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 September 30,March 31, 20222023
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)
Delaware | 81-3028414 | |
(State or other jurisdiction of
| (I.R.S. Employer Identification No.) | |
2301 N. Sepulveda Blvd. Manhattan Beach, | 90266 | |
(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, as of the latest practicable date.
November 14, 2022.May 22, 2023. shares of common stock, $0.000001 par value, as of
TABLE OF CONTENTS
ii |
Item 1. Financial Statements.
EVmo, Inc.
Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
Contents
1 |
EVmo, Inc.
Condensed Consolidated Balance Sheets
As of September 30, 2022March 31, 2023 and December 31, 20212022
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 4,332,459 | $ | 1,853,928 | ||||
Accounts receivable | 785,487 | 751,450 | ||||||
Prepaid expenses | - | 609,701 | ||||||
Deferred offering costs | - | 862,855 | ||||||
Total current assets | 5,117,946 | 4,077,934 | ||||||
Property and equipment, net | 42,991 | 45,601 | ||||||
Rental vehicles, net | 22,250,585 | 8,887,319 | ||||||
Right of use asset | 30,340 | 149,759 | ||||||
Other assets | 1,477,471 | 100,000 | ||||||
TOTAL ASSETS | $ | 28,919,333 | $ | 13,260,613 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable (including $504,403 and $670,047 to related party) | $ | 1,391,469 | $ | 3,784,315 | ||||
Credit Cards | 130,702 | - | ||||||
Accrued expenses | 352,697 | 1,156,265 | ||||||
Notes payables, current (net of discount of $0 and $0) | 437,500 | 156,225 | ||||||
Customer deposit - related party | - | - | ||||||
Finance lease obligations, current | 4,839,040 | 1,810,374 | ||||||
Operating lease obligations, current | 38,532 | 143,894 | ||||||
Total current liabilities | 7,189,940 | 7,051,073 | ||||||
Advance from related parties, non-current | 600,000 | |||||||
Note payable, net of current portion (net of discount of $1,024,595 and $1,246,566) | 5,975,405 | 6,097,209 | ||||||
Finance lease obligations, net of current portion | 9,819,373 | 2,178,836 | ||||||
Operating lease obligations, net of current portion | - | 12,988 | ||||||
TOTAL LIABILITIES | 23,584,718 | 15,340,106 | ||||||
Commitments and contingencies | - | - | ||||||
Series B Preferred stock, $ and par value; shares authorized; shares issued and outstanding | - | 2,303,750 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, $ | par value; shares authorized; shares issued and outstanding- | - | ||||||
Common stock, $ | par value; shares authorized; and shares issued and outstanding70 | 36 | ||||||
Additional paid-in capital | 53,212,179 | 39,275,591 | ||||||
Accumulated deficit | (47,877,634 | ) | (43,658,870 | ) | ||||
Total stockholders’ equity | 5,334,615 | (4,383,243 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 28,919,333 | $ | 13,260,613 |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
EVmo, Inc.
Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 2022 and 2021 (unaudited)
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 1,280,180 | $ | 1,702,942 | ||||
Accounts receivable | 844,604 | 919,245 | ||||||
Prepaid expenses | 11,733 | 3,704 | ||||||
Deferred offering costs | - | - | ||||||
Total current assets | 2,136,517 | 2,625,891 | ||||||
Property and equipment, net | 158,310 | 165,781 | ||||||
Rental vehicles, net | 20,040,352 | 20,701,427 | ||||||
Right of use asset | - | - | ||||||
Other assets | 2,000,161 | 2,439,099 | ||||||
TOTAL ASSETS | $ | 24,335,340 | $ | 25,932,197 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable (including $ | and $ to related party)$ | 2,407,771 | $ | 1,834,808 | ||||
Credit Cards | 152,724 | 171,154 | ||||||
Accrued expenses | 219,796 | 217,118 | ||||||
Notes payables, current | 625,000 | 531,250 | ||||||
Accrued Bellridge Settlement, current | 300,000 | - | ||||||
Finance lease obligations, current | 4,909,003 | 4,829,349 | ||||||
Operating lease obligations, current | - | - | ||||||
Total current liabilities | 8,614,294 | 7,583,679 | ||||||
- | 600,000 | |||||||
Note payable, net of current portion (net of discount of $879,929 and $953,256) | 7,345,071 | 6,459,244 | ||||||
Finance lease obligations, net of current portion | 7,607,738 | 8,845,919 | ||||||
Accrued Bellridge Settlement, net of current portion | 1,295,000 | - | ||||||
TOTAL LIABILITIES | 24,862,103 | 23,488,842 | ||||||
Commitments and contingencies | - | - | ||||||
Series B Preferred stock, $ | par value;- | - | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, $ | par value; shares authorized; shares issued and outstanding- | - | ||||||
Common stock, $ | par value; shares authorized; and shares issued and outstanding70 | 70 | ||||||
Additional paid-in capital | 53,412,600 | 53,244,383 | ||||||
Accumulated deficit | (53,939,433 | ) | (50,801,098 | ) | ||||
Total stockholders’ equity | (526,763 | ) | 2,443,355 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 24,335,340 | $ | 25,932,197 |
2022 | 2021 | 2022 | 2021 | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Revenue | $ | 3,551,699 | $ | 2,724,180 | $ | 8,888,034 | $ | 7,670,795 | ||||||||
Cost of revenue* | 2,579,086 | 2,285,878 | 6,636,641 | 5,982,075 | ||||||||||||
*Includes vehicle depreciation | ||||||||||||||||
Gross profit | 972,613 | 438,302 | 2,251,393 | 1,688,720 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing expenses | 99,843 | 26,565 | 244,226 | 257,129 | ||||||||||||
Product development | 85,667 | 46,500 | 160,167 | 106,766 | ||||||||||||
General and administrative expenses | 1,580,058 | 3,218,912 | 4,616,652 | 6,151,507 | ||||||||||||
Total operating expenses | 1,765,568 | 3,291,977 | 5,021,045 | 6,515,402 | ||||||||||||
Loss from operations | (792,955 | ) | (2,853,675 | ) | (2,769,652 | ) | (4,826,682 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest and financing costs | (712,952 | ) | (2,007,194 | ) | (1,449,120 | ) | (6,296,524 | ) | ||||||||
Other income | - | 83,541 | 83,541 | |||||||||||||
Gain on forgiveness of debt | - | - | - | 8,000 | ||||||||||||
Total other income (expense) | (712,952 | ) | (1,923,653 | ) | (1,449,120 | ) | (6,204,983 | ) | ||||||||
Net loss | $ | (1,505,907 | ) | $ | (4,777,328 | ) | $ | (4,218,772 | ) | $ | (11,031,665 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 69,887,149 | 35,715,024 | 69,887,149 | 34,819,334 | ||||||||||||
Diluted | 69,887,149 | 35,715,024 | 69,887,149 | 34,819,334 | ||||||||||||
Loss per share | ||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.13 | ) | $ | (0.06 | ) | $ | (0.32 | ) | ||||
Diluted | $ | (0.02 | ) | $ | (0.13 | ) | $ | (0.06 | ) | $ | (0.32 | ) |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
EVmo, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
For the Nine Months Ended September 30, 2022 and 2021 (unaudited)
Shares | Amount | Capital | Deficit | Equity(Deficit) | ||||||||||||||||
Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity(Deficit) | ||||||||||||||||
Balance, Dec 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 | 5,699,408 | 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 | 69,496,399 | 67 | 53,135,766 | (45,168,922 | ) | 7,966,911 | ||||||||||||||
Issuance of common stock for cash | - | - | - | - | - | |||||||||||||||
Issuance of common stock for exercise of stock options | 196,875 | 42,328 | - | 42,328 | ||||||||||||||||
Stock option expense | 22,868 | 22,868 | ||||||||||||||||||
Net Loss | - | - | (1,202,805 | ) | (1,202,805 | ) | ||||||||||||||
Balance, June 30, 2022 | 69,693,274 | 67 | 53,200,962 | (46,371,727 | ) | 6,829,302 | ||||||||||||||
Issuance of common stock for cash | 9,375 | 3 | 2,013 | - | 2,016 | |||||||||||||||
Stock option expense | - | - | 9,204 | - | 9,204 | |||||||||||||||
Net Loss | - | - | (1,505,907 | ) | (1,505,907 | ) | ||||||||||||||
Balance, September 30, 2022 | 69,702,649 | 70 | 53,212,179 | (47,877,634 | ) | 5,334,615 | ||||||||||||||
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 | ||||||||||||||
Issuance of common stock for exercise of stock options | 260,000 | - | 71,700 | - | 71,700 | |||||||||||||||
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 | ||||||||||||||
Issuance of common stock for exercise of stock options | 26,875 | - | 5,778 | - | 5,778 | |||||||||||||||
Issuance of common stock for cashless exercise of stock options | 312,500 | 1 | (1 | ) | - | |||||||||||||||
Issuance of common stock for settlement of litigation | 31,250 | - | 42,018 | - | 42,018 | |||||||||||||||
Value of warrants issued with note payable | - | 778,697 | 778,697 | |||||||||||||||||
Fair value of warrants issued for financing costs | - | - | 503,690 | - | 503,690 | |||||||||||||||
Stock option expense | 58,253 | 58,253 | ||||||||||||||||||
Net loss | - | - | (4,777,328 | ) | (4,777,328 | ) | ||||||||||||||
Balance, September 30, 2021 | 35,758,149 | 36 | 38,206,344 | (39,705,657 | ) | (1,499,277 | ) |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
EVmo, Inc.
Condensed Consolidated Statements of Cash FlowsOperations
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
2022 | 2021 | |||||||
2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (4,218,772 | ) | $ | (11,031,665 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 1,927,404 | 1,525,332 | ||||||
Stock option expense | 58,188 | 356,227 | ||||||
Amortization of debt discounts | 219,982 | 1,643,408 | ||||||
Common stock issued for financing costs | 34 | 1,440 | ||||||
Preferred stock issued for financing costs | - | 53,750 | ||||||
Common stock issued for settlement agreement | - | 3,240,600 | ||||||
Common stock issued for litigation settlement | - | 42,018 | ||||||
Gain on Forgiveness of Debt | - | (8,000 | ) | |||||
Fair value of warrants issued for financing costs | - | 961,107 | ||||||
Operating lease expense | 119,419 | 77,361 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (34,037 | ) | (516,497 | ) | ||||
Vehicle Deposits | (794,952 | ) | - | |||||
Prepaid expenses and other assets | 253,998 | (68,631 | ) | |||||
Accounts payable | (2,392,846 | ) | 1,656,997 | |||||
Accrued expenses | (763,608 | ) | 830,954 | |||||
Credit Cards | 130,702 | - | ||||||
Customer deposit - related party | - | (150,000 | ) | |||||
Operating lease liability | (118,350 | ) | (68,595 | ) | ||||
Net cash used in operating activities | (5,612,838 | ) | (1,454,194 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | - | (47,051 | ) | |||||
Net cash used in investing activities | - | (47,051 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from sale of common stock | 13,700,000 | 50,000 | ||||||
Proceeds from exercise of stock options | 44,344 | 92,878 | ||||||
Proceeds from advance from related parties | 600,000 | 503,766 | ||||||
Repayment of advance from related parties | - | (603,766 | ) | |||||
Proceeds from convertible note payable | - | 2,500,000 | ||||||
Proceeds from notes payable, net | - | 6,900,000 | ||||||
Repayment of notes payable | (62,500 | ) | (809,519 | ) | ||||
Redemption of Preferred Stock | (2,303,750 | ) | - | |||||
Repayment and down payment of lease vehicle purchase | (4,502,934 | ) | (3,629,792 | ) | ||||
Vehicle Loan Fees | (246,646 | ) | - | |||||
Payment of deferred offering costs | 862,855 | (35,000 | ) | |||||
Net cash provided by (used in) financing activities | 8,091,369 | 4,968,567 | ||||||
NET INCREASE (DECREASE) IN CASH | 2,478,531 | 3,467,322 | ||||||
CASH, BEGINNING OF PERIOD | 1,853,928 | 72,890 | ||||||
CASH, END OF PERIOD | $ | 4,332,459 | $ | 3,540,212 | ||||
CASH PAID FOR: | ||||||||
Interest | $ | 1,449,120 | $ | 157,809 | ||||
Income taxes | $ | - | $ | - | ||||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Payment of accounts payable/accrued expenses with common stock | $ | - | $ | 1,103,750 | ||||
Finance lease obligations | $ | 14,658,413 | $ | 5,692,784 |
2023 | 2022 | |||||||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Revenue | $ | 3,844,136 | $ | 2,459,709 | ||||
Cost of revenue* | 3,288,738 | 1,972,063 | ||||||
*includes vehicle depreciation | 85.55 | % | 80.17 | % | ||||
Gross profit | 555,398 | 487,646 | ||||||
14.45 | % | 19.83 | % | |||||
Operating expenses: | ||||||||
Selling and marketing expenses | 94,123 | 64,336 | ||||||
Product development | 44,502 | 19,000 | ||||||
General and administrative expenses | 3,231,409 | 1,462,325 | ||||||
Total operating expenses | 3,370,034 | 1,545,661 | ||||||
Loss from operations | (2,814,636 | ) | (1,058,015 | ) | ||||
Other income (expense): | ||||||||
Interest and financing costs | (998,773 | ) | (452,037 | ) | ||||
Other income | 673,697 | - | ||||||
Gain on forgiveness of debt | - | - | ||||||
Total other income (expense) | (325,076 | ) | (452,037 | ) | ||||
Net loss | $ | (3,139,712 | ) | $ | (1,510,052 | ) | ||
Weighted average shares outstanding : | ||||||||
Basic | 71,302,649 | 69,469,399 | ||||||
Diluted | 71,302,649 | 69,469,399 | ||||||
Loss per share | ||||||||
Basic | $ | (0.04 | ) | $ | (0.02 | ) | ||
Diluted | $ | (0.04 | ) | $ | (0.02 | ) |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
3 |
EVmo, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
For Three Months Ended March 31, 2023 and 2022 (unaudited)
Additional | Total | |||||||||||||||||||
Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||
Balance, December 31, 2022 | 69,802,949 | 70 | $ | 53,244,383 | $ | (50,801,098 | ) | $ | 2,443,355 | |||||||||||
Issuance of common stock for cash | - | - | ||||||||||||||||||
Issuance of common stock for exercise of stock options | - | - | ||||||||||||||||||
Issuance of common stock for legal settlement | 1,500,000 | 150,000 | 150,000 | |||||||||||||||||
Issuance of common stock for financing cost | - | - | ||||||||||||||||||
Stock option expense | 19,594 | 19,594 | ||||||||||||||||||
Net loss | (3,139,712 | ) | (3,139,712 | ) | ||||||||||||||||
Balance, March 31, 2023 | 71,302,949 | 70 | 53,413,977 | (53,939,433 | ) | (526,763 | ) | |||||||||||||
Balance, Dec 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 | 6,235,675 | 2 | 64,063 | 64,065 | ||||||||||||||||
Issuance of common stock for financing cost | - | |||||||||||||||||||
Stock option expense | 26,116 | 26,116 | ||||||||||||||||||
Net loss | (1,510,052 | ) | (1,510,052 | ) | ||||||||||||||||
Balance, March 31, 2022 | 69,496,699 | 67 | 53,135,766 | (45,168,922 | ) | 7,966,911 | ||||||||||||||
Issuance of common stock for cash | - | |||||||||||||||||||
Issuance of common stock for exercise of stock options | 196,875 | 42,328 | 42,328 | |||||||||||||||||
Stock option expense | 22,868 | 22,868 | ||||||||||||||||||
Net Loss | (1,201,757 | ) | (1,201,757 | ) | ||||||||||||||||
Balance, June 30, 2022 | 69,693,574 | 67 | 53,200,962 | (46,370,679 | ) | 6,830,350 | ||||||||||||||
- | ||||||||||||||||||||
Issuance of common stock for cash | 9,375 | 3 | 2,013 | 2,013 | ||||||||||||||||
Stock option expense | 9,204 | 9,204 | ||||||||||||||||||
Net Loss | (2,924,512 | ) | (2,924,512 | ) | ||||||||||||||||
Balance, September 30, 2022 | 69,702,949 | 70 | 53,212,179 | (49,295,191 | ) | 3,917,055 | ||||||||||||||
Balance | 69,702,949 | 70 | 53,212,179 | (49,295,191 | ) | 3,917,055 | ||||||||||||||
Issuance of common stock for exercise of stock options | 100,000 | - | 23,000 | 23,000 | ||||||||||||||||
Stock Option expense | 9,204 | 9,204 | ||||||||||||||||||
Net Loss | (1,505,907 | ) | (1,505,907 | ) | ||||||||||||||||
Balance, December 31, 2022 | 69,802,949 | 70 | 53,244,383 | (50,801,098 | ) | 2,443,355 | ||||||||||||||
Balance | 69,802,949 | 70 | 53,244,383 | (50,801,098 | ) | 2,443,355 |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
4 |
EVmo, Inc.
Condensed Consolidated Statements of Cash Flows
For Three Months Ended March 31, 2023 and 2022 (unaudited)
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (3,139,712 | ) | $ | (1,510,052 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 783,268 | 213,632 | ||||||
Stock option expense | 19,594 | 26,116 | ||||||
Amortization of debt discounts | 73,327 | - | ||||||
Common stock issued for financing costs | - | 32 | ||||||
Preferred stock issued for financing costs | - | - | ||||||
Common stock issued for settlement agreement | - | - | ||||||
Common stock issued for litigation settlement | 150,000 | - | ||||||
Gain on Forgiveness of Debt | - | - | ||||||
Fair value of warrants issued for financing costs | - | - | ||||||
Leased Vehicles | 260,368 | 381,989 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 74,641 | (13,028 | ) | |||||
Vehicle Deposits | 148,562 | - | ||||||
Prepaid expenses and other assets | (117,701 | ) | 405,851 | |||||
Accounts payable | 572,962 | (2,112,283 | ) | |||||
Accrued expenses | 1,022,633 | (319,221 | ) | |||||
Credit Cards | (18,430 | ) | - | |||||
Customer deposit - related party | - | - | ||||||
Operating lease liability | - | (39,450 | ) | |||||
Net cash used in operating activities | (170,488 | ) | (2,966,414 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | - | - | ||||||
Net cash used in investing activities | - | - | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from sale of common stock | - | 13,834,059 | ||||||
Proceeds from exercise of stock options | - | - | ||||||
Proceeds from advance from related parties | - | - | ||||||
Repayment of advance from related parties | - | - | ||||||
Proceeds from convertible note payable | - | - | ||||||
Proceeds from notes payable, net | 1,000,000 | - | ||||||
Repayment of notes payable* | (93,750 | ) | - | |||||
Redemption of Preferred Stock | - | (2,303,750 | ) | |||||
Repayment of finance lease obligations* | (1,158,524 | ) | (330,969 | ) | ||||
Payment of deferred offering costs | - | 862,855 | ||||||
Net cash provided by (used in) financing activities | (252,274 | ) | 12,062,195 | |||||
*Includes Interest Expense | ||||||||
NET INCREASE (DECREASE) IN CASH | (422,762 | ) | 9,095,781 | |||||
CASH, BEGINNING OF PERIOD | 1,702,942 | 1,853,928 | ||||||
CASH, END OF PERIOD | $ | 1,280,180 | $ | 10,949,709 | ||||
CASH PAID FOR: | ||||||||
Interest | $ | 998,773 | $ | 328,566 | ||||
Income taxes | $ | 2,886 | $ | - | ||||
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Payment of accounts payable/accrued expenses with common stock | $ | - | $ | 1,103,750 | ||||
Finance lease obligations | $ | 12,516,741 | $ | 3,658,241 |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
5 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
Note 1 - Organization and Basis of Presentation
Organization and Line of Business
EVmo, Inc. (“EVmo” or the(the “Company”) was incorporated on June 21, 2016 under the laws of the state of Delaware originally as a limited liability company and subsequently converted to a Delaware C corporation. The Company was originally incorporated under the name of YayYo, Inc. and changed its name to Rideshare Rental, Inc. on September 11, 2020. On March 1, 2021, the Company changed its name from Rideshare Rental, Inc. to EVmo.
EVmo, isInc. The accompanying financial statements are retroactively restated to present the Company as a holding company operating principally through two wholly-owned subsidiaries: (i) RideShare Car Rentals LLC, a Delaware limited liability companyC corporation from June 21, 2016. The Company primarily rents vehicles to drivers for ridesharing Transportation Network Companies (“RideShare”TNCs”), such as Uber and (ii) Distinct Cars, LLC, a Delaware limited liability company (“Distinct Cars”). RideShare offers an online bookings platform (the “Rideshare Platform”) while Distinct Cars maintains a fleet of passenger vehicles and transit vans for use in the last-mile logistical space for rent to our customers who areLyft, as well as drivers in the ridesharing and delivery gig industries, while also providing them with insurance coverage and issuing them insurance cards in their own names. This enables such drivers to meet the vehicle suitability and other requirements of rideshare and delivery gig companies, also known as transportation network companies (“TNCs”),such as Uber, Lyft, DoorDash and Grubhub. Through RideShare and Distinct Cars, we seek to become a leading provider of rental vehicles to drivers in the ridesharing and delivery gig spaces, and an industry leader in supplying transit vans for last-mile logistics. “Gig” generally refers to a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.gig-economy.
Basis of Presentation
The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). with one exception. The lease balances are remaining principal balances of each leasing as of December 31, 2022. The disclosure above identifies the future interest payments to represent the full lease payment obligations. The current treatment is a material deviation from GAAP and ASC 842 but consistent with prior year treatment. An ASC 842 study is planned for 2023 and the Company expects to modify and adjust to comply with ASC 842 by fiscal year end 2023. (The Accounting Standards Codification (“[“ASC”)], maintained by the Financial Accounting Standards Board (the[the “FASB”)], is the current single official source of GAAP.)
Impact of COVID-19 on our BusinessRisks and Uncertainties
On January 30, 2020,In the World Health Organization declared the outbreakordinary course of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, it characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half of 2020, which continued through fiscal 2021. This was consistent with the experience of the TNCs whose drivers we service. According to Bloomberg Second Measure, Uber and Lyft sales were up 104% and 84% year-over-year, respectively, in February 2022 from one year earlier, even in spite of the Delta and Omicron variants that resulted in spikes of infections through periods of 2021.
Given the current prevalence of FDA-approved eligible vaccines across nearly all age groups, the marked overall decrease in the number of COVID-19 infections, hospitalizations and deaths in the first nine months of 2022, and the lifting of most pandemic restrictions in our active markets,business, we are optimistic that COVID-19 will not have a material impact onimpacted by increasing interest rates. Future financing of leased vehicles cost is accelerated due the rising interest rates along with some of our operations invehicle leases adjust as the prime rates change. Additionally, our current fiscal year. However, certain factors- including, for example, a new, more aggressive and deadly variant that is resistant to the vaccines- could reverse the positive trends of recent months and alter our prediction.note payable with Energy Impact Partners monthly interest costs accelerate as prime rates are increases.
Interim financial statements
The unaudited condensed financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of AmericaGAAP were omitted pursuant to such results and regulations. The results of operations for the sixthree months ended June 30, 2022March 31, 2023 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2022.2023.
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 and two other subsidiaries, EV Vehicles, LLC, a Delaware limited liability company, and Premier Mobility Insurance, Inc,, an Oklahoma limited liability company (“Premier Mobility”), that are not yet operational.Car Rentals, LLC. All significant intercompany transactions and balances have been eliminated.
6 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principlesGAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.
Cash Equivalents
For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less.
Property and Equipment and Rental Vehicles
Property and Equipment and Rental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment and rental vehicles is provided using the straight-line method for substantially all assets with estimated lives as follows:
Schedule of Estimated Lives of Equipment
Computer equipment | 5 years | |
Officer furniture | 7 years | |
Leasehold improvements | 15 years or term of lease whichever is less | |
Vehicles | 5 years |
Long-Lived Assets
The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at June 30, 2022March 31, 2023 the Company determined that no impairment charge was necessary.
Revenue Recognition
The Company recognizes all of its material revenue from renting its fleet of cars to TNC drivers. Revenue is recognized generally on a weekly basis based on the rental agreements. The Company recognizes revenue in accordance with FASB ASC Topic 606, Revenue From Contracts with Customers.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes(“ASC 740”). 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 the NineThree Months Ended September 30,March 31, 2023 and 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 recordedrecorded.. The adoption had no effect on the Company’s consolidated financial statements.
Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation(“. FASB ASC 718”). ASCTopic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. There were 8,847,84219,048,672 warrants and options outstanding as of September 30, 2022March 31, 2023 and 2,737,5004,582,842 warrants and options outstanding as of September 30, 2021.March 31, 2022.
Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase shares of the Company’s common stock par value $ (the “Common Stock”), at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. There were and potentially dilutive options and warrants outstanding at September 30,March 31, 2023 and 2022, and 2021, respectively.
Advertising Costs
The Company expenses the cost of advertising as incurred. Advertising costs for the ninethree months ended September 30,March 31, 2023 and 2022 and 2021 were $244,22694,123 and $257,12964,336, respectively.
Fair Value Measurements
The Company applies the provisions of ASC Topic 820-10, “Fair Value Measurements and Disclosures (“ASC 820-10”).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 the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
At September 30,March 31, 2023 and 2022, and 2021, the Company did not identify any liabilities that are required to be presented on the balance sheet at fair value.
Recent Accounting Pronouncements
In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxeswhich amends ASC 740.740 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. ThroughThe Company is currently evaluating the first half of fiscal 2022, the Company has made no material changes to its financial reporting as a resulteffect of this ASU.ASU on the Company’s consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).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 Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in an entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, which includes the Company, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note 3 – Property and Equipment
At September 30, 2022March 31, 2023 and December 31, 20212022 equipment consisted of the following:
Schedule of Property and Equipment
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
Computer equipment | $ | 6,046 | $ | 6,046 | ||||
Office furniture | 17,401 | 17,401 | ||||||
Leasehold improvement | 29,650 | 29,650 | ||||||
Property and equipment | 53,097 | 53,097 | ||||||
Less accumulated depreciation | (10,106 | ) | (7,496 | ) | ||||
Equipment, net | $ | 42,991 | $ | 45,601 |
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Computer equipment | $ | 138,046 | $ | 138,046 | ||||
Office furniture | 17,401 | 17,401 | ||||||
Leasehold improvement | 29,650 | 29,650 | ||||||
Equipment, gross | 185,097 | 185,097 | ||||||
Less accumulated depreciation | (26,787 | ) | (19,316 | ) | ||||
Equipment, net | $ | 158,310 | $ | 165,781 |
Depreciation expense for equipment for the ninethree months ended September 30,March 31, 2023 and 2022 and 2021 was $2,6107,470 and $2,488870 respectively.
9 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
Note 4 – Rental Vehicles
At September 30, 2022March 31, 2023 and December 31, 20212022 all of the Company’s rental vehicles consisted of the following:
Schedule of Rental Vehicles
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
Rental vehicles | $ | 28,229,346 | $ | 13,514,619 | $ | 27,795,646 | $ | 27,702,758 | ||||||||
Rental vehicles, gross | 28,229,346 | 13,514,619 | 27,795,646 | 27,702,758 | ||||||||||||
Less accumulated depreciation | (5,978,761 | ) | (4,627,300 | ) | (7,755,294 | ) | (7,001,331 | ) | ||||||||
Rental vehicles, net | $ | 22,250,585 | $ | 8,887,319 | $ | 20,040,352 | $ | 20,701,427 |
The Company’s rental vehicles are depreciated over their estimated useful life of five years. Depreciation expense for leased assets for the ninethree months ended September 30,March 31, 2023 and 2022 and 2021 was $1,881,1341,064,331 and $1,522,844519,533, respectively. A majority of the rental vehicles are leased with terms are generally for 3612 to 6036 months and the Company has the right to purchase the vehicles at the end of the lease terms.
Note 5 – Notes Payable
Notes payable at September 30, 2022March 31, 2023 and December 31, 20212022 consisted of the following:
Schedule of Notes Payable
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
Advance from related parties, non-current (B) | 600,000 | - | ||||||||||||||
Notes payable to a finance company, interest at the London Interbank Offered Rate (“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) | 7,437,500 | 7,500,000 | ||||||||||||||
Note Payable – Terren Peizer. 0% Interest, secured by common stock purchase warrant | 1,600,000 | 600,000 | ||||||||||||||
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) | 7,250,000 | 7,343,750 | ||||||||||||||
Total notes payable | 8,037,500 | 7,500,000 | 8,850,000 | 7,943,750 | ||||||||||||
Unamortized debt discount | (1,024,595 | ) | (1,246,566 | ) | (879,929 | ) | (953,256 | ) | ||||||||
Notes payable, net discount | 7,012,905 | 6,253,434 | 7,970,071 | 6,990,494 | ||||||||||||
Less current portion | (437,500 | ) | (156,225 | ) | (625,000 | ) | (531,250 | ) | ||||||||
Long-term portion | $ | 6,575,405 | $ | 6,097,209 | $ | 7,345,071 | $ | 6,459,244 |
(A) | 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, |
|
10 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
In connection with the Company’s entry into the Term Loan Agreement,issuance of this note payable, the Company entered into an exchange agreement, dated as of July 8, 2021 (the “Exchange Agreement”), with the holder (the “Holder”) of the Company’salso issued a warrant to purchase 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, shares of its Common Stock at an exercise price of $2.10 per shares. The aggregate relative fair value of these warrants was $778,697 and was recorded as a discount on the Company’snote payable and as additional paid in capital. In addition, the Company incurred $600,000 of cost related to this note payable. The total discount of $1,378,697 is being amortized over the term of the notes payable. In addition, after the public offering and conversion of most of the Series B convertible preferred stock, par value $the two warrants issued to Energy Impact Credit Fund I, LP in 2021 for 0.000001450,000 per share (the “Series B Preferred Stock”) was converted toshares and 3,152,143900,000 shares of Common Stock at $common stock, respectively, were subject to adjustment according to their terms. The warrant for 0.35 per share. On March 22, 2022, shares of Series B Preferred Stock were convertedhas been adjusted to shares of Common Stock at $0.35 per share. The remaining outstanding Series B Preferred Stock, or shares, was redeemed and a final warrant was issued to the Holderone for common shares at an exercise price of $0.501.33 and the warrant for 900,000 shares has been adjusted to one for at an exercise price of $0.71 per share.
On February 16, 2023, the Company received correspondence from EICF constituting a notice of events of default and reservation of rights (the “Notice of Default”) under the Term Loan Agreement. The Notice of Default purports that certain events of default under the Term Loan Agreement have occurred and are continuing, including a failure by the Company to: (i) timely deliver a required financial report, (ii) timely deliver a required liquidity certificate, (iii) maintain the maximum net leverage ratio required under a financial covenant, and (iv) maintain the minimum liquidity required under a financial covenant. EICF has informed the Company in the Notice of Default that EICF and the lenders are now entitled to exercise any and all default-related rights and remedies, that any delay in doing so should not be construed as a consent to or waiver of any of the purported events of default, and that any outstanding amounts under the Term Loan Agreement, including the principal of $7.5 million and any accrued but unpaid interest, may become due or payable. Further, EICF may realize the collateral pledged under the Term Loan Agreement, which consists of substantially all of the property and assets of the Company.
On February 10, 2023, Mr. Peizer, agreed to provide short-term liquidity financing to the Company in the amount of $1,000,000. As consideration for Mr. Peizer’s action, the Company issued to Acuitas Group Holdings, LLC, a California limited liability company and the personal investment vehicle of Mr. Peizer (“Acuitas”), a secured promissory note in the principal amount of $1,600,000 (the “Note”), which was then exchanged for an earlier promissory note in the principal amount of $600,000, issued by the Company to Mr. Peizer on September 30, 2022, which earlier note was then cancelled. The Note is convertible into shares of Common Stock, at the option of Mr. Peizer, at a conversion price of $0.1156 per share. In addition, the Company issued to Acuitas a Common Stock purchase warrant for 13,840,830 common shares, which is exercisable at a price of $0.1156 (the “Peizer Warrant”). The Note and the Peizer Warrant were issued in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
A rollforward of the EIP notenotes payable from December 31, 20212022 to September 30, 2022March 31, 2023 is below:
Schedule of Outstanding Notes Payable including Debt Discount
Notes payable, December 31, 2021 | $ | 7,500,000 | ||
Issued for cash | - | |||
Lease obligation converted to note payable | - | |||
Forgiveness of note payable | - | |||
Repayments | 62,500 | |||
Amortization of debt discounts | - | |||
Notes payable, September 30, 2022 | 7,437,500 |
Notes payable, December 31, 2022 | $ | 6,990,494 | ||
Adjusted Note Payable – Terren Peizer | 1,000,000 | |||
Repayments | (93,750 | ) | ||
Amortization of debt discounts | 73,327 | |||
Notes payable, March 31, 2023 | 7,970,071 |
Future payments under EIP note payable obligations are as follows:
Schedule of Future Payments Under Note Payable Obligations
Years ending December 31, | ||||||||
2022 | $ | 93,750 | ||||||
2023 | 374,940 | $ | 437,500 | |||||
2024 | 374,940 | 750,000 | ||||||
2025 | 374,940 | 750,000 | ||||||
2026 | 6,218,930 | 5,312,500 | ||||||
2027 | 1,600,000 | |||||||
Thereafter | 0 | |||||||
Notes payable | $ | 7,437,500 | ||||||
Notes Payable | $ | 8,850,000 |
Note 6 – Convertible Notes
On April 12, 2021, the Company, entered into a securities purchase agreement with a certain investor in connection with the issuance,There are no convertible notes as of that same date, of a 12.5% original issue discount convertible promissory note and a Common Stock purchase warrant. The note has an original principal amount of $2,250,000, with an original issue discount of $250,000. It bears interest at a fixed rate of 10%, is convertible into shares of Common Stock at a price of $3.00 per share (subject to adjustment as set forth in the note), and matured on January 12, 2022. The warrant grants the right to purchase shares of common 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 93,750 shares of common stock with an exercise price of $3.00 per share, will be issued by the Company to the investor on the 12th day of each month that the note remains 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, 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 $623,373 was determined using the Black-Scholes option pricing model and the following assumptions: term of five years, a risk free interest rate of , a dividend yield of and volatility of . The face amount of the convertible note of $2,250,000 was proportionately allocated to the convertible note and the warrant in the amount of $1,761,866 and $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 $1,298,767 plus 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 shares of the Company’s Series B Preferred Stock.March 31, 2023.
As described in Note 5- “Notes Payable,” 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, shares of Series B Preferred Stock was converted to of common stock at $0.35 per share. On March 22, 2022, shares of Series B Preferred Stock was converted to of common stock at $0.35 per share. The remaining outstanding Series B Preferred Stock, 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 the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
Note 7 – Financing Lease Obligations
Leased vehicleLease obligations at September 30, 2022March 31, 2023 and December 31, 20212022 consisted of the following:
Schedule of Leased VehicleLease Obligations
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
Leased vehicle obligations | $ | 14,658,413 | $ | 3,989,210 | ||||||||||||
Lease obligations | $ | 12,516,741 | $ | 13,675,268 | ||||||||||||
Less current portion | (4,839,040 | ) | (1,810,374 | ) | (4,909,003 | ) | (4,829,349 | ) | ||||||||
Long-term portion | $ | 9,819,373 | $ | 2,178,836 | $ | 7,607,738 | $ | 8,845,919 |
A rollforward of vehicle lease obligations from December 31, 20212022 to September 30, 2022March 31, 2023 is below:
Schedule of VehicleOutstanding Lease Obligations
Lease vehicle obligations, December 31, 2021 | $ | 3,989,210 | ||||||
New lease vehicle obligations | 7,966,487 | |||||||
Lease obligations, December 31, 2022 | $ | 13,675,268 | ||||||
New lease obligations | 0 | |||||||
Disposal of leased vehicles | (1,526,515 | ) | (0 | ) | ||||
Lease obligation converted to note payable | - | - | ||||||
Payments on lease obligations | (1,897,711 | ) | (1,158,527 | ) | ||||
Lease obligations, June 30, 2022 | $ | 8,531,471 | ||||||
New lease vehicle obligations | 8,953,442 | |||||||
Disposal of leased vehicles | (- | ) | ||||||
Lease obligation converted to note payable | - | |||||||
Payments on lease obligations | (2,826,500 | ) | ||||||
Lease obligations, September 30, 2022 | $ | 14,658,413 | ||||||
Lease obligations, March 31, 2023 | $ | 12,516,741 |
Future payments under lease obligations are as follows:
Schedule of FutureFurture Lease Obligations
Years Ending December 31, | ||||||||
2022 | $ | 2,705,192 | ||||||
2023 | 6,347,491 | $ | 5,649,828 | |||||
2024 | 6,979,478 | 6,253,335 | ||||||
2025 | 2,747,076 | 2,845,382 | ||||||
2026 | 548,652 | 636,269 | ||||||
2027 | 0 | |||||||
Total payments | 19,327,889 | 15,384,813 | ||||||
Amount representing interest | (4,669,476 | ) | (2,868,072 | ) | ||||
Lease obligation, net | $ | 14,658,413 | $ | 12,516,741 |
The lease balances are remaining principal balances of each leasing as of March 31, 2023. The disclosure above identifies the future interest payments to represent the full lease payment obligations. The current treatment is a material deviation from GAAP and ASC 842 but consistent with prior year treatment. An ASC 842 study is planned for 2023 and the Company expects to modify and adjust to comply with ASC 842 by fiscal year end 2023.
12 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
Note 78 – 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.842 Leases. As of December 31, 2022, EVmo has closed out the lease for the facility located at 195 S. Robertson Blvd, Beverly Hills, CA 90211 and relocated to 2301 N. Sepulveda Blvd, Manhattan Beach, CA 90266. The current lease of the facility expires within 12 months and is not subject to ASC 842 due to the short-term nature of the lease. As of March 31, 2023, there are not right of use facility lease assets or obligations under ASC 842 rules.
The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of September 30, 2022:
Schedule of Operating Lease Obligations
Classification on Balance Sheet | September 30, 2022 | |||||
Assets | ||||||
Operating lease assets | Operating lease right of use assets | $ | 30,340 | |||
Total lease assets | $ | 30,340 | ||||
Liabilities | ||||||
Current liabilities | ||||||
Operating lease liability | Current operating lease liability | $ | 38,532 | |||
Noncurrent liabilities | ||||||
Operating lease liability | Long-term operating lease liability | - | ||||
Total lease liability | $ | 38,532 |
Remaining Lease obligations at September 30, 2022March 31, 2023 consisted of the following:
Schedule of Lease Obligation Maturity
Years Ending December 31, | ||||||||
2022 | $ | 25,382 | ||||||
2023 | 13,150 | $ | 144,000 | |||||
2024 | - | |||||||
Total payments | 38,532 | 144,000 | ||||||
Less: imputed interest | (0 | ) | ||||||
Total obligation | 144,000 | |||||||
Less: current portion | (38,532 | ) | (144,000 | ) | ||||
Non-current capital leases obligations | $ | - | $ | 0 |
The lease expense for the three months ended March 31, 2023 was $64,000. The cash paid under operating leases for the three months ended March 31, 2023 was $64,000.
13 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
Note 89 – Stockholders’ Equity
The Company has authorized 100,000,000 shares of capital stock, which consists of shares of Common Stock,common stock, $ par value per share, and shares of preferred stock, $ par value per share.
Series B Preferred Stock
Pursuant to the Exchange Agreement (see Note 5- “Notes Payable”), the Holder agreed to exchange the Prior Notes forThere is shares of 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 Certificatepreferred stock as of Designation and the Exchange Agreement, as applicable, the Series B Preferred Stock had the following features:
On January 22, 2022, of Series B Preferred Stock was converted to of Common Stock at $0.35 per share. On March 22, 2022, of Series B Preferred Stock was converted to of Common Stock at $0.35 per share. The remaining outstanding Series B Preferred Stock, 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.31, 2023.
Common Stock
During the ninethree months ended June 30, 2022,March 31, 2023, the Company:Company issued
shares of two-year restricted common stock for settlement of a legal dispute with Bellridge Capital, LP. For details, please see Note 12- “Settlements.”
14 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021 (unaudited)
Stock Options
Summary of Stock Option Activity
Weighted | ||||||||||||||||||||||||||||||||
Weighted | Average | |||||||||||||||||||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||||||||||||||||||
Options | Exercise | Contractual | Intrinsic | |||||||||||||||||||||||||||||
Options Outstanding |
Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | Outstanding | Price | Life | Value | |||||||||||||||||||||||||
Outstanding, December 31, 2021 | 766,750 | $ | 0.53 | 3.76 | $ | 98,937 | 766,750 | $ | 0.53 | $ | 98,937 | |||||||||||||||||||||
Granted | 60,000 | 0.43 | 5,400 | 218,000 | 0.28 | 0 | ||||||||||||||||||||||||||
Forfeited | (104,750 | ) | (104,750 | ) | ||||||||||||||||||||||||||||
Exercised | (206,250 | ) | 0.215 | (206,250 | ) | 0.215 | ||||||||||||||||||||||||||
Outstanding, September 30, 2022 | 515,750 | $ | 0.46 | 4.10 | $ | 97,822 | ||||||||||||||||||||||||||
Exercisable, September 30, 2022 | 494,500 | $ | 0.46 | 3.86 | $ | 97,822 | ||||||||||||||||||||||||||
Outstanding, December 31, 2022 | 507,500 | $ | 0.45 | 161,575 | ||||||||||||||||||||||||||||
Exercisable, December 31, 2022 | 673,750 | $ | 0.45 | 3.19 | $ | 161,575 | ||||||||||||||||||||||||||
Granted | 0 | |||||||||||||||||||||||||||||||
Forfeited | (166,250 | ) | ||||||||||||||||||||||||||||||
Excercised | 0 | |||||||||||||||||||||||||||||||
Outstanding, March 31, 2023 | 507,500 | $ | 0.53 | 4.74 | $ | (41,131 | ) |
Schedule of Options Outstanding by Exercise Price Range
Options | Options | Price | Options | Price | Price | Options | Price | ||||||||||||||||||||
Outstanding | Outstanding | Exercisable | Outstanding | Exercisable | |||||||||||||||||||||||
Number of | Number of | Exercise | Number of | Exercise | Exercise | Number of | Exercise | ||||||||||||||||||||
Options | Options | Price | Options | Price | Price | Options | Price | ||||||||||||||||||||
20,000 | $ | 0.21 | 20,000 | $ | 0.21 | ||||||||||||||||||||||
205,750 | 0.215 | 205,750 | 0.215 | ||||||||||||||||||||||||
15,000 | 0.22 | 15,000 | 0.22 | ||||||||||||||||||||||||
155,000 | 0.53 | 133,750 | 0.53 | ||||||||||||||||||||||||
20,000 | 0.94 | 20,000 | 0.94 | ||||||||||||||||||||||||
20,000 | 2.12 | 20,000 | 2.12 | ||||||||||||||||||||||||
20,000 | 3.80 | 20,000 | 3.8 | ||||||||||||||||||||||||
20,000 | 0.39 | 20,000 | 0.39 | ||||||||||||||||||||||||
20,000 | 0.55 | 20,000 | 0.55 | ||||||||||||||||||||||||
20,000 | 0.36 | 20,000 | 0.36 | ||||||||||||||||||||||||
515,750 | 494,500 | ||||||||||||||||||||||||||
20,000 | $ | 0.21 | 20,000 | $ | 0.21 | ||||||||||||||||||||||
102,500 | 0.215 | 102,500 | 0.215 | ||||||||||||||||||||||||
15,000 | 0.12 | 15,000 | 0.12 | ||||||||||||||||||||||||
230,000 | 0.53 | 230,000 | 0.53 | ||||||||||||||||||||||||
20,000 | 0.94 | 20,000 | 0.94 | ||||||||||||||||||||||||
20,000 | 2.12 | 20,000 | 2.12 | ||||||||||||||||||||||||
20,000 | 3.80 | 20,000 | 3.8 | ||||||||||||||||||||||||
20,000 | 0.39 | 20,000 | 0.39 | ||||||||||||||||||||||||
20,000 | 0.55 | 20,000 | 0.55 | ||||||||||||||||||||||||
20,000 | 0.30 | 20,000 | 0.30 | ||||||||||||||||||||||||
20,000 | 0.36 | 20,000 | 0.36 | ||||||||||||||||||||||||
507,500 | 507,500 |
For options granted during the nine months ended September 30, 2022 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $ and the weighted-average exercise price of outstanding options was $. No options were granted during the ninethree months ended September 30, 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.
EVmo, Inc.
Notes to Consolidated Financial Statements
For the Nine Months Ended September 30, 2022 and 2021 (unaudited)March 31, 2023.
The fair value of the outstanding stock options is being amortized to stock option expense over the vesting period. The Company recorded stock option expenseexpenses of $58,18819,594, and $356,22726,116 during the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively. At September 30 2022,March 31, 2023, the unamortized stock option expense was $18,004.4,400.
Warrants
The following is a summary of warrant activity:
Summary of Warrant Activity
Weighted | Weighted | |||||||||||||||
Average | Average | Aggregate | ||||||||||||||
Warrants | Exercise | Remaining | Intrinsic | |||||||||||||
Outstanding | Price | Contractual Life | Value | |||||||||||||
Outstanding, December 31, 2021 | 4,454,717 | $ | 2.53 | $ | - | |||||||||||
Granted | 4,393,125 | 0.34 | ||||||||||||||
Forfeited | - | |||||||||||||||
Exercised | - | |||||||||||||||
Outstanding September 30, 2022 | 8,847,842 | $ | 1.44 | |||||||||||||
Exercisable, September 30, 2022 | 8,847,842 | $ | 1.44 |
The exercise price for warrants outstanding at September 30, 2022:
Schedule of Warrants Outstanding by Excise Price Range
Outstanding and Exercisable | ||||
Number of Warrants | Exercise Price | |||
1,500,000 | $ | 4.00 | ||
65,625 | 5.00 | |||
65,625 | 5.00 | |||
187,500 | 3.00 | |||
93,750 | 3.00 | |||
93,750 | 3.00 | |||
711,656 | 1.33 | |||
93,750 | 3.00 | |||
93,750 | 3.00 | |||
93,750 | 3.00 | |||
1,174,311 | 0.71 | |||
93,750 | 3.00 | |||
93,750 | 3.00 | |||
93,750 | 3.00 | |||
128,125 | 0.50 | |||
625,000 | 0.40 | |||
3,640,000 | 0.33 | |||
8,847,842 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the NineThree Months Ended September 30, 2022March 31, 2023 and 2021202 (unaudited)
Warrants
The following is a summary of warrant activity:
Summary of Warrant Activity
Warrants Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
Outstanding, December 31, 2022 | 8,847,842 | $ | 1.44 | $ | - | |||||||||||
Granted | 13,840,830 | .12 | ||||||||||||||
Forfeited | - | |||||||||||||||
Exercised | - | |||||||||||||||
Outstanding, March 31, 2023 | 19,048,672 | $ | .69 | $ | - | |||||||||||
Exercisable, March 31, 2023 | 19,048,672 | $ | .69 | $ | - |
The exercise price for warrants outstanding at March 31, 2023:
Schedule of Warrants Outstanding by Exercise Price Range
Outstanding and Exercisable | |||||
Number of Warrants | Exercise Price | ||||
1,500,000 | $ | 4.00 | |||
65,625 | 5.00 | ||||
65,625 | 5.00 | ||||
187,500 | 3.00 | ||||
93,750 | 3.00 | ||||
93,750 | 3.00 | ||||
711,656 | 1.33 | ||||
93,750 | 3.00 | ||||
93,750 | 3.00 | ||||
93,750 | 3.00 | ||||
1,174,311 | 0.71 | ||||
93,750 | 3.00 | ||||
93,750 | 3.00 | ||||
93,750 | 3.00 | ||||
128,125 | 0.50 | ||||
625,000 | 0.40 | ||||
13,840,830 | 0.12 | ||||
19,048,672 |
16 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For Three Months Ended March 31, 2023 and 2022 (unaudited)
Note 910 – Related Party Transactions
During the ninethree months ended September 30, 2022 and 2021,March 31, 2023, the Company is engaged with RG Alliance Group LLC (“RGA”) to perform internal accounts payable, bookkeeping, internal financial reporting and audit support. RGA is 51% owned by Ryan Saathoff, chief financial officer of the Company. Total professional fees expensed in three months ended March 31, 2023 for RGA is $1,671,63045,800.
In the three months ended March 31, 2023, the Company received $100,000 and $2,386,623, respectively,in payment for Accounts Receivable related to insuring the Company fleetrental of vehicles via an insurance brokerage firm, whose ownerTransit Vans to PDQ Pickup LLC (“PDQ”) in 2021. PDQ is also a stockholderowned by Terren Peizer, former executive chairman of the Company, and in professional fees related to an administrative bookkeeping group partially owned by anits principal executive officer is Stephen Sanchez, also the Company’s chief executive officer.
As described in Note 5, herein, on September 30, 2022, Terren S. Peizer, executive chairman of the board of directors of the Company, agreed to provide financing to the Company in the amount of $600,000, to be allocated as collateral for the Company’s Premier Mobility subsidiary. The Company issued a subordinated, non-interest bearing, promissory note due September 30, 2023 for that same amount to Mr. Peizer. Upon maturity, the Company shall repay the principal to Mr. Peizer and shall also issue to him a five-year common stock purchase warrant for shares Common Stock at an exercise price of $.
Note 1011 – 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 litigationlegal proceedings or asserted potential litigationclaims 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: No 20STCV09143
Robert Vanech v. YayYo, Inc., and Ramy El-Batrawi, No. 21STCV45724
AThese two cases raise similar claims against the Company and Ramy El-Batrawi, the founder and former chief executive officer of the Company, by two former executives who worked briefly for the Company in 2016-17. The Davis 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 CEOchief executive officer and as a director on or about December 2016. Mr. Vanech was hired as chief financial officer and director at approximately the same time. Both Messrs. Vanech’s and Davis’s employment with the Company ended after several months. As part of histheir compensation, Mr.Messrs. Davis allegesand Vanech allege that hethey expected to receive stock options in the Company. In histheir respective pleadings, Mr.both Messrs. Davis admitsand Vanech admit that heeach person resigned from histheir executive officer and director positions but assertsassert that hethey did not receive certain compensation in the form of stock options (he has also included a claim for wage and hour violations).options. The Company denies liability and has asserted that it has paid Mr.Messrs. Davis and Vanech all amounts due to himthem under histheir respective employment agreement,agreements/settlement agreements, while also asserting that Mr.both Messrs. Davis and Vanech failed to exercise histheir respective stock options before they expired on December 31, 2018. The Company filed a demurrer to the firsteach plaintiff’s amended complaint, which the Superior Court granted in part and denied in part on September 8, 2021. The plaintiffpart. Plaintiff Davis has since filed a second amended complaint on October 8, 2021, to which the Company has filed an answer. The Company’s position is that the lawsuitlawsuits entirely lackslack merit, and the Company intends to defend iteach case vigorously. This lawsuitPlaintiffs have now filed a motion to consolidate the two actions-based similarity of the facts (and defenses) and that motion is currentlypending. The cases, whether consolidated or not, are expected to go to trial later in the discovery phase.2023 and will be decided in two bench trials or pursuant to summary judgement.
Bellridge Capital, LP, v. EVmo, Inc., 1:21-cv-07091-PGG (Filed in Southern District of New York)
In the first half of 2021, a warrant holder, Bellridge Capital, LP, sought to exercise a warrant for 1,500,000 shares, with a stated exercise price of $4.00 per share, 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 that anti-dilution adjustment. In September 2021, the warrant holder brought suit for damages in the Southern District of New York. It is the Company’s position as to both lawsuits is that the lawsuit is withoutMessrs. Davis’ and Vanech’s claims entirely lack merit, and the Company is vigorously defendingintends to defend against the lawsuit. This lawsuit is currentlylawsuits vigorously.
Zada v. EVMO, Inc and Rami El-Batrawi, Los Angeles Superior Court No. 21STCV43510
On November 29, 2021, a complaint was filed by Norman Zada, a Company shareholder, against EVmo and Mr.El-Batrawi alleging breach of contract and fraud in connection with the plaintiff’s purchase of 1.90 per share. By virtue of the allegedly late delivery of shares, the plaintiff alleges damages of approximately $94,420. Other allegations of wrongdoing on Mr. El-Batrawi’s behalf are included in the discovery phase.complaint but add nothing of a material nature to the legal dispute. Both Mr.El-Batrawi and EVmo presently intend to file demurrers to the Complaint and, if necessary, vigorously defend the lawsuit on the merits. shares of Common Stock in February 2018 that the plaintiff claims he did not receive for over three years. By the time the plaintiff was able to acquire the shares, the value of the stock had dropped to $
17 |
EVmo, Inc.
Notes to Consolidated Financial Statements
For the Nine Months Ended September 30, 2022 and 2021 (unaudited)
Note 1112 – Settlements
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 allegations in the complaints underlying the State Cases differ fromare virtually identical to those included in the consolidated federal securities cases discussed below (In re YayYo Securities Litigation) only by a few words and some random punctuation marks, and are therefore virtually identical.. The State Cases litigation was stayed pending the outcome of the federal securities cases, as to which, as noted below, the parties announced a settlement in principle last year. Please see the disclosure concerning In re YayYo Securities Litigation immediately below for further information regarding the final disposition of the State Cases litigation.
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. and Aegis Capital Corp. The federal court consolidated the two matters for all practical purposes. As with the State Cases, the Company denied liability and asserted that it accurately and completely disclosed all material facts and circumstances in its SEC filings, and that the complaint’s alleged violations of securities laws are baseless. The parties to the federal court litigation announced on October 21, 2021 that they had reached a settlement, which received preliminary approval by the district court on January 13, 2022, allowing the notice of the proposed settlement to be distributed to all class members, who unless they object or drop out, will be bound by the multi-million dollar settlement. The Company’s portion of the settlement was $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 the whole amount due to the plaintiffs.
On July 12, 2022, the district court presiding over In re YayYo Securities Litigation signed an order and final judgment with respect to the settlement described herein. The plaintiffs in the State Cases were bound by this settlement and therefore the State Cases were subject to dismissal by operation of law. On October 19, 2022, the court presiding over the State Cases signed the order of dismissal.
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 complaint was subsequently transferred to the U.S. District Court for the Central District of California and assigned as a related case to the judge in In re YayYo Securities Litigation. This case was a purported shareholder derivative action, in which the Company was 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. Upon the settlement and dismissal of In re YayYo Securities Litigation, this case was also subject to a motion to dismissal, which the district court granted upon motion ofand the plaintiffsaction was terminated on September 19, 2022.
Bellridge Capital, LP, v. EVmo, Inc., 1:21-cv-07091-PGG (Filed in Southern District of New York)
In the first half of 2021, a warrant holder, Bellridge Capital, LP (“Bellridge”), sought to exercise a warrant for 1,620,000 over a 36-month period, subject to downward adjustment if the market price of the Common Stock exceeds certain thresholds set forth in the Settlement Agreement. Upon execution of the Settlement Agreement by the parties, and contingent upon the obligations of the Company as set forth therein being fulfilled, the complaint brought by Bellridge was dismissed with prejudice. shares, with a stated exercise price of $ per share, 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 that anti-dilution adjustment. In September 2021, the warrant holder brought suit for damages in the Southern District of New York. In March 2023, the parties to this litigation entered into a settlement agreement. On March 16, 2023, the Company and Bellridge entered into a settlement agreement relating to the litigation between them described in Note 12- “Contingencies” above (the “Settlement Agreement”). The Settlement Agreement provides for the immediate issuance by the Company to Bellridge of shares of Common Stock and an aggregate cash payment by the Company to Bellridge of $
Note 1213 – Subsequent Events
There arehave been no material subsequent events as of November 14, 2022.since March 31, 2023.
18 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations
Cautionary Note Regarding Forward-Looking Statements
CertainThis quarterly report on Form 10-Q (this “Report”) contains forward-looking statements made herein, as well as in other filings we make withwithin the SEC and other written and oral information we release, regarding our future performance constitute “forward-looking statements” as defined inmeaning of the Private Securities Litigation Reform Act of 1995. Forward-lookingWe intend such 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 impliedcovered by such forward-looking statements. Thethe safe harbor provisions for forward-looking statements included hereincontained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on current expectations that involve numerous risksour management’s beliefs and uncertainties. Our plansassumptions, and objectives are based, in part, on assumptions involvinginformation currently available to management. Forward-looking statements include the continued expansioninformation concerning our possible or assumed future results of business, which assumptions involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe our assumptions underlyingoperations set forth under the forward-looking statements are reasonable, any of the assumptions could prove inaccurate, and, therefore, there can be no assurance the forward-looking statements included herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described elsewhere in this report and as also may be described from time to time in future reports we file with the SEC. You should read such information in conjunction with our consolidated financial statements and related notesheadings “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations.” Forward-looking statements also include statements in this report. There also may be other factors that we cannot anticipatewhich words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or thatsimilar expressions 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.used.
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.Securities & Exchange Commission (the “SEC”).
All brand names or trademarks appearing in this Report are the property of their respective holders. Unless the context requires otherwise, references in this Report to “EVmo,” the “Company,” “we,” “us,” and “our” refer to EVmo, Inc., a Delaware corporation, and its consolidated subsidiaries.
Our Corporate History and Background
EVmo Inc. (“EVmo”, the “Company”, “we”, “our”, or “us”) was initially formed on June 21, 2016 as a Delaware limited liability company under the name “YayYo, LLC.” The Company was subsequently converted into a Delaware corporation pursuant to Section 265 of the Delaware General Corporation Law.Law (the “DGCL”). The Company now operates as a “C” corporation formed under the laws of the State of Delaware.
We became a reporting company when, on March 17, 2017, an offering circular on Form 1-A relating to a best-efforts offering of our common stock, par value.value $0.000001 per share (the “Common Stock”), pursuant to “Regulation A+” of the Securities Act of 1933, as amended (the “Securities Act”), was qualified by the “SEC”.SEC. Then, on November 15, 2019, we completed an initial public offering of 2,625,000 shares of Common Stock, at $4.00 per share, for gross proceeds, before underwriting discounts and commissions and expenses, of $10.5 million and our Common Stock was listed on the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “YAYO.”
On February 10, 2020, after being advised by Nasdaq that it believed we no longer met the conditions for continued listing, wethe Company announced ourits intent to voluntarily delist ourits Common Stock. Since delisting from Nasdaq, our Common Stock has been quoted and traded on the Pink Open Market, which is operated by OTC Markets Group, under the same ticker symbol. The delisting was effective on March 1, 2020.
In September 2020, we changed our name from YayYo, Inc. to Rideshare Rental, Inc., in order for our corporate brand to better reflect our principal business, the rental ofbusinesses, ridesharing and delivery gig vehicles.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. In January 2022, we completed a follow-on public offering of 27,400,000 shares of Common Stock, at $0.50 per share, which will, among other uses, provide capital required to facilitate our electric vehicles transition strategy.
We are a holding company operating principally through two wholly-owned subsidiaries: RideShare Car Rentals, LLC (“RideShare”)Our address is 3201 N. Sepulveda Blvd. Manhattan Beach, CA 90266. Our telephone number is (310) 926-2643 and Distinct Cars, LLC (“Distinct Cars”). 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.website may be accessed at www.evmo.com.
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Impact of COVID-19 on our business
On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, it characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half of 2020, which continued through fiscal 2021. This was consistent with the experience of the TNCs whose drivers we service. According to Bloomberg Second Measure, Uber and Lyft sales were up 104% and 84% year-over-year, respectively, in February 2022 from one year earlier, even in spite of the Delta and Omicron variants that resulted in spikes of infections through periods of 2021.
Given the current prevalence of FDA-approved eligible vaccines across nearly all age groups, the marked overall decrease in the number of COVID-19 infections, hospitalizations and deaths through the first nine months of 2022, and the resulting lifting of most pandemic restrictions in our active markets, we are optimistic that COVID-19 will not have a material impact on our operations in the current fiscal year. However, certain factors- including, for example, a new, more aggressive and deadly variant that is resistant to the vaccines- could reverse the positive trends of recent months and alter our prediction.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiaries, Distinct Cars, LLC (“Distinct Cars”) and RideShare.RideShare Car Rentals, LLC (“Rideshare”), both of which are limited liability companies organized in the State of Delaware. All significant intercompany transactions and balances have been eliminated.
Consolidated Results of Operations—Three Months Ended September 30, 2022,March 31, 2023, Compared to Three Months Ended September 30, 2021March 31, 2022
Total Revenues.
Revenue for the three months ended September 30, 2022March 31, 2023 was $3,551,699$3,844,136, an increase of $827,519$1,384,427 or 23.3%56.28% compared to revenue for the three months ended September 30, 2021March 31, 2022 of $2,724,180.$2,459,709. The increase is principally due to an increase in the size of our rental vehicle fleet and an increase in our daily rental rate.
Cost of Revenues.
The principal components of costs of revenue are depreciation of the vehicles, vehicle insurance and maintenance.
Cost of revenues for the three months ended September 30, 2022 was $2,579,086,March 31, 2023 were $3,288,738, an increase of $293,208,$1,316,675 or 11.4%,66.77% compared to the cost of revenues for the three months ended September 30, 2021March 31, 2022 of $2,285,878.$1,972,063. Depreciation expenses on the vehicles is included in cost of revenues. The increase is due to higher depreciation expense, insurance expense and vehicle repairsexpenses due to an increase in fleet size.size and higher repairs and maintenance, including body shop expenses to redeploy vehicles. For the three months ended September 30,March 31, 2023 and 2022 and 2021 our cost of revenue including vehicle depreciation was 72.62%14.45% and 83.91%19.83% of our revenue, respectively, including vehicle depreciation. Excludingrespectively. The increase in the cost of revenue is mainly attributed to an increase in body shop-related expenses, depreciation expense, auto maintenance expenses and registration expenses due to the increase in fleet size in 2022.
If we exclude vehicle depreciation, cost of revenuegross profit for the three months ended September 30,March 31, 2023 was $1,619,729, an increase of $612,550 or 42.17% compared to gross profit for the three months ended March 31, 2022 of $1,007,179. Excluding vehicle depreciation, gross margin the three months ended March 31, 2023 was 49.6%42.14%, as compared to gross margin for the lowest costthree months ended March 31, 2022 of revenues by percentage of revenue in company history. The decrease in the cost of revenue as a percentage of revenue is due to improved daily rental rates, effective fleet management and improved driver turnover rates40.95%.
Selling and Marketing Expenses.
Selling and marketing expenses for the three months ended September 30, 2022March 31, 2023 were $99,843,$94,123, representing an increase of $73,278,$29,787 or 275.8%,46.30% over the expenses incurred in the three months ended September 30, 2021March 31, 2022, of $26,565.$64,336. The increase is due to a focused advertising campaign targeted at renting newand high demand for vehicles added in 2022 to the platform.our fleet.
General and Administrative Expenses.
General and administrative expenses for the three months ended September 30, 2022,March 31, 2023, were $1,580,058,$3,231,409, representing an decreaseincrease of $1,638,854,$1,769,084 or 103.7%, under the expenses incurred in121% over the three months ended September 30, 2021March 31, 2022 of $3,218,912.$1,462,325. The decreaseincrease is due primarily to maintained payroll, no additional stock issued, reducedthe final accrued settlement expense of the Bellridge Capital warrant dispute and legal fees and controlled administrative expenses.associated with the settlement.
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Total Operating Expenses
Total operating expenses for the three months ended September 30, 2022March 31, 2023 were $1,765,568,$3,370,034, representing a decreasean increase of $1,526,409,$1,824,373 or 86.5%,118% compared to the expenses incurred in the three months ended September 30, 2021March 31, 2022 of $3,291,977.$1,545,661. The decreaseincrease is due primarily to maintained payroll, no additional stock issued, reducedthe final accrued settlement expense of the Bellridge Capital warrant dispute and legal fees and controlled administrative expenses.associated with the settlement.
Interest expense and financing cost
Interest and financing expenses for the three months ended September 30, 2022March 31, 2023 were $712,952$998,773 compared to $2,007,194$452,037 for the three months ended September 30, 2021.Mach 31, 2022. The interest expense was debt service on the EIP Note payablefor Energy Impact Partners note interest expense and vehicle lease financing interest expense. The decreaseincrease from September 30, 2021March 31, 2022 was due to the non-recurring issuance of 825,000 shares of common stock to Acuitas,increase in connection with a settlement agreement between Acuitas and XLLC, a company owned byleased vehicles on financing terms in fiscal year 2022.
Other Income
Other income for the Company’s former chief executive officer. The valuethree months ended March 31, 2023 was $673,697. This other income resulted from the completion of the shares was $3,240,600 whichEmployer Retention Tax Credit, (ERTC) for employee retention in 2021 and 2022. The total tax refund from ERTC is based on$783,369 less the market pricefee of $109,672 for professional services rendered from the Common Stock atfirm hired to compile the grant date. The $3,240,600 was expensed as financing costs asdocumentation and complete the dispute underlyingprocess and submit the settlement agreement related to an anti-dilution of a prior investment in the Company by Acuitas.amended 941 returns.
Net Loss
The net loss for the three months ended September 30, 2022March 31, 2023 was $(1,505,907),$3,139,712, representing a decrease of $3,271,421$1,629,660 or 217.2%108% compared to net loss from the three months ended September 30, 2021 of $(4,777,328). The increase is due to the reasons described above. The company achieved positive EBITDA for the first time in the three months ended September 30,March 31, 2022 of $117,029.
Consolidated Results of Operations—Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 30, 2021
Total Revenues
Revenue for the nine months ended September 30, 2022 was $8,888,034 an increase of $1,217,239 or 13.7% compared to revenue for the nine months ended September 30, 2021 of $7,670,795. The increase is principally due to an increase in the size of our rental vehicle fleet and an increase in our daily rental rate.
Cost of Revenues
The principal components of costs of revenue are depreciation of the vehicles, vehicle insurance and maintenance.
Cost of revenues for the nine months ended September 30, 2022 was $6,636,641, an increase of $654,566, or 9.86%, compared to the cost of revenues for the nine months ended September 30, 2021 of $5,982,075 The increase is due to higher depreciation expense, insurance expense and vehicle repairs due to an increase in fleet size. For the nine months ended September 30, 2022 and 2021 our cost of revenue was 74.67% and 77.99% of our revenue, respectively, including vehicle depreciation. Excluding vehicle depreciation, cost of revenue for the nine months ended September 30, 2022 was 53.5%. The decrease in the cost of revenue as a percentage of revenue is due to improved daily rental rates, effective fleet management and improved driver turnover rates.
Selling and Marketing Expenses
Selling and marketing expenses for the nine months ended September 30, 2022 were $244,226, representing a decrease of $12,903, or 5.28%, over the expenses incurred in the nine months ended September 30, 2021 of $257,129.$1,510,052. The decrease is due to a change in the advertising plan now targeted at renting new vehicles added tofinal accrued settlement expense of the platform.Bellridge Capital warrant dispute and legal fees associated with the settlement.
General and Administrative Expenses
General and administrative expenses for the nine months ended September 30, 2022, were $4,616,652, representing a decrease of $1,534,855, or 33.25%, over the expenses incurred in the nine months ended September 30, 2021 of $6,151,507. The decrease is due to maintained payroll, no additional stock issued, reduced legal fees, and controlled administrative expenses.
Total Operating Expenses
Total operating expenses for the nine months ended September 30, 2022 were $5,021,045, representing a decrease of $1,494,357, or 29.76%, compared to the expenses incurred in the nine months ended September 30, 2021 of $6,515,402. The decrease is due to maintained payroll, no additional stock issued, reduced legal fees, and controlled administrative expenses.
Interest expense and financing cost
Interest and financing expenses for the nine months ended September 30, 2022 were $1,449,120 compared to $6,296,524 for the nine months ended September 30, 2021. The interest expense was for redemption and conversion of Series B Preferred Stock, note interest expense and vehicle lease financing interest expense. The decrease from September 30, 2021 was due to the non-recurring issuance of 825,000 shares of Common Stock to Acuitas Group Holdings, LLC, (“Acuitas”) which is the Company’s largest shareholder, in connection with a settlement agreement between Acuitas and X, LLC, a company owned by the Company’s former chief executive officer. The value of the shares was $3,240,600 which is based on the market price of the Common Stock at the grant date. The $3,240,600 was expensed as financing costs as the dispute underlying the settlement agreement related to an anti-dilution of a prior investment in the Company by Acuitas.
Net Loss
The net loss for the nine months ended September 30, 2022 was $(4,218,772), representing an decrease of $6,812,893 or 161.49% compared to net loss from the nine months ended September 30, 2021 of $(11,031,665). The increase is due to the reasons described above. The company is approaching positive EBITDA through the first nine months ended September 30, 2022, with negative EBITDA of $(644,096).
Liquidity, Capital Resources and Plan of Operations
OnIn November 15, 2019, we closedcompleted our initial public offering of Common Stock, registered on an S-1 Registration Statement under the Securities Act, which was declared effective on November 13, 2019. Weand sold a total of 2,625,000 common shares at a price of $4.00 per share. Total gross proceeds from the offering were $10,500,000, before deducting underwriting discounts and commissions and other offering expenses.
OnIn January 6,2021, we received $500,000 from one of our stockholders in exchange for a convertible note. The note was convertible into shares of Common Stock at $0.50 per share and was converted into 1,000,000 shares of Common Stock in February 2021.
In April 2021, as part of a securities purchase agreement (the “Securities Purchase Agreement”), we issued and sold to an investor 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 ten percent (10%), was convertible into shares of Common Stock at a price of $3.00 per share (subject to adjustment), and was to mature on January 12, 2022. The warrant granted the investor the right to purchase 187,500 shares of Common Stock at an exercise price of $3.00, subject to adjustment; it is exercisable at any time within five (5) years of the date of issuance and additional warrants, each for 93,750 shares of Common Stock with an exercise price of $3.00 per share, were to be issued by the Company to the investor each month that the note remains outstanding.
In July 2021, we entered into a term loan, guarantee and security agreement (the “Term Loan”) with EICF Agent LLC, as agent for the lenders, and Energy Impact Credit Fund I, LP, as lender, providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million, consisting of a $7.5 million closing date term loan facility and up to $7.5 million of borrowings under a delayed draw term loan facility. The initial loan was fully drawn on the closing date. The term loan agreement will mature on July 9, 2026.
In connection with the Term Loan, we entered into an exchange agreement (the “Exchange Agreement”) with the same investor (the “Investor”) with whom we entered into the Securities Purchase Agreement. As part of the Exchange Agreement, the Investor agreed to exchange the note we issued to it in April 2021 for 230,375 shares of Series B preferred stock, and a warrant. This warrant granted the Investor the right to purchase 93,750 shares of Common Stock at an exercise price of $3.00, subject to adjustment. This warrant is exercisable in full at any time within five (5) years of the date of issuance. Additional warrants on substantially identical terms were issued by the Company to the Investor monthly until such time as the preferred stock was redeemed or converted in full, after which a final warrant was issued. All of the shares of Series B preferred stock were converted by their holder into shares of Common Stock, or redeemed by us, in the first quarter of 2022.
In January 2022, we closedcompleted a follow-on offering of 27,400,000 shares of Common Stock forat a price of $0.50 per share, for total gross proceeds of $13,700,000.
Subsequently, we issued 6,310,000 shares of common stock for the conversion of 220,850 shares of Series B Preferred Stock. The remaining 9,525 outstanding shares of Series B Preferred Stock were redeemed by the Company
In addition, after the recent public offering and conversion of most of the Series B Preferred Stock, the two warrants issued to Energy Impact Credit Fund I, LP in 2021 for 450,000 shares and 900,000 shares of Common Stock, respectively, were subject to adjustment according to their terms. The warrant for 450,000 common shares has been adjusted to one for 711,656 common shares at an exercise price of $1.33 and the warrant for 900,000 common shares has been adjusted to one for 1,174,311 common shares at an exercise price of $0.71 per share.
Current Assets, Current Liabilities and Working CapitalCapital.
At September 30, 2022,March 31, 2023, the Company’s current assets totaled $5,117,946,$2,136,517, current liabilities totaled $7,189,940, and a working capital deficit of $(2,071,994). At December 31, 2021, the Company’s current assets totaled $4,077,934, current liabilities totaled $7,051,073,$9,909,294, and working capital was a deficit of $(2,973,139).$7,772,777. At December 31, 2022, the Company’s current assets totaled $2,625,891, current liabilities totaled $7,583,679, and working capital was a deficit of $4,957,788.
Regarding current liabilities, the amounts categorized as accounts payable credit cards and accrued expenses totaled $1,874,868$2,627,567 and $4,940,580$2,051,926 as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively, a decreasean increase of $3,065,712$575,641 or 163.52%28.1%, due primarily to the reduction of accounts payable and the reductionfinal accrued settlement expense of the Bellridge Capital warrant dispute and legal settlement balance.fees associated with the settlement. This excludes the Accrued Bellridge Settlement, current portion of $300,000 and long term portion of $1,295,000.
Since inception, our principal sources of operating funds have beenbeen: (i) proceeds from equity financing,financings, including the saletwo (2) public offerings of our Common Stock described above and the private sales of our Common Stock to initialcertain investors known to managementin transactions exempt from registration under the Securities Act; (ii) the Term Loan for $7.5 million described above; and principal shareholders of the Company. We do expect that(iii) revenues generated from our current cash on hand to fund operations for the balance of 2022.operations. As of September 30, 2022,March 31, 2023, the Company had $4,332,459 in cash. The Company used $(7,691,035)$1,280,180 in cash fromand cash equivalents. As of the date of this Report, we do not believe that we have sufficient capital to finance our operating activitiesexpenses for the nine months ended September 30, 2022.remainder of this fiscal year and the Company is actively seeking new sources of capital.
Capital ExpendituresResources
During the ninethree months ended September 30, 2022,March 31, 2023, the Company had capital expenditures of $16,919,929$260,368 in leased vehicles. At September 30, 2022,March 31, 2023, approximately 80%70% of the Company’s vehicles were financed with leases. At September 30, 2022March 31, 2023 the Company had $28,229,346$27,795,646 of rental vehicles, net of accumulated depreciation in the amount of $5,978,761,$7,755,294, totaling $22,2050,585$20,040,352 in net rental vehicles. At December 31, 20212022 the Company had $13,514,619$27,702,758 of rental vehicles, net of accumulated depreciation in the amount of $4,627,299,$7,001,331, totaling $8,887,320$20,701,427 in net rental vehicles. The Company’s rental vehicles are depreciated over their estimated useful life of five years. The lease terms for those rental vehicles that are leased are generally for three years and the Company has the right to purchase the leased assets at the end of the lease terms.
Additionally, the Company purchased $132,000 in kiosks for the launch of the Trek World project in Illinois. A contract is in place with Trek World to guarantee the costs of the kiosks through rental of the vehicles and a revenue share potential on the point-of-sale device merchant fees. Should Trek World terminate the rental agreements. Payment in full for the $132,000 is to be reimbursed at termination of the rentals from Trek World. The Company’s rental vehicles and kiosks are depreciated over their estimated useful life of five years. The lease terms for those rental vehicles that are leased are generally for one to three years and the Company has the right to purchase the leased vehicle at the end of the lease terms.
Statement of Cash Flows
Cash Flows from Operating Activities
Net cash provided fromused in operating activities for the ninethree months ended September 30, 2022March 31, 2023 totaled $(7,691,035)$(170,488), which was a decreasean increase of $6,236,841$2,795,926 from the net cash provided by operating activities of $(1,454,194)$(2,966,414) for the same period in 2021.2022. The decreaseincrease is principally due to the reduction in accountsfinal accrued settlement expense payable followingover three years of the equity capital raise in January 2022, decrease in accrued expense, and purchase of new vehicles.Bellridge Capital warrant dispute.
Cash Flows from Financing Activities
Net cash provided by financing activities for the ninethree months ended September 30, 2022March 31, 2023 totaled $10,196,566,$(252,274), which was an increasea decrease of $5,227,999$12,288,160 from $4,968,567$12,062,195 for the same period in 2021.2022. The change is principally due to the equity capital raise completed on January 6, 2022 and financing of new vehicles.2022.
Current Plan of Operations
Our plan of operations is currently focused on the growth and ongoing development of our operating businesses: (i) the Rideshare Platform, offered through Rideshare, and (ii) our vehicle fleet, which is commercially available through Distinct Cars.Cars, and (iii) our fleet management initiatives. We expect to incur substantial expenditures in the foreseeable future for the continuing operations of our businesses. Moreover, we haveWe embarked on our EV strategy in 2021, in which we intendset a goal to replace our entire fleet of vehicles with all electric vehicles by 2024.2026. At this time, we cannot reliably estimate the timing or aggregate amount of all of the costs associated with these efforts.
Although,efforts and, as of the date of this Report, we state above, we believe we have sufficient working capital to finance our operations in fiscal 2022 andcannot continue 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 perioduntil such time as we have secured new sources of time.capital.
We continually reevaluate our plan of operations to determine how we can most effectively utilize our resources. The completion of any aspect of our plan of operations is highly dependent upon the ready availability of cash to implement that aspect of the plan and other factors, several of which are beyond our control. There can be no assurance that our current capital resources will be adequate to continue to fund our ongoing operations, nor can there be any assurance that, should we require additional capital, we will successfully obtain it on favorable terms, or at all. The potential inadequacy of our existing capital or the inability to secure additional capital could have a material adverse effect on us, including the possibility that we would have to sell or forego a portion or all of our assets or cease operations. If we discontinue our operations, we may not have sufficient funds to pay any amounts to our stockholders.
If our operating businesses fail to achieve anticipated financial results, our existing capital will likely be depleted more quickly than we anticipate and our ability to raise additional capital in the future to fund our operations would likely be seriously impaired. If in the future we are not able to demonstrate favorable financial results or projections from our operating businesses, we may not be able to raise the capital we need to continue operations.
Similarly, because ourOur working capital requirements depend upon numerous factors and there can be no assurance that our current cash resources will be sufficient to fund our short-term operations. We have determined that our long-term operations will require new sources of capital, which we are actively working to obtain at this time.
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.
Contractual Obligations, Commitments and Contingencies
The Company periodically enters into a series of monthly vehicle leasing agreements with ACME Auto Leasing, Utica Leasing Company, NFS Financial Services, Liberty Financial and Spring Free EV each with an approximate lease term of 12 to 60 months.
The Company owes monthly payments under each lease agreement ranging from approximately $285 per month to $1,150 per month. At the end of the term of most lease agreements, we have the right to purchase ownership and title of the subject vehicle for a nominal payment. In addition, the lease agreements are subject to and secured by a grant of a purchase money security interest on each leased vehicle. We expect the useful life of each vehicle to be approximately five years but also expect to cycle vehicles at three years.
We lease and maintain our principal offices at 2301 N. Sepulveda Blvd. Manhattan Beach, CA 90266 where the majority of our operational staff conducts its activities on a day-to-day basis. The lease expires January 2024 with a monthly lease payment of $16,000. We do not currently own any real estate.
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.
There is one material deviation from GAAP related to ASC 842. The lease balances presented represent remaining principal balances of each lease as of December 31, 2022. The disclosure identifies the future interest payments to represent the full lease payment obligations. The current treatment is a material deviation from GAAP and ASC 842 but consistent with prior year treatment. An ASC 842 study is planned for 2023 and the Company expects to modify and adjust to comply with ASC 842 by fiscal year end 2023.
Property and Equipment and Rental Vehicles
Property and Equipment and Rental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment and rental vehicles is provided using the straight-line method for substantially all assets with estimated lives as follows:
Computer equipment | 5 years | |
Officer furniture | 7 years | |
Leasehold improvements | 15 years or term of lease whichever is less | |
Vehicles | 5 years |
The Company has not changed its estimate for the useful lives of its equipment and rental vehicles, but would expect that a decrease in the estimated useful lives of equipment and rental vehicles of one year would result in an annual increase to depreciation expense of approximately $600,000,$675,000, 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.$450,000.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740.Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has not changed it methodology for estimating the valuation allowance. A change in valuation allowance affect earnings in the period the adjustments are made and could be significant due to the large valuation allowance currently established.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.
Revenue Recognition
The Company recognizes revenue primarily from renting its fleet of cars to drivers for TNC companies, such as Uber and Lyft, based on their rental agreements which are generally administered on a weekly basis. The Company recognizes revenue in accordance with FASB ASC 606.606, Revenue From Contracts with Customers.
We consider a signed contract or other similar documentation reflecting the terms and conditions under which products will be provided to be persuasive evidence of an arrangement. Collectability is assessed based on a number of factors, including payment history and the creditworthiness of a customer. If it is determined that collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash.
Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC 718.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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.Risk
Not required under Regulation S-K for “smaller reporting companies.”
Item 4. Controls and Procedures.Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures (as that term is defined in Rule 13a-15(d)13a-15(e) under the Securities Exchange Act of the Exchange Act)1934, as amended [the “Exchange Act”]). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our 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. Disclosure controls and procedures are, without limitation, also intended to ensure that such information is gathered and communicated to management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), or persons performing similar functions, as appropriate, to facilitate timely decisions regarding required disclosure.
In accordance with Rule 13a-15(b) ofunder the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q,Report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”)CEO and Chief Financial Officer (“CFO”),CFO, to assess the effectiveness of our disclosure controls and procedures as of September 30, 2022.March 31, 2023. Based uponon that evaluation, our CEO and CFO have concluded that, at March 31, 2023, such disclosure controls and procedures were not effective. We elaborate on the basis for this conclusion in the discussion contained in our “Management’s Report on Internal Control over Financial Reporting” below.
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 year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Our CEO and CFO have concluded, based on their evaluation as of the end of the fiscal quarter covered by this Report, that our disclosure controls and procedures were not effective as a result of a control issue described herein; however, it is possible that this evaluation failed to provide reasonable assuranceidentify other control issues that information required to be disclosed by us in reports thatwould have reinforced this conclusion, and for which 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.have not yet initiated any remedial action.
Management’s Report on Internal Control over Financial Reporting
As required by SEC rules and regulations for the implementation of Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
(1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; | |
(2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and | |
(3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at March 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission COSO (2013 framework). Based on those criteria, management determined that we did not maintain effective internal control over financial reporting at March 31, 2023.
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Our management has concluded that our internal control over financial reporting contains a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We do not have sufficient segregation of duties within our 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 evaluatedweighed the impact of our failure to have a proper segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the resulting control deficiency that resulted represented a material weakness.
To address this material weakness, management performed additional analyses and otherhas implemented procedures to ensure that the financial statements balances included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
In 2021, the Company improved oversight relating to its accounting and finance functions, but has yet to hire a sufficient number of additional accounting and finance staff to fully address the material weakness identified herein. Therefore, as of the date of this Report, this material weakness still exists and is the basis for our conclusion that our disclosure controls and procedures were, at March 31, 2023, and remain, not effective.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(d) 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.
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 10-11- “Contingencies.”
Item 1A. Risk Factors.
Not required under Regulation S-K for “smaller reporting companies.”
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds
None.
Item 3. Defaults Upon Senior Securities.Securities
None.
Item 4. Mine Safety Disclosures.Disclosures
Not applicable.
Item 5. Other Information.Information
Effective as of August 9, 2022, Gregory Miller resigned as Chief Operating Officer of the Company, citing family obligations as his reason for doing so. No successor to Mr. Miller has been appointed as of the date of this quarterly report.None.
Item 6. Exhibits.
Exhibit | Description | |
31.1 | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) | |
31.2 | Certification of the Chief Financial Officer and Secretary pursuant to Rule 13a-14(a) | |
32.1 | Certification of the Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of the Chief Financial Officer and Secretary furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS* | Inline XBRL Instance Document | |
101.SCH* | Inline XBRL Taxonomy Schema | |
101.CAL* | Inline XBRL Taxonomy Calculation Linkbase | |
101.DEF* | Inline XBRL Taxonomy Definition Linkbase | |
101.LAB* | Inline XBRL Taxonomy Label Linkbase | |
101.PRE* | Inline XBRL Taxonomy Presentation Linkbase | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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: |