LMP Automotive (LMPX) 10-K/A 2020 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to ______

Commission File Number: 001-39150

LMP Automotive Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	82-3829328
(State or other jurisdiction of  incorporation or organization)	(I.R.S. Employer Identification No.)
500 East Broward Blvd, Suite 1900, Fort Lauderdale, FL	33394
(Address of principal executive offices)	(Zip Code)

(954) 895-0352

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of each exchange on which registered
Common Stock, Par Value $0.00001 Per Share	The Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes  ☒ No

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

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

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

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

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

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2020 (the last business day of the registrant’s most recently completed second quarter). was approximately $57,500,000 based upon a closing price of $9.80.

As of March 25, 2021, there were 20,100 shares of the registrant’s Series A Preferred Stock and 10,051,874 shares of the registrant’s common stock outstanding.

EXPLANATORY NOTE

On March 25, 2021, LMP Automotive Holdings, Inc. (the “Company”) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Original Form 10-K”). This Amendment No. 1 (the “Amendment”) amends the Original Form 10-K solely to correct a typographical error in the audit report of our independent accounting firm, Grassi & Co., CPAs, P.C.. The audit report included in the Original Form 10-K omitted the name of the Company in two instances. A new audit report with the correction is filed hereto.

This Amendment speaks as of the original filing date and does not reflect events occurring after the filing of the Original Form 10-K. No revisions are being made to the Company’s financial statements or any other disclosure contained in the Original Form 10-K. This Amendment does not otherwise update any exhibits as originally filed or previously amended.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by the Company’s principal executive officer and principal financial officer are filed herewith as exhibits to this Amendment pursuant to Rule 13a-14(a) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).

LMP AUTOMOTIVE HOLDINGS, INC.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2020

INDEX

		Page
PART II
Item 8.	Financial Statements and Supplementary Data	1
PART IV
Item 15.	Exhibits, Financial Statement Schedules	2
	Signatures	4
	Index to Consolidated Financial Statements	F-1

i 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements and supplementary data required by this item are included after Part IV of this Annual Report on Form 10-K beginning on page F-1.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)(1) Financial statements.

The financial statements and supplementary data required by this item begin on page F-1.

(a)(2) 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.

(a)(3) Exhibits.

Exhibit No.	Exhibit Description
3.1	Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Form S-1 filed on December 3, 2019).
3.2	Certificate of Amendment to Certificate of Incorporation of LMP Automotive Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-K filed on December 23, 2020).
3.3	Bylaws (incorporated by reference to Exhibit 3.2 to the registrant’s Form S-1 filed on December 3, 2019).
4.1	Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 4.2 to the registrant’s Form S-1 filed on December 3, 2019).
4.2	Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 4.3 to the registrant’s Form S-1 filed on December 3, 2019).
10.1	Employment Agreement, dated as of February 20, 2018 by and between LMPMotors.com and Samer Tawfik (incorporated by reference to Exhibit 10.1 to the registrant’s Form S-1 filed on December 3, 2019).
10.2	First Amendment to Employment Agreement, dated as of December 30, 2020, by and between LMP Automotive Holdings, Inc. and Samer Tawfik (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed on January 12, 2021).
10.3	2018 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the registrant’s Form S-1 filed on December 3, 2019).
10.4	Lease Agreement, dated as of January 1, 2018, by and between LMPMotors.com and ST RXR Investments, LLC (incorporated by reference to Exhibit 10.3 to the registrant’s Form S-1 filed on December 3, 2019).
10.5	Revolving Line of Credit Agreement, dated July 25, 2018, by and between LMP Automotive Holdings, Inc. and ST RXR Investments, LLC (as amended on May 21, 2019) (incorporated by reference to Exhibit 10.4 to the registrant’s Form S-1 filed on December 3, 2019).
10.6	Lease Agreement, dated as of April 12, 2018, by and between 615 5th Street, Corp. and LMP Finance LLC d/b/a LMP Rentals Delaware Corporation (incorporated by reference to Exhibit 10.7 to the registrant’s Form S-1 filed on December 3, 2019).
10.7	Engagement Letter, dated as of April 25, 2018, by and between LMP Automotive Holdings, Inc. and Daszkal Bolton, LLP (incorporated by reference to Exhibit 10.8 to the registrant’s Form S-1 filed on December 3, 2019).
10.8	Mercedes-Benz Financial Services Finance Commitment, dated as of April 25, 2019 (incorporated by reference to Exhibit 10.9 to the registrant’s Form S-1 filed on December 3, 2019).
10.9	Revolving Line of Credit Agreement, dated as of September 30, 2019 by and between ST RXR Investments, LLC and LMP Automotive Holdings, Inc. (incorporated by reference to Exhibit 10.11 to the registrant’s Form S-1 filed on December 3, 2019).
10.10	Demand Promissory Note and Loan and Security Agreement, dated as of August 19, 2019 by and between LMP Motors.com, LLC and NextGear Capital, Inc. (incorporated by reference to Exhibit 10.12 to the registrant’s Form S-1 filed on December 3, 2019).

2

10.11	Warrant Agreement, dated December 9, 2019, by and between LMP Automotive Holdings, Inc. and Fordham Financial Management, Inc. (the “Representative”) (incorporated by reference to Exhibit 4.1 to the registrant’s Form 8-K filed on December 10, 2019)**
10.12	Form of Representative’s Warrant (incorporated by reference to Exhibit 4.4 to the registrant’s Form S-1 filed on February 5, 2020).
10.13	Warrant Agreement, dated February 13, 2020, by and between LMP Automotive Holdings, Inc. and the Representative (incorporated by reference to Exhibit 99.1 to the registrant’s Form 8-K filed on February 13, 2020)***
10.14	Form of Representative’s Warrant (incorporated by reference to Exhibit 4.1 to the registrant’s Amendment No. 4 to Form S-1 filed on October 25, 2019).
10.15	Employment Agreement, dated as of August 8, 2020, by and between LMP Automotive Holdings, Inc. and Evan Bernstein.
10.16	First Amendment to Employment Agreement, dated as of December 30, 2020, by and between LMP Automotive Holdings, Inc. and Evan Bernstein (incorporated by reference to Exhibit 10.2 to the registrant’s Form 8-K filed on January 12, 2021).
10.17	Employment Agreement, dated as of July 26, 2020, by and between LMP Automotive Holdings, Inc. and Richard Aldahan.
10.18	First Amendment to Employment Agreement, dated as of December 30, 2020, by and between LMP Automotive Holdings, Inc. and Richard Aldahan (incorporated by reference to Exhibit 10.3 to the registrant’s Form 8-K filed on January 12, 2021).
10.19	Credit Agreement, dated March 4, 2021, by and among LMP Automotive Holdings, Inc. and each Floor Plan Borrower identified therein, as borrowers, certain subsidiaries of the borrowers identified therein as Guarantors, the lenders from time to time party thereto, and Truist Bank, as Administrative Agent and Swing Line Lender (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed on March 8, 2021).
10.20	Asset Purchase Agreement, dated as of August 28, 2020, by and among LMP Automotive Holdings, Inc., Beckley Buick-GMC Auto Mall, Inc., King Coal Chevrolet Co., Hometown Preowned Vehicles, Inc. and the other parties thereto (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed on September 1, 2020).
10.21	Real Estate Purchase Agreement, dated as of August 28, 2020, by and between E&W, LLC and 601 NSR, LLC (incorporated by reference to Exhibit 10.2 to the registrant’s Form 8-K filed on September 1, 2020).
10.22	Real Estate Purchase Agreement, dated as of August 28, 2020, by and between The Meg Rental Corporation and 601 NSR, LLC (incorporated by reference to Exhibit 10.3 to the registrant’s Form 8-K filed on September 1, 2020).
10.23	Dealership Asset Purchase Agreement, dated as of September 3, 2020, by and among LMP Automotive Holdings, Inc., William B. Fuccillo, Sr., Fuccillo Affiliates of Florida, Inc. and Fuccillo Associates of Florida, Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed on September 3, 2020).
10.24	Real Estate Contract, dated as of September 3, 2020, by and among LMP Automotive Holdings, Inc., WBF Florida Properties, LLC and WBF Florida Properties III, LLC (incorporated by reference to Exhibit 10.2 to the registrant’s Form 8-K filed on September 3, 2020).
10.25	Membership Interest Purchase Agreement, dated as of March 9, 2021, by and among LMP Finance, LLC, Kevin Sisti, Murdo Smith and Randal Roberge (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K filed on March 10, 2021).
10.26	Sublease, dated as of September 2, 2020, by and between JetSmarter Inc. and LMP Automotive Holdings, Inc.
10.27	Asset Purchase Agreement, dated as of August 28, 2020, by and among LMP Automotive Holdings, Inc., Bachman-Bernard Chevrolet-Buick-GMC-Cadillac, Inc., Philip M. Bachman, Jr. and Myron Bernard (incorporated by reference to Exhibit 10.4 to the registrant’s Form 8-K filed on September 1, 2020).
10.28	Real Estate Purchase Agreement, dated as of August 28, 2020, by and among Philip M. Bachman, Jr., Myron Bernard and 601 NSR, LLC (incorporated by reference to Exhibit 10.5 to the registrant’s Form 8-K filed on September 1, 2020).
10.29	Revolving Line of Credit Agreement, dated as of March 22, 2021, by and between ACFP MGMT, LLC and LMP Automotive Holdings, Inc.
21.1	List of Subsidiaries of the Registrant.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*

* Filed herewith.

** The Representative’s Warrant issued by the Company to each of the entities and individuals set forth on Exhibit 99.1 to the registrant’s Form 8-K filed on December 10, 2019, all of whom are affiliates of the Representative, are substantially identical in all material respects to the Representative’s Warrants issued to Fordham Financial Management, Inc. on December 10, 2019 and filed as an exhibit to such Form 8-K, except as to the recipient of such warrants and the number of shares of Common Stock issuable upon exercise of such warrants. Pursuant to Instruction 2 to Item 601 of Regulation S-K, we have omitted filing copies of such warrants as exhibits and have filed a schedule as Exhibit 99.1 to the registrant’s Form 8-K filed on December 10, 2019 identifying the other warrants omitted and setting forth the material details in which such warrants differ from the warrant incorporated by reference herein.

*** The Representative’s Warrant issued by the Company to each of the entities and individuals set forth on Exhibit 99.1 to the registrant’s Form 8-K filed on February 13, 2020, all of whom are affiliates of the Representative, are substantially identical in all material respects to the Representative’s Warrants issued to Fordham Financial Management, Inc. on February 13, 2020 and filed as an exhibit to such Form 8-K, except as to the recipient of such warrants and the number of shares of Common Stock issuable upon exercise of such warrants. Pursuant to Instruction 2 to Item 601 of Regulation S-K, we have omitted filing copies of such warrants as exhibits and have filed a schedule as Exhibit 99.1 to the registrant’s Form 8-K filed on February 13, 2020 identifying the other warrants omitted and setting forth the material details in which such warrants differ from the warrant incorporated by reference herein.

3

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 31, 2021	LMP AUTOMOTIVE HOLDINGS, INC.
	By:	/s/ Samer Tawfik
		Samer Tawfik
		Chief Executive Officer
		(Principal Executive Officer)

Date: March 31, 2021
	By:	/s/ Evan Bernstein
		Evan Bernstein
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned officers and/or directors of the Registrant, by virtue of their signatures to this report, appearing below, hereby constitute and appoint Samer Tawfik and Evan Bernstein, or any one of them, with full power of substitution, as attorneys-in-fact in their names, places and steads to execute any and all amendments to this report in the capacities set forth opposite their names and hereby ratify all that said attorneys-in-fact do by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Samer Tawfik	Dated: March 31, 2021
Name: Samer Tawfik Title: Chairman, President and Chief Executive Officer (Principal Executive Officer)
/s/ Evan Bernstein	Dated: March 31, 2021
Name: Evan Bernstein Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ William Cohen	Dated: March 31, 2021
Name: William “Billy” Cohen
Title: Director
/s/ Robert Morris	Dated: March 31, 2021
Name: Robert “Bob” J. Morris, Jr.
Title: Director
/s/ Elias Nader	Dated: March 31, 2021
Name: Elias Nader
Title: Director

4

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2020 and 2019	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019	F-4
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2020 and 2019	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019	F-6
Notes to the Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of LMP Automotive Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of LMP Automotive Holdings, Inc. (the Company) as of December 31, 2020 and 2019, and the related statements of operations, shareholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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 States) (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 audit 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 are 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. Accordingly, 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 evaluating 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.

GRASSI & CO., CPAs, P.C.

We have served as the Company’s auditor since 2018.

Jericho, New York

March 25, 2021

F-2

LMP AUTOMOTIVE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

AT DECEMBER 31, 2020 AND 2019

	December 31, 2020			December 31, 2019
ASSETS:
Cash	$	3,935,726		$	6,508,055
Accounts receivable		515,761			54.044
Automotive inventory, net		8,498,089			10,035,903
Net investment in sales-type leases		11,743,576			800,761
Other current assets		719,760			830,533
Total current assets		25,412,912			18,229,296
Property, equipment and leasehold improvements, net		4,216,819			509,355
Intangible assets		1,110,823			69,327
Deposits held in escrow for acquisitions		3,250,000			-
Right-of-use asset		422,501			1,100,271
TOTAL ASSETS	$	34,413,055		$	19,908,249
LIABILITIES:
Accounts payable	$	273,835		$	112,840
Vehicle floorplan and notes payable-current portion		723,798			2,164,424
Premium finance contract		543,098			-
Other current liabilities		1,333,235			653,063
Operating lease liability, current portion		181,437			335,338
Total current liabilities		3,055,403			3,265,665
Vehicle floorplan and notes payable, net of current portion		1,929,447			-
Operating lease liability, net of current portion		283,716			795,147
Total liabilities		5,268,566			4,060,812
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.00001 par value; 1,000,000 shares authorized, nil shares issued and outstanding		-			-
Common stock, $0.00001 par value; 29,000,000 shares authorized; 10,029,040 and 8,691,323 shares issued and outstanding at December 31, 2020 and 2019, respectively		101			87
Additional paid-in capital		45,318,891			27,106,058
Treasury stock at cost, 159,653 and 138,600 shares at December 31, 2020 and 2019, respectively		(758,352	)		(658,350	)
Accumulated deficit		(15,416,151	)		(10,600,358	)
Total shareholders’ equity		29,144,489			15,847,437
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	34,413,055		$	19,908,249

The accompanying notes are an integral part of these consolidated financial statements.

F-3

LMP AUTOMOTIVE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

	2020			2019
Revenues:
Vehicle sales	$	28,009,886		$	9,111,513
Subscription fees		1,857,981			1,389,679
Rental revenues		14,589			351,885
Interest revenue – sales-type leases		560,161			5,517
Total revenues		30,442,617			10,858,594
Cost of revenues:
Vehicle sales		26,563,952			9,719,713
Subscription and rental		824,073			1,285,907
Total cost of revenues		27,388,025			11,005,620
Gross profit (loss)		3,054,592			(147,026	)
Selling, general and administrative expenses		3,988,292			2,878,988
Share-based compensation		147,020			111,623
Acquisition, consulting and legal expenses		2,837,330			761,813
Depreciation and amortization expense - building, equipment, leasehold improvements, and intangibles		566,372			95,764
Loss from operations		(4,484,422	)		(3,995,214	)
Other expenses:
Interest		(331,371	)		(34,637	)
Net loss	$	(4,815,793	)	$	(4,029,851	)
Net loss per share attributable to shareholders, basic and diluted	$	(0.49	)	$	(0.24	)
Weighted average shares of common stock outstanding, basic and diluted		9,796,233			16,577,106

The accompanying notes are an integral part of these consolidated financial statements.

F-4

LMP AUTOMOTIVE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

	Common Shares Outstanding			Preferred Stock		Common Stock			Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total
Balance at December 31, 2018		24,645,294		$	-	$	246		$	16,306,737		$	-		$	(6,552,886	)	$	9,754,097
Common stock repurchased		(143,655	)		-		-			(20,430	)		(658,350	)		-			(678,780	)
Common stock contributed and retired		(18,500,000	)		-		(185	)		185			-			-			-
Share-based compensation		-			-		-			111,623			-			-			111,623
Issuance of stock for cash, net		2,645,000			-		26			10,495,694			-			-			10,495,720
Debt converted to stock		44,684			-		-			212,249			-			-			212,249
Net loss		-			-		-			-			-			(4,029,851	)		(4,029,851	)
Impact of adoption of ASU 2016-02 related to leases		-			-		-			-			-			(17,621	)		(17,621	)
Balance at December 31, 2019		8,691,323		$	-		87			27,106,058			(658,350	)		(10,600,358	)		15,847,437
Issuance of shares for cash		1,275,000			-		13			17,578,360			-			-			17,578,373
Issuance of share for purchase of assets		33,183			-		-			487,454			-			-			487,454
Common stock repurchased		(21,053	)		-		-			-			(100,002	)		-			(100,002	)
Cashless exercise of warrants		50,587			-		1			(1	)		-			-			-
Share based compensation										147,020									147,020
Net loss		-			-		-			-						(4,815,793	)		(4,815,793	)
Balance December 31, 2020		10,029,040			-	$	101		$	45,318,891		$	(758,352	)	$	(15,416,151	)	$	29,144,489

The accompanying notes are an integral part of these consolidated financial statements.

F-5

LMP AUTOMOTIVE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(4,815,793	)	$	(4,029,851	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and impairment		1,307,938			1,812,472
Share-based compensation		147,020			111,623
Loss on disposal		-			60,368
Principal collections on investments in sales-type lease contracts		2,036,581			180,036
Amortization of operating lease expense		12,438			12,593
(Increase) Decrease in assets:
Accounts receivable		745,281			232,938
Vehicles purchased for investment in sales-type lease contracts		(13,604,418	)		(980,797	)
Automotive inventory		6,311,251			(194,451	)
Prepaid expenses and other assets		713,502			(449,821	)
(Decrease) Increase in liabilities:
Accounts payable		160,995			(821,569	)
Other current liabilities		680,172			84,705
NET CASH USED IN OPERATING ACTIVITIES		(6,305,033	)		(3,981,754	)
CASH FLOWS FROM INVESTING ACTIVITIES
Escrow deposit for contracted acquisition		(4,250,000	)		-
Return of escrow deposit		1,000,000			-
Purchases of property and equipment		(3,848,633	)		(144,704	)
Proceeds from sale of assets		-			43,865
Purchases of intangible assets		(656,798	)		(54,503	)
NET CASH USED IN INVESTING ACTIVITIES		(7,755,431	)		(155,342	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from line of credit – related parties		-			3,200,000
Principal reduction on line of credit – related parties		-			(4,975,000	)
Principal and interest repayments on convertible notes payable		-			(972,458	)
Repayment of Vehicle floorplan and notes payable		(5,990,236	)		2,164,424
Repurchase of common stock		(100,002	)		(678,780	)
Net cash received from issuance of common stock		17,578,373			10,495,720
Deferred stock offering costs		-			987,093
NET CASH PROVIDED BY FINANCING ACTIVITIES		11,488,135			10,220,999
NET (DECREASE) INCREASE IN CASH		(2,572,329	)		6,083,903
CASH, BEGINNING OF YEAR		6,508,055			424,152
CASH, END OF YEAR	$	3,935,726		$	6,508,055
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest	$	331,371		$	44,333
Right-of-use asset	$	476,483		$	-
Purchase of software license for debt and equity	$	823,994		$	-
Purchase of vehicles for debt and equity	$	6,419,425		$	-
Premium finance contract for insurance	$	602,730		$	-
Issuance of stock for conversion of debt	$	-		$	212,249

The accompanying notes are an integral part of these consolidated financial statements. 

F-6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Nature of Operations and Principles of Consolidation

Business Activity

LMP Motors.com, LLC (“LMP Motors”) is engaged in the buying and selling of vehicles in the automotive industry and operates in the state of Florida. LMP Motors is a limited liability company and was organized in the state of Delaware.

601 NSR, LLC (“NSR”) was formed to enter into future potential strategic acquisitions and is currently inactive. NSR is a limited liability company and was organized in the state of Delaware.

LMP Finance, LLC (“LMP Finance”) is engaged in the purchasing, subscribing and renting of vehicles. LMP Finance operates in the state of Florida. LMP Finance is a limited liability company and was organized in the state of Delaware.

LMP Automotive Holdings, LLC (“LMP Automotive”) was formed to acquire the assets from LMP Motors.com LLC, LMP Finance, LLC and other subsidiary companies. LMP Automotive operates in the state of Florida. LMP Automotive is a limited liability company and was organized in the state of Delaware.

LMP Automotive Holdings, Inc. (“Automotive”) is a holding company incorporated in the state of Delaware on December 15, 2017. On December 15, 2017, the common ownership contributed 100% of its interest in LMP Motors, NSR, LMP Finance and LMP Automotive to Automotive.

Principles of Consolidation

These consolidated financial statements include the amounts of Automotive and its wholly-owned subsidiaries, LMP Motors, NSR, LMP Finance, and LMP Automotive, collectively referred to as the “Company.” All significant intercompany balances and transactions are eliminated in the consolidation.

Note 2 - Summary of Significant Accounting Policies

Liquidity

The Company has sustained net losses and has an accumulated deficit of $15,416,151 as of December31, 2020. Management plans to make strategic acquisitions of new and pre-owned automobile dealerships to expedite the Company’s growth and produce positive margins.  The Company completed an initial public offering (“IPO”) during December 2019.  In February 2020, the Company completed a secondary public offering, selling 1,200,000 shares of common stock at an offering price of $16.00 per share, and warrants to purchase shares of common stock. Aggregate gross proceeds from the offering were approximately $19.2 million, and net proceeds received after underwriting fees and offering expenses were approximately $17.5 million.

Management plans to continue to obtain funding for vehicle purchases and dealership acquisitions through a combination of debt and equity financing. Currently, management has secured a commitment for up to $192 million in financing including floorplan financing to complete acquisitions of auto dealerships and the related real estate. Management believes these acquisitions will generate cash flow sufficient to fund the operations of the Company for the foreseeable future.

Basis of Presentation

The accompanying consolidated financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-7

Note 2 - Summary of Significant Accounting Policies (cont’d.)

Accounts Receivable

The Company carries its accounts receivable at cost. Accounts receivable are due upon receipt. Such estimates are based on management’s assessments of the creditworthiness of its customers, the aged basis of its receivables, as well as current economic conditions and historical information. Management has determined that no allowance for uncollectible accounts for accounts receivable is necessary at December 31, 2020 and 2019.

Inventory

The Company’s inventory consists of automobiles. Inventories are valued at the lower of cost or market, with cost determined by specific identification and with market defined as net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventories at December 31, 2020 and 2019 are recorded based on perpetual inventory records.

The Company depreciates its fleet inventory monthly based on 1% of initial cost. For the years ended December 31, 2020 and 2019, fleet vehicle depreciation approximated $670,000 and $991,000, respectively. This depreciation was recorded to cost of revenues - subscription and rental in the accompanying consolidated statement of operations.

Company management periodically reviews its inventories to determine whether any inventories have declined in value. The Company has recorded a reserve for impairment of $141,762 and $49,000 to reflect inventory at net realizable value at December 31, 2020 and 2019, respectively. These write downs were recorded to cost of revenues - vehicle sales in the accompanying consolidated statement of operations.

	December 31, 2020			December 31, 2019
Automotive Inventory	$	9,169,915		$	10,907,755
Inventory Impairment		(141,762	)		(49,180	)
Inventory Accumulated Depreciation		(530,064	)		(822,672	)
Inventory In-transit Deposits		-			-
Total Automotive Inventory, net	$	8,498,089		$	10,035,903

	December 31, 2020		December 31, 2019
Automotive Inventory- Fleet, net	$	4,177,645	$	9,083,469
Automotive Inventory- Available for Sale, net		4,320,444		952,434
Inventory In-transit Deposits		-		296,383
Total Automotive Inventory, net	$	8,498,089	$	10,035,903

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are expensed in the period incurred. When items included in property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in selling, general and administrative expenses.

F-8

Note 2 - Summary of Significant Accounting Policies (cont’d.)

Property, Equipment and Leasehold Improvements (cont’d.)

Vehicles and equipment are depreciated utilizing the straight-line method over the estimated useful lives of the respective assets as follows:

Vehicles	5 years
Furniture and fixtures	10 years
Buildings	39 years
Equipment	7 years

Leasehold improvements are amortized over the shorter of the remaining term of the lease or the useful life of the improvement utilizing the straight-line method.

Intangible Assets

Intangible assets are stated at their historical cost and amortized on a straight-line basis over their expected economic useful lives.

Long-lived Assets

The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows. There were no deemed impairments of long-lived assets at December 31, 2020 and 2019.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  To increase the comparability of fair value measurements, a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 - Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 - Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.  These valuations require significant judgment.

At December 31, 2020 and 2019, the fair value of these financial instruments, including cash, accounts receivable, net investment in sales-type lease, and accounts payable, approximated book value due to the short maturity of these instruments. Vehicle floorplan and notes payable, convertible notes and related party notes payable approximate fair value due to market interest rates.

Convertible Notes

The Company recorded a discount to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. During the year ended December 31, 2019, all convertible notes were repaid or converted to shares of common stock.

F-9

Note 2 - Summary of Significant Accounting Policies (cont’d.)

Share-Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of stock options, based on the fair value of those awards at the date of grant over the requisite service period, which generally is the vesting period of the award. The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards.

Share-based compensation plans, related expenses, and assumptions used in the Black-Scholes option pricing model are more fully described in Note 19.

Revenue Recognition

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers ("ASC 606"). ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied.

Vehicle Sales Revenue

The Company’s business consists of retail and wholesale sales of used vehicles to customers. Sales are based on a physical showroom and efficient online showrooms on the Company’s websites. The Company offers a home delivery service so that it delivers the car to the place agreed upon with the client. The Company also sells used vehicles in auctions.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a vehicle to a customer. The prices of the vehicles are stated in its contracts at stand-alone selling prices, which are agreed upon with its customer prior to delivery. The Company satisfies its performance obligation for used vehicle sales upon delivery when the transfer of title, risks and rewards of ownership and control pass to the customer. The Company recognizes revenue at the agreed-upon price stated in the contract, including any delivery charges. In addition, any noncash consideration received from a customer (i.e., trade-in vehicles) is recognized at fair value. Customer payment is received, or third-party financing is confirmed prior to vehicle transfer.

The Company leases vehicles to third parties that are accounted for in accordance with FASB ASC 842, Leases. These leases generally have lease terms less than one year in duration. The accounting for investments in leases and leased vehicles is different depending on the type of lease. Each lease is classified as either a direct-financing lease, sales-type lease, or operating lease, as appropriate. The Company classifies leases as sales-type leases, where the present value of the sum of the lease payments and guaranteed residual value exceeds the Company’s investment in the leased vehicle.

Revenue on direct financing and sales-type leases is recognized at the inception of the lease and the related interest income is recognized over the term of the lease using the effective interest method. Revenues on the sales of vehicles at the end of a lease are recognized at the inception of the lease, and any net gain or loss on sales of such vehicles is presented within Vehicle Sales Revenues and Vehicle Sales Cost of Revenues in the condensed consolidated statements of operations. Interest income is derived from the discounted cash flows of the lease payments. Investments in sales-type leases are comprised of the minimum lease payments receivable and guaranteed residual at their present value.

The Company collects sales taxes and other taxes from customers on behalf of governmental authorities at the time of sale. These taxes are accounted for on a net basis and are not included in sales or cost of sales.

F-10

Note 2 - Summary of Significant Accounting Policies (cont’d.)

Revenue Recognition (cont’d.)

Subscription Revenue

The Company offers a vehicle subscription plan where a customer will pay a monthly fee in exchange for access to a vehicle.  The Company’s subscriptions include monthly swaps, scheduled maintenance and upkeep, license, and registration and in most cases roadside assistance. Customers have the flexibility to up-or-downgrade a vehicle monthly, with the vehicle payment adjusted accordingly.  There is an activation payment at subscription inception that varies based upon the monthly payment of the selected vehicle.  Monthly vehicle payments are dependent upon the vehicle selected by the customer. Due to the nature of the subscription contract, where the subscriber can swap out the vehicle in the contract and the performance obligation is completed and recognized each month, the revenues earned under these contracts are recognized in accordance with ASC 606.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a vehicle to a customer under a subscription contract. The prices of the vehicles are stated in its contracts at stand-alone subscription prices, which are agreed upon with the customer prior to delivery. The Company satisfies its performance obligation for monthly subscription payments upon delivery to the customer and in each subsequent month the customer retains possession of the vehicle. The Company recognizes revenue at the agreed-upon price stated in the contract in the month earned.

The Company also receives a one-time, non-refundable payment as an activation fee to its vehicle subscription program. This fee is deferred and amortized to income monthly over the term of the subscription, as the performance obligation (providing a vehicle for the customer) is completed over the term of the subscription.

Customer payment has been received prior to initial vehicle transfer and on each monthly recurring anniversary date.

The Company collects sales taxes and other taxes from customers on behalf of governmental authorities at the time of sale. These taxes are accounted for on a net basis and are not included in sales or cost of sales.

Rental Revenue

The Company accounts for revenue earned from vehicle rentals and rental related activities wherein an identified asset is transferred to the customer and the customer has the ability to control that asset under FASB ASC 842, Leases. Revenue from operating leases is recognized ratably on a straight-line basis over the term of the agreement.

Performance obligations associated with rental related activities, such as charges to the customer for the fueling of vehicles and value-added services such as loss damage waivers, navigation units, and other ancillary and optional products, are also satisfied over the rental period.

Payments are due from customers at the time of reservation. Additional charges incurred by the customers are collected at the time of vehicle return. The Company collects sales taxes and other taxes from customers on behalf of governmental authorities at the time of sale. These taxes are accounted for on a net basis and are not included in sales or cost of sales.

F-11

Note 2 - Summary of Significant Accounting Policies (cont’d.)

Income Taxes

Income tax expense includes federal and state taxes currently payable and deferred taxes arising from temporary differences between income for financial reporting and income tax purposes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. The effect of a change in the tax rate on the deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company establishes a valuation allowance when necessary to reduce its deferred tax assets to an amount that is expected to be realized.

Advertising

The Company expenses advertising and marketing costs in the period incurred. Advertising expense was approximately $76,000 and $124,000 for the years ended December 31, 2020 and 2019, respectively.

Leases

The Company adopted ASU No. 2016-02, Leases (“Topic 842”), using the modified retrospective adoption method with an effective date of January 1, 2019. This standard requires all lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments.  

Under Topic 842, the Company applied a dual approach to all leases whereby the Company is a lessee and classifies leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the Company. Lease classification is evaluated at the inception of the lease agreement. Regardless of classification, the Company records a right-of-use asset and a lease liability for all leases with a term greater than 12 months. The lease for the premises occupied in Plantation, Florida, was classified as an operating lease as of December 31, 2019. Operating lease expense is recognized on a straight-line basis over the term of the lease.

F-12

Note 2 - Summary of Significant Accounting Policies (cont’d.)

Leases (cont’d.)

In July 2020, the Company purchased the leased property in Plantation, Florida. The Company derecognized the right-of-use asset and operating lease liability by recording the net liability of $32,162 as a reduction of expense in the consolidated statement of operations.

In September 2020, the Company entered into a new lease for premises in Fort Lauderdale, Florida (the “Fort Lauderdale lease”). The 34-month lease resulted in the recognition of an approximately $476,000 right-of-use asset and operating lease liability.

The components of the right-of-use asset and lease liabilities as of December 31, 2020 (Fort Lauderdale lease) and 2019 (Plantation lease) are as follows.

	2020		2019
Operating lease right-of-use asset	$	422,500	$	1,100,271
Operating lease liability, current portion	$	181,437	$	335,338
Operating lease liability, net of current portion	$	283,716	$	795,147

Operating Leases

During 2018, the Company entered into a lease with an entity related through common ownership for its facilities in Plantation, Florida. The five-year, triple-net lease provides for monthly payments of $28,500 plus CAM and sales taxes, with annual escalations of three percent (3%). The Company has an option to extend the lease for an additional five-year term, with annual escalations of three percent (3%). The option to extend the lease is not recognized in the right-of-use asset or operating lease liability. The Company purchased the property in July 2020.

During September 2020, the Company entered into a lease with an unrelated entity for office space in Fort Lauderdale, Florida. The 34-month lease provides for monthly payments of $16,113 plus operating costs and sales taxes.

Discount Rate

When available, the Company uses the rate implicit in the lease or a borrowing rate based on similar debt to discount lease payments to present value. However, the lease generally does not provide a readily determinable implicit rate, and the Company’s existing debt does not have similar terms. Therefore, the Company used the 3-year Treasury constant maturity at the lease commencement date to discount lease payments.

Lease Cost

Operating lease cost related to right-of-use assets (Plantation, FL lease) was approximately $168,500 for the portion of the 2020 before its purchase in July and was $387,000 for the year ended December 31, 2019.

Operating lease cost related to right-of-use asset on the Fort Lauderdale lease was approximately $59,000 for the period from mid -September 2020 through December 31, 2020. The weighted average remaining term on the lease is 2.42 years. The weighted average discount rate was 3%.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.  This guidance was to be effective for reporting periods beginning after December 15, 2019, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates, which deferred the effective dates for the Company, as a smaller reporting company, until fiscal year 2023. The Company currently plans to adopt the guidance at the beginning of fiscal 2023. The Company is continuing to assess the impact of the standard on its consolidated financial statements.

F-13

Note 3 - Global Pandemic

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond the point of origin. On March 20, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 outbreak continues to evolve as of the date of these consolidated financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s consolidated financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its consolidated financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020. To curb the financial impacts of the outbreak, the Company initially reduced the total compensation to a maximum of $120,000 per employee for all current employees, effective beginning in May 2020. The Company also reduced the headcount of all nonessential employees, implemented cost cuts, and canceled certain new vehicle orders to accommodate the then-current demand. The Company has since resumed normal salaries, hiring practices, and vehicle purchases.

Note 4 - Asset Purchase Agreements

Completed

On February 19, 2020, the Company consummated an Asset Purchase Agreement whereby the Company purchased $4.2 million of assets that did not constitute a business, comprised of vehicles ($2.87 million) and a perpetual, non-exclusive license for leasing software ($1.35 million). The vehicles were financed by two different lenders, and the Company paid approximately $526,000 in cash and issued 33,183 shares of common stock at $14.69 per share (closing price of its common stock on February 19, 2020) for the remainder of the purchase consideration.

The non-exclusive perpetual software license is for a vehicle subscription service app for upcoming launch in the Apple App and Google Play stores. The license value of $1.35 million is being amortized over its estimated economic useful life of three (3) years.

The vehicle acquisition was financed in part by two credit lines. The first line from Sutton Leasing funded the purchase of 30 vehicles for $2.4 million at the floating LIBOR rate on the date of the advance, plus 2.80%, or 4.55% interest on the date of the advance, with terms ranging from 24 to 36 months. The second line from The Bancorp Bank was a credit line for funding advances up to $850,000 at the Prime Rate per the Wall Street Journal on the date of the advance plus 2%, but not less than 4% on advances on 48-month terms. The Company used approximately $818,400 at 6.5% interest for the purchase of 13 vehicles, with terms ranging from 32 to 41 months.

On July 13, 2020, the Company entered into an Asset Purchase Agreement to purchase a 75% interest in certain assets and assume certain liabilities held by a dealership in Newnan, Georgia for $27.0 million in cash, which will be accounted for as a business combination. The acquisition was not consummated and was cancelled.

Pending

On August 28, 2020, the Company entered into an Asset Purchase Agreement (the “WV APA”) to acquire an 85% interest in certain assets held by three dealerships in West Virginia for $12 million in cash. In connection with the WV APA, the Company has agreed to acquire certain of the dealership’s real properties at values yet to be determined. The acquisition was consummated in March 2021, See Note 22.

Also, on August 28, 2020, the Company entered into an Asset Purchase Agreement the (“TN APA”) to acquire certain assets held by a dealership in Tennessee for $2.5 million in cash. In connection with the TN APA, the Company has agreed to acquire the dealership’s real property for $5.4 million. This acquisition has not yet been consummated.

See Note 22 - Subsequent Events for additional pending acquisitions.

Note 5 - Proposed Business Combinations

During the year ended December 31, 2020, the Company entered into several agreements to acquire a controlling interest in certain operating dealerships, as more fully described below.

On September 3, 2020, the Company entered into a Dealership Asset Purchase Agreement (“DAPA”) to acquire certain assets of a Southwest Florida dealership for $36.0 million. In connection with the DAPA, the Company has agreed to acquire the dealership’s real property for $33.1 million. The acquisition has not yet been consummated.

F-14

Note 5 - Proposed Business Combinations (cont’d.)

On October 9, 2020, the Company entered into a Membership Interest Purchase Agreement (“MIPA”) to acquire a 70% interest in a group of dealership franchises and related businesses in New York for a total purchase price of $425.6 million. This agreement was subsequently terminated in February 2021.

As part of the pending dealership acquisitions initiated during the third quarter, the Company paid deposits totaling $4,250,000. During the quarter ended December 31, 2020, the Company received a return of its $1,000,00 deposit for the Newnan, GA dealership, net of expenses. As of December 31, 2020, the balance of acquisition deposits is $3,250,000.

The Company intends to finance these acquisitions with a combination of debt and equity offerings, plus private seller debt.

Note 6 - Concentration of Credit Risk

The Company maintains its cash balances in several financial institutions which are insured by the Federal Deposit Insurance Corporation (“FDIC”) for up to $250,000 per institution. From time to time, its balances may exceed these limits. As of December 31, 2020 and 2019, the Company’s cash balances exceeded the FDIC limits by approximately $3,186,000 and $5,758,000, respectively.

Note 7 - Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements, net are summarized as follows:

	December 31,
	2020			2019
Vehicles	$	153,822		$	28,730
Land		435,700			-
Building		3,164,000			-
Furniture, fixtures and equipment		392,262			301,417
Leasehold and building improvements		299,526			288,738
		4,445,610			618,885
Less: Accumulated depreciation and amortization		(228,791	)		(109,530	)
	$	4,216,819		$	509,355

Depreciation and amortization expense related to property, equipment, leasehold improvements and intangibles amounted to $127,076, and $95,765 for the years ended December 31, 2020 and 2019, respectively.  During the year ended December 31, 2020, the Company transferred a company owned vehicle with a book value of $14,093, net of accumulated depreciation of $7,815, from fixed assets to inventory.

On July 8, 2020, the Company terminated the lease and purchased the land and building where its headquarters were located in Plantation, Florida, from its landlord, ST RXR Investments, LLC, a related party owned by the Company’s President and Chief Executive Officer, for $3.6 million in cash. The land and building were valued based upon a third party fairness report.

Note 8 - Intangible Assets

Intangible assets, net, are summarized as follows:

	December 31, 2020			December 31, 2019
Software license	$	1,350,000		$	-
Website design and other intangibles		230,568			99,776
		1,580,568			99,776
Less: Accumulated amortization		(469,745	)		(30,449	)
	$	1,110,823		$	69,327

Amortization expense amounted to $439,296 and $30,449, respectively, for the years ended December 31, 2020 and 2019.

As of December 31, 2020, future amortization of intangible assets was as follows:

Years ending December 31,
2021	$	497,819
2022		478,412
2023		89,254
2024		45,338
	$	1,110,823

F-15

Note 9 - Investment in Sales-type Leases

Investment in Sales-type Leases consists of the following:

	December 31, 2020			December 31, 2019
Sales-type leases:
Minimum lease payments receivable	$	1,576,325		$	157,542
Unearned income		(576,853	)		(47,114	)
Guaranteed residual value of vehicles		10,744,104			690,333
Total investment in leasing operations	$	11,743,576		$	800,761

As of December 31, 2020 and 2019, the total investment in sales-type leases is classified as short-term as all leases are due within one year of the balance sheet date.

The Sales-type Leases are leased to three customers. The residual value of the vehicles is guaranteed by these customers, whether or not the customers ultimately purchase the vehicles at the end of the lease term..

Note 10 - Related Party Transactions

During 2018, the Company entered into a non-interest bearing revolving line of credit agreement with an entity related to the majority shareholder (credit limit is $4,000,000). Amounts drawn on the line of credit become due and payable on the earlier of written demand by the lender or May 21, 2020, as defined in the agreement. The line of credit was paid in full in December 2019.

During 2018, the Company entered into a lease with an entity related through common ownership for its facilities in Plantation, Florida. On July 8, 2020, the Company terminated the lease and purchased the land and building where its headquarters were located in Plantation, Florida, from its landlord, ST RXR Investments, LLC, a related party owned by the Company’s President and Chief Executive Officer, for $3.6 million in cash. The land and building were valued based upon a third-party condition report.

The Company leases vehicles under its subscription and sales-type programs to certain directors under 6-month contracts. Total payments made by directors for the vehicle leases amounted to approximately $59,000 for the year ended December 31, 2020.

F-16

Note 11 - Convertible Notes Payable

During the second and third quarters of 2018, the Company issued convertible promissory notes (“6-Month Notes”) in an aggregate principal amount of $1,448,965, pursuant to a private placement offering. The 6-Month Notes bear interest at 4% per annum and mature six (6) months from the date of issuance, at which time the principal and any accrued but unpaid interest shall be due and payable. Accrued interest at December 31, 2019 and 2018 was $0 and $20,757, respectively. The holders of the 6-Month Notes may, at any time prior to the maturity date, convert the 6-Month Notes (and accrued interest) into shares of the Company’s Common Stock by dividing (a) the outstanding principal balance and unpaid accrued interest under this Note on the date of conversion by (b) $4.75 (subject to adjustment as provided in the 6-Month Notes). Based on the terms of the conversion rights, the Company did not recognize a beneficial conversion discount.

During the year ended December 31, 2019, the Company repaid eight of the 6-Month Notes in the principal amount of $962,000 and converted the remaining seven 6-Month Notes with a principal and accrued interest of $212,249 to 44,684 shares of common stock.

Note 12 - Accounts Payable and Other Current Liabilities

Accounts payable and other current liabilities are summarized as follows:

	December 31,
	2020		2019
Accounts Payable	$	251,118	$	68,033
Credit Card Payable		22,747		44,807
Total Accounts Payable	$	273,835	$	112,840

Other Current Liabilities:

	December 31
	2020		2019
Accrued Payroll	$	197,635	$	157,174
Customer Deposits - Leases		-		103,217
Subscription Security Deposits		82,117		57,094
Subscription Deferred Activation Fees		114,635		145,986
Rental Deposits on Hand		-		3,463
Accrued Legal Expenses		133,032		-
Property Tax Accrual		9,503		61,577
Sales and Other Taxes Payable		37,905		42,483
Litigation Accrual		550,000		-
Other Accruals		208,408		82,069
Total Other Current Liabilities	$	1,333,235	$	653,063

Note 13 - Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

F-17

Note 13 - Income Taxes (cont’d.)

Deferred tax assets are required to be reduced by a valuation allowance to the extent that, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized.

Deferred Taxes

Components of income tax benefit for the years ended December 31, 2020 and 2019 are as follows:

	December 31,
	2020		2019
Current tax expense (benefit)	$	-	$	-
		-		-
Deferred tax expense (benefit)	$	-	$	-
		-		-
Total provision for income taxes	$	-	$	-

Temporary differences between financial statement carrying amount and tax basis of assets and liabilities that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2020 and 2019 are as follows:

	December 31,
	2020			2019
Deferred tax assets:
Net operating loss	$	3,585,532		$	2,723,750
Intangible assets		72,543			21,853
Acquisition expenses		265,195			-
Other		35,930			12,465
Stock options		158,161			109,372
Total deferred income tax assets		4,117,361			2,867,440
Deferred income tax liabilities:
Depreciation		(39,349	)		(7,633	)
Total deferred income tax liabilities		(39,349	)		(7,633	)
Valuation allowance		(4,078,012	)		(2,859,807	)
Net deferred income tax asset	$	—		$	—

The Company had a net operating loss carryforward of approximately $15,300,000 and $10,700,000 as of December 31, 2020 and 2019, respectively. The amount of net operating loss carryforward that can offset future taxable income may be limited in accordance with IRC Section 382 following certain ownership changes. Net deferred tax assets are mainly comprised of temporary differences between financial statement carrying amount and tax basis of assets and liabilities.

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Note 13 - Income Taxes (cont’d.)

Deferred Taxes (cont’d.)

FASB ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2020 and 2019, the Company had a full valuation allowance on its net deferred income tax asset.

In addition, the Company performed a comprehensive review of its uncertain tax positions and determined that no adjustments were necessary relating to unrecognized tax benefits at December 31, 2020 and 2019. The Company’s federal and state income tax returns are subject to examination by taxing authorities for three years after the returns are filed, and the Company’s federal and state income tax returns for 2019, 2018 and 2017 remain open to examination.

The reconciliation of income tax benefit is computed at the U.S. federal statutory rate as follows:

	December 31,
	2020			2019
U.S. federal statutory tax rate		21.00	%		21.00	%
Permanent differences		-0.16	%		-0.29	%
Change in valuation allowance		-25.3	%		-20.93	%
State tax effect, net of federal benefit		4.31	%		4.29	%
Prior tax adjustments		0.00	%		-4.07	%
Other items		0.15	%		0.00	%
Total		0.00	%		0.00	%

Note 14 - Lease Commitments

The annual minimum lease payments, including fixed rate escalations, on the Company’s operating lease liability with an unrelated party in Fort Lauderdale, Florida as of December 31, 2020 are as follows:

Years Ending December 31:
2021	$	193,359
2022		193,358
2023		96,679
Total minimum lease payments		483,589
Less: amount representing interest		(18,243	)
Present value of future payments		465,153
Less: current obligations		(181,437	)
Long-term obligations	$	283,718

Operating Leases

During 2019, the Company entered into an agreement for the right to use certain parking spaces in Oakland Park, Florida. The month-to-month agreement called for monthly rent of $5,000 per month, plus sales tax. This agreement was cancelled in 2020.

Rent expense charged to operations for the years ended December 31, 2020 and 2019, inclusive of CAM and taxes, was approximately $401,270 and $562,300, respectively.

Note 15 - Vehicle Floorplan and Notes Payable

In the second quarter of 2019, Mercedes-Benz Financial approved $3.5 million for the Company’s subscription and rental fleet inventory purchases. During 2019, the Company purchased vehicles totaling approximately $2,400,000 under various Note and Security Agreements with 10% cash down payments and the remaining $2,160,000 financed over 36 months at an interest rate of 4.89%. At December 31, 2019, the outstanding principal balance was approximately $2,103,000.

In 2020, Mercedes-Benz Financial increased the approval amount from $3.5 million to $10 million. Under this new approval amount the Company financed vehicles previously purchased totaling approximately $3.517,000 under Note and Security Agreements with no cash down payment and financed over 36 months at interest rates between 3.99% and 4.15%. As of December 31, 2020 and December 31, 2019, the outstanding principal and accrued interest balance on the notes was approximately $1,978,156 and $2,104,000, respectively.

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Note 15 - Vehicle Floorplan and Notes Payable (cont’d.)

In February 2020, the Company entered into an Asset Purchase Agreement (see Note 4), which was financed in part by two credit lines.

● The first line from Sutton Leasing was for $2.4 million at the floating LIBOR rate on the date of the advance, plus 2.80%, or 4.55% interest on the date of the advance, with terms ranging from 24 to 36 months. The outstanding balance on the Sutton line was approximately $426,155 as of December 31, 2020.

● The second line from The Bancorp Bank is a credit line for funding advances up to $850,000 at the Prime Rate per the Wall Street Journal on the date of the advance plus 2%, but not less than 4% on advances on 48-month terms. The Company used approximately $818,400 at 6.5% interest to purchase vehicles, with terms ranging from 32 to 41 months. The outstanding balance on the Bancorp line was approximately $248,934 as of December 31, 2020.

In the third quarter of 2019, NextGear Capital approved a $250,000 vehicle floorplan line with an interest rate of 10% and principal payments due at 60 and 90 days and final payoff due at 120 days or upon vehicle sale. At December 31, 2019, the outstanding principal balance was approximately $60,000. The principal balance was paid off during the first quarter of 2020.

Future maturities under the Floorplan and Note Agreements are as follows:

Years Ending December 31:
2021	$	723,798
2022		867,323
2023		1,062,124
Total minimum payments		2,653,245
Less: Amounts due within one year		723,798
Long-term portion	$	1,929,447

Note 16 - Contingencies

The Company is subject to asserted claims and liabilities that arise in the ordinary course of business. The Company maintains third-party insurance to mitigate potential losses from these actions. In the opinion of management, the amount of the ultimate liability with respect to these actions will not materially affect the Company’s financial position or results of operations.

On February 10, 2020, a partial summary judgment was granted for the plaintiff for alleged breach of its license agreement to use garage parking spaces in Miami Beach, Florida, which the Company terminated in April 2019. The current asserted losses by the plaintiff total approximately $224,250, with a potential maximum exposure under the terminated agreement of approximately $580,450. The judge ordered the parties to further mediate the dispute, and the Company appealed the summary judgment. During the second quarter of 2020, the Company posted a bond with the court to continue mediation of this matter. In November 2020, the Company lost an appeal 2020 requiring the Company to post an additional bond. As a result of ongoing settlement negotiations, the Company recorded a provision for its expected settlement amount at December 2020. In February 2021, the Company reached a final settlement agreeing to pay a total of $550,000, $270,000 within 3 days of the final settlement and two payments of $140,000 each on or before June 30, 2021 and September 30, 2021, respectively.

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Note 17 - Equity

In December 2020, the Company’s shareholders approved a reduction in the number of authorized shares of common stock from 100,000,000 shares to 29,000,000 shares, and a reduction in the authorized shares of preferred stock from 10,000,000 shares to 1,000,000 shares.

During 2019, the Company’s CEO retired 18,500,000 beneficially owned common shares of stock for no value. In addition, four non-accredited investors were refunded a total of $20,430, which cancelled 5,055 shares. Total outstanding common shares after the share retirement and refunds were 6,001,639, prior to the IPO.

On December 9, 2019, the Company completed its IPO, selling 2,645,000 shares of common stock at an offering price of $5.00 per share, and warrants to purchase shares of common stock. Aggregate gross proceeds from the IPO, which included the exercise in full of the representative’s over-allotment option, were approximately $13.2 million, and net proceeds received after underwriting fees and offering expenses were approximately $12 million. Total equity from the IPO after deducting deferred offering expenses of $1.5 million was approximately $10.5 million.

During 2019, the Company converted seven of its 6-Month Notes with a value of $212,249 to 44,684 shares of common stock.

In February 2020, the Company completed a secondary public offering, selling 1,200,000 shares of common stock at an offering price of $16.00 per share, and warrants to purchase shares of common stock. Aggregate gross proceeds from the offering were approximately $19.2 million, and net proceeds received after underwriting fees and offering expenses were approximately $17.3 million.

In February 2020, as part of its Asset Purchase Agreement, the Company issued 33,183 shares of common stock valued at a price of $14.69 per share, the closing price on the date of the transaction, or $487,454.

In May 2020, the Company offered to rescind the purchase of certain shares of Company stock, including shares converted from debt in 2018 and 2019. The Company estimates that the maximum amount of costs related to the rescission offer will be approximately $1.6 million, plus accrued interest. In July 2020, the Company paid approximately $163,000 to investors who accepted the offer, including approximately $100,000 recorded as Treasury Stock for the repurchase of 21,053 shares of Common Stock, and approximately $63,000 recorded as interest, based on a price per share of $4.75. All other offers have since expired.

In September 2020, the Company issued 75,000 shares of common stock in exchange for $249,750 in connection with the exercise of an option granted to an investor.

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In September 2020, the Company issued 7,427 shares of common stock in connection with the cashless exercise of 10,695 underwriter warrants with exercise prices of $6.25 per share. The underwriter warrants were granted in connection with the Company’s IPO.

During the quarter ended December 31, 2020, the Company issued 39,980 shares of common stock in connection with the cashless exercise of 51,943 underwriter warrants with exercise prices of $6.25 per share. The underwriter warrants were granted in connection with the Company’s IPO.

During the quarter ended December 31, 2020, the Company issued 3,180 shares of common stock in connection with the cashless exercise of 11,361 underwriter warrants with exercise prices of $20.00 per share. The underwriter warrants were granted in connection with the Company’s IPO.

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Note 18 - Treasury Stock

During 2019, the Company purchased an aggregate of 143,655 shares of its Common Stock from four (4) shareholders at an aggregate price of $4.75 per share, or $678,780. These shares are currently held in treasury.

During 2020, the Company purchased an additional 21,053 shares of its Common Stock from a shareholder at price of $4.75 per share, or $100,002. These shares are currently held in treasury.

Note 19 - Stock Options

During the year ended December 31, 2020, the Company granted stock options to purchase 158,000 shares of its Common Stock to various employees, independent contractors and directors. These options vest over twenty-four to thirty-six months, are exercisable for 5 years, and enable the holders to purchase shares of its Common Stock at exercise prices ranging from $7.50 - $30.00. The per-share values of these options range from $3.49 to $11.89, based on Black-Scholes-Merton pricing models with the following assumptions: (i) Volatility from 52.93% to 55.01%, (ii) Expected term of 5 years, (iii) Risk free rate from 0.24% to 0.40%, and (iv) Dividend rate of 0.0%.

At December 31, 2020 and 2019, the Company had $828,943 and $231,354, respectively, of unrecognized compensation costs related to stock options outstanding, which will be recognized through 2023. The Company recognizes forfeitures as they occur. Share-based compensation expense was $147,020 and $111,623 for the years ended December 31, 2020 and 2019, respectively. The total amount recorded in “Additional paid-in capital” related to vested stock options for the year ended December 31, 2020, was approximately $147,000. The weighted average remaining contractual term for the outstanding options at December 31, 2020 and 2019 is 2.84 and 3.54 years, respectively.

Stock option activity for the years ended December 31, 2020 and 2019, was as follows:

	Number of Options			Weighted Avg. Exercise Price
Outstanding at December 31, 2018		511,000		$	-
Options granted		112,500			7.01
Options exercised		-			-
Options forfeited or expired		(279,000	)		-
Outstanding at December 31, 2019		344,500		$	4.57
Options granted		158,000			13.36
Options exercised		(75,000	)		3.33
Options forfeited or expired		(56,000	)		9.84
Outstanding at December 31, 2020		371,500		$	7.97
Vested as of December 31, 2020		205,978		$	4.68
Vested as of December 31, 2019		260,468		$	3.80

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Note 20 - Purchase Warrants

Common stock purchase warrant activity for the years ended December 31, 2020 and 2019 are as follows:

	Number of Warrants			Weighted Avg. Exercise Price
Outstanding at December 31, 2018		-		$	-
Issued		115,000			6.25
Cancelled		-			-
Exercised		-			-
Outstanding at December 31, 2019		115,000		$	6.25
Issued		36,000			20.00
Cancelled		(3,268	)		6.25
Exercised		(70,664	)		8.46
Outstanding at December 31, 2020		77,068		$	10.65

In connection with the Company’s IPO, the Company granted warrants to purchase 115,000 shares of its Common Stock at $6.25 per share to its underwriters.

In February 2020, in connection with its second public offering, the Company granted warrants to purchase 36,000 shares of its Common Stock at $20.00 per share to its underwriters.

Note 21 - Net Loss per Share Attributable to Common Shareholders

The basic and diluted net loss per common share was the same for each period presented as the Company’s potentially dilutive shares would be antidilutive.  The weighted average shares of Common Stock outstanding were 9,796,233 and 16,577,106 for the years ended December 31, 2020 and 2019, respectively.

Note 22 - Subsequent Events

On January 7, 2021 and effective December 30, 2020, the Company entered into amendments to the employment agreements with its Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Chief Operating Officer (COO).

Under the terms of the First Amendment to the Employment Agreement, the Company (i) increased the annual base salary of the CEO and the COO to $300,000, (ii) amended the vesting for options to purchase up to 10,000 and 40,000 shares, respectively, of the Company’s common stock previously awarded and (iii) agreed to award options to purchase up to an aggregate of 150,000 and 145,000 shares, respectively, of the Company’s common stock upon the achievement of certain milestones. In addition, the Company awarded the COO a one-time bonus of $350,000 payable upon the consummation of the Company’s proposed financing with Truist Bank, payable in cash, Company securities or a combination of both, and (v) awarded the COO a quarterly bonus of a percentage of the Company’s post-minority interest income.

Under the terms of the First Amendment to the Employment Agreement, the Company (i) agreed to permit the CFO the use of a Company vehicle, (ii) amended the vesting for options to purchase up to 40,000 shares of the Company’s common stock previously awarded to the CFO and (iii) agreed to award the CFO options to purchase up to an aggregate of 100,000 shares of the Company’s common stock upon the achievement of certain milestones.

In January 2021, the Company issued 5,000 shares of common stock in exchange for $19,490 upon the exercise of options to purchase 3,000 and 2,000 shares at exercise prices of $3.33 and $4.75, respectively.

In January 2021, the Company issued 86 shares of common stock upon the cashless exercise of 115 underwriter warrants with an exercise price of $6.75 per share.

In February 2021, the Company reached a final settlement of a lawsuit for the Company’s alleged breach of its license agreement to use garage parking spaces in Miami Beach, Florida. Under the settlement agreement, the Company agreed to pay a total of $550,000, $270,000 within 3 days of the final settlement and two payments of $140,000 each on or before June 30, 2021 and September 30, 2021, respectively. The Company made the initial payment required under the agreement.

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Note 22 - Subsequent Events (cont’d.)

In February 2021, LMP Automotive received approximately $20.1 million ($18.6 million, net) from the sale of 20,100 shares of Series A Convertible Preferred Stock and warrants to purchase up to 861,429 shares of common stock at a strike price of $21.00 pursuant to a Securities Purchase Agreement. The Series A Preferred Stock is convertible into shares of common stock at an initial conversion price of $17.50 per share, subject to adjustment.

In March 2021, the Company consummated the purchase of a controlling interest in a component of the Beckley Dealership Acquisition and a 100% interest in the associated real estate for purchase consideration of approximately $24.6 million cash.

In March 2021, the Company consummated the purchase of a controlling interest in the Fuccillo Dealership Acquisition and a 100% interest in the associated real estate for purchase consideration of approximately $68.5 million cash.

In March 2021, the Company consummated the purchase of a controlling interest in the Bachman Dealership Acquisition and a 100% interest in the related real estate for purchase consideration of approximately $ $7.5 million.

In March 2021, LMP Finance entered into an agreement to purchase a controlling membership interest in LTO Holdings, LLC for purchase consideration of $225,000 cash and issuance of 16,892 shares of the Company’s common stock and a capital contribution of $225,000.

In March 2021, LMP Automotive and certain subsidiaries entered into a Credit Agreement for term loans and floor plan financing of up to approximately $101.3 million and $90.35 million, respectively.

In March 2021, the Company signed a Revolving Line of Credit Agreement (the Line) and received funding of $500,000, the credit limit on the Line. The Line is due on April 30, 2021 and bears interest of 1.5% per month, plus a $15,000 origination fee due on April 30, 2021.

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