UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2021March 31, 2022

or

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from _____ to _______

 

Commission File Number: 001-39132

 

 

EVMO,INC.

(exact name of registrant as specified in its charter)

 

RIDESHARE RENTAL, INC.

(former name of registrant as specified in its charter)

Delaware 95-3261426

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

   

433 N. Camden Drive, Suite 600195 South Robertson Blvd.

Beverly Hills, California

 9021090211
(Address of principal executive offices) (Zip Code)

(310) 926-2643

(Registrant’s telephone number, including area code)

 

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

Title of each class Trading Symbol Name of each exchange on which registered
None N/A N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock,common stock, as of the latest practicable date.

 

38,505,55469,693,274 shares of Common Stock,common stock, $0.000001 par value, as of AugustMay 13, 20212022

 

 

 

TABLE OF CONTENTS

 

PART I FINANCIAL INFORMATION: 
   
Item 1.Financial Statements1
   
 Condensed Consolidated Balance Sheets as of June 30, 2021March 31, 2022 and December 31, 20202021 (unaudited)12
   
 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and Six months Ended June 30, 2021 and 2020 (unaudited)23
   
 Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and Six months Ended June 30, 2021 and 2020 (unaudited)34
   
 Condensed Consolidated Statements of Cash Flows for the Six monthsThree Months Ended June 30,March 31, 2022 and 2021 and 2020 (unaudited)45
   
 Notes to Condensed Consolidated Financial Statements (unaudited)56
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1819
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk2425
   
Item 4.Controls and Procedures2425
   
PART II OTHER INFORMATION: 
   
Item 1.Legal Proceedings2526
   
Item 1A.Risk Factors26
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds26
   
Item 3.Defaults Upon Senior Securities26
   
Item 4.Mine Safety Disclosures26
   
Item 5.Other Information26
   
Item 6.Exhibits26
   
 Signatures27

 

ii

 

PART I – FINANCIAL INFORMATION

Item 1.

 

EVmo, Inc.

Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (unaudited)

Contents

Page
Financial Statements:
Consolidated Balance Sheets as of March 31, 2022 and December 31, 20212
Consolidated Statements of Operations for the Three Months ended March 31, 2022 and 20213
Consolidated Statement of Stockholders’ Equity for the Three Months ended March 31, 2022 and 20214
Consolidated Statements of Cash Flows for the Three Months ended March 31, 2022 and 20215
Notes to Consolidated Financial Statements6

1

EVmo, Inc.

Condensed Consolidated Balance Sheets

As of June 30, 2021March 31, 2022 and December 31, 20202021

 

  June 30,  December 31, 
  2021  2020 
  (unaudited)    
ASSETS        
Current Assets:        
Cash $162,727  $72,890 
Accounts receivable  428,623   119,239 
Prepaid expenses  171,405   23,861 
Deferred offering costs  251,918   - 
Total current assets  1,014,673   215,990 
         
Property and equipment, net  46,471   1,908 
Rental vehicles, net  8,010,050   6,196,433 
Right of use asset  210,763   - 
Other assets  200,000   200,000 
TOTAL ASSETS $9,481,957  $6,614,331 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities:        
Accounts payable (including $546,746 and $590,176 to related party) $2,274,029  $1,157,299 
Accrued expenses  103,067   961,704 
Convertible note payable, (net of discount of $1,103,849 and $0)  1,146,151   - 
Notes payables, current (net of discount of $0 and $1,973)  611,880   666,132 
Customer deposit - related party  -   150,000 
Advance from related parties  -   100,000 
Finance lease obligations, current  1,532,320   1,426,425 
Operating lease obligations, current  133,559   - 
Total current liabilities  5,801,006   4,461,560 
         
Note payable, net of current portion  148,863   149,414 
Finance lease obligations, net of current portion  1,554,858   926,453 
Operating lease obligations, net of current portion  87,615   - 
TOTAL LIABILITIES  7,592,342   5,537,427 
         
Commitments and contingencies  -   - 
         
STOCKHOLDERS’ EQUITY        
Preferred stock, $0.000001 par value; 10,000,000 shares authorized; nil shares issued and outstanding  -   - 
Common stock, $0.000001 par value; 90,000,000 shares authorized; 35,387,524 and 31,981,374 shares issued and outstanding  35   32 
Additional paid-in capital  36,817,909   29,750,864 
Accumulated deficit  (34,928,329)  (28,673,992)
Total stockholders’ equity  1,889,615   1,076,904 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $9,481,957  $6,614,331 

   March 31,   December 31, 
   2022   2021 
   (unaudited)     
ASSETS        
Current Assets:        
Cash $10,949,709  $1,853,928 
Accounts receivable  764,478   751,450 
Prepaid expenses  310,818   609,701 
Deferred offering costs  -   862,855 
Total current assets  12,025,005   4,077,934 
         
Property and equipment, net  44,731   45,601 
Rental vehicles, net  8,292,568   8,887,319 
Right of use asset  142,791   149,759 
Other assets  -   100,000 
TOTAL ASSETS $20,505,095  $13,260,613 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities:        
Accounts payable (including $207,135 and $670,047 to related party) $1,672,033  $3,784,315 
Accrued expenses  837,044   1,156,265 
Notes payables, current (net of discount of $0 and $0)  312,500   156,225 
Customer deposit - related party  -   - 
Advance from related parties  -   - 
Finance lease obligations, current  1,616,586   1,810,374 
Operating lease obligations, current  117,432   143,894 
Total current liabilities  4,555,595   7,051,073 
         
Note payable, net of current portion (net of discount of $1,246,566)  5,940,934   6,097,209 
Finance lease obligations, net of current portion  2,041,655   2,178,836 
Operating lease obligations, net of current portion  -   12,988 
TOTAL LIABILITIES  12,538,184   15,340,106 
         
Commitments and contingencies  -   - 
        
Series B Preferred stock, $0.000001 par value; 230,550 shares authorized; nil and 230,375 shares issued and outstanding  -   2,303,750 
         
STOCKHOLDERS’ EQUITY        
Preferred stock, $0.000001 par value; 10,000,000 shares authorized; nil shares issued and outstanding  -   - 
Common stock, $0.000001 par value; 90,000,000 shares authorized; 67,367,924 and 35,769,524 shares issued and outstanding  67   36 
Additional paid-in capital  53,135,766   39,275,591 
Accumulated deficit  (45,168,922)  (43,658,870)
Total stockholders’ equity  7,966,911   (4,383,243)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $20,505,095  $13,260,613 

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

12
 

EVmo, Inc.

Condensed Consolidated Statements of Operations

For the Three and Six Months Ended June 30,March 31, 2022 and 2021 and 2020 (unaudited)

 

                 2022  2021 
 Three Months Ended June 30,  Six Months Ended June 30,  Three Months Ended March 31, 
 2021  2020  2021  2020  2022  2021 
              
Revenue $2,652,083  $1,580,555  $4,946,615  $3,328,197  $2,459,709  $2,294,532 
                        
Cost of revenue  1,915,294   1,295,059   3,696,197   2,696,350   1,972,063   1,780,903 
                        
Gross profit  736,789   285,496   1,250,418   631,847   487,646   513,629 
                        
Operating expenses:                        
Selling and marketing expenses  64,816   79,133   230,564   210,642   64,336   165,748 
Product development  50,766   -   60,266   -   19,000   9,500 
General and administrative expenses  1,493,494   861,410   2,932,595   2,757,616   1,462,325   1,439,101 
Total operating expenses  1,609,076   940,543   3,223,425   2,968,258   1,545,661   1,614,349 
                        
Loss from operations  (872,287)  (655,047)  (1,973,007)  (2,336,411)  (1,058,015)  (1,100,720)
                        
Other income (expense):                        
Interest and financing costs  (964,387)  (67,795)  (4,289,330)  (147,651)  (452,037)  (3,324,943)
Other income  -   - 
Gain on forgiveness of debt  -   -   8,000   -   -   8,000 
Total other income (expense)  (964,387)  (67,795)  (4,281,330)  (147,651)  (452,037)  (3,316,943)
                        
Net loss $(1,836,674) $(722,842) $(6,254,337) $(2,484,062) $(1,510,052) $(4,417,663)
                        
Weighted average shares outstanding :                        
Basic  35,333,924   31,064,184   34,364,066   30,245,994   72,645,391   33,383,431 
Diluted  35,333,924   31,064,184   34,364,066   30,245,994   72,645,391   33,383,431 
                        
Loss per share                        
Basic $(0.05) $(0.02) $(0.18) $(0.08) $(0.02) $(0.13)
Diluted $(0.05) $(0.02) $(0.18) $(0.08) $(0.02) $(0.13)

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

23
 

EVmo, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Six Months Ended June 30,March 31, 2022 and 2021 and 2020 (unaudited)

 

                     
        Additional     Total 
  Common Stock  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Deficit  Equity (Deficit) 
Balance, December 31, 2020  31,981,374  $32  $29,750,864  $(28,673,992) $1,076,904 
                     
Issuance of common stock for cash  100,000   -   50,000   -   50,000 
Issuance of common stock for exercise of stock options  35,000   -   15,400   -   15,400 
Issuance of common stock for cashless exercise of stock options  960,550   1   (1)  -   - 
Issuance of common stock for settlement of litigation  225,000   -   1,103,750   -   1,103,750 
Issuance of common stock for conversion of convertible debt  1,000,000   1   499,999   -   500,000 
Issuance of common stock for settlement agreement  825,000   1   3,240,599   -   3,240,600 
Issuance of common stock for financing cost  600   -   1,440   -   1,440 
Beneficial conversion feature associated with convertible debt  -   -   30,000   -   30,000 
Value of warrants issued with convertible debt                    
Fair value of warrants issued for financing costs                    
Stock option expense  -   -   193,587   -   193,587 
Net loss  -   -   -   (4,417,663)  (4,417,663)
                     
Balance, March 31, 2021  35,127,524   35   34,885,638   (33,091,655)  1,794,018 
                     
Issuance of common stock for exercise of stock options  260,000   -   71,700   -   71,700 
Issuance of common stock for settlement of litigation              -   - 
Issuance of common stock for conversion of convertible debt              -   - 
Issuance of common stock for settlement agreement              -   - 
Issuance of common stock for financing cost              -   - 
Beneficial conversion feature associated with convertible debt  -   -   810,634   -   810,634 
Value of warrants issued with convertible debt  -   -   488,133   -   488,133 
Fair value of warrants issued for financing costs  -   -   457,417   -   457,417 
Stock option expense  -   -   104,387   -   104,387 
Net loss  -   -   -   (1,836,674)  (1,836,674)
                     
Balance, June 30, 2021  35,387,524  $35  $36,817,909  $(34,928,329) $1,889,615 
                     
Balance, December 31, 2019  29,427,803  $29  $28,735,894  $(25,171,915) $3,564,008 
                     
Stock option expense  -   -   457,242   -   457,242 
Net loss  -   -   -   (1,761,220)  (1,761,220)
                     
Balance, March 31, 2020  29,427,803   29   29,193,136   (26,933,135)  2,260,030 
                     
Issuance of common stock for cash  2,553,571   3   274,997       275,000 
Net loss  -   -   -   (722,842)  (722,842)
                     
Balance, June 30, 2020  31,981,374  $32  $29,468,133  $(27,655,977) $1,812,188 

  Shares  Amount  Capital  Deficit  (Deficit) 
        Additional     Total Stockholders’ 
  Common Stock  Paid-in  Accumulated  Equity 
  Shares  Amount  Capital  Deficit  (Deficit) 
Balance, December 31, 2021  35,769,524  $36  $39,275,591  $(43,658,870) $(4,383,243)
                   - 
Issuance of common stock for cash  27,400,000   28   13,700,000       13,700,028 
Issuance of common stock for exercise of stock options  91,500   1   69,996       69,997 
Issuance of common stock for conversion of convertible debt  128,125   1   64,063       64,064 
Issuance of common stock for financing cost  535,967   1   -       1 
Stock option expense          26,116       26,116 
Net loss              (1,510,052)  (1,510,052)
                     
Balance, March 31, 2022  65,725,116   67  53,135,766  (45,168,922)  7,966,911 
                     
Balance, December 31, 2020  31,981,374  $32  $29,750,864  $(28,673,992) $1,076,904 
                     
Issuance of common stock for cash  100,000   -   50,000   -   50,000 
Issuance of common stock for exercise of stock options  35,000   -   15,400   -   15,400 
Issuance of common stock for cashless exercise of stock options  960,550   1   (1)  -   - 
Issuance of common stock for settlement of litigation  225,000   -   1,103,750   -   1,103,750 
Issuance of common stock for conversion of convertible debt  1,000,000   1   499,999   -   500,000 
Issuance of common stock for settlement agreement  825,000   1   3,240,599   -   3,240,600 
Issuance of common stock for financing cost  600   -   1,440   -   1,440 
Beneficial conversion feature associated with convertible debt  -   -   30,000   -   30,000 
Stock option expense  -   -   193,587   -   193,587 
Net loss  -   -   -   (4,417,663)  (4,417,663)
                     
Balance, March 31, 2021  35,127,524   35   34,885,638   (33,091,655)  1,794,018 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

34
 

EVmo, Inc.

Condensed Consolidated Statements of Cash Flows

For the SixThree Months Ended June 30,March 31, 2022 and 2021 and 2020 (unaudited)

 

 2021  2020  2022  2021 
          
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss $(6,254,337) $(2,484,062) $(1,510,052) $(4,417,663)
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization  995,123   669,367   213,632   463,251 
Stock option expense  297,974   457,242   26,116   193,587 
Amortization of debt discounts  476,891   19,906   -   31,789 
Common stock issued for financing costs  1,440   -   32   1,440 
Common stock issued for settlement agreement  3,240,600   -   -   3,240,600 
Gain on forgiveness of debt  (8,000)  -   -   (8,000)
Fair value of warrants issued for financing costs  457,417   -   -   - 
Operating lease expense  47,458   - 
Leased Vehicles  381,989   18,708 
Changes in operating assets and liabilities:                
Accounts receivable  (309,384)  15,769   (13,028)  77,604 
Prepaid expenses  (147,544)  233,496 
Prepaid expenses and other assets  298,883   (31,815)
Other Assets  106,968   - 
Accounts payable  1,308,562   789,267   (2,112,283)  402,141 
Accrued expenses  (163,637)  (40,184)  (319,221)  (12,776)
Customer deposit - related party  (150,000)  -   -   125,000 
Operating lease liability  (37,047)  -   (39,450)  (6,654)
Net cash used in operating activities  (244,484)  (339,199)  (2,966,414)  77,212 
                
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of property and equipment  (47,051)  -   -   (47,051)
Net cash used in investing activities  (47,051)  -   -   (47,051)
                
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from sale of common stock  50,000   275,000   13,834,059   50,000 
Proceeds from exercise of stock options  87,100   -   -   15,400 
Proceeds from advance from related parties  503,766   150,000   -   503,766 
Repayment of advance from related parties  (603,766)  (150,000)  -   (34,485)
Proceeds from convertible note payable  2,500,000   -   -   500,000 
Proceeds from notes payable  -   342,675 
Proceeds from notes payable, net  -   (20,551)
Repayment of notes payable  (48,776)  -   -   - 
Redemption of Preferred Stock  (2,303,750)  - 
Repayment of finance lease obligations  (2,071,952)  (1,431,665)  (330,969)  (961,705)
Payment of deferred offering costs  (35,000)  -   862,855   - 
Net cash provided by (used in) financing activities  381,372   (813,990)  12,062,195   52,425 
                
NET INCREASE (DECREASE) IN CASH  89,837   (1,153,189)  9,095,781   82,586 
                
CASH, BEGINNING OF PERIOD  72,890   1,256,429   1,853,928   72,890 
                
CASH, END OF PERIOD $162,727  $103,240  $10,949,709  $155,476 
                
CASH PAID FOR:                
Interest $102,446  $127,745  $328,566  $51,114 
Income taxes $-  $-  $-  $- 
                
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES                
Payment of accounts payable/accrued expenses with common stock $1,103,750  $-  $1,103,750  $- 
Finance lease obligations $3,705,417  $2,246,285  $3,658,241  $3,705,417 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

45
 

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the SixYear Three Months Ended June 30,March 31, 2022 and 2021 and 2020 (unaudited)

 

Note 1 - Organization and Basis of Presentation

 

Organization and Line of Business

 

EVmo, Inc. (the(“EVmo” or the “Company”) was organizedincorporated on June 21, 2016 under the laws of the state of Delawareoriginally as a limited liability company. Itcompany and subsequently converted to a Delaware C corporation, alsocorporation. The Company was originally incorporated in Delaware, namedunder the name of YayYo, Inc. On September 11, 2020, the Companyand changed its name to Rideshare Rental, Inc. and on September 11, 2020. On March 1, 2021, the Company again changed its name this timefrom Rideshare Rental, Inc. to EVmo, Inc. The Company’s principal business

EVmo is a holding company operating principally through two wholly-owned subsidiaries: (i) Rideshare Car Rentals LLC, a Delaware limited liability company (“Rideshare”), and (ii) Distinct Cars, LLC, a Delaware limited liability company (“Distinct Cars”). Rideshare offers an online bookings platform (the “Rideshare Platform”) while Distinct Cars maintains a fleet of passenger vehicles and transit vans for use in the last-mile logistical space for rent to rent vehiclesour customers who are drivers in the ridesharing and delivery gig industries, while also providing them with insurance coverage and issuing them insurance cards in their own names. This enables such drivers to drivers who work for ridesharing Transportation Network Companies (“TNCs”)meet the vehicle suitability and other requirements of rideshare and delivery gig companies such as Uber, Lyft, DoorDash and Lyft, as well asGrubhub. Through Rideshare and Distinct Cars, we seek to become a leading provider of rental vehicles to drivers in the ridesharing and delivery gig-economy thatgig spaces, and an industry leader in supplying transit vans for last-mile logistics. “Gig” generally refers to a labor market characterized by the prevalence of short-term contracts or freelance work for companies such as DoorDash and GrubHub.opposed to permanent jobs.

 

Basis of Presentation

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”)(GAAP).

 

Risk and Uncertainties

Impact of COVID-19 on our Business

On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, it characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half of 2020, which has continued intothrough fiscal 2021. This was consistent with the first halfexperience of the TNCs whose drivers we service. According to Bloomberg Second Measure, Uber and Lyft sales were up 104% and 84% year-over-year, respectively, in February 2022 from one year earlier, even in spite of the Delta and Omicron variants that resulted in spikes of infections through periods of 2021. As

Given the current prevalence of FDA-approved eligible vaccines across most age groups, the datemarked decrease in the number of this quarterly report, several vaccinations for COVID-19 have received emergency-use authorization from the Food and Drug Administration and many of the lockdown restrictions imposed by state and local governments have abated. Still, the pandemic has not yet ended, and there have been multiple waves where infections, hospitalizations and deaths have sharply increased. Most recently, variants of the original virus have been identified, and many Americans have resisted obtaining one of the vaccinations, both of which have resulted in increases in the aggregate numberfirst quarter of infections. We therefore cannot predict2022, and the ultimate impactresulting easement of pandemic restrictions in our active markets, we are optimistic that COVID-19 maywill not have a material impact on our business overoperations in the entiretycurrent fiscal year. However, certain factors- including, for example, a new, more aggressive and deadly variant that is resistant to the vaccines- could reverse the positive trends of this year,recent months and possibly beyond.alter our prediction.

Interim financial statements

 

The unaudited condensed consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rulesresults and regulations. The results of operations for the sixthree months ended June 30, 2021March 31, 2022 are not necessarily indicative of the results expected for the year ending December 31, 2021.2022.

Note 2 – Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiaries, Distinct Cars LLC and RideShare, Car Rentals, LLC.and a third subsidiary, EV Vehicles, LLC, a Delaware limited liability company that is not yet operational. All significant intercompany transactions and balances have been eliminated.

6

EVmo, Inc.

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAPgenerally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.

 

5

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

Cash Equivalents

 

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less.

 

Property and Equipment and Rental Vehicles

 

Property and equipmentEquipment and rental vehiclesRental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment and rental vehicles is provided using the straight-line method for substantially all assets with estimated lives as follows:

Schedule of Estimated Lives of Equipment

 Computer equipment5 years
 Officer furniture7 years
 Leasehold improvements15 years or term of lease whichever is less
 Vehicles5 years

 

Long-Lived Assets

 

The Company applies the provisions of the Financial Standards Accounting Board (“FASB”)’s Accounting Standards Codification (“ASC”)ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at June 30, 2021,March 31, 2022 the Company determined that 0no impairment charge was necessary.

 

Revenue Recognition

 

The Company recognizes all of its material revenue from renting its fleet of cars to TNC drivers. Revenue is recognized generally on a weekly basis based on the rental agreements, which are generally entered into on a weekly basis.agreements. The Company recognizes revenue in accordance with FASB ASC Topic 606, Revenue From Contracts with Customers. Generally, this enables us to both recognize revenue when we have satisfied our obligations under our rental agreement, i.e. when we have provided the vehicle to our renter, and to recognize the entire amount we expect to receive pursuant to the agreement, including estimates.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

7

EVmo, Inc.

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.recorded. The adoption had no effect on the Company’s consolidated financial statements.

6

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

 

Stock-Based Compensation

 

The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees as well as non-employees, which is permitted under ASC 718.and non-employees. There were 2,006,250 4,582,842warrants and 1,515,000 694,625options outstanding as of June 30, 2021March 31, 2022 and 1,631,250warrants and 716,000 1,755,000options outstanding as of June 30, 2020.March 31, 2021.

 

Basic and Diluted Earnings Per Share

 

Earnings per share (“EPS”) is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic EPSearnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase shares of the Company’s common stock, par value $0.000001(the (the “Common Stock”) at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. There were 3,521,250 5,287,467and 2,347,250 3,386,250potentially dilutive options and warrants outstanding at June 30,March 31, 2022 and 2021, and 2020, respectively, and 750,000 shares potentially issuable upon the conversion of an outstanding convertible note at June 30, 2021.respectively.

 

Advertising Costs

 

The Company expenses the cost of advertising as incurred. Advertising costs for the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 were $230,56464,336 and $210,642165,748, respectively.

 

Fair Value Measurements

 

The Company applies the provisions of ASC Subtopic 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:

 

 ●Level 1 inputs to the valuation methodology are quoted, unadjusted prices for identical assets or liabilities in active markets.
   
 ●Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, as well as other than quoted prices for identical assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
   
 ●Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

 

8

EVmo, Inc.

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

At June 30,March 1, 2022 and 2021, and December 31, 2020, the Company did not identify any liabilities that are required to be presented on the balance sheet at fair value.

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued Accounting Standards Update (“ASU”)ASU 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.

 

7

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under ASC Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under ASC Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and EPSearnings-per-share (EPS) for convertible instruments and contract in an entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, which includes the Company, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements, and whether it intends to early adopt.statements.

 

Management does not believe that any recently issued, but not yet effective, accounting updatesstandards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

Note 3 – Property and Equipment

 

At June 30, 2021March 31, 2022 and December 31, 2020, property and2021 equipment consisted of the following:

Schedule of Property and Equipment

 June 30, December 31,  March 31, December 31, 
 2021 2020  2022 2021 
          
Computer equipment $6,046  $6,046  $6,046  $6,046 
Office furniture  17,401   -   17,401   17,401 
Leasehold improvement  29,650   -   29,650   29,650 
  53,097   6,046 
Property and Equipment  53,097   53,097 
Less accumulated depreciation  (6,626)  (4,138)  (8,366)  (7,496)
Equipment, net $46,471  $1,908  $44,731  $45,601 

 

Depreciation expense for equipment for the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 was $2,488870 and $744826, respectively.

9

EVmo, Inc.

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

 

Note 4 – Rental Vehicles

At June 30, 2021March 31, 2022 and December 31, 2020,2021 all of the Company’s rental vehicles consisted of the following:

Schedule of Rental Vehicles

 June 30, December 31,  March 31, December 31, 
 2021 2020  2022 2021 
          
Rental vehicles $11,874,137  $9,067,885  $13,132,629  $13,514,619 
  11,874,137   9,067,885 
Rental vehicles, gross  13,132,629   13,514,619 
Less accumulated depreciation  (3,864,087)  (2,871,452)  (4,840,061)  (4,627,300)
Rental vehicles, net $8,010,050  $6,196,433  $8,292,568  $8,887,319 

 

The Company’s leased assets, consisting ofrental vehicles are depreciated over their estimated useful life of five years years.. Depreciation expense for leased assets for the six monthsyears ended June 30,March 31, 2022 and 2021 and 2020 was $992,635519,533 and $668,623462,425, respectively. The leaseA majority of the rental vehicles are leased with terms are generally for 3012 to 36 months and the Company has the right to purchase the leased assetsvehicles at the end of the lease terms for generally a nominal amount.terms. The reduction in Rental Vehicles Asset balance was due to the sale of 36 Transit Vans in Q1 2022.

 

8

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

Note 5 – Notes Payable

Notes payable at June 30, 2021March 31, 2022 and December 31, 20202021 consisted of the following:

Schedule of Notes Payable 

  March 31,  December 31, 
  2022  2021 
       
Notes payable to individual investors; accrue interest at 8% per annum; principal payments equal to 1/12 of original balance plus interest due quarterly; due from dates ranging from August 9, 2020 to March 26, 2021; unsecured $-  $- 
Note payable to the Small Business Administration. The note bears interest at 3.75% per annum, requires monthly payments of $731 after 24 months from funding and is due 30 years from the date of issuance.  -   - 
Note payable issued under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in the amount of $192,775. The loan has terms of 24 months and accrues interest at 1% per annum. During the years ended December 31, 2021 and 2020, $8,000 and $184,775, respectively, of this loan has been forgiven as provided for in the CARES Act.  -   - 
Notes payable to a finance company, default interest at 14% per annum; monthly principal payments ranging from $10,000 to $40,000 with unpaid principal due on December 15, 2021  -   - 
Notes payable to a finance company, interest at LIBOR plus 10% per annum; monthly principal payments of 0.4166% of principal balance beginning August 1, 2022, with unpaid principal due on July 9, 2026 (A)  7,500,000   7,500,000 
Total notes payable  7,500,000   7,500,000 
Unamortized debt discount  (1,246,566)  (1,246,566)
Notes payable, net discount  6,253,434   6,253,434 
Less current portion  (312,500)  (156,225)
Long-term portion $5,940,934  $6,097,209 

  June 30,  December 31, 
  2021  2020 
Notes payable to individual investors; accrue interest at 8% per annum; principal payments equal to 1/12 of original balance plus interest due quarterly; due from dates ranging from August 9, 2020 to March 26, 2021; unsecured (A) $304,667  $304,667 
Note payable to the Small Business Administration. The note bears interest at 3.75% per annum, requires monthly payments of $731 after 24 months from funding and is due 30 years from the date of issuance.  148,863   149,414 
 Note payable issued under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in the amount of $192,775. The loan has terms of 24 months and accrues interest at 1% per annum. During the year ended December 31, 2020, $184,775 of this loan has been forgiven as provided for in the CARES Act.  -   8,000 
Notes payable to a finance company, default interest at 14% per annum; monthly principal payments ranging from $10,000 to $40,000 with unpaid principal due on December 15, 2021  307,213   355,438 
Total notes payable  760,743   817,519 
Unamortized debt discount  0   (1,973)
Notes payable, net discount  760,743   815,546 
Less current portion  (611,880)  (666,132)
Long-term portion $148,863  $149,414 

(A)In connection with the issuance of these notes payable in 2018 and 2017,On July 9, 2021 (the “Closing Date”), the Company also issuedentered into a Term Loan, Guarantee and Security Agreement (the “Term Loan Agreement”) with EICF Agent LLC (“EICF”), as agent for the lenders, and Energy Impact Credit Fund I, LP, as lender (the “Lender”), providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million (collectively, the “Term Loans”), consisting of a $7.5 million closing date term loan facility (the “Closing Date Term Loan”) and up to $7.5 million of borrowings under a delayed draw term loan facility (the “Delayed Draw Term Loan Facility”). The Closing Date Term Loan was fully drawn on the Closing Date, while the Delayed Draw Term Loan Facility is available upon the satisfaction of certain conditions precedent specified in the Term Loan Agreement. The Term Loan Agreement matures on July 9, 2026. Borrowings under the Term Loan Agreement bear interest at the London Interbank Offered Rate (“LIBOR”), plus a margin of 10.0%. As a condition precedent to the Agent and the Lender entering into the Term Loan Agreement, the Company issued to the Lender a common stock purchase warrant, dated as of the Closing Date (the “Warrant”), which grants the Lender the right to purchase up to 24,0501.5 million shares of its Common Stockthe common stock of the Company, par value $0.000001, at an exercise price of $2.10, subject to these note holdersadjustment as additional incentiveset forth in the Warrant. The Warrant is subject to make the loans. The aggregate fair value of thesevesting, with 450,000 shares of Common Stock exercisable as of the Closing Date and the remainder exercisable only in the event that the Company borrows under the Delayed Draw Term Loan Facility or fails to consummate a qualifying equity transaction on or before October 7, 2021. The Warrant has no expiration date. In addition, in October 2021, the Company was required to issue to Lender an additional warrant for 900,000 shares of common stock (the “Additional Warrant”) as a penalty since the Company was unable to raise equity capital within 90 days of the date of this agreement. Upon completion of the equity capital raise completed on January 6, 2022, anti-dilution adjustments were made to the issued warrants. The Warrant for 450,000 common shares at an exercise price of $2.10 was adjusted to one for 119,875711,656 shares at an exercise price of $1.33 and the Additional Warrant for 900,000 common shares at an exercise price was recorded as a discount on the note payable and as additional paid-in-capital. The discountadjusted to one for 1,174,311 shares at an exercise price of $119,8750.71 is being amortized over the term of the notes payable. During the six months ended June 30, 2021 and 2020, $1,973 and $19,906, respectively, was charged to interest expense as amortization of the discounts, with an unamortized balance of $0 at June 30, 2021..

 

10

EVmo, Inc.

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

In connection with the Company’s entry into the Term Loan Agreement, the Company entered into an exchange agreement, dated as of July 8, 2021 (the “Exchange Agreement”), with the holder (the “Holder”) of the Company’s 12.5% OID convertible promissory notes due January 12, 2022 issued on April 12, 2021 (the “Prior Notes”). This Exchange Agreement resulted in the issuance of preferred stock that was later either converted to common stock or redeemed after completion of the equity capital raise in January 2022. On January 22, 2022, 110,325 of Series B preferred stock was converted to 3,152,143 of common stock at $0.35 per share. On March 22, 2022, 110,525 of Series B preferred stock was converted to 3,157,857 of common stock at $0.35 per share. The remaining outstanding Series B preferred stock, 9,525 shares,was redeemed and a final warrant was issued to the Holder for 128,125 common shares at an exercise price of $0.50 per share.

A roll-forwardrollforward of notes payable from December 31, 20202021 to June 30, 2021March 31, 2022 is below:

Schedule of Outstanding Notes Payable 

Notes payable, December 31, 2021 $7,500,000 
Issued for cash  - 
Lease obligation converted to note payable  - 
Forgiveness of note payable  - 
Repayments  - 
Amortization of debt discounts  - 
Notes payable, March 31, 2022  7,500,000 

     
Notes payable, December 31, 2020 $815,546 
Forgiveness of note payable  (8,000)
Repayments  (48,776)
Amortization of debt discounts  1,973 
Notes payable, June 30, 2021 $760,743 

9

EVmo, Inc.

Notes to Condensed Consolidated Financial StatementsFuture payments under note payable obligations are as follows:

For the Six Months Ended June 30, 2021 and 2020 (unaudited)Schedule of Future Payments Under Note Payable Obligations

Years ending December 31,   
2022 $156,225 
2023  374,940 
2024  374,940 
2025  374,940 
2026  6,218,955 
Thereafter    
Notes payable $7,500,000 

Note 6 – Convertible Notes

On January 8, 2021, the Company, issued a stand-alone $500,000 convertible promissory note to Mr. John Gray, principal of one of the Company’s largest stockholders, the Gray Mars Venus Trust, Arizona 2015, an Arizona asset management limited partnership. The convertible note accrued interest at a fixed rate of 6% and had a maturity date of January 6, 2022. Any unpaid principal balance on the convertible note could be converted at any time, at the option of Mr. Gray, into shares of Common Stock at a price of $0.50 per share. The Company recorded a beneficial conversion feature associated with this convertible note of $30,000, which was recorded as a debt discount. On February 12, 2021, Mr. Gray converted the full amount of the convertible promissory note into 1,000,000 shares of Common Stock.

 

On April 12, 2021, the Company, entered into a securities purchase agreement with a certain investor in connection with the issuance, as of that same date, of a 12.5% 12.5% original issue discount convertible promissory note and a Common Stockcommon stock purchase warrant. The note hadhas an original principal amount of $2,250,000, with an original issue discount of $250,000. It borebears interest at a fixed rate of 10%10%, wasis convertible into shares of Common Stock at a price of $3.00per share (subject to adjustment as set forth in the note), and was to maturematures on January 12, 2022. The warrant grants the right to purchase 187,500shares of Common Stockcommon stock at an exercise price of $3.00, subject to adjustment as set forth therein, and is exercisable at any time within five years of the date of issuance. The agreement provides that additional warrants, each for 93,750shares of Common Stockcommon stock with an exercise price of $3.00$3.00 per share, will be issued by the Company to the investor on the 12th12th day of each month that the note remainedremains outstanding. Both the note and the warrant include anti-dilution provisions in which the conversion price of the note and the exercise price of the warrant will be reduced to equal the conversion or exercise price, as applicable, of any subsequently-issued derivative security to acquire shares of Common Stock,common stock, or their equivalent, should that conversion or exercise price be lower than that of the note or the warrant. To account for the note and warrant, the Company first determined the value of the note and the fair value of the detachable warrants issued in connection with this convertible note. The estimated value of the warrants of $623,373was determined using the Black-Scholes option pricing model and the following assumptions: a term of five yearsyears,, a risk-freerisk free interest rate of ..089%089%, a dividend yield of 0% 0% and volatility of 190%190%. The face amount of the convertible note of $2,250,000$2,250,000 was proportionately allocated to the convertible note and the warrant in the amount of $1,761,866and $488,134, respectively. Since the Company’s stock price exceeded the conversion price on the transaction date, there is an embedded beneficial conversion feature present in the convertible note of $810,633. The combined discount of $1,298,767plus the original issue discount are recorded as a debt discount to the convertible note and are being amortized over the year life of the note. In July 2021, the Company and noteholder agreed to convert the convertible note into 230,250 shares of the Company’s Series B Preferred Stock.

As described in Note 5, in connection with the Company’s entry into the Term Loan Agreement, the Company also entered into the Exchange Agreement. This Exchange Agreement resulted in the issuance of preferred stock that was later either converted to common stock or redeemed after completion of the equity capital raise in January 2022. On January 22, 2022, 110,325 of Series B preferred stock was converted to 3,152,143 of common stock at $0.35 per share. On March 22, 2022, 110,525 of Series B preferred stock was converted to 3,157,857 of common stock at $0.35 per share. The remaining outstanding Series B preferred stock, 9,525 shares, was redeemed and a final warrant was issued to the Holder for 128,125 common shares at an exercise price of $0.50 per share.

11

EVmo, Inc.

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

 

Please see Note 13- Subsequent Events for a description of how the note described immediately above has since been cancelled, and Series B convertible preferred stock has been issued to the investor.

A roll-forwardroll forward of convertible notes from March 31, 2022 to December 31, 2020 to June 30, 2021 is below:

Schedule of Convertible Notes

     
Convertible notes, December 31, 2020 $- 
Issued for cash  2,500,000 
Issued for original issue discount  250,000 
Debt discount related to convertible notes  (1,578,767)
Conversion to Common Stock  (500,000)
Amortization of debt discounts  474,918 
Convertible notes, June 30, 2021 $1,146,151 
Convertible notes, December 31, 2021$-
Issued for cash-
Issued for original issue discount-
Debt discount related to convertible notes-
Conversion to common stock-
Conversion to preferred stock-
Amortization of debt discounts-
Convertible notes, March 31, 2022$-

Note 7 – Financing Lease Obligations

 

Lease obligations at June 30, 2021March 31, 2022 and December 31, 20202021 consisted of the following:

Schedule of Lease Obligations

  March 31,  December 31, 
  2022  2021 
       
Lease obligations $3,658,241  $3,989,210 
Less current portion  (1,616,586)  (1,810,374)
Long-term portion $2,041,655  $2,178,836 

 

  June 30,  December 31, 
  2021  2020 
       
Lease obligations $3,087,178  $2,352,878 
Less current portion  (1,532,320)  (1,426,425)
Long-term portion $1,554,858  $926,453 

10

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

A roll-forwardrollforward of lease obligations from December 31, 20202021 to June 30, 2021March 31, 2022 is below:

Schedule of Outstanding Lease Obligations

    
Lease obligations, December 31, 2020 $2,352,878 
Lease obligations, December 31, 2021 $3,989,210 
New lease obligations  3,049,261   1,303,487 
Disposal of leased vehicles  (243,009)  (1,229,692)
Lease obligation converted to note payable  - 
Payments on lease obligations  (2,071,952)  (405,764)
Lease obligations, June 30, 2021 $3,087,178 
Lease obligations, March 31, 2022 $3,658,241 

 

Future payments under lease obligations are as follows:

Schedule of Future Lease Obligations

    
Years Ending December 31,   
2022 $1,310,334 
2023  1,823,126 
2024  615,200 
2025  406,075 
2026  71,969 
Total payments  4,226,714 
Amount representing interest  (568,463)
Lease obligation, net $3,658,241 

12

EVmo, Inc.

Twelve Months Ending June 30,   
2022 $1,663,320 
2023  1,099,666 
2024  540,146 
 Total payments  3,303,132 
 Amount representing interest  (215,954)
 Lease obligation, net $3,087,178 

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

 

Note 8 – Operating Lease Obligations

 

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate.

 

The Company leases its corporate office space under an operating lease that expires in 2023. The Company accounts for this lease under the provisions of ASC Topic 842 Leases.

 

The table below presents the lease-relatedlease related assets and liabilities recorded on the Company’s consolidated balance sheetsheets as of June 30, 2021:March 31, 2022:

Schedule of Operating Lease Obligations

   June 30, 
 Classification on Balance Sheet 2021  Classification on Balance Sheet 

March 31,

2021

 
Assets         
Operating lease assets Operating lease right of use assets $210,763  Operating lease right of use assets $109,953 
Total lease assets   $210,763  $109,953 
          
Liabilities          
Current liabilities          
Operating lease liability Current operating lease liability $133,559  Current operating lease liability $117,432 
Noncurrent liabilities          
Operating lease liability Long-term operating lease liability  87,615  Long-term operating lease liability  - 
Total lease liability   $221,174  $117,432 

 

Lease obligations at June 30, 2021March 31, 2022 consisted of the following:

Schedule of Lease Obligation Maturity

Years Ending December 31,   
2022 $101,432 
2023  13,150 
Total payments  117,432 
Total obligation  - 
Less: current portion  (117,432)
Non-current capital leases obligations $- 

 

The lease expense for the three months ended March 31, 2022 was $64,204. At March 31, 2022, the weighted average remaining lease terms was 1.0 year and the weighted average discount rate was 15%.

Twelve Months Ending June 30,   
2022 $157,800 
2023  92,050 
Total payments  249,850 
Less: imputed interest  (28,676)
Total obligation  221,174 
Less: current portion  (133,559)
Non-current capital leases obligations $87,615 

 

11

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the SixYear Three Months Ended June 30,March 31, 2022 and 2021 and 2020 (unaudited)

The lease expense for the six months ended June 30, 2021 was $63,010. The cash paid under operating leases for the six months ended June 30, 2021 was $52,600. At June 30, 2021, the weighted-average remaining lease term was 1.51 years and the weighted-average discount rate was 15%.

Note 9 – Stockholders’ Equity

 

The Company has authorized 100,000,000shares of capital stock, withwhich consists of 90,000,000shares of Common Stock,common stock, $0.000001par value per share, and 10,000,000shares of preferred stock, $0.000001par value per share.

Series B Preferred Stock

Pursuant to the Exchange Agreement (see Note 5), the Holder agreed to exchange the Prior Notes for 230,375 shares of Series B convertible preferred stock, par value $0.000001 per share (the “Series B Preferred Stock”), and a warrant (the “Exchange Warrant”). The Exchange Warrant granted the Holder the right to purchase 93,750 shares of Common Stock at an exercise price of $3.00, subject to adjustment as set forth therein. The Exchange Warrant is exercisable in full at any time within five years of the date of issuance. Additional warrants on substantially identical terms as the Exchange Warrant were issued by the Company to the Holder monthly until all of the outstanding Series B Preferred Stock was either converted or redeemed in full, upon which a final warrant was issued.

Pursuant to its Certificate of Designation and the Exchange Agreement, as applicable, the Series B Preferred Stock had the following features:

●The Series B Preferred Stock was convertible at any time at the option of the holder thereof into shares of Common Stock at an initial conversion price of $3.00 per share, subject to adjustment as set forth in the Certificate of Designation;

●The Series B Preferred Stock was subject to mandatory redemption in full at a redemption price initially equal to $10.00 per share, within 15 business days after the date on which the Company completed an equity financing resulting in total proceeds of at least $10 million. At any time after January 12, 2022, provided that the Company had paid in full all obligations outstanding under the Term Loan Agreement, the holders of a majority of the outstanding shares of Series B Preferred Stock were entitled to require the Company to redeem the Series B Preferred Stock at the then applicable redemption price, and any such redemption of Series B Preferred Stock would be prior and superior to the redemption of any and all other equity securities of the Company duly tendered for redemption; and

●If, at any time while the Series B Preferred Stock is outstanding, the Company completed any single public offering or private placement of its equity, equity-linked or debt securities (each, a “Future Transaction”), the Holder could, in its sole discretion, elect to apply all, or any portion, of the then outstanding Preferred Stock and any accrued but unpaid dividends, as purchase consideration for such Future Transaction. The conversion price applicable to such conversion would equal seventy percent (70%) of the cash purchase price paid per share, unit or other security denomination for the securities of the Company issued to other investors in the Future Transaction.

On January 22, 2022, 110,325 of Series B preferred stock was converted to 3,152,143 of common stock at $0.35 per share. On March 22, 2022, 110,525 of Series B preferred stock was converted to 3,157,857 of common stock at $0.35 per share. The remaining outstanding Series B preferred stock, 9,525 shares, was redeemed and a final warrant was issued to the Holder for 128,125 common shares at an exercise price of $0.50 per share.

 

Common Stock

 

During the sixthree months ended June 30, 2021,March 31, 2022, the Company:

 

●issued 100,0000 shares of Common Stock to a member of the Company’s Board of Directors, in a negotiated transaction for $0.50 per share, or aggregate cash consideration of $50,000;
●issued 295,000 shares of Common Stock for the exercise of 295,000 stock options for cash consideration of $87,100;
●issued 960,55027,400,000 shares of Common Stock for the cashless exercise of common stock through an equity capital raise at $1,000,0000.50 stock options;per share;
●issued 6003,152,143 shares of Common Stockcommon stock at $0.35per share to an investor in connection with a prior note payable agreement;redeem 110,325 shares of Series B Preferred Stock;
●issued 1,000,000 shares of Common Stock in connection with the conversion of a convertible note payable for $500,000;
●issued an aggregate of 225,000 shares of Common Stock in connection with legal settlements. The shares were valued at $1,103,750 which was based on the market price of the Common Stock on the grant date; and
●issued 825,0003,157,857 shares of common stock at $0.35per share to Acuitas Group Holdings, LLC, (“Acuitas”) which is now the Company’s largest shareholder, in connection with a settlement agreement between Acuitas and X, LLC, a limited liability company controlled by the Company’s former chief executive officer. The value of the shares was $redeem 3,240,600, 110,525 which was based on the market priceshares of the Common Stock at the date of the settlement agreement. The $3,240,600 was expensed as financing costs, as the dispute underlying the settlement agreement related to the anti-dilution of a prior investment in the Company by Acuitas.Series B Preferred Stock;

14

EVmo, Inc.

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

 

Stock Options and Warrants

 

The following is a summary of stock option activity:

Summary of Stock Option Activity

  Options Outstanding  Weighted Average Exercise Price  Weighted Average Remaining Contractual Life  Aggregate Intrinsic Value 
Outstanding, December 31, 2021  766,750  $.53   3.76  $98,937 
Granted  40,000   .47   4.89     
Forfeited  -   -         
Exercised  -             
Outstanding, March 31, 2022  806,750  $0.44   3.71  $162,791 
Exercisable, March 31, 2022  619,750  $0.50   3.86  $98,937 

 

The exercise price for options outstanding and exercisable at March 31, 2022:

        Weighted    
     Weighted  Average    
     Average  Remaining  Aggregate 
  Options  Exercise  Contractual  Intrinsic 
  Outstanding  Price  Life  Value 
Outstanding, December 31, 2020  2,540,000  $0.22   4.52  $1,074,245 
Granted  270,000   0.51         
Forfeited  -   0.00         
Exercised  (1,295,000)  0.230         
Outstanding, June 30, 2021  1,515,000  $0.29   4.09  $2,769,275 
Exercisable, June 30, 2021  772,500  $0.34   4.11  $1,390,384 

 Schedule of Options Outstanding by Exercise Price Range

Number of Options, Outstanding  Exercise Price, Outstanding  Number of Options, Exercisable  Exercise Price, Exercisable 
Outstanding  Exercisable 
Number of  Exercise  Number of  Exercise 
Options  Price  Options  Price 
 20,000  $0.210   20,000  $0.210 
 516,750   0.215   372,250   0.215 
 15,000   0.220   10,000   0.220 
 155,000   0.530   117,500   0.530 
 20,000   0.940   20,000   0.940 
 20,000   2.120   20,000   2.120 
 20,000   3.800   20,000   3.800 
 20,000   0.390   20,000   0.390 
 20,000   0.550   20,000   0.550 
 806,750       619,750     

For options granted during the three months ended March 31, 2022 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $0.47 and the weighted-average exercise price of such options was $0.47. No options were granted during the three months ended March 31, 2022 where the exercise price was less than the stock price at the date of grant or the exercise price was greater than the stock price at the date of grant.

 

1215
 

 

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the SixYear Three Months Ended June 30,March 31, 2022 and 2021 and 2020 (unaudited)

The exercise price forfair value of the stock options outstandingis being amortized to stock option expense over the vesting period. The Company recorded stock option expense of $26,116 and exercisable at June 30, 2021:$193,587 during the three months ended March 31, 2022 and 2021, respectively. At March 31, 2022, the unamortized stock option expense was $50,610.

Schedule of Options Outstanding by Exercise Price RangeWarrants

Outstanding  Exercisable 
Number of  Exercise  Number of  Exercise 
Options  Price  Options  Price 
 20,000  $0.210   15,000  $0.210 
 1,305,000   0.215   648,125   0.215 
 15,000   0.220   0   0.220 
 155,000   0.530   89,375   0.530 
 20,000   3.800   20,000   3.800 
 1,515,000       772,500     

 

The following is a summary of warrant activity:

Summary of Warrant Activity

        Weighted    
     Weighted  Average    
     Average  Remaining  Aggregate 
  Warrants  Exercise  Contractual  Intrinsic 
  Outstanding  Price  Life  Value 
Outstanding, December 31, 2020  1,631,250  $4.08   2.38  $- 
Granted  375,000   3.00         
Forfeited  -             
Exercised  -             
Outstanding, June 30, 2021  2,006,250  $3.88   2.44  $- 
Exercisable, June 30, 2021  2,006,250  $3.88   2.44  $- 

  Warrants Outstanding  Weighted Average Exercise Price  Weighted Average Remaining Contractual Life  Aggregate Intrinsic Value 
Outstanding, December 31, 2021  3,918,750  $2.87   3.17  $- 
Granted  664,092             
Forfeited  -             
Exercised  -             
Outstanding, March 31, 2022  4,582,842  $2.47   3.48  $- 
Exercisable, March 31, 2022  4,582,842  $2.47   3.48  $- 

 

The exercise price for warrants outstanding at June 30, 2021:March 31, 2022:

 Schedule of Warrants Outstanding by Exercise Price Range

Outstanding and ExercisableOutstanding and Exercisable Outstanding and Exercisable 
Number ofNumber of Exercise Number of Exercise 
WarrantsWarrants  Price Warrants Price 
375,000 $3.00 
1,500,000   4.00 1,174,311  $0.71 
131,250   5.00 711,656   1.33 
2,006,250     937,500   3.00 
1,500,000   4.00 
131,250   5.00 
128,125   .50 
4,582,842     

 

In connection with a convertible note discussed in Note 6, the Company has issued an aggregate of 187,500 warrants since the convertible note remained outstanding as of June 30, 2021. The fair value of the warrants was determined to be $451,415, using a Black-Scholes model, and has been recorded as financing costs in the accompanying statements of operations for the six months ended June 30, 2021. The Company used the following assumptions in determining the fair value:

Schedule of Assumptions Used

Risk-free interest rate0.76 – 0.87%
Expected life of the options5 years
Expected volatility190%
Expected dividend yield0%

1316
 

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the SixYear Three Months Ended June 30,March 31, 2022 and 2021 and 2020 (unaudited)

Note 10 – Related Party Transactions

 

During the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, the Company expensed $1,618,441 530,987and $1,103,460897,281, respectively, in insurance expense related to insuring the Company fleet of vehicles from an insurance brokerage firm whose owner is also a principal stockholder of the Company. At June 30, 2021 and December 31, 2020, $546,746 and $265,257, respectively, was owed to this insurance brokerage from and is included in accounts payable in the accompanying consolidated balance sheets.

The Company’s Executive Chairman, Terren S. Peizer, and its former chief executive officer (“CEO”), Ramy El-Batrawi, each made financial advances to the Company that were outstanding during the first six months of fiscal 2021. At December 31, 2020, the Company owed its former CEO $100,000. During the six months ended June 30, 2021, Mr. Peizer loaned the Company $503,767 and was repaid $503,767 and Mr. El-Batrawi was repaid the $100,000 outstanding from fiscal 2020. At June 30, 2021, the Company owed its Executive Chairman and its former CEO $0 and $0, respectively.

 

Note 11 – Contingencies

Legal Proceedings

From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. The Company is currently not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows, other than those described below.

Anthony Davis v. YayYo, Inc., and Ramy El-Batrawi

A complaint was filed on March 5, 2020, in the Los Angeles Superior Court by plaintiff Anthony Davis, who was hired by the Company as its CEO and as a director on or about December 2016. Mr. Davis’s employment with the Company ended after several months. As part of his compensation, Mr. Davis alleges that he expected to receive stock options in the Company. In his pleadings, Mr. Davis admits that he resigned from his executive officer and director positions, but asserts that he did not receive certain compensation in the form of stock options (he has also included a claim for wage and hour violations). The Company denies liability and has asserted that it has paid Mr. Davis all amounts due to him under his employment agreement, while also asserting that Mr. Davis failed to exercise his stock options before they expired on December 31, 2018. The Company has filed a demurrer to the first amended complaint, which is expected to be heardthe Superior Court granted in part and denied in part on September 8, 2021 in Superior Court.2021. The Plaintiff since filed a second amended complaint, to which the Company has filed an answer. The Company’s position is that the lawsuit entirely lacks merit, and the Company intends to defend it vigorously.

Ivan Rung v. YayYo, Inc., Ramy El-Batrawi, et al., 20STCV27876 and Michael Vanbecelaere v. YayYo, Inc., Ramy El-Batrawi, et al., 20STCV28066 (Vanbecelaere)(hereafter the “State Cases”)

On July 22 and July 23, 2020, respectively, two actions were filed in the Los Angeles Superior Court. The complaints underlying the State Cases differ only by a few words and some random punctuation marks, and are therefore virtually identical. Plaintiffs Ivan Rung and Michael Vanbecelaere each claimed to have purchased the Common Stock as part of the Company’s initial public offering (the “IPO”); they purport to bring a securities class action on behalf of all purchasers of the Common Stock pursuant to the registration statement and prospectus filed with the SEC and distributed in connection with the Company’s IPO, which was launched on November 14, 2019. The State Case complaints allege misrepresentations and material omissions in the SEC filings in violation of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”). The Company has and continues to vigorously deny any and all liability and asserts that the State Cases are baseless. It is the Company’s firm position that it accurately and completely disclosed all material facts and circumstances in its SEC filings relating to the IPO, and subsequently in its periodic SEC reports, including those that were potentially adverse to the Company’s operations and business prospects. The State Cases litigation is presently stayed pending the outcome of the federal securities case discussed below (Hamlin v. YayYo, Inc.)

14

EVmo, Inc., as to which, as noted below, the parties have announced a “settlement in principle,” which is subject to court approval in the district court. The Company anticipates filing motions to dismiss the purported class actions in Superior Court on the basis of the anticipated approval of the federal settlement.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

Jason Hamlin v. YayYo, Inc., Ramy El-Batrawi, et al., 20-cv-8235 (SVW) and William Koch v. YayYo, Inc., Ramy El-Batrawi, et al., 20-cv-8591 (SVW)(now consolidated as “In re YayYo Securities Litigation”)

These two actions were filed on September 9, 2020 and September 18, 2020, respectively, in the United States District Court for the Central District of California. Plaintiffs Jason Hamlin and William Koch each claim to have purchased the Common Stock as part of the IPO and, like the plaintiffs in the State Cases, purport to bring a securities class action pursuant to Sections 11 and 15 of the Securities Act, as well as and Section 17(a) and 10(b)(5) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on behalf of all purchasers of the Common Stock in the IPO. The first amended complaint, like the State Cases, alleges false statements and material omissions of material fact in connection with the SEC filings distributed in connection with the IPO. The defendants include directors of the Company and the underwriters of the IPO, WestPark Capital, Inc. (“WestPark”) and Aegis Capital Corp. The federal court has consolidated the two matters for all practical purposes. As with the State Cases, the Company deniesdenied liability and assertsasserted that it accurately and completely disclosed all material facts and circumstances in its SEC filings, and that the complaint’s alleged violations of securities laws are baseless. The parties to the federal court litigation announced on October 21, 2021 that they had reached a settlement, which received preliminary approval by the district court on January 13, 2022, allowing the notice of the proposed settlement to be distributed to all class members, who unless they object or drop out, will be bound by the multi-million dollar settlement. The Company’s motionportion of the settlement was $1 million paid out in equal installments every three months over the course of 2022. These payments have been and will continue to be timely made. Executive Chairman Terren Peizer provided his personal guarantee for judgment on the pleadings was recently denied, andwhole amount due to the plaintiff’s motion for class action certification is presently pending.plaintiffs. The Company intends to vigorously defend the lawsuit in federal court. The Courtdistrict court has set a trial datehearing for final approval of October 5, 2021.the settlement for June 6, 2022 in an order that stated: “the Court grants preliminary approval of the settlement and of the notification procedures as detailed in the parties’ proposed order, ECF No. 168-2,” with the court setting dates for persons to file objections or comments to the settlement prior the hearing which was “set for June 6, 2022 at 1 :30p.m.”

17

EVmo, Inc.

Notes to Consolidated Financial Statements

For Year Three Months Ended March 31, 2022 and 2021 (unaudited)

Konop v. El-Batrawi, et al., 1:20-cv-1379- MN (Filed in Del. District Court)

On October 12, 2020 a complaint was filed in Delaware District Court, which has since been transferred to the U.S. District Court for the Central District of California, and assigned as a related case to the judge in the pending federal securities action described immediately above. This case is a purported shareholder derivative action, in which allegesthe Company is a nominal defendant, alleging that the Company’s executive officers and directors at the time of its IPO made false and misleading statements relating to the Company’s business, operations, and future prospects and that the directors breached their fiduciary duties in doing so. The Company believes that the allegations of the complaint are spurious and will vigorously defend the case at trial.

15

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

Bellridge Capital, LP, v. EVmo, Inc., 1:21-cv-07091-PGG (Filed in Southern District of New York)

ForIn the Six Months Ended June 30,first half of 2021 a warrant holder, Bellridge Capital, LP, sought to exercise a warrant for 1,500,000 shares for a nominal amount, claiming that an anti-dilution adjustment had been triggered in 2020, which had reduced the exercise price to such amount. The Company rejected the exercise, on the basis that the warrant had previously been amended to remove the anti-dilution adjustment provisions and 2020 (unaudited)fix the exercise price at $4.00. In September 2021, the warrant holder brought suit for damages in the Southern District of New York. It is the Company’s position that the lawsuit is without merit. This lawsuit is currently in the discovery phase.

 

Note 12 – Settlements

FirstFire Settlement of In re YayYo Securities Litigation and the State Cases

On February 11, 2021,Please see a description of the preliminary collective settlement the Company entered into a settlement agreement and mutual release (the “Settlement Agreement”) with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (“FirstFire”), relating to a pending action in the U.S. District Court in the Southern District of New York, FirstFire Global Opportunities Fund, LLC v. WestPark Capital, Inc. et. al., No. 1:20-cv-03327-LLS. The other parties to the Settlement Agreement were the Company’s co-defendants in the litigation, WestPark, Mr. Richard A. Rappaport and Mr. Ramy El-Batrawi, former chief executive officer of the Company.

This litigation was commenced by FirstFire in April 2020 and subsequently amended in December 2020. FirstFire was a subscriber to the Company’s IPO. It alleged in the litigation that the Company and the other named defendants had,has reached in connection with both the IPOIn re YayYo Securities Litigation and the registration statement on Form S-1 filed thereto, committed violations of Sections 11, 12(a) and 15 of the Securities Act, Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated under the Exchange Act. Each of the Company, WestPark, Mr. Rappaport and Mr. El-Batrawi vigorously denied and disputed these allegations.

In consideration of the releases, covenants, terms and conditions set forthState Cases in the Settlement Agreement, FirstFire agreed to dismiss the litigation with prejudice, to not file any further litigation relating to the IPO, and to waive and relinquish any and all claims on shares of Common Stock other than as specified in the Settlement Agreement.“Note 11- Contingencies” above. The Company agreedexpects that the district court will grant final approval to sell to FirstFire one hundred fifty thousand (150,000) shares of Common Stock (the “Settlement Shares”), with such shares issued pursuant to the exemption from registration under Rule 506(b) of the Act. The purchase price of the Settlement Shares was $0.066667 per share, or an aggregate of $10,000. Any resale of the Settlement Shares by FirstFire shall be subject to the conditions of Rule 144 of the Act. None of WestPark, Mr. Rappaport or Mr. El-Batrawi contributed to the Settlement Shares or any other consideration under the Settlement Agreement.

Social Reality Settlement

On February 19, 2021, the Company entered into a confidentialthis omnibus settlement agreement and mutual release with SRAX, Inc., a Delaware corporation formerly known as Social Reality, Inc. (“SRAX”), relating to an action brought by SRAX against the Company in Los Angeles Superior Court on or around February 11, 2020. A descriptionJune 6, 2022, and, in anticipation of this litigationsuch approval, has been included bymaking settlement payments to the Company in its prior filings.plaintiffs during the first quarter of 2022.

16

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

The Company and SRAX mutually agreed to keep the material terms of this settlement confidential, subject to disclosure as required by applicable law or regulation.

 

Note 13 – Subsequent Events

The Company has evaluatedThere are no material subsequent events through August 13, 2021. The Company has determined there were no subsequent events that require recognition or disclosure in the financial statements, except as discussed below.

During the two months subsequent to June 30, 2021, the Company has issued an aggregate of 187,500 warrants pursuant to the terms of the convertible note agreement discussed in Note 6.

On July 9, 2021 (the “Closing Date”), the Company entered into a Term Loan, Guarantee and Security Agreement (the “Term Loan Agreement”) with EICF Agent LLC (“EICF”), as agent for the lenders, and Energy Impact Credit Fund I, LP, as lender (the “Lender”), providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million (collectively, the “Term Loans”), consisting of a $7.5 million closing date term loan facility (the “Closing Date Term Loan”) and up to $7.5 million of borrowings under a delayed draw term loan facility (the “Delayed Draw Term Loan Facility”). The Closing Date Term Loan was fully drawn on the Closing Date, while the Delayed Draw Term Loan Facility is available upon the satisfaction of certain conditions precedent specified in the Term Loan Agreement. The Term Loan Agreement matures on July 9, 2026. Borrowings under the Term Loan Agreement bear interest at the London Interbank Offered Rate (“LIBOR”), plus a margin of 10.0%. As a condition precedent to the Agent and the Lender entering into the Term Loan Agreement, the Company issued to the Lender a common stock purchase warrant, dated as of the Closing Date (the “Warrant”), which grants the Lender the right to purchase up to 1.5 million shares of the common stock of the Company, par value $0.000001 (the “Common Stock”), at an exercise price of $2.10, subject to adjustment as set forth in the Warrant. The Warrant is subject to vesting, with 450,000 shares of Common Stock exercisable as of the Closing Date and the remainder exercisable only in the event that the Company borrows under the Delayed Draw Term Loan Facility or fails to consummate a qualifying equity transaction on or before October 7, 2021. The Warrant has no expiration date.

In connection with the Company’s entry into the Term Loan Agreement, the Company entered into an exchange agreement, dated as of July 8, 2021 (the “Exchange Agreement”), with the holder (the “Holder”) of the Company’s 12.5% OID convertible promissory notes (see Note 6) due January 12, 2022issued on April 12, 2021 (the “Prior Notes”).

Pursuant to the Exchange Agreement, the Holder agreed to exchange the Prior Notes for 230,375 shares of Series B convertible preferred stock, par value $0.000001 per share (the “Preferred Stock”), and a warrant (the “Exchange Warrant”). The Exchange Warrant grants the Holder the right to purchase 93,750 shares of Common Stock at an exercise price of $3.00, subject to adjustment as set forth therein. The Exchange Warrant is exercisable in full at any time within five (5) years of the date of issuance. Additional warrants on substantially identical terms as the Exchange Warrant will be issued by the Company to the Holder monthly until such time as the Preferred Stock is redeemed in full, upon which a final warrant will be issued.

The Preferred Stock is convertible at any time at the option of the holder thereof into if not previously converted into shares of Common Stock at an initial conversion price of $3.00 per share, subject to adjustment as set forth in the Certificate of Designation (as defined below).

The Preferred Stock is subject to mandatory redemption in full at a redemption price initially equal to $10.00 per share, within 15 business days after the date on which the Company has completed an equity financing resulting in total proceeds of at least $10 million. At any time after January 12, 2022, provided that the Company has paid in full all obligations outstanding under the Term Loan Agreement, the holders of a majority of the outstanding shares of Preferred Stock shall be entitled to require the Company to redeem the Preferred Stock at the then applicable redemption price, and any such redemption of Preferred Stock shall be prior and superior to the redemption of any and all other equity securities of the Company duly tendered for redemption.

If at any time while the Preferred Stock is outstanding, the Company completes any single public offering or private placement of its equity, equity-linked or debt securities (each, a “Future Transaction”), the holders of the Preferred Stock may, in their sole discretion, elect to apply all, or any portion, of the then outstanding Preferred Stock and any accrued but unpaid dividends, as purchase consideration for such Future Transaction. The conversion price applicable to such conversion shall equal seventy percent (70%) of the cash purchase price paid per share, unit or other security denomination for the securities of the Company issued to other investors in the Future Transaction.report.

 

1718
 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q may containCertain statements made herein, as well as in other filings we make with the SEC and other written and oral information we release, regarding our future performance constitute “forward-looking statements,” withinstatements” as defined in the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.1995. Forward-looking statements can be identified by words such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” and similar references to future periods. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. AnyThe forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the continued expansion of our business, which involvesassumptions involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe our assumptions underlying anythe forward-looking statements are reasonable, theyany of the assumptions could prove to be inaccurate, and, therefore, there can be no assurance thatthe forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Our actual results may differ materially from those anticipated in anythese forward-looking statements as a result of various factors.factors, including those described elsewhere in this report and as also may be described from time to time in future reports we file with the SEC. You should read such information in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the SEC.

Our Corporate History and Background

 

The CompanyEVmo was organized in Delawareinitially formed on June 21, 2016 as a Delaware limited liability company under the name “YayYo, LLC.” ItThe Company was subsequently converted into a Delaware corporation and allpursuant to Section 265 of YayYo, LLC’s liabilities and assets were assumed by the Company. On September 11, 2020,Delaware General Corporation Law (the “DGCL”). The Company now operates as a “C” corporation formed under the Company changed its name to Rideshare Rental, Inc. and on March 1, 2021,laws of the Company again changed its name, this time to EVmo, Inc.State of Delaware.

 

The Company isWe became a holdingreporting company operating through its principal wholly-owned subsidiaries, Distinct Cars, LLC (“Distinct Cars”) and Rideshare Car Rentals, LLC (“Rideshare Car Rentals”).

Rideshare Car Rentals is an online rideshare vehicle booking platform designed to service the ridesharing economy, i.e. the Rideshare Platform, particularly ridesharing companies such as Uber and Lyft and delivery-gig companies like DoorDash and GrubHub. Distinct Cars maintains a fleet of standard and, increasingly, electric passenger vehicles available for rent to drivers in both the ridesharing and delivery-gig industries. The Company seeks to turn over its entire vehicle fleet to electric vehicles over the next several years in order to become the leading provider of electric rental vehicles to drivers in the ridesharing and delivery-gig economies.

Onwhen, on March 16, 2018, we completed17, 2017, an offering under Regulationcircular on Form 1-A relating to a best-efforts offering of our common stock pursuant to “Regulation A+” of the Securities Act whichof 1933, as amended (the “Securities Act”), was qualified by the SECSecurities and Exchange Commission (the “SEC”). Then, on March 15, 2017, and sold a total of 365,306 shares of Common Stock. We received cash proceeds of $1.8 million, net of commissions and other costs associated with the gross offering proceeds or payable by us.

On November 15, 2019, the Company effected its IPO, sellingwe completed an initial public offering of 2,625,000 shares of Common Stock, at $4.00 per share, for gross proceeds, before underwriting discounts and commissions and expenses, of $10.5 million and our Common Stockcommon stock was then listed on the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “YAYO.”

 

On February 10, 2020, after being advised by Nasdaq that it believed we no longer met the conditions for continued listing, the Company notified Nasdaq ofannounced its intent to voluntarily delist its Common Stock from Nasdaq. In connection therewith, the Company filed a Form 25 with the SEC on February 20, 2020. The Company elected to effect the voluntary delisting of its Common Stock after discussions with Nasdaq’s staff, and based on the determination of the Company’s board of directors that voluntarily delisting the Common Stock from Nasdaq was in the best interests at that time of the Company and its stockholders. Followingcommon stock. Since delisting from Nasdaq, the Common Stockour common stock has been quoted and traded on the Pink Open Market, stillwhich is operated by OTC Markets Group, under the trading symbol, “YAYO.”same ticker symbol. The delisting was effective on March 1, 2020.

 

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In September 2020, we changed our name from YayYo, Inc. to Rideshare Rental, Inc., in order for our corporate brand to better reflect our principal businesses, ridesharing and vehicle rentals. In February 2021, we again changed our name to EVmo, Inc., to underscore our commitment to making a full transition to electric vehicles by the end of 2024.

We are a holding company operating principally through two wholly-owned subsidiaries: Rideshare Car Rentals, LLC and Distinct Cars, LLC. Our proprietary Rideshare Platform provides TNC drivers with an online booking platform, while Distinct Cars maintains a fleet of passenger vehicles and transit vans for use in the last-mile logistical space for rent to our TNC driver customers, enabling such drivers to meet the vehicle suitability and other requirements of rideshare and delivery gig companies such as Uber, Lyft, DoorDash and Grubhub. Through Rideshare and Distinct Cars, we seek to become a leading provider of rental vehicles to drivers in the ridesharing and delivery gig spaces, and an industry leader in supplying transit vans for last-mile logistics.

 

Impact of COVID-19 on our business

 

On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, it characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half of 2020, which has continued intothrough fiscal 2021. This was consistent with the first halfexperience of the TNCs whose drivers we service. According to Bloomberg Second Measure, Uber and Lyft sales were up 104% and 84% year-over-year, respectively, in February 2022 from one year earlier, even in spite of the Delta and Omicron variants that resulted in spikes of infections through periods of 2021. As

Given the current prevalence of FDA-approved eligible vaccines across most age groups, the datemarked decrease in the number of this quarterly report, several vaccinations for COVID-19 have received emergency-use authorization from the Food and Drug Administration and many of the lockdown restrictions imposed by state and local governments have abated. Still, the pandemic has not yet ended, and there have been multiple waves where infections, hospitalizations and deaths have sharply increased. Most recently, variants of the original virus have been identified, and many Americans have resisted obtaining one of the vaccinations, both of which have resulted in increases in the aggregate numberfirst quarter of infections. We therefore cannot predict2022, and the ultimate impactresulting easement of pandemic restrictions in our active markets, we are optimistic that COVID-19 maywill not have a material impact on our business overoperations in the entiretycurrent fiscal year. However, certain factors- including, for example, a new, more aggressive and deadly variant that is resistant to the vaccines- could reverse the positive trends of this year,recent months and possibly beyond.alter our prediction.

Principles of consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its principal wholly-owned subsidiaries, Distinct Cars, LLC and RideShare Car Rentals.Rentals, LLC. All significant intercompany transactions and balances have been eliminated.

 

Consolidated Results of Operations—Three Months Ended June 30, 2021,March 31, 2022, Compared to Three Months Ended June 30, 2020March 31, 2021

 

Total Revenues.

 

Revenue for the three months ended June 30, 2021March 31, 2022 was $2,652,083,$2,459,709, an increase of $1,071,528$165,177 or 67.8%6.7% compared to revenue for the three months ended June 30, 2020March 31, 2021 of $1,580,555.$2,294,532. The increase is principally due to an increase in rentals of our vehicle fleet. During the three months ended June 30, 2021, the average weekly rental income per vehicle placed in service was $413 compared to $292 for the same period in 2020. Our revenues declined in March-April of 2020 due to the impact of COVID-19fleet and began to recover in May-June 2020. Our revenue since June 2020 has now exceeded pre-COVID-19 levels, but there is no assurance that this trend will continue.

Cost of Revenues.

The principal components of costs of revenue are depreciation of our fleet vehicles, vehicle insurance, and vehicle maintenance.

Cost of revenues for the three months ended June 30, 2021 was $1,915,294, an increase of $620,235 or 49.9% compared to cost of revenues for the three months ended June 30, 2020 of $1,295,059. The increase is due to higher depreciation expense and insurance expense due to an increase in fleet size. For the three months ended June 30, 2021 and 2020 our cost of revenue was 72.2% and 81.9% of our revenue, respectively. The decrease in the cost of revenue as a percentage of revenue is due to higher weeklydaily rental rates.rate.

Selling and Marketing Expenses.

Selling and marketing expenses for the three months ended June 30, 2021 were $64,816, representing a decrease of $14,317 or 18.1% over the three months ended June 30, 2020 of $79,133. The decrease is due to a decrease in advertising to gig-economy drivers as we have maintained a high utilization rate for our vehicles.

General and Administrative Expenses.

General and administrative expenses for the three months ended June 30, 2021 were $1,493,494, representing an increase of $632,084 or 73.4% over the three months ended June 30, 2020 of $861,410. The increase is principally due to higher professional fees, salaries and stock option expense during the three months ended June 30, 2021.

Total Operating Expenses

Total operating expenses for the three months ended June 30, 2021 were $1,609,076, representing an increase of $668,533 or 71.1% compared to the three months ended June 30, 2020 of $940,543. The increase is due to the reasons described immediately above.

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Interest expense and financing cost

Interest and financing expenses for the three months ended June 30, 2021 were $964,387 compared to $67,795 for the three months ended June 30, 2020. The increase in interest and financing cost for the three months ended June 30, 2021 was due to amortization of debt discounts and issuance of additional warrants associated with the $2.250 million convertible note.

Net Loss

The net loss for the three months ended June 30, 2021 was $1,836,674, representing an increase of $1,113,832 or 154.1% compared to the three months ended June 30, 2020 of $722,842. The increase is due to the higher total operating expenses described above.

Consolidated Results of Operations—Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

Total Revenues.

Revenue for the six months ended June 30, 2021 was $4,946,615, an increase of $1,618,418 or 48.6% compared to revenue for the six months ended June 30, 2020 of $3,328,197. The increase is principally due to an increase in rentals of our vehicle fleet. During the six months ended June 30, 2021, the average weekly rental income per vehicle placed in service was $409 compared to $309 for the same period in 2020.

Our revenues declined in March- April of 2020 due to the impact of COVID-19 and began to recover in May-June 2020. Our revenue since June 2020 has now exceeded pre-COVID-19 levels, but there is no assurance that this trend will continue.

 

Cost of Revenues.

 

The principal components of costs of revenue are depreciation of the vehicles, vehicle insurance and vehicle maintenance.

 

Cost of revenues for the sixthree months ended June 30, 2021 was $3,696,197,March 31, 2022 were $1,972,063, an increase of $999,847$191,160 or 37.1%9.6% compared to cost of revenues for the sixthree months ended June 30, 2020March 31, 2021 of $2,696,350.$1,780,903. The increase is due to higher depreciation expense, and insurance expense and vehicle repairs due to an increase in fleet size. For the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 our cost of revenuesrevenue was 74.7%80.1% and 81.0%77.6% of our revenue, respectively.respectively including vehicle depreciation. The decreaseincrease in the cost of revenue as a percentage of revenue is due to higher weekly rental rates.increase insurance and body shop costs.

Selling and Marketing Expenses.

 

Selling and marketing expenses for the sixthree months ended June 30, 2021March 31, 2022 were $230,564,$64,336, representing an increasea decrease of $19,922$101,412 or 9.5%61.2% over the sixthree months ended June 30, 2020March 31, 2021, of $210,642.$165,748. The increasedecrease is due to an increase ineffective focused advertising campaign and high demand for vehicle reducing our rentals to gig-economy drivers.cost of client acquisition.

General and Administrative Expenses.

 

General and administrative expenses for the sixthree months ended June 30, 2021March 31, 2022, were $2,932,595,$1,462,325, representing an increase of $174,979$23,557 or 6.3%1.6% over the sixthree months ended June 30, 2020March 31, 2021 of $2,757,616. The increase is principally due to higher professional fees and salaries offset by a decrease in stock option expense during the six months ended June 30, 2021.$1,439,101.

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Total Operating Expenses

Total operating expenses for the sixthree months ended June 30, 2021March 31, 2022 were $3,223,425,$1,545,661, representing an increasea decrease of $255,167$68,688 or 8.6%4.4% compared to the sixthree months ended June 30, 2020March 31, 2021 of $2,968,258.$1,614,349. The increasedecrease is due to the reasons described immediately above.reduction in professional fees.

Interest expense and financing cost

 

Interest and financing expenses for the sixthree months ended June 30, 2021March 31, 2022 were $4,289,330$452,032 compared to $147,651$3,324,943 for the sixthree months ended June 30, 2020.Mach 31, 2021. The increase in interest expense was for redemption and conversion of the Preferred Series B Stock, Energy Impact Partners note interest expense and vehicle lease financing cost for the six months ended June 30,interest expense. The decrease from March 31, 2021 was due tothe non-recurring the issuance of 825,000 shares of Common Stockcommon stock to Acuitas Group Holdings, LLC, (“Acuitas”) which is now the Company’s largest shareholder, in connection with a settlement agreement between itAcuitas and X, LLC, a limited liability company controlledowned by the Company’s former CEO.chief executive officer. The board of directors deemed it was in the best interest of the Company to issue the shares to Acuitas. The value of the shares was $3,240,600 which wasis based on the market price of the Common StockCompany’s common stock at the date of the settlement agreement.grant date. The $3,240,600 was expensed as financing costs as the dispute underlying the settlement agreement related to thean anti-dilution of a prior investment in the Company by Acuitas. Also, the increase is due to amortization of debt discounts and issuance of additional warrants associated with the $2.250 million convertible note.

 

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Gain on Forgiveness of Debt

Gain on forgiveness of debt for the six months June 30, 2021 was $8,000 as compared to $0 for the same period in 2020, as, during the six months ended June 30, 2021, the remaining amount we received under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act was forgiven.

Net Loss

 

The net loss for the sixthree months ended June 30, 2021March 31, 2022 was $6,254,337,$1,510,052, representing an increase of $3,770,275$2,907,611 or 151.8%65.8% compared to net loss from the sixthree months ended June 30, 2020March 31, 2021 of $2,484,062.$4,417,663. The increase is due to the higher total operating expensesreasons described above.

Liquidity, Capital Resources and Plan of Operations

 

On November 15, 2019, we closed our IPOinitial public offering of common stock registered on an S-1 Registration Statement under the Securities Act, which was declared effective on November 13, 2019. We sold a total of 2,625,000 common shares of Common Stock was effected. Our public offeringat a price wasof $4.00 per share. Total gross proceeds from the offering were $10,500,000, before deducting underwriting discounts and commissions and other offering expenses.

During the year ended December 31, 2020, we sold an aggregate of 2,553,571 shares of Common Stock to three investors for cash proceeds of $275,000, of which 125,000 shares was sold to a member of our Board of Directors for cash consideration of $25,000.

 

On January 8, 2021,6, 2022, we received $500,000 fromclosed a convertible note from onefollow-on offering of our stockholders. The note was convertible into27,400,000 shares of Common Stock atcommon stock for $0.50 per share, and was converted into 1,000,000 sharesfor gross proceeds of Common Stock in February 2021.$13,700,000.

 

On April 12, 2021,Subsequently, we entered into a securities purchase agreement with a certain investor in connection with the issuance of a 12.5% original issue discount convertible promissory note and a common stock purchase warrant. The note had an original principal amount of $2,250,000, with an original issue discount of $250,000. It bore interest at a fixed rate of 10%, was convertible intoissued 6,310,000 shares of common stock at a pricefor the conversion of $3.00 per share (subject to adjustment as set forth in220,850 shares of Series B preferred stock. The remaining 9,525 outstanding shares of Series B preferred stock were redeemed by the note), and was to mature on January 12, 2022.Company

 

On July 9, 2021, we entered into a Term Loan Agreement with EICF Agent LLC, as agent forIn addition, after the lenders,recent public offering and conversion of most of the Series B preferred stock, the two warrants issued to Energy Impact Credit Fund I, LP as lender, providingin 2021 for a secured term loan facility in an aggregate principal amount450,000 shares and 900,000 shares of upcommon stock, respectively, were subject to $15.0 million, consisting of a $7.5 million closing date term loan facility and upadjustment according to $7.5 million of borrowings under a delayed draw term loan facility.their terms. The initial term loanwarrant for 450,000 common shares has been fully drawn, whileadjusted to one for 711,656 common shares at an exercise price of $1.33 and the remainder is available upon the satisfactionwarrant for 900,000 common shares has been adjusted to one for 1,174,311 common shares at an exercise price of certain conditions precedent specified in the agreement. The Term Loan Agreement matures on July 9, 2026. Borrowings under the Term Loan Agreement bear interest at the LIBOR, plus a margin of 10.0%.

During the six months ended June 30, 2021, we sold 100,000 shares of Common Stock to a member of our Board of Directors for cash consideration of $50,000.$0.71 per share.

 

Current Assets, Liabilities and Working Capital.

 

At June 30,March 31, 2022, the Company’s current assets totaled $12,025,005, current liabilities totaled $4,555,595, and working capital was $7,469,410. At December 31, 2021, the Company’s current assets totaled $1,014,673,$4,077,934, current liabilities totaled $5,801,006,$7,051,073, and working capital was a deficit of $4,786,333. At December 31, 2020, the Company’s current assets totaled $215,990, current liabilities totaled $4,461,560, and working capital was a deficit of $4,245,570. As of June 30, 2021, the Company had $162,727 in cash. The Company used $244,484 of cash for operating activities for the six months ended June 30, 2021.$2,973,139.

 

Regarding current liabilities, the amounts categorized as accounts payable and accrued expenses totaled $2,377,096$2,509,077 and $2,119,003$4,940,580 as of June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, a decrease of $258,093$2,431,503 or 12.2%49.2%, due to Common Stockcommon stock issued for legal settlements that were previously included in accrued expenses.

 

Since inception, our principal sources of operating funds have been proceeds from debt and equity financings,financing including the sale of our Common Stockcommon stock to initial investors known to management and principal shareholders of the Company, our IPO in November 2019, and the Term Loan Agreement entered into in July 2021 described above. As of the date of this quarterly report, weCompany. We do expect that our current cash on hand will be sufficient to fund our existing operations and future business growth for at least the next twelve months. In addition to the July 2021 term loan,balance of 2022. As of March 31, 2022, the Company is currently seeking to raise additional capital. Ifhad $10,949,709 in cash. The Company generated $(2,992,530) in cash from operating activities for the Company is not successful in raising additional capital it may be forced to scale back, perhaps significantly, its business operations and growth plans.three months ended March 31, 2022.

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Capital Expenditures

 

During the sixthree months ended June 30, 2021,March 31, 2022, the Company had capital expenditures of $3,049,261$1,303,487 in leased vehicles. At June 30, 2021, mostMarch 31, 2022, approximately 50% of the Company’s vehicles were financed with leases. At June 30, 2021March 31, 2022 the Company had $11,874,137$13,132,629 of rental vehicles, net of accumulated depreciation in the amount of $3,864,087,$4,840,062, totaling $8,010,050$8,292,597 in net rental vehicles. At December 31, 20202021 the Company had $9,067,885$13,514,619 of rental vehicles, net of accumulated depreciation in the amount of $2,871,452,$4,627,299, totaling $6,196,433$8,887,320 in net rental vehicles. The Company’s rental vehicles are depreciated over their estimated useful life of five years. The termlease terms for those rental vehicles that we lease isare leased are generally for three years and the Company has the right to purchase the vehicles for $1 eachleased assets at the end of the lease term.terms.

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Statement of Cash Flows

 

Cash Flows from Operating Activities

Net cash used in operating activities for the sixthree months ended June 30, 2021March 31, 2022 totaled $244,484,$(2,992,530), which was aan decrease of $94,715 or 27.9%$3,069,742 from the net cash used inprovided by operating activities of $339,199$77,212 for the same period in 2020.2021. The decrease is principally due to the changereduction in operating assetsaccounts payable following the equity capital raise in January 2022 and liabilities, and non-cash expense items.

Cash Flows from Investing Activities

Net cash used in investing activities for the six months ended June 30, 2021 totaled $47,051, which was an increase of $47,051 from $0 for the same period in 2020. The change is principally due to the purchase of property and equipment.accrued expenses.

 

Cash Flows from Financing Activities

 

Net cash provided by financing activities for the sixthree months ended June 30, 2021March 31, 2022 totaled $381,372,$12,088,311, which was a changean increase of $1,195,362$12,035,886 from the net cash used in financing activities of $813,990$52,425 for the same period in 2020.2021. The change is principally due to cash received from the sale of Common Stock, the exercise of both stock options and a convertible note in 2021, offset by an increase in paymentsequity capital raise completed on financing lease obligations.January 6, 2022.

Current Plan of Operations

 

Our plan of operations is currently focused on the growth and ongoing development of our operating businesses: (i) the Rideshare Platform, offered through Rideshare, Rentals, and (ii) our vehicle fleet, which is commercially available through Distinct Cars. We expect to incur substantial expenditures in the foreseeable future for the enhancedcontinuing operations of our businesses and related, ongoing, internal research and development.businesses. Moreover, we have embarked on “EV strategy”our EV strategy, in which we intend to replace our entire fleet of vehicles with all electric vehicles over the next several years.by 2024. At this time, we cannot reliably estimate the timing or aggregate amount of all of the costs associated with these efforts.

 

The continuationAlthough, as we state above, we believe we have sufficient working capital to finance our operations in fiscal 2022 and to execute the 2022 phase of our EV strategy, it is possible that our expansion plan may require us to raise significant additional capital within a short period of time. The cash flow from our Rideshare Platform and particularly our Distinct Cars businesses and our existing capital resources are sufficient for us to continue our operations, but fully executing our future business plans may require significant additional capital, which we are currently seeking to raise.

 

We continually reevaluate our plan of operations to determine the manner in whichhow we can most effectively utilize our resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the ready availability of cash to implement that aspect of the plan and other factors, several of which are beyond our control. There iscan be no assurance that our current capital resources will be sufficientadequate to continue to fund our ongoing operations, nor can there be any assurance that, ifshould we require additional capital, we will successfully obtain it on favorable terms, or at all. The potential inadequacy of our existing capital or the inability to secure additional capital could have a material adverse effect on us, including the possibility that we would have to sell or forego a portion or all of our assets or cease operations. If we discontinue our operations, we may not have sufficient funds to pay any amounts to our stockholders.

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If our operating businesses fail to achieve anticipated financial results, our existing capital will likely be depleted more quickly than we anticipate and our ability to raise additional capital in the future to fund our operations would likely be seriously impaired. If in the future we are not able to demonstrate favorable financial results or projections from our operating businesses, we may not be able to raise the capital we need to continue operations.

 

Similarly, because our working capital requirements depend upon numerous factors there can be no assurance that our current cash resources will be sufficient to fund our operations.

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Because our working capital requirements depend upon numerous factors there can be no assurance that our current cash resources will be sufficient to fund our operations. At present, we have no committed external sources of capital, and do not expect any significant product revenues for the foreseeable future. Thus, we will require immediate additional financing to fund future operations. There can be no assurance, however, that we will be able to obtain funds on acceptable terms, if at all.

 

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements.

 

Quantitative and Qualitative Disclosures about Market Risk

 

In the ordinary course of our business, we are not exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.

 

Critical Accounting Policies and Estimates

 

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. In many instances, we could have reasonably used different accounting estimates and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. This applies in particular to useful lives of non-current assets and valuation allowance for deferred tax assets. Actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving our judgments and estimates.

 

Property and Equipment and Rental Vehicles

 

Property and equipmentEquipment and rental vehiclesRental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment and rental vehicles is provided using the straight-line method for substantially all assets with estimated lives as follows:

 

Computer equipment5 years
Officer furniture7 years
Leasehold improvements15 years or term of lease whichever is less
Vehicles5 years

 

The Company has not changed its estimate for the useful lives of its equipment and rental vehicles, but would expect that a decrease in the estimated useful lives of equipment and rental vehicles of one year would result in an annual increase to depreciation expense of approximately $600,000, and an increase in the estimated useful lives of equipment and rental vehicles of one year would result in an annual decrease to depreciation expense of approximately $400,000.

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Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has not changed it methodology for estimating the valuation allowance. A change in valuation allowance affect earnings in the period the adjustments are made and could be significant due to the large valuation allowance currently established.

 

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Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.

 

Revenue Recognition

 

The Company recognizes revenue primarily from renting its fleet of cars to drivers for TNC companies.companies, such as Uber and Lyft, based on their rental agreements which are generally administered on a weekly basis. The Company recognizes revenue in accordance with FASB ASC 606, Revenue From Contracts with Customers. Generally, this enables us to both recognize revenue when we have satisfied our obligations under our rental agreement, i.e. when we have provided the vehicle to our renter, and to recognize the entire amount we expect to receive pursuant to the agreement, including estimates.

 

We consider a signed contract or other similar documentation reflecting the terms and conditions under which products will be provided to be persuasive evidence of an arrangement. Collectability is assessed based on a number of factors, including payment history and the creditworthiness of a customer. If it is determined that collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash.

 

Stock-Based Compensation

 

The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.

 

Contingencies

 

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required under Regulation S-K for “smaller reporting companies.”

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

 

We maintain a set of disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC.

 

In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including our CEOChief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to assess the effectiveness of our disclosure controls and procedures as of June 30, 2021.March 31, 2022. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure due to a material weakness.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

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We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

To address this material weakness, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

 

Changes in Internal Controls over Financial Reporting

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of the pending legal proceedings that could be material to the Company, please see Note 11- Contingencies.

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Item 1A. Risk Factors.

Not required under Regulation S-K for “smaller reporting companies.”

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits.

Exhibit Description
31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)
31.2 Certification of the Chief Financial Officer and Secretary pursuant to Rule 13a-14(a)
32.1 Certification of the Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of the Chief Financial Officer and Secretary furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*Inline XBRL Instance Document
101.SCH*Inline XBRL Taxonomy Schema
101.CAL*Inline XBRL Taxonomy Calculation Linkbase
101.DEF*Inline XBRL Taxonomy Definition Linkbase
101.LAB*Inline XBRL Taxonomy Label Linkbase
101.PRE*Inline XBRL Taxonomy Presentation Linkbase
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURES

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

 

 

EVMO, INC.

(Registrant)

   
 By:/s/ Stephen Sanchez
  Stephen Sanchez, Chief Executive Officer
   
  /s/ Ryan Saathoff
  Ryan Saathoff, Chief Financial Officer

 Date:AugustMay 16, 20212022

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