As filed with the Securities and Exchange Commission on November 5, 2019July 16, 2021
Registration No. 333-224549333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
(Amendment #14)S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
YayYo,EVmo, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 7371 | 81-3028414 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial
| (I.R.S. Employer
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433 N. Camden Drive, Suite 600
Beverly Hills, CaliforniaCA 90210
(310) 926-2643
(Address, Including Zip Code, and Telephone Number,
(310) 926-2643
(Address, including zip code, and telephone number, including area code,
Including Area Code, of registrant’s principal executive offices)Registrant’s Principal Executive Offices)
Jonathan Rosen
Stephen M. Sanchez
Chief Executive Officer
YayYo, Inc.
433 N. Camden Drive, Suite 600
Beverly Hills, CaliforniaCA 90210
(310) 926-2643
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to
Copies to:
Joseph A. Tagliaferro III, Esq. Withers Bergman LLP 1925 Century Park East, Suite 400 Los Angeles, CA 90067 Telephone: (310) 277-9930 Facsimile: (310) 951-9139 |
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Gracin & |
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The Chrysler Building 405 Lexington Avenue, 26th Floor | |
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New York, NY | |
| 10174 Telephone:(212) Facsimile:(212) 208-4657 |
Approximate date of commencement of proposed sale to the public:public: As soon as practicable after the effective date of this Registration Statement.registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒☑
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
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 7(a)(2)(B)13(a) of the SecuritiesExchange Act. ☐[ ]
CALCULATION OF REGISTRATION FEE
| Title of each class of securities to be registered(1) | Proposed Maximum Aggregate Offering Price(5) | Amount of Registration Fee(5) | ||||||
| Common Stock, par value $0.000001 per share (the “Common Stock”)(2) | $ | 11,500,000 | $ | 1,254.65 | ||||
| Representative’s Warrants(3) | — | — | ||||||
| Shares of Common Stock issuable upon exercise of Representative’s Warrants(4) | $ | 625,000 | $ | 68.19 | ||||
| Total | $ | 12,125,000 | $ | 1,322.84 | ||||
| (1) | In the event of a stock split, stock dividend, or similar transaction involving our Common Stock, the number of shares of Common Stock included in the Units and underlying the warrants registered hereby shall automatically be increased to cover the additional shares of Common Stock issuable pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”). |
| (2) | Includes shares of Common Stock that may be issued upon exercise of a 45-day option granted to the representative of the underwriters to cover over-allotments, if any. |
| (3) | No additional registration fee is payable pursuant to Rule 457(g) under the Securities Act. |
| (4) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. The representative’s warrants are exercisable for up to the number of shares of Common Stock equal to 5% of the aggregate number of shares of Common Stock sold in this offering at a per share exercise price equal to 125% of the public offering price of the shares. As estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the representative’s warrants is $625,000, which is equal to 125% of $500,000 (5% of the proposed maximum aggregate offering price of $10,000,000). |
| (5) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses: one to be used in connection with the initial public offering of 2,875,000 shares of our common stock (includingshares of common stock which may be issued on exercise of a 45-day option granted to the underwriters to cover over-allotments, if any) through the underwriters named on the cover page of this prospectus (the “IPO Prospectus”) and one to be used in connection with the potential resale by certain selling stockholders of an aggregate amount up to 1,650,000 shares of our common stock (the “Selling Stockholder Prospectus”), consisting of up to (i) 150,000 shares of our common stock and (ii) 1,500,000 shares of our common stock issuable upon exercise of outstanding common stock purchase warrants. The IPO Prospectus and the Selling Stockholder Prospectus will be identical in all respects except for the alternate pages for the Selling Stockholder Prospectus included herein which are labeled “Alternate Pages for Selling Stockholder Prospectus.”
The Selling Stockholder Prospectus is substantively identical to the IPO Prospectus, except for the following principal points:
We have included in this Registration Statement, after the financial statements, a set of alternate pages to reflect the foregoing differences of the Selling Stockholder Prospectus as compared to the Prospectus.
The sales of our securities registered in the Prospectus and the shares of our common stock registered in the Selling Stockholder Prospectus may result in two offerings taking place concurrently, which could affect the price and liquidity of, and demand for, our securities. This risk and other risks are included in “Risk Factors” beginning on page 7 of the IPO Prospectus.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not solicitingnor does it seek an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated November 5, 2019
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED JULY 16, 2021 |
PROSPECTUS Shares
YayYo, Inc.
2,500,000Shares of Common Stock
EVmo, Inc.
This is an initiala firm commitment public offering of shares_____shares of common stock, par value $0.000001 per share (the “Common Stock”) of YayYo,EVmo, Inc. We areImmediately prior to this offering, 2,500,000 sharesour Common Stock has been traded on the Pink Open Market and quoted on the OTC Market under the symbol “YAYO.” On , 2021, the closing price of our common stock.
Prior to this primary offering, there has been no public market for our common stock.Common Stock was $ per share. The final public offering price of the shares of Common Stock in this offering will be $4.00. determined through negotiation between us and the underwriters in the offering and the recent market price used throughout this prospectus may not be indicative of the final offering price.
We have applied to have our common stockCommon Stock listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “YAYO”“EVMO.” No assurance can be given that our application will be approved or that an active trading market on Nasdaq will develop. No assurance can be given that the trading prices of our Common Stock on the Pink Open Market will be indicative of the prices of our Common Stock if our Common Stock were traded on the Nasdaq Capital Market. This offering will only occur if Nasdaq approves the listing of the Common Stock on Nasdaq. If Nasdaq does not approve the listing of the Common Stock, we will not proceed with this offering.
We plan to effect a reverse stock split of our Common Stock with a ratio of between one-for-two and-one-half and one-for-three and one-half as approved by our board of directors and shareholders, with the final ratio to be determined by our board of directors prior to the effective date of the registration statement of which listing isthis prospectus forms a condition topart and the pricing of this offering.
We intendare an “emerging growth company” and a “smaller reporting company,” each as defined under the federal securities laws and, as such, have elected to usecomply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings. See the proceeds from this primary offering for the acquisitionsection titled “Implications of passenger vehicles made available for rentBeing an Emerging Growth Company and for general corporate purposes, including working capital and sales and marketing activities. See “Use of Proceedsa Smaller Reporting Company.”
Investing in our common stocksecurities involves a high degree of risk.risks. See “Risk Factors” beginning on page 78 of this prospectus for a discussion of informationthe risks that you should be consideredconsider in connection with an investment in our common stock.Common Stock.
Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, and we have elected to comply with certain reduced public company reporting requirements.
| Per Share | Total | |||||||
| Initial public offering price | $ | $ | ||||||
| Underwriting discounts and commissions(1) | $ | $ | ||||||
| Proceeds, before expenses, to us | $ | $ | ||||||
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We have granted to the representative of the underwriters of this offering an option for a period of 45 days from the date of this prospectus to purchase up to an additional shares of our Common Stock, an amount equal to 15% of the number of shares offered hereby, on the same terms and conditions described herein, solely to cover over-allotments, if any. See “Underwriting” for more information.
The underwriters expect to deliver the shares of Common Stock against payment in New York, New York on or about , 2019.2021, subject to customary closing conditions.
Prospectus datedThinkEquity
a division of Fordham Financial Management, Inc.
The date of this prospectus is , 20192021
EVmo, Inc.
TABLE OF CONTENTS
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Table of Contents
Through and including , 2019 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriter and with respect to their unsold allotments or subscriptions.ABOUT THIS PROSPECTUS
You should rely only onWe have not, and the underwriters have not, authorized anyone to provide you with information different than that which is contained in this prospectus or in any free writing prospectus supplement or amendment. Neitherthat we nor the underwriters, have authorized any other person to provide youfor use in connection with information that is different from, or adds to, that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it.offering. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The selling stockholders are offering to sell, and seeking offers to buy, our common stockshares of Common Stock only in jurisdictions where offers and sales are permitted. The distribution of this prospectus and the offering of the Common Stock in certain jurisdictions may be restricted by law. This prospectus does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any Common Stock offered by this prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
You should assume that the information containedappearing in this prospectus and in any free writing prospectus that we have authorized for use in connection with this offering, is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.those respective documents. Our business, financial condition, results of operations and prospects may have changed since those dates. You should read this prospectus and any free writing prospectus that date. We are notwe have authorized for use in connection with this offering, in their entirety before making an offerinvestment decision. You should also read and consider the information in the documents to which we have referred you in the sections of any securitiesthis prospectus entitled “Where You Can Find More Information.”
For investors outside of the United States: No action is being taken in any jurisdiction outside of the United States that would permit a public offering of the shares of our Common Stock or possession or distribution of this prospectus in whichany such offerjurisdiction. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Common Stock and the distribution of this prospectus outside of the United States.
We further note that the representations, warranties and covenants made by us in any agreement that is unlawful.filed as an exhibit to this prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
Unless the context requires otherwise, references in this prospectus to “EVmo,” “EVmo, Inc.,” the “Company,” “we,” “us,” and “our” refer to EVmo, Inc., a Delaware corporation.
This prospectus may make reference to trademarks, servicemarks and tradenames owned by us or other companies. All such trademarks, servicemarks and tradenames, if any, included in this prospectus are the property of their respective owners.
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ThroughoutThis summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our securities. Before deciding to invest in our securities, you should read this entire prospectus carefully, including the section of this prospectus unlessentitled “Risk Factors” beginning on page 8. All brand names or trademarks appearing in this report are the property of their respective holders.
A reverse stock split of our Common Stock will be effected prior to the closing of this offering. All share amounts in this prospectus have been retroactively adjusted to give effect a [ ] to [ ] reverse stock split to be effected prior to the effective time of the registration statement to which this prospectus forms a part.
Overview of the Company
EVmo, Inc. is a holding company operating principally through two wholly-owned subsidiaries: (i) Rideshare Car Rentals LLC, a Delaware limited liability company (“Rideshare”), and (ii) Distinct Cars, LLC, a Delaware limited liability company (“Distinct Cars”). Rideshare offers an online bookings platform (the “Rideshare Platform”) while Distinct Cars maintains a fleet of passenger vehicles and transit vans for use in the last-mile logistical space for rent to our customers who are drivers in the ridesharing and delivery gig industries, while also providing them with insurance coverage and issuing them insurance cards in their own names. This enables such drivers to meet the vehicle suitability and other requirements of rideshare and delivery gig companies such as Uber, Lyft, DoorDash and Grubhub. Through Rideshare and Distinct Cars, we seek to become a leading provider of rental vehicles to drivers in the ridesharing and delivery gig spaces, and an industry leader in supplying transit vans for last-mile logistics. “Gig” generally refers to a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.
Drivers can rent their vehicles using the Rideshare Platform, which enables them to check inventory and performance and review vehicle data. Drivers have the ability to book vehicles on line by the day, week or month, at their option, make payments, check insurance, or extend their rental with a minimum of inconvenience, while at the same time incurring no maintenance expenses. Depending on the make and model of the requested vehicle, rental prices begin at $39 per day or $795 per month. The Rideshare Platform is available on desktop, iOS and Android devices. We initially launched the Rideshare Platform in Los Angeles, CA and have since expanded it in the following markets: Oakland, CA; Las Vegas, NV; Chicago, IL; Newark, NJ; Baltimore, MD; and Dallas, TX.
In March 2021, we formed another wholly-owned subsidiary, EV Vehicles LLC, a Delaware limited liability company, which we intend to utilize as the corporate platform to implement our strategy to transition our entire fleet of rental vehicles from standard vehicles with internal combustion engines to electric by 2024.
Our Market
We service drivers in the ridesharing and delivery gig industries by providing them with qualifying vehicles and insurance, enabling them to work for Transportation Network Companies (“TNCs”) such as Uber and Lyft. We strongly believe this is a vibrant and growing market, as the advent of ridesharing and food delivery gigs over the last decade has permanently changed the transportation industry. The U.S. Department of Labor-Bureau of Labor Statistics in its April 2021 report has reported that consumer expenditures on transportation were approximately $1.1 trillion in 2019. Further, according to such statistics, transportation (including vehicle purchases and expenditures for gasoline and motor oil) was the second largest household expenditure after housing and the aggregate consumer spending on transportation was almost twice as large as that of healthcare and three times as large as entertainment. The use of rideshare and food delivery gig applications on smart phones has been transformative, allowing Uber, for example, to announce in mid-2016 that it had completed its two billionth ride only six months after it marked its first one billion rides.
One of the challenges the ridesharing and delivery gig industries faces is ensuring that driver growth keeps pace with the massive demand. Lyft recently reported an increase in active riders by over 940,000 in the first quarter of 2021 than in the fourth quarter of 2020, and that by the end of February 2021 rider growth had exceeded driver growth. Uber has 3.5 million active drivers on its platform during the first three months of the year but is also reporting a shortage. In April 2021, it announced a $250 million stimulus to entice both former and new drivers to work for them.
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Accordingly, the TNCs have actively taken steps to satisfy their driver demand by setting up programs designed to get eligible drivers into qualified cars. Uber has entered into multiple partnerships with car rental companies, and Lyft Express Driver is partnered with Hertz. We believe EVmo can be a major independent player in this space, since we also supply TNC drivers with qualifying vehicles, which we expect will eventually be electric vehicles, and provide them access to the Rideshare Platform, which is a driver-friendly mechanism to manage their vehicle rental and allowing them to generate income.
Our Growth Strategy
Our current growth strategy, which we formulated in early 2021, centers around our goal to transition our entire vehicle fleet to electric vehicles. We initiated this strategy for several reasons. First, we believe that industry trends are clear that electric vehicles will become the mainstay of the automobile market over the next 10 years. The Ford Motor Company has recently announced its intention to invest more than $30 billion in vehicle electrification through 2025, and has stated that it expects electric vehicles will comprise nearly half of all global sales by 2030. General Motors has stated that its goal is to exclusively sell electric vehicles by 2035. Apple and Hyundai are collaborating on producing an electric vehicle, and industry leader Tesla is rapidly growing and expanding its electric vehicle product line. While, according to LMC Automotive, only 410,000 electric vehicles were built in North America in 2020, annual production is expected to increase to at least 1.4 million vehicles by 2028.
Second, we believe that both drivers and riders will be increasingly drawn to electric vehicles for their environmental benefits, especially as they become comparable to combustion cars in terms of pricing, mileage and the number of available options to choose from. The demand for clean energy products is undeniable, and electric vehicles should be no exception as consumers continue to seek out eco-friendly alternatives.
Finally, we concluded that governmental policies and mandates will ultimately force the hand of both the automobile industry and consumers. Fuel economy and carbon dioxide emission targets are under constant review by the Environmental Protection Agency and many state governments, and in our opinion, this has helped shape manufacturing strategies and consumer preferences. Several states and municipalities have taken steps to either halt the sales of gasoline-fueled vehicles in the near future, or to promote the sale of electric vehicles. For example, the governor of California issued an executive order in September 2020 requiring all in-state sales of new passenger cars and trucks to be zero- emissions by 2035. In Oregon, residents can receive a rebate of up to $2,500 on the purchase or lease of a qualifying electric vehicle.
While we will incur a considerable short-term operating expense in turning over our fleet, we firmly believe that the reputational and brand benefits we will realize from being known as a TNC vehicle provider with an entirely electric fleet will quickly allow us to differentiate ourselves and significantly grow our business. The trends we describe above will directly impact the ridesharing and delivery gig industries, as we believe that both TNC drivers and riders will increasingly express a preference for electric vehicles. By making ourselves an early industry leader in this area, we believe that we will be well- positioned to market ourselves successfully and become profitable, using our current business model of vehicle rentals to TNC drivers. We currently have 40 electric vehicles in our fleet and we expect this number to grow to approximately 150-200 by the end of 2021. We expect to complete our transition to wholly electric by 2024.
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, the World Health Organization characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half of 2020, which has continued into the early months of 2021. As of the date of this prospectus, several vaccinations for COVID-19 have received emergency-use authorization from the Food and Drug Administration and many of the lockdown restrictions imposed by state and local governments have abated. Still, the pandemic has not yet ended, and there have been multiple waves where infections, hospitalizations, and deaths have sharply increased. Most recently, several variants of the original virus have been identified, and it is not yet known to what degree the authorized vaccinations provide resistance to these variants. We therefore cannot predict the ultimate impact that COVID-19 may have on our business this year, and possibly beyond.
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Corporate History and Information
EVmo was initially formed on June 21, 2016 as a Delaware limited liability company under the name “YayYo, LLC.” The Company was subsequently converted into a Delaware corporation pursuant to Section 265 of the Delaware General Corporation Law (the “DGCL”). The Company now operates as a “C” corporation formed under the laws of the State of Delaware.
We became a reporting company when, on March 17, 2017, an offering circular on Form 1-A relating to a best-efforts offering of our Common Stock pursuant to “Regulation A+” of the Securities Act, was qualified by the Securities and Exchange Commission (the “SEC”). Then, on November 15, 2019, we completed an initial public offering of 2,625,000 shares of Common Stock, at $4.00 per share, for gross proceeds, before underwriting discounts and commissions and expenses, of $10.5 million and our Common Stock was listed on the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “YAYO.”
On February 10, 2020, after being advised by Nasdaq that it believed we no longer met the conditions for continued listing, the Company announced its intent to voluntarily delist its Common Stock. Since delisting from Nasdaq, our Common Stock has been quoted and traded on the Pink Open Market, which is operated by OTC Markets Group, under the same ticker symbol. The delisting was effective on March 1, 2020. However, as we now believe that we can comply with Nasdaq listing requirements, we have applied to list our Common Stock on the Nasdaq Capital Market under the symbol “EVMO.”
In September 2020, we changed our name from YayYo, Inc. to Rideshare Rental, Inc., in order for our corporate brand to better reflect our principal businesses, ridesharing and vehicle rentals. In February 2021, we again changed our name to EVmo, Inc., to underscore our commitment to making a full transition to electric vehicles by the end of 2024.
Our address is 433 N. Camden Drive, Suite 600, Beverly Hills, CA 90210. Our telephone number is (310) 926-2643 and our website may be accessed at www.evmo.com.
Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). As an “emerging growth company,” we may take advantage of specified reduced disclosure and other requirements that are otherwise designated or the context suggests otherwise,applicable generally to public companies. These provisions include, but are not limited to:
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Concurrent with the primary offering, the Company is registering shares of common stock in connection with the potential resale by certain selling stockholders of an aggregate amount up to (i) 150,000 shares of our common stock and (ii) 1,500,000 shares of our common stock issuable upon exercise of outstanding common stock purchase warrants. Please read the risk factors, including the risk factor titled “Sales of our common stock in the primary offering will be taking place concurrently with common stock registered by selling stockholders which might affect the price, demand, and liquidity of our common stock”on page 29.
Market data and certain industry data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. We have not independently verified any of the data from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry, have not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the forecasts we cite. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.
This summary provides a brief overview of the key aspects of our business and our securities. The reader should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under “Risk Factors.” Some of the statements contained in this prospectus, including statements under “Summary” and “Risk Factors” as well as those noted in the documents incorporated herein by reference, are forward-looking statements and may involve a number of risks and uncertainties. Our actual results and future events may differ significantly based upon a number of factors. The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus.
As used in this prospectus, all references to “capital stock,” “common stock,” “Shares,” “preferred stock,” “stockholders,” “shareholders” applies only to YayYo, Inc. and “we,” “our,” “us,” the “Company,” the “registrant,” or “YayYo” refer to YayYo, Inc., a Delaware corporation. References in this prospectus to the terms “Company,” “we,” “our” or words of like import mean YayYo, Inc. and its direct and indirect subsidiaries, which currently consist of Distinct Cars, LLC, a Delaware limited liability company (“Distinct Cars”), Rideshare Car Rentals LLC, a Delaware limited liability company (“Rideshare”), Savy LLC, a Delaware limited liability company (“Savy”) and Rideyayyo LLC, a Delaware limited liability company (“Rideyayyo”).
About our Company
The Company is a holding company operating through its wholly-owned subsidiaries, including Distinct Cars, LLC, a Delaware limited liability company (“Distinct Cars”), Savy LLC, a Delaware limited liability company (“Savy”), Rideyayyo LLC, a Delaware limited liability company (“Rideyayyo”) and Rideshare Car Rentals LLC, a Delaware limited liability company (“Rideshare”).
On August 12, 2017, we announced we were shifting our primary focus in the transportation/ridesharing industry from the development of the Metasearch App. We have no intention of continuing this business direction. As of the date of this Prospectus, the Company’s operating business segments include (i) an online rideshare vehicle booking platform to service the ridesharing economy through Rideshare (the “Rideshare Platform”), and (ii) the leasing of a fleet of standard passenger vehicles to be made commercially available for rent through Distinct Cars (“Fleet Management”). Through the Company’s wholly-owned subsidiaries Rideshare and Distinct Cars, the Company seeks to become the leading provider of a standard rental vehicle and services to drivers in the ridesharing economy.
The Company operations are organized into two business segments across the ridesharing and transportation industry:
Rideshare Platform—On October 31, 2017, the Company created the wholly-owned subsidiary, Rideshare, to incubate the concept of a proprietary transportation network system focused on the developing of a Rideshare marketplace booking platform to rent standard passenger vehicles to self-employed ridesharing drivers. The Company has now deployed and launched the Rideshare Platform on its operating online platform, located atwww.Ridesharerental.com. The Rideshare Platform is a proprietary car-rental marketplace that connects the Company’s Fleet Management vehicles, other fleet owners and selected individual car owners with Rideshare drivers seeking rental vehicles.
Fleet Management—On June 10, 2017, the Company formed the wholly-owned subsidiary, Distinct Cars, for purposes of developing a fleet management business. The Fleet Management business focuses on the maintenance of a fleet of brand new standard passenger vehicles, under lease contract with the Company, to be subsequently rented directly to drivers in the ridesharing economy. The Fleet Management business and vehicles are made commercially available through the Company’s Rideshare Platform.
Recent Developments
YayYo, Inc. - Recent Financing Activities
As of October 31, 2019, the Company had 26,802,976 shares of common stock issued and outstanding. From January 2018 to June 30, 2019, the Company issued (i) 46,330 shares of common stock under the Regulation A+ Offering (defined below) in exchange for cash proceeds, and (ii) 986,095 shares of restricted common stock, pursuant to following:
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No shares of common stock have been issued since June 30, 2019.
As of October 31, 2019, with the issuances above, we had 26,802,976 shares of common stock issued and outstanding.
In December 2016, we filed an offering statement pursuant to Regulation A of the Securities Act, which was qualified by the SEC on March 17, 2017. We offered up to a maximum of 6,250,000 shares of common stock on a “best efforts” basis, at a price of $8.00 per share. On March 16, 2018, we closed the Regulation A offering, after issuing365,306shares of common stock for proceeds of approximately$1.8 millionnet of offering expenses (the “Regulation A+ Offering”).
On March 8, 2018, YayYo, Inc., entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended) (the “Lender”), pursuant to which the Lender purchased (i) a senior secured promissory note in the principal face amount of $6,000,000 due March 8, 2023, subject to extension (the “Second Note”) and (ii) warrants to acquire up to an aggregate of 1,500,000 shares, of our common stock (the “Warrant Shares”), with an exercise price of $4.00 per share (the “Warrants” or the “Selling Securityholder Warrant”) and 150,000 commitment shares of common stock, par value $0.000001 per share, of the Company (the “Commitment Shares”) for an aggregate purchase price of $6,000,000 (the “Second Note Offering”) to be directed and deposited by the Lender in the Company’s Master Restricted Account (defined below). The principal balance of $6,000,000 on the Second Note bears interest at a rate per annum equal to LIBOR plus 100 basis points, subject to adjustment in accordance with the terms of the Second Note. The Warrants expire five years from the date of issuance. Further, the Company paid $178,228 of issuance costs associated with the Second Note. The relative fair value of the 150,000 Commitment Shares of common stock was $378,916 and the relative fair value of the 1,500,000 Warrant Shares was $3,726,506 and both were recorded as a discount on the Second Note and as additional paid in capital. In addition, the issuance costs of $178,228 have also been recorded as a debt discount. The debt discount of $4,283,650 is being amortized over the term of the Second Note.
YayYo, Inc.’s obligations to repay and otherwise perform its obligations under the Second Note are secured by a continuing first priority lien and perfected security interest in the $6,000,000 held in the Master Restricted Account (the “Collateral”), to be held and maintained at Umpqua Bank (the “Master Restricted Account”), subject to a deposit account control agreement, dated as of March 7, 2018, by and between YayYo, Inc., the Lender and Umpqua Bank (the “Controlled Account Agreement”). Subject to the terms of the Second Note and Controlled Account Agreement, upon the exercise of the Warrant and following YayYo, Inc.’s receipt of a notice by the holder of the Second Note electing to effect a release of cash with respect to the Collateral or at any such time that the outstanding amount of the Collateral is greater than or exceeds the principal face amount under the Second Note, the Lender will release a certain percentage of cash held as Collateral in the Master Restricted Account to YayYo, Inc. Under the terms of the Purchase Agreement, YayYo, Inc., will use any proceeds received and distributed from the Master Restricted Account, if at all, for general corporate purposes.
Further, in 2018, the Company issued notes payable and also issued an aggregate of 5,850 shares of its common stock to the note holders as additional incentive to make the loans.
In February 2018, the Company issued 81,250 shares of its common stock to two individuals for services rendered. In May 2018, the Company issued 1,250 shares of its common stock to a company for services.
On April 1, 2018, the Company entered into an incentive agreement for a grant of stock with David Haley, a former director of the Company, pursuant to which Mr. Haley has agreed to write, provide and procure two particular insurance policies (the “Special Policies”) for Rideshare and Distinct Cars, in consideration for 250,000 shares of Company restricted common stock, provided further, that in consideration for certain monetary advances made and extended by Mr. Haley on behalf of the Company for certain down payment requirements for the Special Policies, the Company has agreed to issue Mr. Haley 14,945 shares of Company restricted common stock, at a price per share equal to $8.00, as reimbursement for the cost of Mr. Haley’s monetary advances made on behalf of the Company. 258,695 shares of Company restricted common stock was issued on April 1, 2018 and 6,250 shares of Company restricted common stock was issued on October 8, 2018.
In July 2018, the Company issued a consultant 100,000 shares of common stock for an agreement to provide services. The Company entered into an agreement with the consultant to cancel the shares in November 2018.
During fiscal year 2017, the Company entered into vehicle leasing agreements with Acme Auto Leasing LLC (the “Lessor”) and issued additional consideration the Lessor in the form of a restricted stock grant in the amount of 100,000 shares of common stock, in exchange for certain terms to be provided by the Lessor under all lease agreements entered into between the Lessor and the Company. On December 2017, July 2018 and November 2018, the Company issued the Lessor an additional 250,000, 91,500 and 207,000 shares of common stock, respectively, under similar arrangements in connection with lease arrangements.
As of June 30, 2019, December 31, 2018 and December 31, 2017, the Company has total lease obligations in the amount of $3,221,785, $3,790,147 and $1,593,291, respectively, (collectively, the “Finance Lease Obligations”).
On September 12, 2018, the Company entered into a new note payable agreement, as amended on November 1, 2019, whereby the Company repaid $4,821,810 of the original $6,000,000 note payable and the balance of $1,178,190 plus an original issue discount of $117,828 was rolled into a note payable for $1,296,018. This note payable is due the earlier of November 30, 2019 or the closing of an offering of at least $3,000,000. As a result of this transaction, the Company recognized interest expense for the remaining unamortized debt discount associated of $4,018,560.
Distinct Cars, LLC - Recent Financing Activities
As of the date of this prospectus, Distinct Cars, as lessee, entered into a series of open-ended lease agreements and disclosure statements with Lessor to lease standard passenger vehicles, each with an approximate lease term of 30 to 36 months (each a “Lease Agreement” and collectively, the “Lease Agreements”). Monthly payments under each Lease Agreement range from approximately $342 per month to $621 per month. At the end of the term of the Lease Agreement, lessee has the right to purchase ownership and title of the subject vehicle for a nominal payment. In addition, the Lease Agreements are subject to the grant of a purchase money security interest on each leased vehicle.
Distinct Cars has completed a debt round of financing pursuant to which Distinct Cars raised aggregate gross proceeds in the amount of $319,667 from 38 accredited investors in exchange for senior secured promissory notes issued by Distinct Cars (each a “Distinct Cars Note” and collectively, the “Distinct Cars Notes”). The maturity date under the Distinct Cars Notes is 36 months from the date of issuance (the “DCN Maturity Date”) ranging from August 9, 2020 to May 23, 2021. The principal amount under the Distinct Cars Notes ranges from a minimum amount of $5,000 per Distinct Cars Note up to $20,000 per Distinct Cars Note. The Distinct Cars Notes accrue interest at a rate of 8% per annum with interest due and payable upon the DCN Maturity Date. The principal amount and any unpaid and accrued interest thereunder is due and payable in twelve quarterly installments commencing upon January 1, 2018. The Distinct Cars Notes are secured by a senior secured priority lien in the equity of the fleet of leased automobiles acquired under the Lease Agreements described above subject to subordination in priority lien status to the purchase money security interest held by the lessor under the Lease Agreements. In addition to the total amount of principal and interest owing under the Distinct Cars Note, upon execution of the Distinct Cars Note and placement of funds the holder received a stock grant (the “Stock Grant”) of YayYo Inc., common stock (the “Parent Shares”) in an amount equal to 100% of the principal sum as calculated by a price of $4.00 per share with 30% coverage.
Risk Factors
Our business is subject to a number of risks. You should be aware of these risks before making an investment decision. These risks are discussed more fully in the section of this prospectus titled “Risk Factors”, which begins on page 7 of this prospectus.
Information Regarding our Capitalization
As of October 31, 2019, we had 26,802,976 shares of common stock issued and outstanding. Additional information regarding our issued and outstanding securities may be found in the sections of this prospectus titled “Market for Common Equity and Related Stockholder Matters” and “Description of Securities.”
Unless otherwise specifically stated, information throughout this prospectus does not assume the exercise of outstanding options or warrants to purchase shares of our common stock.
Organizational History
The Company is a holding company operating through its wholly-owned subsidiaries, including Distinct Cars, LLC, a Delaware limited liability company, Savy LLC, a Delaware limited liability company, Rideyayyo LLC, a Delaware limited liability company and Rideshare Car Rentals LLC, a Delaware limited liability company.
The Company was formed on June 21, 2016 under the name “YayYo, LLC,” which was converted into a Delaware corporation pursuant to the unanimous written consent of our former manager and members in a transaction intended to be tax-free under the Internal Revenue Code (the “Conversion”). Pursuant to the Conversion, the members of YayYo, LLC have assigned, transferred, exchanged and converted their respective limited liability company membership interests of YayYo, LLC to the Company in exchange for common stock of the Company. All of YayYo, LLC’s liabilities and assets, including its intellectual property, were automatically transferred to the Company and the Company has assumed ownership of such assets and liabilities upon the filing of the “Certificate of Conversion from a Delaware Limited Liability Company to a Delaware Corporation” with the State of Delaware pursuant to Section 265 of the Delaware General Corporation Law. The Company now operates as a “C” corporation formed under the laws of the State of Delaware.
Corporate Information
Our principal executive office is located at 433 North Camden Drive, Suite 600, Beverly Hills, California 90210. Our telephone number is (310) 926-2643. Our web address iswww.yayyo.com. Information included on our website is not part of this prospectus.
Implications of Being an Emerging Growth Company
We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an “emergingemerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).company. We will continue to remain an emerging growth company until the earlierearliest of the following: (i) the last day of the fiscal year following the fifth anniversary of the date of the first salecompletion of our common stock pursuant to an effective registration statement under the Securities Act;this offering; (ii) the last day of the fiscal year in which we haveour total annual gross revenues ofrevenue is equal to or more than $1.07 billion or more;billion; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under applicable SEC rules. the rules of the Securities and Exchange Commission (the “SEC”).
We expectare also a “smaller reporting company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies. To the extent that we will remain an emerging growthcontinue to qualify as a smaller reporting company for the foreseeable future, but cannot retain our emerging growth company status indefinitely and will no longerafter we cease to qualify as an emerging growth company, on or before the last daycertain of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuantexemptions available to an effective registration statement under the Securities Act. For so longus as we remain an emerging growth company may continue to be available to us as a smaller reporting company, including exemption from compliance with the auditor attestation requirements pursuant to SOX and reduced disclosure about our executive compensation arrangements. We will continue to be a “smaller reporting company” until we are permitted and intend to relyhave $250 million or more in public float (based on exemptions from specified disclosure requirementsthe price of our Common Stock) measured as of the last business day of our most recently completed second fiscal quarter or, in the event we have no public float or a public float that are applicable to other public companies that are not emerging growth companies.is less than $700 million, annual revenues of $100 million or more during the most recently completed fiscal year.
These exemptions include:
We may choose to take advantage of some, but not all, of these exemptions. We have taken advantage of certain reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different thanfrom the information you receive from other public companies in which you hold stock.
An In addition, the JOBS Act provides that an emerging growth company canmay take advantage of thean extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This allows an emerging growth company to delaystandards, delaying the adoption of certainthese accounting standards until those standardsthey would otherwise apply to private companies. We have irrevocably elected to avail ourselves of thisthe extended transition period and, asfor complying with new or revised financial accounting standards. As a result of the accounting standards election, we will not be requiredsubject to adoptthe same implementation timing for new or revised accounting standards on the dates on which adoption of such standards is required foras other public reporting companies.companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult.
| 4. |
We are also a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and have elected to take advantage of certain of the scaled disclosure available for smaller reporting companies.THE OFFERING
SUMMARY OF THE OFFERINGThe following summary contains general information about this offering. The summary is not intended to be complete. You should read the full text and more specific details contained elsewhere in this prospectus.
| Common | shares of Common Stock. | ||
| Option to Purchase Additional Shares of Common | We have granted the representative of the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to additional shares of our Common Stock, an amount equal to 15% of the | ||
| Common |
| shares | |
| We estimate that we will receive net proceeds from this offering of approximately $ million, or approximately $ million if the representative of the underwriters | |||
| We currently intend to use a portion of the net proceeds | |||
| Risk Factors | Investing in our Common Stock involves significant risks. Before making a decision whether to invest in our Common Stock, please read the information contained under the heading “Risk Factors” beginning on page |
| Common Stock Trading Symbol; Proposed | “YAYO” at present. We have applied to |
| 5. |
The number of shares of our Common Stock that will be outstanding immediately after the offering is based on shares outstanding as of July , 2021. Unless we specifically state otherwise, the share information in this prospectus excludes:
| ● | shares of our Common Stock issuable upon the exercise of issued and outstanding stock options outstanding at a | |
| 1,500,000 shares of | ||
|
| |
| ||
| ● | shares of Common Stock issuable upon the exercise of the warrant to be issued to the representative of the underwriters upon closing of this offering. |
Unless otherwise indicated, all information in this prospectus assumes:
| ● | no exercise of the outstanding warrant or any of the outstanding stock options issued under the 2016 Equity Incentive Plan, as described above; | |
| ● | no exercise by the underwriters of their option to purchase up to an additional shares of Common Stock from us in this offering to cover over-allotments, if any; | |
| ● | no exercise of the representative’s warrants to be issued upon consummation of this offering at an exercise price equal to 125% of the initial offering price of the Common Stock; | |
| ● | the Series B Preferred Stock is redeemed from the proceeds of this offering and is not converted into shares of Common Stock prior to completion of this offering; | |
| ● | that the public offering price is $ per share (which is the midpoint of the range set forth on the cover page of this prospectus; and | |
| ● | a reverse stock split being effected at a ratio of 1-for- . |
| 6. |
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table summarize our financial data for the periods and as of the dates indicated. The consolidated statements of operations data for the years ended December 31, 2020 and 2019 are derived from our audited consolidated financial statements and notes thereto that are included elsewhere in this prospectus. The statements of operations data for the three months ended March 31, 2021 and 2020 and the balance sheet data as of March 31, 2021 have been derived from our unaudited condensed financial statements and related notes included elsewhere in this prospectus and have been prepared in accordance with generally accepted accounting principles in the United States of America on the same basis as the annual audited financial statements and, in the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial information in those statements. Our historical results are not necessarily indicative of results that may be expected in the future, and results for the period ended March 31,2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021. You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in the registration statement of which this prospectus forms a part.
| Three Months Ended March 31, | Years Ended December 31, | |||||||||||||||
| 2021 | 2020 | 2020 | 2019 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Consolidated Statements of Operations Data: | ||||||||||||||||
| Revenue | $ | 2,294,532 | $ | 1,747,642 | $ | 7,621,180 | $ | 6,914,910 | ||||||||
| Cost of revenue | 1,780,903 | 1,401,291 | 5,263,474 | 4,673,870 | ||||||||||||
| Gross profit | 513,629 | 346,351 | 2,357,706 | 2,241,040 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing | 165,748 | 131,509 | 490,403 | 765,441 | ||||||||||||
| Product development | 9,500 | 0 | 0 | 13,500 | ||||||||||||
| General and administrative | 1,439,101 | 1,896,206 | 5,288,316 | 4,023,921 | ||||||||||||
| Loss on settlement of debt | 0 | 0 | 0 | 252,900 | ||||||||||||
| Total operating expenses | 1,614,349 | 2,027,715 | 5,778,719 | 5,055,762 | ||||||||||||
| Loss from operations | (1,100,720 | ) | (1,681,364 | ) | (3,421,013 | ) | (2,814,722 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest and financing costs | (3,324,943 | ) | (79,856 | ) | (265,839 | ) | (1,115,499 | ) | ||||||||
| Gain on forgiveness of debt | 8,000 | 0 | 184,775 | 0 | ||||||||||||
| Total other income (expense) | (3,316,943 | ) | (79,856 | ) | (81,064 | ) | (1,115,499 | ) | ||||||||
| Net loss | $ | (4,417,663 | ) | $ | (1,761,220 | ) | $ | (3,502,077 | ) | $ | (3,930,221 | ) | ||||
| Loss per share - basic and diluted | $ | (0.13 | ) | $ | (0.06 | ) | $ | (0.11 | ) | $ | (0.14 | ) | ||||
| Weighted average common shares outstanding - basic and diluted | $ | 33,383,431 | $ | 29,427,803 | $ | 31,118,425 | $ | 27,112,557 | ||||||||
| As of March 31, 2021 | ||||||||||||
| Actual | Pro forma (1) | As adjusted (2) | ||||||||||
| Unaudited Consolidated Balance Sheet Data: | ||||||||||||
| Cash and cash equivalents | $ | 155,476 | $ | 8,728,767 | $ | |||||||
| Working capital | $ | (4,855,688 | ) | $ | 1,413,853 | $ | ||||||
| Total assets | $ | 9,523,702 | $ | 18,096,993 | $ | |||||||
| Total liabilities | $ | 7,729,684 | $ | 15,229,684 | $ | |||||||
| Accumulated deficit | $ | (33,091,655 | ) | $ | (34,322,114 | ) | $ | |||||
| Total stockholders’ equity | $ | 1,794,018 | $ | 563,559 | $ | |||||||
(1) The pro forma balance sheet data in table above reflects: (i) the receipt on April 12, 2021 of cash proceeds of $2,000,000 from the issuance of note that has since been exchanged for both 230,375 shares of Series B Preferred Stock and a warrant to purchase shares of Common Stock; (ii) the liability incurred from the issuance of the note in the principal amount of $2,250,000, which is now cancelled; (iii) the receipt on July 9, 2021 of net cash proceeds of $6,573,291 from the issuance of a note evidencing a term loan; and (iv) the liability incurred from the issuance of the term note in the principal amount of $7,500,000.
(2) The pro forma as adjusted balance sheet data in the table above reflects: the (i) the pro forma adjustments set forth above; (ii) the sale and issuance by us of ___ shares of our Common Stock in this offering, based upon the assumed public offering price of $ per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us; and (iii) the redemption by us of 230,375 shares of Series B Preferred Stock for $2,303,750.
| 7. |
Our business is subject to manyAn investment in our Common Stock involves a high degree of risk. You should consider the risks, uncertainties and uncertainties, which may affect our future financial performance. If anyassumptions discussed below as well as all of the eventsother information contained in this prospectus. It is not possible to predict or circumstances described below occur, our business and financial performanceidentify all such risks. Consequently, we could also be adversely affected our actual results could differ materially from our expectations, and the price of our stock could decline. The risks and uncertainties discussed belowby additional factors that are not the only ones we face. There may be additional risks and uncertainties not currentlypresently known to us or that we currently do not believe are material that may adversely affectconsider to be immaterial to our business and financial performance. You should carefully consider the risks described below, together with all other information included in this prospectus including our financial statements and related notes, before making an investment decision.operations. The statements contained in this prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. Ifoccurrence of any of the followingthese known or unknown risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and investors in our securities maymight cause you to lose all or part of their investment.your investment in the Common Stock.
Risks Related to Our Business and Industry
We have generated only limited revenue to date, have incurred net losses since inception, and may continue to incur net losses for the foreseeable future.
We are an emerging growth company with a limited operating history and limited sales to date.
The Company isWe are subject to all of the risks inherent in the establishment of an emerging growtha start-up company, including the absence of an operatinga lengthy history and the risk that we may be unable to successfully operate our business segments.of successful operations. There can be no assurance that the Companywe will be able to continue to successfully operate our business, segments, including, without limitation, the Company’sdeveloping and enhancing, as applicable, our technologies, products and services.
The Company was incorporated onWe were initially organized in November 16, 2016 and only commenced operations thereafter. The Companyit was incorporated pursuant to the simultaneous filing of the Company’s certificate of incorporation, as filed and stamped by the Delaware Secretary of State on November 16, 2016, and the “Certificate of Conversion from a Delaware Limited Liability Company to a Delaware Corporation”, as filed and stamped on the same date by the Delaware Secretary of State pursuant to Section 265 of the Delaware General Corporation Law. The Company now operates as a “C” corporation formed under the laws of the State of Delaware. Accordingly, we have limited operating history upon which to base an evaluation of our business and prospects. You must consider the risks and difficulties we face as a small operating company with limited operating history.
Onnot until August 12, 2017 we announced that we were shiftingshifted our primary corporate focus inoperations into the transportation/ridesharing industry, towards the vehicle rental business with a focus on developing (i) an online rideshare marketplace booking platform to service the ridesharing economy through the Company’s wholly-owned subsidiary Rideshare (the “Rideshare Platform”), and (ii) the maintenance ofgrowing and maintaining Distinct Cars. We therefore have a fleet of standard passenger vehicles to be made commercially available for rent through the Company’s wholly-owned subsidiary Distinct Cars (“Fleet Management”). Through the Company’s wholly-owned subsidiaries Rideshare and Distinct Cars, we have limited operating history in the vehicle rental, fleet managementridesharing and transportation industry.delivery gig industries. We generated $3,289,478$2,294,532 in revenue during first quarter of 2021 but had a net loss of ($4,417,663) as compared to a net loss of ($1,761,220) for the first quarter of 2020. We generated $7,621,180 in revenue during fiscal year 2018.2020 but had a net loss of ($3,502,077); in the previous fiscal year, our net loss was ($3,930,221). While our current net loss decreased from the previous fiscal year, and is significantly lower than that of two years ago, we have still not achieved profitability as yet and cannot predict with any certainty when we will do so, if ever. Any unanticipated increase in operating expenses, or a decline in revenues such as we experienced during the early months of the COVID-19 pandemic in 2020, or a failure by us to successfully grow our business, may result in a continuation of net losses for the foreseeable future.
OperatingMore generally, operating results for future periods are subject to numerous uncertainties, several of which we address in this section, and we cannot assure you that the Company will ever achieve or sustain profitability. The Company’s prospects must be considered in light of the general risks encountered by small operating companies with limited operating history, particularly companies in newnewer and rapidly evolving markets.markets, as well as those risks particular to us, which we describe in this section. Operating results will depend upon many factors, including our success in attracting and retaining motivated and qualified personnel, whether or not we can obtain needed financing on satisfactory terms, our ability to establish short term credit lines or obtain financing from other sources, our abilitycontinue to develop and market newour products and services, whether or not we can control costs,our operating expenses, and general economic conditions. The Company has engaged in limited operations to date, and althoughAlthough the Company believes that its plans to grow, expand and scale operations organically, particularly through our transition to electric vehicles, will be successful, there is no assurance that this willmay in fact not be the case. ThereNor can there be noany assurance that the Company’s salesrevenue projections and marketing plans will be achievedrealized as anticipated and planned. The Company cannot assure either its current shareholders or any prospective investors that itany such failure will be able to successfully develop and market its products and services which maynot have a material adverse effect on our business.
We have incurred a significant amount of secured indebtedness in order to finance our operations and, if we are unable to timely and adequately service this debt, substantially all of our assets will be subject to seizure by our lender.
In July 2021, we entered into a Term Loan, Guarantee and Security Agreement with EICF Agent LLC, as agent for the lender, 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, against which we have borrowed $7.5 million as of the closing date of the agreement. These borrowings are guaranteed by the Company’s wholly-owned subsidiaries and are a general obligation of the Company. We have granted our lender a security interest in the right, title, and interest in the collateral identified in the agreement, which is substantially all of the Company’s property and assets other than certain leased vehicles. If, for whatever reason, we are unable to timely and adequately service this debt, these assets will be subject to seizure by our lender, and we will have very limited recourse short of satisfying our debt to delay or prevent any such seizure. This contingency would have a material adverse effect on our business, and would likely prevent us from continuing as a going concern.
We willmay need but may be unable to obtain additional funding on satisfactory terms, which could dilute our shareholders or impose burdensome financial restrictions on our business.
We have relied upon cash from financing activities and in the future,While we hopeintend to rely predominantly on revenues generated from operations, as well as the capital generated from this offering, to fund all of the cash requirements of our activities; however,business for the foreseeable future, we do not expect that our currenthave, in the past, relied on cash on hand will fund our existing operations and future business growth. We willobtained from financing. If we need to raise additional capital after this offering in order to further execute our business plan and growth, goals for at least the next twelve-month period thereafter. Futureit is possible that future financings may not be timely available, on a timely basis,either in sufficient amounts or on terms acceptable to us, if at all. Any future debt financing or other financing of securities senior to the common stockour Common Stock will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition and results of operations because we could lose our existing sources of funding and impair our ability to secure new sources of funding.
| 8. |
We have incurred net losses since inception.
For the six month period ended June 30, 2019, we generated a loss of $996,915 and hadThe ongoing COVID-19 pandemic may have an accumulated deficit of $22,238,609. For the fiscal year ended December 31, 2018, we generated a loss of $13,189,122 and had an accumulated deficit of $21,241,694. For the fiscal year ended December 31, 2017, we generated a loss of $6,568,863 and had an accumulated deficit of $8,052,572. Increases in costs and expenses may result in a continuation of losses for the foreseeable future. There can be no assurance that we will be commercially successful.
adverse effect on our business.
We have significant working capital requirements and issuance of common stock or the exercise of outstanding warrants and options to meet these working capital requirements and fund our operations may dilute your investment.
We have been operating atOn January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a loss since inception“Public Health Emergency of International Concern,” and our working capital requirements continue to be significant. As of December 31, 2017, and 2018, and June 30, 2019 our working capital deficit was $618,910, $5,007,729 and $5,641,266, respectively. We have been supporting our business predominantly throughon March 11, 2020, the sale of debt and equity since inception. Since 2017, we have also been supporting our business through our operating cash flow from our limited operational business segments. However, to dateWorld Health Organization characterized the majority of our working capital needs have been funded through third-party capital financings. We will need additional funding to develop our business segments, to increase our sales and marketing capabilities, technologies and assets, as well as for working capital requirements and other operating and general corporate purposes. Our working capital requirements depend and will continue to depend on numerous factors, including the timing of revenues, the expense involved in development of our products and services, and capital improvements. If we are unable to generate sufficient revenue and cash flow from operations, we will need to seek additional equity or debt financing to provide the capital required to maintain or expand our operations, which may have the effect of diluting our existing stockholders or restricting our ability to run our business.
There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, or at all. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay, scale back or eliminate the development of business opportunities and our operations and financial condition may be materially adversely affected. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, could increase our expenses and require that our assets be providedoutbreak as a security for such debt. Debt financing would also be required“pandemic.” In response, numerous states and cities ordered their residents to be repaid regardlesscease 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 operating results. Equity financing, if obtained, could resultcash flows, but we then saw a positive upward movement in dilution to our then existing stockholders.revenue during the second half of 2020, which has continued into the early months of 2021. As of the date of this filing, weprospectus, several vaccinations for COVID-19 have issuedreceived emergency-use authorization from the Food and outstandingDrug Administration and many of the Selling Securityholder Warrant to purchase an aggregatelockdown restrictions imposed by state and local governments have abated. Still, the pandemic has not yet ended, and there have been multiple waves where infections, hospitalizations, and deaths have sharply increased. Most recently, several variants of 1,500,000 shares of our common stock. Wethe original virus have also reserved an aggregate of 10,000,000 shares of common stock for issuance under our 2016 Equity Incentive Plan (the “2016 Plan”). As of June 30, 2019, we have options to purchase an aggregate of 300,000 shares of our common stock outstanding pursuant to our 2016 Plan.
We have outstanding debt and lease commitments, which are secured by our assetsbeen identified, and it is not yet known to what degree the authorized vaccinations provide resistance to these variants. We therefore cannot predict the ultimate impact that COVID-19 may make it more difficult for us to make payments on our other debt and lease obligations.
As of June 30, 2019, December 31, 2018 and December 31, 2017, we had outstanding indebtedness totaling $3,233,087, $2,690,181 and $909,889, respectively. As of June 30, 2019, December 31, 2018 and December 31, 2017, we had outstanding lease obligations totaling $3,221,785, $3,790,147 and $1,593,291, respectively.
Our debt and lease commitments could have important consequences to you. For example, they could:
Our ability to meet our debt service and lease obligations depends on our future financial and operating performance, which will be impacted by general economic conditions and by financial, business and other competitive factors, many of which are beyond our control. These factors could include operating difficulties, increased operating costs, competition, regulatory developments and delays in our business strategies. Our ability to meet our debt service and lease obligations may depend in significant part on the extent to which we can successfully execute our business strategy and successfully operate our business segments. We may not be able to execute our business strategy and our business operations may be materially impacted.
Typical loan agreements also might contain restrictive covenants, which may impair our operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to our rights. A judgment creditor would have the right to foreclose on any of our assets resulting in a material adverse effect on our business ability to generate revenue, operating results or financial condition.this year, and possibly beyond.
IfWhile our business does not generate sufficient cash flow from operations or future sufficient borrowings are not available to us under our credit agreements or from other sources, we might not be able to service our debt and lease commitments, including the notes, or to fund our other liquidity needs. If we are unable to service our debt and lease commitments, due to inadequate liquidity or otherwise, we may have to delay or cancel potential acquisitions, sell equity securities, sell assets or restructure or refinance our debt. We might not be able to sell our equity securities, sell our assets or restructure or refinance our debt on a timely basis or on satisfactory terms or at all. In addition, the terms of our agreements with original equipment manufacturers or debt agreements may prohibit us from pursuing any of these alternatives.
Our Rideshare Platform user metrics and other estimatesrelated software are highly technical, they do not enjoy patent protection, and are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.measurement.
WeOur Rideshare Platform and its related software are highly technical and complex. Although we have not identified any significant technical issues to date, the Rideshare Platform could contain software bugs, hardware errors, or other vulnerabilities as yet unknown to us, which could manifest themselves in any number of ways in our products and services, including through diminished performance or malfunctions. Further, while we regularly review key metrics related to the operation of our Rideshare Platform business, including, but not limited to, our monthly average users subscribers and customersin order to evaluate growth trends, measure our performance, and make strategic decisions. Thesedecisions, it is important to note that these metrics are calculated using internal company data and have not been validated by an independent third party. Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of Rideshare Platform users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies.
OurMoreover, while we developed and coded the Rideshare Platform, emphasizes rapid innovationwe did not do so using any innovative technologies or software, and prioritizes long-term user engagement over short-term financial conditiontherefore we have not obtained any patents for either the Rideshare Platform or results of operations. That strategy may yield results that sometimes doits software. Anyone who wanted to duplicate the Rideshare Platform would not align with the market’s expectations. If that happens, our stock price may be negatively affected.subject to an action for patent infringement by us.
OurA security breach or other disruption to the Rideshare Platform business is growing and becoming more complex, andor our success depends on our ability to quickly develop and launch new and innovative products. Our focus on complexity and quick reactionsinternal information technology systems could result in unintended outcomesthe loss, theft, misuse, or decisions that are poorly received byunauthorized disclosure of driver or sensitive company information, could disrupt our usersoperations, or partners. Our culture also prioritizescould frustrate or thwart our long-term user engagement over short-term financial conditiondrivers’ ability to access or results of operations. We frequently make decisions that may reduce our short-term revenue or profitability if we believe thatuse the decisions benefit the aggregate user experience and will thereby improve our financial performance over the long-term. These decisions may not produce the long-term benefits that we expect, in which case, our user growth and engagement, our relationships with advertisers and partners, as well as our business, operating results, and financial condition could be seriously harmed.
Our Rideshare Platform and software is highly technical and may contain undetected software bugs or vulnerabilities,rent vehicles from us, which could manifest in ways that could seriously harm our reputation and our business.
OurThe Rideshare Platform and software is highly technicalour internal information technology systems store and complex. Our Rideshare Platform may contain undetected software bugs, hardware errors, and other vulnerabilities. These bugs and errors can manifest in any number of ways in our products, including through diminished performance, security vulnerabilities, malfunctions, or even permanently.
We also could face claims for product liability, tort, or breach of warranty. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and seriously harm our reputation and our business. In addition, if our liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business could be seriously harmed.
To carry out our business plan we will requiretransmit a significant amount of cash. Ourpersonal and/or confidential information, including the license and credit card information of our drivers and our own financial, operational and strategic information. The functionality and security of the Rideshare Platform and the protection of our drivers’ and our information is therefore critically important to us. However, with the frequency, intensity, and sophistication of cyber-attacks and data security incidents significantly increasing in recent years, we are subject to such attacks, resulting in data privacy and security risks. Cyber-attacks may disrupt our drivers’ ability to generate cash depends on many factors beyondeither access or effectively use the Rideshare Platform, through which they secure or extend their rentals of vehicles belonging to our control.
Our ability to fund planned capital expenditures will depend onDistinct Cars fleet, which would interfere with our ability to generate cashrevenue. Further, any such attack that results in the future. This ability,loss, theft, misuse, or unauthorized disclosure of personal, confidential, and sensitive information of either us or our drivers could lead to some extent, is subject to general economic, financial,significant reputational or competitive legislative, regulatory and other factors that are beyond our control.
We do not believe that our cash flow from operating activities and our existing capital resources, including the liquidity provided by our credit agreements and lease financing arrangements, will be sufficient to fund our planned capital expenditures. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to usharm, result in an amount sufficient to fund our other liquidity needs. We may need to delay capital expenditures or seek additional equity financing. For more information see “Management’s Discussion Analysis of Financial Condition and Resultsof Operation—Liquidity, Capital Resources and Plan of Operations” below.
Our debt and other commitmentslitigation, expose us to regulatory proceedings, and cause us to incur substantial liability or expenses, potentially creating a number of risks, including cmaterial adverse effect.
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ash requirements for debt and lease obligations, availability and interest rate variability, each of which could hamper our growth and profitability.
A significant portion of the cash flow we generate must be used to service the interest and principal paymentsChanges in laws or regulations relating to our various financial commitments, including $3,233,087privacy, data protection or the protection or transfer of total notes payable of which $0 is long-term,personal data, or any actual or perceived failure by us to comply with such laws and $3,221,785 of lease commitment obligations of which $1,559,309 is long-term, as of June 30, 2019. A sustained or significant decrease in our operating cash flows could lead to an inability to meet our debt service requirements or to a failure to meet specified financial and operating covenants included in certain of our agreements. If this were to occur, it may lead to a default under one or more of our commitments. In the event of a default for this reason,regulations or any other reason,obligations relating to privacy, data protection or the potential resultprotection or transfer of personal data, could adversely affect our business.
We receive, transmit and store a large volume of personally identifiable information and other data relating to the users on the Rideshare Platform. Numerous local, municipal, state, and federal laws and regulations address privacy, data protection and the collection, storing, sharing, use, disclosure and protection of certain types of data, including the California Online Privacy Protection Act, the Personal Information Protection and Electronic Documents Act, the U.S. Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, Section 5(c) of the Federal Trade Commission Act, the California Consumer Privacy Act, or CCPA, and the California Privacy Rights Act, or CPRA, which becomes operative on January 1, 2023. These laws, rules and regulations evolve frequently and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement, and may be inconsistent from one jurisdiction to another. For example, the accelerationCPRA will require new disclosures to California consumers and affords such consumers new data rights and abilities to opt-out of amounts due,certain sharing of personal information. The CPRA provides for fines of up to $7,500 per violation, which can be applied on a per-consumer basis. Aspects of the CPRA and its interpretation and enforcement remain unclear. The effects of this legislation potentially are far-reaching, however, and may require us to further modify our data processing practices and policies and incur additional compliance-related costs and expenses. The CPRA and other changes in laws or regulations relating to privacy, data protection and information security, particularly any new or modified laws or regulations that require enhanced protection of certain types of data or new obligations with regard to data retention, transfer or disclosure, could have agreatly increase the cost of providing our offerings, require significant changes to our operations or even prevent us from providing certain offerings in jurisdictions in which we currently operate and adverse effect on us.in which we may operate in the future.
Because we finance the majority of our operating and strategic initiatives using a variety of commitments, including $6,454,872 in total notes payable and loan facilities, we are dependent on continued availability of these sources of funds. If these agreements are terminated or we are unable to access them because of a breach of financial or operating covenants or otherwise, we will likely be materially affected.
The interest rates we are charged on a substantial portion of our debt, including the Second Note payable, are variable, increasing or decreasing based on changes in certain published interest rates. Increases to such interest rates would likely result in significantly higher interest expense for us, which would negatively affect our operating results. Because many of our customers finance their vehicle purchases, increased interest rates may also decrease vehicle sales, which would negatively affect our operating results.
We are a holding company and as a result rely on payments from our subsidiaries in order to meet our cash needs and service our debt. Our subsidiaries may not be able to distribute the necessary funds to us and this could adversely affect our ability to make payments on our indebtedness.
As a holding company without independent means of generating operating revenues, YayYo, Inc.,EVmo depends on dividends, distributions and other payments, from our subsidiaries to fund our obligations and to meet our cash needs. If the operating results of our operating subsidiaries at any given time are insufficient to make distributions to us, we would be unable to make payments on our outstanding indebtedness, which would likely have a material adverse effect on our business, financial condition and future prospects.
We face intense competition that may lead to downward pricing or an inability by us to increase prices.generate profits.
The transportation network and vehicle rental and used-vehicle sale industries are each highly competitive and are increasingly subject to substitution.competitive. While price is not the only competitive factor, we believe price is onewe provide an effective business model for the benefit of the primary competitive factorsdrivers in the vehicleridesharing and delivery gig space, insofar as we can offer both the Rideshare Platform and vehicles in which to utilize it through Distinct Cars, we have multiple competitors, several of which are much larger and better-resourced than we are. We believe our principal competitors to be HyreCar, a publicly-traded company that also facilitates the rental marketof vehicles for use by drivers who work for TNCs such as Uber, Lyft, DoorDash, and that technology has enabled cost-conscious customers, including business travelers,Grubhub, and Lyft Express, which makes rental vehicles available to more easily compare rates available fromLyft drivers. National car rental companies. In addition, ourcompanies such as Hertz and Avis also have programs directed at ridesharing and delivery drivers. Our competitors may reduce their prices in order to, among other things, attempt to gain a competitive advantage, capture market share, or to compensate for declines in overall rental activity.activity, such as during the early months of the COVID-19 pandemic in 2020. To the extent we do not match or remain within a reasonable competitive margin of our competitors’ pricing, our revenues and results of operations, financial condition, liquidity and cash flows could be materially and adversely affected. If competitive pressures lead us to match any of our competitors’ downward pricing and we are not able to reduce our operating costs,expenses, then our margins,revenues and results of operations, financial condition, liquidity and cash flows could again be materially and adversely affected.
Further, we may in the future develop and launch other products or services that may be in direct competition with the various players in the ridesharing industry, such as Uber and Lyft, and all of whom have greater resources than us. Therethere are low barriers to entry in the ridesharing and delivery gig space, and we expect that competition will likely intensify in the future. We believe that numerous factors, including price, offerings, reliability, client base, brand name and general economic trends will affect our ability to compete successfully. Our existing competitors include, and our future competitors may include, many large companies that have substantially greater market presence and financial, technical, marketing and other resources than we do. There can be no assurance that we will have the financial resources, technical expertise or marketing and support capabilities in which to compete successfully. Increased competition could result inSuch significant competition which in turn could result in lower revenues, which could materially, adverselyand negatively, affect our potentialfuture profitability.
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We might incur significant expenses to develop products that are never successfully commercialized.
We have incurred and expect to continue to incur research and development and other expenses in connection with our products business. The potential products to which we devote resources might never be successfully developed or commercialized by us for numerous reasons. Until June 30, 2017,For example, during our first year of operations, we were focused on the development and commercialization of a single sign-on metasearch “ridesharing” (the “Metasearch App”).
Asridesharing application, and allocated considerable resources toward it. While we completed development of this application, for several reasons we never commercialized it and ultimately opted to abandon it in favor of the date ofRideshare Platform. If we were to again incur significant expenses in connection with a product or service from which we never derive any revenue, this prospectus, the Company has completed the development of the Metasearch App; however, it has no further intention to continue the development or marketing of the Metasearch App. While the Company does not intend to allocate additional corporate resources to the development of the Metasearch App, there can be no assurances that we will not incur additional expenses for the Metasearch App that has not been fully developed and/or commercialized. Such additional expenses could have a material adverse effect on our business, financial condition and future prospects.
We rely on third-party insurance to cover auto-related risks, and our coverage may be inadequate or our current insurer could either discontinue our coverage or demand significantly higher premiums.
We face risks related to uninsured liabilities or future claims that exceed our insurance limits.
Our businesses expose us to claims for personal injury, death and property damage resulting from the use of the vehicles rented bythrough us, and for employment-related injury claims by our employees. We purchase insurance through a general underwriter, American Business Insurance Services, Inc., to cover us for these claims. We cannot assure you, however, that we will not be exposed to uninsured liability potentially resulting in multiple payouts or otherwise, liabilities in respect of existing or future claims exceeding the level of our insurance, availability of sufficient capital to pay any uninsured claims or the availability of insurance with unaffiliated carriers maintained on economically reasonable terms, if at all. While we have insurance for many of these risks, we retain risk relating to certain of these perils and certain perils are not covered by our insurance.
We are subject to a wide variety of regulatory burdens related to our operations and while management believes that the chosen operations and strategies are achievable in light of current economic and legal conditions, changes in the following regulatory areas may require management to make significant modifications to our stated strategies depending on future events.
Governmental regulations, claims and legal proceedings. Governmental regulations affect almost every aspect of our business, including the fair treatment of our employees, wage and hour issues, and our financing activities with customers. We could also be susceptible to claims or related actions if we fail to operate our business in accordance with applicable laws.
Vehicle Requirements. Federal and state governments in our markets have increasingly placed restrictions and limitations on the vehicles sold in the market in an effort to combat perceived negative environmental effects. For example, in the U.S., vehicle manufacturers are subject to federally mandated corporate average fuel economy standards which will increase substantially through 2025. Furthermore, numerous states, including California, have adopted or are considering requiring the sale of specified numbers of zero-emission vehicles. Significant increases in fuel economy requirements and new federal or state restrictions on emissions on vehicles and automobile fuels in the U.S. could adversely affect prices of and demand for the new vehicles that we sell.
Environmental regulations.We are subject to a wide range of environmental laws and regulations, including those governing: discharges into the air and water; the operation and removal of storage tanks; and the use, storage and disposal of hazardous substances. In the normal course of our operations we use, generate and dispose of materials covered by these laws and regulations. We face potentially significant costs relating to claims, penalties and remediation efforts in the event of non-compliance with existing and future laws and regulations.
Accounting rules and regulations. The Financial Accounting Standards Board is currently evaluating several significant changes to generally accepted accounting standards in the U.S., including the rules governing the accounting for leases. Any such changes could significantly affect our reported financial position, earnings and cash flows. In addition, the Securities and Exchange Commission is currently considering adopting rules that would require us to prepare our financial statements in accordance with International Financial Reporting Standards, which could also result in significant changes to our reported financial position, earnings and cash flows.
Changes in the U.S. legal and regulatory environment that affect our operations, including laws and regulations relating to taxes, automobile related liability, insurance rates, insurance products, consumer privacy, data security, employment matters, licensing and franchising, automotive retail sales, fuel costs, cost and fee recovery and the banking and financing industry could disrupt our business, increase our expenses or otherwise have a material adverse effect on our results of operations, financial condition, liquidity and cash flows.
We are subject to a wide variety of U.S. laws and regulations and changes in the level of government regulation of our business have the potential to materially alter our business practices and materially adversely affect our financial condition, results of operations, liquidity and cash flows, including our profitability. Those changes may come about through new laws and regulations or changes in the interpretation of existing laws and regulations.
Any new, or change in existing, U.S. law and regulation with respect to optional insurance products or policies could increase our costs of compliance or make it uneconomical to offer such products, which would lead to a reduction in revenue and profitability. If customers decline to purchase supplemental liability insurance products from us as a result of any changes in these laws or otherwise, our results of operations, financial condition, liquidity and cash flows could be materially adversely affected.
Certain proposed or enacted laws and regulations with respect to the banking and finance industries, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (including risk retention requirements) and amendments to the SEC’s rules relating to asset-backed securities, could restrict our access to certain financing arrangements and increase our financing costs, which could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows.
We rely on third-party insurance policies to insure auto-related risks. If insurance coverage is insufficient for the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks facing our business, which could adversely affect our business, financial condition and results of operations.
We procure third-party insurance policies which provide coverage for both owners and drivers on our platform. If the amount of one or more auto-related claims were to exceed our applicable aggregate coverage limits, we may bear the excess liability. Insurance providers have raised premiums and deductibles for many businesses and may do so in the future. As a result, our insurance and claims expense could increase. Our business, financial condition and results of operations could be adversely affected if (i)the cost per claim premiums or the number of claims significantly exceeds our historical experience and coverage limits, (ii) we experience a claim in excess of coverage limits, (iii) our insurance providers failprovider fails, for any reason, to pay insurance claims, or (iv) we experience a claim for which coverage is not provided. Any exposure to uninsured liability potentially resulting in multiple payouts or otherwise, any liabilities in respect of existing or future claims that exceed the level of our insurance, any lack of availability of sufficient capital to pay any uninsured claims, or any inability by us to secure insurance on economically reasonable terms, if at all, could have a material adverse effect.
Our actual lossesMoreover, should our general underwriter for any reason opt to discontinue our coverage, we may exceedbe unable to find an adequate replacement. The market for a general underwriter for a company such as us is limited, and it is possible that any replacement insurer could request significantly higher premiums than our current one. Since we would be unable to operate without such insurance, reserves, which could adversely affectwe would either be forced to pay such premiums, or discontinue operations. Even if we were able to negotiate a new policy with our current underwriter, a demand by it for similarly increased premiums would have the same effect.
We rely on third-party background checks to screen potential drivers, and if such checks fail to provide accurate information, or they cannot be timely obtained, or we do not maintain business relationships with background check providers, our business, financial condition and results of operations.operations could be adversely affected.
We establish insurance reservesrely on third-party background checks to screen the records of potential drivers to help identify those that are not qualified to utilize the Rideshare Platform or rent a vehicle from Distinct Cars. To the extent that there is a failure for claims incurred butwhatever reason to timely process or obtain the necessary background checks, or the information we receive from them is not yet paid and claims incurred but not yet reported and any related estimable expenses, and we periodically evaluate and, as necessary, adjust our insurance reserves as our experience developscomplete or new information is learned. We employ various predictive modeling and actuarial techniques and make numerous assumptions based on limited historical experience and industry statistics to estimate our insurance reserves. Estimating the number and severity of claims, as well as related judgment or settlement amounts, is inherently difficult, subjective, and speculative. A number of external factors can affect the actual losses incurred for any given claim, including the length of time the claim remains open, fluctuations in healthcare costs, legislative and regulatory developments and judicial developments. Additionally,accurate, we may encounter in the future, instanceseither fail to rent one of insurance fraud, which could increase our actual insurance-related costs. For any of the foregoing reasons, our actual losses for claims and related expenses may deviate, individuallyvehicles to a qualified driver, thereby losing revenue, or in the aggregate, from the insurance reserves reflected in our consolidated financial statements. If we determine that our estimated insurance reserves are inadequate, we may be requiredrent a vehicle to increase such reserves at the time of the determination,an unqualified driver, which could result in liability and/or reputational damage to us. Also, if any of our third- party background check providers terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we may need to find an increase to our net loss in the period in which the deficiency is determinedalternate provider, and negatively impact our financial condition and results of operations.
We may not be able to obtain adequate financingsecure similar terms or replace such partners in an acceptable time frame. If we cannot find alternate third-party background check providers on terms acceptable to continue our operations.
We will needus, we may not be able to raise additional funds through the issuance of equity, equity-related, or debt securities or through obtaining credit from government or financial institutions. This capital will be necessary to fund ongoing operationstimely onboard potential drivers, and continue research and development activities, includingas a result, the Rideshare Platform and our Fleet Management business. We cannotDistinct Cars may be certain that additional funds will be availableless attractive to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects would be materially and adversely affected.qualified drivers.
We may pursue strategic transactions which could be difficult to implement, disrupt our business or change our business profile significantly.
While our short-term preference is to continue to grow EVmo organically, using our existing operations and organizational structure, we have been and remain open to a strategic transaction that would inure to the benefit of our shareholders. Any future strategic acquisition or disposition of assets or a business could involve numerous risks, including: (i)including potential disruption of our ongoing business and distraction of management; (ii)management, difficulty integrating the acquired business or segregating assets and operations to be disposed of; (iii)of, exposure to unknown, contingent or other liabilities, including litigation arising in connection with the acquisition or disposition or against any business we may acquire; (iv)acquire, changing our business profile in ways that could have unintended negative consequences;consequences, and (v) the failure to achieve anticipated synergies.
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If we enter into significant strategic transactions, the related accounting charges may affect our financial condition and results of operations, particularly in the case of an acquisition. The financing of any significant acquisition may result in changes in our capital structure, including the incurrence of additional indebtedness. A material disposition could requireindebtedness, the amendment or refinancingservicing of which would increase our outstanding indebtedness or a portion thereof.operating expenses and adverse impact our future profitability.
We rely on our management team, which has little experience working together.
We depend on a small number of executive officers and other members of management to work effectively as a team, to execute our business strategy and operating business segments, and to manage employees and consultants. Our success will be dependent on the personal efforts of our Chief Executive Officer, our directors and such other key personnel. Any of our officers or employees can terminate his or her employment relationship at any time, and the loss of the services of such individuals could have a material adverse effect on our business and prospects. Mr. El-Batrawi, the founder and original Chairman of the Board and original Chief Executive Officer of the Company from its incorporation of the Company, resigned from all positions with the Company as a condition for being approved for listing on The Nasdaq Capital Market. Our management team has only worked together for only a very short period of time and may not work well together as a management team.
We have no long-term employment agreements in place with our executive officers.
As of the date of this Prospectus we have no employment agreements or similar arrangements with our executive officers. If we fail to reach mutually satisfactory agreement with our executives, any one or more of such persons may terminate their association with the Company. The loss of any one or more of these experienced executives may have a material and adverse effect on our Company and its business prospects. The Company has entered into an oral agreement with its Chief Executive Officer, Jonathan Rosen, for an annual salary of $300,000, retroactive to his start date of February 1, 2019. The Company also agreed to issue a restricted stock grant of 500,000 shares of common stock with one-third of the restricted shares vesting upon the closing of the Company’s initial public offering with the remainder vesting ratably each month over the twenty-four months following the initial public offering.
Our business operations are dependent upon the ability of our new employees to learn their new roles.
Until June 30, 2017, we were focused on the development and commercialization of the Metasearch App. On August 12, 2017, we announced that we were shifting our primary corporate focus in the transportation/ridesharing industry towards the vehicle rental business with a focus on developing the Rideshare Platform and our Fleet Management business.
In connection with the transition of our business operations, we have replaced many employees in key functions. As new employees gain experience in their roles, we could experience inefficiencies or a lack of business continuity due to loss of historical knowledge and a lack of familiarity of new employees with business processes, operating requirements, policies and procedures, some of which are new, and key information technologies and related infrastructure used in our day-to-day operations and financial reporting and we may experience additional costs as new employees learn their roles and gain necessary experience. It is important to our success that these new employees quickly adapt to and excel in their new roles. If they are unable to do so, our business and financial results could be materially adversely affected. In addition, if we were to lose the services of any one or more key employees, whether due to death, disability or termination of employment, our ability to successfully operate our business segments, financial plans, marketing and other objectives, could be significantly impaired.
Raising additional capital by issuing additional securities may cause dilution to our current and future shareholders.
We will need to, or desire to, raise substantial additional capital in the future. Our future capital requirements will depend on many factors, including, among others:
If we raise additional funds by issuing equity or convertible debt securities, we will reduce the percentage of ownership of the then-existing shareholders, and the holders of those newly-issued equity or convertible debt securities may have rights, preferences, or privileges senior to those possessed by our then-existing shareholders. Additionally, future sales of a substantial number of shares of our common stock, or other equity-related securities in the public market could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities. We cannot predict the effect that future sales of our common stock, or other equity-related securities would have on the market price of our common stock at any given time.
If our management is unable to accurately estimate future levels of rental activity and adjust the number and mix of vehicles used in our rental operations, our results of operations, financial condition, liquidity and cash flows could suffer.
Because vehicle costs typically represent our single largest expense and vehicle purchases are typically made weeks or months in advance of the expected use of the vehicle, our business is dependent upon the ability of our management to accurately estimate future levels of rental activity and consumer preferences with respect to the mix of vehicles used in our rental operations. To the extent we do not purchase sufficient numbers of vehicles, or the right types of vehicles, to meet consumer demand, we may lose revenue to our competitors. If we purchase too many vehicles, our vehicle utilization could be adversely affected and we may not be able to dispose of excess vehicles in a timely and cost-effective manner. If our management is unable to accurately estimate future levels of rental activity and determine the appropriate mix of vehicles used in our rental operations, including because of changes in the competitive environment or economic factors outside of our control, our results of operations, financial condition, liquidity and cash flows could suffer.
Our corporate governance documents provide that we will indemnify our directors, officers and employees to the fullest extent permitted by law which may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties.
Our Certificate of Incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:
These limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission. Our bylaws provide that we will indemnify our directors, officers and employees to the fullest extent permitted by law. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding. We believe that these bylaw provisions are necessary to attract and retain qualified persons as directors and officers. The limitation of liability in our Certificate of Incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Concentrating voting control will limit or preclude our stockholders’ ability to influence corporate matters, including the election of directors, any merger, consolidation or other major corporate transaction requiring stockholder approval, which may negatively impact your liquidity and/or your gain on your investment.
Mr. El-Batrawi has entered into a Voting Trust Agreement (the “Trust”) pursuant to which the voting power of all of his outstanding common stock will be controlled by a trustee who will use the voting power of the common stock held in the Trust to vote on all matters presented for a vote of stockholders in the same proportion that the shares of common stock not subject to the Trust voted on such matters. The Trust shall be irrevocable, and shall terminate upon the earlier of (a) the written agreement of the Company, the trustee and a duly authorized representative of Nasdaq, or (b) the date upon which the Company is not listed on a security exchange controlled by Nasdaq.
As of the date of this prospectus, the Gray Mars Venus Trust, of which John Gray is the beneficial owner, owns approximately 38.5% of our outstanding shares of common stock. Taking into account the effect of the Trust on voting power, the Gray Mars Venus Trust will control, after this offering approximately 35.2% of the Company’s voting stock and have a significant ability to influence corporate matters, including the election of directors, any merger, consolidation or other major corporate transaction requiring stockholder approval, which may negatively impact your liquidity and/or your gain on your investment.
In addition to the stock controlled by John Gray, five other individuals or entities will own 39.5% of our common stock after the completion of this offering, which further concentrates the influence on corporate matters among a few shareholders.
As a result, these stockholders, if they act together, will be able to control the management and affairs of our company and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of our other stockholders.
Negative press involving our founder and former Chief Executive Officer and former director may harm the reputation of the Company.
Mr. El-Batrawi is our founder and he served as our Chief Executive Officer from the incorporation of the Company until October 4, 2018, Acting Chief Executive Officer from November 17, 2018 to February 1, 2019 and as our director from November 2016 until September 2019. Since 2012, Mr. El-Batrawi has been the owner and Chief Executive Officer of Growth Strategy Investments, LLC and, since 2015, Mr. El-Batrawi has been the managing director of X, LLC, both of which are management companies. On April 13, 2006, Ramy Y. El Batrawi was named, along with others officers, directors and/or associates of Genesis Intermedia, Inc., as defendants in a Securities and Exchange Commission enforcement action. In the Securities and Exchange Commission (“SEC”) complaint, filed in the United States District Court for the Central District of California, entitled SEC v. Ramy El-Batrawi, et al., United States District Court for the Central District of California, Case No 2: -06-cv-02247-(MRP_(RZ) (the “Action”). The Action alleged violations of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, in connection with a stock loan and manipulation scheme. The Action alleged, among other things, that defendants had violated antifraud provisions of federal securities laws by orchestrating a scheme to manipulate the stock price of Genesis Intermedia, Inc. (GENI), a now-defunct public company that was based in Van Nuys, California (the “Complaint”). On April 1, 2010, Mr. El-Batrawi settled the Action by entering into a final judgment by consent with the SEC, without admitting or denying the allegations contained in the Complaint (the “Settlement”). In connection with the voluntary Settlement of the charges set forth in the Complaint, the U.S. District Court for the Central District of California entered the consent against Mr. El-Batrawi, which, among other things, barred Mr. El-Batrawi from acting as an officer or director of a public company for a period of five years following the date of entry of the final judgment by consent. Any negative press stories about Mr. El-Batrawi may harm the reputation of the Company and damage our business prospects.
We may fail to respond adequately to changes in technology and customer demands.
In recent years our industry has been characterized by rapid changes in technology and customer demands. For example, in recent years, industry participants have taken advantage of new technologies to improve vehicle utilization, decrease customer wait times and improve customer satisfaction. Our industry has also seen the entry of new competitors whose businesses and efforts continue to introduce various types of self-driving vehicles. Our ability to continually improve our current processes, products and offerings in response to changes in technology is essential in maintaining our competitive position and maintaining current levels of customer satisfaction. We may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products or enhanced product offerings.
User engagement and growth depends on software and device updates beyond our control.
Our mobile application and websites are currently available on multiple operating systems, including iOS and Android, across multiple different manufacturers, including Motorola, LG, Apple and Samsung and on thousands of devices. Changes to the device infrastructure or software updates on such devices could render our platform and services useless or inoperable and require users to utilize our website rather than our mobile application which may result in decreased user engagement. Any decrease in user engagement may devalue our value proposition to customers who may no longer continue to do business with us which may have a material adverse effect on business, financial conditions and results of operation.
Defects in our mobile application may adversely affect our business.
Tools, code, subroutines and processes contained within our mobile application may contain defects when updates and new versions are released. Our introduction of a mobile application with defects or quality problems may result in adverse publicity, uncollectible or delayed accounts receivable, product redevelopment costs, loss of or delay in market acceptance of our services or claims by customers or others against us. Such problems or claims may have a material and adverse effect on our business, prospects, financial condition and results of operations.
We may not be able to manage our growth effectively.
OurWhile we have experienced operational growth is expectedover the last two years, further growth in the absence of an increase in our ability to manage it will place a significant strain on our current managerial, operational and financial resources. As the number of our users, partnerscustomers and other business partners grows, we must increasinglyeffectively manage multiple relationships with various customers, strategic partnersthem and other third parties. There can be no assurance that our systems, procedures or controls will be adequate to support our operations or that our management will be able to achieve the rapid execution necessary to successfully grow and scale our services, products and offerings. Our operating results will also depend on our ability to expand sales and marketing commensurate with the growth of our business and the ridesharing, industry.delivery gig and vehicle rental industries. If we are unable to manage growth effectively, our business, results of operations and financial condition will be adversely affected.
Maintaining favorable brand recognition is essentialOur ridesharing and delivery gig drivers are subject to our success,vehicle and failure to do so could materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Our business is heavily dependent upon the favorable brand recognition that our “YayYo”, “Distinct Cars” and “Rideshare” brand names have in the markets in which they participate. Factors affecting brand recognition are often outside our control, and our efforts to maintain or enhance favorable brand recognition, such as marketing and advertising campaigns, may not have their desired effects. In addition, it may be difficult to monitor or enforce such requirements, particularly in foreign jurisdictions and various laws may limit our ability to enforce the terms of these agreements or to terminate the agreements. Any decline in perceived favorable recognition of our brands could materially adversely affect our results of operations, financial condition, liquidity and cash flows.
Changes in U.S., global or regional economic conditions.
A current decrease in economic activity in the United States or, depending on future operations, in other regions of the world in which we plan to operate our Fleet Management business segment, Rideshare Platform and related services could adversely affect demand, thus reducing our ability to generate revenue. A decline in economic conditions could reduce our users’ interest in utilizing our products and services. In addition, an increase in price levels generally, or in price levels in a particular sector such as the fuel sector, could result in a shift in consumer demand away from ridesharing services, which could also adversely affect our revenues and, at the same time, increase our costs.
Risks Relating to Our Business and Industry.
If our efforts to attract prospective customers to our Fleet Management business and Rideshare Platform are not successful, or we fail to retain customers or continue attracting existing customers to our products and services, our growth prospects and revenue will be adversely affected.
Our ability to grow our business and generate revenue depends on retaining and expanding our total customer base, increasing revenue by effectively monetizing our Rideshare Platform user base, and increasing the number of customers to our Fleet Management business. We must convince prospective customers of the benefits of our ridesharing vehicle rental services and equipment offerings and our existing users of the continuing value of our products and services, including our Rideshare Platform. Our ability to attract new users and customers, retain existing users and customers. If we fail to keep pace with competing offerings or technological advancements to the ridesharing industry or fail to offer compelling product offerings and state-of-the-art delivery for our Rideshare Platform to meet consumer demands, our ability to grow or sustain the reach of our product and service offerings, attract and retain users and customers may be adversely affected.
We have no control over the Vehicle Registration Requirements or such other ridesharing vehicledriver qualification requirements imposed by the major Transportation Network Company (“TNC”)TNC providers, and our business may be adversely affected in the event that TNCsuch providers restrict or limit prospective ridesharing and delivery gig drivers from utilizing or registering third-party rental vehicles with the TNC.
We rely on the major TNC businesses, such as Uber, Lyft, DoorDash and GrubHub, that drive and servicepresently dominate the ridesharing economy,and delivery gig industries, and over whom we have no control,control. They have imposed qualification requirements on both vehicles and drivers, which we strive to imposehelp our customers i.e. the Vehicle Registration Requirements and permit prospective ridesharingTNC drivers, to utilize lease or rental vehicles, suchmeet, as our product offerings, underpart of their employment with the major TNC ridesharing services. We cannot guarantee that each major TNC business will always permit prospective ridesharing drivers to use third-party lease or rental vehicles such as ours, and any revocation or severe limitation on drivers’ ability to obtain vehicles through Distinct Cars would have a material adverse effect on us. Nor can we guarantee that the vehicle and driver requirements they have imposed will not be made more onerous, making it more difficult for us to satisfy their vehicle requirements or find drivers who qualify under their employment agreement with the TNC.such enhanced rules and possibly shrinking our customer base, which will adversely affect our revenues.
Our business may be adversely affected ifcommercial partnerships provide us with competitive pricing options that enable us to acquire vehicles at less than suggested retail prices, and any cancellation of or unfavorable adjustment to these partnerships will increase our abilityoperating expenses.
We have to rentdate financed the acquisition of our vehicles maintained under our Fleet Management business is limited, impaired or delayed because of a modification to the Vehicle Registration Requirements or any similar prohibition that prevents prospective ridesharing drivers from renting our Fleet Management vehicles or other third-party vehicle rentals for use under the terms of the prospective ridesharing drivers agreement withextended to us by our commercial partners, such TNC businesses.
We face risks of increased costs of cars, including as a result of limited supplies of competitively priced cars.
As of June 30, 2019, and December 31, 2018, we have a fleet of approximately 347 and 360 vehicles, respectively, all of which are under a lease contract with District Cars and financed by ACME Auto Leasing, LLC. In addition, under our booking platform we manage approximately 50 vehicles. In recent years, the average cost of new cars has increased. As of the date of this prospectus, we have financed the purchase and leasing of the Hyundai cars that we rent from ACME Auto Leasing. Under the terms of a commercial partnership program, Hyundai USA hasfor standard internal combustion vehicles and, more recently, Tesla for electric vehicles. These partners have agreed to extend fleet program competitive pricing options below manufactures’ suggested retail prices (“MSRP”MSRP”) on all Hyundaithe vehicles purchasedacquired through selected dealerships.dealerships, which we in turn finance through lenders who transfer title to the vehicle to us and maintain a lien until the loan is repaid. We cannot assure you that we will be able to maintain membership in the Hyundaithese commercial partnership programprograms or continue receiving competitive pricing options below MSRP rates on all Hyundai vehicles purchased. If either Hyundai USA, or especially, Tesla, cancels the respective commercial partnership program for whatever reason, including the failure by us to timely repay our loans, or doesthey do not continue to offer us competitive terms and conditions, and we are not able to purchase sufficient quantities of cars from other automobile manufacturers on competitive terms and conditions or below MSRP rates, then we may be forced to purchase cars at higher prices, or on terms less competitive, than for cars purchased by our competitors. In addition, certain car manufacturers, such as Ford, have adopted strategies to de-emphasize sales to the car rental industry which they view as less profitable due to historical sales incentive and other discount programs that have tended to lower the average cost of cars for fleet purchasers such as us. Reduced or limited supplies of equipment together with increased prices are risks that we also face in our equipment rental business. We cannot offer assurance that we will be able to pass on increased costs of cars or equipment to our rental customers. Failure to pass on significant cost increases to our customers would have a material adverse impact on our results of operations and financial condition.
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We are subject to a wide variety of regulatory burdens directly or indirectly related to our operations, including environmental laws and efforts to classify TNC drivers as employees instead as independent contractors.
We are subject to a variety of regulatory burdens related to our operations, and while our management believes that the success of our operations and the implementation of our growth strategies are achievable in light of current economic and legal conditions, significant changes in the regulations that apply to us may require management to make modifications that could impede our ability to generate future revenues or reduce operating expenses. For example, as a business that operates in the ridesharing and delivery gig economy, we are directly impacted by regulations imposing fuel emission standards on automobiles, and other environmental laws and rules. While our planned transition to electric vehicles will, eventually, exempt us from many of these restrictions and their resulting expense, we are still, and expect to remain for at least the near future, reliant on non-electric automobiles for the bulk of our revenue; we therefore continue to face potentially significant costs relating to claims, penalties and remediation efforts in the event of non-compliance with existing and future laws and regulations governing standard automobiles.
FluctuationsAnother regulatory effort that could indirectly and adversely impact us is the effort by some states, including most notably our principal market, California, to classify ridesharing and delivery gig economy drivers as employees and not as independent contractors, thereby entitling them to costly labor protections and benefits, which could dampen hiring by TNC companies and make it more difficult for us to generate revenue. While the passage of Proposition 22 in fuel costsCalifornia in November 2020 allows for TNC drivers to continue to be classified as independent contractors, albeit with additional benefits, a future proposition, legislative action, or reduced suppliesjudicial decision could harmreverse this. Also, any of the other markets in which we operate, or a potential future market, could adopt a different stance and in turn hamper our business.ability to generate revenue in such market or make it cost-prohibitive for us to expand into it. Recently, the U.S. Department of Labor rescinded a rule under the Fair Labor Standards Act that made it easier for businesses to classify certain workers as independent contractors and not as employees and the Secretary of Labor has publicly stated his belief that many U.S. gig workers should be classified as employees.
We are currently party to several litigation actions, including potential securities class-action lawsuits, which, should we receive an unfavorable judgment or be compelled to enter into settlements on less-than-favorable terms, could have a negative impact on our financial results and could cause reputational damage to the Company.
As disclosed in Note 11 to the unaudited financial statements for the first quarter of fiscal 2021 included in the registration statement of which this prospectus forms a part, the Company is currently party to several litigation actions, including potential class-action lawsuits that allege misrepresentations and material omissions in the registration statement on Form S-1 that the Company filed with the SEC in connection with its initial public offering, claiming violations of Sections 11 and 15 of the Securities Act. It has been and remains the Company’s position that these lawsuits are without merit, as we have asserted in our pleadings that the Company accurately and completely disclosed all material facts and occurrences, including adverse ones, in its registration statement, related public filings and other public statements.
Mediation efforts with respect to these actions are currently underway and it is possible that a global settlement among the parties may be adversely affected by limitationsreached before any further proceedings commence. However, these mediation efforts have to date been unsuccessful and if the litigation actions proceed, we may ultimately receive unfavorable judgments. It is also possible that even if we reach a settlement, it may be on fuel supplies,terms that the impositionCompany views as less-than- favorable. Either of mandatory allocationsthese contingencies could result in a negative impact on our financial statements and the Company suffering reputational damage. If severe enough, either the financial cost of a settlement or rationing of fuelthe damage to our reputation, or significant increases in fuel prices. A severe or protracted disruption of fuel supplies or significant increases in fuel pricesboth, could have a material adverse effect on our business, financial condition and results of operations, either by directly interfering with our normal activities or by disrupting the air travel on which a significant portion of our car rental business relies.future prospects.
The concentration of our reservations, accountingRisks Related to Our Management and information technology functions at a limited number of facilities in California creates risks for us.Our Corporate Governance
We have concentrated our reservations functions for the United States in one office location in Los Angeles, California, and we have concentrated our accounting functions for the United States in one office location in Los Angeles. In addition, our major information systems are centralizedhad significant turnover in our office location in Los Angeles. A disruptionsenior management team since our inception and our current management team has little experience working together.
Since our inception, our senior management team has turned over several times. Most recently, during the first quarter of normal business at any2020, both our chief executive officer (“CEO”) and our president resigned, necessitating the reappointment of our principal office location in Los Angeles, California, whetherfounder, Ramy El-Batrawi, as CEO. In the resultfirst quarter of localized conditions (such2021, Mr. El- Batrawi resigned as CEO and was replaced by Stephen M. Sanchez, who previously had served as chairman of the Company’s Board of Directors (the “Board of Directors” or the “Board”). At the same time, Terren S. Peizer was elected to the Board of Directors as its Executive Chairman, succeeding Mr. Sanchez, who remains on the Board as a fire or explosion) ornon-independent director; Mr. Peizer’s election as Executive Chairman of the resultBoard was commensurate with a transaction in which he became the Company’s largest shareholder. At the end of events or circumstancesthe first quarter of broader geographic impact (such2021, Laurie DiGiovanni resigned as an earthquake, storm, flood, epidemic, strike, act of war, civil unrest or terrorist act), could materially adversely affect our businesschief operating officer (“COO”). Effective on April 1, 2021, Ms. DiGiovanni was replaced as COO by disrupting normal reservations, customer service, accounting and systems activities.Gregory Miller.
We face risks arising from our heavy reliance on communications networks and centralized information systems.
We rely heavily on information systems to accept reservations, process rental and sales transactions, manage our fleets of cars and equipment, account for our activities and otherwise conduct our business. We have centralized our information systems in one office location in Los Angeles, California, and we rely on communications service providers to link our systems with the business locations these systems serve. A simultaneous loss of both facilities, or a major disruption of communications between the systems and the locations they serve, could cause a loss of reservations, interfere with our ability to manage our fleet, slow rental and sales processes and otherwise materially adversely affect our ability to manage our business effectively. Our systems back-up plans, business continuity plans and insurance programs are designed to mitigate such a risk, not to eliminate it. In addition, because our systems contain information about individuals and businesses, our failure to maintain the security of the data we hold, whether the result of our own error or the malfeasance or errors of others, could harm our reputation or give rise to legal liabilities leading to lower revenues, increased costs and other material adverse effects on our results of operations.
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The misuse or theft of informationWhile we possess could harm our reputation or competitive position, adversely affect the price at which shares of our common stock trade or give rise to material liabilities.
We possess non-public information with respect to individuals, including our customers andbelieve our current senior management team is stable, experienced, and former employees, and businesses, as well as non-public information with respectcompetent, Messrs. Sanchez, Peizer, Saathoff or Miller have never worked collectively together prior to our own affairs. The misuse or thefttheir recent appointments to the executive leadership of the Company. It is possible that information by either our employees or third partiescould result in material damage to our brand, reputation or competitive position or materially affect the price at which shares of our common stock trade. In addition, depending on the type of information involved, the nature of our relationship with the person or entity to which the information relates, the cause and the jurisdiction whose laws are applicable, that misuse or theft of information could result in governmental investigations or material civil or criminal liability. The laws that would be applicable to such a failure are rapidly evolving and becoming more burdensome.
If we acquire any businesses in the future, they could prove difficult to integrate, disrupt our business, or have an adverse effect on our results of operations.
We intend to pursue growth primarily through internal growth, but from time to time we may consider opportunistic acquisitions which may be significant. Any future acquisition would involve numerous risks including, without limitation:
If we make acquisitions in the future, acquisition-related accounting charges may affect our balance sheet and results of operations. In addition, the financing of any significant acquisition may result in changes in our capital structure, including the incurrence of additional indebtedness. We may not be successful in addressing these risks or any other problems encountered in connection with any acquisitions.
Our business is cyclical,working together and the Company will suffer as a disruption in rental activity could materially adversely affect our results of operations.
In the car rental business, a decline in economic activity typically results in a decline in both business and leisure travel and, accordingly, a decline in the volume of car rental transactions. In the equipment rental business, a decline in economic activity typically results in a decline in activity in non-residential construction and other businesses in which our equipment rental customers operate and, therefore, results in a decline in the volume of equipment rental transactions. In the case of a decline in car or equipment rental activity,result. More generally, we may reduce rental rates to meet competitive pressures, which could have a material adverse effect on our results of operations. A decline in economic activity also may have a material adverse effect on residual values realized on the disposition of our revenue earning cars and/or equipment.
Certain significant components of our expenses, including real estate taxes, rent, utilities, maintenance and other facility-related expenses, the costs of operating our information systems and minimum staffing costs, are fixed in the short-run. Cyclical changes in our revenues do not alter those fixed expenses, typically resulting in higher profitability in periods when our revenues are higher and lower profitability in periods when our revenues are lower. The Company believes that the second and third quarters of the year will be stronger quarters due to their increased levels of leisure travel and construction activity. Any occurrence that disrupts rental activity during the second or third quarters could have a disproportionately material adverse effect on our liquidity and/or results of operations.
We may be unable to maintain or establish relationships with third-party partners, ridesharing services or technology providers, which could limit the information we are able to provide to users.
We anticipate that the demand for our products and services will be dependent on key relationships with ridesharing services, auto manufacturers, fleet providers and other industry providers. We will seek to develop and maintain relationships with these companies. Failure to continue to develop and/or maintain these relationships, and/or a failure for these relationships to yield benefit would have an adverse effect on our business.
We rely on the performance of highly skilled personnel, including senior management and our technology professionals, and if we are unable to retain or motivate key personnel or hire, retain and motivate qualified personnel, our business would be harmed.
We believe our success has depended, and continues to depend on the efforts and talents of our senior management and our skilled team members. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. The loss of any of our senior management or key employees could materially adversely affect our ability to build on the efforts they have undertaken and to execute and operate our business segments, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees.
Competition for well-qualified employees in all aspects of our business, including software engineers and other technology professionals, is intense both in the U.S. and abroad.
Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate existing employees. Software engineers and technology professionals are key individuals in designing the code and algorithms necessary to our Rideshare Platform. Therefore, our ability to attract top talent and experienced engineers and technology professional is important to our success. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business would be adversely affected.
We rely on non-employee third parties for important services which may impact steady growth if third parties to provide important services cannot be retained.
We will have a small number of executive officers and other members of management to work effectively as a team, to execute our business strategy and manage our operating businesses, and to supervise employees and we do not have any operational infrastructure or prior operating history. We intend to relyconsultants. Our success is reliant on the efforts of our management team, our advisors, third-party consultants, outside attorneys, advisors, accountants, auditors,CEO, chief financial officer (“CFO ”), COO, the Board of Directors and especially its Executive Chairman, and other administrators. Thekey personnel. Any of our officers or employees can terminate his or her employment relationship, and any director may resign from the Board, at any time, and the loss of the services of any of such personnel mayindividuals could have a material adverse effect on our business and prospects.
Our Chief Executive Officer and Chief Financial Officer are part-time employees and each devotes only a limited number of hours per week to the Company, which may result in either adverse effects or conflicts of interest.
Mr. Sanchez, our CEO, and Ryan Saathoff, our CFO, are not full-time employees of EVmo at present and each devotes only a limited number of hours per week to managing the Company’s operations and executing its growth strategy. Mr. Sanchez and Mr. Saathoff also serve, respectively, as the chief executive officers of PDQ Pickup LLC, a moving and logistics company, and RG Alliance, a back-office solutions company. On any given week, either or both may be required to spend more hours working for their other companies than for EVmo and the potential exists for either or both to be distracted as a result of their outside employment, which could result in a failure to successfully implement a key EVmo initiative, or timely address a problem within EVmo, or effectively strategize as to how best to fulfill short and long-term EVmo goals. We expect that, for the foreseeable future, these executive officers will continue to dedicate only a portion of their professional efforts to our business and operations, and there can beis no assurancecurrent contractual obligation for them to spend a specific amount of their time with us. Further, it is possible that if any or all of such personnel were to become unavailable, that qualified successors can be found, on acceptable terms.
We depend on third parties to provide us with services critical to our business including, equipment manufacturers that provide us with standard passenger vehicles and vehicle leasing services at competitive prices. Whilenot only could we believe that there is sufficient supply in the market, the failure of any of these third parties to adequately provide the needed services could have a materialexperience an adverse effect on our business.
operations due to the demands placed on our management team by their other professional obligations, but conflicts of interest could also arise.
If our management is unable to accurately assess current levels or estimate future levels of our Rideshare Platform or Distinct Cars activity, our results of operations, financial condition, liquidity and cash flows could suffer.
Governmental regulation and associated legal uncertainties could limit our
Our business is dependent upon the ability to expand our product offerings or enter into new markets and could require us to expend significant resources, including the attention of our management to reviewaccurately assess current levels of activity or estimate future levels of activity involving the use of the Rideshare Platform and comply with such regulations.Distinct Cars rentals. We need to adequately evaluate consumer preferences to ensure that the Rideshare Platform functions as needed by ridesharing and delivery gig drivers and that they have easy access to the right mix of vehicles used in our rental operations. For example, to the extent we do not lease sufficient numbers of vehicles, or the right types of vehicles, to meet consumer demand, we may lose revenue to our competitors. Alternatively, if we lease too many vehicles, our vehicle utilization could be adversely affected and we may not be able to dispose of excess vehicles in a timely and cost-effective manner. If our management is unable to make the necessary assessments and estimations for whatever reasons, including because of changes in the competitive environment or economic factors outside of our control, our results of operations, financial condition, liquidity and cash flows could suffer.
Our Bylaws provide that we will indemnify our directors, and that we have the power to indemnify our officers and employees, to the fullest extent permitted by law, which may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties, or from bringing derivative litigation against our directors and officers.
ElementsOur Amended and Restated Bylaws (the “Bylaws”) provide that we will indemnify our directors, officers and employees to the fullest extent against expenses judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the ridesharing industryfact that such person is or was a director of the Company, permitted by Section 145 of the DGCL. Our Bylaws also provide that the Company shall have the power (though not the obligation), to the extent and in the manner permitted by the DGCL, to indemnify each of its employees, officers, and agents (other than directors) against expenses (as defined in Section 145 of the DGCL), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any, arising by reason of the fact that such person is or was an employee, officer or agent of the Company. We believe that these Bylaw provisions are currently or will be regulated by Federal, state, city and/or local governments,necessary to attract and retain qualified persons as directors, officers and key employees. These indemnification provisions may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our ability to provide these services is and will continue to be affected by government regulations. The implementation of unfavorable regulations or unfavorable interpretations of existing regulations by courts or regulatory bodies with respect to the ridesharing industry or “Transportation Network Companies” (“TNC”) could require us to incur significant compliance costs, cause the development of the affected markets to become impractical and otherwise have a material adverse effect on our business,shareholders. Our results of operations and financial condition. Moreover,condition may be harmed to the extent we pay the costs of settlement and damage awards against directors, officers and key employees pursuant to these indemnification provisions.
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Majority voting power in our Common Stock is concentrated in a handful of shareholders, including our executive officers and directors, which severely limits the ability of our other shareholders to influence corporate matters.
As of the date of this prospectus, our executive officers and directors collectively own approximately 30% of our issued and outstanding shares, the vast majority of which is held of record by the investment vehicle of our Executive Chairman, Terren S. Peizer. These shares, together with those beneficially owned by a combination of two or at most three other principal stockholders, represent a majority of our voting shares.
As a result, these shareholders, if they act together, will be able to control the management and affairs of the Company and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger, acquisition or consolidation. This concentration of ownership may have the effect of delaying or preventing a change-in-control that would be to the benefit of the Company and might adversely affect the market price of our Common Stock. This concentration of ownership may therefore not be in the future, webest interests of our other shareholders.
Our stock price has fluctuated in the past, has recently been volatile and may elect to add services or products to our business plan that compete directly with ridesharing services, such as Uber and Lyft, which could expose us to additional regulations, compliance obligations and legal challenges. In addition, our business strategy involves expansion into regions aroundbe volatile in the world, many of which have different legislation, regulatory environments, tax laws and levels of political stability. Compliance with foreign legal, governmental, regulatory or tax requirements will place demands on our time and resources, and we may nonetheless experience unforeseen and potentially adverse legal, regulatory or tax consequences. It is intended that our business will assist with the processing of customer credit card transactions which would result in us receiving and storing personally identifiable information. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world. This legislation and regulation is generally intended to protect the privacy and security of personal information, including credit card information, that is collected, processed and transmitted in or from the governing jurisdiction. We could be adversely affected if government regulations require TNCs,future, and as a result investors in our Common Stock could incur substantial losses.
Our stock price has fluctuated in the past, has recently been volatile, and may be volatile in the future. From January 1, 2020 through December 31, 2020 the reported closing price of our Common Stock on the Pink Open Market fluctuated between $0.08 and $1.44 per share. From January 1, 2021 through March 31, 2021 the reported closing price of our Common Stock fluctuated between $0.53 and $5.67 per share. The ongoing COVID-19 pandemic has caused broad stock market and industry fluctuations that have often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our Common Stock. The market price for our Common Stock may be influenced by many factors, including adverse investor reaction to our operating performance, a failure by us to significantly changetimely realize our business practices with respectelectric vehicle growth strategy, our inability to raise additional capital as needed or doing so on less-than-favorable terms, the departure of key personnel, general market conditions, external events such as the ongoing COVID-19 pandemic, and any of the other risks described in this type of information.“Risk Factors” section.
Any of these factors, or others that we have not described or even contemplated as yet, may seriously harm the market price of our Common Stock, regardless of our operating performance. Since the stock price of our Common Stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our Common Stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation against us is already pending, as described herein, and if additional litigation is instituted against us, it could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.
Risks Related to this Offering
Our management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not yield a significant return.
Our management will have total discretion over the use of proceeds from this offering. We currently intend to allocate the net proceeds from the sale of shares of our Common Stock offered through this prospectus to, among other things, the redemption of 230,375 shares of Series B Preferred Stock issued in July 2021, the acquisition of a number of electric vehicles as part of our transition plan to become a wholly electric vehicle ridesharing and delivery gig industry company, and working capital. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, technologies, products or assets. However, our management could spend the proceeds of the offering in ways that do not be able to adequately protectimprove our intellectual property, which could harmresults of operations or enhance the value of our brands and adversely affect our business.
We believeCommon Stock. The failure by management to apply these funds effectively could result in financial losses that intellectual property will be critical to our success, and that we will rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements to protect our proprietary rights. If we are not successful in protecting our intellectual property, it could have a material adverse effect on our business, resultscause the price of operationsour Common Stock to decline and financial condition. While we believe that wedelay the development of our product candidates.
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Purchasers in this offering will be issued trademarks, copyrightsexperience immediate and other intellectual property to protectsubstantial dilution in the book value of their investment.
Because the public offering price per share is substantially higher than the book value per share of our business, there can be no assurance that our operations do not, orCommon Stock, you will not, infringe valid, enforceable third-party patentssuffer substantial dilution in the net tangible book value of third parties or that competitors will not devise new methods of competing with us that are not covered by our anticipated patent applications. Moreover, it is intended that we will rely on intellectual property and technology developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties at all or on reasonable terms. Effective trademark, service mark, copyright and trade secret protection may not be availablethe Common Stock you purchase in every country in which our intended services will be provided. The laws of certain countries do not protect proprietary rightsthis offering. After giving effect to the same extent assale by us of shares of our Common Stock at a public offering price of $ per share, and after deducting the lawsunderwriting discount and estimated offering expenses payable by us, you will suffer immediate and substantial dilution of $ per share in the net tangible book value of the U.S. and, therefore,Common Stock you purchase in certain jurisdictions, we may be unable to protect our proprietary technology adequately against unauthorized third party copying or use, which could adversely affect our competitive position. We may license in the future, certain proprietary rights, such as trademarks or copyrighted material, to third parties. These licensees may take actions that might diminish the value of our proprietary rights or harm our reputation, even if we have agreements prohibiting such activity. Also, to the extent third parties are obligated to indemnify us for breaches of our intellectual property rights, these third parties may be unable to meet these obligations. Any of these events could have a material adverse effect on our business, results of operations or financial condition.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
We anticipate that a substantial amount of our processes and technologies will be protected by trade secret laws. In order to protect these technologies and processes, we intend to rely in part on confidentiality agreements with our employees, licensees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in such cases, we could not assert any trade secret rights against such parties.this offering. To the extent that our employees, contractorsoutstanding options, warrants or other third parties with which we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in relatedderivative securities are ultimately exercised or resulting know-how and inventions. Laws regarding trade secret rights in certain markets in which we operate may afford little or no protection to our trade secrets. The loss of trade secret protection could make it easier for third parties to compete with our products, services by copying functionality, among other things. In addition, any changes in, or unexpected interpretations of, the trade secret and other intellectual property laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our business, revenue, reputation and competitive position.
Our business is heavily reliant upon communications networks and centralized information technology systems and the concentration of our systems creates risks for us.
We rely heavily on communication networks and information technology systems to accept reservations, process rental and sales transactions, manage our pricing, manage our revenue earning vehicles, manage our financing arrangements, account for our activities and otherwise conduct our business. Our reliance on these networks and systems exposes us to various risks that could cause a loss of reservations, interfere with our ability to manage our vehicles, slow rental and sales processes, adversely affect our ability to comply with our financing arrangements and otherwise materially adversely affect our ability to manage our business effectively. Our major information technology systems, reservations and accounting functions are centralized in a few locations worldwide. Any disruption, termination or substandard provision of these services, whether as the result of localized conditions (such as a fire, explosion or hacking), failure of our systems to function as designed, or as the result of events or circumstances of broader geographic impact (such as an earthquake, storm, flood, epidemic, strike, act of war, civil unrest or terrorist act), could materially adversely affect our business by disrupting normal reservations, customer service, accounting and information technology functions or by eliminating access to financing arrangements. Any disruption or poor performance of our systems could lead to lower revenues, increased costs or other material adverse effects on our results of operations, financial condition, liquidity or cash flows.
Defects in our Rideshare Platform and its functionality and the technology powering our custom development services may adversely affect our business.
It is anticipated that the tools, code, subroutines and processes contained within our Rideshare Platform or the technology powering our custom development services may contain defects when introduced and also when updates and new versions are released. The introduction of our Rideshare Platform or custom development services with defects or quality problems may result in adverse publicity, product returns, reduced orders, uncollectible or delayed accounts receivable, product redevelopment costs, loss of or delay in market acceptance of our products or claims by customers or others against us. Such problems or claims may have a material and adverse effect on our business, prospects, financial condition and results of operations.
Manufacturer safety recalls could create risks to our business.
Our Fleet Management vehicles may be subject to safety recalls by their manufacturers. The Raechel and Jacqueline Houck Safe Rental Car Act of 2015 prohibits us from renting vehicles with open federal safety recalls and to repair or address these recalls prior to renting or selling the vehicle. Any federal safety recall with respect to our vehicles would require us to decline to rent recalled vehicles until we can arrange for the steps described in the recall to be taken. If a large number of vehicles are the subject of a recall or if needed replacement parts are not in adequate supply, we may not be able to rent recalled vehicles for a significant period of time. Those types of disruptions could jeopardize our ability to fulfill existing contractual commitments or satisfy demand for our vehicles and could also result in the loss of business to our competitors. Depending on the severity of any recall, it could materially adversely affect our revenues, create customer service problems, reduce the residual value of the recalled vehicles and harm our general reputation.
If we are unable to purchase adequate supplies of competitively priced vehicles and the cost of the vehicles we purchase increases, our financial condition, results of operations, liquidity and cash flows may be materially adversely affected.
The price and other terms at which we can acquire vehicles vary based on market and other conditions. For example, certain vehicle manufacturers have in the past, and may in the future, utilize strategies to de-emphasize sales to the vehicle rental industry, which can negatively impact our ability to obtain vehicles on competitive terms and conditions. Consequently, there is no guarantee that we can purchase a sufficient number of vehicles at competitive prices and on competitive terms and conditions. If we are unable to obtain an adequate supply of vehicles,converted, or if we obtain less favorable pricing and other terms when we acquire vehicles and are unable to pass on any increased costsissue equity-based awards to our customers, thenemployees under our financial condition, results of operations, liquidity and cash flows may be materially adversely affected.
If third parties claim that we infringe their intellectual property, it may result in costly litigation.
We cannot assure you that third parties will not claim our current or future products or services infringe their intellectual property rights. Any such claims, with or without merit, could cause costly litigation that could consume significant management time. As the number of product and services offerings in the ridesharing industry increases and functionalities increasingly overlap, companies such as ours may become increasingly subject to infringement claims. Such claims also might require us to enter into royalty or license agreements. If required, we may not be able to obtain such royalty or license agreements or obtain them on terms acceptable to us.
Failure to comply with federal and state privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or regulations, could adversely affect our business.
A variety of federal and state laws and regulations govern the collection, use, retention, sharing and security of consumer data. The existing privacy-related laws and regulations are evolving and subject to potentially differing interpretations. In addition, various federal, state and foreign legislative and regulatory bodies may expand current or enact new laws regarding privacy matters. Further, several states have adopted legislation that requires businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our business. In addition, a failure or perceived failure to comply with industry standards or with our own privacy policies and practices could adversely affect our business. Federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party web “cookies” for behavioral advertising. The regulation of these cookies and other current online advertising practices could adversely affect our business.
Our business model is entirely dependent on the continued success and viability of the ridesharing industry and “transportation network companies”, and we may become subject to government regulation and legal uncertainties that could reduce demand for our products and services or increase the cost of doing business, thereby adversely affecting our ability to generate revenues.
The past year has seen a boom in the number of ridesharing companies that allow customers to order rides on demand using apps on their smartphones. Private drivers use their personal automobiles to pick up the customers and drive them to the desired destination in exchange for a negotiated fee. The passengers then write reviews, similar to other peer-to-peer online services. Large amounts of venture capital and private equity has been invested in a handful of these new companies, which have the potential to disrupt the traditional transportation industry. However, the ridesharing marketplace has come under increased scrutiny from governments and various interested groups (such as taxi drivers, taxi companies, environmentalists, etc.) have continuously opposed the proliferation of ridesharing services in recent years. Despite opposition from many of these interested groups and governmental agencies, on September 19, 2013, the California Public Utilities Commission (“CPUC”) voted unanimously to allow these ridesharing services to operate in California as a new category of business called “transportation network companies” (“TNC”).
In California, licenses2016 Equity Incentive Plan, there will be issuedfurther dilution to qualifying TNCs, subject to new regulations that require drivers to undergo criminal background checks and vehicle inspections, receive driver training, follow a zero-tolerance policy on drugs and alcohol, and carry insurance policies with a minimum of $1 millioninvestors who purchase shares in liability coverage. Some of the companies that are expected to receive new TNC licenses include Lyft (www.lyft.me), SideCar (www.side.cr) and UberX (www.uber.com). The CPUC has responded to rapidly evolving disruptive technology and its decision will likely set an example for cities and states across the country. Its decision is also expected to preempt ongoing efforts by some California cities to regulate or ban peer-to-peer ridesharing under their authority to license taxi companies. The City of Los Angeles, however, is currently considering a possible appeal of the CPUC decision and implementing additional regulations to TNC drivers, which have been referred to as “Bandit cabs” by some on the City Council. Other cities across the country are also now looking at new regulations for Rideshare companies.
As can be gleaned from these recent events around the ridesharing industry, this new business model is not without its opponents. Some raise concerns about public safety and the potential for abuse or unintended consequences, while others question whether the new regulations require additional enforcement capability. The taxi industry, which is less than pleased to see this new competition, has criticized these ridesharing apps as operating essentially like unlicensed taxi cabs. Since the new technology uses GPS to measure the distance of a ride and the corresponding fee, the taxi industry believes that it works similarly to a taxi meter and should therefore comply with local taxi ordinances. Some of the primary concerns raised by skeptics include how liability will be allocated between the TNC and its independent contractor driver, and how the insurance industry will adapt to this new business. Proper hiring practices, training and oversight by the TNC also will be necessary to ensure public safety. The extent to which the TNCs will be inspected and the new regulations enforced is still unclear, but this will be an important means by which the public may judge the safety of this new industry. Based on the direction states and cities are heading with respect to the governance of TNCs or ridesharing services, and the ever increasing popularity and use of ridesharing services and TNCs, it is likely that a number of laws and regulations will become applicable to us or the TNCs which we rely upon for the operation of products and related services or may be adopted in the future with respect to mobile applications and/or TNCs covering issues such as: (i) liability, (ii) unionization, (iii) rules and standards for drivers, vehicles, and passenger safety, (iv) licensing and insurance requirements, and (v) environmental concerns, among others. It is difficult to predict how existing laws will be applied to our business and the new laws and regulations to which we and/or ridesharing services will likely become subject. If ridesharing services are not able to comply with these laws or regulations or if we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement new measures to sustain our operating business segments. We anticipate that scrutiny and regulation of the ridesharing industry will increase and we will be required to devote legal and other resources to addressing such regulation, either directly or indirectly. Changes to these laws intended to address these issues, including some recently proposed changes, could create uncertainty in the marketplace. Such uncertainty could reduce demand for our services or increase the cost of doing business due to increased costs of litigation or increased service or operating costs.
We may be subject to a number of risks related to credit card payments, including data security breaches and fraud that we or third parties experience or additional regulation, any of which could adversely affect our business financial condition and results of operations.
We may be subject to a number of risks related to credit card payments, including data security breaches and fraud that we or third parties experience or additional regulation, any of which could adversely affect our business, financial condition and results of operations. We anticipate accepting payment from our users primarily through credit card transactions and certain online payment service providers. The ability to access credit card information on a real time-basis without having to proactively reach out to the consumer each time we process an auto-renewal payment or a payment for the purchase of a premium feature on any of our dating products is critical to our success. When we or a third party experiences a data security breach involving credit card information, affected cardholders will often cancel their credit cards. In the case of a breach experienced by a third party, the more sizable the third party’s customer base and the greater the number of credit card accounts impacted, the more likely it is that our users would be impacted by such a breach. To the extent our users are ever affected by such a breach experienced by us or a third party, affected users would need to be contacted to obtain new credit card information and process any pending transactions. It is likely that we would not be able to reach all affected users, and even if we could, some users’ new credit card information may not be obtained and some pending transactions may not be processed, which could adversely affect our business, financial condition and results of operations. Even if our users are not directly impacted by a given data security breach, they may lose confidence in the ability of service providers to protect their personal information generally, which could cause them to stop using their credit cards online and choose alternative payment methods that are not as convenient for us or restrict our ability to process payments without significant user effort. Additionally, if we fail to adequately prevent fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures and significantly higher credit card-related costs, any of which could adversely affect our business, financial condition and results of operations. Finally, the passage or adoption of any legislation or regulation affecting the ability of service providers to periodically charge consumers for recurring membership payments may adversely affect our business, financial condition and results of operations.
We depend upon intellectual property and proprietary rights that are vulnerable to unauthorized use.
We rely on a combination of copyright and trademark laws, trade secrets, software security measures, license agreements and nondisclosure agreements to protect our proprietary information. Our success will depend, in part, on our ability to operate without infringing the patent or other proprietary rights of others and our ability to preserve our trade secrets and other proprietary property, including our rights in any technology licenses upon which any of our products or services are based. Our inability to preserve such rights properly or operate without infringing on such rights would have a material adverse effect on our business, results of operations and financial condition. We currently do not own any registered copyrights, patents or patent applications pending. It may be possible for unauthorized third parties to copy aspects of, or otherwise obtain and use, our proprietary information without authorization. In addition, there can be no assurance that any confidentiality agreements between us and our employees, or any license agreements with our customers, will provide meaningful protection for our proprietary information in the event of any unauthorized use or disclosure of such proprietary information.
We may not be able to keep up with rapid technological changes.
To remain competitive, we must continue to enhance and improve the usability, functionality, and features of our Rideshare Platform and related services. The evolving nature of the ridesharing industry, transportation network companies, telecommunications, apps, and mobile based services, which is characterized by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions and the emergence of new industry standards and practices, could render our existing systems, app and services obsolete. Our success will depend, in part, on our ability to develop, innovate, license or acquire leading technologies useful in our business, enhance our existing solutions, develop new solutions and technology that address the increasingly sophisticated and varied needs of our current and prospective users, and respond to technological advances and emerging industry and regulatory standards and practices in a cost-effective and timely manner. Future advances in technology may not be beneficial to, or compatible with, our business. Furthermore, we may not successfully use new technologies effectively or adapt our proprietary technology and app to user requirements or emerging industry standards on a timely basis. Our ability to remain technologically competitive may require substantial expenditures and lead time. If we are unable to adapt in a timely manner to changing market conditions or user requirements, our business, financial condition and results of operations could be seriously harmed.
We depend on the continued growth and reliability of the internet, global positioning systems, ridesharing services and apps.
The recent growth in the use of apps and ridesharing services may cause periods of decreased performance for many ridesharing services, internet providers, apps and related service providers. If app and ridesharing usage continues to grow rapidly, the infrastructure these services are reliant upon (i.e. the internet, global positioning systems, and telecommunications networks and devices) may not be able to support these demands and therefore performance and reliability may decline. Decreased performance with respect to some or all of these critical components of our business model has also been attributed to illegal attacks by third parties. If outages or delays occur frequently or increase in frequency, or businesses are not able to protect themselves adequately from such illegal attacks, the market for mobile apps, ridesharing services and related technologies could grow more slowly or decline, which may reduce the demand for our Rideshare Platform and related services.
Our business is dependent upon consumers renting our Fleet Management vehicles, using our Rideshare Platform and related services and if we fail to obtain broad adoption, our business would be adversely affected.
Our success will depend on our ability to monetize our fleet of vehicles and our Rideshare Platform, ensuring our Rideshare Platform is fully functional and reliable as intended, operate and educate consumers regarding the benefits of renting vehicles for ridesharing opportunities, and persuade them to adopt YayYo! and/or “Rideshare” as their “go to” ridesharing vehicle rental service provider. We do not know if our products and services will be successful over the long term and market acceptance may be hindered if our Rideshare platform does not function efficiently and/or our user experience is not compelling and financially beneficial to our users. If consumers do not adopt and use our Rideshare Platform and related services, we will not be able to generate revenues and our financial condition will suffer as a result.
International expansion of our business exposes us to market, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.
Our business strategy includes eventual international expansion. Adapting our Rideshare Platform to function internationally and doing business internationally involves a number of risks, including: (i) multiple, conflicting and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; (ii) obtaining regulatory approvals where required; (iii) requirements to maintain data and the processing of that data on servers located within such countries; (iv) complexities associated with managing multiple payment processing methods and multiple ridesharing service providers; (v) natural disasters, political and economic instability, including wars, terrorism, political unrest, outbreak of disease, protests, boycotts, curtailment of trade and other market restrictions; and (vi) regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the United States Foreign Corrupt Practices Act of 1977 (“FCPA”), U.K. Bribery Act of 2010 and comparable laws and regulations in other countries. Any of these factors could significantly harm our future international expansion and operations and, consequently, our ability to generate revenue and results of operations.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or users or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
In the ordinary course of our business, we and our third-party billing and collections providers and ridesharing service partners may collect and store sensitive data, including legally-protected personal information. We may also process and store and use additional third-parties to process and store, sensitive intellectual property and other proprietary business information, including that of our customers and collaborative partners. While we intend to implemented data privacy and security measures that will be compliant with applicable privacy laws and regulations, future security breaches could subject us to liability for violations of various laws, rules or regulations, civil liability, government-imposed fines, orders requiring that we or these third parties change our or their practices, or criminal charges, which could adversely affect our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business.
We may become a party to intellectual property litigation or administrative proceedings that could be costly and could interfere with our ability to focus on our operating business segments.
The technology industry has been characterized by extensive litigation regarding patents, trademarks, trade secrets, and other intellectual property rights, and companies in the industry have used intellectual property litigation to gain a competitive advantage. It is possible that U.S. and foreign patents and pending patent applications or trademarks controlled by third parties may be alleged to cover our products or services, or that we may be accused of misappropriating third parties’ trade secrets. Additionally, our products may include hardware and software components that we purchase from vendors and may include design components that are outside of our direct control. Our competitors, many of which have substantially greater resources and have made substantial investments in patent portfolios, trade secrets, trademarks, and competing technologies, may have applied for or obtained, or may in the future apply for or obtain, patents or trademarks that will prevent, limit or otherwise interfere with our ability to make, use, sell and/or export our products and services or to use product names. We may become a party to patent or trademark infringement or trade secret related disputes or litigation as a result of these and other third party intellectual property rights being asserted against us. The defense and prosecution of these matters are both costly and time consuming. Vendors from whom we purchase hardware or software may not indemnify us in the event that such hardware or software is accused of infringing a third party’s patent or trademark or of misappropriating a third party’s trade secret.
Further, if such patents, trademarks, or trade secrets are successfully asserted against us, this may harm our business and result in injunctions preventing us from selling our products, license fees, damages and the payment of attorney fees and court costs.offering. In addition, if we are found to willfully infringe third party patentsissue additional equity securities or trademarks or to have misappropriated trade secrets, we could be required to pay treble damagesderivative securities, investors purchasing shares in addition to other penalties. Although patent, trademark, trade secret, and other intellectual property disputes in the technology industry have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. We may be unable to obtain necessary licenses on satisfactory terms, if at all. If we do not obtain necessary licenses, we may not be able to redesign our Rideshare Platform or related services in order to avoid infringement.
Additionally, in the future we may need to commence proceedings against others to enforce our patents or trademarks, if applicable, or to protect our copyrights, trade secrets or know how, trade secrets or know how, or to determine the enforceability, scope and validitythis offering will experience additional dilution. For a further description of the proprietary rights of others. These proceedings would result in substantial expense to us and significant diversion of effort by our technical and management personnel. We may not prevail in any lawsuitsdilution that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. We may not be able to stop a competitor from marketing and selling products that are the same or similar to our products and services or from using product or service names that are the same or similar to ours, and our business may be harmed as a result.
We may face claims from companies that incorporate open source software into their products or from open source licensors, claiming ownership of, or demanding release of, the source code, the open source software or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to ceaseyou will experience immediately after this offering, our Rideshare Platform unless and until we can re-engineer it to avoid infringement. This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. These risks could be difficult to eliminate or manage, and, if not addressed, could harm our business, financial condition and operating results.
see “Our use of “open source” software could adversely affect our ability to offer our services and subject us to possible litigation.Dilution” on page 25.
We use open source software in connection withSales of a substantial number of shares of our technology development. From time to time, companiesCommon Stock, or the perception that use open source software have faced claims challengingsuch sales may occur, may adversely impact the useprice of open source software and/or compliance with open source license terms. We could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source licenses require users who distribute software containing open source to make available all or part of such software, which in some circumstances could include valuable proprietary code of the user. We intend to monitor the use of open source software and will try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous. Any requirement to disclose proprietary source code or pay damages for breach of contract could be harmful to our business, results of operations or financial condition, and could help our competitors develop products and services that are similar to or better than ours.
Common Stock.
No assurances of protection for proprietary rights; reliance on trade secrets.
In certain cases, we may rely on trade secrets to protect intellectual property, proprietary technology and processes, which we have acquired, developed or may developSales of a substantial number of shares of our Common Stock in the future. There can bepublic market could occur at any time. These sales, or the perception that such sales may occur, may adversely impact the price of our Common Stock, even if there is no assurances that secrecy obligations will be honored or that others will not independently develop similar or superior products or technology. The protectionrelationship between such sales and the performance of intellectual property and/or proprietary technology through claimsour business. As of trade secret status has been the subjectJuly , 2021, we had shares of increasing claims and litigation by various companies both in order to protect proprietary rightsCommon Stock outstanding, as well as for competitive reasons even where proprietary claims are unsubstantiated.stock options to purchase an aggregate of 1,755,000 shares of our Common Stock at a weighted-average strike price of $0.25 per share, and outstanding warrants to purchase up to an aggregate of 2,550,000 shares of our Common Stock at a weighted-average exercise price of $3.53 per share. The prosecutionexercise of proprietary claims or the defensethese outstanding derivative securities may result in further dilution of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area. We may also be subject to claims by other parties with regard to the use of intellectual property, technology information and data, which may be deemed proprietary to others.your investment.
Our network operations may be vulnerable to hacking, viruses and other disruptions, which may make our Rideshare online platform and related services less attractive and reliable.
Internet usage and mobile app usage could decline if any well-publicized compromise of security occurs. Hacking involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions, loss or corruption of data, software, hardware or other computer equipment. Hackers, if successful, could misappropriate proprietary information or cause disruptions in our service. We may be required to expend capital and other resources to protect our products and services and related systems upon which our products and services is reliant against hackers. There can be no assurance that any measures we may take will be effective. Security breaches could have a material adverse effect on our business. In addition, the inadvertent transmission if computer viruses or other digital problems could expose us to a material risk of loss or litigation and possible liability, as well as materially damage our reputation and decrease our user base.
We currently have a small sales and marketing organization. If we are unable to expand our direct sales force in the U.S. to promote our services and related products, the commercial appeal and brand awareness for our products and services may be diminished.
We currently have a small sales and marketing organization. The Company may expand the core sales and marketing team to oversee the sales and marketing of our “YayYo!” business. We will incur significant additional expenses and commit significant additional management resources to expand and grow our sales force. We may not be able to build on the expansion of these capabilities despite these additional expenditures. If we elect to rely on third parties to sell our products in the U.S., we may receive less revenue than if we sold our products directly. In addition, although we would intend to diligently monitor their activities, we may have little or no control over the sales efforts of those third parties. In the event we are unable to develop and expand our own sales force or collaborate with a third party to sell our products, we may not be able to operate our products and/or services which would negatively impact our ability to generate revenue. We may not be able to enter into any marketing arrangements on favorable terms or at all. If we are unable to enter into a marketing arrangement for our products, we may not be able to develop an effective sales force to successfully operate our products and/or services. If we fail to enter into marketing arrangements for our products and are unable to develop an effective sales force, our ability to generate revenue would be limited.
We currently serve a segment of the Rideshare driver market that is large and valuable, but has less than average credit and commercial financial performance. We cannot predict the future performance of this market segment.
Rideshare drivers are frequently unemployed, underemployed or otherwise financially challenged, which is one reason they are attracted to the rideshare business. We believe these drivers are critical to the rideshare ecosystem, that their numbers will grow, and they still perform financially to a degree that we can benefit. However, there can be no assurance that they will grow or maintain their percentage of the driver population, and that they will perform fiscally in a way that the company needs to generate a profit. Should they decrease in numbers or percentage of the driver population, or should we be unable to manage their successful payments for our cars, services, repairs or other charges, we may not be able to operate at a level of profit acceptable to the Company.
Risks Relating to Ownership of Our Securities.Securities
Our Common Stock is currently quoted and traded on the Pink Open Market and thus may have a limited market and lack of liquidity.
There is no active public trading market for our common stock and we cannot assure you that an active trading market will develop in the near future.
Our common stock is not quoted in the over-the-counter markets and is not listed on any stock exchange and thereCommon Stock is currently no active trading inquoted and traded Pink Open Market, which may have an unfavorable impact on our securities. We have applied to have our common stock listed on the Nasdaq Capitalprice and liquidity. The Pink Open Market under the symbol “YAYO” which listing is a condition to this offering. We cannot assure you that an active tradingsignificantly more limited market for our common stock will develop in the future due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. We cannot give you any assurance that an active public trading market for our common stock will develop or be sustained. You may not be able to liquidate your shares quickly or at the market price if trading in our common stock is not active.
Sales of our common stock in the primary offering will be taking place concurrently with common stock registered by selling stockholders which might affect the price, demand, and liquidity of our common stock.
We are registering shares of common stock to certain security holders concurrently with the primary offering which include the potential resale by certain selling stockholders of an aggregate amount up to 1,650,000 shares of our common stock, consisting of up to (i) 150,000 shares of our common stock and (ii) 1,500,000 shares of our common stock issuable upon exercise of outstanding Selling Securityholder. Sales by these selling stockholders may reduce the price of our common stock, demand for the shares sold in the offering and, as a result, the liquidity of your investment.
The public price of our common stock may be volatile, and could, following a sale decline significantly and rapidly.
The initial public offering price for the shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this primary offering. The market price of our common stock may decline below the initial offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in the primary offering, or at all. Following this Offering, the public price of our common stock in the secondary market will be determined by private buy and sell transaction orders collected from broker-dealers.
We may not be able to satisfy listing requirements of Nasdaq to maintain a listing of our common stock.
If our common stock is listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing. If we violate the maintenance requirements for continued listing of our common stock, our common stock may be delisted. In addition, our board may determine that the cost of maintaining our listing onthan a national securities exchange outweighssuch as the benefits of such listing. A delistingNew York Stock Exchange or Nasdaq. The quotation of our common stock from Nasdaqshares on such a marketplace may materially impairresult in a less liquid market available for existing and potential shareholders to trade shares of our stockholders’ ability to buy and sellCommon Stock, could depress the trading price of our common stock, and could have an adverse effectimpact on our ability to raise capital. While we are working at present to uplist our Common Stock to the Nasdaq Capital Market, we will have to meet stringent listing standards in order to do so, and there is no guarantee that our listing application will be approved. Until such time as our Common Stock is again listed on a national securities exchange, there can be no assurance that there will be an active market for it, either now or in the future, or that our shareholders will be able to successfully divest their shares, particularly at a price that reflects the true value of the Company.
Securities analysts may not cover our Common Stock, and this may have a negative impact on its market price.
Even if we are successful in uplisting our Common Stock to the efficiency ofNasdaq Capital Market, the trading market for our common stock. In addition,Common Stock will depend, in part, on the delistingresearch and reports that securities or industry analysts publish about us or our business. We do not currently have and, after our uplisting, may never obtain research coverage by independent securities and industry analysts. If no independent securities or industry analysts commence coverage of us, the trading prices for our commonCommon Stock will be negatively impacted. If we obtain independent securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our Common Stock, or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our Common Stock could significantly impairdecrease and we could lose visibility in the financial markets, which could cause our abilitystock price and trading volume to raise capital.decline.
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Our Common Stock is a penny stock under current SEC rules.
This Offering has not been reviewed by independent professionals.
We have not retained any independent professionals to review or comment onOur Common Stock is, as of the date of this prospectus, a “penny stock,” which, as defined by the SEC in Rule 15g-9 promulgated under the Exchange Act, is any equity security that has a market price (as defined in Rule 15g-9) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse or spousal equivalent, as well as to institutions and individuals who qualify under certain specified non-financial metrics. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise protectexempt from the interestrules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the investors hereunder. Although webroker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have retainedthe effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our own counsel, neither such counsel nor any other counsel has made, on behalf of the investors, any independent examination of any factual matters represented by management herein. Therefore, for purposes of making a decision to purchase our Shares, you should not rely on our counsel with respect to any matters herein described. Prospective investors are strongly urged to rely on the advice of their own legal counsel and advisors in making a determination to purchase our shares of common stock. securities.
There has been no public market for our common stock prior to this Offering, and an active market in which investors can resell their shares may not develop.
Prior to this Offering, there has been no public market for our common stock. All investments in securities involve the risk of loss of capital. No guarantee or representation is made that an investor will receive a return of its capital. The value of our common stock can be adversely affected by a variety of factors, including development problems, regulatory issues, technical issues, commercial challenges, competition, legislation, government intervention, industry developments and trends, and general business and economic conditions. We cannot predict the extent to which an active market for our common stock will develop or be sustained after this Offering, or how the development of such a market might affect the market price of our common stock.
Sales of our common stock under our resale registration statement and under Rule 144 could reduce the price of our stock.
An aggregate of25,067,786 of our outstanding shares of common stock are subject to lock-up agreements. An additional 339,125 of our outstanding shares of common stock “restricted securities” and are subject to restrictions on transfer. In general, persons holding “restricted securities,” must hold their shares for a period of at least six months, may not sell more than 1% of the total issued and outstanding shares in any 90-day period, and must resell the shares in an unsolicited brokerage transaction at the market price. Shares shall be locked up as follows: (i) 2,900,000 shares of common stock held by X, LLC, 10,325,000 shares of common stock held by Gray Mars Venus Trust, Arizona 2015, 2,844,945 shares of common stock controlled by David Haley, 2,758,824 shares of common stock held by James Malackowiski, 2,018,750 shares of common stock held by John O’Hurley and 1,654,412 shares held by Acuitas Group Holdings, LLC for six months; (ii) 1,500,000 shares of common stock issuable upon exercise of outstanding warrants held by Bellridge Capital, L.P. for 60 days; (iii) 400,000 shares of common stock held by Bellridge Capital, L.P. for 30 days and (iv) an additional 2,165,855 shares of common stock held by other stockholders for periods ranging from 47 days to six months; provided, however, certain shares may not be subject to a lock up period in the event that such shares are sold at certain minimum prices (see “Shares Eligible for Future – Lock-Up Agreements”). However, Rule 144 will only be available for resale in the 90 days after the Company becomes subject to the ongoing SEC reporting requirements. The Company may voluntarily file current reports on Form 8-K. The availability for sale of substantial amounts of common stock under Rule 144 could reduce prevailing market prices for our securities. The registration statement to which this Prospectus relates also registers the potential resale by certain selling stockholders of an aggregate amount up to 1,650,000 shares of our common stock consisting of up to (i) 150,000 shares of our common stock and (ii) 1,500,000 shares of our common stock issuable upon exercise of outstanding Selling Securityholder Warrant, which shares shall be subject to a lock up for 60 days.
Our continuing failure to maintain effective disclosure controls and procedures due to a material weakness in our internal controlscontrol over financial reporting could have an adverse impact on usus.
.
During the preparation of our consolidated financial statements for the fiscal year ended December 31, 2020, we provided our management’s assessment of the effectiveness of our disclosure controls and procedures as of December 31, 2020, as well as management’s report on the Company’s internal control over financial reporting. The conclusion stated therein is that such disclosure controls and procedures were not effective at that time and that, relatedly, our internal control over financial reporting contained a material weakness.
The basis for these conclusions is our failure to maintain sufficient segregation of duties within our accounting functions, which is considered a basic internal control. While, due to our current size and the nature of our operations, segregation of all duties may not always be possible and may not be economically feasible, to the extent possible, the initiation of transactions, the custody of assets, and the recording of transactions should be performed by separate individuals.
We reached a similar conclusion in connection with the preparation of our consolidated financial statements for the quarter ended March 31, 2021 and the fiscal year ended December 31, 2019 and, while we are requiredworking to implement remedial measures, including the recent hiring of additional accounting personnel, it is possible that we may not be able to make them fully effective prior to the end of the current fiscal year or that, even if we are successful in implementing them, they will be inadequate to cure our material weakness. For that reason, it is possible that our management’s assessment of our disclosure controls and procedures will remain unchanged for the foreseeable future. A chronic failure to establish and maintain appropriate internal controls over financial reporting. Failure to establish thoseeffective controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditionsShould that need to be addressedhappen, investors could lose confidence in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessmentthe accuracy of our internal controls over financial reportingperiodic reports filed under the Exchange Act. Additionally, our ability to obtain additional financing could be impaired or disclosurea lack of investor confidence in the reliability and accuracy of our public accounting firm’s attestationreporting could cause our stock price to or report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.decline.
AMoreover, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-makingdecision- making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
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At present, we believe that we have effective internal controls in place. However, our management, including our Chief Executive Officer, cannot guarantee that our internal controls and disclosure controls that we have in place will prevent all possible errors, mistakes or all fraud.
Our financial controls and procedures may not be sufficient to ensure timely and reliable reporting of financial information, which, as a public company, could materially harm our stock price.
We require significant financial resources to maintain our public reporting status. We cannot assure you we will be able to maintain adequate resources to ensure that we will not have any future material weakness in our system of internal controls. The effectiveness of our controls and procedures may in the future be limited by a variety of factors including:
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Despite these controls, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies like us face additional limitations. Smaller reporting companies employ fewer individuals and can find it difficult to employ resources for complicated transactions and effective risk management. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
If we fail to have effective controls and procedures for financial reporting in place, we could be unable to provide timely and accurate financial information and be subject to investigation by the Securities and Exchange Commission and civil or criminal sanctions.
We must implement additional and expensive procedures and controls in order to grow our business and organization and to satisfy new reporting requirements, which will increase our costs and require additional management resources.
Upon becoming a fully public reporting company, we will be required to comply with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the related rules and regulations of the SEC, including the requirements that we maintain disclosure controls and procedures and adequate internal control over financial reporting. In the future, if our securities are listed on a national exchange, we may also be required to comply with marketplace rules and heightened corporate governance standards. Compliance with the Sarbanes-Oxley Act and other SEC and national exchange requirements will increase our costs and require additional management resources. We recently have begun upgrading our procedures and controls and will need to continue to implement additional procedures and controls as we grow our business and organization and to satisfy new reporting requirements. If we are unable to complete the required assessment as to the adequacy of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act or if we fail to maintain internal control over financial reporting, our ability to produce timely, accurate and reliable periodic financial statements could be impaired.
If we do not maintain adequate internal control over financial reporting, investors could lose confidence in the accuracy of our periodic reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Additionally, our ability to obtain additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price to decline.
We are an “emerging growth company” under the JOBS Act of 2012 and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 (the “Securities Act”) for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.
We will remain an “emerging growth company” until the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act, although we will lose that status sooner if our revenues exceed $1.07 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.
Our status as an “emerging growth company” under the JOBS Act enables us to provide reduced disclosure and to delay our adoption of new or revised accounting standards, which may make it more difficult to raise capital as and when we need it.it and this will not change for so long as we also remain a “smaller reporting company.”
BecauseWe are considered an “emerging growth company” as that term is defined in the JOBS Act. For as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. For a reporting company such as us, these provisions include: (i) an exemption from the auditor attestation requirement in the assessment of the company’s internal controls over financial reporting; (ii) an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies; (iii) an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the company; and (iv) reduced disclosure about the company’s executive compensation.
We will remain an emerging growth company upon the earliest of the following: (i) the last day of our first fiscal year following the fifth anniversary of our initial public offering; (ii) the last day of our fiscal year during which our total annual gross revenue is equal to or more than $1.07 billion; (iii) the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt securities, or (iv) the date on which we are deemed to be a “large accelerated filer,” as that term is defined in Rule 12b-2 of the Exchange Act. Even at such time as we cease to be an emerging growth company, we may retain our present status as a “smaller reporting company,” as also defined in Rule 12b-2 of the Exchange Act, in which case many of the same exemptions and scaled disclosure requirements would still be available to us.
These exemptions from various reporting requirements, provided to us as an “emerging growth company” and because we will have anthe extended transition period for complying with new or revised financial accounting standards, we may bemake us less attractive to investors and it may be more difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry.competitors. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
The requirements of being a public company, including compliance with the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as our future obligation to meet Nasdaq listing requirements, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
As a public company, we have to comply with the federal securities laws, rules and regulations, including those of the Exchange Act, as well as certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, related rules and regulations of the SEC and, if we are successful in uplisting our Common Stock, the listing requirements of Nasdaq, none of which a private company is required to do. Complying with these laws, rules and regulations occupies and will continue to occupy a significant amount of the time of our Board of Directors and management and significantly increases our costs and expenses. Among other things, we must maintain a system of internal control over financial reporting and disclosure controls and procedures in compliance with the requirements of Section 404 of the Sarbanes- Oxley Act, prepare periodic public reports in accordance with our obligations under the federal securities laws, retain outside counsel and accountants to assist in our compliance, and provide investor relations services. Although we strive to meet these obligations in a timely and cost-effective manner, there is no guarantee that we will be able to continue to do so, and any failure by us in this regard will expose the Company to regulatory action, including fines and other sanctions, would likely cause reputational damage, and could cause the price of our Common Stock to suffer.
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We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.
We have never paid cash dividends on our common stockCommon Stock and do not anticipate paying cash dividends on our common stockdoing so in the foreseeable future. We currently intend to retain any future earnings to support the development of our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our boardBoard of directorsDirectors after taking into account various factors, including, but not limited to, our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stockCommon Stock may be limited by Delaware state law. Accordingly, investors must rely on sales of their common stockCommon Stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.Common Stock.
Our Amended and Restated Bylaws provide that a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware)will be the sole and exclusive forum for certain disputesinclude an “exclusive forum” provision, which could limit stockholders’your ability to obtain a favorable judicial forum for any disputes you have with the Company or its directors, officers or employees.
Our Amended and Restated Bylaws provide that unless the Company consents in writing to the selection of an alternative forum, a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for claims with respect to (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the Delaware General Corporation Law, or theour Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) or the Amended and Restated Bylaws of the Company (in each case, as they may be amended from time to time), or (iv) any action asserting a claim against the Company or any director or officer or other employee of the Company governed by the internal affairs doctrine. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
This choice of forum provision may limit a stockholder’sshareholder’s ability to bring a claim in a judicial forum that he, she or it finds favorable for disputes with the Company or its directors, officers, other employees or agents, which may discourage such lawsuits against the Company and its directors, officers, other employees and agents. Alternatively, if a court were to find the choice of forum provision contained in our Amended and Restated Bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on the Company’s business, results of operations, and financial condition.
You should consult your own independent tax advisor regarding any tax matters arising with respect to the securities offered in connection with this offering.
Participation in this offering could result in various tax-related consequences for investors. All prospective purchasers of the resold securities are advised to consult their own independent tax advisors regarding the U.S. federal, state, local and non-U.S. tax consequences relevant to the purchase, ownership and disposition of the resold securities in their particular situations.
IRS CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE INTERNAL REVENUE SERVICE, WE INFORM YOU THAT ANY U.S. TAX ADVICE CONTAINED HEREIN (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES UNDER THE INTERNAL REVENUE CODE. IN ADDITION, ANY U.S. TAX ADVICE CONTAINED HEREIN (INCLUDING ANY ATTACHMENTS) IS WRITTEN TO SUPPORT THE “PROMOTION OR MARKETING” OF THE MATTER(S) ADDRESSED HEREIN. YOU SHOULD SEEK ADVICE BASED ON YOUR PARTICULAR CIRCUMSTANCES FROM YOUR OWN INDEPENDENT TAX ADVISOR.
IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS FILING, POTENTIAL INVESTORS SHOULD KEEP IN MIND THAT OTHER POSSIBLE RISKS MAY ADVERSELY IMPACT THE COMPANY’S BUSINESS OPERATIONS AND THE VALUE OF THE COMPANY’S SECURITIES.
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SPECIAL NOTECAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements.” Forward-lookingforward-looking statements reflect the current view about future events. When usedthat involve substantial risks and uncertainties. All statements contained in this prospectus other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
The words “anticipate,” “believe,” “estimate,” “expect,” “future,“intend,” “intend,“may,” “plan,” or the negative of these terms“predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions as they relateare intended to us or our management, identify forward-looking statements. Suchstatements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, but are not limited to,among other things, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-lookingabout:
| ● | our ability to implement our business strategy and transition to electric vehicles; | |
| ● | anticipated trends and challenges in our business and the markets in which we operate; | |
| ● | our expected future financial performance; | |
| ● | our expectations regarding our operating expenses; | |
| ● | our ability to anticipate market needs or develop new or enhanced products to meet those needs; | |
| ● | our expectations regarding market acceptance of our products and services; | |
| ● | our ability to compete in our industry and innovation by our competitors; | |
| ● | our ability to successfully identify and manage any potential acquisitions; | |
| ● | our ability to maintain or broaden our business relationships and develop new relationships with strategic alliances, suppliers, customers, distributors or otherwise; | |
| ● | our ability to recruit and retain qualified sales, technical and other key personnel; | |
| ● | our ability to obtain additional financing; | |
| ● | our ability to manage growth; | |
| ● | our potential to uplist our Common Stock to Nasdaq or another national securities exchange; and | |
| ● | other risks and uncertainties, including those described in the section entitled “Risk Factors” in this prospectus. |
These forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our forward- looking statements, so you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and assumptions regardingprojections about future events and trends that we believe may affect our business, financial condition and operating results. We have included important factors in the economy and other future conditions. Because forward–lookingcautionary statements relate to the future, they are subject to inherent uncertainties, risks and changesincluded in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factorsthis prospectus that could cause actual future results or events to differ materially from those in the forward-looking statements include, without limitation:
Should onethat we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual resultsinvestments we may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements.make. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we do not intendplan to publicly update or revise any forward-looking statements contained herein after we distribute this prospectus, whether as a result of any new information, future events or otherwise.
You should read this prospectus with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any of the forward-looking statements to conform these statements to actual results.whether as a result of new information, future events or otherwise, except as required by applicable law.
| 20. |
We estimate that we will receivethe net proceeds to us from the sale of shares of our Common Stock by us in this offering will be approximately $8,900,000 (or$ million, or approximately $10,265,000$ million if the underwriters’underwriters exercises in full their option to purchase additional shares is exercised in full) fromof Common Stock to cover over-allotments, if any, assuming the sale of the common stock offered by us in this primary offering, based onshares of Common Stock at an assumed public offering price of $4.00$ per share and(the last quoted price of our Common Stock on May , 2021), in each case, after deducting the estimated underwriting discountsdiscount and commissions andthe estimated offering expenses payable by us.
AnA $1.00 increase or decrease(decrease) in the assumed public offering price of 100,000$ per share (the closing price of our Common Stock as quoted on the Pink Open Market on July , 2021) would increase (decrease) the aggregate net proceeds to us from this offering by approximately $ million, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, would increase or decrease net proceeds to us from this primary offering by $364,000, based on a public offering price of $4.00 per share,remains the same and after deducting the estimated underwriting discounts and commissions.
The principal purposescommissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of this primary offering are to increase our capitalization and financial flexibility, increase our visibility500,000 shares in the marketplace and create a public market for our common stock. Asnumber of the date of this prospectus, we cannot specify with certainty all of the particular uses forshares offered by us would increase (decrease) the net proceeds to us from this primary offering. However, we currently intend to use the net proceeds to us from this primary offering to add to our fleet of passenger vehicles made available for rent through the Company’s wholly-owned subsidiary, Distinct Cars, and for general corporate purposes, including working capital, sales and marketing activities. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments.
We will retain broad discretion in the allocation of the net proceeds from this primary offering and could utilize the proceeds in ways that do not necessarily improve our results of operations or enhance the value of our common stock.
The table below sets forth the manner in which we expect to use the net proceeds we receive from this primary offering. All amounts included in the table below are estimates.
| Description | Amount | |||
| Purchase of Passenger Vehicles Made Available for Rent | $ | 5,000,000 | ||
| Repayment of Notes Payable | 2,400,000 | |||
| Sales and Marketing | $ | 750,000 | ||
| Working Capital and General Corporate Purposes | $ | 750,000 | ||
| Total | $ | 8,900,000 | ||
The foregoing information is an estimate based on our current business plan. We may find it necessary or advisable to re-allocate portions of the net proceeds reserved for one category to another, and we will have broad discretion in doing so. Pending these uses, we intend to invest the net proceeds of this primary offering in a money market or other interest-bearing account.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is not listed on any stock exchange or over-the-counter market or quotation system. There is currently no active trading market in our common stock. We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “YAYO” which listing is a condition to this offering. For more information see the section “Risk Factors.”
As of October 31, 2019, we have 26,802,976 shares of our common stock issued and outstanding held by approximately 1,148 stockholders of record.
We also have outstanding:
|
Dividends
We have not declared any cash dividends since inception and we do not anticipate paying any dividends in$ million, assuming that the foreseeable future. Instead, we anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth and development of our business, including potentially the acquisition of, or investment in, businesses, technologies or products that complement our existing business. The payment of dividends is within the discretion of the board of directors and will depend on our earnings, capital requirements, financial condition, prospects, applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits, and other factors our board might deem relevant. There are no restrictions that currently limit our ability to pay dividends on our common stock other than those generally imposed by applicable state law.
Securities Authorized for Issuance under Equity Compensation Plan
On November 30, 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”) that governs equity awards to our employees, directors, officers, consultants and other eligible participants. Under the 2016 Plan there are 10,000,000 shares of common stock reserved for issuance.
The types of awards permitted under the 2016 Plan include qualified incentive stock options and non-qualified stock options. Each option shall be exercisable at such times and subject to such terms and conditions as the Board may specify.
The Board of Directors has the power to amend, suspend or terminate the 2016 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our common stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year.
2016 Equity Compensation Plan Information as of December 31, 2018
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders - 2016 Plan | $ | 300,000 | $ | 8.00 | 9,250,000 | |||||||
| Total | $ | 300,000 | $ | 8.00 | 9,250,000 | |||||||
As of December 31, 2018, options to purchase up to 750,000 shares of common stock have been granted under the 2016 Plan (450,000 expired in 2018) of which 300,000 shares of common stock are vested and exercisable. The following table summarizes information about stock options granted at December 31, 2018 under the 2016 Plan:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Exercise Price | Outstanding | Weighted Average Remaining contractual life (in years) | Weighted Average Exercise Price | Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | 8.00 | 300,000 | 1.50 | 8.00 | 300,000 | 8.00 | ||||||||||||||||
The following table sets forth our consolidated capitalization, as of June 30, 2019, and on a pro forma basis giving effect to the sale of 2,500,000 shares of common stock by us in this offering at aassumed public offering price of $4.00 per shareremains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
You should readWe expect to use the following tablenet proceeds from this offering as follows:
| ● | $2,303,750 for the redemption of the 230,375 outstanding shares of Series B Preferred Stock issued in July 2021 at a redemption price of $10.00 per share, assuming no conversion of any of the shares of Series B Preferred Stock into Common Stock prior to the completion of this offering; and | |
| ● | $ for the acquisition of electric vehicles, in conjunction with the Company’s electric vehicles transition strategy. |
The remaining proceeds will be allocated toward working capital and is expected to be utilized for general corporate purposes. We may also use a portion of the net proceeds from this offering to pursue potential strategic acquisitions, although we do not have any specific plans or arrangements to do so at this time.
Pending other uses, we intend to invest our proceeds from the offering in conjunction with “Useshort-term investments or hold them as cash. We cannot predict whether the proceeds invested, if any, will yield a favorable return. Our management will have broad discretion in the use of Proceeds,” “Management’s Discussionthe net proceeds from the offering, and Analysisinvestors will be relying on the judgment of Financial Conditionour management regarding the application of the net proceeds.
| 21. |
MARKET PRICE OF OUR COMMON STOCK
Market Information
Our Common Stock is quoted and Resultstraded on the Pink Open Market, which is operated by the OTC Markets Group, under the symbol “YAYO.”
On July , 2021, the closing price for our Common Stock as quoted on the Pink Open Market was $ per share. From the date of Operations”our initial public offering in November 2019 until February 2020, our Common Stock was listed on Nasdaq. We delisted from Nasdaq as of late February 2020 and our financial statementsCommon Stock has since traded on the Pink Open Market. Shown below is the range of high and related notes includedlow closing prices for our Common Stock for the periods indicated as reported by Nasdaq or quoted on the Pink Open Market, as applicable. Such quotations represent inter-dealer prices without retail markup, markdown or commission and may not necessarily represent actual transactions.
| Quarter Ending March 31, 2021 | High | Low | ||||||
| $ | 5.67 | $ | 0.53 | |||||
| Year Ending December 31, 2020 | High | Low | ||||||
| Fourth Quarter | $ | 0.87 | 0.21 | |||||
| Third Quarter | 0.40 | 0.20 | ||||||
| Second Quarter | 0.72 | 0.08 | ||||||
| First Quarter | 1.44 | 0.13 | ||||||
| Quarter Ending December 31, 2019 | High | Low | ||||||
| $ | 3.95 | $ | 1.26 | |||||
As of July , 2021, our Common Stock was held of record by approximately stockholders. Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of individual stockholders represented by these record holders.
| 22. |
We have never declared or paid cash dividends on our Common Stock, and do not anticipate paying cash dividends to our holders of our Common Stock in the near future. We currently intend to retain all available funds and any future earnings for use in the operation of our business. Therefore, we do not currently expect to pay any cash dividends on our Common Stock for the foreseeable future.
Our Board of Directors has the right to authorize the issuance of Series A convertible preferred stock in the future, without shareholder approval, the holders of which may have preferences over the holders of our Common Stock as to payment of dividends. To date, we have not issued any shares of Series A convertible preferred stock. While we have designated a class of Series A convertible preferred stock for issuance, we have not determined a dividend to be paid to holder of such any such shares at this prospectus. time. The holder of shares of Series A convertible preferred stock shall be entitled to receive dividends when, as, and if declared by the Board in an amount that shall be paid pro rata on the Common Stock.
Our Board of Directors has authorized the issuance of up to 230,550 shares of Series B Preferred Stock, of which 230,375 shares are currently outstanding. The holder of the Series B Preferred Stock is entitled to receive dividends in the form of either shares of Common Stock or, at the Company’s election, both cash and shares of Common Stock, and are payable on either the date the Series B Preferred Stock is converted into shares of Common Stock or the date the Series B Preferred Stock is redeemed. These dividends began accruing on the issuance date of the Series B Preferred Stock and shall be computed on the basis of a 365-day year and actual days elapsed.
| 23. |
The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2019:March 31, 2021:
As of March 31, 2021 | ||||||||||||
| Actual | Pro forma (1) | As Adjusted (2) | ||||||||||
| Cash and equivalents | $ | 155,476 | $ | 8,728,767 | $ | |||||||
| Indebtedness and redeemable preferred stock | $ | 5,480,969 | $ | 15,284,719 | $ | |||||||
| Stockholders’ Equity | ||||||||||||
| Preferred stock, $0.000001 par value; 10,000,000 shares authorized; nil shares issued and outstanding | - | |||||||||||
| Common stock, $0.000001 par value; 90,000,000 shares authorized; 35,127,524, 35,127,524 and _____shares issued and outstanding | 35 | 35 | ||||||||||
| Additional paid-in capital | 34,885,638 | 34,885,638 | ||||||||||
| Accumulated deficit | (33,091,655 | ) | (34,322,114 | ) | ||||||||
| Total stockholders’ equity | 1,794,018 | 563,559 | ||||||||||
| Total capitalization | $ | 7,274,987 | $ | 15,848,278 | $ | |||||||
(1) The pro forma balance sheet data in table above reflects: (i) the receipt on April 12, 2021 of cash proceeds of $2,000,000 for a note that has since been exchanged for both 230,375 shares of Series B Preferred Stock and a warrant to purchase shares of Common Stock; (ii) the liability incurred from the issuance of the note in the principal amount of $2,250,000, which is now cancelled; (iii) the receipt on July 9, 2021 of net cash proceeds of $6,573,291 for a note evidencing a term loan; and (iv) the liability incurred from the issuance of the term note in the principal amount of $7,500,000.
(2) The pro forma as adjusted balance sheet data in the table above reflects the: (i) the pro forma adjustments set forth above; (ii) the sale and issuance by us of ___ shares of our Common Stock in this offering, based upon the assumed public offering price of $ per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us; and (iii) the redemption by us of 230,375 shares of Series B Preferred Stock for $2,303,750.
Each $1.00 increase (decrease) in the assumed offering price of $_____ per share (the closing price of our Common Stock as quoted on the Pink Open Market on July , 2021), would increase (decrease) our pro forma as adjusted cash, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this offering remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 500,000 shares in the number of shares of Common Stock offered by us would increase (decrease) our pro forma as adjusted cash, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately $ million, assuming the assumed offering price of $ per share (the closing price of our Common Stock as quoted on the Pink Open Market on July , 2021, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.
The number of shares of our Common Stock that will be outstanding immediately after the offering is based on shares outstanding as of March 31, 2021, and assumes that the Series B Preferred Stock issued in July 2021 does not convert into shares of Common Stock, and is instead redeemed using the proceeds of this offering. Unless we specifically state otherwise, the share information in this prospectus excludes:
| ● | 1,755,000 shares of our Common Stock issuable upon the exercise of issued and outstanding stock options at a weighted-average strike price of $0.25 per share; | |
| ● | 2,550,000 shares of Common Stock issuable upon the exercise of outstanding warrants at a weighted-average exercise price of $3.53 per share; | |
| ● | shares of Common Stock reserved for future issuance under our 2016 Equity Incentive Plan for employees, directors, officers, consultants and other eligible participants; and | |
| ● | shares of Common Stock issuable upon the exercise of the warrant to be issued to the representative of the underwriters upon closing of this offering. |
| 24. |
| Actual | As Adjusted (1) | |||||||
| Cash | $ | 34,381 | $ | 6,536,141 | ||||
| Indebtedness due within one year | $ | 4,895,563 | $ | 2,497,323 | ||||
| Total long term debt - net of current portion | $ | 1,559,309 | $ | 1,559,309 | ||||
| Stockholders’ equity: | ||||||||
| Common stock, $0.000001 par value, 90,000,000 shares authorized, 26,802,976 shares outstanding actual, 29,302,976 shares outstanding as adjusted | 27 | 29 | ||||||
| Preferred stock, $0.000001 par value, 10,000,000 shares authorized; 0 shares outstanding | — | — | ||||||
| Additional paid-in capital | 19,867,551 | 28,767,549 | ||||||
| Accumulated deficit | (22,238,609 | ) | (22,238,609 | ) | ||||
| Total stockholders’ equity | (2,371,031 | ) | 6,528,969 | |||||
| Total capitalization | $ | 4,083,841 | $ | 10,585,601 | ||||
(1) Does not include: (a) shares issuable upon the exercise of the underwriter’s option to purchase up to 375,000 additional shares of common stock; (b) 1,500,000 shares of our common stock issuable upon exercise of outstanding Selling Securityholder Warrant; and (c) 300,000 shares of our common stock issuable upon exercise of granted and vested stock options granted under our 2016 Plan. Includes the repayment of $1,518,240 of notes payable.
Purchasers ofIf you invest in our common stockCommon Stock in this offering, your interest will experience an immediate and substantial dilution inbe diluted immediately to the as adjusted net tangible book valueextent of their shares of common stock. Dilution in as adjusted net tangible book value represents the difference between the public offering price per share and the as adjusted net tangible book value (deficit) per share of our common stock immediatelyCommon Stock after thethis offering.
The historical net Net tangible book value of our common stock as of June 30, 2019 was $(2,371,031) or $(0.09) per share. Historical net tangible book value(deficit) per share of our common stock representsCommon Stock is determined at any date by subtracting our total liabilities from the amount of our total tangible assets (total assets less intangible assets) and dividing the difference by the number of shares of our Common Stock deemed to be outstanding at that date. Dilution in net tangible book value (deficit) per share represents the difference between the amount per share paid by investors in this offering and the net tangible book value (deficit) per share of our Common Stock immediately after this offering.
Our historical net tangible book value (deficit) as of March 31, 2021 was approximately $ million, or $ per share. Our historical net tangible book value (deficit) per share represents our total tangible assets less our total liabilities, divided by the number of shares of common stockCommon Stock outstanding as of that date. On a pro forma basis, after giving effect to the sale of 2,500,000 shares in this offering at an initial public offering price of $4.00 per share for net proceeds of approximately $8.9 million, as if such offering had occurred at the end of June 30, 2019, ourMarch 31, 2021.
Our pro forma net tangible book value as of June 30, 2019 would have been approximately $6,528,969,March 31, 2021 was or approximately $0.22$ per share of our common stock. This represents an immediate increase in as adjusted proshare. Pro forma net tangible book value per share represents the amount of $0.31our tangible assets as adjusted to take into account the net proceeds of $ that we received from the a bridge loan we received in April 2021 and $2 million of net proceeds that we received on April 12, 2021 from a loan that has since been converted into preferred stock and a warrant and the amount of our total liabilities as adjusted to take into account the bridge loan in the principal amount of $2,250,000. The note underlying the bridge loan has since been exchanged for 230,375 shares of Series B Preferred Stock and a warrant to purchase shares of Common Stock, and is now cancelled.
After further giving effect to the sale of shares of our Common Stock in this offering at the assumed public offering price of $ per share, which was the last quoted price of our Common Stock on the Pink Open Market, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, and after redemption of the 230,375 shares of Series B Preferred Stock at a redemption price of $10.00 per share, for an aggregate amount of $2,303,750, our pro forma as adjusted net tangible book value as of March 31, 2021 would have been approximately $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and immediate dilution in net tangible book value of $ per share to investors in this offering. The following table illustrates this dilution on a per share basis:
| Assumed public offering price per share | $ | |||||||
| Historical net tangible book value (deficit) per share as of March 31, 2020 | $ | |||||||
| Pro Forma net tangible book value per share as of March 31, 2021 | ||||||||
| Increase in pro forma net tangible book value per share | ||||||||
| Pro forma as adjusted net tangible per share | ||||||||
| Dilution in pro forma as adjusted net tangible book value per share to new investors in this offering | $ |
| Dilution Table | ||||||||
| Assumed offering price per share | 6.00 | |||||||
| Net tangible book value per share before offering | 0.02 | |||||||
| Increase per share attributable to offering | 0.27 | |||||||
| Net tangible book value per share as adjusted to reflect the offering | 0.29 | |||||||
| Dilution per share to new shareholders | 5.71 |
If the underwriters exercise in full their option to purchase additional shares of our Common Stock at the public offering price of $ per share, our as adjusted net tangible book value would be approximately $ per share, an increase of approximately $ per share to existing stockholders and an immediate dilution in as adjusted pro forma net tangible book valueof approximately $ per share of $3.78 to new investors who purchasepurchasing shares of our Common Stock in this offering, after deducting the underwriting discount and estimated offering expenses payable by us.
A $1.00 increase or decrease in the offering. The following table illustrates this per shareassumed public offering price of our Common Stock would increase or decrease the dilution to new investors:investors by $____, assuming the number of shares of Common Stock offered by us remains the same and after deducting the estimated underwriting discounts and commissions. Similarly, each aggregate increase or decrease of 500,000 shares of Common Stock would increase or decrease the dilution to new investors by $____ per share, assuming that the assumed public offering price of shares of Common Stock remains the same and after deducting the estimated underwriting discounts and commissions.
The number of shares of Common Stock to be outstanding after this offering is based on shares outstanding as of March 31, 2021, assumes that the 230,375 outstanding shares of Series B Preferred Stock issued in July 2021 does not convert into shares of Common Stock, and is instead redeemed from the proceeds of this offering, and excludes:
| 1,755,000 shares of our Common Stock issuable upon the exercise of issued and outstanding stock options at a weighted-average strike price of $0.25 per share; | ||
| ● | 2,550,000 shares of Common Stock issuable upon the exercise of outstanding warrants at a weighted-average exercise price of $3.53 per share; and | |
| ● | shares of Common Stock reserved for future issuance under our 2016 Equity Incentive Plan; | |
| ● | shares of Common Stock issuable upon the exercise of the warrant to be issued to the representative of the underwriters upon closing of this offering. |
| Publicoffering price per share | $ | 4.00 | ||
| Historical net tangible book value per share as of June 30, 2019 | $ | (0.09 | ) | |
| Increase in as adjusted pro forma net tangible book value per share attributable to the offering | 0.31 | |||
| Pro forma net tangible book value (deficit) per share as of June 30, 2019 | 0.22 | |||
| Dilution in net tangible book value per share to new investors | $ | 3.78 |
After completionIf the underwriters exercise their option to purchase additional shares in full, the percentage of this offering, ourshares of Common Stock held by existing stockholders would ownwill decrease to approximately 91.5% and our new investors would own approximately 8.5%% of the total number of shares of our common stockCommon Stock outstanding after this offering, and before sales of any of the shares by the Selling Shareholders.
Sales of 150,000 shares of common stock by the Selling Shareholders in the offering covered by a separate prospectus (calculated using $4.00 per share price listed on the cover page of this prospectus and excluding the exercise of the warrants held the selling shareholders) will reduce the number of shares of common stock held by existing stockholders to approximately 91.0% of the total shares of common stock outstanding after this offering, and will increase the shares held by new investors will increase to , or approximately 9.0%% of the total shares of common stock outstanding after this offering.
To the extent that outstanding options or warrants are exercised and outstanding convertible notes are converted into common stock, you will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities may result in further dilution to our stockholders.
The following table summarizes, on an as adjusted basis as of June 30, 2019, the differences between the number of shares of common stock purchased from us,Common Stock outstanding after the total consideration and the average price per share paid by existing stockholders and by investors participating in this offering, after deducting estimated underwriting discounts and commissions and estimated offering expenses, at a public offering price of $4.00 as shown on the cover page of this prospectus.offering.
| Capitalization Table | ||||||||||||||||||||
| Shares Purchased | Total Consideration | |||||||||||||||||||
| Number | Percent | Amount | Percent | Per Share | ||||||||||||||||
| Existing stockholders | 26,802,976 | 91.47 | % | $ | (2,371,031 | ) | (36.32 | )% | $ | (0.09 | ) | |||||||||
| New Investors | 2,500,000 | 8.53 | % | 8,900,000 | 136.32 | % | $ | 3.56 | ||||||||||||
| 29,302,976 | 100.00 | % | $ | 6,528,969 | 100.00 | % | $ | 0.22 | ||||||||||||
| 25. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements made in this prospectus are “forward-looking statements” regarding the plansOur Corporate History and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the “Company” to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing 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 the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and therefore, there can be no assurance the forward-looking statements included in this prospectus 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 the Company or any other person that the objectives and plans of the Company 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 set forth under “Risk Factors” and in other parts of this prospectus. Our fiscal year ends on December 31.Background
Overview
The Company was formed on June 21, 2016 under the name “YayYo,“YayYo, LLC,” which was converted into a Delaware corporation pursuant to the unanimous written consent of our former manager and members in a transaction intended to be tax-free under the Internal Revenue Code (the “Conversion”“Conversion”). All of YayYo, LLC’s liabilities and assets, including its intellectual property, were automatically transferred to the Company and the Company has assumed ownership of such assets and liabilities. The Company now operates as a “C”“C” corporation formed under the laws of the State of Delaware. On September 11, 2020, YayYo, Inc. changed its name to Rideshare Rental, Inc. On March 1, 2021, the Company changed its name from Rideshare Rental, Inc. to EVmo, Inc.
The Company is a holding company operating through its wholly-owned subsidiaries, including Distinct Cars, LLC a Delaware limited liability company (“Distinct Cars”), Savy LLC, a Delaware limited liability company (“Savy”), Rideyayyo LLC, a Delaware limited liability company (“Rideyayyo”) and Rideshare Car Rentals, LLC, a Delaware limited liability company (“Rideshare”). The Company operations are organized and consolidated into one reporting segment which encompasses the financial results of the Company’s two business segments- (i) the Fleet Management business and (ii) the Rideshare Platform.LLC.
On August 12, 2017, we announced that we were shifting our primary corporate focus in the transportation/ridesharing industry away from the development of the Metasearch App. As of the date of this Prospectus, theThe Company’s operating business segmentsdivisions include (i) an online rideshare vehicle booking platform to service the ridesharing economy through Rideshare Car Rentals, i.e. the Company’s wholly-owned subsidiary Rideshare (the “Rideshare Platform,”), and (ii) the maintenance of a fleet of standard passenger vehicles to be made commercially available for rent through the Company’s wholly-owned subsidiary Distinct Cars (“Fleet Management”). Through the Company’s wholly-owned subsidiaries Rideshare and Distinct Cars, theCars. The Company seeks to become the leading provider of a standard rental vehicles to drivers in the ridesharing economy.
Initial Public Offering
On March 16, 2018, we closed our Regulation A+completed an offering under Regulation AA+ of the Securities Act, which was qualified by the SEC on March 15,17, 2017. We sold a total of 365,306 shares of our common stock.Common Stock. We received cash proceeds of $1.8 million, net of commissions and other costs associated with the gross offering proceeds or payable by us.
Factors Affecting Our PerformanceOn November 15, 2019, the Company closed its initial public offering of 2,625,000 common shares at $4.00 per share, for gross proceeds, before underwriting discounts and commissions and expenses, of $10.5 million, and the shares became listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “YAYO.”
We believeOn February 10, 2020, the Company notified Nasdaq of its intent to voluntarily delist its Common Stock from Nasdaq. In connection therewith, the Company notified Nasdaq of the Company’s intention to file a Form 25 with the SEC on or about February 20, 2020. The Company elected to effect the voluntary delisting of its Common Stock after discussions with Nasdaq’s staff, in which we were advised by the staff that it believed we no longer satisfied listing requirements. The Common Stock now trades on the growthPink Open Market, still under the trading symbol, “YAYO,” but we have applied to relist on the Nasdaq Capital Market and, if approved, will do so using the ticker symbol “EVMO.”
Recent Transactions
April 2021 bridge loan financing
On April 12, 2021, the Company entered into a securities purchase agreement (the “Agreement”) with a certain investor (the “Investor”) in connection with the issuance, as of our businessthat same date, of a 12.5% original issue discount convertible promissory note (the “Note”) and our future success are dependent upon many factors, including our products, servicesa common stock purchase warrant (the “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 an initial price of $3.00 per share (subject to adjustment as set forth in the Note), and market leadership,was to mature on January 12, 2022. The Note has since been exchanged for 230,375 shares of the Company’s Series B Preferred Stock and the success of our salesa warrant, as described below, and marketing efforts, our expansion strategy, our investments for scale and growth. While each of these areas presents significant opportunities for us, they also pose important challenges that we must successfully address in order to sustain the growth of our business and improve our results of operations. The investments that we make in these areas may not result in increased revenue or the growth of our business. Accordingly, these investments may delay or otherwise impair our ability to achieve profitability. The timing of our future profitability will depend upon many variables, including the success of our growth strategies and the timing and size of investments and expenditures that we choose to undertake, as well as market growth and other factors that are not within our control. We have not yet determined when we expect to achieve profitability.cancelled.
ProductThe Warrant grants the Investor the right to purchase 187,500 shares of Common Stock at an exercise price of $3.00, subject to adjustment as set forth therein, and Market Leadership. We are committedis exercisable at any time within five (5) years of the date of issuance. The Warrant provides for a cashless exercise right if at any time after the six-month anniversary of the date of issuance there is no effective registration statement registering the resale of the shares of Common Stock underlying the Warrant. The Warrant also provides, at the option of the Investor, for the payment of cash equal to delivering market-leading products and services in the ridesharing economy to continue to build and maintain credibility withBlack-Scholes value of the growing customer base. We believe we must expand our product, services and market leadership position and strengthremaining unexercised portion of our brand to drive further revenue growth. We intend to continue to invest in the capabilities of our business segments and marketing activities to maintain our strong position in the ridesharing economy. Our results of operations may fluctuate as we make these investments to drive increased customer adoption and usage.Warrant if a fundamental transaction should be effected.
SalesThe Agreement provided that additional warrants, each for 93,750 shares of Common Stock with an initial exercise price of $3.00 per share (subject to adjustment), would be issued by the Company to the Investor on the 12th day of each month that the Note remains outstanding. The Warrant includes anti-dilution provisions in which its exercise price will be reduced to equal the conversion price 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 Warrant. On each of May 12, 2021 and Marketing. In orderJune 12, 2021, the Company issued a Warrant for 93,750 common shares pursuant to maintain our efficient customer acquisition, we must maintain and expand our operating business segments, customer outreach and effectively generate additional sales to enterprises and customers across the United States. Our strategy to achieve ongoing growth is driven by initiatives that expand and diversify our revenues through customer- and market-focused initiatives. We are actively working to expand our Fleet Management business, Rideshare Platform and diversify our equipment rental fleet with a broader mixterms of vehicles to increase in the range of customer options and markets we serve.securities purchase agreement. In addition, we seek to grow our Rideshare business which seeks to connect the owners and/or operatorsInvestor was also granted certain piggyback registration rights for registration of standard passenger vehicles to existing or prospective ridesharing drivers. We will continue to offer a comprehensive equipment rental fleet to maintain our market leadership. We plan to expand our footprint in North America, with a focus on increasing the following: (i)shares of Common Stock underlying the number of major geographical markets served on our Rideshare platform; (ii) the number of vehicles maintained and managed under the Company’s Fleet Management business; and (iii) to continue to reconfigure existing locations with fleet and expertise tailored to local markets. Our footprint expansion will include locations served under our Rideshare Platform and Fleet Management business to better support our growing ridesharing rental business. We will continue to pursue initiatives that allow us to drive sales through our existing locations and geographical territories.Warrant.
Expansion Strategy.July 2021 term loan financing We are focused on expanding our existing customers’ use of our products, services and Rideshare Platform. We believe that there is a significant opportunity to drive additional sales to existing customers, and expect to invest in sales, marketing and customer support to achieve additional revenue growth from existing customers. We believe that the large numbers of drivers and fleet operators that we do and will do business with, create a “Network Effect” that enables us to scale the business, increase diversification and revenue and expand our strength as a potential market leader.
InvestmentsOn 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 Scale. As our business growsthe lenders, and Energy Impact Credit Fund I, LP, as we continue our Rideshare Platform optimization efforts, we expectlender (the “Lender”), providing for a secured term loan facility in an aggregate principal amount of up to realize cost savings through economies$15.0 million (collectively, the “Term Loans”), consisting of scale. We manage our Fleet Management business segmenta $7.5 million closing date term loan facility (the “Closing Date Term Loan”) and up to optimize$7.5 million of borrowings under a delayed draw term loan facility (the “Delayed Draw Term Loan Facility”). The Closing Date Term Loan was fully drawn on the timingClosing Date, while the Delayed Draw Term Loan Facility is available upon the satisfaction of fleet rentals, repairs and maintenance, while atcertain conditions precedent specified in the same time satisfying our customers’ needs. Through continued use and development of our disciplined approach to efficient fleet management, we seek to maximize our utilization and returnTerm Loan Agreement. The Term Loan Agreement matures on investment. As a result, we expect our gross margin to fluctuate from period to period.July 9, 2026.
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Interest Rate
Borrowings under the Term Loan Agreement bear interest at the London Interbank Offered Rate (“LIBOR”), plus a margin of 10.0%. In addition, upon the occurrence of an event of default, and for so long as such event of default continues, default interest equal to 2.00% per year in excess of the rate otherwise applicable will be payable. The Term Loan Agreement also includes customary replacement provisions in the event of the discontinuation of LIBOR.
Security; Guarantees
The Company’s Guaranteed Obligations (as defined in the Term Loan Agreement) are guaranteed by certain of the Company’s material, wholly-owned subsidiaries, subject to customary exceptions (together with the Company, the “Credit Parties”). The Credit Parties’ obligations, including the Closing Date Term Loan and any borrowings under the Delayed Draw Term Loan Facility, are a general obligation of the Company secured by the Collateral, which is defined in the Term Loan Agreement as substantially all of the Company’s property and assets other than certain vehicles leased by the Credit Parties. The Credit Parties and EICF have entered into a pledge agreement in which the Credit Parties have pledged and assigned to EICF, acting on behalf of the Lender, the Collateral and granted a security interest in its right, title, and interest.
Prepayments
Subject to certain conditions, the Company may voluntarily prepay the Term Loans on any Payment Date (as defined in the Term Loan Agreement), in whole or in part, in a minimum amount of $500,000 of the outstanding principal amount. Mandatory prepayments shall be made, subject to certain exceptions, within 120 days of the end of each calendar year, beginning with the year ending December 31, 2022, in the following amounts: (i) if the Total Leverage Ratio (as defined in the Term Loan Agreement) is greater than or equal to 2:50:1:00, 50.0% of Excess Cash Flow (as defined the Term Loan Agreement) or (ii) if the Total Leverage Ratio is less than 2:50:1:00, 25.0% of Excess Cash Flow, net of all voluntary prepayments made on the Term Loans during such calendar year. The Term Loan Agreement also requires mandatory prepayment of certain amounts in the event the Company receives proceeds from certain events and activities, including asset sales and casualty events and the issuance of either indebtedness or preferred equity interests. Whether prepayment is made voluntarily or mandatorily, the Company shall include a prepayment fee (the “Prepayment Fee”), calculated as follows: if prepayment occurs prior to the first anniversary of the Closing Date, a Prepayment Fee of 4.00% of the principal amount being prepaid; if prepayment occurs on or after the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date, a Prepayment Fee of 3.00% of the principal amount being prepaid; and if prepayment occurs on or after the second anniversary of the Closing Date and prior to the third anniversary of the Closing Date, a Prepayment Fee of 2.00% of the principal amount being prepaid.
Fees
The Term Loan Agreement provides for payment to the Agent on behalf of the Lender of (1) closing fees equal to 1.00% of the Closing Date Term Loan, and (2) application fees equal to 1.00% of the Closing Date Term Loan, each of which were payable on the Closing Date. Should the Company make any borrowings under the Delayed Draw Term Loan Facility, the same closing and application fees will be applied against such borrowings.
Representations, Warranties and Covenants
The Term Loan Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants, in each case, with certain exceptions, limitations and qualifications.
The Term Loan Agreement also requires that the Company regularly provide certain financial information to EICF, as well as maintain a net leverage ratio and a minimum amount of liquidity.
Events of Default
Events of default under the Term Loan Agreement include, but are not limited to, a breach of certain covenants or any representations or warranties, failure to timely pay any amounts due and owing, the commencement of any bankruptcy or other insolvency proceeding, judgments in excess of certain acceptable amounts, the occurrence of a change in control, certain events related to ERISA matters, impairment of security interests in the Collateral or invalidity of guarantees or security documents, in each case, with customary exceptions, limitations, grace periods and qualifications.
If an event of default occurs, EICF may, among other things, declare all obligations to be immediately due and payable, together with accrued interest and fees, and exercise remedies under the collateral documents relating to the Term Loan Agreement.
Use of Proceeds
The Company has used or will use, as applicable, the proceeds of the Closing Date Term Loan as follows: (i) for growth capital purposes, working capital purposes and other corporate purposes (ii) for the refinancing of Existing Indebtedness (as defined in the Term Loan Agreement), and (iii) to pay any fees associated with the transactions contemplated under the Term Loan Agreement and any other documents used to facilitate the Term Loans.
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Issuances of Term Note and Warrant
Results
The Closing Date Term Loan has been evidenced by a promissory note (the “Term Note”), dated as of Operationsthe Closing Date, and duly executed and delivered by the Company.
As a condition precedent to the Agent and the Lender entering into the Term Loan Agreement, the Company issued to the Lender a common stock purchase warrant, dated as of the Closing Date (the “EIP Warrant”), which grants the Lender the right to purchase up to 1.5 million shares of Common Stock, at an exercise price of $2.10, subject to adjustment as set forth in the EIP Warrant. The EIP Warrant is subject to vesting, with 450,000 shares of Common Stock exercisable as of the Closing Date and the remainder exercisable only in the event that the Company borrows under the Delayed Draw anti-dilution and RF regarding the ratult Term Loan Facility or fails to consummate a qualifying equity transaction on 150,000 vests on draw down 900,000 vests if no financing or before October 7, 2021. The EIP Warrant has no expiration date.
The Term Note and the EIP Warrant were issued in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder. The Lender is an accredited investor, as that term is defined in Regulation D of the Securities Act. Any additional notes to be issued by the Company to the Lender pursuant to the Term Loan Agreement will be issued in reliance on the same exemption.
PrinciplesExchange of consolidationNote for Series B Preferred Stock and Warrant
In connection with the Company’s entry into the Term Loan Agreement, the Company entered into an exchange agreement, dated as of July 8, 2021 (the “Exchange Agreement”), with the Investor.
Pursuant to the Exchange Agreement, the Investor agreed to exchange the Note for 230,375 shares of Series B Preferred Stock, and a warrant 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”). The terms of the Exchange Warrant are substantially identical to the Warrant described above. Additional warrants on substantially identical terms as the Exchange Warrant will be issued by the Company to the Holder monthly until such time as the Series B Preferred Stock is redeemed in full, upon which a final warrant will be issued.
The Series B Preferred Stock is convertible at any time at the option of the holder thereof into if not previously converted into shares of Common Stock at an initial conversion price of $3.00 per share, subject to adjustment as set forth in its certificate of designation (the “Certificate of Designation”).
The Series B Preferred Stock is subject to mandatory redemption in full at a redemption price initially equal to $10.00 per share, within 15 business days after the date on which the Company has completed an equity financing resulting in total proceeds of at least $10 million. It is the Company’s intention to redeem the Series B Preferred Stock in full using the proceeds from this offering.
At any time after January 12, 2022, provided that the Company has paid in full all obligations outstanding under the Term Loan Agreement, the holders of a majority of the outstanding shares of Series B Preferred Stock shall be entitled to require the Company to redeem the Series B Preferred Stock at the then applicable redemption price, and any such redemption of Series B Preferred Stock shall be prior and superior to the redemption of any and all other equity securities of the Company duly tendered for redemption.
If at any time while the Series B Preferred Stock is outstanding, the Company completes any single public offering or private placement of its equity, equity-linked or debt securities (each, a “Future Transaction”), the holders of the Preferred Stock may, in their sole discretion, elect to apply all, or any portion, of the then outstanding Series B Preferred Stock and any accrued but unpaid dividends, as purchase consideration for such Future Transaction. The conversion price applicable to such conversion shall equal seventy percent (70%) of the cash purchase price paid per share, unit or other security denomination for the securities of the Company issued to other investors in the Future Transaction.
The Certificate of Designation sets forth the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions of the Series B Preferred Stock and has been filed as an amendment to the Company’s amended and restated certificate of incorporation with the Division of Corporations, Delaware Secretary of State, along with a certificate of correction to address clerical errors made in the Certificate of Designation.
The Preferred Stock and the Exchange Warrant were issued in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated thereunder. The Holder is an accredited investor, as that term is defined in Regulation D of the Securities Act. Any additional warrants to be issued by the Company to the Holder pursuant to the Exchange Agreement will be issued in reliance on the same exemption.
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Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly ownedwholly-owned subsidiaries, Distinct Cars, LLC a Delaware limited liability company (“Distinct Cars”), Savy LLC, a Delaware limited liability company (“Savy”), Rideyayyo LLC, a Delaware limited liability company (“Rideyayyo”) and RideshareRideShare Car Rentals, LLC, a Delaware limited liability company (“LLC. All significant intercompany transactions and balances have been eliminated.
Rideshare”Consolidated Results of Operations—Three Months Ended March 31, 2021, Compared to Three Months Ended March 31, 2020).
Total Revenues.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018.
Revenue for the sixthree months ended June 30, 2019March 31, 2021 was $3,475,518,$2,294,532, an increase of $2,438,103$546,890 or 235.0%31.3% compared to revenue for the sixthree months ended June 30, 2018March 31, 2020 of $1,037,415.$1,747,642. The increase is principally due to us increasingan increase in our rental fleet over the comparable periods.fleet. During the sixthree months ended June 30, 2019,March 31, 2021, the average weekly rental income per vehicle placed in service was $341$404 compared to $270$249 for the same period in 2018.2020. Our revenues declined in March and April of 2020 due to COVID -19 and began to recover in May and June 2020. Our revenue since June 2020 is back to pre-COVID-19 levels, but there is no assurance that this trend will continue.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017.
Revenue for the 2018 fiscal year was $3,289,478. Revenue for the 2017 fiscal year was $235,690. The increase is due to us beginning to generate revenue from renting cars to Uber and Lyft drivers in August 2017. During the year ended December 31, 2018, the average weekly rental income per vehicle placed in service was $302 compared to $173 for the year ended December 31, 2017.
From June 21, 2016 (inception) to December 31, 2016, the Company was a pre-revenue development stage company purposed to commercialize the ridesharing industry through the development and distribution of our planned meta-search ridesharing mobile App. The Company generated no revenues from the Company’s inception on June 21, 2016 until October 31, 2016. On August 12, 2017, we announced that we were shifting our primary corporate focus in the transportation/ridesharing industry from the development of the Metasearch App. As of the date of this Prospectus, the Company’s operating business segments include (i) an online rideshare vehicle booking platform to service the ridesharing economy through the Company’s wholly-owned subsidiary Rideshare (the “Rideshare Platform”), and (ii) the maintenance of a fleet of standard passenger vehicles to be made commercially available for rent through the Company’s wholly-owned subsidiary Distinct Cars (“Fleet Management”).
Cost of Revenues.
The principal components of costs of revenue are depreciation of the vehicles, vehicle insurance and maintenance.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018.
Cost of revenues for the sixthree months ended June 30, 2019March 31, 2021 were $2,044,241,$1,780,903, an increase of $1,316,617$379,612 or 181.9%27.1% compared to cost of revenues for the sixthree months ended June 30, 2018March 31, 2020 of $727,624.$1,401,291. The increase is due to thehigher depreciation expense and insurance expense due to an increase in revenue as noted above.fleet size. For the sixthree months ended June 30, 2019March 31, 2021 and 20182020 our cost of revenue was 59%77.6% and 70%80.2% of our revenue, respectively.
Year Ended December 31, 2018 Compared to The decrease in the Year Ended December 31, 2017.
Costcost of revenues for the 2018 fiscal year were $2,374,397. Costrevenue as a percentage of revenues for the 2017 fiscal year were $213,111. The increaserevenue is due to the increase in revenue as noted above. In 2018 and 2017 our cost of revenue was 72% and 90% of our revenue, respectively.
General and Administrative Expenses.higher weekly rental rates.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018.
General and administrative expenses for the six months ended June 30, 2019 were $1,460,811, representing a decrease of $2,512,104 or approximately 63.2% over the six months ended June 30, 2018 of $3,972,915. The decrease is principally due to lower stock compensation expense of $3,112,234 for 2018 compared to $0 for 2019 offset by higher payroll costs as we hired additional personnel for our expanding operations and higher occupancy costs.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017.
General and administrative expenses for the 2018 fiscal year were $6,584,251, representing an increase of $3,334,592 or approximately 102.6% over the 2017 fiscal year of $3,249,659. The increase is principally due to stock-based compensation for the 2018 fiscal year was $4,364,468 compared to $1,676,476 for the 2017 fiscal year and higher payroll costs as we hired additional personnel for our expanding operations and higher occupancy costs.
Selling and Marketing Expenses.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018.
Selling and marketing expenses for the sixthree months ended June 30, 2019March 31, 2021 were $102,606,$165,748, representing an increase of $11,111$34,239 or approximately 12.1%26.0% over the same period in 2018. Selling and marketing expenses were $91,495 for the sixthree months ended June 30, 2018.March 31, 2020 of $131,509. The increase is due to an increase in advertising our rentals to Uber and Lyftgig-economy drivers.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2021 were $1,439,101, representing a decrease of $457,105 or 24.1% over the three months ended March 31, 2020 of $1,896,206. The decrease is principally due to lower payroll costs for executive officers and a decrease in stock option expense during the three months ended March 31, 2021.
Total Operating Expenses
Total operating expenses for the three months ended March 31, 2021 were $1,614,349, representing a decrease of $413,366 or 20.4% compared to the three months ended March 31, 2020 of $2,027,715. The decrease is due to the reasons described above.
Interest Expense and Financing Cost
Interest and financing expenses for the three months ended March 31, 2021 were $3,324,943 compared to $79,856 for the three months ended Mach 31, 2020. The increase in interest and financing cost for the three months ended March 31, 2021 was due to the issuance of 825,000 shares of Common Stock to Acuitas Group Holdings, LLC, (“Acuitas”) which is now the Company’s largest shareholder, in connection with a settlement agreement between Acuitas and X, LLC, a company owned by the Company’s former chief executive officer. The board of directors deemed it was in the best interest of the Company to issue the shares to Acuitas. The value of the shares was $3,240,600 which is based on the market price of the 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.
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Gain on Forgiveness of Debt
Gain on forgiveness of debt for the three months March 31, 2021 was $8,000 as compared to $0 for the same period in 2020, as, during the three months ended March 31, 2021, the remaining amount we received under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act was forgiven.
Net Loss
The net loss for the three months ended March 31, 2021 was $4,417,663, representing an increase of $2,656,443 or 150.8% compared to the three months ended March 31, 2020 of $1,761,220. The increase is due to the reasons described above.
Consolidated Results of Operations—Year Endedended December 31, 20182020, Compared to the Year Endedended December 31, 2017.2019
Total Revenues
Revenue for the year ended December 31, 2020 was $7,621,180, an increase of $706,270 or 10.2% compared to revenue for the year ended December 31, 2019 of $6,914,910. The increase is principally due to an increase in the size of our rental fleet offset by a decrease in our average weekly rental income levels throughout the year ended December 31, 2020 due to the COVID-19 outbreak. During the year ended December 31, 2020, the average weekly rental income per vehicle placed in service was $308 compared to $335 for the same period in 2019. Our revenues declined in March and April due to COVID-19 and began to recover in May and June 2020. Our revenue since June is back to pre-COVID-19 levels, but there is no assurance that this trend will continue.
Cost of Revenues
Cost of revenues for the year ended December 31, 2020 were $5,263,474, an increase of $589,604 or 12.6% compared to cost of revenues for the year ended December 31, 2019 of $4,673,870. The increase is due to higher depreciation expense due to an increase in fleet size and higher repairs and maintenance due to the age of the fleet. For the year ended December 31, 2020 and 2019 our cost of revenue was 69.1% and 67.6% of our revenue, respectively. The increase in the cost of revenue as a percentage of revenue is due to the decrease in average weekly rental income due to the COVID – 19 outbreak.
Selling and Marketing Expenses
Selling and marketing expenses for the 2018 fiscal year ended December 31, 2020 were $482,811,$490,403, representing a decrease of $275,038 or 35.9% over the year ended December 31, 2019 of $765,441. The decrease is due to better management of media placements for our advertising and a change in the vendor we used to spearhead our marketing efforts to ridesharing and delivery gig drivers.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2020 were $5,288,316, representing an increase of $396,713$1,264,395 or approximately 460.8%31.4% over the same period in 2017. Sellingyear ended December 31, 2019 of $4,023,921. The increase is principally due to higher payroll costs (including stock option expense of $739,973) as we hired additional personnel for our expanding operations and marketing expenses were $86,098 for the 2017 fiscal year. In 2018 most of the sellinghigher management salaries; and marketing expenses was spent on advertising our rentals to Uber and Lyft drivers.higher occupancy costs.
Impairment of leased assets
Impairment of leased assets for the 2018 fiscal year was $2,388,000 compared to $2,800,000 for the 2017 fiscal year. The value of the leased assets was initially determined as the sum of the lease liability plus the up-front consideration of 298,500 and 350,000 shares of the Company’s common stock (valued at $2,388,000 and $2,800,000) paid to the lessor during 2018 and 2017, respectively. There was no impairment of leased assets in the six months ended June 30, 2019 and 2018.
Loss on the settlementSettlement of debtDebt
Loss on the settlement of debt for the six monthsyear ended June 30, 2019December 31, 2020 was $252,900$0 as compared to $0$252,900 for the same period in 2018.2019. During the monthsyear ended June 30,December 31, 2019, we settled outstanding debt of $421,500 with 84,300 shares of common stock valued at $674,000. There was no loss on the settlement of debt$674,400.
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Total Operating Expenses
Total operating expenses for the yearsyear ended December 31, 2018 and 2017.
Interest expense, net
Six Months Ended June 30,2020 were $5,778,719, representing an increase of $722,957 or 14.3% compared to the year ended December 31, 2019 Comparedof $5,055,762. The increase is due to Six Months Ended June 30, 2018.the reasons described above.
Interest and financing expenses for the six months ended June 30, 2019 were $611,875 compared to $380,872 for the same period in 2018. The increase in interest expense and financing costs is due to more interest bearing obligations outstanding during the six months ended June 30, 2019 period as compared to the same period in 2018.
Expense, Net
Year ended December 31, 2018 Compared to the Year ended December 31, 2017.
Interest and financing expenses for the year ended December 31, 20182020 were $4,639,442$265,839 compared to $192,395$1,115,499 for the year ended December 31, 2019. The decrease in interest and financing cost for the year ended December 31, 2020 was due to a decrease in outstanding debt.
Gain on Forgiveness of Debt
Gain on forgiveness of debt for the year ended December 31, 2020 was $184,775 as compared to $0 for the same period in 2017. The significant increase in interest expense and financing costs is a result2019, as, during the year ended December 31, 2020, the entire loan of amortization of debt discount. In September 2018,that amount that we received under the Company repaid and exchanged a senior secured promissory note in the principal face amount of $6,000,000. On September 12, 2018, the Company entered into a new note payable agreement, as amended on November 1, 2019, whereby the Company repaid $4,821,810Paycheck Protection Program of the original $6,000,000 note payableCoronavirus Aid, Relief and the balance of $1,178,190 plus an original issue discount of $117,828Economic Security Act was rolled into a note payable for $1,296,018. This note payable is due the earlier of November 30, 2019 or the closing of an offering of at least $3,000,000. As a result of this transaction, the Company recognized interest expenseforgiven.
Net Loss
The net loss for the remaining unamortized debt discount associated of $4,018,560.
Total Operating Expenses
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018.
Total operating expenses for the six monthsyear ended June 30, 2019 were $1,816,317,December 31, 2020 was $3,502,077, representing a decrease of $2,257,792$428,144 or approximately 55.4% over10.9% compared to the same period in 2018. For the six monthsyear ended June 30, 2018, total operating expenses were $4,074,109.December 31, 2019 of $3,930,221. The decrease is due to the reasons described above.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017.
Total operating expenses for the 2018 fiscal year were $9,464,761, representing an increase of $3,025,449 or approximately 47.0% over the same period in 2017. For the 2017 fiscal year, total operating expenses were $6,439,312. The increase is due to the reasons described above.
Net Loss.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018.
The net loss for the six months ended June 30, 2019 was $996,915, representing a decrease of $3,148,275 or approximately 76.0% over the same period in 2018. For the six months ended June 30, 2018, the net loss was $4,145,190.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017.
The net loss for the 2018 fiscal year was $13,189,122, representing an increase of $6,620,259 or approximately 100.8% over the same period in 2017. For the 2017 fiscal year, the net loss was $6,568,863.
Liquidity, Capital Resources and Plan of Operations
On November 15, 2019, we completed our initial public offering of Common Stock, after our registration statement on Form S-1 under the Securities Act was declared effective by the SEC on November 13, 2019. We sold a total of 2,625,000 common shares at a price of $4.00 per share. Total gross proceeds from the offering were $10,500,000, before deducting underwriting discounts and commissions and other offering expenses.
During the year ended December 31, 2020, we sold an aggregate of 2,553,571 shares of Common Stock to three investors for cash proceeds of $275,000, of which 125,000 shares was sold to a member of our Board of Directors for cash consideration of $25,000.
On January 8, 2021, we received $500,000 from a convertible note issued to one of our stockholders. The note is convertible into shares of Common Stock at $0.50 per share. The note was converted into 1,000,000 shares of Common Stock in February 2021; these shares have demand registration rights for a period of twelve months after conversion of the note as well as piggyback registration rights, subject to certain exceptions.
During the three months ended March 31, 2021, we sold 100,000 shares of Common Stock to a member of our Board of Directors for cash consideration of
$50,000.
Current Assets, Liabilities and Working Capital
At June 30, 2019,March 31, 2021, the Company’s current assets totaled $245,093,$252,787, current liabilities totaled $5,886,359,$5,108,475, and working capital was a deficit of $5,641,266.$4,855,688. At December 31, 2018,2020, the Company’s current assets totaled $386,344,$215,990, current liabilities totaled $5,394,073,$4,461,560, and working capital was a deficit of $5,007,729. As of
$4,245,570. At December 31, 2017,2019, the Company’s current assets totaled $322,144,$2,098,660, current liabilities totaled $941,054,$2,655,055, and working capital was a deficit of $618,910.$556,395.
Regarding current liabilities, the amounts categorized as accounts payable and accrued expenses totaled $1,043,210$1,404,618 and $1,213,452$2,119,003 as of June 30, 2019March 31, 2021 and December 31, 2018,2020, respectively, a decrease of $170,242$714,385 or approximately 14%.33.7%, due to Common Stock issued for legal settlements that were previously included in accrued expenses. Regarding current liabilities, the amounts categorized as accounts payable and accrued expenses totaled $1,213,452$2,119,003 and $131,453$951,231 as of December 31, 20182020 and December 31, 2017,2019, respectively, an increase of $1,081,999$1,167,772 or approximately 823%123%.
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Since inception, our principal sources of operating funds have been proceeds from equity and debt financing including the sale of our Common Stock to initial investors known to management and principal shareholders of the Company. We do not expect that our current cash on hand will fund our existing operations and future business growth. We will need to raise additional capital in order execute our business plan and growth goals for at least the next twelve-month period thereafter. If the Company is unable to raise sufficient additional funds, it will have to execute a slower than planned growth path, reduce overhead and scale back its business plan until sufficient additional capital is raised to support further operational expansion and growth. As of December 31, 2020, the Company had $72,890 in cash. The Company generated $536,723 of cash for operating activities for the year ended December 31, 2020. The Company is seeking to raise additional capital. If the Company is not successful in raising additional capital it will be forced to significantly scale back its business operations and it growth plans. In addition, the COVID-19 virus and the related impact it is having on the U.S. economy is currently having a negative impact on the cash flows of our business. However, we were able to obtain two loans totaling $342,675 related to new legislation passed as a result of COVID-19, of which $184,775 was forgiven in 2020.
Capital Expenditures
Capital Expenditures
During the sixthree months ended June 30, 2019,March 31, 2021, the Company had capital expenditures of $510,136$3,049,261 in leased vehicles. At June 30, 2019, allMarch 31, 2021, most of the Company’s leased assetsvehicles were finance leased right-of-use assets and,with leases. At March 31, 2021 the Company had $12,117,146 of rental vehicles, net of accumulated depreciation in the amount of $1,067,878 for the six months ended June 30, 2019, totaled $4,758,110$3,333,877, totaling $8,783,269 in net rental vehicles. During the year ended December 31, 2020, the Company had capital expenditures of $3,705,417 in leased assets.vehicles. At December 31, 2020, most of the Company’s vehicles were financed with leases. At December 31, 2020 the Company had $9,067,885 of rental vehicles, net of accumulated depreciation in the amount of $2,871,452, totaling $6,196,433 in net rental vehicles. At December 31, 2019 the Company had $6,284,211 of rental vehicles, net of accumulated depreciation in the amount of $1,547,164, totaling $4,737,047 in net rental vehicles. The Company’s leased assets, consisting ofrental vehicles 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 assets for $1 eachvehicle at the end of the lease terms.
During the year ended December 31, 2018, the Company had capital expenditures in the amount of $3,703,514. $2,840 in computer equipment and $3,700,674 in leased vehicles. At December 31, 2018, all of the Company’s leased assets were finance leased right-of-use assets and, net of accumulated depreciation in the amount of $546,632 for fiscal year 2018, totaled $5,115,117 in net leased assets.
During the year ended of December 31, 2017, the Company had capital expenditures in the amount of $2,119,246. $3,178 in computer equipment and $2,116,068 in leased vehicles, subject to adjustment. At December 31, 2017, all of the Company’s leased assets were finance leased right-of-use assets and, net of accumulated depreciation in the amount of $82,586 for fiscal year 2017, totaled $2,033,482 in net leased assets.
Statement of Cash Flows
Cash Flows from Operating Activities – Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018.
Net cash used inprovided by operating activities for the sixthree months ended June 30, 2019March 31, 2021 totaled $60,370,$77,212, which was a decreasean increase of $427,246$638,742 or approximately 88%114% from the net cash used in operating activities of $487,616$561,530 for the same period in 2018.2020. The increase is principally due to the change in accounts payable, accrued expenses customer deposits, and non-cash expense items.
Net cash generated by operating activities for the year ended December 31, 2020 totaled $536,723, which was an increase of $3,952,946 from the net cash expended in operating activities of $3,416,223 for the same period in 2019. The increase is principally due to the change in prepaid expenses, other assets, accounts payable and accrued expenses, and non-cash expense items.
Cash Flows from OperatingInvesting Activities - Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017.
Net cash used in operating activities for the fiscal year ended December 31, 2018 totaled $424,156, which was a decrease of $1,427,967 or approximately 77% from the net cash used in operating activities of $1,852,123 for the same period in 2017.
Cash Flows from Investing Activities - Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018.
Net cash used in investing activities for the sixthree months ended June 30, 2019March 31, 2021 totaled $0,$47,051, which was a decreasean increase of $2,840 or 100%$11,514 from the net cash used in investing activities of $2,840$35,537 for the same period in 2018.
Cash Flows from Investing Activities -Year Ended December 31, 2018 Compared2020. The change is principally due to the Year Ended December 31, 2017.
Net cash used in investing activities for the fiscal year ended December 31, 2017 totaled $2,840, which was a decreasepurchase of $338 or approximately 11% from the net cash used in investing activities of $3,178 for the same period in 2017.property and equipment.
Cash Flows from Financing Activities - Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018.
Net cash usedexpended in financing activities for the six monthsyear ended June 30, 2019December 31, 2020 totaled $182,693,$1,720,262, which was a decreasechange of $6,550,915$6,504,550 from the net cash providedgenerated by financing activities of $6,318,222$4,784,288 for the same period in 2018.
Cash Flows from Financing Activities -Year Ended December 31, 2018 Compared2019. The change is principally due to the Year Ended December 31, 2017.IPO proceeds received in 2019, increase in payments on financing lease obligations in 2020 and repayments of notes payable in 2019 offset by proceeds received from notes payable.
Net cash provided by financing activities for the fiscal yearthree months ended DecemberMarch 31, 20182021 totaled $395,702,$52,425, which was a decreasechange of $1,749,694 or approximately 82%$674,208 from the net cash provided byused in financing activities of $2,145,396$621,783 for the same period in 2017.2020. The change is principally due to cash received from the sale of Common Stock, exercise was stock options, convertible note and advances from related parties in 2021 offset by an increase in payments on financing lease obligations.
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Current Plan of Operations
Our plan of operations is currently focused on the growth and ongoing development of our operating business segments:businesses: (i) ourthe Rideshare Platform, offered through the Company’s wholly-owned subsidiary Rideshare, and (ii) our Fleet Management business, made commercially available through the Company’s wholly-owned subsidiary Distinct Cars. We expect to incur substantial expenditures in the foreseeable future for the potentialenhanced operations of our business segmentsbusinesses and related, ongoing, internal research and development. Moreover, we have embarked on “EV strategy” in which we intend to replace our entire fleet of vehicles with all electric vehicles by 2024. At this time, we cannot reliably estimate the nature, timing or aggregate amount of such costs. Our Rideshare Platform will require extensive technical evaluation, potential regulatory review and approval, significant marketing efforts and substantial investment before it or any successors could provide usall of the costs associated with any revenue. Further, we intend to continue to build our corporate and operational infrastructure and to build interest in our product and service offerings.these.
As noted above, theThe continuation of our current plan of operations requiresmay require us to raise significant additional capital immediately.within a short period of time. If we are successful in raising capital, we believe that the Company will have sufficient cash resources to fund its plan of operations. The cash flow from our current vehicle leasing businessRideshare Platform and, especially, Distinct Cars businesses and our existing capital resources are sufficient for us to continue our current operations, but for us to fully execute our business plan we will likely require significant additional capital.
We continually evaluate our plan of operations discussed above to determine the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations. The inability to secure additional capital would 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 will not have sufficient funds to pay any amounts to our stockholders.
Even if we raise additional capital in the near future, if our operating business segmentsbusinesses fail to achieve anticipated financial results, our ability to raise additional capital in the future to fund our operating business segmentsoperations would likely be seriously impaired. If in the future we are not able to demonstrate favorable financial results or projections from our operating business segments,businesses, we will not be able to raise the capital we need to continue our then current business operations and business activities, and we will likely not have sufficient liquidity or cash resources to continue operating.
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.
Credit Facilities
As of December 31, 2018, the Company had notes payable consisting of the following: (i) $790,000 in unsecured notes payable to an investor, accruing interest at 5% per annum, to be made dueContractual Obligations, Commitments and payable as of August 31, 2019; (ii) $319,667 in unsecured notes payable to an investor, accruing interest at 8% per annum, with principal payments equal to 1/12 of the original balance plus interest due quarterly- due and payable from dates ranging from August 9, 2020 to May 23, 2021; (iii) $222,222 in unsecured notes payable to an investor, accruing interest at 6% per annum, to be made due and payable as of August 31, 2019, as subsequently amended to November 30, 2019; (iv) $1,296,018 in a secured note payable due the earlier of August 31, 2019, as subsequently amended to November 30, 2019, or the closing of an offering of at least $3,000,000 and (v) $62,274 in unsecured notes payable/line of credit to a merchant banks, accruing interest at 15%. Other than the foregoing, and to vendors and service providers in the ordinary course of our business, we do not have any other credit facilities or other access to bank credit.
As of December 31, 2017, the Company had notes payable consisting of the following: (i) $445,000 in unsecured notes payable to an investor, accruing interest at 5% per annum, to be made due and payable as of March 31, 2019; (ii) $242,667 in unsecured notes payable to an investor, accruing interest at 8% per annum, with principal payments equal to 1/12 of the original balance plus interest due quarterly- due and payable from dates ranging from August 9, 2020 to December 11, 2020; (iii) $222,222 in unsecured notes payable to an investor, accruing interest at 6% per annum, to be made due and payable as of August 31, 2019, as subsequently amended to November 30, 2019. Other than the foregoing, and to vendors and service providers in the ordinary course of our business, we do not have any other credit facilities or other access to bank credit.
Bellridge Second Note Offering
On March 8, 2018, YayYo, Inc., entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Bellridge Capital, L.P.(the “Selling Securityholder”), an “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended) (the “Lender”), pursuant to which the Lender purchased:
In consideration for the Second Note, Warrant Shares and Commitment Shares, the Lender paid an aggregate purchase price of $6,000,000 (the “Second Note Offering”) to be directed and deposited by the Lender in the Company’s Master Restricted Account (defined below).
The principal balance of $6,000,000 on the Second Note bears interest at a rate per annum equal to LIBOR plus 100 basis points, subject to adjustment in accordance with the terms of the Second Note. Further, the Company paid $178,228 of issuance costs associated with the Second Note. The relative fair value of the 150,000 Commitment Shares of common stock was $378,916 and the relative fair value of the 1,500,000 Warrant Shares was $3,726,506 and both were recorded as a discount on the Second Note and as additional paid in capital. In addition, the issuance costs of $178,228 have also been recorded as a debt discount. The debt discount of $4,283,650 is being amortized over the term of the Second Note. The Second Note was repaid/rolled into a secured note payable in September 2018.Contingencies
The Company believes that as of the date of this prospectus, the Company is in compliance with all of the foregoing restricted covenants, including such additional covenants set forth under Second Note. Further, the Company believes that as of the date of this prospectus, the Company is in compliance with all affirmative covenants set forth below.
Under the terms and conditions of the Second Note, the Company is required to adhere to certain obligations and restrictive financial covenants, including, but not limited to, the following restrictive covenants:
For more information on the terms and conditions of the Bellridge Second Note Offering please see “Description of Securities.”
Contractual Obligations, Commitments and Contingencies
During fiscal year 2017 and 2018 and the six months ended June 30, 2019, the Companyhas entered into a series of monthly vehicle leasing agreements with AcmeACME Auto Leasing.Leasing and LMP Financial Services, each with an approximate lease term of 12 to 36 months. As of June 30, 2019, December 31, 20182020 and December 31, 2017,2019, the Company hashad total lease obligations in the amount of $3,221,785, $3,790,147$2,352,878 and $1,593,291, respectively, (collectively, the “Finance Lease Obligations”).$2,400,565, respectively. The Company owes monthly payments under each Lease Agreement ranging from approximately $342$285 per month to $621 per month. At the end of the term of the Lease Agreement, lessee has 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.
During fiscal year 2018We lease and 2017, we leased and maintained primarymaintain our principal offices at 433 North Camden Drive, Suite 600, Beverly Hills, California 9021090210. We also lease and 6600 Sunset Blvd., Los Angeles,maintain other offices at 195 South Robertson Drive, Beverly Hills, CA 90028, the latter being the location90210, where the majority of our operations andoperational staff conductconducts its activities on a dailyday-to-day basis. We do not currently own any real property.estate.
Financings and Securities Offerings
YayYo, Inc., Equity Offerings
In December 2016, we filed an offering statement pursuant to Regulation A of the Securities Act, which was qualified by the SEC on March 17, 2017. We offered up to a maximum of 6,250,000 shares of common stock on a “best efforts” basis, at a price of $8.00 per share. On March 16, 2018, we closed the Regulation A offering, after issuing 365,306 shares of common stock for proceeds of approximately $1.8 million net of offering expenses (the “Regulation A+ Offering”).
During the year ended December 31, 2018, the Company sold 46,330 shares of common stock to two investors for cash proceeds of $307,924.
During the year ended from December 31, 2017, the Company sold 371,351 shares of common stock to investors for gross cash proceeds of $2,484,199 of which 326,126 shares and $2,303,299 of cash proceeds were related to the Company’s Regulation A offering. The Company incurred $814,442 of offering cost related to the sale of common stock which consisted principally of legal fees and costs associated with soliciting the sale of common stock directly to the Regulation A+ Offering investors.
During fiscal year 2017 and 2018 and the six months ended June 30, 2019, the Company entered into a series of monthly vehicle leasing agreements with Acme Auto Leasing LLC (the “Lessor”). As of June 30, 2019, December 31, 2018 and December 31, 2017, the Company has total lease obligations in the amount of $3,221,785, $3,790,147 and $1,593,291, respectively (collectively, the “Finance Lease Obligations”).
On July 15, 2017, the Company and the Lessor entered into an agreement pursuant to which the Company agreed to issue additional consideration to the Lessor in the form of a restricted stock grant in the amount of 100,000 shares of common stock, in exchange for certain terms to be provided by the Lessor under all lease agreements entered into between the Lessor and the Company (the “Lease Side Agreement”).
From June 21, 2016 (inception) to December 31, 2016, the Company raised an additional $175,400 from the funds subscribed to under SAFE agreements with 28 unaffiliated investors. In addition, between December 2016 and January 17, 2016, we received subscriptions for $175,400 of our SAFE Shares from 28 investors in our Rule 506(b) private placement under Regulation D of the Securities Act, that, by their terms, automatically convert into 43,850 shares of our common stock as of the filing of this Prospectus (at a conversion price of $4.00 per share). We terminated such private placement on January 17, 2017. On March 17, 2017 our SAFE Shares were automatically converted into 43,850 shares of our common stock.
Selling Securityholder Transactions
In December 2017, YayYo, Inc., issued a senior secured promissory note to the Selling Securityholder, in the original principal amount of $222,222 (the “First Note”). As an inducement for the secured parties to extend the loan as evidenced by the First Note and to secure complete and timely payment of the First Note, YayYo, Inc., as borrower, issued and granted a security interest in all the assets of YayYo, Inc., (including a pledge of securities, owned as of record and beneficially by YayYo, Inc., in the wholly-owned subsidiaries of the Company) and its subsidiaries, existing as of the date of issuance of thereafter acquired.
On March 8, 2018, YayYo, Inc., entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended) (the “Lender”), pursuant to which the Lender purchased (i) a senior secured promissory note in the principal face amount of $6,000,000 due March 8, 2023, subject to extension (the “Second Note”) and (ii) warrants to acquire up to an aggregate of 1,500,000 shares of common stock, with an exercise price of $4.00 per share and 150,000 commitment shares of common stock, of the Company (the “Commitment Shares”) for an aggregate purchase price of $6,000,000 (the “Second Note Offering”) to be directed and deposited by the Lender in the Company’s Master Restricted Account (defined below). The principal balance of $6,000,000 on the Second Note bears interest at a rate per annum equal to LIBOR plus 100 basis points, subject to adjustment in accordance with the terms of the Second Note. The Warrants expire five years from the date of issuance. Further, the Company paid $178,228 of issuance costs associated with the Second Note. The Company also paid $178,228 of issuance costs associated with this Second Note. The relative fair value of the 150,000 Commitment Shares of common stock was $378,916 and the relative fair value of the 1,500,000 Warrant Shares was $3,726,506 and both were recorded as a discount on the Second Note and as additional paid in capital. In addition, the issuance costs of $178,228 have also been recorded as a debt discount. The debt discount of $4,283,650 is being amortized over the term of the Second Note.
YayYo, Inc., obligations to repay and otherwise perform its obligations under the Second Note are secured by a continuing first priority lien and perfected security interest in the $6,000,000 held in the Master Restricted Account (the “Collateral”), to be held and maintained at Umpqua Bank (the “Master Restricted Account”), subject to a deposit account control agreement, dated as of March 7, 2018, by and between YayYo, Inc., the Lender and Umpqua Bank (the “Controlled Account Agreement”). Subject to the terms of the Second Note and Controlled Account Agreement, upon the exercise of the Warrant and following YayYo, Inc.’s receipt of a notice by the holder of the Second Note electing to effect a release of cash with respect to the Collateral or at any such time that the outstanding amount of the Collateral is greater than or exceeds the principal face amount under the Second Note, the Lender will release a certain percentage of cash held as Collateral in the Master Restricted Account to YayYo, Inc. Under the terms of the Purchase Agreement, YayYo, Inc., will use any proceeds received and distributed from the Master Restricted Account, if at all, for general corporate purposes.Off-Balance Sheet Arrangements
The Company repaid and exchanged a senior secured promissory note in the principal face amount of $6,000,000. On September 12, 2018, the Company entered into a new note payable agreement, as amended on November 1, 2019, whereby the Company repaid $4,821,810 of the original $6,000,000 note payable and the balance of $1,178,190 plus an original issue discount of $117,828 was rolled into a note payable for $1,296,018. This note payable is due the earlier of November 30, 2019 or the closing of an offering of at least $3,000,000. As a result of this transaction, the Company recognized interest expense for the remaining unamortized debt discount associated of $4,018,560.
Distinct Cars, LLC
As of the date of this Prospectus, Distinct Cars, LLC, as lessee, entered into a series of open-ended lease agreements and disclosure statements with Acme Auto Leasing, Inc., (“Lessor”) to lease standard passenger vehicles, each with an approximate lease term of 30 to 36 months (each a “Lease Agreement” and collectively, the “Lease Agreements”). Monthly payments under each Lease Agreement range from approximately $342 per month to $621 per month. At the end of the term of the Lease Agreement, lessee has the right to purchase ownership and title of the subject vehicle for a nominal payment. In addition, the Lease Agreements are subject to the grant of a purchase money security interest on each leased vehicle.
Distinct Cars, LLC has completed a debt round of financing pursuant to which Distinct Cars raised aggregate gross proceeds in the amount of $319,667 from 38 accredited investors in exchange for senior secured promissory notes issued by Distinct Cars (each a “Distinct Cars Note” and collectively, the “Distinct Cars Notes”). The maturity date under the Distinct Cars Notes is 36 months from the date of issuance (the “DCN Maturity Date”) ranging from August 9, 2020 to May 23, 2021. The principal amount under the Distinct Cars Notes ranges from a minimum amount of $5,000 per Distinct Cars Note up to $20,000 per Distinct Cars Note. The Distinct Cars Notes accrue interest at a rate of 8% per annum with interest due and payable upon the DCN Maturity Date. The principal amount and any unpaid and accrued interest thereunder is due and payable in twelve quarterly installments commencing upon January 1, 2018. The Distinct Cars Notes are secured by a senior secured priority lien in the equity of the fleet of leased automobiles acquired under the Lease Agreements described above subject to subordination in priority lien status to the purchase money security interest held by the lessor under the Lease Agreements. In addition to the total amount of principal and interest owing under the Distinct Cars Note, upon execution of the Distinct Cars Note and placement of funds the holder received a stock grant (the “Stock Grant”) of YayYo Inc., common stock (the “Parent Shares”) in an amount equal to 100% of the principal sum as calculated by a price of $4.00 per share with 30% coverage. The Stock Grant is offered pursuant to Rule 506(b) of Regulation D and Section 4(a)(2) of the Securities Act of 1933.
X, LLC
During the fiscal year ended December 31, 2017 and the periods from June 21, 2016 (inception) to December 31, 2016, X, LLC, a limited liability company owned and controlled by Ramy El-Batrawi, our founder and former Chief Executive Officer and former director, issued to the Company advances of a total of $50,000 and $75,000. As of December 31, 2017, $125,000 of these loan advances were repaid in full. The loan advances were non-interest bearing and due upon demand. At December 31, 2017 and December 31, 2016, the amount due to X, LLC, as holder of the note was $0 and $75,000, respectively.
Chase Financing, Inc.
On January 6, 2017, the Company received $50,000 from Chase Financing, Inc., (“CFI”) and issued its 10% original issue discount senior secured convertible note in the amount of $55,555, with a maturity date of April 6, 2017 (the “First CFI Note”). Subsequent to the First CFI Note, on January 23, 2017, the Company received an additional $25,000 from CFI, and issued a second 10% original issue discount senior secured convertible note in the principal amount of $30,555, with a maturity date of April 6, 2017 (the “Second CFI Note”). Subsequent to the Second CFI note, the Company received an additional $25,000 from CFI, and issued a third 10% original issue discount senior secured convertible note in the amount of $27,778 (the “Third CFI Note” and together with the First CFI Note and the Second CFI Note, collectively, the “CFI Notes”). As a result, the Company is obligated to repay CFI a total of $113,888 in principal plus all accrued interest thereon to CFI under the CFI Notes on or before the stated maturity dates, subject to extension per the terms.
Pursuant to the terms, the CFI Notes were secured by a first priority lien and security interest on all of the assets of the Company, now owned or hereafter acquired, and were convertible at the option of the holder into shares of our common stock at a conversion price equal to the lower of $7.00 per share or the average of the five lowest volume weighted average trading prices (“VWAP”) of our common stock during the 20 trading days immediately prior to the date of conversion. In an event of default occurs under the terms of the CFI Notes, the conversion price will be reduced to $1.00 per share.
Concurrently with the execution of the CFI Letter Agreement and the First CFI Note, as additional collateral to secure the repayment of the CFI notes by the Company, Ramy El-Batrawi, our founder and former Chief Executive Officer and former director, and X, LLC (an entity wholly owned by Mr. El-Batrawi), entered into a Limited Recourse Guaranty and Pledge Agreement with CFI (the “Guaranty and Pledge Agreement”), pursuant to which X, LLC agreed to unconditionally and irrevocably guarantee the Company’s repayment of the CFI Notes, and pursuant to which X, LLC pledged up to 300,000 shares of our common stock held of record and beneficially owned by X, LLC.
In addition to the Guaranty and Pledge, on January 6, 2017, X, LLC (an entity wholly owned by Mr. El-Batrawi) entered into a common stock purchase agreement (“Stock Purchase Agreement”), pursuant to which X, LLC agreed to sell and transfer to CFI 200,000 shares of our common stock, held of record and beneficially owned by X, LLC, in exchange for the aggregate nominal consideration of $1.00. Under the Stock Purchase Agreement, and in addition to the 200,000 shares of common stock to be issued upon the effective date of the Stock Purchase Agreement, X, LLC has agreed to provide CFI with certain anti-dilution protection provisions, whereby X, LLC will issue a number of shares of our common stock, held as of record and beneficially by X, LLC, equal to 2% of the number of shares of common stock issued or underlying common stock Equivalents (as defined under the Stock Purchase Agreement) issued, as the case may be, in the event of a Dilutive Share Issuance (as defined under the Stock Purchase Agreement). X, LLC has the right to repurchase 100,000 of such shares at an aggregate purchase price of $208,500 if exercises within the initial three months after the date of the Stock Purchase Agreement, or $258,500 if exercised within the second three months. As of December 31, 2017, the CFI Notes have been repaid in full by the Company.
Since inception, our principal sources of operating funds have been proceeds from equity financing including the sale of our common stock to initial investors known to management and principal shareholders of the Company. We do not expect that our current cash on hand will fund our existing operations and future business growth. We will need to raise additional capital in order execute our business plan and growth goals for at least the next twelve-month period thereafter. If the Company is unable to raise sufficient additional funds, it will have to execute a slower than planned growth path, reduce overhead and scale back its business plan until sufficient additional capital is raised to support further operational expansion and growth. As of December 31, 2018, the Company has $277,444 in cash. The Company used $424,156 of cash for operating activities for the year ended December 31, 2018. With the addition of approximately 50 new vehicles during the last half of 2018, the Company believes that based on its current operations, it will have sufficient cash available for current operations through at least December 2019.
no off-balance sheet arrangements.
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Off-Balance Sheet Arrangements
The Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion. As of December 31, 2017, the convertible note has been repaid and there is no derivative financial instrument.
Segment Information
Quantitative and Qualitative Disclosures about Market Risk
In the ordinary course of our business, we are not exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. In many instances, we could have reasonably used different accounting estimates and in other instances changes in the accounting estimates are reasonably likely to occur from period to period. This applies in particular to useful lives of non-current assets and valuation allowance for deferred tax assets. Actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving our judgments and estimates.
Property and Equipment and Rental Vehicles
Revenue Recognition
Property and Equipment and Rental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment and rental vehicles is provided using the straight- line method for substantially all assets with estimated lives as follows:
| Computer equipment | 5 years |
| Officer furniture | 7 years |
| Leasehold improvements | 15 years or term of lease whichever is less |
| Vehicles | 5 years |
The Company has not changed its estimate for the useful lives of its equipment and rental vehicles, but would expect that a decrease in the estimated useful lives of equipment and rental vehicles of one year would result in an annual increase to depreciation expense of approximately $600,000, and an increase in the estimated useful lives of equipment and rental vehicles of one year would result in an annual decrease to depreciation expense of approximately
$400,000.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has not changed it methodology for estimating the valuation allowance. A change in valuation allowance affect earnings in the period the adjustments are made and could be significant due to the large valuation allowance currently established.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.
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Revenue Recognition
The Company recognizes revenue from renting its fleet of cars to Uberridesharing and Lyftdelivery gig drivers. Revenue is recognized based on the rental agreements which are generally on a weekly basis. The Company recognizes revenue in accordance with FASB ASC 606,Revenue From Contracts with Customers.
Weconsider 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
Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718,Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-basedequity- based compensation issued to employees and non-employees.
We account for stock-based compensation in accordance with the authoritative guidance on stock compensation. Under the fair value recognition provisions of this guidance, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. As a result, we are required to estimate the amount of stock-based compensation we expect to be forfeited based on our historical experience. If actual forfeitures differ significantly from our estimates, stock-based compensation expense and our results of operations could be materially impacted.
For options granted during fiscal year 2016 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $0.85 and the weighted-average exercise price of such options was $1.00. No options were granted during fiscal 2016 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.
For options granted during fiscal year 2017 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $7.54 and the weighted-average exercise price of such options was $8.00. No options were granted during fiscal 2017 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.
The fair value of the stock options is being amortized to stock option expense over the vesting period. The Company recorded stock option expense of $904,468 and $1,676,476, respectively, during the year ended December 31, 2018 and the year ended December 31, 2017. As of December 31, 2018, the unamortized stock option expense was $0.
The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted are as follows:
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
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Corporate History
The Company was formed on June 21, 2016 under the name “YayYo, LLC,” which was converted into a Delaware corporation pursuant to the unanimous written consent of our former manager and members in a transaction intended to be tax-free under the Internal Revenue Code (the “Conversion”). Pursuant to the Conversion, the members of YayYo, LLC have assigned, transferred, exchanged and converted their respective limited liability company membership interests of YayYo, LLC, to the Company in exchange for common stock, par value $0.000001 per share, of the Company. All of YayYo, LLC’s liabilities and assets, including its intellectual property, were automatically transferred to the Company and the Company has assumed ownership of such assets and liabilities upon the filing of the “Certificate of Conversion from a Delaware Limited Liability Company to a Delaware Corporation” with the State of Delaware pursuant to Section 265 of the Delaware General Corporation Law. The Company now operates as a “C” corporation formed under the laws of the State of Delaware.
Our mailing address is YayYo, Inc., 433 North Camden Drive, Suite 600, Beverly Hills, California 90210 and our telephone number is (310) 926-2643. Our website address is www.yayyo.com. The information contained therein or accessible thereby shall not be deemed to be incorporated into this Prospectus.
Business Overview
The CompanyEVmo is a holding company operating principally through itstwo wholly-owned subsidiaries, includingsubsidiaries: Rideshare and Distinct Cars, LLC, a Delaware limited liability company (“Distinct Cars”), Savy LLC, a Delaware limited liability company (“Savy”), Rideyayyo LLC, a Delaware limited liability company (“Rideyayyo”) andCars. Rideshare Car Rentals LLC, a Delaware limited liability company (“Rideshare”). Until June 30, 2017, we were focused on the development and commercialization of a single sign-on metasearch “ridesharing” application for smartphone users that seeks to provide price comparison and bookings of available ridesharing and taxi services along with select limousine and other public and/or private transportation services (“Metasearch App”).
As of the date of this Prospectus, the Company had completed the development ofoffers the Rideshare marketplace Metasearch App. Due to partner limitations and other rationale, the Company has no further intention to continue the development or marketing of the Metasearch App.
On August 12, 2017, we announced that we were shifting our corporate focus in the transportation/ridesharing industry from being an exclusive provider of transportation networks systems towards a more diversified operating company with a direct focus on the vehicle rental business and a related transportation network. As of the date of this Prospectus, the Company’s operating business segments include (i) an online rideshare vehicle booking platformPlatform to service the ridesharing economy through the Company’s wholly-owned subsidiary Rideshare (the “Rideshare Platform”), and (ii) the maintenance ofdelivery gig industries while Distinct Cars maintains a fleet of standard passenger vehicles to be made commercially availableand transit vans for the last-mile logistical space for rent through the Company’s wholly-owned subsidiary Distinct Cars (“Fleet Management”).to our customers, who are drivers for TNC companies such as Uber, Lyft, DoorDash and Grubhub, among others. Through the Company’s wholly-owned subsidiaries Rideshare and Distinct Cars, the Company seeks to become thea leading provider of a standard rental vehiclevehicles to drivers in the ridesharing economy.and delivery gig spaces, and an industry leader in supplying transit vans for last-mile logistics. In March 2021, we formed another wholly-owned subsidiary, EV Vehicles LLC, a Delaware limited liability company, which we intend to utilize as the corporate platform to execute our electric vehicles strategy.
We generate the vast majority of our revenues through the rental of our fleet vehicles. We also receive an immaterial amount of revenue in the form of fees assessed through the Rideshare Rental E-Commerce Platform, such as late fees in the event that a vehicle rental expires without being extended by the driver and the vehicle has not yet been returned, or when the Rideshare Platform is used in a vehicle not owned by us.
OnOur Business Model and Our Future Opportunities
We have developed what we believe is an innovative and effective business model in which we not only provide ridesharing and delivery gig drivers with the necessary technology to operate, through the Rideshare Platform, but also the vehicles themselves, via Distinct Cars, should the driver either not have a qualified vehicle to use or prefers to not use a personal vehicle for this type of work. Our two principal operating subsidiaries have a rare corporate synergy that enables us to both diversify and create complementary revenue streams. Further, as we continue our transition to electric vehicles, we believe we are in the vanguard of a new era in commercial transportation and that our early presence in this industry will further distinguish us from a competitive standpoint.
Prior to 2020, we only supplied vehicles to drivers in the ridesharing space but we expanded our service last year to the delivery gig space, which has provided us with another form of service diversity, one with fewer barriers to entry. The requirements for vehicles operated by delivery gig drivers are significantly less onerous than those operated by rideshare drivers, as delivery gig drivers are not transporting people.
The demand for ridesharing in particular plummeted during the early months of the COVID-19 pandemic, and some drivers opted not to work in ridesharing during the worst months of the pandemic, leading to a sharp decrease in the number of TNC drivers. Uber, for example, recently reported that it has 3.5 million drivers using its platform, which is twenty-two percent (22%) less than one year ago, although four percent (4%) higher than in the first quarter of 2021. Both Uber and Lyft have stated that driver growth is not keeping pace with demand and that, as restrictions related to COVID-19 are increasingly being lifted, driver growth is lagging behind rider growth. We believe this increased demand for ridesharing and delivery gig services is producing a commensurate need for qualified vehicles on the road at any given time, which need we are well-positioned to meet.
We currently have four priorities: diversifying our revenues by expanding into different markets in North America and continuing our transition to electric vehicles; improving our operating efficiencies, particularly through training our sales force; meeting our customers’ expectations by continuing to provide TNC drivers with quality vehicles and reliable service via the Rideshare Platform; and disciplined capital management, in which our management team allocates our resources effectively.
Rideshare Car Rentals, LLC
In October 31, 2017, the Company created the wholly-owned subsidiary, Rideshare in order to incubatelaunch the concept of Rideshare Platform, a proprietary, rideshare vehicle booking platform developed, coded and wholly-owned by us, and used primarily to rent standard passengerour Distinct Car vehicles to self-employedTNC ridesharing and delivery gig drivers. The Company has now deployed and launched the Rideshare Platform on the Company’s e-commerce website. Further, the Rideshare Platform also commercially markets the Company’s ownDistinct Cars fleet (and to a lesser extent the vehicles of cars as well as other fleet owners and selected individual car owners. The Rideshare Platform bookings service provides all standard passenger car owners with a financial opportunity to monetize personally owned vehicles by renting them outowners) to ridesharing economy drivers. Our business strategy with our operating Rideshare Platform is to continue developing our brand around becoming the TNC vehicle rental network for the ridesharing economy that matches the owners and/or operators of passenger vehicles (including the Company’s fleet of maintained vehicles) to existing or prospective ridesharing economyand delivery gig drivers. The Company initially launched the Rideshare Platform in Los Angeles, CA and has since expanded it to launched in three additional cities.Oakland, CA; Las Vegas, NV; Chicago, IL; Newark, NJ; Baltimore, MD; and Dallas, TX.
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The Rideshare Platform leverages technology to connect the owners and/or operators of standard passenger vehicles (including the Company’s fleet of maintained vehicles) to existing or prospective ridesharing drivers. The platform’sPlatform’s functionality provides ridesharing drivers with access to certain data emitted from their respective CompanyDistinct Cars rental vehicle(s) through a personal Rideshare rental dashboard. Vehicle owners can also access and manage data emitted from their personal vehicle(s) under rental to a third-party from the Rideshare Platform inventory dashboard and can further manage the other aspects of the vehicle rental transaction through the Rideshare Platform. Further, customers renting vehicles on the Rideshare Platform, can also accessincluding rental extension options through the Rideshare Platform.options. All transactional aspects of the rental vehicle(s) (including, but not limited to, background checks, terms, deposits and insurance costs) are run securely through the Rideshare Platform. In addition, our Rideshare website located atwww.ridesharerental.comnot only effectively monetizes Company-ownedthe Distinct Cars vehicle fleets, made available under our Fleet Management business,fleet, but also generates revenue by charging transactional fees to other vehicle owners and ridesharing economyand delivery gig drivers for all rental transactions consummated on the Rideshare Platform. The Rideshare Platform is available on desktop, iOS and Android devices. The development and functionality of our mobile applications are a material component to our business as drivers are more likely to transact via mobile devices.
Most importantly, all standard passenger vehicles and transit vans made available on the Rideshare platformPlatform not owned by us are fully qualified by the Company and guaranteed to meet the necessary Ridesharing Qualification Requirements imposed on ridesharing economy drivers by the private ridesharing TNCs. The Company mission seeks to put more prospective ridesharing drivers on roadways by providing ridesharing drivers with fully inspected vehicle offerings that are guaranteed to meet the Ridesharing Qualification Requirements.TNC qualification requirements.
Further, the Company’s car liability and physical damage insurance policies (“Company Insurance Policies”) cover both third-party vehicle owners as well as ridesharing drivers under rental contract. The Company Insurance Policies provide insurance on all listed Rideshare rental vehicles, provided that the Company Insurance Policy coverage is suspending during periods when the ridesharing driver under rental contract with the Company is actively operating on either the Uber or Lyft platform. During these periods when ridesharing drivers are actively operating Rideshare rental vehicles on either the Uber or Lyft platforms, coverage under the Company Insurance Policies are subordinate to the vehicle insurance coverage provided by Uber, Lyft or such other TNCs.Distinct Cars
The Company believes that due to the development of the ridesharing economy and its anticipated growth trajectory, the commercial ridesharing economy market will reward the Company as an early entrant to the third-party vehicle rental business. Under the Rideshare Platform we intend to become the go-to booking destination and brand for ridesharing economy vehicle rentals in a TNC marketplace that connects owners and/or operators of standard passenger vehicles with ridesharing economy drivers. We believe that our product and service offerings on the Rideshare Platform will continue to be an attractive proposition for all ridesharing economy drivers either simply requiring a standard passenger vehicle to operate or otherwise struggling to qualify their personal vehicles under the Vehicle Inspection Requirements. Further, we believe that the Company will require additional capital investment to continue funding Rideshare, the Rideshare Platform orwww.ridesharerental.com, including technology, payments and advertising, for purposes of continuing to develop and scale the Rideshare Platform and business. Further, we believe there is an immediate opportunity and necessity to grow and scale the Rideshare Platform in new geographical territories for purposes of developing and strengthening the Company’s brand and competitive advantage in the ridesharing economy vehicle rental market. For more information see “Risk Factors.”
Insurance Policy
As of the date of this Prospectus, the Company together with a Managing General Underwriter (“MGU”) maintains an insurance policy on behalf of the Company. Under the policy the MGU will handle all back-end insurance generation and processing through an API connection with the Company’s databases. We believe that this MGU insurance policy has made it possible for us to launch our Rideshare Platform, which will also allow the Company to have other third-party fleet owners supply vehicles to drivers through our platform and have them covered under the terms of our insurance policy. Our insurance policy provides physical damage and liability coverage to all rideshare drivers and fleet owners under the Rideshare Platform. Under the terms of our policy, ridesharing drivers acquiring rental vehicles under our Rideshare Platform as well as owners of the rental vehicles are provided with an insurance ID card that lists each parties name and the vehicle VIN number. Further, customers to our Rideshare Platform pay daily (for the duration of the rental period) to become designated as a supplemental insured party under the Company’s insurance policy. Under the terms of our policy, insurance coverage is valid from the date of commencement of the rental period up until the date that the vehicle is returned.
Ambassador Referral Program
The Company has further enhanced the monetization of the Rideshare Platform by creating and deploying the Rideshare Rental Ambassador program. Drivers renting cars from our Rideshare Platform can join the Ambassador program and refer other potential drivers and prospective customers to rent from the Rideshare Platform, providing our customers with additional income opportunities. The Company has designed and deployed a referral commissions team matrix that allows for both depth and breadth of commissionable referrals for the participating driver. As participating drivers add additional referred drivers to their down line, they progress in gaining additional levels of commission rewards. Eventually they are able to earn a free vehicle rental from Rideshare as a premium reward. This program requires that the driver continues to rent their vehicle from Rideshare in order to continue receiving commissions from other drivers’ rentals under the Ambassador’s down line. For further details on our Ambassador Referral Program, please visitwww.Ridesharerental.com/company/ambassador-program-terms-conditions.
Fleet Management Business
OnIn June 10, 2017, the Company formed the wholly-owned subsidiary, Distinct Cars for purposesthe purpose of developing a fleet management business. The Company’s Fleet Management business to couple with the Rideshare Platform, which was then under development. District Cars maintains a fleet of brand new standard and, increasingly and ultimately exclusively, electric passenger vehicles and transit vans for the logistical space to be subsequently rented directly to drivers in the ridesharing economyand delivery gig economies through the Rideshare Platform. The Company’s fleet of vehicles, under lease contract and maintained by Distinct Cars, as well as other third-party vehicles, will behave been made commercially available for rental bookings on the Rideshare Platform as well as on other third-party e-commerce booking platforms and/or through strategic partnerships and relationships. The Company seeks to provide drivers in the ridesharing economy with full-service vehicle rentals and fleet contract maintenance solutions for commercial standard passenger vehicles.
The Company’s material operations for the Fleet Management business are primarily conducted in the State of California. As a provider of comprehensive, integrated vehicle rental and fleet management solutions, the Fleet Management businessPlatform. Distinct Cars markets and manages short and long-term vehicle rentals to ridesharing and delivery gig economy drivers located in Los Angeles County.
The Company is focused on operating, developing and investing in its vehicle rental business with a focus on marketing directly to the peer-to-peer car sharing and ridesharing industry professionals. The Company is capable of meeting customers’ needs, including, but not limited to a guaranty that all vehicles maintained under the Fleet Management business will comply with and pass the Ridesharing Qualification Requirements. Our Fleet Management product and service offering includes full-service vehicle rental(s) and contract maintenance, along with distribution center management and transportation management service.drivers. As of the date of this Prospectus, the Company’s customer base is primarily ridesharingprospectus, approximately half of these drivers are located withinin greater Los Angeles County thatwhile the other half are operating and performing driving services on behalf of a host oflocated in the private ridesharing TNCs (primarily Lyft and Uber). While our Fleet Management business is primarily concentrated within the State of California, Los Angeles County, the Company intends to expand our Fleet Management services and product offerings nationally.other six cities where we have operations.
In August 2017, following our announcement that we were shifting our primary corporate operations, we entered into a leasing arrangement for an initial group of twelve (12) vehicles, with the intent of testing our fleet management concept within the ridesharing industry. Following the Company’s proof onof concept period, we expanded our Fleet Management business in December 2017 by adding an additional 135 vehicles to our fleet of vehicles.fleet. As of the date of this Prospectus, our full-service vehicle rental and contract maintenance under our Fleet Management segment is the Company’s main operating line of business and primary revenue generating business segment. As of June 30, 2019, the Company Fleet Management business managesJuly , 2021, Distinct Cars includes a fleet of approximately 347600 vehicles- including standard internal combustion engine and electric passenger vehicles as well as transit vans for the last-mile logistical space- under lease contract. During fiscal year 2017,Generally, professional ridesharing and delivery gig economy drivers contracted with private ridesharing TNCscontract for vehicle rental periods generally ranging from less than three days to six months. The rental vehicles made commercial available to customersTNC drivers by the Company are configured and guaranteed to be compliant with the Vehicle Inspection Requirements imposed on ridesharing vehiclessame vehicle requirements promulgated by the largest private ridesharing TNCs, (specifically, Uber and Lyft).Lyft.
The Company believes that customers will rent vehicles offered by our Fleet Management businessDistinct Cars in order to reduce the complexity cost and total capitalcost associated with vehicle ownership. Further, we believe that due to our market focus on the ridesharing industryownership, and the additional imposition of the Ridesharing Qualification Requirements imposed on ridesharing vehicles by the dominant private ridesharing TNCs, customers will be further incentivized to rent our Fleet Management vehicles to guarantee compliance with the Ridesharing Qualification Requirements.
TNC vehicle requirements. Depending on the make and model of the requested vehicle, our rental prices begin at $39 per day or $795 per month. Under aour full-service rental agreement, the Company provides and fully maintains the vehicle, which is generally specifically configured to meetvehicle; the Ridesharing Qualification Requirements.
Fleet Management Software
The Company has been an early adopter of technologies to leverage the Fleet Management business. To ensure that the Company’s fleet of vehicles meetservices provided include preventive and comply with the Ridesharing Qualification Requirements and transmit relevant dataregular maintenance, advanced diagnostics through our customers, the Company has fit its Fleet Management vehicles with fleet management GPS solution software, providing open platformemergency road service, fleet management solutions to businesses of all sizes. These full-featured solutions helpservices, and safety programs, through our Company-operated facilities.
Commercial Fleet Purchase Programs
In June 2017, the Company manage their drivers and vehicles by extracting accurate and actionable intelligence from real-time and historical location trip data. The telematics solutions forcommenced purchasing cars pursuant to a fleet optimization provide our Fleet Management vehicles with fitted software analytics and data involving (i) fuel efficiency; (ii) management of vehicle maintenance and (iii) prevention of vehicle wear and tear.
Commercial Partnership Programs
The Company has become a member of a commercial partnership programpurchase arrangement with Hyundai USA, a subsidiary of the Hyundai Motor Group.Group (“Hyundai”). The Hyundai provides and sells its vehicles in the United States through its subsidiary Hyundai USA (collectively, “Hyundai”).
In June of 2017,arrangement has provided the Company, joined a commercial partnership program hosted by Hyundai as a commercial partnership member for purposesdue to its quantity of developing the Company’s Fleet Management segment. Under the terms of the Hyundai partnership program, Hyundai will extend special pricing of fleet vehicles to program members to be subsequently sold to the Company through selected Hyundai dealerships. The Company believes that the Hyundai commercial fleet management program will provide the Companycars purchased, with competitive pricing options (or best available pricing) below MSRP on all purchases for brand-new Hyundai vehicles under lease and priority status on the availability and delivery of all Hyundai vehicles to be made through selected Hyundai dealerships. The Company’s status as a commercial partnership memberunder contract with Hyundai under the commercial fleet management program is a non-exclusive and non-binding arrangement between Hyundai and the Company. The vehicle purchases are currently financed by ACME Auto Leasing and LMP Financial Services, with title to the vehicles held by the Company under liens held by the financiers.
The Company has since entered into a similar fleet purchase arrangement with Hyundai’s affiliate, Kia Motors America, Inc., and in March 2021 we entered into a separate fleet purchase arrangement with Tesla, Inc. (“Tesla”), which is intended to facilitate our strategy to transition to electric vehicles. The terms of each program are standardized according to the number of vehicles purchased in bulk, with each such purchase memorialized in an order submitted by us, and agreed and accepted to by Hyundai, Kia Motors America, Inc.or Tesla, as applicable.
Neither partnership is in the form of a supply or requirements contract. We submit, on an as-needed basis, purchase orders for vehicles to be purchased underHyundai and now Tesla and these orders are fulfilled on the Hyundai fleet management program and delivered through dealerships are being financed and leased togeneral terms established at the Company by ACME Auto Leasing. Under the Company’s leasing agreements with ACME Auto Leasing, the Company acquires the right to title and possessioninception of the Hyundai vehicles under a standard three-year leasing agreement with ACME Auto Leasing, LLC, in exchange for competitive pricing under all leases, with a $1 optional residual purchase at the end of the three-year lease term. Further, in exchange for attractive pricing from ACME Auto Leasing, LLC, on all leased Hyundai vehicles the Company has granted 350,000 shares of common stock to ACME Auto Leasing, LLC, under the terms of a Side Agreement.partnership program, including below-MSRP pricing.
The Company believes that availability of the Hyundai commercial partnership program is a key relationship for the Company’s continuing operations. Any termination or suspension of our membership to the Hyundai commercial partnership program may potentially result in increases to the Company’s cost of revenue which may have a material impact on the Company’s operating expenses. For more information please see the section entitled “Risk Factors.”
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The Ridesharing Industry
At the most basic level, real-time ridesharing is a service that arranges one-time shared rides on short notice. Traditionally, ridesharing arrangements between two or more unrelated individuals for commuting purposes have been relatively inflexible, long-term arrangements. These commuting arrangements will establish reasonably fixed departure time schedulesVehicle and driving responsibilities. The complexity of work and social schedules and the perceived increase in vehicle trip complexity, such as trip chaining, has made this type of commuting arrangement much less desirable. “Real-time” ridesharing attempts to provide added flexibility to ridesharing arrangements by allowing drivers and passengers to partake in occasional shared rides. The internet-connected, global positioning system (“GPS”) enabled device automatically detects your current location, takes the home location that you have programmed in previously and searches the database for drivers traveling a similar route and willing to pick up passengers. According to Wikipedia.org, “real-time” ridesharing is defined as “a single, or recurring ridesharing trip with no fixed schedule, organized on a one-time basis, with matching of participants occurring as little as a few minutes before departure or as far in advance as the evening before a trip is scheduled to take place”.
A number of TNCs located in San Francisco premiered apps for real-time ridesharing in early 2010. Several TNCs were introduced that were advertising as ridesharing, but in fact dispatched commercial operators similar to a taxi service. Transportation industry experts have frequently referred to these services as “ridesourcing” to clarify that drivers do not share a destination with their passengers. Rather, the “ridesourcing” app simply outsources rides to available commercial drivers. In 2013 an agreement was reached with California Public Utilities Commission creating a new category of service called “Transportation Network Companies” or “TNCs” to cover both real-time and scheduled ridesharing companies. Transportation Network Companies have faced regulatory opposition in many other cities, including Los Angeles, Chicago, New York City, and Washington, D.C, among others.
“Ridesharing” has been controversial, variously criticized as lacking adequate regulation, insurance, licensure, and training. One of the main so-called ridesharing (but actually ridesourcing) firms, Uber, was banned in Berlin and a number of other European cities. Opposition may also come from taxi companies and public transit operators because they are seen as alternatives. Early real-time ridesharing projects are believed to have begun in the 1990s, but they faced obstacles such as the need to develop a user network and a convenient means of communication. Gradually the means of arranging the ride shifted from telephone to internet, email, and smartphone; and user networks were developed around major employers and universities. As of 2006, the goal of taxi-like responsiveness still generally eluded the industry; “next day” responsiveness was generally considered the state of the art.
The term “ridesharing” was starting to become a misnomer, they are a lot more like successful private cab or taxi businesses that cater to a smartphone-toting clientele and actively rival traditional cab or taxi companies and having reliable and affordable door-to-door transportation in general can help expand car-free living. Given the fast rise of smartphone adoption globally, ridesharing’s success doesn’t come as a surprise. But there are many reasons why customers prefer to book those services versus taxis. Among those are a clear overview of pricing prior to booking, the ease and convenience of “one-tap” rides, the ability to monitor and follow drivers on map displayed on the user’s smartphone, the convenience of a cashless transaction, fare splitting, and feedback options. The premier and probably most well know ridesharing service, Uber, was born when its founders became annoyed that they could not get a taxi in Paris. By eliminating the antiquated taxi dispatch system through technology (call and book taxi, call to request driver’s location, call when taxi doesn’t arrive), the founders of Uber created an innovative technology alternative to the traditional taxi dispatch system that has been widely adopted by users worldwide. By eliminating a key piece of the supply chain and streamlining efficiencies for the users, Uber was able to completely disrupt a century-old taxi industry. In essence, Uber and Lyft are really the two companies that dominate the market and Uber so far has won across the board: access, driver experience, customer experience, brand and funding.
The growth of the ridesharing economy has resulted in increasing consumer demand for ridesharing services, provided by Transportation Network Companies (“TNCs”) such as Lyft, Gett and Uber, that offer a ridesharing economy service through mobile applications.
Ridesharing apps connect people who need a ride with people who have a vehicle and time to drive - notably, not necessarily people who are licensed taxi drivers. Ridesharing TNCs like Lyft, Gett and Uber provide a smartphone app that lets consumers hail a ride, set their destination, and pay without leaving the app itself. The benefits to the consumer is ease of use, availability of rides, and sometimes lower prices than traditional taxis. Many companies require at least some sort of certification for the drivers and take a portion of the drivers’ fares. Ridesharing drivers can choose when they work (though they can receive bonuses for logging a certain number of hours) and provide their own vehicles. In the United States, ridesharing companies argue that the work-when-you-want arrangement qualifies drivers as contractors, not employees. Despite legal battles and controversy over surge pricing, ridesharing companies have exploded in popularity, both in the U.S. and internationally. Early entrants in the TNC app space, like Uber and Flywheel, were founded around 2009. Overall, the industry has raised more than $10 billion in venture funding.Driver Requirements
We believegenerally impose the same requirements on both drivers and vehicles as those of Uber and Lyft. Any driver who wishes to rent a car from us or use the Rideshare Platform in their own vehicle is screened and evaluated to ensure that we have strong economic prospects by virtue of the following dynamics of the industry:he or she:
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| ● | has had an | |
| ● | passes a background check, including a clean driving record; and | |
| ● | has or will qualify for in-state auto insurance in |
As noted, each of our Distinct Cars vehicles meets both Uber and Lyft vehicular requirements. If a driver does not rent a vehicle from our fleet we obtain a motor vehicle report for his or her vehicle at the outset of their use of the Rideshare Platform, and renew it every six months. The requirements any vehicle using the Rideshare Platform, whether from Distinct Cars or not, must meet are as follows:
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| ● | The vehicle model must be 15 years old or newer; | |
| ● | The vehicle’s title cannot be salvaged, reconstructed or rebuilt; and | |
| ● | The vehicle must be in |
Regulation of the Ridesharing Industry
In the current ridesharing marketplace, often times the TNCs (such as Uber or Lyft) generally takes the place of government in enforcing standards for drivers and vehicles, though all states and the District of Columbia now have basic driver background and minimum insurance requirements in place for TNCs. Each TNC has its own regulations at the corporate level. However, in many instances, state, local or federal governments are beginning to seriously assess the ridesharing industry and it is likely that regulations and mandated standards are imminent. For more information see section “Vehicle Registration Requirements.”
Our Opportunity
The increasing demand for ridesharing services has produced an increase in demandAlso, a vehicle used by TNC businesses for more ridesharing drivers and vehicles on the road at any given time. The growing demographic of ridesharing drivers, as determined on a global basis, has drawn ridesharing drivers to the ridesharing marketing to perform services for a host of private TNC businesses focused on ridesharing, such as Uber and Lyft.
Complicating this matter further, many potential ridesharing drivers drawn to the ridesharing market are being rejected or turned away from employment by the private ridesharing TNCs on account of the fact that the driver’s personal vehicles fail to meet the Ridesharing Qualification Requirements imposed on all ridesharing vehicles by the private ridesharing TNCs. Private ridesharing TNCs impose certain vehicle safety tests and precautions on all ridesharing vehicles to be utilized by drivers under employment with the private ridesharing TNCs. Generally, the TNCs impose certain standard requirements on all ridesharing drivers and their respective vehicles (the “Driver Qualification Requirements”) as well as additional vehicle safety tests, inspections and precautions on all ridesharing vehicles to be utilized by drivers under employment with the private ridesharing TNCs (the “Vehicle Qualification Requirements”, together with the Driver Qualification Requirements, the “Ridesharing Qualification Requirements”). For more information see“Ridesharing Qualification Requirements”. According to an Uber spokesperson, 10%-15% who sign up to be drivers are qualified, but do not have the right kind of car and are unable to buy one due to bad credit. Further, the Company believes that this is resulting in a shortfall of ridesharing drivers on the road at any given time. Private ridesharing TNCs have responded to this issue by actively pursuing programs to get eligible ridesharing drivers into qualified cars that meet the Ridesharing Qualification Requirements. The Company believes that the TNC line of business and immense capital requirements in developing a fleet management business to service the growing ridesharing industry on such a large scale will restrict the ability of the private ridesharing TNCs to dominate the ridesharing vehicle rental market. Further, despite the financial resources and scale of the dominant TNCs in the ridesharing business, the Company believes that third-party vehicle rental providers are a necessity to the growth and service of a robust ridesharing market.
Ridesharing Qualification Requirements
The TNCs generally impose a host of requirements on potential ridesharing driver applicants seeking employment with TNCs such as Uber and/or Lyft. For example, prior to becoming a ridesharing driver Uber and Lyft impose similar uniform requirements on all ridesharing vehicles and drivers. Generally, the ridesharing driver must meet the following standard “Driver Qualification Requirements”:
In addition, the TNCs may impose cosmetic guidelines on all ridesharing vehicles providing ridesharing services on behalf of the private ridesharing company. Certain cosmetic features may prevent a potential ridesharing driver’s vehicle from qualifying under the vehicle inspection on account of the following: (i) the vehicle includes a full-body wrap containing advertisements, or any large ads; (ii) the vehicle has holes or damage to the exterior; (iii) the vehicle has taxi decals or taxi-style paint; (iv) the vehicle has significant damage to the interior (including any torn seats, large permanent stains, strong permanent odors); (v) the vehicle has paint oxidation; or (vi) the vehicle has different colored hoods/doors; (vii) the vehicle has objectionable aftermarket modification (collectively, “Cosmetic Qualification Requirements”).
In addition to the Driver Qualification Requirements, private ridesharing companies also require all potential ridesharing drivers to undergo a vehicle inspection test, on all personal driver vehicles to be used by the potential ridesharing driver to perform ridesharing services on behalf of the private ridesharing company. In order to become a Uber or Lyft driver, a potential ridesharing driver’s vehicle generally must pass the 19-point vehicle inspection to confirm that it meets the private ridesharing companies requirements.
A 19-point inspection is a standard vehicle inspection procedure to check a car in 19 specific areas to ensure that it conforms to safety and operational requirements. While the 19 points are the same for different companies, their procedures differ slightly. The process also varies based on the geographical location where the inspection is performed. The 19 points of the vehicle checked for inspection includewhich typically includes headlights, tail-lights, indicator lights, stop lights, foot brakes, emergency/parking brake, steering mechanism, windshield, heat and air conditioning, front, rear and side windows, front seat adjustment mechanism, door controls (open, close, lock), horn, speedometer, body condition/ damage, muffler and exhaust system, condition or tires, interior and exterior rear-view mirrors and safety belts for driver and passengers. Any vehicle having a problem or issue with any of the inspection points will generally not pass the vehicle inspection and will be refused the opportunity to become a ridesharing driver for the private ridesharing company.
Company Growth Strategy
Our long-term strategy is focused on four priorities: expanding and diversifying our revenues; improving our operating effectiveness; enhancing the customer experience; and disciplined capital management.
Expand and Diversify Revenues—Our strategy to achieve ongoing growth is driven by initiatives that expand and diversify our revenues through customer- and market-focused initiatives. We are actively working to expand our Fleet Management business, Rideshare Platform and diversify our equipment rental fleet with a broader mix of vehicles to increase in the range of customer options and markets we serve. In addition, we seek to grow our Rideshare business which seeks to connect the owners and/or operators of standard passenger vehicles to existing or prospective ridesharing drivers. We will continue to offer a comprehensive equipment rental fleet to maintain our market leadership. We plan to expand our footprint from Los Angeles, throughout California and then to the rest of North America, with a focus on increasing the following: (i) the number of major geographical markets served on our Rideshare platform; (ii) the number of vehicles maintained and managed under the Company’s Fleet Management business; and (iii) to continue to reconfigure existing locations with fleet and expertise tailored to local markets. Our footprint expansion will include locations served under our Rideshare Platform and Fleet Management business to better support our growing ridesharing rental business. We will continue to pursue initiatives that allow us to drive sales through our existing locations and geographical territories.
Improve Operating Effectiveness—We are focused on generating continuous improvement across our operations, with an emphasis on building a strong safety culture, fleet management business, e-commerce bookings website, fleet availability and improving margins. We are continuing to build a highly professional and technology-enabled sales force and to optimize our sales territories to support our revenue growth objectives. We will continue to improve the effectiveness of our sales team with focused training, strong customer relationship management capabilities, and ongoing technology enhancements.
Enhance the Customer Experience—We seek to differentiate our business by delivering a superior customer experience through the variety and quality of the vehicles and services we offer, the ease of doing business with us and the added value we offer through services, products and technologies. Our focus on quality vehicle brands tailored to meet the Vehicle Qualification Requirements of the ridesharing industry is intended to meet the preferences of ridesharing drivers, including the expectations for reliable, safe, efficient and effective maintained vehicles. We expect to add more expertise across our team to help our customers achieve the best results for their projects. In developing and providing vehicle rental related technologies, we are focused on meeting customer expectations related to convenience and on-demand access to data and information.
Disciplined Asset Management—We manage our vehicle rental fleet to optimize the timing of fleet rentals, repairs and maintenance, while at the same time satisfying our customers’ needs. Through continued use and development of our disciplined approach to efficient fleet management, we seek to maximize our utilization and return on investment.
Intellectual Property
We generally rely on trademark, copyright and trade secret laws and employee and third-party non-disclosure agreements to protect its intellectual property and proprietary rights. We are currently in the process of pursuing trademark protection for our name and logos in the United States. Although we believe that our pending trademark applications will be granted by the United States Patent and Trademark Office, there can be no assurance that any trademarks will be granted or that any trademark relied upon by us in the future, if any, will not be challenged, invalidated or circumvented or that the rights granted thereunder or under licensing agreements will provide competitive advantages to the Company. We own registered trademarks “YayYo®” and the service mark for the stylized design representing an automobile.
In the future we may rely on patents to protect our intellectual property and proprietary technology, to the extent feasible, and plans to consult with intellectual property counsel to determine what patents we may be able to file to protect its intellectual property. As of the date of this Prospectus, we have not filed any patents in the United States or any other country. Although we believe that some of our technology may be patentable, there can be no assurance that any patents will be granted or that any patent relied upon by us in the future, if any, will not be challenged, invalidated or circumvented or that the rights granted thereunder or under licensing agreements will provide competitive advantages to the Company. We believe that due to the rapid pace of technological innovation for technology, mobile and internet products, our ability to establish and maintain a position of technological leadership in the ridesharing industry depends more on the skills of its development personnel than the legal protection afforded its existing technology. For more information see the section “Risk Factors”.
EmployeesInsurance
As of the date of this Prospectus,prospectus, the Company, together with our managing general underwriter, American Business Insurance Services, Inc. (the “MGU”), maintains an insurance policy on behalf of the Company. Under the policy the MGU handles all back-end insurance generation and processing through an application programming interface (API) connection with the Company’s databases. We believe that this MGU insurance policy has made it possible for us to maintain our Rideshare Platform, which allows the Company to have other third-party fleet owners supply vehicles to drivers through our platform and have them covered under the terms of our insurance policy. Our insurance policy provides physical damage and liability coverage to all rideshare drivers under the Rideshare Platform. Under the terms of our policy, both Rideshare Platform drivers acquiring vehicles through Distinct Cars as well as owners of their own vehicles are provided with an insurance ID card that lists each party’s name and the vehicle VIN number. Our Rideshare Platform customers pay daily (for the duration of the rental period) to become designated as a supplemental insured party under the Company’s insurance policy. Under the terms of our policy, insurance coverage is valid from the date of commencement of the rental period up until the date that the vehicle is returned.
Further, the Company’s car liability and physical damage insurance policies cover both third-party vehicle owners as well as ridesharing and delivery gig drivers under rental contract. These policies provide insurance on all listed vehicles, provided that the coverage is suspended during periods when the ridesharing driver under rental contract with the Company is actively operating on either the Uber or Lyft platform.
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Intellectual Property
As of the date of the registration statement of which this prospectus is a part, we have two registered trademarks “YayYo®” and the service mark for a stylized design representing an automobile that is present in our web sites and our marketing materials. We have no applications for other trademarks as of the date of the registration statement of which this prospectus is a part. We have no patents or copyrights.
Human Capital
As of the date of the registration statement of which this prospectus is a part, we had approximately 2135 full-time employees, and 3 consultants,all of which are based at our offices. None of our employees are subject to a collective bargaining agreement, and we believe that our relations with our employees generally are good.
RegulatoryRegulation
We are subject to a number of U.S. federal and state and foreign laws and regulations that involve matters central to our business. These laws and regulations may involve privacy, data protection, intellectual property, competition, consumer protection, export taxation or other subjects. Many of the laws and regulations to which we are subject are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate. Because laws and regulations have continued to develop and evolve rapidly, it is possible that we may not be, or may not have been, compliant with each such applicable law or regulation. In addition to the foregoing, we are also subject to the following:
Governmental regulations affect almost every aspect of our business, including the fair treatment of our employees, wage and hour issues, and our financing activities with customers. We could also be susceptible to claims or related actions if we fail to operate our business in accordance with applicable laws.
Federal and state governments in our markets have increasingly placed restrictions and limitations on the vehicles sold in the market in an effort to combat perceived negative environmental effects. For example, in the U.S., vehicle manufacturers are subject to federally mandated corporate average fuel economy standards which will increase substantially through 2025. Furthermore, numerous states, including California, have adopted or are considering requiring the sale of specified numbers of zero-emission vehicles. Significant increases in fuel economy requirements and new federal or state restrictions on emissions on vehicles and automobile fuels in the U.S. could adversely affect prices of and demand for the new vehicles that we sell.
| Governmental regulations affect almost every aspect of our business, including the classification of ridesharing and delivery gig economy drivers as either independent contractors or employees, the fair treatment of our employees, wage and hour issues, and our financing activities with customers. We could also be susceptible to claims or related actions if we fail to operate our business in accordance with applicable laws; | ||
While we are actively working to mitigate the impact of vehicle-related regulations through our strategy of transitioning our vehicle fleet to electric, until such time as at least the majority of our fleet has switched, we will remain subject to such regulations.
The Financial Accounting Standards Board is currently evaluating several significant changes to generally accepted accounting standards in the U.S., including the rules governing the accounting for leases. Any such changes could significantly affect our reported financial position, earnings and cash flows. In addition, the Securities and Exchange Commission is currently considering adopting rules that would require us to prepare our financial statements in accordance with International Financial Reporting Standards, which could also result in significant changes to our reported financial position, earnings and cash flows.
Federal and state governments in our markets have increasingly placed restrictions and limitations on the vehicles sold in the market in an effort to combat perceived negative environmental effects. For example, in the U.S., vehicle manufacturers are subject to federally mandated corporate average fuel economy standards which will increase substantially through 2025. Furthermore, numerous states, including California, have adopted or are considering requiring the sale of specified numbers of zero-emission vehicles. Significant increases in fuel economy requirements and new federal or state restrictions on emissions on vehicles and automobile fuels in the U.S. could adversely affect prices of and demand for the new vehicles that we sell.
Changes in the U.S. legal and regulatory environment that affect our operations, including laws and regulations relating to taxes, automobile related liability, insurance rates, insurance products, consumer privacy, data security, employment matters, licensing and franchising, automotive retail sales, cost and fee recovery and the banking and financing industry could disrupt our business, increase our expenses or otherwise have a material adverse effect on our results of operations, financial condition, liquidity and cash flows. For additional information please see the section entitled “Risk Factors.”
LitigationCompetition
From timeThe market for providing vehicles to time,TNC drivers is competitive. We believe our principal competitors to be HyreCar, a publicly-traded company that also facilitates the rental of vehicles for use by drivers who work for ridesharing and delivery gig platforms, and Lyft Express, which makes rental vehicles available to Lyft drivers. National car rental companies such as Hertz and Avis also have programs directed at ridesharing and delivery drivers. These companies are all larger and better-resourced than we may be subjectare at present, and have superior market presence and reputation.
However, we believe we enjoy a competitive advantage vis-à-vis the above companies through our ability to legal proceedings and claims in the ordinary course of business. We have received, and may in the future continuedirectly rent cars to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners and our customers by determiningfrom our Distinct Cars fleet and the scope, enforceability and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardlesshigh functionality of the outcome, litigation can have an adverse impact onRideshare Platform. We also believe that our transition to electric vehicles by 2024 will enhance our brand and further distinguish us because of defense and settlement costs, diversion of management resources, and other factors.To date, we have not been made aware of any actual, pending or threatened litigation against the Company.from our competitors.
PropertyLegal Proceedings
We lease and maintain our primary offices at 433 North Camden Drive, Suite 600, Beverly Hills, California 90210. We also lease and maintain executive offices at 6600 Sunset Blvd., Los Angeles, CA 90028, wherehave included a description of those pending legal proceedings or potential claims against us whose outcome may, either individually or in the majorityaggregate, have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows, in Note 11 to the unaudited financial statements for the first quarter of our operations and staff will conduct activities on a daily basis. We do not currently own any real estate.fiscal 2021 included herein.
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The following summary of the rights of our capital stock is not complete and is subject to and qualified in its entirety by reference to our Certificate of Incorporation and Bylaws. Copies of these documents are filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part.
General
The Company is authorized to issue two classes of stock. The total number of shares of stock which the Company is authorized to issue is 100,000,000 shares of capital stock, consisting of 90,000,000 shares of Common Stock, $0.000001 par value per share, and 10,000,000 shares of preferred stock,
$0.000001 par value per share.
Common Stock
The holders of our Common Stock are entitled to the following rights:
Voting rights
Each share of our Common Stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of our Common Stock are not entitled to cumulative voting rights with respect to the election of directors.
Dividend rights
Subject to limitations under Delaware law and preferences that may apply to any shares of preferred stock that we may decide to issue in the future, holders of our Common Stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by our Board out of funds legally available therefor.
Liquidation rights
In the event of the liquidation, dissolution or winding up of our business, the holders of our Common Stock are entitled to share ratably in the assets available for distribution after the payment of all of our debts and other liabilities, subject to the prior rights of the holders of our preferred stock.
Other Matters
The holders of our Common Stock have no subscription, redemption or conversion privileges. Our Common Stock does not entitle its holders to preemptive rights. All of the outstanding shares of our Common Stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of our Common Stock are subject to the rights of the holders of shares of any series of preferred stock which we may issue in the future.
Preferred Stock
Our authorized preferred stock consists of 10,000,000 shares of preferred stock, par value $0.000001 per share. As of the date of this filing, 2,000,000 shares of preferred stock have been designated as Series A non-voting convertible preferred stock, none of which have been issued, and 230,550 shares have been designated as Series B non-voting convertible preferred stock, of which 230,375 shares were issued in July 2021 pursuant to an exchange agreement we entered into with our bridge lender. The 230,375 shares of Series B Preferred Stock remain outstanding.
The Series B Preferred Stock is convertible at any time at the option of the holder thereof into if not previously converted into shares of Common Stock at an initial conversion price of $3.00 per share, subject to adjustment as set forth in its Certificate of Designation, Preferences and Rights, which is filed as Exhibit 3.4 to our registration statement, of which this prospectus forms a part. The Series B Preferred Stock is subject to mandatory redemption in full at a redemption price initially equal to $10.00 per share, within 15 business days after the date on which the Company has completed an equity financing resulting in total proceeds of at least $10 million. It is the Company’s intention to redeem the Series B Preferred Stock in full using the proceeds from this offering. At any time after January 12, 2022, provided that the Company has paid in full all obligations outstanding under the Term Loan Agreement, the holders of a majority of the outstanding shares of Series B Preferred Stock shall be entitled to require the Company to redeem the Series B Preferred Stock at the then applicable redemption price, and any such redemption of Series B Preferred Stock shall be prior and superior to the redemption of any and all other equity securities of the Company duly tendered for redemption. If at any time while the Series B Preferred Stock is outstanding, the Company completes any single public offering or private placement of its equity, equity-linked or debt securities, the holders of the Preferred Stock may, in their sole discretion, elect to apply all, or any portion, of the then outstanding Series B Preferred Stock and any accrued but unpaid dividends, as purchase consideration. The conversion price applicable to such conversion shall equal seventy percent (70%) of the cash purchase price paid per share, unit or other security denomination for the securities of the Company issued to other investors.
Our Board has the authority to issue Series A preferred stock, or other preferred stock in one or more classes or series and to fix the designations, powers, preferences, and rights, and the qualifications, limitations or restrictions thereof including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders. The Certificate of Designation, Preferences and Rights of our Series A convertible preferred stock was filed as Exhibit 3.3 to our registration statement, of which this prospectus forms a part.
As a general matter, the issuance of preferred stock could adversely affect the rights of the holders of Common Stock and, therefore, reduce the value of the Common Stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the Common Stock until the Board of Directors determines the specific rights of the holders of the preferred stock; however, these effects may include:
| ● | Restricting dividends on the Common Stock; | |
| ● | Diluting the voting power of the Common Stock; | |
| ● | Impairing the liquidation rights of the Common Stock; or | |
| ● | Delaying or preventing a change-in-control of the Company without further action by the stockholders. |
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Warrant
On March 8, 2018, the Company issued a warrant to purchase a total of 1,500,000 shares of Common Stock at the exercise price of $4.00 per share. The shares of our Common Stock underlying this warrant were registered as part of our initial public offering.
Options
2016 Equity Incentive Plan
On November 30, 2016, we adopted our 2016 Equity Incentive Plan to reward and provide incentives to our officers, directors, employees, consultants and other eligible participants. We set aside options to purchase up to 10,000,000 shares of Common Stock for issuance under the plan, which may be granted in the form of either incentive stock options or non-qualified stock options. Our Board of Directors administers the 2016 Equity Incentive Plan and has the authority to select the recipients, the time or times at which awards may be granted, the number of shares to be subject to each option awarded, the vesting schedule of the options, and the price at which the options may be exercised. The Board may also amend the 2016 Equity Incentive Plan at its discretion.
Transfer Agent and Registrar
The transfer agent and registrar for our Common Stock is VStock Transfer, LLC. VStock Transfer, LLC is located at 18 Lafayette Place, Woodmere, New York 11598, telephone number (212) 828-8436.
Anti-Takeover Effects of Certain Provisions of our Bylaws
Our Bylaws establish advance notice procedures with respect to shareholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the Board of Directors or a committee of the Board of Directors. Also, our Bylaws prohibit our shareholders from taking action by written consent in lieu of a meeting and provide that, unless we consent otherwise in writing, most claims brought against the Company, or shareholder derivative claims brought on its behalf, must be adjudicated in courts located within the State of Delaware. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Although our certificate contains the choice of forum provision described above, it is possible that a court could rule that such a provision is inapplicable for a particular claim or action or that such provision is unenforceable. Several lawsuits involving other companies have been brought challenging the validity of choice of forum provisions in certificates of incorporation, and it is possible that a court could note such provision is inapplicable or unenforceable. Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Amendment of Bylaws
Our Bylaws may be amended (or repealed) by a majority of the Board of Directors in accordance with Delaware law and our Certificate of Incorporation. Our Bylaws may also be amended (or repealed) by the affirmative vote of a supermajority, i.e. seventy-five percent (75%), of holders of the voting power of all of the then-outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class.
Penny Stock Rules
Our shares of Common Stock are subject to the “penny stock” rules of the Exchange Act. In general terms, “penny stock” is defined as any equity security that has a market price less than $5.00 per share, subject to certain exceptions. The rules provide that any equity security is considered to be a penny stock unless that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC, authorized for quotation from Nasdaq, issued by a registered investment company, and excluded from the definition on the basis of price (at least $5.00 per share), or based on the issuer’s net tangible assets or revenues. In the last case, the issuer’s net tangible assets must exceed $3,000,000 if in continuous operation for at least three years or $5,000,000 if in operation for less than three years, or the issuer’s average revenues for each of the past three years must exceed $6,000,000.
Trading in shares of penny stock is subject to additional sales practice requirements for broker-dealers who sell penny stocks to persons other than established customers and accredited investors. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 (or $300,000 together with their spouse), and certain institutional investors. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of the security and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered Representative, and current quotations for the security. Finally, monthly statements must be sent disclosing recent price information for the penny stocks. These rules may restrict the ability of broker-dealers to trade or maintain a market in our Common Stock, to the extent it is penny stock, and may affect the ability of stockholders to sell their shares.
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The following aresets forth information about our directors and executive officers and directors and their respective ages and positions as of October 31, 2019.the date of the registration statement of which this prospectus is a part:
| Name | |||||||
| Stephen M. Sanchez | Chief Executive Officer and Director | ||||||
| Ryan Saathoff | 47 | Chief Financial Officer | |||||
| Gregory Miller | 62 | Chief Operating Officer | |||||
| Terren S. Peizer | 61 | Executive Chairman of the Board of Directors | |||||
| Harbant S. Sidhu | 62 | Director | |||||
| Douglas M. Mox | 54 | Director | |||||
| John P. O’Neill | 63 | Director | |||||
| Executive | |||||||
|
During the past five (5) years, none of the persons identified aboveStephen M. Sanchez has been involved in any bankruptcy or insolvency proceeding or convicted in a criminal proceeding, excluding traffic violationsone of our directors since January 2020 and other minor offenses. There is no arrangement or understanding betweenhas served as the persons described above and any other person pursuant to which the person was selected to his or her office or position.
Jonathan Rosen, Chief Executive Officer. Mr. Rosen is theCompany’s Chief Executive Officer on a part-time basis since February 2021. Mr. Sanchez has over 30 years of experience in the Company.logistics industry, particularly in the design, implementation and operation of last- mile delivery services. Since November 2019, Mr. Rosen has more than 25 years’ experience serving as an executive driving revenue, operations and marketing for leading public and private companies. For the past 15 years, Mr. Rosen has focused on automotive, software and media markets at both successful startups and global companies. He held the founding Chief Marketing and Chief Revenue Officer positions at Involvesoft, a leading SaaS software company (2017-2018), where he was brought in by the company’s venture bankers to launch the entity and raise capital. Mr. Rosen held multiple interim executive and advisory positions to numerous early-stage companies similar to YayYo. His experience over the last five years includes interim executive or consulting roles at WeWork (2017-2018), Beachbody (2015-2016), Ziff Davis/J2 Equities (2015), iInside and Opus Research (2014-2015) and others. Prior to that he held executive roles at companies including Autobytel, Webvisible, and America Online. At AOL, he servedSanchez also serves as the Executive DirectorCEO of Strategy, where he shepherded high-value acquisitionsPDQ Pickup LLC, a moving and partnerships including Advertising.com; and architected their first traffic acquisition programs. Rosen served as Senior Vice President for Autobytel – one of the largest automotive search and online properties where he led business development, ad networks and advertising sales and operations. Early in his career,logistics company, or PDQ Pickup. From August 2019 until November 2019, Mr. Rosen held senior management roles in the computer storage industry andSanchez was the founding President of iProspect; now the world’s largest search marketing agency and a subsidiary of Dentsu.
Laurie DiGiovanni, Chief Operating Officer. Ms. DiGiovanni is the Chief Operating Officer of PDQ Pickup. From January 2018 until August 2019, Mr. Sanchez was Senior Vice President of Operations and Business Development for Boxbot, Inc., a robotics company focusing on the Company. Shedevelopment and sale of autonomous last-mile delivery vehicles. From November 2015 until January 2018, Mr. Sanchez was Senior Manager of Final Mile Process Engineering for Amazon, Inc. From September 2014 until November 2015, Mr. Sanchez served as Vice President/Director of Supply Chain – Hub and Network Planning, for LaserShip Inc., a regional provider of same-day and next-day delivery services. Mr. Sanchez, who is a veteran of the U.S. Navy, also has held positions of increasing responsibility with affiliates of DHL International GmbH, as well as with National Express Corporation and United Parcel Service. We believe that Mr. Sanchez is qualified to serve as a director of our company as a result of his extensive leadership experience in logistics and business development.
Ryan Saathoff has served as the Company’s Chief OperatingFinancial Officer on a part-time basis since May 2016.April 2020. In addition, Ms. DiGiovanni served as Chief Executive Officer of the Company from October 4, 2018 to November 17, 2018. Since 2012, Ms. DiGiovanni has held marketing and operating executive positions at Beverly Hills Rent a Car and Executive Transportation pursuant to which Ms. DiGiovanni managed national corporate expansions and activation of transportation industry leading brands and was executive producer for a range of marketing campaigns at auto shows and transportation industry live events. Ms. DiGiovanni manages all business operations of the Company and its subsidiaries including driver training and the Fleet Management business segment. Ms. DiGiovanniMr. Saathoff is the founder, of the Association for FinanceCEO, and Insurance Professionals (AFIP), an association that has certified tens of thousands for more ethical car buying practices, and mandatory for auto industrymanaging partner at RG Alliance, a privately-held full back office solutions company, with over 50 employees and implemented10% of its business outside the U.S. He has served as CEO of RG Alliance since 2012, and is responsible for all strategic outcome planning, financial strategy, process optimization, and leveraging business intelligence from key metrics. In that role, he has been significantly involved in leading global automotive markets. Shesupporting his clients through multiple large public and private financial acquisitions and has guided several client executive teams in taking their companies public. He also played key roles inserves on the launchboards of many automotive initiatives, including managing new divisionsseveral non-profit companies and brands for Beverly Hills Travelis affiliated with numerous professional and Lifestyle and American Dream Classics; serving as Director of Training for CarsDirect.com; and leading marketing and customer experience campaigns for Barrett-Jackson Car Auction. Ms. DiGiovanni also has direct brand experience within the automotive industry including project management and training positions with Toyota, Mazda, and Nissan. Ms. DiGiovanni hasassociations. Mr. Saathoff holds a Bachelor of Arts degree from California State University, Fullerton.San Marcos.
Gregory Miller has served as the Company’s Chief Operating Officer since April 2021. Mr. Miller is a well-respected leader with more than 35 years of experience in the fleet management, transportation and logistics industries. In addition to his service with the Company, since 2012 he has served as the President and CEO of FleetLogik, a specialized fleet management firm based in Chicago, IL providing solutions to a broad base of public and private enterprises. His prior experience in leading both international and domestic fleet enterprises includes the role of Senior Vice President Fleet Operations and Procurement for National Express, a leading transit provider operating more than 17,000 vehicles across North America. Mr. Miller also was responsible for delivering global fleet excellence for DHL Express, managing more than 30,000 vehicles across North, Central and South America. He has held various advisory or board positions, including the Board of Directors for Auto Safety House, a Gladstone portfolio company operating a multi-state full-service truck, bus and utility vehicle distributor headquartered in Phoenix, AZ, eIQ an early start-up venture focused on the analytics of mobility and electric vehicles based in Oakland, CA, The Salvation Army advisory council and the Ford Fleet Advisory Council. Mr. Miller has a degree in Automotive Technology and a State of California lifetime teacher’s credential.
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Board of Directors
Kevin F. Pickard,Terren S. Peizer has been Executive Chairman of the Board of Directors since February 2021. He is a highly successful entrepreneur and investor, having founded and commercialized several public and private companies. Over the last decade, Mr. Peizer has served as the founder, Board Chairman, Chief FinancialExecutive Officer Secretary and Director.majority stockholder of OnTrak Inc., a leading AI and telehealth-enabled, virtualized healthcare treatment company. Mr. PickardPeizer is also the Board Chairman, Chief Executive Officer and majority shareholder of BioVie, Inc., which is the chief financial officer, secretaryindustry leader in the development of two orphan drug candidates for the treatment of rare liver diseases. In addition, Mr. Peizer is founder, Chairman and CEO and majority shareholder of four privately- held companies. He was Chairman of Cray, Inc., which he bought from Silicon Graphics for assumption of debt and recently sold to Hewlett Packard for approximately $1.4 billion. Mr. Peizer is chairman and sole shareholder of Acuitas Group Holdings, LLC, his personal investment holding company. In addition, Mr. Peizer has held senior executive positions at Goldman, Sachs & Co., First Boston, and Drexel Burnham Lambert. We believe that Mr. Peizer’s vast experience as a corporate executive, particularly with several public companies, qualifies him to serve on and chair our Board of Directors (Mr. Peizer had previously served as one of our directors from the time of our conversion from an LLC to a corporation until May 2017).
Harbant S. Sidhu has served as a director of the Company and has worked with the Company since October 2017. Since 2000, Mr. Pickard has been providing management consulting services through Pickard & Company, CPAs to small and medium-sized companies, included due diligence on potential acquisitions, the preparation of projections and business plans, assistance with restructuring of companies, posturing companies for initial public offerings, review and preparation of filings with the Securities and Exchange Commission. Prior to 2000, Mr. Pickard was a partner of Singer Lewak Greenbaum & Goldstein, LLP, Los Angeles, California, where he co-managed the accounting its securities industry practice group. Mr. Pickard also worked at PricewaterhouseCoopers, LLP (formerly, Coopers & Lybrand, LLP) where he focused on auditing companies in insurance, high-tech and industries. Mr. Pickard holds a Bachelor's of Science in Accounting and a Master of Accountancy from Brigham Young University. Mr. Pickard is currently a licensed Certified Public Accountant in North Carolina, and California. Mr. Pickard’s experience in accounting and finance qualify him for a position on our board of directors.
Jeffrey J. Guzy, Director. Mr. Guzy serves as a business development consultant and entrepreneur in Arlington, Virginia. Mr. Guzy is currently working with CoJax Oil and Gas Corporation and PrecyseTech. Prior to that, Mr. Guzy served, from October 2007 to August 2010 as the President of Leatt Corp. and has remained a director of that public company since April 2007. Mr. Guzy has an MBA in Strategic Planning and Management from The Wharton School of the University of Pennsylvania; a M.S. in Systems Engineering from the University of Pennsylvania; a B.S. in Electrical Engineering from Penn State University; and a Certificate in Theology from Georgetown University. Mr. Guzy has served as an executive manager or consultant for business development, sales, customer service and management in the telecommunications industry, specifically, with IBM Corp., Sprint International, Bell Atlantic Video Services, Loral CyberStar and FaciliCom International. Mr. Guzy has also started his own telecommunications company providing Internet services in Western Africa. He serves as an independent director and chairman of the audit committee of Capstone Companies, Inc., a public corporation. Mr. Guzy’s financial background, as well as his ability to serve as our audit committee financial expert, qualifies him to serve as a member of our board of directors.
Christopher Miglino, Director. Mr. Miglino serves as a director of the Company. Mr. Miglino has long been at the nexus of consumers, brands, social and lifestyle media, cause marketing and the enlightened, sustainable business movement. Mr. Miglino is the founder and CEO of Social Reality. Since 2010, Mr. Miglino has served as the Chief Executive Officer of Social Reality. Prior to founding Social Reality, Mr. Miglino served as the Chief Executive Officer of Lime Ad Network, a vanguard in the green and sustainable online business arena that connected consumers and brands with a collection of more than 250 green and socially conscious businesses. From June 2004 until August 2008, Mr. Miglino was CEO of Conscious Enlightenment, where he oversaw their day to day operations in the publishing and advertising industry. From 2004 until 2008, Mr. Miglino served as a board member for Golden Bridge Yoga in Los Angeles, a studio that encompasses over 20,000 square feet of yoga spaces including a restaurant. Mr. Miglino’s extensive knowledge of marketing, advertising and social media make him valuable as a member of our board of directors.
Harbant S. Sidhu, Director. Mr. Sidhu serves as a director of the Company.January 2020. Mr. Sidhu is a design engineer and founder of Advanced Tek Group, Inc. (formerly Magnaspec, Inc.), a private aerospace manufacturing business. Since 2012, Mr. Sidhu has operated Advanced Tek Group, Inc., managing all aspects of the operating business. Mr. Sidhu has experience in personnel management and oversite, aerospace and defense engineering, sales, manufacturing, accounting and operational experience in the aerospace and defense manufacturing industry. Mr. Sidhu has performed unclassified contracting work in components production for Mexico’s Department of Defense.in Mexico. Mr. Sidhu graduated as an electrical engineer in 1980 from Punjab University, India. Mr. Sidhu’s experience in human resources coupled with his business experience qualifies him to serve on our boardBoard of directors.Directors.
Paul Richter, Director.Douglas M. Mox has been one of our directors since January 2020. Mr. RichterMox has extensive experience in financial management and strategic planning, as well as logistics, engineering and operations. Since January 2013, Mr. Mox has been the Chief Operating Officer of Grace Thomas Investment, a private equity firm. Prior thereto, Mr. Mox, who has a B.S. degree in aviation management/logistics, worked as a senior manager at DHL Worldwide Express, an affiliate of DHL International GmbH, and as an industrial engineering manager for United Parcel Service. The Company believes that Mr. Mox is a member of the board of directors of the Company since July 2019. In addition, he previously servedqualified to serve as a director of the Company from October 2017 to November 2018. Since 1986, Mr. Richter,as a licensed attorney, has performed legal servicesresult of his financial expertise and his extensive experience in the areasprivate equity and logistics industries.
John P. O’Neill has been our Director since January 2020. Mr. O’Neill is a 45-year veteran of securitiesthe logistics industry and corporate law representing public and private companieshas worked both in the U.S. and internationally over the course of his career. Since 1990, Mr. Richter’s legal practice focuses predominantly on SEC/state securities law compliance (including publicO’Neill has been employed by affiliates of DHL International GmbH in positions of increasing responsibility in the U.S. and private securities offerings and SEC filings); corporate governance law compliance; contracts; commercial transactions; regulatory dispute resolution; business start-up formation and funding; employee-employer dispute resolution; corporate compensation plans; business immigration; and compliance with FINRA, NASDAQ andthroughout Asia. Since March 2013, Mr. O’Neill has been the Deputy Managing Director of DHL-Sinotrans International Air Courier, in Beijing. The OTC Markets Group, Inc. rules and regulations. In addition,Company believes that Mr. Richter hasO’Neill is qualified to serve as a director of the Company as a result of his extensive leadership experience in cross-border transactional matters having performed U.S. legal work for companies based in Hong Kong, India, Poland, Norway, Canada, United Kingdom and U.A.E. Mr. Richter is a licensed attorney with the state bar of Virginia.logistics industry.
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Mr. Richter has an L.LM. in Securities Regulation from Georgetown Law Center, Washington, D.C. (1987) and a J.D. from George Mason University Law School, Arlington, Virginia (1985). He has a B.A. with honors from Knox College, Galesburg, Illinois. Mr. Richter originated and authored the first few editions of Corporate Anti-Takeover Defenses: The Poison Pill Device (published by Clark Boardman Co. and then by West Publishing for 18 annual editions) and he currently updates or assists in updating the following legal publications of Thomson Reuters West that were originally authored by other persons: Securities Public and Private Offerings (since 2006); Acquisitions and Mergers in Negotiated and Contested Transactions (since 2008);and Designing and Effective Securities and Corporate Compliance Program, (2017-2018 edition) (Corporate Compliance Series). He authored two CLE lectures and materials on Securities Law for Access MCLE (2016). Mr. Richter’s experience in corporate and securities law matters coupled with his international experience qualifies him to serve on our board of directors.CORPORATE GOVERNANCE
CodeBoard of Ethics
Our Board plans to adopt a written code of business conduct and ethics (“Code”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. We intend to post on our website a current copy of the Code and all disclosures that are required by law in regard to any amendments to, or waivers from, any provision of the Code.
Voting Trust
Mr. El-Batrawi has entered into a Voting Trust Agreement pursuant to which the voting power of all of his outstanding common stock will be controlled by a trustee who will use the voting power of the common stock held in the Trust to vote on all matters, other than certain extraordinary matters, presented for a vote of stockholders in the same proportion that the shares of common stock not subject to the Trust voted on such matters. Mr. El-Batrawi’s entrance into the Voting Trust Agreement is a condition for the Company’s approval for listing on The Nasdaq Capital Market.
The Trust shall be irrevocable, and shall terminate upon the earlier of (a) the written agreement of the Company, the trustee and a duly authorized representative of Nasdaq, or (b) the date upon which the Company is not listed on a security exchange controlled by Nasdaq.
The trustee, initially one of our directors, Harbant S. Sidhu, shall have discretion to vote the Trust’s shares on all extraordinary matters which shall include any merger, consolidation, business combination, share exchange, restructuring, recapitalization or acquisition involving the Company or any similar transaction or the sale, lease, exchange, pledge, mortgage or transfer of all or a material portion of the Company’s assets.
Board Leadership Structure and Risk OversightDirectors
The Board of Directors oversees our business affairs and considersmonitors the risks associatedperformance of management. In accordance with our business strategycorporate governance principles, the Board of Directors does not involve itself in day-to-day operations of the Company. The directors keep themselves informed through discussions with the Chief Executive Officer, other key executives and decisions. Theby reading the reports and other materials that we send them and by participating in Board currently implements its risk oversight function asof Directors and committee meetings.
Term of Office
Each of our current directors, with the exception of our Executive Chairman Terren S. Peizer, was elected to the Board in January 2020 in accordance with Section 3 of the Company’s By-Laws. Mr. Peizer was appointed to the Board by a whole. Eachunanimous vote of the directors in connection with an expansion of the Board committees,that was authorized in February 2021. Since the current term of office for each director is one year, and the Board has not yet scheduled an annual meeting of Company shareholders or arranged to take action by unanimous written consent of a majority of Company shareholders, each director other than Mr. Peizer may, as set forth below, will also provide risk oversightof the date of this prospectus, be considered a “holdover director.”
The Board size was recently expanded from five to seven members and the Board is currently working to fill the vacancies in respectits membership. Once the Board has been fully constituted, it intends to take action to elect its membership either at a meeting of its areasCompany shareholders or by unanimous written consent of concentration and reports material risks to the board for further consideration.a majority of Company shareholders.
Director Independence
Our Board of Directors
Our business and affairs are managed under the direction of our Board. Our Board consists of five directors, three of whom qualify as “independent” under the listing standards of Nasdaq.
Directors serve until the next annual meeting and until their successors are elected and qualified. Officers are appointed to serve for one year until the meeting of the Board following the annual meeting of shareholders and until their successors have been elected and qualified.
Director Independence
Ourboard of directors are composed is comprised of a majority of “independent directors” as defined under the rules of Nasdaq. WeAlthough we are not currently listed on Nasdaq or any other exchange, we use the definition of “independence”“independence” of Nasdaq to make this determination. Nasdaq Listing Rule 5605(a)(2) provides that an “independent director”“independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq listing rules provide that a director cannot be considered independent if:
| ● | the director is, or at any time during the past three (3) years was, an employee of the company; |
| ● | the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of twelve (12) consecutive months within the three (3) years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service); |
| ● | the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions); |
| ● | the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three (3) years, any of the executive officers of the company served on the compensation committee of such other entity; or |
| ● | the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three (3) years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit. |
Under such definitions,our Board has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our Board has determined thatJeffrey J. Guzy, Christopher Miglino, Paul Richter Douglas M. Mox, John P. O’Neill and Harbant S. Sidhu are all independent directors of the Company. However, our common stockCommon Stock is not currently quoted or listed on any national exchange or interdealer quotation system with a requirement that a majority of our Board be independent and, therefore, the Company is not subject to any director independence requirements.
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Board Leadership Structure and Risk Oversight
The Board oversees our business and considers the risks associated with our business strategy and decisions. The Board currently implements its risk oversight function as a whole. Each of the Board committees, as set forth below, will also provide risk oversight in respect of its areas of concentration and reports material risks to the board for further consideration.
Board of Directors Meetings and Attendance
During the fiscal year ended December 31, 2020, the Board of Directors held 12 meetings. Each director attended all of these Board meetings.
Code of Ethics
Although we are not required to do so, as the Common Stock is not listed on a national securities exchange in which an adopted Code of Ethics would be a listing requirement, our Board plans at some point to adopt a written code of business conduct and ethics (a “Code”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. We intend to post on our website a current copy of the Code and all disclosures that are required by law in regard to any amendments to, or waivers from, any provision of the Code.
Committees of the Board of Directors
Our Board has established an audit committee and a compensation committee. Our Board has not yet adopted procedures by which stockholders may recommend nominees to the Board of Directors. The composition and responsibilities of each of the committees of our Board is described below. Members serve on these committees until their resignation or until as otherwise determined by our board of directors.
Audit Committee
We have established an audit committee consisting of Harbant Sidhu, Paul RichterDouglas M. Mox and Jeffrey J. Guzy.In addition, our Board has determined that Mr. Guzy is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended, or the Securities Act.John P. O’Neill (the “Audit Committee”). The audit committee’sAudit Committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:
| ● | reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our annual disclosure report; |
| ● | discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; |
| ● | discussing with management major risk assessment and risk management policies; |
| ● | monitoring the independence of the independent auditor; |
| ● | verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; |
| ● | reviewing and approving all related-party transactions; |
| ● | inquiring and discussing with management our compliance with applicable laws and regulations; |
| ● | pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; |
| ● | appointing or replacing the independent auditor; |
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| ● | determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
| ● | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and |
| ● | approving reimbursement of expenses incurred by our management team in identifying potential target businesses. |
The audit committeeAudit Committee is composed exclusively of “independent directors” who are “financially literate” as defined under the Nasdaq listing standards.standards we need to comply with in order to uplist our Common Stock. The Nasdaq listing standards define “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
In addition, However, neither of Messrs. Mox or O’Neill qualifies as an “Audit Committee financial expert,” as that term is defined in current SEC regulations. The Board size has recently been expanded and we expect that one if not more than one of our new directors to be added to the Company intends to certify to Nasdaq thatBoard will so qualify. For now, the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication.
CompensationDuring the fiscal year ended December 31, 2020, the Audit Committee held one meeting.
Compensation Committee
We have established a compensation committee of the boardBoard of directors to consistDirectors, which consists of Christopher Miglino and Harbant S. Sidhu eachand Stephen M. Sanchez, the former of whom is an independent director.Each member of our compensation committee Mr. Sidhu is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act, or Rule 16b-3, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code, or Section 162(m). Mr. MiglinoSanchez is the chairman of the compensation committee. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
| ● | reviews, approves and determines, or makes recommendations to our board of directors regarding, the compensation of our executive officers; |
| ● | administers our equity compensation plans; |
| ● | reviews and approves, or makes recommendations to our board of directors, regarding incentive compensation and equity compensation plans; and |
| ● | establishes and reviews general policies relating to compensation and benefits of our employees. |
Non-Employee DirectorDuring the fiscal year ended December 31, 2020, the Compensation Committee held one meetings.
In November 2017, the Company entered into two separate independent director agreements with Jeffrey J. Guzy and director Paul Wesley Richter, each an independent director of the Company (each a “Subject Director” and, collectively, the “Subject Directors”), pursuant to which the Company has agreed to pay each Subject Director a flat, fixed cash fee of $2,500 for each fiscal quarter that each Subject Director serves as an independent director on the board of directors of the Company (the “Subject Director Agreements”). The first payment under Subject Director Agreements was due and payable on or before November 30, 2017 for the fourth fiscal quarter of 2017.Nominating Committee
We do not currently have a nominating committee. Instead of having such a committee, our Board of Directors historically has searched for and evaluated qualified individuals to become nominees for membership on our Board of Directors. The directors recommend candidates for nomination for election or reelection and, as necessary, to fill vacancies and newly created directorships.
We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. In the event such a proposal is made, all members of our Board will participate in the consideration of director nominees.
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Non-Employee Director Compensation
Directors do not currently receive compensation for their services on the Board or on any Board committees.
Related Party Transactions
We include a description of our related party transactions in Note 8 to the financial statements included herein.
Family Relationships
There are no family relationships among any of our officers or directors.
Involvement in Certain Legal Proceedings
Except as disclosed below, toTo our knowledge, none of our current directors or executive officers has, during the past ten (10) years:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| ● | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two |
| ● | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; |
| ● | been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent |
| ● | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
YayYo, Inc., vs. Hurst Capital LLLP, Zach Hurst, Austin Hurst, Ryan O’Connor, Scott Carl Edwards, Robert Lisiescki, Christopher John Gilbert, Joseph Andreini III, and Joseph Hoffman.
On November 21, 2016, the Company filed a lawsuit in U.S. District Court, for the Central District of California against Hurst Capital LLLP, Zach Hurst, Austin Hurst, Ryan O’Connor, Scott Carl Edwards, Robert Lisiescki, Christopher John Gilbert, Joseph Andreini III, and Joseph Hoffman (collectively, the “Defendants”). The lawsuit alleges claims for fraud, fraudulent inducement and concealment, negligent misrepresentation, unfair business practices, intentional interference with contractual relations and prospective economic relations, and conversion, based on the Company’s belief that the Defendants made fraudulent and intentionally misleading representations to induce the Company to retain their services in connection with building our website and mobile applications, failed to satisfy the terms of their engagement with the Company and attempts to charge the Company for services which was never performed or was subpar. On February 23, 2018, the Company entered into a settlement agreement and mutual release by and between Ryan O’Connor, Robert Lisiescki, Christopher John Gilbert, and Joseph Hoffman pursuant to which the parties agreed to settlement and dismiss the action and to sever, release and discharge and terminate all rights, obligations and liabilities against the Defendants.
Except as set forth above and in our discussion below in “Certain“Certain Relationships and Related Transactions,,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
We areShareholder Communications
Currently, we do not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, we believe will have a material adverse effect on our business, financial condition or operating results.process for shareholders to send communications to the Board of Directors. To date, no shareholders have made any recommendations to us to adopt such a policy.
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The following table illustratesprovides information regarding the compensation paid byearned for the Company to its Chief Executive Officer, itsyears ended December 31, 2020 and 2019, for (i) all individuals serving as our principal executive officer or acting in a similar capacity during 2019 (“PEO”), and (ii) our two most highly compensated executive officers other than the Chief Executive OfficerPEO who were serving as executive officers at the end of the last completed fiscal year, and up to one additional individual for whom disclosure would have been provided but for the fact that the individual was not serving as an executive officer of the Company at the end of the last completed fiscal year. We refer to these individuals as the “Named Executive Officers”. The disclosure is provided for the years ended December 31, 2018 andDecember 31, 2017.2020:
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Other Benefits ($)(4) | Option Award ($) (5) | Total ($) | ||||||||||||||||||
| Laurie DiGiovanni, Former Chief Executive Officer and Chief Operating Officer, Former Director (1) | 2018 | 120,000 | — | — | — | 120,000 | ||||||||||||||||||
| 2017 | 120,000 | — | — | — | 120,000 | |||||||||||||||||||
| Kevin F. Pickard, Chief Financial Officer, Secretary, Director | 2018 | 66,000 | — | 904,468 | — | 970,468 | ||||||||||||||||||
| 2017 | 16,800 | — | 1,356,703 | — | 1,373,503 | |||||||||||||||||||
| Ramy El-Batrawi, Former Chief Executive Officer, Former Director (6) | 2018 | 205,000 | — | — | — | 205,000 | ||||||||||||||||||
| 2017 | 286,300 | — | — | — | 286,300 | |||||||||||||||||||
| Anthony Davis, Former President, Chief Executive Officer, Director | 2018 | - | — | — | — | — | ||||||||||||||||||
| 2017 | 20,000 | (2) | — | — | — | 20,000 | ||||||||||||||||||
| Robert W. Vanech, Former Chief Financial Officer, Treasurer, Secretary, Director | 2018 | - | — | — | — | — | ||||||||||||||||||
| 2017 | 20,000 | (3) | — | — | — | 20,000 | ||||||||||||||||||
Name and principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Non-Qualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||||||||
| Ramy El-Batrawi | 2020 | $ | 0 | $ | 0 | $ | 0 | $ | 132,007 | $ | 0 | $ | 0 | $ | 0 | $ | 132,007 | |||||||||||||||||||
| Chief Executive Officer (1) | 2019 | $ | 167,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 167,000 | |||||||||||||||||||
| Ryan Saathoff | 2020 | $ | 25,615 | $ | 0 | $ | 0 | $ | 8,800 | $ | 0 | $ | 0 | $ | 0 | $ | 34,415 | |||||||||||||||||||
| Chief Financial Officer (4) | 2019 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||
| Laurie DiGiovanni | 2020 | $ | 199,472 | $ | 0 | $ | 0 | $ | 79,204 | $ | 0 | $ | 0 | $ | 0 | $ | 278,676 | |||||||||||||||||||
| Former Chief Operating Officer (2) | 2019 | $ | 147,250 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 147,250 | |||||||||||||||||||
| Jonathan Rosen | 2020 | $ | 12,942 | $ | 0 | $ | 0 | $ | 167,761 | $ | 0 | $ | 0 | $ | 0 | $ | 180,703 | |||||||||||||||||||
| Former Chief Executive Officer (3) | 2019 | $ | 275,000 | $ | 25,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 300,000 | |||||||||||||||||||
| Kevin Pickard | 2020 | $ | 29,054 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 29,054 | |||||||||||||||||||
| Former Chief Financial Officer (4) | 2019 | $ | 125,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 125,000 | |||||||||||||||||||
| Boyd Bishop | 2020 | $ | 68,823 | $ | 0 | $ | 0 | $ | 289,481 | $ | 0 | $ | 0 | $ | 0 | $ | 358,304 | |||||||||||||||||||
| Former President (5) | 2019 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||
| (1) |
|
On October 4, 2018, Mr. El-Batrawi resigned as Chief Executive Officer. He then was appointed Acting Chief Executive Officer on November 17, 2018. On February 1, 2019, Mr. El-Batrawi resigned from his position as Acting Chief Executive Officer | |
| (2) | Ms. DiGiovanni resigned as Chief Operating Officer, effective as of the end of the first quarter of 2021. |
| (3) | Mr. Rosen was appointed Chief Executive Officer on February 1, 2019, and served until January 26, 2020. |
| (4) | Mr. Pickard served as Chief Financial Officer until April 2020. Upon his resignation, Ryan Saathoff was appointed to succeed him. |
| (5) | Mr. Bishop served as President of the Company between January and March 2020. |
The following table provides information about equity awards granted to our named executive officers that were outstanding on December 31, 2018.
| Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) | Options Exercise Price ($) | Options Expiration Date | Number of shares or units of stock that have not vested (#) | Market value of shares of units of stock that have not vested ($) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) | |||||||||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||||||
| Ramy El-Batrawi (1) | — | — | — | $ | — | */*/* | — | — | — | — | ||||||||||||||||||||||||||||||
| — | — | — | $ | — | */*/* | — | — | — | — | |||||||||||||||||||||||||||||||
| — | — | — | $ | — | */*/* | — | — | — | — | |||||||||||||||||||||||||||||||
| Laurie DiGiovanni (2) | — | — | — | $ | — | */*/* | — | — | — | — | ||||||||||||||||||||||||||||||
| — | — | — | $ | — | */*/* | — | — | — | — | |||||||||||||||||||||||||||||||
| — | — | — | $ | — | */*/* | — | — | — | — | |||||||||||||||||||||||||||||||
| Kevin F. Pickard | 300,000 | — | — | $ | 8.00 | 12/31/2020 | — | — | — | — | ||||||||||||||||||||||||||||||
| — | — | — | $ | — | */*/* | — | — | — | — | |||||||||||||||||||||||||||||||
| — | — | — | $ | — | */*/* | — | — | — | — | |||||||||||||||||||||||||||||||
| — | — | — | $ | — | */*/* | — | — | — | — | |||||||||||||||||||||||||||||||
(1) On October 4, 2018, Mr. El-Batrawi resigned as Chief Executive Officer. He then was appointed Acting Chief Executive Officer on November 17, 2018. On February 1, 2019, Mr. El-Batrawi resigned from his position as Acting Chief Executive Officer of the Company upon the appointment of Jonathan Rosen as Chief Executive Officer. In addition, Mr. El-Batrawi resigned as our director effective as of September 1, 2019.Bonuses
(2)Ms. DiGiovanni has served as Chief Operating Officer since May 2016. Ms. DiGiovanni served as Chief Executive Officer from October 4, 2018 to November 17, 2018.
Employment Agreements.
AsMr. Rosen was paid a bonus of December 31, 2018, the Company had no employment agreements with any of its named executive officers. The Company has entered into an oral agreement with its Chief Executive Officer, Jonathan Rosen, for an annual salary of $300,000, retroactive to his start date of February 1, 2019. The Company also agreed to issue a restricted stock grant of 500,000 shares of common stock with one-third$25,000 upon completion of the restricted shares vesting upon the closing of the Company'sCompany’s initial public offering with the remainder vesting ratably each month over the twenty-four months following the initial public offering.in November 2019. No other bonuses were paid that year and none were paid in 2020.
On November 29, 2016, the Company and Mr. Davis, a formerEmployment Agreements
No current executive officer of the Company has, as of the date of this prospectus, entered into an offer of employment agreement with the Company setting forth an initial base salary for Mr. Davis’s first three monthsCompany. We are currently in the process of servicenegotiating employment agreements with our CEO, COO and performance under his termChief Financial Officer. We expect that these employment agreements will be finalized and executed by the parties on or before the completion of employment withthis offering.
None of our executive officers is at present a full-time employee of the Company. As set forth underFor a description of the employment offer, Mr. Davis was entitledmaterial risk this may pose to receive (i) $15,000 for his service in the month of December 2016, (ii) $10,000 for service performed during the month of January, 2017us, please refer to “Risk Factors- Risks Related to Our Management and an additional $10,000 for service performed by Mr. Davis during the month of February 2017.Our Corporate Governance.”
On November 29, 2016, the Company and Mr. Vanech, a former executive officer of the Company, entered into an offer of employment agreement with the Company setting forth an initial base salary for Mr. Vanech first three months of service and performance under his term of employment. As set forth under the employment offer, Mr. Vanech was entitled to receive (i) $15,000 for his service in the month of December 2016, (ii) $10,000 for service performed during the month of January, 2017 and (iii) an additional $10,000 for service performed by Mr. Vanech during the month of February 2017.
Board Compensation
During the fiscal year ended December 31, 2018, Jeffrey J. Guzy and director Paul Wesley Richter received $7,500 in cash for board service fees. For more information please see the section entitled “Non-Employee Director Compensation” above.
| 48. |
PRINCIPAL STOCKHOLDERSSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information,shows the beneficial ownership of our Common Stock (our only outstanding calls of voting securities) as of October 31, 2019, with respect to the holdingsJuly , 2021, of (1)(i) each person who isknown to us to be the beneficial owner of more than 5% of Company common stock, (2) eachat least five percent (5%) of our directors, (3)outstanding common stock; (ii) each director; (iii) each executive officer,officer; and (4)(iv) all of our current directors and executive officers as a group.
Beneficial ownership of the common stock is determined in accordance with the rules of the SecuritiesSEC, and Exchange Commission (the “SEC”) andgenerally includes any shares of Company common stock over which a person exercises sole or shared voting power and/or investment power with respect to the securities held. Shares of Common Stock subject to options and warrants currently exercisable or of which a person has a right to acquire ownership at any timeexercisable within 60 days as of October 31, 2019.July , 2021 are deemed outstanding and beneficially owned by the person holding such options or warrants for purposes of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as otherwise indicated we believe thatin the footnotes to this table, the persons or entities named in this table have sole voting and investment power with respect to all shares of common stock heldour Common Stock shown as beneficially owned by them. Applicable percentage ownership in the following table is based on 26,802,976 shares of common stock issued and outstanding before the offering, and 29,302,976 after the offering assuming a common stock offering of 2,500,000 shares (excluding 375,000 shares which may be sold upon exercise of the underwriters’ over-allotment option), plus, for each individual, any securities that individual has the right to acquire within 60 days of October 31, 2019.
To the best of our knowledge, except as otherwise indicated, each of the persons namedThe percentages in the table has sole voting and investment power with respect to thebelow are based on 35,370,899 outstanding shares of our common stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. To our knowledge, there is no arrangement, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
| Name and Address of Beneficial Owner | Title | Beneficially Owned | Percent of Class Before Offering | Percent of Class After Offering | ||||||||||
| Officers and Directors(1) | ||||||||||||||
| Jonathan Rosen | Chief Executive Officer | — | — | — | ||||||||||
| Kevin F. Pickard(2) | Chief Financial Officer and Director | 300,000 | 1.1 | % | 1.0 | % | ||||||||
| Laurie DiGiovanni | Chief Operating Officer | — | — | — | ||||||||||
| Jeffrey J. Guzy | Director | — | — | — | ||||||||||
| Christopher Miglino | Director | — | — | — | ||||||||||
| Harbant S. Sidhu | Director | — | — | — | ||||||||||
| Paul Richter | Director | — | — | — | ||||||||||
| Officers and Directors as a Group (total of 7 persons) | 300,000 | 1.1 | % | 1.0 | % | |||||||||
| 5% Stockholders | ||||||||||||||
| X, LLC(3) (5) | 2,900,000 | 10.8 | % | 9.9 | % | |||||||||
| Gray Mars Venus Trust, Arizona 2015(4) (5) | 10,325,000 | 38.5 | % | 35.2 | % | |||||||||
| Bellridge Capital, L.P.(5) (6) | 2,400,000 | 8.5 | % | 7.8 | % | |||||||||
| David Haley(5) (7) | 2,844,945 | 10.6 | % | 9.7 | % | |||||||||
| James Malackowiski(5) (8) | 2,758,824 | 10.3 | % | 9.4 | % | |||||||||
| John O’Hurley(5) (9) | 2,018,750 | 7.5 | % | 6.9 | % | |||||||||
| Acuitas Group Holdings, LLC(5) (10) | 1,654,412 | 6.2 | % | 5.7 | % | |||||||||
* Less than 1%
(1)Common Stock. Unless otherwise indicated, the principal mailing address of the named directors and officerseach of the Companypersons below is c/o YayYo,EVmo, Inc., 433 NN. Camden Dr., #Drive, Suite 600, Beverly Hills, CA,California, 90210. The Company’s executive office is also located at 433 N. Camden Drive, Suite 600, Beverly Hills, California, 90210.
(2) Includes non-qualified stock option to purchase up to an aggregate of 300,000 shares of common stock.
(3)Common stock beneficially owned by Ramy El-Batrawi are held of record by X, LLC, which is an entity that is wholly-owned and controlled by Ramy El-Batrawi, our founder and former Chief Executive Officer and director. Its address is 2635 Astral Dr., Los Angeles, CA 90046. Mr. El-Batrawi has voting and dispositive control over any securities owned of record by X, LLC. Mr. El-Batrawi has entered into a Voting Trust Agreement (the “Trust”) pursuant to which the voting power of all of his outstanding common stock will be controlled by a trustee who will use the voting power of the common stock held in the Trust to vote on all matters presented for a vote of stockholders in the same proportion that the shares of common stock not subject to the Trust voted on such matters.
(4)Gray Mars Venus Trust, Arizona 2015, an entity beneficially owned and controlled by John Gray. Itsaddress is 75 Avon Ave, Mill Valley, CA 94941.
(5) As a condition to approving the Company’s common stock for listing on The Nasdaq Capital Market, X, LLC, agreed to sell 12,525,000 of its 15,425,000 shares of the Company’s common stock. The 12,525,000 shares (the “Private Shares”) were sold pursuant to an exemption from registration under the Securities Act to four existing Company shareholders who qualify as accredited investors (as that term is defined in Securities Act Rule 501(a)). The Private Shares were sold at $3.00 per share in exchange for non-recourse, non-interest-bearing promissory notes with maturities ranging from one year to eighteen months. X, LLC transferred all rights of ownership to the purchasers. The purchasers shall be entitled to receive all dividends and distributions, shall have the power to exercise all voting rights and may sell or pledge the Private Shares. The Private Shares, however, shall not be electronically transferred to the purchasers’ account until the pricing of this public offering.
(6) Includes the following: (i) 650,000 shares of common stock, (ii) 1,500,000 underlying shares of common stock to be acquired upon the exercise of the Selling Securityholder Warrant, and (iii) an option (exercisable at any time by Bellridge Capital, L.P.) from a non-affiliate shareholder of the Company to purchase 250,000 shares of issued and outstanding common stock of the Company from the non-affiliate shareholder. Bellridge Capital LLC (“BC LLC”) is the investment manager of Bellridge Capital, L.P., Boris Klimov (a.k.a Robert Klimov) is the managing partner and controlling person of BC LLC and may be deemed to share beneficial ownership of the shares beneficially owned by Bellridge Capital, L.P. BC LLC may be deemed to share beneficial ownership of the shares beneficially owned by Bellridge Capital, L.P. BC LLC and Mr. Klimov each disclaims beneficial ownership of the securities with respect to which indirect beneficial ownership is described. Bellridge Capital. L.P.’s address is 515 E. Las Olas Boulevard, #120A, Fort Lauderdale, FL 33301.
(7) The address of the stockholder is 32107 W Lindero Canyon Dr., #120, Westlake Village, CA 91361. Includes 80,000 shares of common stock owned by American Business Insurance Services, Inc. Mr. Haley is the Chief Executive Officer of American Business Insurance Services, Inc. and in such capacity has the right to vote and dispose of the securities held by such entity.
(8) The address of the stockholder is 330 W. Wellington Ave., Chicago, IL 60605.
(9) The address of the stockholder is 1710 Monte Cielo Ct., Beverly Hills, CA 90210.
(10)Acuitas Group Holdings, LLC, an entity beneficially owned and controlled by Terren Peizer. Its address is 11601 Wilshire Blvd #1100, Los Angeles, CA 90025. Mr. Peizer has voting and dispositive control over any securities owned of record by Acuitas Group Holdings, LLC.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the arrangements, discussed in the sections titled “Directors, Executive Officers and Corporate Governance” and “Executive Compensation” the following is a description of each transaction since June 21, 2016 and each currently proposed transaction in which:
| Name of Beneficial Owner | Title | Amount Beneficially Owned | Total Percentage | Total Percentage After the Offering | ||||||||||
| Officers and Directors (1) | ||||||||||||||
| Terren S. Peizer (2) | Executive Chairman | 10,055,512 | 28.43 | % | % | |||||||||
| Ryan Saathoff | Chief Financial Officer | 98,050 | (3) | * | % | |||||||||
| Gregory Miller | Chief Operating Officer | 0 | * | % | ||||||||||
| Stephen M. Sanchez | Chief Executive Officer and Director | 42,214 | (4) | * | % | % | ||||||||
| Douglas M. Mox | Director | 20,000 | (5) | * | % | % | ||||||||
| John P. O’Neill | Director | 272,100 | (6) | * | % | % | ||||||||
| Harbant S. Sidhu | Director | 70,000 | (7) | * | % | % | ||||||||
| All Current Executive Officers and Directors as a Group | 10,557,876 | 29.8 | % | % | ||||||||||
| Greater than 5% Stockholders | ||||||||||||||
| Gray Mars Venus Trust, Arizona 2015 (8) | 5,659,190 | 16.00 | % | % | ||||||||||
| Bellridge Capital, L.P. (9) | 2,526,122 | 7.14 | % | % | ||||||||||
| Acuitas Group Holdings, LLC (2) | 10,055,512 | 28.43 | % | % | ||||||||||
| Acme Auto Leasing, LLC (10) | 2,137,278 | 6.04 | % | % | ||||||||||
| *less than 1% | % | |||||||||||||
| (1) |
Unless otherwise indicated, the |
Selling Securityholder Transactions
In December 2017, YayYo, Inc., issued a senior secured promissory note to the Selling Securityholder, a security holder of the Company under Item 404(a) of Regulation S-K, in the original principal amount of $222,222 (the “First Note”). As an inducement for the secured parties to extend the loan as evidenced by the First Note and to secure complete and timely payment of the First Note, YayYo, Inc., as borrower, issued and granted a security interest in all the assets of YayYo, Inc. (including a pledge of securities, owned as of record and beneficially by YayYo, Inc., in the wholly-owned subsidiaries of the Company) and its subsidiaries, existing as of the date of issuance of thereafter acquired.
On March 8, 2018, YayYo, Inc., entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Selling Securityholder, a security holder of the Company under Item 404(a) of Regulation S-K and “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended) (the “Lender”), pursuant to which the Lender purchased (i) a senior secured promissory note in the principal face amount of $6,000,000 due March 8, 2023, subject to extension (the “Second Note”) and (ii) warrants to acquire up to an aggregate of 1,500,000 shares of common stock (the “Warrant Shares”), with an exercise price of $4.00 per share (the “Warrant”) and 150,000 commitment shares of common stock (the “Commitment Shares”) for an aggregate purchase price of $6,000,000 (the “Second Note Offering”) to be directed and deposited by the Lender in the Company’s Master Restricted Account (defined below). The principal balance of $6,000,000 on the Second Note bears interest at a rate per annum equal to LIBOR plus 100 basis points, subject to adjustment in accordance with the terms of the Second Note. The Selling Securityholder Warrant expire five years from the date of issuance. Further, the Company paid $178,228 of issuance costs associated with the Second Note.
YayYo, Inc., obligations to repay and otherwise perform its obligations under the Second Note are secured by a continuing first priority lien and perfected security interest in the $6,000,000 held in the Master Restricted Account (the “Collateral”), to be held and maintained at Umpqua Bank (the “Master Restricted Account”), subject to a deposit account control agreement, dated as of March 7, 2018, by and between YayYo, Inc., the Lender and Umpqua Bank (the “Controlled Account Agreement”). Subject to the terms of the Second Note and Controlled Account Agreement, upon the exercise of the Warrant and following YayYo, Inc.’s receipt of a notice by the holder of the Second Note electing to effect a release of cash with respect to the Collateral or at any such time that the outstanding amount of the Collateral is greater than or exceeds the principal face amount under the Second Note, the Lender will release a certain percentage of cash held as Collateral in the Master Restricted Account to YayYo, Inc. Under the terms of the Purchase Agreement, YayYo, Inc., will use any proceeds received and distributed from the Master Restricted Account, if at all, for general corporate purposes.
The Company repaid and exchanged a senior secured promissory note in the principal face amount of $6,000,000. On September 12, 2018, the Company entered into a new note payable agreement, as amended on November 1, 2019, whereby the Company repaid $4,821,810 of the original $6,000,000 note payable and the balance of $1,178,190 plus an original issue discount of $117,828 was rolled into a note payable for $1,296,018. This note payable is due the earlier of November 30, 2019 or the closing of an offering of at least $3,000,000. As a result of this transaction, the Company recognized interest expense for the remaining unamortized debt discount associated of $4,018,560.
We are party to an investors’ rights agreement with the Selling Securityholder,a security holder of the Company under Item 404(a) of Regulation S-K,which provides, among other things, that certain holders of our capital stock and securities have the right to demand that we file a registration statement or request that their shares of our capital stock or common stock equivalents be covered by a registration statement that we are otherwise filing under this prospectus. See the section titled “Description of Securities—Registration Rights.”
X, LLC
During the fiscal year ended December 31, 2017 and the periods from June 21, 2016 (inception) to December 31, 2016, X, LLC, a limited liability company owned and controlled by Ramy El-Batrawi, our founder and former Chief Executive Officer and former director, issued to the Company advances of a total of $50,000 and $75,000, respectively. As of December 31, 2017, $125,000 of these loan advances were repaid in full. The loan advances were non-interest bearing and due upon demand. At December 31, 2018 and December 31, 2017, there was no balance owed under the note.
During the period from June 21, 2016 (inception) to October 31, 2016, the Company paid management fees of $110,000 to X, LLC, a company that is beneficially owned and controlled by Ramy El-Batrawi. During the year ended December 31, 2018 and December 31, 2017, the Company paid management fees of $205,000 and $286,300, respectively, to a company that is owned by the Company’s majority stockholder.
On January 6, 2017, the Company received $50,000 from Chase Financing, Inc., (“CFI”) and issued its 10% original issue discount senior secured convertible note in the amount of $55,555, with a maturity date of April 6, 2017 (the “First CFI Note”). Subsequent to the First CFI Note, on January 23, 2017, the Company received an additional $25,000 from CFI, and issued a second 10% original issue discount senior secured convertible note in the principal amount of $30,555, with a maturity date of April 6, 2017 (the “Second CFI Note”). Subsequent to the Second CFI note, the Company received an additional $25,000 from CFI, and issued a third 10% original issue discount senior secured convertible note in the amount of $27,778 (the “Third CFI Note” and together with the First CFI Note and the Second CFI Note, collectively, the “CFI Notes”). As a result, the Company is obligated to repay CFI a total of $113,888 in principal plus all accrued interest thereon to CFI under the CFI Notes on or before the stated maturity dates, subject to extension per the terms.
Pursuant to the terms, the CFI Notes were secured by a first priority lien and security interest on all of the assets of the Company, now owned or hereafter acquired, and were convertible at the option of the holder into shares of our common stock at a conversion price equal to the lower of $7.00 per share or the average of the five lowest volume weighted average trading prices (“VWAP”) of our common stock during the 20 trading days immediately prior to the date of conversion. In an event of default occurs under the terms of the CFI Notes, the conversion price will be reduced to $1.00 per share.
Concurrently with the execution of the CFI Letter Agreement and the First CFI Note, as additional collateral to secure the repayment of the CFI notes by the Company, Ramy El-Batrawi and X, LLC (an entity wholly owned and controlled by Mr. El-Batrawi), entered into a Limited Recourse Guaranty and Pledge Agreement with CFI (the “Guaranty and Pledge Agreement”), pursuant to which X, LLC agreed to unconditionally and irrevocably guarantee the Company’s repayment of the CFI Notes, and pursuant to which X, LLC pledged up to 300,000 shares of our common stock held of record and beneficially owned by X, LLC.
In addition to the Guaranty and Pledge, on January 6, 2017, X, LLC (an entity wholly owned by Mr. El-Batrawi) entered into a common stock Purchase Agreement (“Stock Purchase Agreement”), pursuant to which X, LLC agreed to sell and transfer to CFI 200,000 shares of our common stock, held of record and beneficially owned by X, LLC, in exchange for the aggregate nominal consideration of $1.00. Under the Stock Purchase Agreement, and in addition to the 200,000 shares of common stock to be issued upon the effective date of the Stock Purchase Agreement, X, LLC has agreed to provide CFI with certain anti-dilution protection provisions, whereby X, LLC will issue a number of shares of our common stock, held as of record and beneficially by X, LLC, equal to 2% of the number of shares of common stock issued or underlying common stock equivalents (as defined under the Stock Purchase Agreement) issued, as the case may be, in the event of a Dilutive Share Issuance (as defined under the Stock Purchase Agreement). X, LLC has the right to repurchase 100,000 of such shares at an aggregate purchase price of $208,500 if exercises within the initial months after the date of the Stock Purchase Agreement, or $258,500 if exercised within the second three months. As of December 31, 2017, the CFI Notes have been repaid in full by the Company.
Lexicon Labs
On September 28, 2016, YayYo, LLC entered into a product management proposal with Lexicon Labs (the “Product Management Proposal”), whereas Lexicon Labs shall use its own personnel and other assets to oversee and manage the development of our technology and to assist with product development services to the Company in the form of (a) design and development services to provide iOS operating system capabilities for our mobile app “YayYo!”, (b) design and development for a web registration portal for on-boarding new users, and (c) development of web administration applications to allow high level team members to be able to track user analytical information. On November 16, 2016, the Company adopted and ratified the terms of the Product Management Proposal and accepted the benefits of such arrangement on behalf of the Company.
Lexicon Labs is managed by Ali Rashidifar, a former director of the Company and consultant to the Company holding the position of product manager. Under the terms of the Product Management Proposal, the Company has agreed to pay Lexicon Labs compensation in the form of a management cost in an amount equal to $10,000 (paid on a monthly basis). Since November 16, 2016 (the date of the Company’s incorporation), the Company has paid Lexicon Labs $10,000 for services rendered for the month of November 2016 under the terms off the Product Management Proposal. As a manager of Lexicon Labs, the Company believes that Mr. Rashidifar will directly or indirectly benefit financially from our Product Management Proposal and it is further assumed, at this stage, that the Company will continue the engagement of Lexicon Labs for the performance of product management services under the Product Management Proposal beyond November 2017, whereby the Company anticipates that aggregate fees paid to Lexicon Labs will exceed an aggregate of $120,000 in total payments issue and received by Lexicon Labs. As of December 31, 2017, the Product Management Proposal with Lexicon Labs has been terminated.
Independent Director Agreements
In November 2017, the Company entered into two separate independent director agreements with Jeffrey J. Guzy and Paul Wesley Richter, a director of the Company (each a “Subject Director” and, collectively, the “Subject Directors”), pursuant to which the Company has agreed to pay each Subject Director a flat, fixed cash fee of $2,500 for each fiscal quarter that each Subject Director serves as an independent director on the board of directors of the Company (the “Subject Director Agreements”). The first payment under Subject Director Agreements was due and payable on or before November 30, 2017 for the fourth fiscal quarter of 2017.
Loan from Stockholder
On September 17, 2017 the Company entered into a promissory note with John Gray, the control person for Gray Mars Venus Trust, Arizona 2015, for $390,000. The largest balances for the year ended December 31, 2018 and December 31, 2017, respectively, were $986,200 and $445,000. The current balance of the promissory note is $880,000. The promissory note accrues interest at a rate of 5%. The Company accrued but did not pay $7,463 and $4,051 of interest for the years ended December 31, 2018 and 2017, respectively.
Incentive Agreement for Grant of Stock
On April 1, 2018, the Company entered into an incentive agreement for a grant of stock with David Haley, a former director of the Company, pursuant to which Mr. Haley has agreed to write, provide and procure two particular insurance policies for Rideshare Car Rentals, LLC and Distinct Cars, LLC (the “Special Policies”) in consideration for a grant of 250,000 shares of Company restricted common stock, provided further, that in consideration for certain monetary advances made and extended by Mr. Haley on behalf of the Company for certain down payment requirements for the Special Policies, the Company has agreed to issue Mr. Haley 14,945 shares of Company restricted common stock, at a price per share equal to $8.00, as reimbursement for the cost of Mr. Haley’s monetary advances made on behalf of the Company. In March 2019, the Company issued American Business Insurance Services, Inc. 80,000 shares of common stock in connection the settlement of $400,000 of debt related to insurance policies. Mr. Haley is the Chief Executive Officer of American Business Insurance Services, Inc. 258,695 shares of Company restricted common stock was issued on April 1, 2018 and 6,250 shares of Company restricted common stock was issued on October 8, 2018.
Social Reality, Inc.
During the year ended December 31, 2018, the Company incurred $334,471 for advertising and digital media services from Social Reality, Inc. The advertising fees for the year ended December 31, 2018, were less than 5% of Social Reality, Inc.’s consolidated gross revenues. One of our directors, Christopher Miglino, is the Chief Executive Officer of Social Reality, Inc. and owns approximately 7.5% of Social Reality Inc.’s stock. At December 31, 2018, the Company had an amount due of $334,471 to Social Reality, Inc. The transactions with Social Reality, Inc. were arm’s length transactions in the ordinary course of business upon terms no less favorable than the Company could obtain from third parties.
Non-Qualified Stock Option Agreement
On June 9, 2017, the Company entered into a non-qualified stock option agreement with Kevin Pickard, our Chief Financial Officer and director, providing for an option grant to purchase an aggregate of 300,000 shares at an exercise price of $8.00 per share. The option grant vests at a rate of 10,000 options per month following the date of the option grant. As of December 31, 2018, an aggregate of 300,000 options are vested and exercisable. The options expire December 31, 2020.
On December 1, 2016, the Company entered into a series of non-qualified stock option agreements with former executive officers and directors of the Company providing for a series of option grants to those former executive officers and directors to purchase an aggregate of 450,000 shares at an exercise price of $1.00 per share. The options expired December 31, 2018.
The following description of our securities is only a summary and is qualified in its entirety by reference to the actual terms and provisions of the capital stock contained in our certificate of incorporation and our bylaws.
General
The Company is authorized to issue two classes of stock. The total number of shares of stock which the Company is authorized to issue is 100,000,000 shares of capital stock, consisting of 90,000,000 shares of common stock, $0.000001 par value per share, and 10,000,000 shares of preferred stock, $0.000001 par value per share.
Common stock
The holders of our common stock are entitled to the following rights:
Voting Rights
Each share of our common stock entitles its holder to one vote per share on all matters to be voted or consented upon by the stockholders. Holders of our common stock are not entitled to cumulative voting rights with respect to the election of directors.
Dividend Rights
Subject to limitations under Delaware law and preferences that may apply to any shares of preferred stock that we may decide to issue in the future, holders of our common stock are entitled to receive ratably such dividends or other distributions, if any, as may be declared by our Board out of funds legally available therefor.
Liquidation Rights
In the event of the liquidation, dissolution or winding up of our business, the holders of our common stock are entitled to share ratably in the assets available for distribution after the payment of all of our debts and other liabilities, subject to the prior rights of the holders of our preferred stock.
Other Matters
The holders of our common stock have no subscription, redemption or conversion privileges. Our common stock does not entitle its holders to preemptive rights. All of the outstanding shares of our common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders of shares of any series of preferred stock which we may issue in the future.
Preferred Stock
Our authorized preferred stock consists of 10,000,000 shares of preferred stock, par value $0.000001 per share. As of the date of this filing, 2,000,000 shares of preferred stock have been designated as Series A non-voting convertible preferred stock, none of which have been issued. Our Board has the authority to issue preferred stock in one or more classes or series and to fix the designations, powers, preferences, and rights, and the qualifications, limitations or restrictions thereof including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders.
While we do not currently have any plans for the issuance of any preferred stock, the issuance of preferred stock could adversely affect the rights of the holders of common stock and, therefore, reduce the value of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the common stock until the Board of Directors determines the specific rights of the holders of the preferred stock; however, these effects may include:
| (2) | Based on a Schedule 13D/A filed with the |
Warrants
The underwriting agreement provides that the obligations of the underwriters We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof. Over-Allotment Option Discounts, Commissions and Reimbursement The underwriters propose initially to offer the shares of Common Stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at those prices less a concession not in excess of $ per share of Common Stock. If all of the shares of Common Stock offered by us are not sold at the public offering price, the underwriters may change the offering price and other The following table shows the public offering price, underwriting discounts and commissions and proceeds before expenses to us. The information assumes either no exercise or full exercise of the over-allotment option we granted to the Representative. Total Without Over-allotment Option Total With Over-allotment Option We have agreed to pay a non-accountable expense allowance to the Representative equal to 1% of the gross proceeds received at the closing of the offering. The non-accountable expense allowance of 1% is not payable with respect to any shares sold upon exercise of the underwriters’ over-allotment option. We have paid an expense deposit of $35,000 to the Representative, which will be applied against the out-of-pocket accountable expenses that will be paid by us to the underwriters in connection with this offering, and will be reimbursed to us to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A). We have also agreed to pay certain of the Representative’s expenses relating to the offering, including (a) all filing fees and communication expenses relating to the registration of the shares of Common Stock to be sold in the offering (including the share’s subject to the underwriters’ over-allotment option) with the SEC, (b) all filing fees and expenses associated with the review of the offering by FINRA; (c) all fees and expenses relating to the listing of such securities on the Nasdaq Capital Market, including any fees charges by The Depository Trust Company for new securities; (d) all fees, expenses and disbursements relating to background checks of our officers, directors and entities in an amount not to exceed $15,000 in the aggregate; (e) all fees, expenses and disbursements relating to the registration or qualification of the shares of our Common Stock under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate, with such fees and expenses limited to $5,000 to counsel for the commencement of “blue sky” work and an additional $10,000 at the closing of the offering; (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the shares of our Common Stock under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, the underwriting agreement, any blue sky surveys and, if appropriate, any agreement among underwriters, selected dealers’ agreement, underwriters’ questionnaire and power of attorney), registration statements, prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final prospectuses as the Representative may reasonably deem necessary; (h) the costs and expenses of a public relations firm; (i) the costs of preparing, printing and delivering certificates representing the Common Stock; (j) fees and expenses of the transfer agent for the shares of Common Stock; (k) stock transfer and/or Our total estimated expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions, are Representative’s Warrants Upon closing of this offering, we have agreed to issue to the Representative as The Lock-Up Agreements Pursuant to “lock-up” agreements, our directors and officers and holders of 5% or greater of our outstanding shares of Common Stock have agreed, subject to limited exceptions, for a period of six (6) months from the date of the closing date of this offering in the case of the directors and officers and three (3) months from the date of the closing date of this offering in the case of any 5% or greater stockholders, without the prior written consent of the Representative, that they will not offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of our securities), enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of our of our securities convertible into or exercisable or exchangeable for our Common Stock or preferred stock or any of our other securities, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any of our securities, shares of common stock, preferred stock or securities convertible into or exercisable or exchangeable for common stock or preferred stock or any of our other securities or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, without the Representative’s prior written consent. In addition, pursuant to the underwriting agreement, we and any of our successors have agreed, for a period of three (3) months from the closing date of this offering, that each will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of our capital stock or any securities convertible into or exercisable or exchangeable for our shares of capital stock; (ii) file or caused to be filed any registration statement with the Commission relating to the offering of any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of our capital stock; (iii) complete any offering of our debt securities, other than entering into a line of credit with a traditional bank or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our capital stock, whether any such transaction described in clause (i), (ii), (iii) or (iv) above is to be settled by delivery of shares of our capital stock or such other securities, in cash or otherwise. Right of First Refusal Until twelve (12) months from the closing date of this offering, the Representative will have an irrevocable right of first refusal, to act as sole investment banker, sole book-runner, sole underwriter and/or sole placement agent, at the Representative’s sole discretion, for each and every future public and private equity and debt offering, including all equity linked financings, during such twelve (12) month period for us or any successor to or any subsidiary of ours, on terms customary to the Representative. The Representative will have the sole right to determine whether or not any other broker-dealer will have the right to participate in any such offering and the economic terms of any such participation. Discretionary Accounts The underwriters do not intend to confirm sales of the shares of Common Stock offered hereby to any accounts over which they have discretionary authority. Trading; Nasdaq Capital Market Listing Our Common Stock is currently quoted on the Pink Open Market, which is operated by the OTC Markets Group, under the symbol “YAYO.” We have applied to list our Common Stock on the Nasdaq Capital Market under the symbol “EVMO.” No assurance can be given that our application will be approved or that a trading market will develop. Determination of Offering Price Although our Common Stock is currently quoted on the Pink Open Market, prior to this offering, there has not been an active trading market for our Common Stock. The public offering price for our Common Stock in this offering will be determined through negotiations between us and the underwriters. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. We offer no assurances that the public offering price of our Common Stock will correspond to the price at which our Common Stock will trade in the public market subsequent to this offering or that an active trading market for our Common Stock will develop and continue after this offering. Other Relationships From time to time, certain of the underwriters and/or their affiliates may in the future provide, various investment banking and other financial services for us for which they may receive customary fees. In the course of their businesses, the underwriters and their affiliates may actively trade our securities or loans for their own account or for the accounts of customers, and, accordingly, the underwriters and their affiliates may at any time hold long or short positions in such securities or loans. Except for services provided in connection with this offering, no underwriter has provided any investment banking or other financial services to us during the 180-day period preceding the date of this prospectus and we do not expect to The Representative acted as placement agent for the term Loan, Guarantee and Security Agreement for the financing that closed on July 9, 2021, and received Cash Compensation of $450,000 and a warrant to purchase shares of our Common Stock at an exercise price of $ . Price Stabilization, Short Positions and Penalty Bids In connection with this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing Finally, the underwriters may bid for, and purchase, shares of our These activities may stabilize or maintain the market price of our In connection with this offering, the underwriters Electronic Distribution This prospectus in electronic format may be made available on websites or through other online services maintained by one or more of the underwriters, European Economic Area and United Kingdom In relation to each Member State of the European Economic Area and the United Kingdom (each a “Relevant State”), no Common Stock has been offered or will be offered pursuant to the offering to the public in that provided that no such offer of Common Stock shall result in a requirement for us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation. For the purposes of this provision, the expression an “offer of Common Stock to the public” in relation to any Common Stock in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any Common Stock to be offered so as to enable an investor to decide to purchase or subscribe for our Common Stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129. United Kingdom This prospectus has only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000, or the FSMA) as received in connection with the issue or sale of our Common Stock in circumstances in which Section 21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done in relation to our Common Stock in, from or otherwise involving the United Kingdom. Canada The shares of Common Stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts, or NI 33-105, the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts, or NI 33-105, the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering. Australia This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to China The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.” France This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code Monétaire et Financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. This document and any other offering material relating to the Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1, D.754-1 ;and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1; and D.764-1 of the French Monetary and Financial Code and any implementing regulation. Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code. Ireland The information in this (l) of the Prospectus Regulations and (ii) fewer than 100 natural or Israel The securities offered by this prospectus have not been approved or disapproved by the Israel Securities Authority (the “ISA”), nor have such securities been registered for sale in Israel. The securities may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus that has been approved by the ISA. The ISA has not issued permits, approvals or licenses in connection with this offering or publishing this prospectus, nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. This document does not constitute a prospectus under the Israeli Securities Law and has not been filed with or approved by the ISA. In the State of Israel, this document may be distributed only to, and may be directed only at, and any offer of the securities may be directed only at, (i) to the extent applicable, a limited number of persons in accordance with the Israeli Securities Law and (ii) investors listed in the first addendum to the Israeli Securities Law (the “Addendum”) consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange Ltd., underwriters, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,” each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it. Italy The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Societ — $$ — Aga e la Borsa, “CONSOB” pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than: Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors. Japan The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect. Portugal This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissăo do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person. Sweden This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person. Switzerland The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland. Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA). This document is personal to the recipient only and not for general circulation in Switzerland. United Arab Emirates Neither this document nor the securities have been approved, disapproved or passed on in any Our consolidated financial statements as of December 31, 2020 and for the two years ended December 31, 2020 and 2019 included in the registration statement of which this prospectus forms a part have been included in reliance of the report of AJ Robbins CPA LLC, an independent registered public accounting firm, given on the authority of said form as experts in auditing and accounting. WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable. Financial Statements for the years ended December 31, 2020 and 2019 Condensed Consolidated Balance Sheets As of March 31, 2021 and December 31, 2020 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Operations For the Three Months Ended March 31, 2021 and 2020 (unaudited) The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2021 and 2020 (unaudited) The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2021 and 2020 (unaudited) The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) Note 1 - Organization and Basis of Presentation Organization and Line of Business EVmo, Inc. (the “Company”) was incorporated on June 21, 2016 under the laws of the state of Delaware originally as a limited liability company and subsequently changed to a 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, Inc. The accompanying financial statements are retroactively restated to present the Company as a C corporation from June 21, 2016. The Company primarily rents vehicles to drivers for ridesharing Transportation Network Companies (“TNCs”) such as Uber and Lyft as well as drivers in the delivery 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). Risk and Uncertainties 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, the World Health Organization characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half of 2020, which has continued into the early months of 2021. As of the date of this prospectus, several vaccinations for COVID-19 have received emergency-use authorization from the Food and Drug Administration and many of the lockdown restrictions imposed by state and local governments have abated. Still, the pandemic has not yet ended, and there have been multiple waves where infections, hospitalizations, and deaths have sharply increased. Most recently, several variants of the original virus have been identified, and it is not yet known to what degree the authorized vaccinations provide resistance to these variants. We therefore cannot predict the ultimate impact that COVID-19 may have on our business this year, and possibly beyond. Interim financial statements The unaudited condensed consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rules and regulations. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021. Note 2 – Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Distinct Cars, LLC and RideShare Car Rentals, LLC. All significant intercompany transactions and balances have been eliminated. EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved. Cash Equivalents For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less. Property and Equipment and Rental Vehicles Property and Equipment and Rental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment and rental vehicles is provided using the straight-line method for substantially all assets with estimated lives as follows: Long-Lived Assets The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at March 31, 2021, 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 based on the rental agreements which are generally on a weekly basis. The Company recognizes revenue in accordance with FASB ASC 606, Revenue From Contracts with Customers. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 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. EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) Stock-Based Compensation The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. There were 1,631,250 warrants and 1,755,000 options outstanding as of March 31, 2021 and 1,631,250 warrants and 716,000 options outstanding as of March 31, 2020. Basic and Diluted Earnings Per Share 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 $0.000001 (the “Common Stock”) at the average market price during the period. There were 3,386,250 and 2,347,250 potentially dilutive securities outstanding at March 31, 2021 and 2020, respectively. Advertising Costs The Company expenses the cost of advertising as incurred. Advertising costs for the three months ended March 31, 2021 and 2020 were $165,748 and $131,509, respectively. Fair Value Measurements The Company applies the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows: 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. At March 31, 2021 and December 31, 2020, the Company did not identify any liabilities that are required to be presented on the balance sheet at fair value. EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in 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, 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 Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluation the impact this ASU will have on its consolidated financial statements. Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances. Note 3 – Property and Equipment At March 31, 2021 and December 31, 2020, property and equipment consisted of the following: Depreciation expense for equipment for the three months ended March 31, 2021 and 2020 was $826 and $302, respectively. EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) Note 4 – Rental Vehicles At March 31, 2021 and December 31, 2020, all of the Company’s rental vehicles consisted of the following: The Company’s leased assets, consisting of vehicles, are depreciated over their estimated useful life of five years. Depreciation expense for leased assets for the three months ended March 31, 2021 and 2020 was $462,425 and $314,483, respectively. The lease terms are generally for 30 to 36 months and the Company has the right to purchase the leased assets at the end of the lease terms for generally a nominal amount. Note 5 – Notes Payable Notes payable at March 31, 2021 and December 31, 2020 consisted of the following: (A) In connection with the issuance of these notes payable in 2018 and 2017, the Company also issued an aggregate of 24,050 shares of its Common Stock to these note holders as additional incentive to make the loans. The aggregate relative fair value of these shares of Common Stock was $119,875 and was recorded as a discount on the note payable and as additional paid in capital. The discount of $119,875 is being amortized over the term of the notes payable. During the three months ended March 31, 2021 and 2020, $1,789 and $9,953, respectively, was charged to interest expense as amortization of the discounts, with an unamortized balance of $184 at March 31, 2021. A rollforward of notes payable from December 31, 2020 to March 31, 2021 is below: EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) Note 6 – Convertible Note On January 8, 2021, the Company, issued a stand-alone $500,000 convertible promissory note to Mr. John Gray, principal of one of the Company’s largest stockholders, the Gray Mars Venus Trust, Arizona 2015, an Arizona asset management limited partnership. The convertible note accrues interest at a fixed rate of 6% and will mature on January 6, 2022. Any unpaid principal balance on the convertible note may be converted at any time, at the option of Mr. Gray, into shares of the Company’s Common Stock at a price of $0.50 per share. The Company recorded a beneficial conversion feature associated with this convertible note of $30,000 which was recorded as a debt discount. On February 12, 2021, Mr. Gray converted the full amount of the convertible promissory note into 1,000,000 shares of the Company’s Common Stock. Note 7 – Financing Lease Obligations Lease obligations at March 31, 2021 and December 31, 2020 consisted of the following: A rollforward of lease obligations from December 31, 2020 to March 31, 2021 is below: Future payments under lease obligations are as follows: Note 8 – Operating Lease Obligations The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate. EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) The Company leases its corporate office space under an operating lease that expires in 2013. The Company accounts for this lease under the provision of ASC 842 Leases. The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of March 31, 2021: Lease obligations at March 31, 2021 consisted of the following: The lease expense for the three months ended March 31, 2021 was $25,204. The cash paid under operating leases for the three months ended March 31, 2021 was $13,150. At March 31, 2021, the weighted average remaining lease terms were 1.76 years and the weighted average discount rate was 15%. Note 8 – Stockholders’ Equity The Company authorized 100,000,000 shares of capital stock with consists of 90,000,000 shares of Common Stock, $0.000001 par value per share and 10,000,000 shares of preferred stock, $0.000001 par value per share. Common Stock During the three months ended March 31, 2021, the Company: EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) Stock Options The following is a summary of stock option activity: The exercise price for options outstanding and exercisable at March 31, 2021: The following is a summary of warrant activity: EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) The exercise price for warrants outstanding at March 31, 2021: Note 10 – Related Party Transactions During the three months ended March 31, 2021 and 2020, the Company expensed $897,281 and $515,092, respectively, in insurance expense related to insuring the Company fleet of vehicles from an insurance brokerage firm whose owner is also a stockholder of the Company. At March 31, 2021 and December 31, 2020, $110,762 and $265,257, respectively, was owed to this insurance brokerage from and is included in accounts payable in the accompanying consolidated balance sheets. The Company’s Executive Chairman and former CEO have made advances the Company. At March 31, 2021, the Company owed its Executive Chairman and former CEO $503,767 and $65,514, respectively. At December 31, 2020, the Company owed its former CEO $100,000. Note 11 – Contingencies Legal Proceedings From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. The Company is currently not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows. Anthony Davis v. YayYo, Inc., and Ramy El-Batrawi A typical commercial dispute led to a complaint filed on March 5, 2020, in the LA Superior Court. Plaintiff Anthony Davis (“Davis”) was hired by the Company as its Chief Executive Officer in or about December 2016, although he worked there for only a matter of months. Mr. El-Batrawi, the founder of the Company and a former CEO and director, and was involved, the complaint alleges, in Davis’ hiring and termination. As part of his compensation, Mr. Davis alleges that he expected to receive stock options in the Company. Davis admits that he resigned from his executive officer and director positions, but asserts that he did not receive his stock options (he also included a spurious claim for wage and hour violations). The Company denied liability and has asserted that it has paid Davis all amounts due to him under the contract, while in the fact that Davis failed to exercise his stock options before they expired on December 31, 2018. The Company has filed a demurrer to the complaint which resulted in the plaintiff filing an amended complaint to which we will file a demurrer to be heard on September 8, 2021 in LA Superior Court. The lawsuit entirely lacks merit, and will have no material impact on the company’s business or prospects. 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 two, twin actions (with virtually identical complaints) were filed in the LA Superior Court. The State Case complaints differed only by a few words and the random punctuation mark. Plaintiff Ivan Rung and Michael Vanbecelaere each claimed to have purchased the Company’s stock in the IPO ; they purported to bring a securities class action on behalf of all purchasers of the Company’s stock pursuant to the Registration Statement and Prospectus issued in connection with the Company’s November 14, 2019 IPO. Lifting allegations freely from the FirstFire case complaint, the State Case Complaint is vague about alleged misrepresentation and material omissions, detailing instead a supposed chronology of events leading to the Company’s voluntary decision to delist its stock from NASDAQ following some business setbacks in early 2020. The Company announced in an 8K filed on February10, 2020 that it was voluntarily delisting from NASDAQ. Although YayYo obviously admits that its stock was delisted on NASDAQ, Company has denied liability and asserts that it accurately and completely disclosed all materially adverse facts and occurrences in its Registration Statement, related public filings and other public statements, and the Complaint’s alleged violations of Sections 11 & 15 of the Securities Act of 1933 are baseless. If the mediation is unsuccessful, YayYo intends to vigorously defend the lawsuit as it entirely lacks merit. The litigation is presently stayed EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) Jason Hamlin v. YayYo, Inc., Ramy El-Batrawi, et al., 20-cv-8235 (SVW) and William Koch v. YayYo, Inc., Ramy El-Batrawi, et al, 20-cv-8591 (SVW)(now consolidate in “In re YayYo Securities Litigation”) These two copy-cat actions were filed on September 9, 2020 and September18, 2020, respectively, in the United States District Court for the Central District of California, both cases as purported class actions. Plaintiffs Jason Hamlin and William Koch each claim to have purchased the Company’s stock “traceable to the IPO” and like plaintiffs Vanbecelaere and Rung in the state court actions, purport to bring a securities class action pursuant to Sections 11 & 15 of the Securities Act of 1933 on behalf of all purchasers of the Company’s stock. The first amended complaint alleges false statements and material omissions of material fact in connection with the Registration Statement and Prospectus issued in connection with the Company’s November 14, 201 9 initial stock offering (IPO). The defendants include directors of the company and the Underwriters to the IPO, Westpark Capital and Aegis Capital Corp. The federal court has consolidated the two matters for all purposes, and an initial status conference has been scheduled and held. As with the Vanbecelaere state court case, the Company denies liability and asserts that it accurately and completely disclosed all materially adverse facts, events and occurrences in its Registration Statement and related public filings, and the complaint’s alleged violations of Sections 11 & 15 of the Securities Act of 1933 are baseless. The Company intends to vigorously defend the lawsuit in federal court. All the securities lawsuits, in both federal and state court, are presently stayed pending the outcome of this mediation. Konop v. El-Batrawi, 1:20-cv-1379- MN (Filed in Del. District Court) Finally, on October 12, 2020 another cookie cutter complaint was filed in Delaware District Court, which has now been transferred to the U.S. District Court for the Central District of California, and assigned as a related case to Judge Wilson who, as noted, has the pending federal securities action assigned to him. Although styled as a “Derivative action” the complaint in Konop is another cut-and-paste job based on the original FirstFire complaint filed in the SDNY. It recites a litany of false allegations of mismanagement by YayYo’s principal, Mr. El-Batrawi and members of the Board of Directors, and purports to sue for damages caused by poor management by the officers and directors. The allegations of the complaint are spurious and no damages can or will be proved at trial. Uptick Media v. YayYo, Inc., AAA Arbitration pending in New York Plaintiff a consulting firm based in New York and Miami entered into a “consulting agreement” with the company in 2017 in which Uptick promised to deliver strategic services and other professional services to YayYo in exchange for $5,000 in cash and $100,000 worth of stock. They never provided any consultation or services or advice and the contract was not renewed. Uptick is suing the company for $100,000 in stock claiming breach of contract. The Company has denied liability on the basis of non-performance. This dispute is being arbitrated by AAA in New York. Note 12 – Settlements FirstFire Settlement On February 11, 2021, the Company, entered into a settlement agreement and mutual release (the “Settlement Agreement”) with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (“FirstFire”), relating to a pending action in the U.S. District Court in the Southern District of New York, FirstFire Global Opportunities Fund, LLC v. WestPark Capital, Inc. et. al., No. 1:20-cv-03327-LLS. The other parties to the Settlement Agreement are the Company’s co-defendants in the litigation, WestPark Capital, Inc. a Colorado corporation (“WestPark”), Mr. Richard A. Rappaport and Mr. Ramy El-Batrawi, former chief executive officer of the Company. EVmo, Inc. Notes to Condensed Consolidated Financial Statements For the Three Months Ended March 31, 2021 and 2020 (unaudited) This litigation was commenced by FirstFire in April 2020 and subsequently amended in December 2020. FirstFire was a subscriber to the Company’s initial public offering of Common Stock, in November 2019 (the “IPO”). It alleged in the Litigation that the Company and the other named defendants had, in connection with the IPO and the registration statement on Form S-1 filed thereto, committed violations of Sections 11, 12(a) and 15 of the Securities Act of 1933, as amended (the “Securities Act”), Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated under the Exchange Act. Each of the Company, WestPark, Mr. Rappaport and Mr. El-Batrawi vigorously denied and disputed these allegations. In consideration of the releases, covenants, terms and conditions set forth in the Settlement Agreement, FirstFire agreed to dismiss the litigation with prejudice, to not file any further litigation relating to the IPO, and to waive and relinquish any and all claims on shares of Common Stock other than as specified in the Settlement Agreement. The Company agreed to sell to FirstFire one hundred fifty thousand (150,000) shares of Common Stock (the “Settlement Shares”), with such shares issued pursuant to the exemption from registration under Rule 506(b) of the Act. The purchase price of the Settlement Shares was $0.066667 per share, or an aggregate of $10,000. Any resale of the Settlement Shares by FirstFire shall be subject to the conditions of Rule 144 of the Act. None of WestPark, Mr. Rappaport or Mr. El-Batrawi contributed to the Settlement Shares or any other consideration under the Settlement Agreement. Social Reality Settlement On February 19, 2021, the Company entered into a confidential settlement agreement and mutual release with SRAX, Inc., a Delaware corporation formerly known as Social Reality, Inc. (“SRAX”), relating to an action brought by SRAX against the Company in Los Angeles Superior Court on or around February 11, 2020. A description of this litigation has been included by the Company in its prior filings. The Company and SRAX mutually agreed to keep the material terms of this settlement confidential, subject to disclosure as required by applicable law or regulation. Note 13 – Subsequent Events The Company has evaluated subsequent events through July 14, 2021. The Company has determined there were no subsequent events that require recognition or disclosure in the financial statements, except as discussed below. On April 12, 2021, the Company, entered into a securities purchase agreement with a certain investor in connection with the issuance, as of that same date, of a 12.5% 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 an initial price of $3.00 per share, and was to mature on January 12, 2022. The note has since been exchanged for 230,375 shares of the Company’s Series B Preferred Stock and a warrant, as described below, and cancelled. The warrant grants the right to purchase 187,500 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 (5) years of the date of issuance. The agreement provided 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 remained outstanding. The warrant include anti-dilution provisions in which its exercise price 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 the exercise price of the warrant. On each of May 12, 2021 and June 12, 2021, the Company issued another warrant for an additional 93,750 common shares to the same investor pursuant to the terms of the agreement. On July 9, 2021, the Company entered into a term loan, guarantee and security agreement with a lender and its agent providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million, with $7.5 million funded upon closing and up to $7.5 million of additional borrowings under a delayed draw term loan facility. This agreement matures on July 9, 2026. Borrowings under it bear interest at LIBOR, plus a margin of 10.0%, with a default interest rate equal to 2.00% per year in the event of an ongoing event of default. The Company’s obligations under this agreement are guaranteed by its wholly-owned subsidiaries, and are a general obligation of the Company secured by substantially all of the Company’s property and assets. The Company may voluntarily prepay the term loans and mandatory prepayment will be required under certain contingencies, with a prepayment fee to be assessed, the amount of which will be calculated depending on when the prepayment is made. The Company has executed and delivered a term note evidencing this loan and has also issued a warrant granting the lender the right to purchase up to 1.5 million shares of Common Stock at an exercise price of $2.10. In connection with the Company’s entry into the term loan, guarantee and security agreement, the Company also entered into an exchange agreement, dated as of July 8, 2021, with the counterparty to the securities purchase agreement entered into in April 2021. The investor agreed to exchange its note for 230,375 shares of the Company’s Series B Preferred Stock, and a warrant to purchase 93,750 shares of Common Stock at an exercise price of $3.00. The Series B Preferred Stock is subject to mandatory redemption in full at a redemption price initially equal to $10.00 per share, within 15 business days after the date on which the Company has completed an equity financing resulting in total proceeds of at least $10 million. Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United Sates) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we were required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. According we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluation of the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Emphasis of As We have served as the Company’s auditor since 2016 Denver, Colorado March aj@ajrobbins.com 400 South Colorado Blvd, Suite 870, Denver, Colorado 80246 (B)303-537-5898 (M)720-339-5566 (F)303-586-6261 EVmo, Inc. As of December 31, The accompanying footnotes are an integral part of these consolidated financial statements. For the The accompanying footnotes are an integral part of these consolidated financial statements. For the The accompanying footnotes are an integral part of these consolidated financial statements. For the The accompanying footnotes are an integral part of these consolidated financial statements. For Year Ended December 31, Note 1 - Organization and Basis of Presentation Organization and Line of Business Basis of Presentation The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP). Risk and Uncertainties In December 2019, a novel strain of coronavirus surfaced in China, which has and is continuing to spread throughout the world, including the United States. 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, the World Health Organization characterized the outbreak as a “pandemic.” In response, numerous states and cities ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the second half of 2020, which has continued into the early months of 2021. As of the date of this prospectus, several vaccinations for COVID-19 have received emergency-use authorization from the Food and Drug Administration and many of the lockdown restrictions imposed by state and local governments have abated. Still, the pandemic has not yet ended, and there have been multiple waves where infections, hospitalizations, and deaths have sharply increased. Most recently, several variants of the original virus have been identified, and it is not yet known to what degree the authorized vaccinations provide resistance to these variants. We therefore cannot predict the ultimate impact that COVID-19 may have on our business this year, and possibly beyond. Note 2 – Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Distinct Cars, LLC and RideShare Car Rentals, Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved. Cash Equivalents For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less. Equipment and Rental Vehicles Equipment 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 December 31, Revenue Recognition The Company recognizes revenue from renting its fleet of cars to Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740,Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 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. Stock-Based Compensation The Company records stock-based compensation in accordance with FASB ASC Topic 718,Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. There were Basic and Diluted Earnings Per Share 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 common stock at the average market price during the period. There were Advertising Costs The Company expenses the cost of advertising as incurred. Advertising costs for the years ended December 31, Research and Development Costs The Company expenses its research and development costs as incurred. Research and developments costs for the years ended December 31, Fair Value Measurements The Company applies the provisions of ASC 820-10, 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. At Recent Accounting Pronouncements In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-07,Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The adoption of this ASU did not have an impact on its financial statements. In In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 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 – Equipment At Depreciation expense for equipment for the Note 4 – At The Company’s Note 5 – Notes Payable Notes payable at (A) In connection with the issuance of these notes payable in 2018 and 2017, the Company also issued an aggregate of 24,050 shares of its common stock to these note holders as additional incentive to make the loans. The aggregate relative fair value of these shares of common stock was $119,875 and was recorded as a discount on the note payable and as additional paid in capital. The discount of $119,875 is being amortized over the term of the notes payable. During the A rollforward of notes payable from December 31, 2018 to Note 6 – Lease Obligations Lease obligations at A rollforward of lease obligations from December 31, 2018 to Note 7 – Stockholders’ Equity The Company authorized 100,000,000 shares of capital stock with consists of 90,000,000 shares of common stock, $0.000001 par value per share and 10,000,000 shares of preferred stock, $0.000001 par value per share. Common Stock During the During the Stock Options The following is a summary of stock option activity: The exercise price for options outstanding and exercisable at For options granted during the year ended December 31, 2020 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $0.211 and the weighted-average exercise price of such options was $0.215. For options granted during the year ended December 31, 2020 where the exercise price was greater than the stock price at the date of the grant, the weighted-average fair value of such options was $1.11 and the weighted-average exercise price of such options was $4.00. No options were granted during the year ended December 31, 2020 where the exercise price was less than the stock price at the date of grant. The fair value of the stock options is being amortized to stock option expense over the vesting period. The Company recorded stock option expense of $739,973 and $0 during the years ended December 31, 2020 and 2019, respectively. At December 31, 2020, the unamortized stock option expense was $253,830. The assumptions used during the year ended December 31, 2020 in calculating the fair value of options granted using the Black-Scholes option-pricing model for options granted are as follows: The following is a summary of warrant activity: The exercise price for warrants outstanding at Note 8 – Related Party Transactions During the During the Note 9 – Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and A reconciliation of the differences between the effective and statutory income tax rates for the years ended December 31, 2020 and 2019: At December 31, 2020 and 2019, the significant components of the deferred tax assets are summarized below: The valuation allowance increased by $644,665 and $1,081,921 in 2020 and 2019, respectively, as a result of the Company generating additional net operating losses. The Company has recorded as of December 31, 2020 and 2019 a valuation allowance of $3,224,084 and $2,549,418, respectively, as it believes that it is The Company conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of December 31, 2020 and 2019. The Company has net operating loss carry-forwards of approximately $11,300,000. Such amounts are subject to Note 10 - Contingencies Legal Proceedings From time to time, Anthony Davis v. EVmo, Inc. (formerly YayYo, Inc.), and Ramy El-Batrawi This action was filed on March 5, 2020, in the Superior Court of the In Re YayYo Securities Litigation Two actions styled as securities class actions were filed in the United States District Court for the Central District of California, on September 9, 2020 (Hamlin v. YayYo) and September 18, 2020, respectively (Koch v. YayYo et al). The plaintiffs to each action individually alleged misrepresentations and material omissions in the registration statement on Form S-1 that the Company filed with the SEC in connection with its initial public offering, which was declared effective on November 13, 2019, claiming violations of Sections 11 and 15 of the Securities Act. Each purported action involved securities class action claims. The district court consolidated the two actions, and the Hamlin action was since dismissed. The district court indicated in its order consolidating the actions that the new caption for the case would be “In Re YayYo Securities Litigation.” The Company filed an answer, denying liability and asserted that it accurately and completely disclosed all material facts and occurrences, including adverse ones, in its registration statement, related public filings and other public statements, and further asserted that the alleged violations of Sections 11 and 15 of the Securities Act are baseless. Each of the parties to this litigation has mutually agreed to request a stay of the proceedings pending a mediation that is tentatively scheduled for April 29, 2021 in which a global settlement, also involving the plaintiff class representative identified in the case described immediately below, Michael Vanbecelaere v. YayYo, Inc, et al. Two actions styled as securities class actions were filed in the Superior Court of the State of California for the County of Los Angeles, on July 22, 2020 and July 23, 2020, respectively. The plaintiffs to each action individually alleged misrepresentations and material omissions in the registration statement on Form S-1 that the Company filed with the SEC in connection with its initial public offering, which was declared effective on November 13, 2019, claiming violations of Sections 11 and 15 of the Securities Act. Each action purported to bring a securities class action against the Company; one of the two lawsuits was dismissed on the basis that the lead plaintiff in one of the actions was not a suitable class Representative, and that plaintiff later joined the lawsuit brought by the other one. In its answer, the Company denied liability and asserted that it accurately and completely disclosed all material facts and occurrences, including adverse ones, in its registration statement, related public filings and other public statements, and further asserted that the alleged violations of Sections 11 and 15 of the Securities Act are baseless. Each of the parties to this litigation has mutually agreed to request a stay of the proceedings pending a mediation that is tentatively scheduled for April 29, 2021, which will also include the parties to the action described immediately above. Uptick Capital, LLC v. EVmo, Inc. (formerly YayYo, Inc.) On March 5, 2021, Uptick Capital, LLC (“Uptick”), filed an arbitration demand with the American Arbitration Association (“AAA”) alleging breach of contract with respect to an Advisory Agreement that Uptick asserts it entered into with the Company on August 7, 2017. The claim filed with the AAA alleges that “pursuant to the terms of the Advisory Agreement, Uptick was entitled to receive $2,500 per month for three months” plus “an issuance of restricted shares of $50,000 worth of YayYo common stock in exchange for providing certain consulting services to YayYo.” The agreement, according to the demand, was renewed once. The Company has not yet formally responded to the arbitration claim but denies liability and intends to vigorously defend this arbitration on the basis that Uptick failed to comply with the contract. It is unknown what the potential liabilities are but, as of the date of the registration statement of which this prospectus is a part, the Company believes they should not exceed $10,000 in cash and $100,000 worth of stock. Note 11 – Subsequent Events Convertible promissory note On January 8, 2021, the Company, issued a stand-alone $500,000 convertible promissory note (the “Note”) to Mr. John Gray, principal of one of the Company’s largest stockholders, the Gray Mars Venus Trust, Arizona 2015, an Arizona asset management limited partnership (the “Gray Trust”), in return for a loan extended by Mr. Gray to the Company in the principal amount of the Note. The Note accrued interest at a fixed rate of 6% and will mature on January 6, 2022. Any unpaid principal balance on the Note was eligible to be converted at any time, at the option of Mr. Gray, into shares of the Company’s Common Stock, at a price of $0.50 per share. Upon conversion, the common shares Mr. Gray was to have received have registration rights, as specified in the Note. On February 25, 2021, Mr. Gray converted the full amount of the convertible promissory note into 1,000,000 shares of the Company’s common stock. FirstFire Settlement On February 11, 2021, the Company, entered into a settlement agreement and mutual release (the “Settlement Agreement”) with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (“FirstFire”), relating to a pending action in the U.S. District Court in the Southern District of New York, FirstFire Global Opportunities Fund, LLC v. WestPark Capital, Inc. et. al., No. 1:20-cv-03327-LLS (the “Litigation”). The other parties to the Settlement Agreement are the Company’s co-defendants in the Litigation, WestPark Capital, Inc. a Colorado corporation (“WestPark”), Mr. Richard A. Rappaport and Mr. Ramy El-Batrawi, chief executive officer of the Company. The Litigation was commenced by FirstFire in April 2020 and subsequently amended in December 2020. FirstFire was a subscriber to the Company’s initial public offering of Common Stock in November 2019 (the “IPO”). It alleged in the Litigation that the Company and the other named defendants had, in connection with the IPO and the registration statement on Form S-1 filed thereto, committed violations of Sections 11, 12(a) and 15 of the Securities Act of 1933, as amended (the “Securities Act”), Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated under the Exchange Act. Each of the Company, WestPark, Mr. Rappaport and Mr. El-Batrawi vigorously denied and disputed these allegations. In consideration of the releases, covenants, terms and conditions set forth in the Settlement Agreement, FirstFire has agreed to dismiss the Litigation with prejudice, to not file any further litigation relating to the IPO, and to waive and relinquish any and all claims on shares of Common Stock other than as specified in the Settlement Agreement. The Company has agreed to sell to FirstFire one hundred fifty thousand (150,000) shares of Common Stock (the “Settlement Shares”) on or around February 15, 2021, with such shares to be issued pursuant to the exemption from registration under Rule 506(b) of the Act. The purchase price of the Settlement Shares will be $0.066667 per share, or an aggregate of $10,000. Any resale of the Settlement Shares by FirstFire shall be subject to the conditions of Rule 144 of the Securities Act. None of WestPark, Mr. Rappaport or Mr. El-Batrawi are contributing to the Settlement Shares or any other consideration under the Settlement Agreement. Social Reality Settlement On February 19, 2021, the Company entered into a confidential settlement agreement and mutual release (the “Agreement”) with SRAX, Inc., a Delaware corporation formerly known as Social Reality, Inc. (“SRAX”), relating to an action brought by SRAX against the Company in Los Angeles Superior Court on or around February 11, 2020 (the “Litigation”). A description of the Litigation has been included by the Company in its prior filings, most recently in its quarterly report on Form 10-Q for the quarterly period ended September 30, 2020, filed on November 12, 2020. The Company and SRAX have mutually agreed to keep the material terms of the Agreement confidential, subject to disclosure as required by applicable law or regulation. Common Stock issuances In addition to the above-described issuance of Common Stock subsequent to December 31, 2020, the Company has issued the following shares of Common Stock: ● Bridge loan financing On April 12, 2021, the Company, entered into a securities purchase agreement with a certain investor in connection with the issuance, as of that same date, of a 12.5% 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 an initial price of $3.00 per share, and was to mature on January 12, 2022. The note has since been exchanged for 230,375 shares of the Company’s series B preferred stock, par value $0.000001 (the “Series B Preferred Stock”) and a warrant, as described below, and cancelled. The warrant grants the right to purchase 187,500 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 (5) years of the date of issuance. The agreement provided 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 remained outstanding. The warrant include anti-dilution provisions in which its exercise price 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 the exercise price of the warrant. On each of May 12, 2021 and June 12, 2021, the Company issued another warrant for an additional 93,750 common shares to the same investor pursuant to the terms of the agreement. Term loan financing On July 9, 2021, the Company entered into a term loan, guarantee and security agreement with a lender and its agent providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million, with $7.5 million funded upon closing and up to $7.5 million of additional borrowings under a delayed draw term loan facility. This agreement matures on July 9, 2026. Borrowings under it bear interest at LIBOR, plus a margin of 10.0%, with a default interest rate equal to 2.00% per year in the event of an ongoing event of default. The Company’s obligations under this agreement are guaranteed by its wholly-owned subsidiaries, and are a general obligation of the Company secured by substantially all of the Company’s property and assets. The Company may voluntarily prepay the term loans and mandatory prepayment will be required under certain contingencies, with a prepayment fee to be assessed, the amount of which will be calculated depending on when the prepayment is made. The Company has executed and delivered a term note evidencing this loan and has also issued a warrant granting the lender the right to purchase up to 1.5 million shares of Common Stock at an exercise price of $2.10. Exchange of bridge note for preferred stock and warrant In connection with the Company’s entry into the term loan, guarantee and security agreement, the Company also entered into an exchange agreement, dated as of July 8, 2021, with the counterparty to the securities purchase agreement entered into in April 2021. The investor agreed to exchange its note for 230,375 shares of the Company’s Series B Preferred Stock, and a warrant to purchase 93,750 shares of Common Stock at an exercise price of $3.00. The Series B Preferred Stock is subject to mandatory redemption in full at a redemption price initially equal to $10.00 per share, within 15 business days after the date on which the Company has completed an equity financing resulting in total proceeds of at least $10 million. Shares of Common Stock EVmo, Inc. PRELIMINARY PROSPECTUS ThinkEquity , 2021 Through and including INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission (“SEC”) registration fee and the Financial Industry Regulatory Authority, Inc. Item 14. Indemnification of permitted by Section 145 of the Section 145(a) of the DGCL authorizes a corporation to indemnify any person who was or is a party, or is threatened to be made a party, to a threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that the person is or was a director, officer, employee or agent of the Section 145(b) of the DGCL provides in relevant part that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, Section 145(g) of the DGCL As disclosed elsewhere in this registration statement, we plan to Item 15. Recent Sales of Unregistered On March 28, 2019, we sold an aggregate of 80,000 shares to our managing general underwriter, American Business Services, Inc., in a negotiated transaction that satisfied $400,000 in accounts payable, or $5.00 per share. On June 26, 2019, we sold an aggregate of 4,300 shares to RG Alliance, the company which our CFO, Ryan Saathoff, serves as CEO, in a negotiated transaction that satisfied $21,500 in accounts payable, or $5.00 per share. We engaged in three unregistered sales of Common Stock during the fiscal year ended December 31, 2020. The sales are as follows: On June 9, 2020, we sold 125,0000 shares to John P. O’Neill, a member of our Board of Directors, in a negotiated transaction for $0.20 per share, or aggregate cash consideration of $25,000. In the first quarter of On April 12, 2021, the Company, entered into a securities purchase agreement with a certain investor in connection with the issuance, as of On July 9, 2021, the Company entered into a term loan, guarantee and security agreement with a lender and its agent providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million, with $7.5 million funded upon closing and up to $7.5 million of additional borrowings under a delayed draw term loan facility. This agreement matures on July 9, 2026. Borrowings under it bear interest at LIBOR, plus a margin of 10.0%, with a default interest rate equal to 2.00% per year in the event of an ongoing event of default. The Company’s obligations under this agreement are guaranteed by its wholly-owned subsidiaries, and are a general obligation of the Company secured by substantially all of the Company’s property and assets. The Company may voluntarily prepay the term loans and mandatory prepayment will be required under certain contingencies, with a prepayment fee to be assessed, the amount of which will be calculated depending on when the prepayment is made. The Company has executed and delivered a term note evidencing this loan and has also issued a warrant granting the lender the right to purchase up to 1.5 million shares of Common Stock at an exercise price of $2.10. In connection with the Company’s entry into the term loan, guarantee and security agreement, the Company also entered into an exchange agreement, dated as of July 8, 2021, with the counterparty to the securities purchase agreement entered into in April 2021. The investor agreed to exchange its note for 230,375 shares of the Company’s Item 16. Exhibits * To be filed by amendment. Item 17. The undersigned registrant hereby Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to The undersigned registrant hereby undertakes: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to securityholders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. The registrant hereby further undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this We, the undersigned officers and directors of EVmo, Inc., hereby severally constitute and appoint Stephen M. Sanchez and Ryan Saathoff, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him or her and in his or her name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Percentage Ownership After Offering On March 8, 2018, the Company issued to the Selling Securityholder warrants to purchase a total of 1,500,000 shares of Company common(3) This total includes non-qualified stock at the exercise price of $4.00 per share. The shares of Company common stock underlying the Selling Securityholder Warrant are being registered under this prospectus. The Selling Securityholder Warrant expires five years from the date of issuance. See “Certain Relationships and Related Transactions” elsewhere in this prospectus.In March 2018, the Company issued to Aegis Capital Corp., as a placement agent (“Aegis”) warrants (the “Aegis Warrants”) to purchase a certain number of shares of common stock of the Company (“Placement Agent Warrant Shares”) equal to 8% of the aggregate number of securities placed in the Second Note Offering (or the 2018 Senior Secured Note offering), plus any securities underlying any convertible securities placed in the Second Note Offering to such purchasers. The Aegis Warrants provide the holder with the right to purchase the underlying Warrant Shares at a price of $4.00 per share. The Aegis Warrants expires five years from the date of issuance.Options2016 Equity Incentive PlanOn November 30, 2016, we adopted our 2016 Equity Incentive Plan (the “Plan”) to reward and provide incentives to our officers, directors, employees, consultants and other eligible participants. We have set aside options to purchase up to 10,000,000 shares of common stock for issuance under the Plan, which may be granted in the form of either incentive stock options or non-qualified stock options. Our Board of Directors administers the Plan and has the authority: (i) to select the Plan recipients, the time or times at which awards may be granted, the number of shares to be subject to each option awarded, the vesting schedule of the options and (ii) to amend the stock option Plan to reward and provide incentives to its officers, directors, employees, consultants and other eligible participants. As of the date of this prospectus, 750,000 options have been granted under the Plan, of which 720,000 options are vested and exercisable. 100% of the outstanding options have been granted to former officers and directors of the Company. Subsequent to the completion of this offering, the Company expects to continue to issue options as an inducement for managerial and qualified personnel to remain with and to join the Company. As of December 31, 2018, the Company granted an aggregate of 750,000 (450,000 expired in 2018) non-qualified stock options under the plan. As of June 30, 2019, an aggregate of 300,000 non-qualified stock options are vested and exercisable.Restricted StockAs of June 30, 2019, we had issued and outstanding 1,413,820 shares of restricted common stock, of which 924,695 shares are subject to lock-up agreements described elsewhere in this prospectus.Registration RightsThe Selling Securityholder, a principal shareholder of the Company and the holder of the Selling Securityholder Warrant, is entitled to rights with respect to the registration of their shares beneficially owned under the Securities Act. These registration rights are set forth under the terms of the Purchase Agreement, dated March 8, 2018, and as further set forth under a registration rights agreement, dated March 8, 2018, by and between the Company and Bellridge Capital, L.P. (the “Registration Rights Agreement”). For more information see “Certain Relationships and Related Transactions.” The Registration Rights Agreements sets forth a mandatory date for registration of 1,650,000 shares of restricted common stock of the Company beneficially owned as of record by the Selling Securityholder, pursuant to which the parties agreed that as soon as practicable after the date on which the shares of Company common stock, whether as a result of a public offering, merger, recapitalization, reorganization or otherwise, are registered under the Securities Exchange Act of 1934, as amended (each a “Public Company Date”), but in no event later than thirty (30) days after a Public Company Date (the “Filing Deadline”). The Registration Rights Agreement sets forth that the Company shall use its best efforts to cause the registration statement filed on behalf of the registrable securities to become effective as soon as practicable after filing, subject to the Filing Deadline. Under this prospectus, the Company is registering the underlying shares of common stock under the Selling Securityholder Warrant and such other registrable securities in accordance with the terms of the Purchase Agreement and Registration Rights Agreement. We will pay the registration expenses (other than underwriting discounts, selling commissions and stock transfer taxes) of the holders of the shares registered pursuant to the registrations described below.79IndebtednessAs of December 31, 2018, we had outstanding indebtedness, excluding capital leases, of approximately a total of $2,690,181, which consisted of the following: (i) $790,000 in unsecured notes payable to an investor, accruing interest at 5% per annum, to be made due and payable as of August 31, 2019; (ii) $319,667 in unsecured notes payable to an investor, accruing interest at 8% per annum, with principal payments equal to 1/12 of the original balance plus interest due quarterly- due and payable from dates ranging from August 9, 2020 to December 11, 2020; (iii) $222,222 in unsecured notes payable to an investor, accruing interest at 6% per annum, to be made due and payable as of August 31, 2019, as subsequently amended to November 30, 2019; (iv) $1,296,018 in a secured note payable due the earlier of August 31, 2019, as subsequently amended to November 30, 2019, as amended, or the closing of an offering of at least $3,000,000 and (v) $62,274 in unsecured notes payable/line of credit to a merchant banks, accruing interest at 15%. Other than the foregoing, and to vendors and service providers in the ordinary course of our business, we do not have any other credit facilities or other access to bank credit.Our contractual obligations and commercial commitments as of December 31, 2018 are summarized below:Long-term debt—We have long-term debt obligations of nil as of December 31, 2018.Capital lease obligations—We have capital lease obligations of $3,790,147 as of December 31, 2018.Operating leases—We have operating lease obligations of nil as of December 31, 2018.Bellridge Second Note OfferingOn March 8, 2018, YayYo, Inc., entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Selling Securityholder, an “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended) (the “Lender”), pursuant to which the Lender purchased:●a senior secured promissory note in the principal face amount of $6,000,000 due March 8, 2023, subject to extension (the “Second Note”);●warrants to acquire up to an aggregate of 1,500,00093,750 shares with an exercise price of $4.00 per share (the “Warrant Shares”) of common stock (defined below) of the Company (the “Warrants” or the “Selling Securityholder Warrant”);Common Stock.49. (4) ●This total includes non-qualified stock options to purchase up to an aggregate of 20,000 shares of Common Stock.(5) Mr. Mox’s entire beneficial ownership at present consists of non-qualified stock options. (6) 150,000 commitmentThis total includes non-qualified stock options to purchase up to an aggregate of 20,000 shares of Common Stock.(7) This total includes non-qualified stock options to purchase up to an aggregate of 20,000 shares of Common Stock. (8) John Gray has direct beneficial ownership of 1,017,690 shares of Common Stock. The Gray Mars Venus Trust, Arizona 2015, an entity controlled by Mr. Gray (the “Gray Trust”), beneficially owns the remainder of these shares and Mr. Gray has voting and investment power over them. The Gray Trust’s address is 75 Avon Ave, Mill Valley, CA 94941. (9) Bellridge Capital LLC (“BC LLC”) is the investment manager of Bellridge Capital, L.P., Boris Klimov (a.k.a Robert Klimov) is the managing partner and controlling person of BC LLC and he and BC LLC may be deemed to share beneficial ownership of the position reported above, although BC LLC and Mr. Klimov each disclaims beneficial ownership of the securities with respect to which indirect beneficial ownership is described. The total beneficial ownership reported above includes 1,026,122 shares of Common Stock and a warrant to purchase an additional 1,500,000 shares of common stock, par value $0.000001 per share,which is exercisable at any time. Mr. Klimov has voting and investment power over these securities. Bellridge Capital. L.P.’s address is 515 E. Las Olas Boulevard, #120A, Fort Lauderdale, FL 33301 #120A, Fort Lauderdale, FL 33301.(10) Based on a Schedule 13G filed with the Securities and Exchange Commission on March 26, 2021. Acme Auto Leasing LLC (“Acme”)’s address is 440 Washington Avenue, North Haven, CT 06473. Christopher Cullen, the managing member of the Company (the “Commitment Shares”).Acme, has voting and investment power over these shares.In consideration for the Second Note, Warrant Shares and Commitment Shares, the Lender paid an aggregate purchase price of $6,000,000 (the “Second Note Offering”) to be directed and deposited by the Lender in the Company’s Master Restricted Account (defined below).The principal balance of $6,000,000 on the Second Note bears interest at a rate per annum equal to LIBOR plus 100 basis points, subject to adjustment in accordance with the terms of the Second Note. Further, the Company paid $178,228 of issuance costs associated with the Second Note. The relative fair value of the 150,000 Commitment Shares of common stock was $378,916 and the relative fair value of the 1,500,000 Warrant Shares was $3,726,506 and both were recorded as a discount on the Second Note and as additional paid in capital. In addition, the issuance costs of $178,228 have also been recorded as a debt discount. The debt discount of $4,283,650 is being amortized over the term of the Second Note.Under the terms and conditions of the Second Note, the Company is required to adhere to certain obligations and restrictive financial covenants, including but not limited to, the following restrictive covenants:●The Company will not, and the Company shall cause each of its subsidiaries to not, directly or indirectly, incur or guarantee, assume or suffer to exist any indebtedness (other than (i) the Indebtedness evidenced by the Second Note and the First Note and (ii) other Permitted Indebtedness). Under the terms of the Second Note, “Permitted Indebtedness” means (i) indebtedness evidenced by the Second Note and the First Note, (ii) indebtedness secured by permitted liens or unsecured indebtedness and (iii) permitted subordinated indebtedness;50.●The Company shall not, and the Company shall cause each of its subsidiaries to not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock;●At any time a Defeasance Failure exists (defined below), the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, permit any indebtedness of the Company or any of its subsidiaries to mature or accelerate prior to the maturity date of the Second Note. “Defeasance Failure” means, as of any given time of determination, the failure of the cash amount in the Holder Master Restricted Account to be greater than or equal to the outstanding amount. “Holder Master Restricted Account” means, solely with respect to the holder, a certain account at Umpqua Bank, or such other account as may be directed by the holder of the Second Note, from time to time, subject to a Controlled Account Agreement in favor of the holder in a form reasonably acceptable to the holder; and●The Company shall not, and the Company shall cause each of its subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by or publicly contemplated to be conducted by the Company and each of its subsidiaries on March 8, 2018 or any business substantially related or incidental thereto. The Company shall not, and the Company shall cause each of its subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose. 80The Company believes that as of the date of this prospectus, the Company is in compliance with all of the foregoing restricted covenants, including such additional covenants set forth under Second Note. Further, the Company believes that as of the date of this prospectus, the Company is in compliance with all affirmative covenants set forth below.Under the terms and conditions of the Second Note, the Company is required to adhere to certain obligations and affirmative covenants, including but not limited to, the following affirmative covenants:●The Company will establish and maintain a bank account for the holder of the Second Note (collectively, including the Holder Master Restricted Account, the “Master Restricted Accounts”) which Master Restricted Account applicable to a holder of Second Note shall be subject to a deposit account control agreement in form and substance reasonably acceptable to such holder of Notes (each, a “Controlled Account Agreement”). On the issuance date of the Second Note, the Company shall have directed the Lender to deposit an aggregate of $6 million of the purchase price for the Second Note, Commitment Shares and Warrant into Master Restricted Accounts;●Upon the occurrence of any Controlled Account Release Event (defined below), the holder of the Second Note shall, as soon as commercially practicable, but in no event later than two trading days thereafter, cause the applicable Controlled Account Release Amount to be released from the Holder Master Restricted Account and deposited into an bank account specified in writing by the Company on or prior to such date (each a “Controlled Account Release”); provided, that if the Company fails to select a bank account in a writing delivered to the holder on or prior to such second trading day, the holder shall effect such Controlled Account Release as soon as commercially practicable after receipt of such bank account election from the Company. “Controlled Account Release Amount” means, with respect to any given Controlled Account Release Event, such amount of cash as specified in the applicable clause of the definition of “Controlled Account Release Event”. “Controlled Account Release Event” means, as applicable, (i) the Company’s receipt of a notice by the Holder electing to effect a release of cash with respect to any Restricted Principal to the Company or (ii) at any time the outstanding amount hereunder is greater than the cash amount in the Holder Master Restricted Account (such excess amount, the “Excess Collateral”), as long as no event of default has occurred and is continuing, the Company may, by delivery of written notice to the Holder, require the release of such Excess Collateral to the Company from the Holder Master Restricted Account;●The Company grants and pledges to the holder of the Second Note a continuing security interest in any cash or other assets, from time to time, in that certain deposit account called the Holder Master Restricted Account, including any and all cash, proceeds, funds, credits, rights and other assets therein or arising therefrom, from time to time, and any additions, dividends, profits and interest in the foregoing and any replacements or substitutions therefore (collectively, the “Collateral”) to secure prompt repayment of any and all amounts outstanding hereunder from time to time and to secure prompt performance by the Company of each of its covenants and duties under the transaction documents. Such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in later-acquired Collateral. Notwithstanding any filings undertaken related to Holder’s rights under the New York Uniform Commercial Code, the Holder’s Lien (as defined in the Second Note) on the Collateral shall remain in effect for so long as any Restricted Principal remains outstanding. Notwithstanding the foregoing, upon any Controlled Account Release, but solely with respect to such the applicable Controlled Account Release Amount, the holder of the Second Note will automatically release any lien on such Controlled Account Release Amount.“Restricted Principal”means, as of any given date, the difference of (i) all cash amounts held in the Master Restricted Account of the Holder as of the Closing Date of the Second Note Offering and (ii) all cash amounts released from the Master Restricted Account of the holder of the Second Note to the Company (or at the Company’s direction) on or prior to such given date;●Notwithstanding anything herein to the contrary, at the option of the holder of the Second Note, the holder of the Second Note may satisfy all, or any part, of any redemption or other cash payment obligation of the Company hereunder and/or pursuant to any other transaction document (each, a“Cash Payment Obligation”), in whole or in part, at the sole option of the holder of the Second Note, from the Collateral in the Holder Master Restricted Account, including, without limitation, in connection with any redemption hereunder upon any event of default under the Second Note, or any other payment due hereunder (whether at or prior to the Maturity Date). In connection with any Cash Payment Obligation, the Company irrevocably consents to delivery by the holder of the Second Note of an instruction letter to the Controlled Account Bank to release Collateral from the Holder Master Restricted Account in an amount not to exceed such Cash Payment Obligation to the holder of the Second Note. Notwithstanding the foregoing, in the absence of any such election by the holder of the Second Note, the Company shall remain obligated to pay such Cash Payment Obligation to the holder of the Second Note without regard to any Collateral in the Holder Master Restricted Account. Upon the occurrence of any event which could reasonably be expected to result in a Cash Payment Obligation, the holder of the Second Note may, at the holder of the Second Note option, withdraw any Collateral in the Holder Master Restricted Account; provided that (x) such withdrawn amount shall not exceed such amount which the holder of the Second Note reasonably believes would be necessary to satisfy such Cash Payment Obligation, and (y) such withdrawal shall not constitute the delivery of a Redemption Notice hereunder or payment hereunder unless the holder of the Second Note specifies in writing to the Company that the holder of the Second Note has applied such Collateral in satisfaction of such Cash Payment Obligation; and●If the Controlled Account Bank breaches any covenant or other term or condition of any Controlled Account Agreement or otherwise fails to promptly comply with the instructions of the holder of the Second Note in connection with the Collateral, the holder of the Second Note may, at its option, withdraw the Collateral from the Controlled Account Bank and hold such Collateral until such time as (x) the Company and the holder of the Second Note have agreed upon a replacement Controlled Account Bank and (y) a Controlled Account Agreement with respect to such Collateral and a new account shall have been duly executed by the Company, the holder of the Second Note and the replacement Controlled Account Bank. Notwithstanding anything herein to the contrary, if the Company or any of its Subsidiaries receives any of the Collateral in breach of any Controlled Account Agreement (or receives notice from any holder of Notes that an amount was wired to the Company from a Master Restricted Account attributable to such holder of Notes without the proper authorization of such holder of Notes), the Company shall promptly cause such amounts to be returned to such applicable Master Restricted Account.The Company repaid and exchanged a senior secured promissory note in the principal face amount of $6,000,000. On September 12, 2018, the Company entered into a new note payable agreement, as amended on November 1, 2019, whereby the Company repaid $4,821,810 of the original $6,000,000 note payable and the balance of $1,178,190 plus an original issue discount of $117,828 was rolled into a note payable for $1,296,018. This note payable is due the earlier of November 30, 2019, as amended, or the closing of an offering of at least $3,000,000. As a result of this transaction, the Company recognized interest expense for the remaining unamortized debt discount associated of $4,018,560.Related Party DebtCapital and Operating LeasesUNDERWRITINGWe maintain capital leases mainly for certain vehicles maintained and under lease with Distinct Cars, LLC. We have several operating vehicle leases with Acme Auto Leasing LLC (the “Lessor”) with lease terms expiring onThinkEquity, a monthly basis. Asdivision of December 31, 2018, our total future operating lease payments amounted to $4,084,152 and the present value of minimum lease payments under our capital leases amounted to $3,790,147.As of the date of this prospectus, Distinct Cars, LLC, as lessee, entered into series open-ended lease agreements and disclosure statements with the Lessor to lease standard passenger vehicles, each with an approximate lease term of thirty (30) to thirty-six (36) months (each a “Lease Agreement” and collectively, the “Lease Agreements”). Monthly payments under each Lease Agreement range from approximately $342 per month to $621 per month. At the end of the term of the Lease Agreement, Lessee has the right to purchase ownership and title of the subject vehicle for a nominal payment. In addition, the Lease Agreements are subject to the grant of a purchase money security interest on each leased vehicle.As of the date of this prospectus, we are indebted to certain principal stockholders of the Company for loans and advances made to our Company over the past five years in the aggregate amount of $1,518,240.812017 Senior Secured NoteIn December 2017, YayYo,Fordham Financial Management, Inc., issued a senior secured promissory note to the Selling Securityholder, in the original principal amount of $222,222 (the “First Note”). As an inducement for the secured parties to extend the loan as evidenced by the First Note and to secure complete and timely payment of the First Note, YayYo, Inc., as borrower, issued and granted a security interest in all the assets of YayYo, Inc., (including a pledge of securities, owned as of record and beneficially by YayYo, Inc., in the wholly-owned subsidiaries of the Company) and its subsidiaries, existing as of the date of issuance of thereafter acquired. See “Certain Relationships and Related Transactions” elsewhere in this prospectus.2018 Senior Secured NoteOn March 8, 2018, YayYo, Inc., entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Selling Securityholder, an “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended) (the “Lender”), pursuant to which the Lender purchased (i) a senior secured promissory note in the principal face amount of $6,000,000 due March 8, 2023, subject to extension (the “Second Note”). The aggregate purchase price of the Second Note is $6,000,000 (the “Second Note Offering”) to be directed and deposited by the Lender in the Company’s Master Restricted Account (defined below). The principal balance of $6,000,000 on the Second Note bears interest at a rate per annum equal to LIBOR plus 100 basis points, subject to adjustment in accordance with the terms of the Second Note. Further, the Company paid $178,228 of issuance costs associated with the Second Note.YayYo, Inc., obligations to repay and otherwise perform its obligations under the Second Note are secured by a continuing first priority lien and perfected security interest in the $6,000,000 held in the Master Restricted Account (the “Collateral”), to be held and maintained at Umpqua Bank (the “Master Restricted Account”), subject to a deposit account control agreement, dated as of March 7, 2018, by and between YayYo, Inc., the Lender and Umpqua Bank (the “Controlled Account Agreement”). Subject to the terms of the Second Note and Controlled Account Agreement, upon the exercise of the Selling Securityholder Warrant and following YayYo, Inc.’s receipt of a notice by the holder of the Second Note electing to effect a release of cash with respect to the Collateral or at any such time that the outstanding amount of the Collateral is greater than or exceeds the principal face amount under the Second Note, the Lender will release a certain percentage of cash held as Collateral in the Master Restricted Account to YayYo, Inc. Under the terms of the Purchase Agreement, YayYo, Inc., will use any proceeds received and distributed from the Master Restricted Account, if at all, for general corporate purposes. See “Certain Relationships and Related Transactions” elsewhere in this prospectus.The Company repaid and exchanged a senior secured promissory note in the principal face amount of $6,000,000. On September 12, 2018, the Company entered into a new note payable agreement, as amended on November 1, 2019, whereby the Company repaid $4,821,810 of the original $6,000,000 note payable and the balance of $1,178,190 plus an original issue discount of $117,828 was rolled into a note payable for $1,296,018. This note payable is due the earlier of November 30, 2019, as amended, or the closing of an offering of at least $3,000,000. As a result of this transaction, the Company recognized interest expense for the remaining unamortized debt discount associated of $4,018,560.Exclusive forum for adjudication of disputes provision which limits the forum to the Delaware Court of Chancery for certain actions against the CompanyOur Amended and Restated Bylaws provide that, unless we consent in writing to the selection of an alternative forum, a state court in the State of Delaware (or, if that court does not have jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these Bylaws (in each case, as they may be amended from time to time), or (d) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine. This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage lawsuits against us or our directors or officers.Transfer Agent and RegistrarThe transfer agent and registrar for our common stock will be VStock Transfer, LLC.ListingWe have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “YAYO” which listing is a condition to this offering.SHARES ELIGIBLE FOR FUTURE SALEThere is not currently an established U.S. trading market for our common stock. We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding warrants, in the public market after this offering, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.Upon the completion of the sale of 2,500,000 shares of our common stock in our primary offering, a total of 29,302,976 shares of our common stock will be outstanding. This number excludes any issuance of an aggregate of additional shares of common stock that could occur in connection with the conversion of our outstanding convertible promissory notes, options and warrants. All of the shares of common stock and shares of common stock issuable upon exercise of warrants, when sold pursuant to this prospectus, will be freely tradable, except that any shares acquired by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations described below. As of October 31, 2019, our directors and executive officers did not own any of our common stock.82As explained in the Explanatory Note to the registration statement of which this prospectus forms a part, this prospectus is to be used in connection with the potential resale by the Selling Securityholder of up to an aggregate of 1,650,000 shares of our common stock, which shares (including 1,500,000 shares issuable upon exercise of outstanding Selling Securityholder Warrant). We will not receive any of the net proceeds from the sale of shares by the Selling Securityholder; however, we may receive proceeds if the Selling Securityholder Warrant is exercised for cash. The shares of common stock being registered under this prospectus permit public resales of such shares, and the Selling Securityholder may offer the shares for resale from time to time pursuant to this prospectus. The Selling Securityholder may also sell, transfer or otherwise dispose of all or a portion of their shares in transactions exempt from the registration requirements of the Securities Act of 1933, as amended, or pursuant to another effective registration statement covering those shares.25,885,303 shares of our outstanding common stock that are not registered under the registration statement of which this prospectus is a part and have not been registered under another registration statement will be deemed restricted securities as defined under Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration promulgated under the Securities Act. Subject to the provisions of Rule 144, all of the outstanding shares of common stock that are currently restricted are available for sale in the public market under Rule 144.For information about shares of common stock issuable upon the exercise of options and warrants, see “Description of Securities.”In general, under Rule 144 as currently in effect, a person, or group of persons whose shares are required to be aggregated, who is deemed to have been an affiliate at any time during the three months preceding a sale, who has beneficially owned shares that are restricted securities as defined in Rule 144 for at least six months is entitled to sell, within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed 1% of the then outstanding shares of our common stock.Sale under Rule 144 by affiliates, whether of restricted or non-restricted shares, include requirements for current public information about the Company; selling the shares pursuant to broker transactions; and limitations on the number of shares sold within a three-month period.In addition, a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale and who has beneficially owned shares of our common stock for at least six months, including the holding period of any prior owner, except if the prior owner was one of our affiliates, would be entitled to sell all of their shares, provided the availability of current public information about our company. To the extent that shares were acquired from one of our affiliates, a person’s holding period for the purpose of effecting a sale under Rule 144 would commence on the date the shares were acquired from the affiliate.Lock-Up AgreementsOur officers, directors affiliates and certain existing stockholders have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock without the prior written consent of the Representative (as defined herein). An aggregate of 25,067,786 of our outstanding shares of common stock shall be subject to lock-up agreements as follows: (i) 2,900,000 shares of common stock held by X, LLC, 10,325,000 shares of common stock held by Gray Mars Venus Trust, Arizona 2015, 2,844,945 shares of common stock controlled by David Haley, 2,758,824 shares of common stock held by James Malackowiski, 2,018,750 shares of common stock held by John O’Hurley and 1,654,412 shares held by Acuitas Group Holdings, LLC for six months; (ii) 1,500,000 shares of common stock issuable upon exercise of outstanding warrants held by Bellridge Capital, L.P. for 60 days; (iii) 400,000 shares of common stock held by Bellridge Capital, L.P. for 30 days and (iv) an additional 2,165,855 shares of common stock held by other stockholders for periods ranging from 47 days to six months.Except for Acuitas Group Holdings, LLC, with respect to the stockholders locking up their shares of common stock for a period of 180 or 120 days, the lock-up restriction shall not apply to their shares to the extent that such shares are sold for a price per share of no less than $6.00. The 400,000 shares of common stock held by Bellridge Capital, L.P. which are being locked up for 30 days shall not be subject to the lock-up to the extent that such shares are sold for a price per share of no less than $6.00. One additional stockholder is locking up his shares as follows: (i) 150,000 shares shall be locked up until the earlier of (x) 47 after the closing of this offering and (y) such time that the Company’s closing price on The Nasdaq Capital Market is $5.00 per share, and (ii) the balance of such shares (the “Additional Shares”) that are being locked up shall be locked up for a period of 180 days; provided, however, that the lock-up restriction shall not apply to the Additional Shares to the extent that such Additional Shares are sold for a price per share of no less than $6.00. Lastly, one other stockholder is locking up his shares as follows: initially 100% of such stockholders shares shall be locked up; provided, however, commencing 47 days after the closing of this offering, only 90% of such shares shall continue to be subject to such lock up. Furthermore, the 90% of such shares that shall be locked-up shall not be subject to the lock-up to the extent that such shares are sold for a price per share of no less than $6.00.Sale of Founder’s Shares and Voting TrustAs a condition to approving the Company’s common stock for listing on The Nasdaq Capital Market, X, LLC, an entity that is wholly-owned and controlled by Ramy El-Batrawi, our founder and former Chief Executive Officer and former director, agreed to sell 12,525,000 of its 15,425,000 shares of common stock. The 12,525,000 shares (the “Private Shares”) were sold pursuant to an exemption from registration to four existing Company shareholders who qualify as accredited investors (as that term is defined in Securities Act Rule 501(a)). The Private Shares were sold at $3.00 per share in exchange for non-recourse, non-interest-bearing promissory notes with maturities ranging from one year to eighteen months. As a result of the sale, X, LLC’s beneficial ownership shall be reduced to 9.9% of the shares outstanding after the completion of this Offering. We will not receive any proceeds from the sale of the Private Shares. If the offering contemplated by this registration statement is not consummated by January 31, 2020, the parties have agreed to unwind the sale of the Private Shares transaction in compliance with applicable law. Mr. El-Batrawi has also entered into a Voting Trust Agreement (the “Trust”) pursuant to which the voting power of all of his remaining 2,900,000 shares of common stock will be controlled by a trustee who will use the voting power of the common stock held in the Trust to vote on all matters presented for a vote of stockholders in the same proportion that the shares of common stock not subject to the Trust voted on such matters.Electronic DistributionA prospectus in electronic format may be made available on the websites maintained by Selling Securityholder, if any, participating in the offering. The Selling Securityholder may agree to allocate a number of shares of common stock to their online brokerage account holders. Internet distributions will be allocated by the Selling Securityholder to make Internet distributions on the same basis as other allocations.Aegis Capital Corp. is acting as the lead managing underwriter and as representative of the underwriters (the “Representative”“Representative”). Subject to the terms and conditions of an underwriting agreement between us and the Representative, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of shares of common stockCommon Stock listed next to its name in the following table:UnderwriterUnderwriters Number of shares of common stockShares ThinkEquity, a division of Fordham Financial Management, Inc. Aegis Capital Corp.Total WestPark Capital, Inc. Totalare committed to purchase allpay for and accept delivery of the shares of common stock offered by this prospectus if they purchase anyare subject to various conditions and representations and warranties, including the approval of certain legal matters by their counsel and other conditions specified in the underwriting agreement. The shares of common stock. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased, or the offering may be terminated. The underwritersCommon Stock are not obligated to purchase the shares of common stock coveredoffered by the underwriters’ option to purchase additional shares of common stock described below. The underwriters, are offering the shares of common stock, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, and other conditions contained in the underwriting agreement, such as the receiptby the underwriters of officer’s certificates and legal opinions.them. The underwriters reserve the right to withdraw, cancel or modify offersthe offer to the public and to reject orders in whole or in part.Over-allotment OptionWe have granted the representative of the underwriters, an option exercisable, for up to 45 days after the date of the underwriting agreement, to purchase up to shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts. The underwriters may exercise this option solely to cover over-allotments, if any, made in connection with this offering.To the extent the option is exercised, and the conditions of the underwriting agreement are satisfied, we will be obligated to sell to the underwriters,take and the underwriters will be obligated to purchase, these additional shares of common stock.Discounts and CommissionsWe have agreed to pay the underwriters a cash fee equal to 8.0% of the aggregate gross proceeds.The Representative has advised us that the underwriters propose to offer the shares directly to the public at the public offering price set forth on the cover of this prospectus. In addition, the Representative may offer some of the shares to other securities dealers at such price less a concession of up to $[ ] per share. After the offering to the public, the offering price and other selling terms may be changed by the Representative without changing the Company's proceeds from the underwriters’ purchase of the shares.The following table shows the public offering price, underwriting discounts and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option. The underwriting discounts are equal to the public offering price per share less the amount per share the underwriters pay us for the shares.Per Share ofCommon StockTotal without Over-allotment OptionTotalOver-allotment OptionPublic offering price$$$Underwriting discounts$$$Proceeds, before expenses, to us$$$$$$We have agreed to pay the Representative a non-accountable expense allowance of 1% of the gross proceeds of the offering. We estimate that the total expenses, but excluding underwriting discounts and commissions and the 1% non-accountable expense allowances, will be approximately $100,000, all of which are payable by us. This figure includes expense reimbursements we have agreed to pay the Representative for reimbursement of its expenses related to the offering up to a maximum aggregate expense allowance of $125,000, for which we have paid a $50,000 advance, which will be returned to us to the extent not offset by actual expenses.Underwriters’ WarrantsAs additional compensation to the underwriters, upon consummation of this offering, we will issue to the underwriters or their designees warrants to purchase an aggregate number of shares of our common stock equal to 5% of the number of shares of common stock issued in this offering (excluding shares of common stock sold to cover over-allotments, if any), at an exercise price per share equal to 125% of the initial public offering price (the “Underwriters’ Warrants”). The Underwriters’ Warrants and the underlying shares of common stock will not be exercised exercise, sold, transferred, assigned, or hypothecated or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Underwriters’ Warrants by any person for a period of 180 days from the effective date of the registration statement (the “Effective Date”) for this offering in accordance with FINRA Rule 5110. The Underwriters’ Warrants will be exercisable, in whole or in part, commencing one year from the Effective Date and will expire on the fifth anniversary of the Effective Date of the registration statement for this offering. In addition, we have granted the underwriters a one-time demand registration right and unlimited “piggyback” registration rights with respect to the underlying shares. The piggyback registration right will not be greater than seven years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G)(v).Determination of Offering PriceBefore this offering, there has been no public market for our common stock. Accordingly, the public offering price will be negotiated between us and the Representative. Among the factors to be considered in these negotiations are:●the prospects for our Company and the industry in which we operate;●our past and present financial and operating performance;●financial and operating information and market valuations of publicly traded companies engaged in activities similar to ours;●the prevailing conditions of United States securities markets at the time of this offering; and●other factors deemed relevant.85Lock-UpAgreementsWe and each of our officers, directors affiliates and certain existing stockholders have agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock without the prior written consent of the Representative. An aggregate of 25,067,786 of our outstanding shares of common stock shall be subject to lock-up agreements as follows: (i) 2,900,000 shares of common stock held by X, LLC, 10,325,000 shares of common stock held by Gray Mars Venus Trust, Arizona 2015, 2,844,945 shares of common stock controlled by David Haley, 2,758,824 shares of common stock held by James Malackowiski, 2,018,750 shares of common stock held by John O’Hurley and 1,654,412 shares held by Acuitas Group Holdings, LLC for six months; (ii) 1,500,000 shares of common stock issuable upon exercise of outstanding warrants held by Bellridge Capital, L.P. for 60 days; (iii) 400,000 shares of common stock held by Bellridge Capital, L.P. for 30 days and (iv) an additional 2,165,855 shares of common stock held by other stockholders for periods ranging from 47 days to six months; provided, however, certain shares may not be subject to a lock up period in the event that such shares are sold at certain minimum prices (see “Shares Eligible for Future – Lock-Up Agreements”).The Representative may in its sole discretion and at any time without notice release some or all of the shares subject to lock-up agreements prior to the expiration of the lock-up period. When determining whether or not to release shares from the lock-up agreements, the Representative will consider, among other factors, the security holder's reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time.Pursuant to the underwriting agreement, we have also agreed, for a period of 180 days from the date of the offering, that we will not, subject to specified exempt issuances, offer, pledge, issue, sell, contract to sell, purchase, contract to purchase, lend, or otherwise transfer or dispose of, directly or indirectly,Common Stock offered by this prospectus if any such shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or suchare taken, other securities, in cash or otherwise; or (iii) file any registration statement with the SEC relating to the offering of anythan those shares of common stock or any securities convertible into or exercisable or exchangeable for common stock.Right of First RefusalAccording toCommon Stock covered by the terms of the underwriting agreement, the Representative shall have the right of first refusal for a period of twelve months after the closing of this offering to act as sole book-running manager for all future public equity offerings by us, or any successor to or subsidiary of our company, during such period.Indemnificationover-allotment option described below.Electronic Offer, Sale and DistributionWe have granted a 45-day option to the representative of SharesAthe underwriters to purchase up to additional shares of our Common Stock at a public offering price of $ per share, solely to cover over-allotments, if any. The representative of the underwriters may exercise this option for 45 days from the date of this prospectus in electronic format may be made available on a website maintainedsolely to cover sales of shares of Common Stock by the Representative and may also be made available on a website maintained by other underwriters. The underwriters may agree to allocate ain excess of the total number of shares toof Common Stock set forth in the table above. If any of these additional shares are purchased, the underwriters for sale to their online brokerage account holders. Internet distributions will be allocated byoffer the Representative to underwriters that may make Internet distributionsadditional shares on the same basisterms as those on which the shares are being offered.allocations. Inselling terms by means of a supplement to this prospectus.51. Per
SharePublic offering price $ $ $ Underwriting discount (7%) $ $ $ Proceeds, before expenses, to us $ $ $ Non-accountable expense allowance (1%)(1) $ $ $ (1) The non-accountable expense allowance will not be payable with respect to the representative’s exercise of the over-allotment option, if any. syndicate membersstamp taxes, if any, payable upon the transfer of securities from us to the underwriters; (l) the costs associated with post-closing advertising the offering in the national editions of the Wall Street Journal and New York Times; (m) the costs associated with bound volumes of the public offering materials as well as commemorative mementos and lucite tombstones, each of which we or our designee will provide within a reasonable time after the closing in such quantities as the Representative may distribute prospectuses electronically. No formsreasonably request, in an amount not to exceed $3,000; (n) the fees and expenses of electronicour accountants; (o) the fees and expenses of our legal counsel and other agents and representatives; (p) fees and expenses of the Representative’s legal counsel not to exceed $75,000; (q) the $29,500 cost associated with the underwriters’ use of Ipreo’s book-building, prospectus other than prospectuses thattracking and compliance software for the offering; (r) $10,000 for data services and communications expenses; and (t) up to $20,000 of the underwriters’ actual accountable “road show,” market making and trading, and clearing firm settlement expenses for the offering.printableapproximately $ .52. Adobe® PDFcompensation warrants to purchase up to shares of Common Stock (5% of the aggregate number of shares of Common Stock sold in this offering exclusive of the over-allotment option, or the representative’s warrants). The representative’s warrants will be usedexercisable at a per share exercise price equal to 125% of the public offering price per share in this offering. The representative’s warrants are exercisable at any time and from time to time, in whole or in part, commencing on a date that is one (1) year from the commencement of sales of securities in connection with this offering and expiring on the five-year anniversary of the commencement of sales of securities in connection with this offering.underwritersrepresentative’s warrants have informed usbeen deemed compensation by FINRA and are therefore subject to a minimum 180-day lock-up pursuant to Rule 5110 (e)(1)(A) of FINRA; however, the Representative has agreed to one year lock-up period as described in the preceding paragraph. The Representative (or permitted assignees under Rule 5110(e)(1)(A)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of one (1) year from the date of commencement of the sale of the securities in this offering. In addition, the warrants provide for registration rights upon request, in certain cases. The sole demand registration right provided will not be greater than five years from the commencement of the sale of the securities in this offering than and a one-time piggyback registration right provided will not be greater than seven years from the commencement of the sale of the securities in this offering in compliance with applicable FINRA rules. We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of Common Stock at a price below the warrant exercise price.53. confirm sales of shares offered by this prospectus to accounts over which they exercise discretionary authority.Other than the prospectus in electronic format, the information on any underwriter's website and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us orretain any underwriter in its capacity as underwriter and should not be relied upon by investors.to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.common stock.Common Stock. Specifically, the underwriters may over-allot in connection with this offering by selling more shares than are set forth on the cover page of this prospectus. This creates a short position in our common stockCommon Stock for its own account. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stockCommon Stock over-allotted by the underwriters is not greater than the number of shares of common stockCommon Stock that they may purchase in the over-allotment option. In a naked short position, the number of shares of common stockCommon Stock involved is greater than the number of shares of common stockCommon Stock in the over-allotment option. To close out a short position, the underwriters may elect to exercise all or part of the over-allotmentover- allotment option. The underwriters may also elect to stabilize the price of our common stockCommon Stock or reduce any short position by bidding for, and purchasing, common stockCommon Stock in the open market.54. a securityshares of Common Stock in this offering because the underwriter repurchases that securitythe shares of Common Stock in stabilizing or short covering transactions.common stockCommon Stock in market making transactions, including “passive” market making transactions as described below.common stockCommon Stock at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriters are not required to engage in these activities, and may discontinue any of these activities at any time without notice. These transactions may be effected on the national securities exchange on which our shares of Common Stock are traded, in the over-the-counter market, or otherwise. and selling group members, if any, or their affiliates may engage in passive market making transactions in our common stockCommon Stock immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 generally provides that:a passive market maker may not effect transactions or display bids for our common stock in excess of the highest independent bid price by persons who are not passive market makers:● a passive market maker may not effect transactions or display bids for our Common Stock in excess of the highest independent bid price by persons who are not passive market makers; ● net purchases by a passive market maker on each day are generally limited to 30% of the passive market maker'smaker’s average daily trading volume in our common stockCommon Stock during a specified two-month prior period or 200 shares of Common Stock, whichever is greater, and must be discontinued when that limit is reached; and ● passive market making bids must be identified as such. CertainRelationshipsIndemnificationCertainWe have agreed to indemnify the underwriters against liabilities relating to this offering arising under the Securities Act and the Exchange Act, liabilities arising from breaches of some or all of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.andor by their affiliates have provided and may in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they have or may in the future receive customary fees, however, except for the right of first refusal disclosed inaffiliates. Other than this prospectus we have no present arrangements within electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the underwriters forregistration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any further services.underwriter in its capacity as underwriter, and should not be relied upon by investors.OfferSelling Restrictions Outside the United StatesOther than in the United States, noNo action has been taken by us orin any jurisdiction (except in the underwritersUnited States) that would permit a public offering of our common stock, or the securities offered bypossession, circulation or distribution of this prospectus or any other material relating to us or our Common Stock in any jurisdiction where action for that purpose is required. The securities offered by this prospectusAccordingly, our common stock may not be offered or sold, directly or indirectly, nor mayand this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securitiesour common stock may be distributed or published, in or from any country or jurisdiction, except under circumstances that will result in compliance with theany applicable rules and regulations of any such country or jurisdiction.55. jurisdiction. Persons into whose possessionRelevant State prior to the publication of a prospectus in relation to the common stock which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:● to legal entities which are qualified investors as defined under the Prospectus Regulation; ● by the underwriters to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or ● in any other circumstances falling within Article 1(4) of the Prospectus Regulation, comes(including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are advisedexercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to inform themselves aboutany applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.56. observeinclude the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any restrictionsof the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.offeringsecurities have not been, and will not be, submitted to the distributionAMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.57. prospectus. This prospectusdocument does not constitute an offera prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to sell(i) qualified investors as defined in Regulation 2a solicitation of an offer to buy anylegal persons who are not qualified investors.● to Italian qualified investors, as defined in Article 100 of Decree no.58 by reference to Article 34-ter of CONSOB; ● Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended; ● Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be: ○ made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and ○ in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws. 58. jurisdictionway by the Central Bank of the United Arab Emirates or any other governmental authority in which suchthe United Arab Emirates, nor has the Company received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or a solicitation is unlawful.EXPERTSinvitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by the Company.AJ Robbins CPA, LLC, an independent certified public accounting firm, audited our financial statementsNo offer or invitation to subscribe for the years ended December 31, 2018 and 2017. We have included our financial statements in this prospectus and elsewheresecurities is valid or permitted in the registration statement in reliance on the reports of AJ Robbins CPA, LLC, given on their authority as experts in accounting and auditing.Dubai International Financial Centre.59. Certain legal matters with respect to theThe validity of the securities being offered by this prospectus will be passed upon for us by Carmel, Milazzo Withers Bergman, LLP, Los Angeles, California. Gracin& DiChiara LLP, New York, New York. Sheppard, Mullin, Richter & HamptonMarlow, LLP, New York, New York is acting as counsel for the underwriters in connection with respect to the primarythis offering.the sharesthis offering of our common stock offered by this prospectus.securities. This prospectus which constitutes ais part of thethat registration statement,statement. This prospectus does not contain all of the information set forth in the registration statement some of which is contained inor the exhibits to the registration statement as permitted by the rules and regulations of the SEC.statement. For further information with respect to us and our common stock,the securities we are offering pursuant to this prospectus, you should refer you to the registration statement including the exhibits filed as a part of the registration statement.and its exhibits. Statements contained in this prospectus concerningas to the contents of any contract, agreement or any other document isreferred to are not necessarily complete. If acomplete, and you should refer to the copy of that contract or document has beenother documents filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. You may obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330.statement. The SEC also maintains an Internetinternet website that contains reports, proxy statements and other information about issuers,registrants, like us, that file electronically with the SEC. The address of that website iswww.sec.gov.We are subject to You may read the information and reporting requirements of the Exchange Act and, in accordance with this law, are required to file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copyingregistration statement at the SEC’s public reference facilities and the website of the SECweb site referred to above. We also maintain a website atwww.yayyo.comwww.evmo.com. You, through which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. InformationOur website address also includes all of the press releases we have issued since our formation and an investor relations page. Our investor relations page includes a link to all of our registration statements and periodic reports posted on the SEC’s EDGAR site, including but not limited to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act. These reports are available free of charge and may be accessed via our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. However, the information contained onin or accessible through our website is not a part of this prospectus or the registration statement of which this prospectus forms a part, and the inclusion ofinvestors should not rely on such information in making a decision to purchase our website addressCommon Stock in this prospectus is an inactive textual reference only.INDEX TO FINANCIAL STATEMENTSoffering.YAYYO, INCDISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITYFinancial Statements60. December 31, 2018 and 2017Index to financial statementsContentsFinancial Statements for the six months ended March 31, 202161. March 31, December 31, 2021 2020 (unaudited) ASSETS Current Assets: Cash $ 155,476 $ 72,890 Accounts receivable 41,635 119,239 Prepaid expenses 55,676 23,861 Total current assets 252,787 215,990 Property and equipment, net 48,133 1,908 Rental vehicles, net 8,783,269 6,196,433 Right of use asset 239,513 - Other assets 200,000 200,000 TOTAL ASSETS $ 9,523,702 $ 6,614,331 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable (including $110,762 and $590,176 to related party) $ 1,150,690 $ 1,157,299 Accrued expenses 253,928 961,704 Notes payables, current (net of discount of $184 and $1,973) 639,370 666,132 Customer deposit - related party 275,000 150,000 Advance from related parties 569,281 100,000 Finance lease obligations, current 2,091,533 1,426,425 Operating lease obligations, current 128,673 - Total current liabilities 5,108,475 4,461,560 Note payable, net of current portion 149,414 149,414 Finance lease obligations, net of current portion 2,348,901 926,453 Operating lease obligations, net of current portion 122,894 TOTAL LIABILITIES 7,729,684 5,537,427 Commitments and contingencies - - STOCKHOLDERS’ EQUITY Preferred stock, $0.000001 par value; 10,000,000 shares authorized; nil shares issued and outstanding - - Common stock, $0.000001 par value; 90,000,000 shares authorized; 35,127,524 and 31,981,374 shares issued and outstanding 35 32 Additional paid-in capital 34,885,638 29,750,864 Accumulated deficit (33,091,655 ) (28,673,992 ) Total stockholders’ equity 1,794,018 1,076,904 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 9,523,702 $ 6,614,331 F-1. 2021 2020 Revenue $ 2,294,532 $ 1,747,642 Cost of revenue 1,780,903 1,401,291 Gross profit 513,629 346,351 Operating expenses: Selling and marketing expenses 165,748 131,509 Product development 9,500 - General and administrative expenses 1,439,101 1,896,206 Total operating expenses 1,614,349 2,027,715 Loss from operations (1,100,720 ) (1,681,364 ) Other income (expense): Interest and financing costs (3,324,943 ) (79,856 ) Gain on forgiveness of debt 8,000 - Total other income (expense) (3,316,943 ) (79,856 ) Net loss $ (4,417,663 ) $ (1,761,220 ) Weighted average shares outstanding : Basic 33,383,431 29,427,803 Diluted 33,383,431 29,427,803 Loss per share Basic $ (0.13 ) $ (0.06 ) Diluted $ (0.13 ) $ (0.06 ) F-2. Common Stock Additional
Paid-in Accumulated Total
Stockholders’ Equity Shares Amount Capital Deficit (Deficit) Balance, December 31, 2020 31,981,374 $ 32 $ 29,750,864 $ (28,673,992 ) $ 1,076,904 Issuance of common stock for cash 100,000 - 50,000 - 50,000 Issuance of common stock for exercise of stock options 35,000 - 15,400 - 15,400 Issuance of common stock for cashless exercise of stock options 960,550 1 (1 ) - - Issuance of common stock for settlement of litigation 225,000 - 1,103,750 - 1,103,750 Issuance of common stock for conversion of convertible debt 1,000,000 1 499,999 - 500,000 Issuance of common stock for settlement agreement 825,000 1 3,240,599 - 3,240,600 Issuance of common stock for financing cost 600 - 1,440 - 1,440 Beneficial conversion feature associated with convertible debt - - 30,000 - 30,000 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 Balance, December 31, 2019 29,427,803 $ 29 $ 28,735,894 $ (25,171,915 ) $ 3,564,008 Stock option expense - - 457,242 - 457,242 Net loss - - - (1,761,220 ) (1,761,220 ) Balance, March 31, 2020 29,427,803 $ 29 $ 29,193,136 $ (26,933,135 ) $ 2,260,030 F-3. 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (4,417,663 ) $ (1,761,220 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 463,251 314,785 Stock option expense 193,587 457,242 Amortization of debt discounts 31,789 9,953 Common stock issued for financing costs 1,440 - Common stock issued for settlement agreement 3,240,600 - Gain on forgiveness of debt (8,000 ) Operating lease expense 18,708 Changes in operating assets and liabilities: Accounts receivable 77,604 21,492 Prepaid expenses (31,815 ) 14,460 Other assets - - Accounts payable 402,141 529,974 Accrued expenses (12,776 ) (148,216 ) Customer deposit - related party 125,000 - Operating lease liability (6,654 ) - Net cash provided by (used in) operating activities 77,212 (561,530 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (47,051 ) - Deposit for vehicles - (35,537 ) Net cash used in investing activities (47,051 ) (35,537 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock 50,000 - Proceeds from exercise of stock options 15,400 - Proceeds from advance from related parties 503,766 - Repayment of advance from related parties (34,485 ) - Proceeds from convertible note payable 500,000 - Repayment of notes payable (20,551 ) - Repayment of finance lease obligations (961,705 ) (621,783 ) Net cash provided by (used in) financing activities 52,425 (621,783 ) NET INCREASE (DECREASE) IN CASH 82,586 (1,218,850 ) CASH, BEGINNING OF PERIOD 72,890 1,256,429 CASH, END OF PERIOD $ 155,476 $ 37,579 CASH PAID FOR: Interest $ 51,114 $ 69,903 Income taxes $ - $ - SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES Payment of accounts payable/accrued expenses with common stock $ - $ - Finance lease obligations $ 3,705,417 $ 2,246,285 F-4. F-5. Computer equipment 5 years Officer furniture 7 years Leasehold improvements 15 years or term of lease whichever is less Vehicles 5 years F-6. ● 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. F-7. March 31, December 31, 2021 2020 Computer equipment $ 6,046 $ 6,046 Office furniture 17,401 - Leasehold improvement 29,650 - 53,097 6,046 Less accumulated depreciation (4,964 ) (4,138 ) Equipment, net $ 48,133 $ 1,908 F-8. March 31, December 31, 2021 2020 Rental vehicles $ 12,117,146 $ 9,067,885 12,117,146 9,067,885 Less accumulated depreciation (3,333,877 ) (2,871,452 ) Rental vehicles, net $ 8,783,269 $ 6,196,433 March 31, December 31, 2021 2020 Notes payable to individual investors; accrue interest at 8% per annum; principal payments equal to 1/12 of original balance plus interest due quarterly; due from dates ranging from August 9, 2020 to March 26, 2021; unsecured (A) $ 304,667 $ 304,667 Note payable to the Small Business Administration. The note bears interest at 3.75% per annum, requires monthly payments of $731 after 12 months from funding and is due 30 years from the date of issuance. 148,863 149,414 Note payable issued under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in the amount of $192,775. The loan has terms of 24 months and accrues interest at 1% per annum. During the year ended December 31, 2020, $184,775 of this loan has been forgiven as provided for in the CARES Act. - 8,000 Notes payable to a finance company, default interest at 14% per annum; monthly principal payments ranging from $10,000 to $40,000 with unpaid principal due on December 15, 2021 335,438 355,438 Total notes payable 788,968 817,519 Unamortized debt discount (184 ) (1,973 ) Notes payable, net discount 788,784 815,546 Less current portion (642,166 ) (666,132 ) Long-term portion $ 146,618 $ 149,414 Notes payable, December 31, 2020 $ 815,546 Forgiveness of note payable (8,000 ) Repayments (20,551 ) Amortization of debt discounts 1,789 Notes payable, March 31, 2021 $ 788,784 F-9. March 31, December 31, 2021 2020 Lease obligations $ 4,440,434 $ 2,352,878 Less current portion (2,091,533 ) (1,426,425 ) Long-term portion $ 2,348,901 $ 926,453 Lease obligations, December 31, 2020 $ 2,352,878 New lease obligations 3,049,261 Payments on lease obligations (961,705 ) Lease obligations, March 31, 2021 $ 4,440,434 Twelve Months Ending March 31, 2022 $ 2,271,153 2023 1,460,669 2024 1,011,377 Total payments 4,743,199 Less: imputed interest (302,765 ) Total obligation 4,440,434 Less: current portion (2,091,533 ) Non-current capital leases obligations $ 2,348,901 F-10. March 31, Classification on Balance Sheet 2021 Assets Operating lease assets Operating lease right of use assets $ 239,513 Total lease assets $ 239,513 Liabilities Current liabilities Operating lease liability Current operating lease liability $ 128,673 Noncurrent liabilities Operating lease liability Long-term operating lease liability 122,894 Total lease liability $ 251,567 Twelve Months Ending March 31, 2022 $ 157,800 2023 131,500 Total payments 289,300 Less: imputed interest (37,733 ) Total obligation 251,567 Less: current portion (128,673 ) Non-current capital leases obligations $ 122,894 ● issued 100,0000 shares of Common Stock to a member of the Company’s Board of Directors, in a negotiated transaction for $0.50 per share, or aggregate cash consideration of $50,000; ● issued 35,000 shares of Common Stock for the exercise of 35,000 stock options for cash consideration of $15,400; ● issued 960,550 shares of Common Stock for the cashless exercise of 1,000,000 stock options; ● issued 600 shares of Common Stock to an investor in connection with a prior note payable agreement; F-11. ● issued 1,000,000 shares of Common Stock in connection with the conversion of a convertible note payable for $500,000; ● issued an aggregate of 225,000 shares of Common Stock in connection with legal settlements. The shares were valued at $1,103,750 which was based on the market price of the Common Stock on the grant date; and ● issued 825,000 shares to Acuitas Group Holdings, LLC, (“Acuitas”) which is now the Company’s largest shareholder, in connection with a settlement agreement between Acuitas and X, LLC, a company owned by the Company’s former chief executive officer. The board of directors deemed it was in the best interest of the Company to issue the shares to Acuitas. The value of the shares was $3,240,600 which is based on the market price of the Company’s Common Stock at the grant date. The $3,240,600 was expensed as financing costs as the dispute underlying the settlement agreement related to an anti-dilution of a prior investment in the Company by Acuitas. Weighted Weighted Average Average Remaining Aggregate Options Exercise Contractual Intrinsic Outstanding Price Life Value Outstanding, December 31, 2020 2,540,000 $ 0.22 4.52 $ 1,074,245 Granted 250,000 0.51 Forfeited - 0.00 Exercised (1,035,000 ) 0.220 Outstanding, March 31, 2021 1,755,000 $ 0.25 4.34 $ 5,525,075 Exercisable, March 31, 2021 899,250 $ 0.27 4.37 $ 2,815,349 Outstanding Exercisable Number of Exercise Number of Exercise Options Price Options Price 20,000 $ 0.210 20,000 $ 0.210 1,505,000 0.215 716,750 0.215 25,000 0.220 7,500 0.220 205,000 0.530 155,000 0.530 1,755,000 899,250 Weighted Average Remaining Aggregate Warrants Exercise Contractual Intrinsic Outstanding Price Life Value Outstanding, December 31, 2020 1,631,250 $ 4.08 2.38 $ - Granted - Forfeited - Exercised - Outstanding, March 31, 2021 1,631,250 $ 4.08 2.13 $ - Exercisable, March 31, 2021 1,631,250 $ 4.08 2.13 $ - F-12. Outstanding and Exerciseable Number of Exercise Warrants Price 1,500,000 $ 4.00 131,250 5.00 1,631,250 F-13. F-14. F-15. YayyoEVmo, Inc.Yayyo,EVmo, Inc.(the “Company”) as of December 31, 20182020 and 2017,2019, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years in the two yearsyear period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Yayyo,EVmo, Inc. as of December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the years in the two yearsyear period then ended, in conformity with accounting principles generally accepted in the United States of America.Mattera Matter-Risks and Uncertaintiesdiscusseddescribe in Note 13 to1, the financial statements,COVID-19 virus could ultimately have a significant negative impact on the 2017 financial statements have been restated to correct a misstatement. Our opinion is not modified with respect toCompany. The Company cannot at this matter.time estimate the long-term effect of this unprecedented situation
22, 201929, 2021YAYYO, INC.F-16. CONSOLIDATED BALANCE SHEETSConsolidated Balance Sheets20182020 and 20172019 2018 2017 (restated) ASSETS Current Assets: Cash $ 277,444 $ 308,738 Accounts receivable - - Prepaid expenses 108,900 13,406 Total current assets 386,344 322,144 Equipment, net 5,092 2,860 Leased assets, net 5,115,117 2,033,482 Deferred offering costs 66,500 - TOTAL ASSETS $ 5,573,053 $ 2,358,486 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current Liabilities: Accounts payable (including $334,471 in 2018 to related party) $ 719,386 $ 100,000 Accrued expenses 494,066 31,453 Notes payables, current (net of discount of $72,211 and $48,600) 2,617,970 254,511 Finance lease obligations, current 1,562,651 555,090 Total current liabilities 5,394,073 941,054 Notes payable, net of current portion (net of discount of $54,190) - 552,588 Finance lease obligations, net of current portion 2,227,496 1,038,201 TOTAL LIABILITIES 7,621,569 2,531,843 Commitments and contingencies - - STOCKHOLDERS’ DEFICIT Preferred stock, $0.000001 par value; 10,000,000 shares authorized; nil shares issued and outstanding Common stock, $0.000001 par value; 90,000,000 shares authorized; 26,718,676 and 25,770,551 shares issued and outstanding 27 26 Additional paid-in capital 19,193,151 7,879,189 Accumulated deficit (21,241,694 ) (8,052,572 ) Total stockholders’ deficit (2,048,516 ) (173,357 ) TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 5,573,053 $ 2,358,486 2020 2019 ASSETS Current Assets: Cash $ 72,890 $ 1,256,429 Accounts receivable 119,239 59,331 Prepaid expenses 23,861 782,900 Total current assets 215,990 2,098,660 Equipment, net 1,908 3,395 Rental vehicles, net 6,196,433 4,737,047 Deposit on vehicles - 164,080 Other assets 200,000 200,000 TOTAL ASSETS $ 6,614,331 $ 7,203,182 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable (including $590,176 and $394,183 to related party) $ 1,157,299 $ 545,254 Accrued expenses (including $0 and $171,665 to related party) 961,704 405,977 Notes payables, current (net of discount of $1,973 and $32,289) 666,132 287,378 Customer deposit - related party 150,000 - Advance from related party 100,000 - Finance lease obligations, current 1,426,425 1,416,446 Total current liabilities 4,461,560 2,655,055 Note payable, net of current portion 149,414 - Finance lease obligations, net of current portion 926,453 984,119 TOTAL LIABILITIES 5,537,427 3,639,174 Commitments and contingencies - - STOCKHOLDERS’ EQUITY Preferred stock, $0.000001 par value; 10,000,000 shares authorized; nil shares issued and outstanding - - Common stock, $0.000001 par value; 90,000,000 shares authorized; 31,981,374 and 29,427,803 shares issued and outstanding 32 29 Additional paid-in capital 29,750,864 28,735,894 Accumulated deficit (28,673,992 ) (25,171,915 ) Total stockholders’ equity 1,076,904 3,564,008 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 6,614,331 $ 7,203,182 F-17. YAYYO, INC.EVmo, Inc.CONSOLIDATED STATEMENTS OF OPERATIONSConsolidated Statements of OperationsYearYears Ended December 31, 20182020 and 20172019 2018 2017 (restated) Revenue $ 3,289,478 $ 235,690 Cost of revenue 2,374,397 213,111 Gross profit 915,081 22,579 Operating expenses: Selling and marketing expenses 482,811 86,098 Product development 9,699 303,555 General and administrative expenses 6,584,251 3,249,659 Impairment of leased assets 2,388,000 2,800,000 Total operating expenses 9,464,761 6,439,312 Loss from operations (8,549,680 ) (6,416,733 ) Other income (expense): Interest and financing costs (4,639,442 ) (192,395 ) Change in value of derivative liability - 40,265 Total other income (expense) (4,639,442 ) (152,130 ) Net loss $ (13,189,122 ) $ (6,568,863 ) Weighted average shares outstanding: Basic 26,321,137 25,297,066 Diluted 26,321,137 25,297,066 Loss per share Basic $ (0.50 ) $ (0.26 ) Diluted $ (0.50 ) $ (0.26 ) 2020 2019 Revenue $ 7,621,180 $ 6,914,910 Cost of revenue 5,263,474 4,673,870 Gross profit 2,357,706 2,241,040 Operating expenses: Selling and marketing expenses 490,403 765,441 Product development - 13,500 General and administrative expenses 5,288,316 4,023,921 Loss on the settlement of debt - 252,900 Total operating expenses 5,778,719 5,055,762 Loss from operations (3,421,013 ) (2,814,722 ) Other income (expense): Interest and financing costs (265,839 ) (1,115,499 ) Gain on forgiveness of debt 184,775 - Total other income (expense) (81,064 ) (1,115,499 ) Net loss $ (3,502,077 ) $ (3,930,221 ) Weighted average shares outstanding : Basic 31,118,425 27,112,557 Diluted 31,118,425 27,112,557 Loss per share Basic $ (0.11 ) $ (0.14 ) Diluted $ (0.11 ) $ (0.14 ) F-18. YAYYO, INC.EVmo, Inc.CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)Consolidated Statements of Stockholders’ EquityYearYears Ended December 31, 20182020 and 20172019 Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Deficit Balance, December 31,2016 25,011,000 $ 25 $ 1,382,930 $ (1,483,709 ) $ (100,754 ) Issuance of common stock for cash 371,351 1 2,484,198 2,484,199 Payment of offering costs (814,442 ) (814,442 ) Value of common stock of related party issued with convertible note payable 99,027 99,027 Value of common stock issued with notes payable 18,200 91,000 91,000 Value of common stock issued with capital lease obligation 350,000 2,800,000 2,800,000 Issuance of common stock for accounts payable 20,000 160,000 160,000 Stock option expense 1,676,476 1,676,476 Net loss (6,568,863 ) (6,568,863 ) Balance, December 31, 2017 25,770,551 26 7,879,189 (8,052,572 ) (173,357 ) Issuance of common stock for cash 46,330 307,924 307,924 Value of common stock issued with notes payable 155,850 407,791 407,791 Value of warrants issued with notes payable 3,726,506 3,726,506 Value of common stock issued with capital lease obligation 298,500 2,388,000 2,388,000 Issuance of common stock for services 432,500 1 3,459,999 3,460,000 Issuance of common stock for accounts payable 14,945 119,274 119,274 Stock option expense 904,468 904,468 Net loss (13,189,122 ) (13,189,122 ) Balance, December 31, 2018 26,718,676 $ 27 $ 19,193,151 $ (21,241,694 ) $ (2,048,516 ) Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Equity (Deficit) Balance, December 31, 2018 26,718,676 $ 27 $ 19,193,151 $ (21,241,694 ) $ (2,048,516 ) Correction to outstanding shares (173 ) - - - - Proceeds from the sale of common stock 2,625,000 2 10,499,998 - 10,500,000 Offering costs - - (1,631,655 ) - (1,631,655 ) Issuance of common stock for settlement of debt 84,300 - 674,400 - 674,400 Net loss - - (3,930,221 ) (3,930,221 ) Balance, December 31, 2019 29,427,803 29 28,735,894 $ (25,171,915 ) 3,564,008 Issuance of common stock for cash 2,553,571 3 274,997 - 275,000 Stock option expense - - 739,973 - 739,973 Net loss - - - (3,502,077 ) (3,502,077 ) Balance, December 31, 2020 31,981,374 $ 32 $ 29,750,864 $ (28,673,992 ) $ 1,076,904 F-19. YAYYO, INC.EVmo, Inc.CONSOLIDATED STATEMENTS OF CASH FLOWSConsolidated Statements of Cash FlowsYearYears Ended December 31, 20182020 and 20172019 2018 2017 (restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (13,189,122 ) (6,568,863 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 500,622 82,904 Stock option expense 904,468 1,676,476 Common stock issued for services 3,460,000 - Non-cash financing costs - 39,293 Amortization of debt discounts 4,460,931 124,320 Change in value of derivative liability - (40,266 ) Gain on disposal of assets (17,360 ) - Impairment of leased assets 2,388,000 2,800,000 Accounts receivable - - Prepaid expenses (95,494 ) (13,406 ) Accounts payable 673,836 15,966 Accrued expenses 489,963 31,453 Net cash used in operating activities (424,156 ) (1,852,123 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (2,840 ) (3,178 ) Deposit for leased vehicles - - Net cash used in investing activities (2,840 ) (3,178 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock 307,924 2,484,199 Payment of offering costs - (614,805 ) Proceeds from convertible note payable - 100,000 Repayment of convertible note payable - (113,888 ) Proceeds from notes payable 7,746,378 887,667 Repayment of note payable (6,111,263 ) - Payment for debt issuance costs (178,228 ) - Proceeds from advance from related party - 50,000 Repayment of advance from related party - (125,000 ) Repayment of finance lease obligations (1,369,109 ) (522,777 ) Net cash provided by financing activities 395,702 2,145,396 NET INCREASE (DECREASE) IN CASH (31,294 ) 290,095 CASH, BEGINNING OF PERIOD 308,738 18,643 CASH, END OF PERIOD $ 277,444 $ 308,738 CASH PAID FOR: Interest $ 139,825 $ 16,402 Income taxes $ - $ - SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES Payment of accounts payable with common stock $ 119,274 $ - Value of equity recorded as debt discounts $ 4,134,297 $ 1,368,063 Finance lease obligations $ 3,700,674 $ 2,116,068 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,502,077 ) $ (3,930,221 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 1,436,383 995,228 Stock option expense 739,973 - Common stock issued for services - - Amortization of debt discounts 30,316 39,922 Loss on the settlement of debt - 252,900 Gain on forgiveness of debt (184,775 ) Changes in operating assets and liabilities: Accounts receivable (59,908 ) (59,331 ) Prepaid expenses 759,039 (674,000 ) Other assets - (200,000 ) Accounts payable 612,045 (174,132 ) Accrued expenses 555,727 333,411 Customer deposit - related party 150,000 - Net cash provided by (used in) operating activities 536,723 (3,416,223 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of vehicles - (225,000 ) Deposit for vehicles - (164,080 ) Net cash used in investing activities - (389,080 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock 275,000 10,500,000 Offering costs paid - (1,565,155 ) Proceeds from advance from related party 250,000 - Repayment of advance from related party (150,000 ) - Proceeds from notes payable 342,675 2,009,300 Repayment of notes payable (15,486 ) (4,379,814 ) Repayment of finance lease obligations (2,422,451 ) (1,780,043 ) Net cash provided by (used in) financing activities (1,720,262 ) 4,784,288 NET INCREASE (DECREASE) IN CASH (1,183,539 ) 978,985 CASH, BEGINNING OF YEAR 1,256,429 277,444 CASH, END OF YEAR $ 72,890 $ 1,256,429 CASH PAID FOR: Interest $ 185,224 $ 1,105,049 Income taxes $ - $ - SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES Payment of accounts payable/accrued expenses with common stock $ - $ 421,500 Finance lease obligations $ 3,705,417 $ 1,159,470 F-20. YAYYO, INC.EVmo, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements20182020 and 20172019YayYo,EVmo, Inc. (“YayYo” 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 changed to a 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, Inc. The accompanying financial statements are retroactively restated to present the Company as a C corporation from June 21, 2016. The Company rents carsvehicles to Uber and Lyft drivers.drivers and drivers in the gig-ecomony. LLC, RideYayYo, LLC and Savy, LLC. All significant intercompany transactions and balances have been eliminated.F-21. isand 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 Vehicles 5 years F-7YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 201720182020 and 2017,2019, the Company took andetermined that no impairment charge against its leased assets for $2,388,000 and $2,800,000, respectively.was necessary.Uberridesharing and Lyftdelivery gig drivers. Revenue is recognized based on the rental agreements which are generally on a weekly basis. The Company recognizes revenue in accordance with FASB ASC 606,Revenue From Contracts with Customers.F-22. 1,500,0001,631,250 warrants and 2,540,000 options outstanding as of December 31, 2020 and 1,631,250 warrants and 300,000 options outstanding as of December 31, 2018.2019.1,800,0004,171,250 and 750,0001,931,250 potentially dilutive securities outstanding at December 31, 20182020 and 2017,2019, respectively.YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 201720182020 and 20172019 were $482,811$490,403 and $86,098,$765,441, respectively.20182020 and 20172019 were $9,699$0 and $303,555,$13,500, respectively.Deferred Offering CostsDeferred offering costs are amounts incurred that are directly related to the offering of the Company’s common stock. These costs will be offset against the proceeds from the Company’s equity offering.Software Development CostsSoftware development costs are capitalized in accordance with FASB ASC 985-20Cost of Software to Be Sold, Leased, or Marketed. Capitalization of software development costs begins upon the establishment of technological feasibility and is discontinued when the product is available for sale. The establishment of technological feasibility and the ongoing assessment for recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors, including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Capitalized software development costs are comprised primarily of direct overhead, payroll costs, and consultants’ fees of individuals working directly on the development of specific software products.Amortization of capitalized software development costs is provided on a product-by-product basis on the straight-line method over the estimated economic life of the products (not to exceed three years). Management periodically compares estimated net realizable value by product to the amount of software development costs capitalized for that product to ensure the amount capitalized is not in excess of the amount to be recovered through revenues. Any such excess of capitalized software development costs over expected net realizable value is expensed at that time.Organizational CostsIn accordance with FASB ASC 720, organizational costs, including accounting fees, legal fees, and costs of incorporation, are expensed as incurred.Derivative Financial InstrumentsThe Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. During the year ended December 31, 2017, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion. The convertible note was repaid therefore, there are no derivative financial instruments at December 31, 2018 and 2017.YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017“Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:●Level 1 inputs to the valuation methodology are quoted 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, 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.The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.At December 31, 2018 and 2017, the Company did not identify any liabilities that are required to be presented on the balance sheet at fair value. The derivative liability associated with the convertible notes payable were both issued and repaid during the year ended December 31, 2017; therefore, there was no derivative liability at December 31, 2018 or December 31, 2017.Recent Accounting PronouncementsIn June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-07,Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.In January 2017, the FASB issued ASU 2017-01,Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The adoption of this ASU did not have an impact on its financial statements.In November 2016, the FASB issued ASU 2016-18,Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.In October 2016, the FASB issued ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842) ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company adopted this ASU for its year ended December 31, 2017.In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company adopted this ASU beginning on January 1, 2018 and used the modified retrospective method of adoption. The adoption of this ASU did not have a material impact on the Company’s financial statements and disclosures.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.YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017Note 3 – EquipmentAt December 31, 2018 and 2017 equipment consisted of the following: 2018 2017 Computer equipment $ 6,046 $ 3,178 6,046 3,178 Less accumulated depreciation (954 ) (318 ) Equipment, net $ 5,092 $ 2,860 Depreciation expense for equipment for the years ended December 31, 2018 and 2017 was $636 and $318, respectively.Note 4 – Leased AssetsAt December 31, 2018 and 2017 all of the Company’s leased assets were finance leased right-of-use assets and consisted of the following: 2018 2017 Vehicles $ 5,661,749 $ 2,116,068 5,661,749 2,116,068 Less accumulated depreciation (546,632 ) (82,586 ) Leased assets, net $ 5,115,117 $ 2,033,482 The Company’s leased assets, consisting of vehicles, are depreciated over their estimated useful life of five years. The value of the leased assets was initially determined as the sum of the lease liability plus the up-front consideration of 298,500 shares of the Company’s common stock (valued at $2,388,000) paid to the lessor in 2018 and 350,000 shares of the Company’s common stock (valued at $2,800,000) paid to the lessor in 2017. During the years ended December 31, 2018 and 2017, the Company determined that the carrying value of the leased assets was impaired and took an impairment charge of $2,388,000 and $2,800,000, respectively, to reduce the carrying value of the leased assets to fair value. Amortization expense for leased assets for the years ended December 31, 2018 and 2017 was $499,986 and $82,586, respectively. The lease terms are generally for three years and the Company has the right to purchase the leased assets for $1 each at the end of the lease terms.Note 5 – Notes PayableNotes payable at December 31, 2018 and 2017 consisted of the following: 2018 2017 Note payable to stockholder; accrue interest at 5% per annum; due March 31, 2019; unsecured $ 790,000 $ 445,000 Notes payable to individual investors; accrue interest at 8% per annum; principal payments equal to 1/12 of original balance plus interest due quarterly; due from dates ranging from August 9, 2020 to March 26, 2021; unsecured (A) 319,667 242,667 Note payable to investor; accrue interest at 6% per annum; due March 31, 2018; unsecured (B) 222,222 222,222 Note payable to investor; original issue discount of $117,828; due the earlier of July 31, 2019 or closing of an offering of at least $3,000,000; secured by assets of the Company (C) 1,296,018 - Note payable to merchant bank; accrues interest at 15% per annum; daily payments of $813 37,308 - Line of credit; $65,000 limit; accrues interest at 15% per annum; weekly payments of $3,038 24,966 - Total notes payable 2,690,181 909,889 Unamortized debt discount (72,211 ) (102,790 ) Notes payable, net discount 2,617,970 807,099 Less current portion (2,617,970 ) (254,511 ) Long-term portion $ - $ 552,588 YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017(A) In connection with the issuance of these notes payable, during the year ended December 31, 2018, the Company also issued an aggregate of 5,850 shares of its common stock to these note holders as additional incentive to make the loans. The aggregate relative fair value of these shares of common stock was $28,875 and was recorded as a discount on the note payable and as additional paid in capital. The discount of $28,875 is being amortized over the term of the notes payable. During the year ended December 31, 2017, the Company also issued an aggregate of 18,200 shares of its common stock to these note holders as additional incentive to make the loans. The aggregate relative fair value of these shares of common stock was $91,000 and was recorded as a discount on the note payable and as additional paid in capital. The discount of $91,000 is being amortized over the term of the notes payable. During the years ended December 31, 2018 and 2017, $37,949 and $0, respectively, was charged to interest expense as amortization of the discounts, with an unamortized balance of $72,211 at December 31, 2018.(B) This note payable was issued with an original issuance discount of $22,222 which is being amortized over the term of the notes payable. During the years ended December 31, 2018 and 2017, $21,506 and $0, respectively, was charged to interest expense as amortization of the discount, with an unamortized balance of $0 at December 31, 2018.(C) On March 8, 2018, the Company issued a note payable for $6,000,000. The note accrues interest at LIBOR plus 100 basis points and is due five years from the date of issuance. The note payable is secured by the restricted cash balance. In addition, the Company issued to the note holder 150,000 shares of the Company’s common stock and 1,500,000 warrants to purchase shares of the Company’s common stock for $4.00 per shares. The warrants expire five years from the date of issuance. The Company also paid $178,228 of issuance costs associated with this note. The relative fair value of the 150,000 shares of common stock was $378,916 and the relative fair value of the 1,500,000 warrants was $3,726,506 and both were recorded as a discount on the note payable and as additional paid in capital. In addition, the issuance costs of $178,228 have also been recorded as a debt discount. The debt discount of $4,283,650 is being amortized over the term of the note payable. On September 12, 2018, the Company entered into a new note payable agreement with this investor whereby, the Company repaid $4,821,810 of the original $6,000,000 note payable and with the balance of $1,178,190 plus an original issue discount of $117,828 being rolled into the September 12, 2018 note payable for $1,296,018. The original issue discount of $117,828 is being amortized to interest expense over the term of the new note payable. As a result of the $6,000,000 note payable being repaid in September 2018, the Company amortized to interest expense the remaining debt discount associated with the note payable of $4,018,560. During the years ended December 31, 2018 and 2017, $4,401,477 and $0, respectively, was charged to interest expense as amortization of the debt discounts associated with the notes payable to this investor, with an unamortized balance of $0 at December 31, 2018.A rollforward of notes payable from December 31, 2016 to December 31, 2018 is below:Notes payable, December 31, 2016 $ 0 Issued for cash 887,667 Issued for original issue discount 22,222 Debt discount related to notes payable (113,222 ) Amortization of debt discounts 10,432 Notes payable, December 31, 2017 $ 807,099 Issued for cash 7,746,378 Repayments (6,111,263 ) Accrued interest converted to note payable 27,350 Debt discount related to notes payable (4,312,525 ) Amortization of debt discounts 4,460,931 Notes payable, December 31, 2018 $ 2,617,970 Note 6 – Lease ObligationsLease obligations at December 31, 2018 and 2017 consisted of the following: 2018 2017 Lease obligations $ 3,790,147 $ 1,593,291 Less current portion (1,562,651 ) (555,090 ) Long-term portion $ 2,227,496 $ 1,038,201 In connection with these finance lease obligations, during the years ended December 31, 2018, the Company also issued to the lessor 298,500 shares of its common stock as additional incentive for the lessor to enter into additional lease agreements. The fair value of these 298,500 shares of common stock was $2,388,000 and was recorded as an up-front lease payment. The fair value of the common stock was based on sales of the Company’s common stock to third parties. Increasing the value of the leased vehicles for the value of the 298,500 shares of common stock resulted in the carrying amount of the vehicles exceeding the fair value of the vehicles. Accordingly, the Company has taken an impairment charge of $2,388,000 during the years ended December 31, 2018 to reduce the carrying value of the vehicles to fair value.YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017A rollforward of lease obligations from December 31, 2016 to December 31, 2018 is below:Lease obligations, December 31, 2016 $ - New lease obligations 2,116,068 Payments on lease obligations (522,777 ) Lease obligations, December 31, 2017 $ 1,593,291 New lease obligations 3,700,674 Disposal of leased vehicles (134,709 ) Payments on lease obligations (1,369,109 ) Lease obligations, December 31, 2018 $ 3,790,147 Future payments under lease obligations are as follows:Years ending December 31, 2019 $ 1,747,166 2020 1,637,780 2021 699,206 Total payments 4,084,152 Amount representing interest (294,005 ) Lease obligation, net $ 3,790,147 The weighted-average remaining lease term at December 31, 2018 is 2.17 years and the weighted average discount rate is 5%.The finance lease costs for the year ended December 31, 2018 consisted of amortization expense of $499,986 and interest expense of $117,858. The finance lease costs for the year ended December 31, 2017 consisted of amortization expense of $82,586 and interest expense of $16,292.Note 7 – Convertible Notes PayableOn January 6, 2017, the Company entered into a letter agreement (the “CFI Letter Agreement”) with Chase Financing, Inc. (“CFI”), pursuant to which CFI agreed to provide up to $100,000 in capital to the Company through one or more loans with an aggregate principal amount of $113,888.On January 6, 2017, the Company received $50,000 from CFI and issued its 10% original issue discount senior secured convertible note in the principal amount of $ 55,555, with a maturity date of April 6, 2017 (the “First CFI Note”). Subsequent to the First CFI Note, on January 23, 2017 the Company received an additional $25,000 from CFI, and issued a second 10% original issue discount senior secured convertible note in the principal amount of $30,555, with a maturity date of April 6, 2017 (the “Second CFI Note “). Subsequent to the Second CFI Note, the Company received an additional $25,000 from CFI, and issued a third 10% original issue discount senior secured convertible note in the amount of $27,778 (the “Third CFI Note” and together with the First CFI Note and the Second CFI Note, collectively, the “CFI Notes”). As a result, the Company is obligated to repay CFI a total of $113,888 in principal plus all accrued interest thereon to CFI under the CFI Notes on or before the stated maturity dates, subject to extension per the terms of the CFI Notes.Pursuant to the terms, the CFI Notes are secured by a first priority lien and security interest on all of the assets of the Company, now owned or hereafter acquired, and are convertible at the option of the holder into shares of our Common Stock at a conversion price equal to the lower of $7.00 per share or the average of the five lowest volume weighted average trading prices (“VWAP”) of our Common Stock during the twenty (20) trading days immediately prior to the date of conversion. If an event of default occurs under the terms of the CFI Notes, the conversion price will be reduced to $1.00 per share.F-14YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017Concurrently with the execution of the CFI Letter Agreement and the First CFI Note, as additional collateral to secure the repayment of the CFI Notes by the Company, Ramy El-Batrawi, our founder, former Chief Executive Officer and former Director, entered into a Limited Recourse Guaranty and Pledge agreement with CFI (the “Guaranty & Pledge”), pursuant to which X, LLC agreed to unconditionally and irrevocably guarantee the Company’s repayment of the CFI Notes, and pursuant to which X, LLC pledged up to 300,000 shares of our Common Stock held of record and beneficially owned by X, LLC.In addition to the Guaranty & Pledge, on January 6, 2017, X, LLC (an entity wholly owned by Mr. El-Batrawi) entered into a Common Stock Purchase Agreement (“Stock Purchase Agreement”), pursuant to which X, LLC agreed to sell and transfer to CFI 200,000 shares of our Common Stock, held of record and beneficially owned by X, LLC, in exchange for the aggregate nominal consideration of one dollar ($1.00). Under the Stock Purchase Agreement, and in addition to the 200,000 shares of Common Stock to be issued upon the effective date of the Stock Purchase Agreement, X, LLC has agreed to provide CFI with certain anti-dilution protection provisions, whereby X, LLC will issue a number of shares of our Common Stock, held as of record and beneficially by X, LLC, equal to two percent (2%) of the number of shares of Common Stock issued or underlying Common Stock Equivalents (as defined under the Stock Purchase Agreement) issued, as the case may be, in the event of a Dilutive Share Issuance (as defined under the Stock Purchase Agreement). X, LLC has the right to repurchase 100,000 of such shares at an aggregate purchase price of $208,500 if exercises within the initial three (3) months after the date of the Stock Purchase Agreement, or $258,500 if exercised within the second three (3) months.The CFI Notes have been repaid by the Company.A rollforward of the convertible note payable from December 31, 2016 to December 31, 2017 is below:Convertible notes, December 31, 2016$-Issued for cash100,000Issued for original issue discount13,888Debt discount related to new convertible notes(113,888)Amortization of debt discounts113,888Repayment in cash(113,888)Convertible notes, December 31, 2017$-Note 8 – Derivative LiabilityThe convertible notes payable discussed in Note 7 had a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature being recorded as a derivative liability.The fair value of the derivative liability was recorded and shown separately under current liabilities. However, as of December 31, 2017 the convertible note payable giving rise to the derivative liability was repaid, and as a result, the derivative liability at December 31, 2017 was $0. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).The Company uses a weighted average Black-Scholes-Merton option pricing model with the following assumptions to measure the fair value of derivative liability:Stock price$4.00Risk free rate0.53%Volatility275%Conversion/ Exercise price$4.00Dividend rate0%Term (years)0.16 to 0.25YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017The following table represents the Company’s derivative liability activity from December 31, 2016 to December 31, 2017:Derivative liability balance, December 31, 2016$-Issuance of derivative liability during the period40,266Change in derivative liability during the period(40,266)Derivative liability balance, December 31, 2017$-Note 9 – Stockholders’ EquityThe Company authorized 100,000,000 shares of capital stock with consists of 90,000,000 shares of common stock, $0.000001 par value per share and 10,000,000 shares of preferred stock, $0.000001 par value per share.Common StockDuring the years ended from December 31, 2018, the Company:●sold 46,330 shares of common stock to investors for gross cash proceeds of $307,924;●issued 155,850 shares of common stock in connection with the issuance of notes payable;●issued 298,500 shares of common stock in connection with lease obligations;●issued 432,500 shares of common stock for services rendered valued at $3,460,000. The value was determined based on the shares price for recent sales of the Company’s common stock; and●issued 14,945 shares of common stock for payment of accounts payable of $119,274.During the year ended from December 31, 2017, the Company:●sold 371,351 shares of common stock to investors for gross cash proceeds of $2,484,199 of which 326,126 shares and $2,303,299 of cash proceeds were related to the Company’s Regulation A offering. The Company incurred $814,442 of offering cost related to the sale of common stock which consisted principally of legal fees and costs associated with soliciting the sale of common stock directly to the Regulation A investors;●issued 18,200 shares of common stock in connection with the issuance of notes payable;●issued 350,000 shares of common stock in connection with lease obligations;●issued 432,500 shares of common stock for services rendered valued at $3,460,000. The value was determined based on the shares price for recent sales of the Company’s common stock; and●issued 20,000 shares of common stock for payment of accounts payable of $160,000.Stock OptionsThe following is a summary of stock option activity: Weighted Weighted Average Average Remaining Aggregate Options Exercise Contractual Intrinsic Outstanding Price Life Value Outstanding, December 31, 2016 450,000 $ 1.00 2.00 $ - Granted 300,000 $ 8.00 Forfeited - Exercised - Outstanding, December 31, 2017 750,000 $ 3.80 1.80 $ 3,150,000 Granted - Forfeited (450,000 ) 1.00 Exercised - Outstanding, December 31, 2018 300,000 $ 8.00 2.00 $ Exercisable, December 31, 2018 300,000 $ 8.00 2.00 $ The exercise price for options outstanding at December 31, 2018:Outstanding Exercisable Number of Exercise Number of Exercise Options Price Options Price 300,000 $ 8.00 $ 300,000 8.00 300,000 300,000 YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017WarrantsThe following is a summary of warrant activity: Weighted Weighted Average Average Remaining Aggregate Warrants Exercise Contractual Intrinsic Outstanding Price Life Value Outstanding, December 31, 2017 - Granted 1,500,000 $ 4.00 Forfeited - Exercised - Outstanding, December 31, 2018 1,500,000 $ 4.00 4.44 $ 6,000,000 Exercisable, December 31, 2018 1,500,000 $ 4.00 4.44 $ 6,000,000 The exercise price for warrants outstanding at December 31, 2018:Outstanding and Exercisable Number of Exercise Warrants Price 1,500,000 $ 4.00 1,500,000 Note 10 – Related Party TransactionsDuring the years ended December 31, 2018 and 2017, the Company paid management fees of $205,000 and $286,300, respectively, to a company that is owned by the Company’s majority stockholder.During the year ended December 31, 2017 and the period from June 21, 2016 (inception) to December 31, 2016, the Company’s majority stockholder advanced a total of $50,000 and $75,000 to the Company. During the year ended December 31, 2017, $125,000 of these advances were repaid. These advances are non-interest bearing and due upon demand.During the years ended December 31, 2018 and 2017, the Company expensed $334,471 and $0, respectively, in advertising expense from a company whose CEO is also a director of the Company. At December 31, 2018 and 2017, $334,471 and $0, respectively, was owed to this company and is included in accounts payable in the accompanying consolidated balance sheets.At December 31, 2018 and 2017, the Company had a note payable to a stockholder for $790,000 and $445,000, respectively.Note 11 – Commitments and ContingenciesThe Company is party to certain legal proceedings from time to time incidental to the conduct of its business. These proceedings could result in fines, penalties, compensatory or treble damages or non-monetary relief. The nature of legal proceedings is such that the Company cannot assure the outcome of any particular matter, and an unfavorable ruling or development could have a materially adverse effect on our consolidated financial position, results of operations and cash flows in the period in which a ruling or settlement occurs. However, based on information available to the Company’s management to date, the Company’s management does not expect that the outcome of any matter pending against the Company is likely to have a materially adverse effect on the Company’s consolidated financial position as of December 31, 2018, results of operations, cash flows or liquidity of the Company.F-17YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017Note 12 – Income TaxesDeferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of December 31, 2018 and 2017 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its business model. Because of the impacts of the valuation allowance, there was no income tax expense or benefit for the years ended December 31, 2018 and 2017.A reconciliation of the differences between the effective and statutory income tax rates for the years ended December 31, 2018 and 2017: 2018 2017 Amount Percent Amount Percent Federal statutory rates $ (2,769,716 ) 21.0 % $ (2,233,413 ) 34.0 % State income taxes (923,239 ) 7.0 % (328,443 ) 5.0 % Permanent differences 3,144,503 -23.8 % 1,786,485 -27.2 % Valuation allowance against net deferred tax assets 548,452 -4.2 % 775,371 -11.8 % Effective rate $ - 0.0 % $ - 0.0 % At December 31, 2018 and 2017, the significant components of the deferred tax assets are summarized below: 2018 2017 Deferred income tax asset Net operation loss carryforwards 1,497,497 1,321,885 Total deferred income tax asset 1,497,497 1,321,885 Less: valuation allowance (1,497,497 ) (1,321,885 ) Total deferred income tax asset $ - $ - The valuation allowance increased by $175,612 in 2018 of which $548,452 was a result of the Company generating additional net operating losses offset by $372,840 as a result of the change in the corporate tax rate from 34% to 21%. The valuation allowance increased by $775,371 in 2017 as a result of the Company generating additional net operating losses.The Company has recorded as of December 31, 2018 and 2017 a valuation allowance of $1,497,497 and $1,321,885, respectively, as it believes that it is more likely than not that the deferred tax assets will not be realized in future years. Management has based its assessment on the Company’s lack of profitable operating history.The Company conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of December 31, 2018 and 2017.The Company has net operating loss carry-forwards of approximately $5,350,000. Such amounts are subject to IRS code section 382 limitations and expire in 2031. The 2016, 2017 and 2018 tax year is still subject to audit.YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017Note 13 – Restatement of Previously Issued Financial StatementsIn connection finance lease obligations as discussed in Note 6, the Company issued the lessor an aggregate of 350,000 shares of its common stock as additional incentive for the lessor to enter into the lease agreements. The Company originally accounted for the issuance of the 350,000 shares of common stock as a debt discount to the lease obligation by recording the relative fair value of the common stock as a debt discount that would be amortized to interest expense over the term of the lease obligations. The Company has restated its previously issued financial statements to record the fair value of the 350,000 shares of common stock as an up-front lease payment; and therefore included in the value of the leased vehicles. Increasing the value of the leased vehicles for the value of the 350,000 shares of common stock resulted in the carrying amount of the vehicles exceeding the fair value of the vehicles. Accordingly, the Company has taken an impairment charge of $2,800,000 to reduce the carrying value of the vehicles to fair value. The adjustments to the previously issued financial statements reflect the following:a.removal of the debt discount from the financing lease obligationb.removal of the amortization of the debt discount to interest expensec.record the impairment of the leased vehiclesConsolidated Balance SheetAs of December 31, 2017 Previously
Filed Adjustment As Restated ASSETS Current Assets: Cash $ 308,738 $ — $ 308,738 Prepaid expenses 13,406 — 13,406 Total current assets 322,144 — 322,144 Equipment, net 2,860 — 2,860 Leased assets, net 2,033,482 — 2,033,482 TOTAL ASSETS $ 2,358,486 $ — $ 2,358,486 LIABILITIES AND STOCKHOLDERS’
EQUITY (DEFICIT) Current Liabilities: Accounts payable $ 100,000 $ — $ 100,000 Accrued expenses 31,453 — 31,453 Notes payable, current (net of discount of $48,600) 254,511 — 254,511 Finance lease obligations, current 72,485 482,605 a 555,090 Total current liabilities 458,449 482,605 941,054 Notes payable, net of current portion (net of discount of $54,190) 552,588 — 552,588 Finance lease obligations, net of current portion 674,208 363,993 a 1,038,201 TOTAL LIABILITIES 1,685,245 846,598 2,531,843 Commitments and contingencies — — — STOCKHOLDERS’ EQUITY (DEFICIT) Preferred stock — — — Common stock 26 — 26 Additional paid-in capital 6,257,225 1,621,964 a,c 7,879,189 Accumulated deficit (5,584,010 ) (2,468,562 ) b,c (8,052,572 ) Total stockholders’ equity (deficit) 673,241 (846,598 ) (173,357 ) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 2,358,486 $ — $ 2,358,486 Consolidated Statement of OperationsFor the Year Ended December 31, 2017 Previously Filed Adjustment As Restated Revenue $ 235,690 $ — $ 235,690 Cost of revenue 213,111 — 213,111 Gross profit 22,579 — 22,579 Operating expenses: Selling and marketing expenses 86,098 — 86,098 Product development 303,555 — 303,555 General and administrative expenses 3,249,659 — 3,249,659 Impairment of leased assets — 2,800,000 c 2,800,000 Total operating expenses 3,639,312 2,800,000 6,439,312 Loss from operations (3,616,733 ) (2,800,000 ) (6,416,733 ) Other income (expense): Interest and financing costs (523,833 ) 331,438 b (192,395 ) Change in value of derivative liability 40,265 — 40,265 Total other income (expense) (483,568 ) 331,438 (152,130 ) Net loss $ (4,100,301 ) $ (2,468,562 ) $ (6,568,863 ) Weighted average shares outstanding : Basic 25,297,066 — 25,297,066 Diluted 25,297,066 — 25,297,066 Loss per share Basic $ (0.16 ) $ (0.10 ) $ (0.26 ) Diluted $ (0.16 ) $ (0.10 ) $ (0.26 ) YAYYO, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor Year Ended December 31, 2018 and 2017Consolidated Statement of Cash FlowsFor the Year Ended December 31, 2017 Previously Filed Adjustment As Restated CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (4,100,301 ) $ (2,468,562 ) $ (6,568,863 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 82,904 — 82,904 Stock option expense 1,676,476 — 1,676,476 Non-cash financing costs 39,293 — 39,293 Amortization of debt discounts 455,758 (331,438 ) b 124,320 Impairment of leased assets — 2,800,000 c 2,800,000 Change in value of derivative liability (40,266 ) — (40,266 ) Change in operating assets and liabilities: — Prepaid expenses (13,406 ) — (13,406 ) Accounts payable 15,966 — 15,966 Accrued expenses 31,453 — 31,453 Net cash used in operating activities (1,852,123 ) — (1,852,123 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (3,178 ) — (3,178 ) Net cash used in investing activities (3,178 ) — (3,178 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock 2,484,199 — 2,484,199 Payment of offering costs (614,805 ) — (614,805 ) Proceeds from convertible note payable 100,000 — 100,000 Repayment of convertible note payable (113,888 ) — (113,888 ) Proceeds from notes payable 887,667 — 887,667 Proceeds from advance from related party 50,000 — 50,000 Repayment of advance from related party (125,000 ) — (125,000 ) Repayment of finance lease obligations (522,777 ) — (522,777 ) Net cash provided by financing activities 2,145,396 — 2,145,396 NET INCREASE IN CASH 290,095 — 290,095 CASH, BEGINNING OF PERIOD 18,643 — 18,643 CASH, END OF PERIOD $ 308,738 $ — $ 308,738 CASH PAID FOR: Interest $ 16,402 $ — $ 16,402 Income taxes $ — $ — $ — SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES Finance lease obligations $ 2,116,068 $ — $ 2,116,068 Value of equity recorded as debt discounts $ 1,368,063 (1,178,036 ) a $ 190,027 F-20CONDENSED CONSOLIDATED BALANCE SHEETSAs of June 30, 2019 and December 31, 2018 (unaudited) June 30, 2019 December 31, 2018 ASSETS Current Assets: Cash $ 34,381 $ 277,444 Accounts receivable 65,115 - Prepaid expenses 145,597 108,900 Total current assets 245,093 386,344 Equipment, net 4,934 5,092 Leased assets, net 4,758,110 5,115,117 Deferred offering costs 66,500 66,500 TOTAL ASSETS $ 5,074,637 $ 5,573,053 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current Liabilities: Accounts payable (including $387,978 and 334,471, respectively to related party) $ 504,801 $ 719,386 Accrued expenses 538,409 494,066 Notes payables, current (net of discount of $52,414 and $72,211) 3,180,673 2,617,970 Finance lease obligations, current 1,662,476 1,562,651 Total current liabilities 5,886,359 5,394,073 Finance lease obligations, net of current portion 1,559,309 2,227,496 TOTAL LIABILITIES 7,445,668 7,621,569 Commitments and contingencies - - STOCKHOLDERS’ DEFICIT Preferred stock, $0.000001 par value; 10,000,000 shares authorized;
nil shares issued and outstanding
Common stock, $0.000001 par value; 90,000,000 shares authorized;
26,802,976 and 26,718,676 shares issued and outstanding 27 27 Additional paid-in capital 19,867,551 19,193,151 Accumulated deficit (22,238,609 ) (21,241,694 ) Total stockholders’ deficit (2,371,031 ) (2,048,516 ) TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 5,074,637 $ 5,573,053 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSFor the Six Months Ended June 30, 2019 and 2018 (unaudited) Six months ended June 30, 2019 2018 Revenue $ 3,475,518 $ 1,037,415 Cost of revenue 2,044,241 727,624 Gross profit 1,431,277 309,791 Operating expenses: Selling and marketing expenses 102,606 91,495 Product development - 9,699 General and administrative expenses 1,460,811 3,972,915 Loss on the settlement of debt 252,900 - Total operating expenses 1,816,317 4,074,109 Loss from operations (385,040 ) (3,764,318 ) Other income (expense): Interest and financing costs (611,875 ) (380,872 ) Total other income (expense) (611,875 ) (380,872 ) Net loss $ (996,915 ) $ (4,145,190 ) Weighted average shares outstanding: Basic 26,760,318 26,086,952 Diluted 26,760,318 26,086,952 Loss per share Basic $ (0.04 ) $ (0.16 ) Diluted $ (0.04 ) $ (0.16 ) The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.F-22CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)For the Six Months Ended June 30, 2019 and 2018 (unaudited) Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Deficit Balance, December 31, 2018 26,718,676 27 19,193,151 (21,241,694 ) (2,048,516 ) Issuance of common stock for accounts payable and accrued expenses 84,300 674,400 674,400 Net loss (996,915 ) (996,915 ) Balance, June 30, 2019 26,802,976 $ 27 $ 19,867,551 $ (22,238,609 ) $ (2,371,031 ) Balance, December 31, 2017 25,770,551 26 7,879,189 (8,052,572 ) (173,357 ) Issuance of common stock for cash 46,330 307,924 307,924 Value of common stock issued with notes payable 155,850 407,791 407,791 Value of warrants issued with notes payable 3,726,506 3,726,506 Issuance of common stock for services 332,500 2,660,000 2,660,000 Issuance of common stock for accounts payable 8,695 69,274 69,274 Stock option expense 452,234 452,234 Net loss (4,145,190 ) (4,145,190 ) Balance, June 30, 2018 26,313,929 $ 26 $ 15,502,918 $ (12,197,762 ) $ 3,305,182 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.F-23CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Six Months Ended June 30, 2019 and 2018 (unaudited) Six months ended June 30, 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (996,915 ) $ (4,145,190 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 514,402 186,061 Stock option expense - 452,234 Common stock issued for services - 2,660,000 Amortization of debt discounts 19,797 304,419 Gain on disposal of assets - (11,302 ) Loss on the settlement of debt 252,900 - Accounts receivable (65,115 ) - Prepaid expenses (36,697 ) 12,859 Accounts payable (214,585 ) 40,142 Accrued expenses 465,843 13,161 Net cash used in operating activities (60,370 ) (487,616 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment - (2,840 ) Net cash used in investing activities - (2,840 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock - 307,924 Proceeds from notes payable 1,051,330 6,645,000 Repayment of note payable (508,394 ) (122,744 ) Payment for debt issuance costs - (178,228 ) Repayment of finance lease obligations (725,599 ) (333,730 ) Net cash provided by (used in) financing activities (182,693 ) 6,318,222 NET INCREASE (DECREASE) IN CASH (243,063 ) 5,827,766 CASH, BEGINNING OF PERIOD 277,444 308,738 CASH, END OF PERIOD $ 34,381 $ 6,136,504 CASH PAID FOR: Interest $ 564,961 $ 24,372 Income taxes $ - $ - SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES Payment of accounts payable/accrued expenses with common stock $ 421,500 $ 69,274 Value of equity recorded as debt discounts $ - $ 4,134,297 Finance lease obligations $ 510,136 $ 659,539 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months Ended June 30, 2019 and 2018 (unaudited)Note 1 - Organization and Basis of PresentationOrganization and Line of BusinessYayYo, Inc. (“YayYo” or the “Company”) was incorporated on June 21, 2016 under the laws of the state of Delaware originally as a limited liability company and subsequently changed to a C corporation. The accompanying financial statements are retroactively restated to present the Company as a C corporation from June 21, 2016. The Company rents cars to Uber and Lyft drivers.Basis of PresentationThe accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP).Interim financial statementsThe unaudited interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosure are adequate to make the information presented not misleading.These statements reflect all adjustment, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2018 and notes thereto included in the Company’s annual report on Form 1-K. The Company follows the same accounting policies in the preparation of interim report. Results of operations for the interim period are not indicative of annual results.Note 2 – Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Distinct Cars, LLC, RideShare Car Rentals, LLC, RideYayYo, LLC and Savy, LLC. All significant intercompany transactions and balances have been eliminated.Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.Cash EquivalentsFor 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.F- 25YAYYO, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months Ended June 30, 2019 and 2018 (unaudited)EquipmentEquipment is 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 is provided using the straight-line method for substantially all assets with estimated lives as follows:Computer equipment5 yearsVehicles5 yearsLong-Lived AssetsThe 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, 2019, the Company determined that no impairment charge was necessary.Revenue RecognitionThe Company recognizes revenue from renting its fleet of cars to Uber and Lyft drivers. Revenue is recognized based on the rental agreements which are generally on a weekly basis. The Company recognizes revenue in accordance with FASB ASC 606,Revenue From Contracts with Customers.Income TaxesThe Company accounts for income taxes in accordance with ASC Topic 740,Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.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.Stock-Based CompensationThe Company records stock-based compensation in accordance with FASB ASC Topic 718,Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. There were 1,500,000 warrants and 300,000 options outstanding as of June 30, 2019.Basic and Diluted Earnings Per ShareEarnings 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 common stock at the average market price during the period. There were 1,800,000 potentially dilutive securities outstanding at June 30, 2019.F- 26YAYYO, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months Ended June 30, 2019 and 2018 (unaudited)Advertising CostsThe Company expenses the cost of advertising as incurred. Advertising costs for the six months ended June 30, 2019 and 2018 were $102,606 and $91,495, respectively.Research and Development CostsThe Company expenses its research and development costs as incurred. Research and developments costs for the six months ended June 30, 2019 and 2018 were $0 and $9,699, respectively.Deferred Offering CostsDeferred offering costs are amounts incurred that are directly related to the offering of the Company’s common stock. These costs will be offset against the proceeds from the Company’s equity offering.Fair Value MeasurementsThe Company applies the provisions of ASC 820-10,“Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows: ● Level 1 inputs to the valuation methodology are quoted 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, 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. The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.June 30, 2019 and December 31, 2018,2020 and 2019, the Company did not identify any liabilities that are required to be presented on the balance sheet at fair value.F-23. F- 27YAYYO, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months Ended June 30, 2019 and 2018 (unaudited)January 2017,December 2019, the FASB issued ASU 2017-01,2019-12, Business Combinations (Topic 805) ClarifyingSimplifying the Definition of a BusinessAccounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). The amendmentsThis update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in this update clarify the definition of a business with the objective of addingASC 740 and amending existing guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposalsimprove consistent application of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The adoption of this ASU did not have an impact on its financial statements.In November 2016, the FASB issued ASU 2016-18,Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.In October 2016, the FASB issued ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842) ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02ASC 740. This update is effective for fiscal years beginning after December 15, 20182021. The guidance in this update has various elements, some of which are applied on a prospective basis and interim periodsothers on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.2018, with early adoption permitted. The Company adopted this ASU for its year ended December 31, 2017.In May 2014,2021, including interim periods within those fiscal years. For all other entities, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 isamendments are effective for interim and annual periodsfiscal years beginning after December 15, 2017.2023, including interim periods within those fiscal years. Early adoption is permitted, only in annual reporting periodsbut no earlier than fiscal years beginning after December 15, 2016,2020, including interim periods therein. Entities will be able to transition towithin those fiscal years. The Board specified that an entity should adopt the standard either retrospectively or as a cumulative-effect adjustmentguidance as of the datebeginning of adoption.its annual fiscal year. The Company adoptedis currently evaluation the impact this ASU beginningwill have on January 1, 2018 and used the modified retrospective method of adoption. The adoption of this ASU did not have a material impact on the Company’sits consolidated financial statements and disclosures.statements.F- 28YAYYO, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months Ended June 30, 2019 and 2018 (unaudited)June 30, 2019 and December 31, 20182020 and 2019 equipment consisted of the following: June 30, 2019 December 31, 2018 2020 2019 Computer equipment $ 6,046 $ 6,046 $ 6,046 $ 6,046 6,046 6,046 6,046 6,046 Less accumulated depreciation (1,112 ) (954 ) (4,138 ) (2,651 ) Equipment, net $ 4,934 $ 5,092 $ 1,908 $ 3,395 six monthsyears ended June 30,December 31, 2020 and 2019 was $1,487 and 2018 was $158 and $318,$1,697, respectively.F-24. Leased AssetsRental VehiclesJune 30, 2019 and December 31, 20182020 and 2019 all of the Company’s leased assets were finance leased right-of-use assets andrental vehicles consisted of the following: June 30, 2019 December 31, 2018 Vehicles $ 5,825,988 $ 5,661,749 5,825,988 5,661,749 Less accumulated depreciation (1,067,878 ) (546,632 ) Leased assets, net $ 4,758,110 $ 5,115,117 2020 2019 Rental vehicles $ 9,067,885 $ 6,284,211 9,067,885 6,284,211 Less accumulated depreciation (2,871,452 ) (1,547,164 ) Rental vehicles, net $ 6,196,433 $ 4,737,047 leased assets, consisting ofrental vehicles are depreciated over their estimated useful life of five years. Depreciation expense for leased assets for the six monthsyears ended June 30,December 31, 2020 and 2019 was $1,434,896 and 2018 was $514,244 and $185,743,$993,531, respectively. The leaseA majority of the rental vehicles are leased with terms are generally for 3012 to 36 months and the Company has the right to purchase the leased assets for $1 eachvehicles at the end of the lease terms.F- 29YAYYO, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months Ended June 30, 2019 and 2018 (unaudited)June 30, 2019 and December 31, 20182020 and 2019 consisted of the following: June 30, 2019 December 31, 2018 Note payable to stockholder; accrue interest at 5% per annum; due December 31, 2019, as amended; unsecured $ 880,000 $ 790,000 Notes payable to individual investors; accrue interest at 8% per annum; principal payments equal to 1/12 of original balance plus interest due quarterly; due from dates ranging from August 9, 2020 to March 26, 2021; unsecured (A) 319,667 319,667 Note payable to investor; accrue interest at 6% per annum; due November 30, 2019, as amended; unsecured (B) 222,222 222,222 Note payable to investor; original issue discount of $117,828; due the earlier of November 30, 2019, as amended, or closing of a public offering; secured by assets of the Company (C) 1,296,018 1,296,018 Note payable to merchant bank; accrues interest at 15% per annum; daily payments of $813 - 37,308 Line of credit; $65,000 limit; accrues interest at 15% per annum; weekly payments of $3,038 - 24,966 Note payable to merchant bank; accrues interest at 127% per annum; 28 weekly payments of $7,446 66,924 - Note payable to merchant bank; accrues interest at 79% per annum; 26 weekly payments of $1,401 69,752 - Note payable to merchant bank; accrues interest at 128 per annum; 130 daily payments of $1,558 101,273 - Note payable to merchant bank; accrues interest at 150% per annum; 120 daily payments of $1,159 34,690 - Note payable to merchant bank; accrues interest at 87% per annum; 160 daily payments of $2,016 76,548 - Note payable to merchant bank; accrues interest at 138% per annum; 125 daily payments of $1,644 165,993 - Total notes payable 3,233,087 2,690,181 Unamortized debt discount (52,414 ) (72,211 ) Notes payable, net discount 3,180,673 2,617,970 Less current portion (3,180,673 ) (2,617,970 ) Long-term portion $ - $ - F- 30 2020 2019 Notes payable to individual investors; accrue interest at 8% per annum; principal payments equal to 1/12 of original balance plus interest due quarterly; due from dates ranging from August 9, 2020 to March 26, 2021; unsecured (A) $ 304,667 319,667 Note payable to the Small Business Administration. The note bears interest at 3.75% per annum, requires monthly payments of $731 after 12 months from funding and is due 30 years from the date of issuance. 149,414 - Note payable issued under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in the amount of $192,775. The loan has terms of 24 months and accrues interest at 1% per annum. During the year ended December 31, 2020, $184,775 of this loan has been forgiven as provided for in the CARES Act. 8,000 - Notes payable to a finance company, default interest at 14% per annum; monthly principal payments ranging from $10,000 to $40,000 with unpaid principal due on December 15, 2021 355,438 - Total notes payable 817,519 319,667 Unamortized debt discount (1,973 ) (32,289 ) Notes payable, net discount 815,546 287,378 Less current portion (666,132 ) (287,378 ) Long-term portion $ 149,414 $ - YAYYO, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months Ended June 30, 2019 and 2018 (unaudited)six monthsyears ended June 30,December 31, 2020 and 2019, $30,316 and 2018, $19,797 and $17,824,$39,922, respectively, was charged to interest expense as amortization of the discounts, with an unamortized balance of $52,414$1,93 at June 30, 2019.December 31, 2020.(B) This note payable was issued with an original issuance discount of $22,222 which is being amortized over the term of the notes payable. During the six months ended June 30, 2019 and 2018, $0 and $21,506, respectively, was charged to interest expense as amortization of the discount, with an unamortized balance of $0 at June 30, 2019.F-25. (C) On March 8, 2018, the Company issued a note payable for $6,000,000. The note accrues interest at LIBOR plus 100 basis points and is due five years from the date of issuance. The note payable is secured by the restricted cash balance. In addition, the Company issued to the note holder 150,000 shares of the Company’s common stock and 1,500,000 warrants to purchase shares of the Company’s common stock for $4.00 per shares. The warrants expire five years from the date of issuance. The Company also paid $178,228 of issuance costs associated with this note. The relative fair value of the 150,000 shares of common stock was $378,916 and the relative fair value of the 1,500,000 warrants was $3,726,506 and both were recorded as a discount on the note payable and as additional paid in capital. In addition, the issuance costs of $178,228 have also been recorded as a debt discount. The debt discount of $4,283,650 is being amortized over the term of the note payable. On September 12, 2018, the Company entered into a new note payable agreement with this investor whereby, the Company repaid $4,821,810 of the original $6,000,000 note payable and with the balance of $1,178,190 plus an original issue discount of $117,828 being rolled into the September 12, 2018 note payable for $1,296,018. The original issue discount of $117,828 is being amortized to interest expense over the term of the new note payable. As a result of the $6,000,000 note payable being repaid in September 2018, the Company amortized to interest expense the remaining debt discount associated with the note payable of $4,018,560. During the six months ended June 30, 2019 and 2018, $0 and $265,089, respectively, was charged to interest expense as amortization of the debt discounts associated with the notes payable to this investor, with an unamortized balance of $0 at June 30, 2019.June 30, 2019December 31, 2020 is below:Notes payable, December 31, 2018 $ 2,617,970 Issued for cash 1,051,330 Repayments (508,394 ) Amortization of debt discounts 19,797 Notes payable, June 30, 2019 $ 3,180,673 F- 31Notes payable, December 31, 2018 $ 2,617,970 Issued for cash 2,009,300 Repayments (4,379,814 ) Amortization of debt discounts 39,922 Notes payable, December 31, 2019 287,378 Issued for cash 342,675 Lease obligation converted to note payable 355,438 Forgiveness of note payable (184,775 ) Repayments (15,486 ) Amortization of debt discounts 30,316 Notes payable, December 31, 2020 $ 815,546 YAYYO, INC.Future payments under note payable obligations are as follows:NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months Ended June 30, 2019 and 2018 (unaudited)Years ending December 31, 2021 $ 668,105 2022 3,104 2023 3,175 2024 3,296 2025 3,422 Thereafter 136,417 $ 817,519 June 30, 2019 and December 31, 20182020 and 2019 consisted of the following: June 30, 2019 December 31, 2018 2020 2019 Lease obligations $ 3,221,785 $ 3,790,147 $ 2,352,878 $ 2,400,565 Less current portion (1,662,476 ) (1,562,651 ) (1,426,425 ) (1,416,446 ) Long-term portion $ 1,559,309 $ 2,227,496 $ 926,453 $ 984,119 June 30, 2019December 31, 2020 is below:Lease obligations, December 31, 2018 $ 3,790,147 $ 3,790,147 New lease obligations 510,136 1,159,470 Disposal of leased vehicles (352,899 ) (769,009 ) Payments on lease obligations (725,599 ) (1,780,043 ) Lease obligations, June 30, 2019 $ 3,221,785 Lease obligations, December 31, 2019 2,400,565 New lease obligations 3,705,417 Disposal of leased vehicles (975,215 ) Lease obligation converted to note payable (355,438 ) Payments on lease obligations (2,422,451 ) Lease obligations, December 31, 2020 $ 2,352,878 The weighted-average remaining lease term at June 30, 2019 is 1.71 years and the weighted average discount rate is 5%.The finance lease costs for the six months ended June 30, 2019 and 2018 consisted of depreciation expense of $514,244 and $170,059, respectively and interest expense of $114,221 and $41,758, respectively.F-26. F- 32YAYYO, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFuture payments under lease obligations are as follows:For the Six Months Ended June 30, 2019 and 2018 (unaudited)Years ending December 31, 2021 $ 1,531,108 2022 769,619 2023 210,219 Total payments 2,510,946 Amount representing interest (158,068 ) Lease obligation, net $ 2,352,878 six monthsyear ended June 30, 2019,December 31, 2020, the Company issued 84,300sold an aggregate of 2,553,571 shares of common stock to vendors in satisfactionthree investors for cash proceeds of $421,500$275,000, of accounts payablewhich 125,000 shares and accrued expenses. The 84,300 shares were valued at $674,000; therefore$25,000 was to a member of the Company took a charge to earningsCompany’s board of $252,900 related todirectors.settlement of debt duringyears ended December 31, 2019, the six months ended June 30, 2019.Company:● issued 84,300 shares of common stock to vendors in satisfaction of $421,500 of accounts payable and accrued expenses. The 84,300 shares were valued at $674,000; therefore the Company took a charge to earnings of $252,900 related to the settlement of debt during the years ended December 31, 2019; ● issued 2,625,000 shares of common shares in connection with its initial public offering at $4.00 per share. Total gross proceeds from the offering were $10,500,000, before deducting underwriting discounts and commissions and other offering expenses. Weighted Weighted Weighted Average Weighted Average Average Remaining Aggregate Average Remaining Aggregate Options Exercise Contractual Intrinsic Options Exercise Contractual Intrinsic Outstanding Price Life Value Outstanding Price Life Value Outstanding, December 31, 2018 300,000 $ 8.00 2.00 $ - 300,000 $ 8.00 2.00 $ - Granted - - $ Forfeited - - Exercised - - Outstanding, June 30, 2019 300,000 $ 8.00 1.50 $ - Exercisable, June 30, 2019 300,000 $ 8.00 1.50 $ - Outstanding, December 31, 2019 300,000 $ 8.00 1.00 $ - Granted 4,040,000 1.62 Forfeited (1,800,000 ) 4.67 Exercised - Outstanding, December 31, 2020 2,540,000 $ 0.22 4.52 $ 1,074,245 Exercisable, December 31, 2020 1,162,875 $ 0.22 4.52 $ 491,821 F-27. June 30, 2019:December 31, 2020:Outstanding Outstanding Exercisable Outstanding Exercisable Number of Options Exercise Price Number of Options Exercise Price Number of Number of Exercise Number of Exercise Options Options Price Options Price 300,000 $ 8.00 $ 300,000 8.00 2,505,000 $ 0.215 1,147,875 $ 0.215 300,000 300,000 35,000 0.220 15,000 0.220 2,540,000 1,162,875 Risk-free interest rate 0.28% - 1.59 % Expected life of the options 5.0 years Expected volatility 195%-212 % Expected dividend yield 0 % Weighted Weighted Weighted Average Weighted Average Average Remaining Aggregate Average Remaining Aggregate Warrants Exercise Contractual Intrinsic Warrants Exercise Contractual Intrinsic Outstanding Price Life Value Outstanding Price Life Value Outstanding, December 31, 2018 1,500,000 $ 4.00 4.44 $ 6,000,000 1,500,000 $ 4.00 4.44 $ 6,000,000 Granted - 131,250 5.00 Forfeited - - Exercised - - Outstanding, June 30, 2019 1,500,000 $ 4.00 3.94 $ 6,000,000 Exercisable, June 30, 2019 1,500,000 $ 4.00 3.94 $ 6,000,000 Outstanding, December 31, 2019 1,631,250 $ 4.08 3.38 $ - Granted - Forfeited - Exercised - Outstanding, December 31, 2020 1,631,250 $ 4.08 2.38 $ - Exercisable, December 31, 2020 1,631,250 $ 4.08 2.38 $ - June 30, 2019:December 31, 2020:Outstanding and Exercisable Number of Warrants Exercise Price 1,500,000 $ 4.00 1,500,000 Outstanding and Exerciseable Number of Exercise Warrants Price 1,500,000 $ 4.00 131,250 5.00 1,631,250 F-28. F- 33YAYYO, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSForIn connection with the Six Months Ended June 30, 2019 and 2018 (unaudited)Company’s initial public offering, the Company issued the underwriters a total of 131,250 warrants to purchase shares of the Company’s common stock for $5.00 per share. The warrants expire in November 2024.six monthsyears ended June 30, 2018,December 31, 2020 and 2019, the Company paid management fees of $120,000,$0 and $0, respectively, to a company that is owned by the Company’s former Chief Executive Officer and director. Beginning on February 1, 2019, the Company entered into a consulting agreement with this individual and paid $132,000$167,000 under the consulting agreement. The consulting agreement was terminated effective September 1, 2019. Also during the years ended December 31, 2020, the Company’s CEO and director advanced the Company $250,000 and the Company repaid $150,000. At December 31, 2020, $100,000 was owed to the Company’s CEO and director related to this advance.six monthsyears ended June 30,December 31, 2020 and 2019, and 2018, the Company expensed $53,507$32,173 and $0,$587,261, respectively, in advertising expenseexpenses from a company whose CEO iswas also a former director of the Company. At June 30, 2019 and December 31, 2018, $387,9782020 and $334,471,2019, $324,920 and $394,183, respectively, was owed to this company and is included in accounts payable in the accompanying consolidated balance sheets.At June 30, 2019 andDuring the years ended December 31, 2018,2020 and 2019, the Company had a note payableexpensed $2,321,186 and $2,214,985, respectively, in insurance expense related to insuring the Company fleet of vehicles from an insurance brokerage firm whose owner is also a stockholder for $880,000of the Company. At December 31, 2020 and $790,000, respectively.2019, $265,257 and $171,665, respectively, was owed to this insurance brokerage from and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.CommitmentsIncome TaxesContingenciesliabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of December 31, 2020 and 2019 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its business model. Because of the impacts of the valuation allowance, there was no income tax expense or benefit for the years ended December 31, 2020 and 2019. 2020 2019 Amount Percent Amount Percent Federal statutory rates $ (735,436 ) 21.0 % $ (825,346 ) 21.0 % State income taxes (245,145 ) 7.0 % (275,115 ) 7.0 % Permanent differences 335,916 -9.6 % (69,409 ) 1.8 % Valuation allowance against net deferred tax assets 644,665 -18.4 % 1,169,870 -29.8 % Effective rate $ - 0.0 % $ - 0.0 % F-29. 2020 2019 Deferred income tax asset Net operation loss carryforwards 3,173,878 2,419,531 Accrued expenses 50,205 159,887 Total deferred income tax asset 3,224,084 2,579,418 Less: valuation allowance (3,224,084 ) (2,579,418 ) Total deferred income tax asset $ - $ - partymore likely than not that the deferred tax assets will not be realized in future years. Management has based its assessment on the Company’s lack of profitable operating history.certain legal proceedings fromIRS code section 382 limitations and expire in 2031. The 2018, 2019 and 2020 tax year is still subject to audit.incidental to the conduct of its business. These proceedings could resultCompany may become involved in fines, penalties, compensatory or treble damages or non-monetary relief. The nature oflawsuits and other legal proceedings that arise in the course of business. Litigation is such that the Company cannot assuresubject to inherent uncertainties, and it is not possible to predict the outcome of any particular matter, and an unfavorable rulinglitigation with total confidence. The following description relates to pending legal proceedings or development couldpotential claims against us whose outcome may, either individually or in the aggregate, have a materially adverse effect on our consolidated financial position, results of operations and cash flows in the period in which a ruling or settlement occurs. However, based on information available to the Company’s management to date, the Company’s management does not expect that the outcome of any matter pending against the Company is likely to have a materiallymaterial adverse effect on the Company’s consolidatedbusiness, financial position as of June 30, 2019,condition, operating results, of operations,or cash flows or liquidityflows.Company.State of California for the County of Los Angeles. Plaintiff Anthony Davis acted as the Company’s Chief Executive Officer from approximately December 2016 through April 2017. Mr. El-Batrawi is the founder of the Company and its former Chief Executive Officer and director, and was involved, the complaint alleges, in Mr. Davis’s hiring and termination after a brief tenure as CEO. As part of his severance compensation, Mr. Davis was granted stock options to purchase shares of Common Stock. Mr. Davis claims that the Company breached its agreement to award him these stock options and includes a claim for wage and hour violations. The lawsuit also seeks declaratory and injunctive relief. Mr. Davis also included a claim under the California Unfair Practices Act. The Company has denied all liability, asserts that it has paid Mr. Davis all amounts due to him under his separation agreement with the Company, and has vigorously defended this lawsuit. The Company has filed a demurrer in connection with this litigation and that demurrer is expected to be resolved at a hearing in May 2021. If the case is not dismissed at that time, the Company will conduct discovery and file a motion for summary judgment.F-30. F- 34F-31. 100,000 shares to a member of the Company’s board of directors for cash proceeds of $50,000; ● 960,550 shares to the Company’s former Chief Executive Officer for the cashless exercise of 1,000,000 stock options; ● 35,000 shares for the exercise of stock options for cash proceeds of $15,450; and ● 825,000 shares to our Executive Chairman in connection with an anti-dilutive agreement. F-32. 
a division of Fordham Financial Management, Inc.2019,, 2021 (the 25th day after the date of this prospectus)offering), all dealers effecting transactions in the Common Stock,these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.2,500,000Shares YayYo, Inc.PROSPECTUSAegis Capital Corp.WestPark Capital, Inc. ,2019 PartPART IIDistribution.Distribution, or FINRA filing. (“FINRA”) filing fee. Amount Securities and Exchange Commission registration fee $ 2,281 FINRA filing fee 3,323 NASDAQ listing fee 75,000 Accountants’ fees and expenses 21,500 Legal fees and expenses 50,000 Printing and engraving expenses 5,000 Miscellaneous 15,000 Total expenses $ 172,104 Amount to be Paid SEC Registration Fee $ 1,323 FINRA Filing Fee 2,319 Nasdaq Listing Fee Legal Fees and Expenses Accounting Fees and Expenses Transfer Agent and Registrar Fees and Expenses Printing Expenses Miscellaneous Expenses Total $ DirectorsOfficers and Officers.DirectorsSection 102Our Amended and Restated Bylaws (the “Bylaws”) provide that we will indemnify our directors, officers and employees to the fullest extent against expenses judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the General Company Law of the State of Delaware (“DGCL”) permitsfact that such person is or was a Company to eliminate the personal liability of directors of a Company to the Company or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our amended and restated certificate of incorporation provides that no director of the Company, shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the DGCL prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.DGCL providesDelaware General Corporation Law (the “DGCL”). Our Bylaws also provide that athe Company hasshall have the power (though not the obligation), to the extent and in the manner permitted by the DGCL, to indemnify each of its employees, officers, and agents (other than directors) against expenses (as defined in Section 145 of the DGCL), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any, arising by reason of the fact that such person is or was an employee, officer or agent of the Company.Company,corporation, or a personis or was serving at the request of the Company forcorporation as a director, officer, employee or agent of another Company,corporation, partnership, joint venture, trust or other enterprise, in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with ansuch action, suit or proceeding, if the person acted in good faith and in a manner the person reasonably believed to which hebe in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful.endingpending or completed action or suit by or proceedingin the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such position,action or suit if suchthe person acted in good faith and in a manner hethe person reasonably believed to be in or not opposed to the best interests of the Company,corporation and in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that in the case of actions brought by or in the right of the Company, no indemnification shall be made within respect toof any claim, issue or matter as to which such person shall have been adjudged to be liable to the Companycorporation unless and only to the extent that the Court of Chancery or other adjudicatingthe court determinesin which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.II-160. Our amended and restated certificate of incorporationThe DGCL also provides that we will indemnify toindemnification under Section 145(d) can only be made upon a determination that indemnification of the fullest extent permitted from time to time bypresent or former director, officer or employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 145(a) and (b).or any other applicable laws as presently or hereafter in effect,also empowers a corporation to purchase and maintain insurance on behalf of any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including, without limitation, an action by or in the right of the Company, by reason of his acting as a director or officer of the Company or any of its subsidiaries (and the Company, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was ana director, officer, employee or agent of the Company or any of its subsidiariescorporation, or is or was serving at the request of the Company in anycorporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other capacity for or on behalf of the Company)enterprise against any liability or expense actuallyasserted against such person and reasonably incurred by such person in respect thereof;provided, however,any such capacity, or arising out of such person’s status as such, whether or not the Company shall be requiredcorporation would have the power to indemnify an officer or director in connection with an action, suit or proceeding (or part thereof) initiated by such person only if (i)against such action, suit or proceeding (or part thereof) was authorized by the Board of Directors and (ii) the indemnification does not relate to any liability arising under Section 16(b)145 of the Exchange Act, as amended, or any rules or regulations promulgated thereunder. Such indemnification is not exclusive of any other right to indemnification provided by law or otherwise.DGCL.If a claim is not paid in full by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amountSection 102(b)(7) of the claim and, if successful in wholeDGCL permits a corporation to provide for eliminating or in part,limiting the claimant shall be entitled to be paid also the expensepersonal liability of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advanceone of its final disposition wheredirectors for any undertaking required bymonetary damages related to a breach of fiduciary duty as a director, as long as the By-lawscorporation does not eliminate or limit the liability of a director for acts or omissions which (1) which breached the director’s duty of loyalty to the corporation or its stockholders, (2) which were not in good faith or which involve intentional misconduct or knowing violation of law, (3) under Section 174 of the Company has been tenderedDGCL; or (4) from which the director derived an improper personal benefit.the Company)enter into an underwriting agreement, which provides that the claimant has not met the standards of conduct which make it permissibleunderwriters are obligated, under some circumstances, to indemnify our directors, officers and controlling persons against specified liabilities, including liabilities under the DGCL for the Company to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Company (including its Board of Directors, legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Indemnification shall include payment by the Company of expenses in defending an action or proceeding in advance of the final disposition of such action or proceeding upon receipt of an undertaking by the person indemnified to repay such payment if it is ultimately determined that such person is not entitled to indemnification.Securities Act.In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended, or the Securities Act, against certain liabilities.Securities. Set forth below is information regarding shares of common stock issued by us since the Company’s inception on June 21, 2016.Securities(a) IssuanceWe engaged in two sales of Capital Stock.unregistered sales of Common Stock during the fiscal year ended December 31, 2019. The sales are as follows:On June 21, 2016 the Company issued 15,625,000 shares of common stock to our Founder, Ramy El-Batrawi, for no cost. Ramy El-Batrawi is an accredited investor for purposes of Rule 501 of Regulation D.During the period from inception to December 31, 2016, the Company issued 9,386,000 shares of common stock to accredited investors for $1,319,900.During the quarter ended March 31, 2017, the Company issued 45,225 to accredited investors for $180,900. II-2● ● ● On April 2, 2020, we sold an aggregate of 1,428,571 shares to ACME Auto Leasing, one of the companies that finances our vehicle purchases, in a negotiated transaction for $0.07 per share, or aggregate cash consideration of $100,000. ● On June 8, 2020, we sold 1,000,000 shares to Acuitas Group Holdings, LLC (“Acuitas”), a Delaware limited liability company which is now the Company’s largest shareholder, in a negotiated transaction for $0.15 per share, or aggregate cash consideration of $150,000. ● On July 15, 2017, the Company entered into an agreement pursuant to which the Company agreed to issue additional consideration to Acme Auto Leasing (the “Lessor”) in the form of a restricted stock grant in the amount of 100,000 shares of common stock, in exchange for certain terms to be provided by the Lessor under all lease agreements entered into between the Lessor and the Company. On December 15, 2017, the Company issued the Lessor an additional 250,000 under a similar arrangement.On December 20, 2017, the Company issued 20,000 shares of common stock to an attorney in exchange for the payment of legal services.In the fourth quarter of 2017, the Company, in connection with the issuance of notes payable to investors, the Company issued an aggregate of 18,200 shares of common stock as additional incentive to make the loans.2018,fiscal 2021, we engaged in the following unregistered sales of Common Stock:● On January 7, 2021, we sold another 100,000 shares to Mr. O’Neill, in a negotiated transaction for $0.50 per share, or aggregate cash consideration of $50,000; ● On February 1, 2021, we issued 600 shares to an investor in connection with a prior note payable agreement; ● On February 12, 2021, we issued 1,000,000 shares to John Gray in connection with the conversion of his note payable for $500,000; ● On February 12, 2021, we issued 150,000 shares to FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company, in connection with the settlement of a legal action; ● On February 23, 2021, we issued 75,000 shares to SRAX, Inc., a Delaware corporation, in connection with the settlement of a legal action; and ● On March 1, 2021, we issued 825,000 shares to Acuitas in connection with a settlement agreement between Acuitas and X, LLC, a Delaware limited liability company controlled by the Company’s former CEO. The value of the shares was $3,240,600 which is based on the market value of the Common Stock at the grant date. notes payable to investors, the Company issuedthat same date, of a 12.5% original issue discount convertible promissory note and a Common Stock purchase warrant. The note had an aggregateoriginal principal amount of 3,000$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 as additional incentiveCommon Stock at an initial price of $3.00 per share, and was to make the loans.On February 21, 2018, the Company issued 81,250 shares of common stock to two accredited investors in exchangemature on January 12, 2022. The note has since been exchanged for services.On March 8, 2018, the Company issued a note payable in the amount of $6,000,000. In addition, the Company issued to the note holder 150,000230,375 shares of the Company’s common stockSeries B Preferred Stock and 1,500,000 warrantsa warrant, as described below, and cancelled. The warrant grants the right to purchase 187,500 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 (5) years of the date of issuance. The agreement provided 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 remained outstanding. The warrant include anti-dilution provisions in which its exercise price 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 the exercise price of the warrant. On each of May 12, 2021 and June 12, 2021, the Company issued another warrant for an additional 93,750 common shares to the same investor pursuant to the terms of the agreement.common stock for $4.00 per share.On April 1, 2018, the Company entered into an incentive agreement forSeries B Preferred Stock, and a grant of stock with David Haley, a former director of the Company, pursuantwarrant to which Mr. Haley has agreed to write, provide and procure two particular insurance policies for Rideshare Car Rentals, LLC and Distinct Cars, LLC (the “Special Policies”) in consideration for a grant of 250,000purchase 93,750 shares of Company restricted common stock, provided further, thatCommon Stock at an exercise price of $3.00. The Series B Preferred Stock is subject to mandatory redemption in consideration for certain monetary advances made and extended by Mr. Haleyfull at a redemption price initially equal to $10.00 per share, within 15 business days after the date on behalf of the Company for certain down payment requirements for the Special Policies,which the Company has agreed to issue Mr. Haley 14,945 sharescompleted an equity financing resulting in total proceeds of Company restricted common stock. 258,695 shares of Company restricted common stock was issued on April 1, 2018 and 6,250 shares of Company restricted common stock was issued on October 8, 2018.at least $10 million.In April 2018, the Company, in connection with the issuance of notes payable to three investors, issued an aggregate of 2,250 shares of common stock as additional incentive to make the loans.Think Equity WarrantIn May 2018, the Company issued an accredited investor 1,250 shares of common stock for services.In May 2018, the Company, in connection with the issuance of notes payable to one investor, issued an aggregate of 600 shares of common stock as additional incentive to make the loans.In July 2018, the Company issued a consultant 100,000 shares of common stock for an agreement to provide services. The Company entered into an agreement with the consultant to cancel the shares in November 2018.In July 2018, the Company issued the Lessor 91,500 shares of common stock in connection with a lease arrangement.In November 2018, the Company issued the Lessor 207,000 shares of common stock in connection with a lease arrangement.In March 2019, the Company issued American Business Insurance Services, Inc. 80,000 shares of common stock in connection the settlement of $400,000 of debt. Mr. Haley, a former directorEach of the Company, issales described above was made pursuant to the Chief Executive Officer of American Business Insurance Services, Inc.In June 2019, the Company issued RG Alliance 4,300 shares of common stock in connection the settlement of $21,500 of debt.The offers, sales and issuances of securities listed above were deemed exemptexemption from registration under Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder in that the issuance of securities were made to accredited investors and did(i.e., a private transaction by an issuer not involveinvolving a public offering. The recipients of such securities in each of these transactions represented their intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.offering).II-362. (b) Warrants.As discussed above, on March 8, 2018, the Company issued# A contract, compensatory plan or arrangement to which a note payabledirector or executive officer is a party or in the amount of $6,000,000. In addition, the Company issued to the note holder 150,000 shares of the Company’s common stock and 1,500,000 warrants to purchase shares of the Company’s common stock for $4.00 per share.The warrant listed above was deemed exempt from registration under Section 4(a)(2) of the Securities Actwhich one or Regulation D promulgated thereunder in that the issuance of securities were made to accredited investors and did not involve a public offering. The recipient of such securities represented its intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.(c) Option Grants.During the year ended December 31, 2016, the Company issued 450,000 options. For options granted during fiscal year 2016 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $0.85 and the weighted-average exercise price of such options was $1.00. No options were granted during fiscal 2016 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.During the year ended December 31, 2016, the Company issued 300,000 options. For options granted during fiscal year 2017 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $7.54 and the weighted-average exercise price of such options was $8.00. No options were granted during fiscal 2017 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.The option described above were deemed exempt from registration in reliance on Section 4(a)(2) of the Securities Act or Rule 701 promulgated thereunder as transactions pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of such securities were our employees,more directors or bona fide consultants and received the securities under our stock option plans.(d) Issuance of Notes.The Company has issued the following notes:●Unsecured note payable for $390,000 to an investor that accrues interest at 5% per annum.●Unsecured notes payable for $319,667 to 38 individual investors that accrue interest at 8% per annum.●Unsecured note payable to investor for 222,222 that accrues interest at 6% per annum.The notes were deemed exempt from registration under Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder in that the issuance of securitiesexecutive officers are eligible to accredited investors and did not involve a public offering.participate.II-463. Item 16. Exhibits and Financial Statement Schedules.(a)Exhibits: Reference is made to the Exhibit Index following the signature pages hereto, which Exhibit Index is hereby incorporated into this Item.(b)Financial Statement Schedules: All schedules are omitted because the required information is inapplicable or the information is presented in the financial statements and the related notes.Undertakings.The undersigned registrant hereby undertakes:Undertakingsundertakes:(1) To file, during any periodundertakes to provide to the Underwriter at the closing specified in which offers or sales are being made, a post-effective amendment to this registration statement:(i) To include any prospectusthe underwriting agreement certificates in such denominations and registered in such names as required by section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuantUnderwriter to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and(iii) To include any material information with respectpermit prompt delivery to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.II-5(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.(4) That, for the purpose of determining liability under the Securities Act to any purchaser:(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and(B) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.(5) That for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.any charter provision, by lawthe foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities: 64. (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. suchthese securities at that time shall be deemed to be the initial bona fide offering thereof.II-665. Registration Statementregistration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State ofBeverly Hills, California on November 5, 2019.July 16, 2021. YAYYO, INC.EVmo, Inc. By: /s/ Jonathan RosenStephen M. Sanchez Jonathan Rosen Chief Executive Officer (Principal Executive Officer) Registration Statementregistration statement has been signed by the following persons in the capacities and on November 5, 2019.the dates indicated./s/ Harbant S. Sidhu /s/ Kevin PickardHarbant S. Sidhu Kevin PickardDirectorDirector and Chief Financial OfficerPrincipal Financial Officer and Accounting OfficerDate /s/ Jeffrey GuzyStephen M. SanchezChief Executive Officer and July 16, 2021 Stephen M. Sanchez (principal executive officer) Jeffrey Guzy DirectorEXHIBIT INDEXII-7* Filed herewith.# Previously filed.+ Indicates a management contract or any compensatory plan, contract or arrangement.II-8ALTERNATE PAGES FOR SELLING STOCKHOLDER PROSPECTUSThe information in this prospectus is not complete and may be changed. The selling stockholders named in this prospectus may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.Subject to Completion, dated November 5, 2019PROSPECTUSYayYo, Inc.1,650,000Shares of Common StockThe selling stockholders plan to sell an aggregate of up to (a) 150,000 outstanding shares of the registrant’s common stock, and (b) 1,500,000 shares of common stock issuable upon exercise of common stock purchase warrants.The selling stockholders must sell their shares at a fixed price per share of $4.00, which is the per share price of the shares being offered in the IPO, until such time our shares are listed on a national securities exchange or quoted on the OTCBB, OTCQX or OTCQB marketplaces. Thereafter, the shares offered by this prospectus may be sold by the selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices. By separate prospectus (the “IPO Prospectus”), we have registered an aggregate of shares of our common stock which we are offering for sale to the public through our underwriters, excluding any shares issuable upon the underwriters’ over-allotment option.We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “YAYO” which listing is a condition to this offering.The distribution of the shares by the selling stockholders is not subject to any underwriting agreement. We will not receive any proceeds from the sale of the shares by the selling stockholders; however, we may receive proceeds if the Selling Securityholder Warrant is exercised for cash. We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.We are an “emerging growth company” under the federal securities laws and have elected to be subject to reduced public company reporting requirements. An investment in our common stock may be considered speculative and involves a high degree of risk, including the risk of a substantial loss of your investment. See “Risk Factors” beginning on page 7 to read about the risks you should consider before buying shares of our common stock. An investment in our common stock is not suitable for all investors. See “Risk Factors-Risks Relating to Ownership of Our Securities.”Sales of the shares of our common stock registered in this prospectus and the IPO Prospectus will result in two offerings taking place concurrently which might affect price, demand, and liquidity.You should rely only on the information contained in this prospectus and any prospectus supplement or amendment. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus is only accurate on the date of this prospectus, regardless of the time of any sale of securities.NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.The date of this prospectus is , 2019EXPLANATORY NOTEConcurrent with this offering, the Company is registering shares of common stock in connection with a public offering of 2,500,000 shares of our common stock through the underwriters (excluding 375,000 shares which may be sold upon exercise of the underwriters’ over-allotment option). Sales by stockholders that purchased shares in our common stock from the underwritten offering may reduce the price of our common stock, demand for our shares and, as a result, the liquidity of your investment.SELLING STOCKHOLDERSThe shares of common stock being offered by the Selling Securityholder are those previously issued to the Selling Securityholder and those issuable to the Selling Securityholder upon exercise of the Selling Securityholder Warrant. For additional information regarding the issuance of common stock and the Selling Securityholder Warrant, see “Certain Relationships and Related Party Transactions” below. We are registering shares of common stock in order to permit the Selling Securityholder to offer the shares for resale from time to time. Except for the ownership of the common stock and the Selling Securityholder Warrant issued pursuant to the Securities Purchase Agreement, the Selling Securityholder have not had any material relationship with us within the past three years.The table below lists the Selling Securityholder and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) of the shares of common stock held by the Selling Securityholder. The second column lists the number of shares of common stock beneficially owned by the Selling Securityholder, based on their respective ownership of shares of common stock of the Company and the Selling Securityholder Warrant, as of October 31, 2019, assuming exercise of the Selling Securityholder Warrant held by each such Selling Securityholder on that date but taking account of any limitations on exercise set forth therein.The third column lists the shares of common stock being offered by this Prospectus by the Selling Securityholder and does not take in account any limitations on exercise of the Selling Securityholder Warrant set forth therein.In accordance with the terms of the Registration Rights Agreement with the holders of the common stock and the Selling Securityholder Warrant, this Prospectus generally covers the resale of the sum of (i) the number of shares of common stock issued in connection with the Securities Purchase Agreement and (ii) 200% of the maximum number of shares of common stock issuable upon exercise of the Selling Securityholder Warrant, in each case, determined as if the outstanding Selling Securityholder Warrant were exercised in full (without regard to any limitations on exercise contained therein) as of the trading day immediately preceding the date this registration statement was initially filed with the SEC. Because the exercise price of the Selling Securityholder Warrant may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this Prospectus. The fourth column assumes the sale of all of the shares of common stock offered by the Selling Securityholder pursuant to this Prospectus. For additional information regarding the Registration Rights Agreement, see “Description of Securities” below.Under the terms of the Selling Securityholder Warrant, a Selling Securityholder may not exercise the warrants to the extent (but only to the extent) such selling stockholder or any of its affiliates would beneficially own a number of shares of our common stock which would exceed 4.99%. The number of shares in the second column reflects these limitations. The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”Name of
Selling
Stockholder Number of Shares of
Common Stock Owned
Prior to Offering Maximum Number of Shares of
Common Stock to be Sold Pursuant
to this Prospectus Number of Shares of
Common Stock Owned
After Offering Bellridge Capital, L.P.(1) 2,400,000 (2) 1,650,000 750,000 2.6 % (1)Bellridge Capital LLC (“BC LLC”) is the investment manager of Bellridge Capital, L.P., Boris Klimov (a.k.a Robert Klimov) is the managing partner and controlling person of BC LLC and may be deemed to share beneficial ownership of the shares beneficially owned by Bellridge Capital, L.P. BC LLC may be deemed to share beneficial ownership of the shares beneficially owned by Bellridge Capital, L.P. BC LLC and Mr. Klimov each disclaims beneficial ownership of the securities with respect to which indirect beneficial ownership is described.(2)Includes the following: (i) 650,000 shares of common stock, (ii) 1,500,000 underlying shares of common stock to be acquired upon the exercise of the Selling Securityholder Warrant, and (iii) an option (exercisable at any time by Bellridge Capital, L.P.) from a non-affiliate shareholder of the Company to purchase an aggregate of 250,000 shares of issued and outstanding common stock of the Company from the non-affiliate shareholder.PLAN OF DISTRIBUTIONThe selling stockholders may, from time to time, sell any or all of their shares of our common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. If the shares of our common stock are sold through underwriters, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at a price of $4.00 per share until our shares are listed on The Nasdaq Capital Market and thereafter at prevailing market prices or privately negotiated prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:●any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; ●ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;/s/ Harbant S. Sidhu Director July 16, 2021 /s/ Harbant S. Sidhu ●block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;/s/ Douglas M. Mox Director July 16, 2021 Douglas M. Mox ●purchases by a broker-dealer as principal and resale by the broker-dealer for its account; ●transactions other than on these exchanges or systems or in the over-the-counter market;/s/ John P. O’Neill ●through the writing of options, whether such options are listed on an options exchange or otherwise;Director July 16, 2021 ●an exchange distribution in accordance with the rules of the applicable exchange;John P. O’Neill ●privately negotiated transactions;●short sales;●broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;●a combination of any such methods of sale; and●any other method permitted pursuant to applicable law.The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. In general, a person who has beneficially owned restricted shares of our common stock for at least six months, in the event we have been a reporting company under the Exchange Act for at least 90 days, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the three months preceding the sale.The selling stockholders may also engage in short sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades.Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of our common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act. In connection with the sale of the shares of our common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of our common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of our common stock short and deliver shares of our common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of our common stock to broker-dealers that in turn may sell such shares.The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of our common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of our common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.The selling stockholders also may transfer the shares of our common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of our common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgees, transferees or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of our common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be an “Underwriter” within the meaning of the Securities Act in connection with such sales. In such event, any commissions paid, or any discounts or concessions allowed to, such broker-dealers or agents and any profit realized on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of our common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of our common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers. Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of our common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. There can be no assurance that any selling stockholder will sell any or all of the shares of our common stock registered pursuant to the registration statement, of which this prospectus forms a part.Each selling stockholder has informed us that it does not have any agreement or understanding, directly or indirectly, with any person to distribute our common stock. None of the selling stockholders who are affiliates of broker-dealers, other than the initial purchasers in private transactions, purchased the shares of common stock outside of the ordinary course of business or, at the time of the purchase of the common stock, had any agreements, plans or understandings, directly or indirectly, with any person to distribute the securities.We are required to pay all fees and expenses incident to the registration of the shares of common stock. Except as provided for indemnification of the selling stockholders, we are not obligated to pay any of the expenses of any attorney or other advisor engaged by a selling stockholder. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, we will file a post-effective amendment to the registration statement. If the selling stockholders use this prospectus for any sale of the shares of our common stock, they will be subject to the prospectus delivery requirements of the Securities Act.The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of our common stock and activities of the selling stockholders, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in passive market-making activities with respect to the shares of common stock. Passive market making involves transactions in which a market maker acts as both our underwriter and as a purchaser of our common stock in the secondary market. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.USE OF PROCEEDSWe will not receive proceeds from sales of our common stock made under this prospectus; however, if we receive proceeds from the cash exercise of the Selling Securityholder Warrant, such proceeds will be used forworking capital and general corporate purposes.DETERMINATION OF OFFERING PRICEThere currently is no public market for our common stock. The shares of common stock may be sold in one or more transactions at a price of $4.00 per share until our shares are listed on The Nasdaq Capital Market and thereafter at prevailing market prices or privately negotiated prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. See “Plan of Distribution” above for more information.LEGAL MATTERSCertain legal matters with respect to the validity of the securities being offered by this prospectus will be passed upon by Carmel, Milazzo & DiChiara LLP, New York, New York.66.
