,999 shares of itsour common stock to three existing shareholders pursuant to a Private Placement and received a total cash consideration of $15,800.valued at $0.01375 per share.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
All references to “Holdings”"Holdings", “we”"we", “our,” “us”"our," "us" and the “Company”"Company" in this Item 2 refer to EMAV Holdings, Inc. and our wholly owned subsidiary, Electric Motors and Vehicles Company (“EMAV”("EMAV").
The discussion in this section contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “would”"anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "should," "would" or “will”"will" or the negative of these terms or other comparable terminology, but their absence does not mean that a statement is not forward-looking. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which could cause our actual results to differ from those projected in any forward-looking statements we make. Several risks and uncertainties we face are discussed in more detail under “Risk Factors”"Risk Factors" in the 20142015 Annual Report filed with the Securities and Exchange Commission on April 22, 2015.4, 2016. You should, however, understand that it is not possible to predict or identify all risks and uncertainties and you should not consider the risks and uncertainties identified by us to be a complete set of all potential risks or uncertainties that could materially affect us. You should not place undue reliance on the forward-looking statements we make herein because some or all of them may turn out to be wrong. We undertake no obligation to update any of the forward-looking statements contained herein to reflect future events and developments, except as required by law. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing in the 20142015 Annual Report filed with the Securities and Exchange Commission on April 22, 20154, 2016 and elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.
Overview
Company Overview
Electric Motors and Vehicles Company (“EMAV”("EMAV") was started in March 2010 with the intent of bringing to market rugged electric vehicles. The business was initially focused on developing a relationship with the Jeep brand as that was the desired model to use for EMAV’sEMAV's electric vehicles. EMAV designed a trailer/camper in conjunction with the MOPAR division of Jeep. The camper was approved as the first camper to be branded as a Jeep. EMAV sold the Jeep Camper directly through dealerships in 2010 and 2011. EMAV abandoned its involvement in the project in 2011 due to slow sales and the lack of financial resources to support marketing for the program.
Through 2011 and 2012, EMAV focused its efforts on electric vehicle technology to be used in vehicles it planned to introduce. EMAV also developed the Power Regeneration Unit (“PRU”("PRU"). It is a small camper designed to be towed behind an electric vehicle and is designed to significantly increase the range of the electric vehicle. EMAV has not commercialized the PRU and has not sold any units of the PRU. It is anticipated that at some time in the future the PRU may become one of the products offered by EMAV.
In 2013, EMAV once again focused its efforts on bringing to market a rugged electric vehicle. EMAV is described as a new car company which we propose to operate out of (i) a Jeep dealership we propose to acquire,acquire; and, (ii) an assembly facility we propose to lease. EMAV will design, assemble, and sell premium rugged sport adventure vehicles (“SAVs”("SAVs") to consumers, with an emphasis on offering electric versions, in addition to commercial products for the construction, fleet, military, homeland security and related industries. EMAV intends to acquire a Jeep automotive dealership through which it will conduct certain aspects of its operations, and which will also afford EMAV access to Jeep vehicles which will serve as the platform/foundation for its vehicle sales. The automotive industry has invested heavily in electric vehicle technology and most manufacturers are now introducing electric vehicles as part of their product line. In addition, a number of new companies have emerged which exclusively manufacture and sell electric vehicles. EMAV intends to be unique in the marketplace in that its proposed signature vehicle, the ES, will be based upon an existing iconic vehicle, the 4-door Jeep Wrangler.
On December 27, 2013, we acquired all of the issued and outstanding common shares of EMAV in exchange for issuing 38,840,525 shares of our common stock. In addition, we assumed the obligations of EMAV to issue common shares pursuant to all outstanding warrants. Following the closing of the merger, EMAV became our wholly-owned subsidiary and the combined entity solely engaged in EMAV’sEMAV's business. EMAV was the acquirer for financial reporting purposes and EMAV Holdings, Inc. was the acquired company. The merger was accounted for as a reverse-merger and recapitalization. Consequently, the assets and liabilities and the operations that are reflected in the historical financial statements prior to the merger are those of EMAV and are recorded at the historical cost basis, and the consolidated financial statements after completion of the merger include the assets and liabilities of the Company and EMAV, and the historical operations of EMAV and operations of the combined company from the closing date of the merger. Subsequent to the merger, our operations are consolidated with the operations of EMAV.
In late 2014, we initiated a plan to acquire auto dealerships in addition to our electric vehicle business. We propose to engage industry experts to enable us to identify, acquire, operate, and integrate auto dealerships. Our roll-up strategy is designed to not compete with the larger acquirers recently entering into this same space. We propose to acquire mid-market, smaller, profitable dealerships often overlooked by the private equity groups and public companies which are now actively pursuing acquisitions in this space. We have identified and initiated discussions with a number of experienced professionals to manage and operate this segment of our business.
Electric Vehicles
Our wholly-owned subsidiary, Electric Motors and Vehicles Company, Inc. ("EMAV"), is a new car company. It is anticipated that the sales, marketing, and administrative functions for our commercial electric vehicles will be operated out of the Detroit, Michigan area. All other functions, including though not limited to all assembly operations; sales and marketing for our consumer sales; and, all other general corporate administrative functions will be conducted in a facility which location we have yet to determine. We have identified suitable properties in a number of locations though we have not yet leased or acquired or made any formal arrangements for such lease or acquisition of a facility.
Consumer Vehicles
EMAV will design, assemble, and sell premium rugged sport adventure vehicles ("SAVs"), with an emphasis on offering electric versions. EMAV intends to acquire a Ford and a Jeep automotive dealership through which it will conduct certain aspects of its operations, and which will also afford EMAV access to Ford and Jeep vehicles which will serve as the platform/foundation for its vehicle sales. The automotive industry has invested heavily in electric vehicle technology and most manufacturers are now introducing electric vehicles as part of their product line to the consumer public. In addition, a number of new companies have emerged which exclusively manufacture and sell electric vehicles. EMAV intends to be unique in the marketplace in that its proposed signature vehicle (the "ES"), will be based upon an existing iconic vehicle; the 4-door Jeep Wrangler.
EMAV proposes to design, develop, manufacture, and sell premium rugged electric vehicles built from the base chassis of the 4-door Jeep Wrangler, and commercial use plug-in hybrid electric vehicles on the chassis of the Ford F-150. We will be a low volume vehicle design, engineering, and manufacturing company focusing on premium rugged electric vehicles. Our initial product offering will focus on the consumer market.
The EMAV ES intends to leverage the iconic design of the 4-door Jeep Wrangler and combine that with aerodynamic body modifications and styling and significant interior comfort and technology upgrades to create its own brand identity. The EMAV ES will maintain the rugged, cool exterior appearance of a Jeep, while the interior will be upgraded with luxury features and technology such as continuous online information access from a 15-17 inch interactive touch screen monitor. The electric 4-wheel drive drive-train is intended to deliver a new premium high performance standard, and with zero emissions the ES will be in a class by itself. EMAV intends to create and dominate the Sport Adventure Vehicle market by delivering a luxurious, comfortable, cool driving experience which is environmentally conscious. At this time EMAV has yet to produce a vehicle for sale and has not yet completed an electric vehicle using the 4-door Jeep Wrangler as its platform.
This Quarterly Report contains additional trade names, trademarks, and service marks of others, which are the property of their respective owners. We do not intend our use or display of other companies' trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
We plan to begin shipments of our signature vehicle, the EMAV ES, in Spring of 2017. In order to do so we must raise sufficient capital so that we can build sales/demonstration models for placement at Jeep dealerships and promote the vehicle through a marketing campaign. We plan to begin shipments of our plug-in hybrid electric Ford F-150 in early 2017. Again, we need to do raise sufficient capital so that we can build sales/demonstration models and promote the vehicle through a marketing campaign. As of the filing of this Quarterly Report we have not yet produced any vehicles. We will be adapting the platform architecture of the 4-door Jeep Wrangler to develop our EMAV ES. This all electric vehicle is designed to create a new niche in the automotive industry: a luxury/premium all electric SUV, which we refer to as a premium Sport Adventure Vehicle.
We plan to begin shipments of our signature vehicle, the EMAV ES, in Spring of 2017. We plan to begin shipments of our plug-in hybrid electric Ford F-150 in early 2017. As of the filing of this Quarterly Report we have not yet produced any vehicles. We will be adapting the platform architecture of the 4-door Jeep Wrangler to develop our EMAV ES. This all electric vehicle is designed to create a new niche in the automotive industry: a luxury/premium all electric SUV, which we refer to as a premium Sport Adventure Vehicle.
We propose to sell our vehicles directly through auto dealership we plan to acquire, as well as on the internet through those dealership, and directly to commercial users. We also propose to sell our vehicles directly through selected dealerships we don't own throughout North America, and then globally. We may also lease small retail spaces in high-traffic areas (such as shopping malls and retail areas of large metropolitan areas) in order to highlight and advertise our product offerings. We will deploy a build-on-demand model so as to keep finished inventory low. Similar to the manner in which many large laptop manufacturers operate, we will maintain low levels of parts and platform vehicles, and then build the vehicle "to order" when our customer places the order. We believe that this approach provides us with a competitive advantage as compared to incumbent automobile manufacturers.
The battery pack and electric power train system we propose to purchase from a third party vendor should enable us to deliver competitive range capability at what we believe will be a compelling battery cost per kilowatt-hour. Our battery packs will use commercially available lithium-ion battery cells. Our proprietary energy management software and system should maximize the energy efficiency of our vehicles. Our proprietary technology includes charge balancing systems, battery engineering, and software and electronics management systems necessary to manage battery and vehicle performance.
We believe that our vehicles will offer consumers a compelling alternative to other electric vehicles, as well as to similar internal combustion engine or hybrid electric vehicles. We expect our electric vehicles will have a lower relative maintenance costs than hybrid, plug-in hybrid, or internal combustion engine vehicles due to fewer moving parts and the absence of certain components, including oil, oil filters, spark plugs, and engine valves. Additionally, government incentives that are currently available can reduce the cost of ownership even further.
Our approach and business model of leveraging a successful and iconic brand and its dealership network will enable us to succeed where so many other electric vehicle manufacturers have failed. We have not created a new vehicle in search of a market. Rather, we have started with a vehicle which has documented and growing demand and will transform it into a premium electric vehicle. We do not require the hundreds of millions of dollars other electric vehicle manufacturers required to start from the ground up. We will not have to raise that level of capital and we will be able to avoid the design, performance, and marketing issues which doomed most early electric vehicle companies.
Commercial Vehicles
We also plan to enter the market for commercial applications and the military, homeland protection, civil, and law enforcement markets. By using a single platform for both commercial and consumer use (the 4-Door Jeep Wrangler and the Ford F-150), we will leverage economies of scale and operating efficiencies to simultaneously produce consumer and commercial vehicles from a single facility. Our signature commercial vehicles will consist of two vehicles:
EMAV Power Station: Designed to replace noisy and polluting towed generators, the vehicle will be the power plant. Non-polluting and silent, the Power Station is ideal for use in myriad industries and applications, such as construction, military, homeland defense, and disaster response.
Fleet, delivery, multi-purpose vehicle: The 4-door Jeep Wrangler has traditionally has been under used in this fast-growing market. Our vehicle will offer a variety of drive-trains, each specifically suited for its specific use and intended demands of the industry.
Acquisition of Car Dealerships
Our engagement of and association with industry experts should give us the ability to identify, acquire, operate, and integrate auto dealerships. Our roll-up strategy is designed to not compete with the larger acquirers recently entering into this same space. We propose to acquire mid-market, smaller, profitable dealerships often overlooked by the private equity groups and public companies which are now actively pursuing acquisitions in this space. We have identified and initiated discussions with a number of experienced professionals to manage and operate this segment of our business. These individuals are auto industry veterans and have owned and operated car dealerships for many years.
EMAV has generated limited revenues from product sales, and no revenue from product sales during the three months ended March 31, 2016 and six months ended June 30, 2015, and 2014, and for years ended December 31, 2015, 2014 2013 and 2012.2013. To date, we have funded our operations through the private sale of equity securities to accredited investors.securities. We do not expect to generate revenue from product sales for at least the next twelve months.
We have an accumulated deficit of $5,032,808$7,587,776 as of June 30, 2015.March 31, 2016. Our net loss for the three months and six months ended June 30, 2015March 31, 2016 was $62,251 and $222,678$2,289,129 as compared to the net loss of $113,208 and $318,908$160,427 for the same comparable periodsperiod in 2014.2015. Substantially all of our operating losses in the three months ended March 31, 2016 resulted from expenses incurredthe interest expense on convertible notes payable and change in connection with developmentfair value of our vehicles and general and administrative costsembedded conversion option liability associated with our operations.convertible debt.
We expect to continue to incur significant expenses and increasing operating losses for at least the next two to four years. In the near term, we anticipate that our expenses will increase as we:
complete our initial vehicle offering;
enter into production and marketing of our initial vehicle offering;
continue our development of additional vehicle offerings;
maintain, expand and protect our intellectual property portfolio; and
provide general and administrative support for our operations.
To fund our future operations and acquisitions of car dealerships, we will need to raise additional capital. The amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs, and related general and administrative support. We anticipate that we will seek to fund our operations through public or private equity or debt financings or other sources. We cannot be certain that anticipated additional financing will be available to us on favorable terms, or at all.
Financial Operations Overview
Revenue and Cost of Goods Sold
We have not earned revenues from product sales for the three months ended March 31, 2016 and six months ended June 30, 2015, and 2014, respectively. We do not expect to earn revenues from product sales for at least the next twelve months. We may never generate revenues from product sales as we may never succeed in selling our initial vehicle or commercializing any other products or vehicles.
Operating Expenses
Operating expenses for the three months and six months ended June 30, 2015March 31, 2016 were $58,538 and $209,909 as$117,174 compared to $108,196 and $308,885$151,371 for the same comparable periodsperiod in 2014.2015. Operating expenses decreased by $49,658$34,197 in 2016 primarily due to the reduction in general and $98,976administrative expense and depreciation expense as discussed below.
General and administrative expense (G&A) was $116,542 and $148,507 for the three months ended March 31, 2016 and six months ended June 30, 2015, when compared to the same comparable periodsrespectively. G&A expense decreased by $31,965 in 2014,2016 over 2015 primarily due to the (a) decrease in depreciation expense and general and administrative expense.
Depreciation expense for the three months and six months ended June 30, 2015 was $1,792 and $4,656 as compared to $3,327 and $4,821 for the same comparable periods in 2014. The Company acquired a design vehicle for $35,821, additional property and equipment of $1,658 in late January 2014, and of $3,429 in May 2014. The Company adjusted and recorded the depreciated expense which resulted in reduction in depreciation expenses for the three months and six months ended June 30, 2015 as compared to the same comparable periods in 2014.
General and administrative expenses (“G&A”) for the three months and six months ended June 30, 2015 were $56,746 and $205,253 as compared to $104,869 and $304,064 for the same comparable periods in 2014. G&A expense decreased primarily due to (a) reduction of consulting expenses related to business advisory services for development plans of our business and initial design of our vehicle by $16,364, (b) reduction of expenses related to finance, business development and support functions,decrease in investor relations expense by $50,667, (c) reduction in travel expenses, and (d) reductionincrease in professional fees for auditing, tax and legal services. Such reductions were offset byservices of $13,500, (d) increase in investor relations expense for the six months ended June 30, 2015 when compared with the same periodstransfer agent fees of $21,206, and (e) reduction in 2014.
travel expenses of $6,027. We expect that general and administrative expenses will increase materially as we operate as a public company. These increases will likely to include salaries and related expenses, legal and consulting fees, accounting and audit fees, director fees, increased directors’directors' and officers’officers' insurance premiums, fees for investor relations services and enhanced business and accounting systems, and other costs.
Depreciation expense for the three months ended March 31, 2016 and 2015 was $632 and $2,864, respectively. During 2015, we sold a vehicle with a cost of $35,821 resulting in reduction in depreciation expense in 2016.
Other Income and Expenses
We did not record any other income for the three months and six months ended June 30, 2015 and 2014, respectively.
Other expenses consisted of interest expense of $3,713 and $12,769$50,183 for the three months and six months ended June 30, 2015March 31, 2016 as compared to interest expense of $5,012 and $10,023$9,056 for the same comparable periodsperiod in 2014.2015. Interest expense was accrued and recorded on a (a) $53,000 stockholder loan obtained by us on May 23, 2013 for our working capital requirements. In conjunction with the execution of $53,000 stockholder loan, we issued 100,000 shares of our common stock to the lender as additional consideration, and recorded a debt discount of $30,000 which is being accreted to interest expense over the term of the promissory note.
For the three months and six months ended June 30, 2015, we recorded an interest expense of $0 and $4,091 related to the accretion of debt discount as compared to interest expense of $4,091 and $8,185 for the same comparable periods in 2014. In addition, we recorded interest expense of $920 and $1,829note, (b) $40,000 stockholder loan obtained on the principal balance borrowed from the stockholder for the three months and six months ended June 30, 2015 as compared to interest expense of $921 and $1,838 for the same comparable periods in 2014.
On June 18, 2014 for our working capital requirements. In conjunction with the Company executed a promissory note and receivedexecution of $40,000 from a shareholder andstockholder loan, we recorded a debt discount of $33,233 applied to normalize interest to 5% per annum, which iswill be amortized as interest expense over the loan term of 34 months, (c) a promissory note to pay a third party a commitment fee of $50,000 and legal fees of $25,000 for a total consideration of $75,000, bearing an annual interest rate of 10%, and due on or before June 30, 2016. The third party agreed to commit to purchase up to $5 million worth of common stock over a period of time terminating on the earlier of (i) 24 months from the date on which the agreement was executed and delivered by the Company and the third party, or (ii the date on which the third party has purchased the aggregate maximum purchase of $5 million, (d) Convertible Promissory Note ("CPN 1 Note") executed on August 17, 2015 of $50,000, bearing 10% interest and maturing on May 17, 2016. In connection with the issuance of the CPN 1 Note, we recorded a debt discount of $5,000 which will be amortized to interest expense over the term of the promissory note. Thedraw of nine months. In accordance with ASC 815, we recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $50,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $3,307 for a total initial embedded conversion option liability of $53,307 on the date of issuance of Note, (e) Convertible Promissory Note ("CPN 2 Note") executed on February 4, 2016 of $86,000, bearing 6% interest and maturing on January 28, 2017. In connection with the issuance of the CPN 2 Note, we recorded a debt discount of $11,100 which will be amortized to interest expense over the term of the draw of 357 days. In accordance with ASC 815, we recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $86,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $10,995 for a total initial embedded conversion option liability of $96,995 on the date of issuance of CPN 2 Note, and (f) Convertible Promissory Note ("CPN 3 Note") executed on February 29, 2016 of $86,000, bearing 6% interest and maturing on January 28, 2017. In connection with the issuance of the CPN 3 Note, we recorded a debt discount of $11,100 which will be amortized to interest expense over the term of the draw of 357 days. In accordance with ASC 815, we recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $86,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $11,734 for a total initial embedded conversion option liability of $97,734 on the date of issuance of CPN 3 Note.
As a result, the Company has recognized and recorded interest expense of $2,932(a) $2,931 on the shareholders loans and $5,865 for the amortization of debt discount related toa promissory note for the three months and six months ended June 30, 2015,March 31, 2016 as compared to interest expense of $0$909 for the same comparable periodsperiod in 2014. In addition, we have recorded an interest expense of $487 and $9872015, (b) $2,305 on thethree convertible promissory notenotes for the three months and six months ended June 30, 2015March 31, 2016 as compared to $0 for the same comparable periodsperiod in 2014.2015, (c) $7,301 related to the amortization of original issue discount and debt discount related to the shareholders loans and convertible promissory notes for the three months ended March 31, 2016 as compared to $8,149 for the same comparable period in 2015, and (d) $37,646 related to amortization of embedded conversion option liability discount on convertible promissory notes for the three months ended March 31, 2016 as compared to $0 for the same comparable period.
The convertible promissory notes issued by the Company on (i) August 17, 2015 for $50,000, (ii) February 4, 2016 for $86,000, and (iii) February 29, 2016 for $86,000, qualifies for derivative accounting treatment due to the variable conversion formula. As a result, the Company recorded an expense of $2,121,772 for the three months ended March 31, 2016 due to a change in the fair value of the liabilities for the embedded conversion option derivative instrument. The change in the fair value of embedded conversion option liability is included in other income (expenses) as of March 31, 2016. The Company did not have any convertible derivative instruments outstanding as of March 31, 2015.
Liquidity and Capital Resources
Since our inception, our operations have been primarily financed through private sales of our equity.equity and debt financing. We have devoted our resources to funding the development of our initial vehicle. We have incurred operating losses in each year since our inception and we expect to continue to incur operating losses into the foreseeable future as we advance the ongoing development of our initial vehicle.
As of June 30, 2015,March 31, 2016, we had $11,010$9,863 of cash and cash equivalents compared to $63,914$1,802 at December 31, 2014.2015. We believe that our existing capital resources, together with interest thereon, will not be sufficient to meet our projected operating requirements for at least the next 12 months and we will need to raise additional capital.capital through sale of equity or debt financing. Based on our operating plan, we will need additional funds to meet operational needs and capital requirements for product development and commercialization. We currently have no credit facility or committed sources of capital. To fund future operations we will need to raise additional capital and our requirements will depend on many factors, including the following:
Funding may not be available to us on acceptable terms or at any terms. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or even suspend development of our initial vehicle. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, grants from the federal government, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our vehicle and future revenue streams, and we may have to grant licenses on terms that may not be favorable to us. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’stockholders' rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
The accompanying financial statements for the sixthree months ended June 30,March 31, 2016 and 2015, respectively, have been prepared on a basis that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have continuing net losses and negative cash flows from operating activities. In addition, we have deficiencies in working capital as of most of the balance sheet dates. These conditions raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. These circumstances caused our independent registered public accounting firm to include an explanatory paragraph in their report dated April 22, 2015,4, 2016, regarding their concerns about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to obtain additional financing as may be required to fund current operations. Management’sManagement's plans include selling our common stock to investors to raise working capital for operations and there is no assurance these plans will be realized.
Operating Activities
Net cash used in operating activities for the sixthree months ended June 30, 2015March 31, 2016 was $127,451$132,448 which resulted primarily from the loss of $222,678,$2,289,129, depreciation expense of $4,656,$632, amortization of prepaid consulting services for stock issuancesOID discount on notes payable of $42,666,$2,932, amortization of debtembedded conversion option liability discount of $9,956, increase$42,016, change in the fair value of embedded conversion option liability of $2,121,772, decrease in accounts payable of $33,260,$15,000, and increase in accrued liabilities of $4,689. Net cash used in operating activities for the six months ended June 30, 2014 was $316,287 which resulted primarily from the loss of $318,908, depreciation of $4,821, amortization of debt discount of $8,185, increase in prepaid expenses of $6,000, decrease in accounts payable of $5,000, and increase in accrued liabilities of $615.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2015 was $0. Net cash used in investing activities for the six months ended June 30, 2014 was $40,908 due to purchase of property and equipment.$4,329.
Financing Activities
Net cash provided by financing activities for the sixthree months ended June 30, 2015March 31, 2016 was $74,547$140,509 primarily due to the receipt of cash proceeds of $71,500$149,800 received from sale of common stock, receipt of cash proceeds from a related party of $10,000,two convertible promissory notes and cash paymentspayment of $6,953$9,291 against the loan received from a stockholder. Net cash provided by financing activities for the six months ended June 30, 2014 was $263,562 primarily due to the receipt of cash proceeds of $237,500 received from sale of common stock, cash proceeds of $40,000 received as a loan from a stockholder, and cash payments of $13,938 against the loan received from a stockholder.note payable.
As a result of the above activities, we experienced a net decreaseincrease in cash and cash equivalents of $52,904 and $93,633$8,061 for the sixthree months ended June 30, 2015 and 2014, respectively.March 31, 2016. Our ability to continue as a going concern is still dependent on our success in obtaining additional financing from investors or from sale of our common stock.
Contractual Commitments and Contingencies
The following table summarizes our obligations and commitments to make future payments under our contractual obligations:
Contractual Obligations
Note Payable - Stockholder Notes Payable(Note 1)
On June 18, 2014, the CompanyMay 23, 2013, we executed a promissory note (the “Note 1”"Note 1") with a stockholder third party lender in the principal amount of $53,000. The terms of the Note 1 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 2016, at which time the entire principal amount, plus any and all accrued interest shall be due and payable. We have made the cumulative principal payments on the Note 1 of $50,546 as of March 31, 2016 and the remaining balance of $2,454 on the Note 1 is due as of March 31, 2016. The Company is delinquent in making a payment of $2,454 as of March 31, 2016, and the note holder has not made a demand for the past due payment. We have recorded interest expense of $919 on Note 1 for the three months ended March 31, 2016, and the total accrued interest payable at March 31, 2016 was $6,204.
Note Payable - Stockholder (Note 2)
On June 18, 2014, we executed a promissory note (the "Note 2") with a stockholder lender in the principal amount of $40,000. The terms of the Note 1 require the Company2 required us 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. In connection with the issuance of Note 2, we have recorded a debt discount of $33,233 applied to normalize interest to 5% which will be amortized as interest expense over the life of the Note 2. We have not paid any principal payments towards the Note 2 as of March 31, 2016 and have recorded an interest expense of $2,932 for amortization of debt discount related to Note 2 for the three months ended March 31, 2016. The unamortized portion of debt discount was $12,707 at March 31, 2016. In addition, we have recorded an interest expense of $143 on Note 2 for the three months ended March 31, 2016 and the total accrued interest payable at March 31, 2016 was $2,775.
Note Payable (Note 3)
On May 23, 2013, the CompanyDecember 22, 2015, we executed a promissory note (the “Note 2”"Note 3") withto pay a stockholder third party lender ina commitment fee of $50,000 and legal fees of $25,000 for a total consideration of $75,000. The third party agreed to commit to purchase up to $5 million worth of our common stock over a period of time terminating on the earlier of (i) 24 months from the date on which the agreement was executed and delivered by the Company and the third party, or (ii the date on which the third party has purchased the aggregate maximum purchase of $5 million. The promissory note bears an interest at the rate of 10% per annum. Payment of all amounts due under Note 3, principal and interest, is due on or before June 30, 2016. We have recorded the principal amount of $53,000. The termsthe promissory note of $75,000 as a deferred asset upon execution of the Note 2 required us to make (a) a principal paymentpromissory note and which will be offset as fee for capital raise against the additional paid in capital when capital is raised by the third party. We have recorded an interest expense of $3,000 on or before June 6, 2013,$1,870 for the three months ended March 31, 2016 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 alltotal accrued interest shall be due and payable. Onpayable at March 30, 2015, the Company and the stockholder mutually agreed to extend the due date of payment of Note 2 to April 1,31, 2016 at which time, the entire principal amount plus and all accrued interest shall be due and payable.was $2,055.
The following table shows our contractual obligation to make the payments in accordance with the terms of the Notes.Notes Payable:
Contractual Obligations of Notes Payable at March 31, 2016:
For the year ended | | Note 1- $53,000 | | | Note 2- $73,233 | | | Note 3- $75,000 | | | Total | |
December 31, 2016 | | $ | 2,454 | | | $ | 67,141 | | | $ | 75,000 | | | $ | 144,595 | |
December 31, 2017 | | | - | | | | 13,161 | | | | - | | | | 13,161 | |
Total | | $ | 2,454 | | | $ | 80,302 | | | $ | 75,000 | | | $ | 157,756 | |
Convertible Promissory Note (the "CPN 1 Note")
On August 17, 2015, the Company received $45,000 from a third party investor against a $50,000 Convertible Promissory Note (the "CPN 1" Note) executed on August 17, 2015. The CPN 1 Note bears an interest rate of 10% per annum. The maturity date of the CPN 1 Note is May 17, 2016 and is the date upon which the principal sum of this promissory note, as well as any unpaid interest and other fees, shall be due and payable. The lender has the right at any time after the effective date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of fully paid and non-assessable shares of common stock of the Company as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the conversion price. The conversion price is the lessor of 55% of the lowest trade price in the 25 trading days previous to the conversion date.
Contractual obligations28
In connection with the issuance of the CPN 1 Note, the Company recorded an original issuance debt discount ("OID") in the amount of $5,000 which will be amortized to interest expense over the term of the draw of nine months. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $50,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $3,307 for a total initial embedded conversion option liability of $53,307. On February 17, 2016, the Company issued 108,403 shares of its common stock to the third party investor pursuant to a conversion notice under the terms of CPN 1 Note. Pursuant to the conversion notice, the investor converted $12,521 of the principal and interest of CPN 1 Note into 108,403 shares of our common stock valued at June 30, 2015:$0.1155 per share. On March 14, 2016, the Company issued 952,203 shares of its common stock to the third party investor pursuant to a conversion notice under the terms of CPN 1 Note. Pursuant to the conversion notice, the investor converted $5,237 of the principal of CPN 1 Note into 952,203 shares of our common stock valued at $0.0055 per share. As a result of the debt conversions, the Company recorded an expense of $320,810 due to change in fair value of the embedded conversion option liability for the three months ended March 31, 2016.
| | 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 | |
For the three months ended March 31, 2016, the Company has recorded interest expense of $1,100 on the CPN 1 Note, interest expense of $1,630 related to the amortization of the OID, $16,852 related to the amortization of the embedded conversion option liability discount , and $320,810 expense due the change in fair value of embedded conversion option liability due to debt conversions. The CPN 1 Note balance was $32,242 and $50,000 at March 31, 2016 and December 31, 2015, respectively, unamortized debt discount was $796 and $2,426, unamortized embedded conversion option liability discount was $8,148 and $25,000, and accrued interest of $2,924 and $1,849 at March 31, 2016 and December 31, 2015, respectively.
Convertible Promissory Note (the "CPN 2 Note")
On February 04, 2016, the Company closed and funded a financing transaction by entering into a Securities Purchase Agreement (the "Purchase Agreement") with a third party (the "Investor"). Pursuant to the Purchase Agreement, the Investor purchased from the Company a Convertible Promissory Note (the "CPN 2 Note", and together with the Purchase Agreement, the "Transaction Documents") in the aggregate principal amount of $86,000 (the "Principal Amount"), and the Company received net proceeds of $74,900 on February 4, 2016.
The Principal Amount bears interest at 6% per annum. All outstanding principal and accrued interest on the CPN 2 Note is due and payable on the maturity date, which is January 28, 2017. Any amount of principal or interest that is due under the CPN 2 Note, which is not paid by the maturity date, will bear interest at the rate of 24% per annum until it is paid. Further, the Company is obligated to reduce the Principal Amount by 50% on or before July 28, 2016. Should the Company fail to do so, then outstanding principal amount will be increased by 200%.
The Note is convertible into shares of the Company's common stock at any time at the discretion of the Investor at a conversion price per share equal to the lesser of: (a) the closing price of the Common Stock on the day before the conversion; or, (b) 50% of the lowest trading price for the common stock during the 30-days of trading ending on the latest complete trading day prior to the date of conversion. The conversion price is subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the Transaction Documents. The Company agreed to reserve that number of shares of common stock equal to 70% of our authorized shares of common stock not otherwise issued.
The CPN 2 Note may be repaid in whole at any time. The repayment amount is subject to a premium on the outstanding principal balance of 150%. If the Company fails to meet its obligations under the terms of the CPN 2 Note, the promissory note shall become immediately due and payable and subject to penalties provided for in the CPN 2 Note.
In connection with the issuance of the CPN 2 Note, the Company recorded an original issuance debt discount ("OID") in the amount of $11,100 which will be amortized to interest expense over the term of the draw of 357 days. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $86,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $10,995 for a total initial embedded conversion option liability of $96,995. For the three months ended March 31, 2016, the Company has recorded interest expense of $792 on the CPN 2 Note, interest expense related to the amortization of the OID discount of $1,741, interest expense related to the amortization of the embedded conversion option liability discount of $13,490, and change in fair value of embedded conversion option liability of $898,952. At March 31, 2016, the principal balance of CPN 2 Note was $86,000, embedded conversion option liability of CPN 2 Note was $887,957, unamortized OID discount was $9,359, unamortized embedded conversion option liability discount was $72,510, and accrued interest was $792.
Convertible Promissory Note (the "CPN 3 Note")
On February 29, 2016, the Company closed and funded a financing transaction by entering into a Securities Purchase Agreement (the "Purchase Agreement") with the same third party (the "Investor") who also executed CPN 2 Note. Pursuant to the Purchase Agreement, the Investor purchased from the Company a Convertible Promissory Note (the "CPN 3 Note"), and together with the Purchase Agreement, the "Transaction Documents") in the aggregate principal amount of $86,000 (the "Principal Amount"), and the Company received net proceeds of $74,900 on February 29, 2016.
The Principal Amount bears interest at 6% per annum. All outstanding principal and accrued interest on the CPN 3 Note is due and payable on the maturity date, which is March 1, 2017. Any amount of principal or interest that is due under the CPN 3 Note, which is not paid by the maturity date, will bear interest at the rate of 24% per annum until it is paid. Further, the Company is obligated to reduce the Principal Amount by 50% on or before July 28, 2016. Should the Company fail to do so, then outstanding principal amount will be increased by 200%.
The Note is convertible into shares of the Company's common stock at any time at the discretion of the Investor at a conversion price per share equal to the lesser of: (a) the closing price of the Common Stock on the day before the conversion; or, (b) 50% of the lowest trading price for the common stock during the 30-days of trading ending on the latest complete trading day prior to the date of conversion. The conversion price is subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the Transaction Documents. The Company agreed to reserve that number of shares of common stock equal to 70% of our authorized shares of common stock not otherwise issued.
The CPN 3 Note may be repaid in whole at any time. The repayment amount is subject to a premium on the outstanding principal balance of 150%. If the Company fails to meet its obligations under the terms of the CPN 2 Note, the promissory note shall become immediately due and payable and subject to penalties provided for in the CPN 3 Note.
In connection with the issuance of the CPN 3 Note, the Company recorded an original issuance debt discount ("OID") in the amount of $11,100 which will be amortized to interest expense over the term of the draw of one year. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $86,000 which will be amortized to interest expense over the term of the draw and an initial change in fair value of $11,734 for a total initial embedded conversion option liability of $97,734. For the three months ended March 31, 2016, the Company has recorded interest expense of $438 on the CPN 3 Note, interest expense related to the amortization of the OID of $943, interest expense related to the amortization of the embedded conversion option liability discount of $7,304, and change in the fair value of embedded conversion option liability of $902,010. At March 31, 2016, the principal balance of CPN 3 Note was $86,000, embedded conversion option liability on CPN 3 Note was $890,275, unamortized original issuance debt discount was $10,157, unamortized embedded conversion option liability discount was $78,690, and accrued interest was $438.
The Company has recorded a total interest expense of $2,305 and $0, on the principal balances of CPN 1 Note, CPN 2 Note and CPN 3 Note, for the three months ended March 31, 2016 and 2015, respectively. In addition, the Company has recorded interest expense for the three months ended March 31, 2016 and 2015, relating to (i) amortization of OID discount of $4,369 and $0, and (ii) amortization of the embedded conversion option liability discount of $37,646 and $0. The Company has recorded accrued interest of $4,179 and $1,849 as of March 31, 2016 and December 31, 2015, respectively.
Other Obligations
Settlement of litigation
The Company entered into an agreement for public relations services (the "Agreement") with an unrelated third party ("DLC") in September 2010. The Company disputed the quality of the services rendered and failed to tender final payment under the Agreement. DLC initiated legal action against the Company in January 2012 for collection under the Agreement. The Company did not have the resources to contest the action, so a default judgment was entered against the Company in favor of DLC in July 2012 in the amount of $14,425. Thereafter, DLC sought to collect on the judgment, and the total amount claimed by DLC grew to over $25,000 as DLC was entitled to collect attorney's fees under the Agreement.
In October 2013, we entered into a settlement agreementthe entire Agreement with a creditorDLC was negotiated and settled requiring the Company to pay $15,000 of which we paidDLC $3,000 in November 2013 and $1,000 per month for the next 12-month period. The Company agreed not to pay twelve monthly installmentscontest DLC's ownership of $1,000 each starting December 2013.80,000 shares of the Company's stock. The Company had recorded a liability and an expense of $15,000 as a result of this litigation in its consolidated financial statements as of March 31, 2016. As of June 30, 2015, we have made payments in the amount of $5,000 covering the eight months ended April 30, 2014, andMarch 31, 2016, the remaining liability on the settlement was $7,000.of $7,000 is included in accounts payable in accompanying consolidated financial statements. The Company plans to make a payment of $7,000on paying DLC for the months coveringof May 2014 through November 2014. Demand for payment of the delinquent balance2014, which DLC has not yet been received by the Company.to demand.
JOBS Act Accounting Election
We are an “emerging"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’smanagement'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’smanagement'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 2014 Annualthis Quarterly Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.
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.
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”Non-Employees".
Equity Instruments Issued to Non-Employees for Acquiring Goods or Services
Issuances of the Company’sCompany'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”"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.
Non Cash Equity Transactions
Shares of equity instruments issued for noncash consideration are recorded at the estimated fair market value of the consideration granted based on the estimated fair market value of the equity instrument, or at the estimated fair market value of the goods or services received whichever is more readily determinable.
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet arrangements as defined in Item 303(c) of the SEC’sSEC's Regulation S-K.S-B. 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.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk.Risk |
As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”"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.Procedures |
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer (who is also our Chief Financial Officer), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2015.March 31, 2016. The term “disclosure"disclosure controls and procedures,”" as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”"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 the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. 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 cost benefit relationship of possible controls and procedures. Based on their evaluation, management concluded as of June 30, 2015March 31, 2016 that our disclosure controls and procedures were not effective because of material weaknesses in our internal control over financial reporting, described below in Management’sManagement'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.
Management's Report on Internal Control Over Financial Reporting
The Company’sCompany's management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of Company management, including the CEO and the CFO, an evaluation was performed of the effectiveness of the Company’sCompany's internal control over financial reporting. The evaluation was based on the framework in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”("COSO"). Because.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 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 criteria set forth in Internal Control — Integrated Framework (1992), our management concluded that, as of June 30, 2015,March 31, 2016, our internal control over financial reporting was not effective because of the 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. |
| |
• | 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. |
| |
• | Have the Company’sCompany's independent transfer agent issue all stock certificates to stockholders listed on the Company’sCompany's stock ledger. |
| |
• | 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:
| |
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. |
| |
• | Implement more robust accounting policies and work with consultants to streamline activities and implement best practices. |
| |
• | 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. |
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. |
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’sCompany'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”"Risk Factors" in the 20142015 Annual Report filed with the Securities and Exchange Commission on April 23, 20154, 2016 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. |
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended June 30, 2015,March 31, 2016, the Company did not sell any shares of its common stock.
On February 23, 2016, the Company issued 108,403 shares of its common stock to Auctus Fund, LLC ("Auctus"), pursuant to private placements we sold a totalconversion notice from Auctus under the terms of 41,000the convertible promissory note dated August 17, 2015 (the "Auctus Note"), which was previously disclosed and reported by the Company on Form 8-K filed with the SEC on August 21, 2015. Pursuant to the Auctus Note and the conversion notice, Auctus converted $12,521 of principal and interest due under the Auctus Note into 108,403 shares of our common stock. The shares of common stockThese securities were issued in this offering were offered and sold without registrationtransactions not registered under the Securities Act or state securities laws, in reliance onupon the exemptionsexemption provided byunder Section 4(a)(2) (previously 4(2)) of the Securities Act andand/or Regulation D promulgated thereunderby the Securities and in reliance on similar exemptions under applicable state laws, based onExchange Commission. We believed that the lack of any general solicitation or advertising in connection withexemption was available because the offer and sale of the securities;securities did not involve a public offering and because of the limited number of recipients, the purchaser's representation of the investorsophistication in financial matters, and its access to information concerning our business.
On March 17, 2016, the Company issued 952,203 shares of its common stock to Auctus pursuant to a conversion notice and converted $5,237 of principal and interest due under the Auctus Note into 952,203 shares of our common stock. These securities were issued in transactions not registered under the Securities Act in reliance upon the exemption provided under Section 4(2) of the Securities Act and/or Regulation D promulgated by the Securities and Exchange Commission. We believed that it is an accredited investor (as that term is defined in Rule 501the exemption was available because the offer and sale of Regulation D) and that it was purchasing the securities fordid not involve a public offering and because of the limited number of recipients, the purchaser's representation of sophistication in financial matters, and its own account and without a viewaccess to distribute them. The shares were sold at a per share purchase price of $0.50 per share, resulting in $20,500 in aggregate proceeds to the Company.information concerning our business.
Subsequent to our fiscal quarter ended June 30, 2015March 31, 2016 and prior to AugustMay 12, 2016, the Company did not sell any shares of its common stock.
On February 4, 2016, the Company closed and funded a financing transaction by entering into a Securities Purchase Agreement (the "Purchase Agreement") with EMA Financial, LLC, a Delaware limited liability company ("EMA Financial"). Pursuant to the Purchase Agreement, EMA Financial purchased from the Company a Convertible Promissory Note (the "Note", and together with the Purchase Agreement, the "Transaction Documents") in the aggregate principal amount of $86,000 (the "Principal Amount"), and delivered net proceeds of $74,900, which amount became available for use by the Company on February 4, 2016. The Principal Amount bears interest at 6% per annum. All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which is January 28, 2017 (the "Maturity Date"). EMA may extend the Maturity Date by providing us with written notice at least 5 days before the Maturity Date. However, EMA may only extend the Maturity Date for up to an additional one-year period. Any amount of principal or interest that is due under the Note, which is not paid by the Maturity Date, will bear interest at the rate of 24% per annum until it is paid (the "Note Default Interest"). Further, we are obligated to reduce the Principal Amount by 50% on or before July 28, 2016, either through (i) accessing the funds under the Equity Purchase Agreement we described in our 8-K we filed December 28, 2015; or, (ii) subsequent financing closed by the Company. Should we fail to do so, the then outstanding principal amount will be increased by 200%. The Note is convertible into shares of the Company's common stock ("Common Stock") at any time at the discretion of EMA Financial at a conversion price per share equal to the lesser of: (a) the closing price of the Common Stock on the day before the conversion; or, (b) 50% of the lowest trading price for the common stock during the 30-days of trading ending on the latest complete trading day prior to the date of conversion (the "Conversion Price"). The Conversion Price is subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the Transaction Documents. We agreed to reserve that number of shares of Common Stock equal to 70% of our authorized shares of Common Stock not otherwise issued. The Note may be repaid in whole at any time. The repayment amount is subject to a premium on the outstanding principal balance of 150%. If the Company fails to meet its obligations under the terms of the Note the Note shall become immediately due and payable and subject to penalties provided for in the Note. All amounts due under the Note become immediately due and payable by us upon the occurrence of an event of default, including but not limited to (i) our sale of all or substantially all of our assets, (ii) our failure to pay the amounts due at maturity, (iii) our failure to issue shares of Common Stock upon any conversion of the Note, (iv) our breach of the covenants, representations or warranties under the Note, (v) our appointment of a trustee, (vi) a judgment against us in excess of $50,000 (subject to a 20 day cure period), (vii) our liquidation, (viii) the filing of a bankruptcy petition by us or against us, (ix) our failure to remain current in our reporting obligations under the Securities Exchange Act of 1934, (x) the delisting of our Common Stock from the OTCQB or equivalent exchange, (xi) a restatement of our financial statements for any period from two years prior to the Note until the Note has been paid in full, or (xi) our effectuation of a reverse stock split without 20 days prior written notice to EMA Financial. These securities were issued in transactions not registered under the Securities Act in reliance upon the exemption provided under Section 4(2) of the Securities Act and/or Regulation D promulgated by the Securities and Exchange Commission. We believed that the exemption was available because the offer and sale of the securities did not involve a public offering and because of the limited number of recipients, the purchaser's representation of sophistication in financial matters, and its access to information concerning our business.
On February 29, 2016 the Company entered into, closed, and funded a financing transaction by entering into a Securities Purchase Agreement (the "Purchase Agreement") with EMA Financial, LLC, a Delaware limited liability company ("EMA Financial"). Pursuant to the Purchase Agreement, EMA Financial purchased from the Company a Convertible Promissory Note (the "Note", and together with the Purchase Agreement, the "Transaction Documents") in the aggregate principal amount of $86,000 (the "Principal Amount"), and delivered net proceeds of $74,900 to the Company. The Principal Amount bears interest at 6% per annum. All outstanding principal and accrued interest on the Note is due and payable on the maturity date, which is March 1, 2017 (the "Maturity Date"). EMA may extend the Maturity Date by providing us with written notice at least 5 days before the Maturity Date. However, EMA may only extend the Maturity Date for up to an additional one-year period. Any amount of principal or interest that is due under the Note, which is not paid by the Maturity Date, will bear interest at the rate of 24% per annum until it is paid (the "Note Default Interest"). Further, we are obligated to reduce the Principal Amount by 50% on or before July 28, 2016, either through (i) accessing the funds under the Equity Purchase Agreement we described in our 8-K we filed December 28, 2015; or, (ii) subsequent financing closed by the Company. Should we fail to do so, the then outstanding principal amount will be increased by 200%. The Note is convertible into shares of the Company's common stock ("Common Stock") at any time at the discretion of EMA Financial at a conversion price per share equal to the lesser of: (a) the closing price of the Common Stock on the day before the conversion; or, (b) 50% of the lowest trading price for the common stock during the 30-days of trading ending on the latest complete trading day prior to the date of conversion (the "Conversion Price"). The Conversion Price is subject to adjustment for stock splits, reverse stock splits, stock dividends and other similar transactions and subject to the terms of the Transaction Documents. We agreed to reserve that number of shares of Common Stock equal to 70% of our authorized shares of Common Stock not otherwise issued. The number of shares Common Stock reserved are the same shares we reserved under the Convertible Promissory Note we disclosed in our Current Report filed on Form 8-K on February 10, 2015 we sold2016. As such, there is no increase in the number of shares of Common Stock from the earlier Convertible Promissory Note. The Note may be repaid in whole at any time. The repayment amount is subject to a totalpremium on the outstanding principal balance of 91,600150%. If the Company fails to meet its obligations under the terms of the Note the Note shall become immediately due and payable and subject to penalties provided for in the Note. All amounts due under the Note become immediately due and payable by us upon the occurrence of an event of default, including but not limited to (i) our sale of all or substantially all of our assets, (ii) our failure to pay the amounts due at maturity, (iii) our failure to issue shares of Common Stock upon any conversion of the Note, (iv) our breach of the covenants, representations or warranties under the Note, (v) our appointment of a trustee, (vi) a judgment against us in excess of $50,000 (subject to a 20 day cure period), (vii) our liquidation, (viii) the filing of a bankruptcy petition by us or against us, (ix) our failure to remain current in our reporting obligations under the Securities Exchange Act of 1934, (x) the delisting of our Common Stock from the OTCQB or equivalent exchange, (xi) a restatement of our financial statements for any period from two years prior to the Note until the Note has been paid in full, or (xi) our effectuation of a reverse stock split without 20 days prior written notice to EMA Financial. These securities were issued in transactions not registered under the Securities Act in reliance upon the exemption provided under Section 4(2) of the Securities Act and/or Regulation D promulgated by the Securities and Exchange Commission. We believed that the exemption was available because the offer and sale of the securities did not involve a public offering and because of the limited number of recipients, the purchaser's representation of sophistication in financial matters, and its access to information concerning our business.
Subsequent to our fiscal quarter ended March 31, 2016, and prior to May 12, 2016, the Company issued additional shares of its common stock. On April 29, 2016 the Company issued 1,432,999 shares of its common stock to Auctus pursuant to a conversion notice from Auctus under the terms of the Auctus Note. Pursuant to the Auctus Note and the conversion notice, Auctus converted $18,360 due under the Auctus Note into 1,432,999 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 stockstock. These securities were issued in these offerings were offered and sold without registrationtransactions not registered under the Securities Act or state securities laws, in reliance onupon the exemptionsexemption provided byunder Section 4(a)(2) (previously 4(2)) of the Securities Act andand/or Regulation D promulgated thereunderby the Securities and in reliance on similar exemptions under applicable state laws, based onExchange Commission. We believed that the lack of any general solicitation or advertising in connection withexemption was available because the offer and sale of the securities;securities did not involve a public offering and because of the limited number of recipients, the purchaser's representation of each investorsophistication in financial matters, and its access 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.information concerning our business.
Item 3. | Defaults Upon Senior Securities. |
Item 3 - Defaults Upon Senior Securities
None.
Item 4. | Mine Safety Disclosures. |
Item 4 - Mine Safety Disclosures
None.
Item 5. | Other Information. |
Item 5 - Other Information
None.
The following Exhibits are filed as part of this Quarterly Report pursuant to Item 601 of Regulation S-K:
| The following Exhibits are filed as part of this Quarterly Report pursuant to Item 601 of Regulation S-K: |
Exhibit Number | | Description |
| | |
2.1.1 | | Agreement and Plan of Merger dated December 5, 2007(1) |
| | |
2.1.2 | | Certificate of Merger - Delaware - dated December 5, 2007(1) |
| | |
2.1.3 | | Articles of Merger - Florida - dated December 7, 2007(1) |
| | |
2.1.4 | | Certificate of Merger – Delaware - dated September 20, 2011 (2) |
| | |
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) |
3.1.1 | | Certificate of Incorporation dated May 14, 1987(1) |
| | |
3.1.2 | | Articles of Amendment dated June 30, 1998(1) |
| | |
3.1.3 | | Articles of Amendment dated November 12, 1998(1) |
| | |
3.1.4 | | Articles of Amendment dated June 22, 2006(1) |
| | |
3.1.5 | | Certificate of Incorporation of Delaware entity dated October 11, 2007(1) |
| | |
3.1.6 | | Articles of Amendment dated October 18, 2007(1) |
| | |
3.1.7 | | Certificate of Amendment dated August 27, 2008(1) |
3.1.8 | | Amendment to Certificate of Incorporation dated December 27, 2013 (3) |
| | |
3.1.9 | | Certificate of Merger dated December 27,2013 (3) |
| | |
3.2.1 | | Florida Amended and Restated By-Laws(1) |
| | |
3.2.2 | | Delaware Amended and Restated By-Laws(1) |
| | |
10.1 | | Stock Purchase Agreement dated March 31, 2010 by and between the Company and Bedrock Ventures, Inc. (4) |
| | |
10.2 | | Repurchase Agreement dated April 1, 2010 by and among the Company and CENTURYCAPITALCENTURY CAPITAL PARTNERS, LLC, and CORPORATE SERVICES INTERNATIONAL, INC. (4) |
| | |
31.131.1* | | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*) |
| | |
31.231.2* | | Certification of the Chief Financial Officer and Chief Operating Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*) |
| | |
32.132.1* | | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002(*) |
| | |
32.232.2* | | Certification of the Chief Financial Officer and Chief Operating Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002(*) |
101*+ | | The following materials from the Company’s AnnualCompany's Quarterly Report on Form 10-K10-Q for the annualperiodquarterly period ended DecemberMarch 31, 2014,2016, formatted in XBRL (eXtensible Business ReportingLanguage)Reporting Language): (i) Consolidated Balance Sheets as at March 31, 2016 and December 31, 2014 and 2013;2015; (ii) Consolidated Statements of Operations for the yearsthree months ended DecemberMarch 31, 20142016 and 2013;2015; (iii) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014 and 2013; (iv) Consolidated Statements of Cash Flows for the yearsthree months ended DecemberMarch 31, 20142016 and 2013;2015; and (iv) Notes to Consolidated Financial Statements. |
101 INS | XBRL Instance Document* |
| |
101 SCH | XBRL Schema Document* |
| |
101 CAL | XBRL Calculation Linkbase Document* |
| |
101 DEF | XBRL Definition Linkbase Document* |
| |
101 LAB | XBRL Labels Linkbase Document* |
| |
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’sCompany's Form 8-K filed on December 31, 2013 and incorporated herein by reference. |
(4) | | Previously filed with the Company’sCompany'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 11, 2015May 13, 2016 | EMAV Holdings, Inc. |
| |
| |
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) |
24
42