UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended SeptemberJune 30, 20212022

or

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

 

For the transition period from _____ to _______

 

Commission File Number: 001-39132

 

 

EVMO, INC.

(exact name of registrant as specified in its charter)

RIDESHARE RENTAL, INC.

(former name of registrant as specified in its charter)

 

Delaware 95-3261426

(State or other jurisdiction of

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

   

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

Beverly Hills, California

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

 

(310) 926-2643

(Registrant’s telephone number, including area code)

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

35,758,14969,693,274 shares of Common Stock,common stock, $0.000001 par value, as of NovemberAugust 12, 20212022.

 

 

TABLE OF CONTENTS

 

PART I FINANCIAL INFORMATION: 
   
Item 1.Financial Statements1
   
 Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20212022 and December 31, 20202021 (unaudited)1
Condensed Consolidated Statements of Operations for the Three and Nine months Ended September 30, 2021 and 2020 (unaudited)2
   
 Condensed Consolidated Statements of Stockholders’ EquityOperations for the Three and NineSix Months Ended SeptemberJune 30, 2022 and 2021 and 2020 (unaudited)3
   
 Condensed Consolidated Statements of Cash FlowsStockholders’ Equity for the NineSix Months Ended SeptemberJune 30, 2022 and 2021 and 2020 (unaudited)4
   
 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (unaudited)5
Notes to Condensed Consolidated Financial Statements (unaudited)56
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1719
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk2326
   
Item 4.Controls and Procedures2326
   
PART II OTHER INFORMATION: 
   
Item 1.Legal Proceedings2427
   
Item 1A.Risk Factors2427
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2427
   
Item 3.Defaults Upon Senior Securities2427
   
Item 4.Mine Safety Disclosures2427
   
Item 5.Other Information2427
   
Item 6.Exhibits2427
   
 Signatures2528

 

ii

EVmo, Inc.

Consolidated Financial StatementsPART I – FINANCIAL INFORMATION

For the Six Months Ended June 30, 2022 and 2021 (unaudited)

 

Item 1.Contents

 

Page
Financial Statements:
Consolidated Balance Sheets as of June 30, 2022 and December 31, 20212
Consolidated Statements of Operations for the Six Months ended June 30, 2022 and 20213
Consolidated Statement of Stockholders’ Equity for the Six Months ended June 30, 2022 and 20214
Consolidated Statements of Cash Flows for the Six Months ended June 30, 2022 and 20215
Notes to Consolidated Financial Statements6

1

EVmo, Inc.

Condensed Consolidated Balance Sheets

As of SeptemberJune 30, 20212022 and December 31, 20202021

 

 

  September 30,  December 31, 
  2021  2020 
  (unaudited)    
ASSETS      
Current Assets:        
Cash $3,540,212  $72,890 
Accounts receivable  635,736   119,239 
Prepaid expenses  192,492   23,861 
Deferred offering costs  479,330   - 
Total current assets  4,847,770   215,990 
         
Property and equipment, net  46,471   1,908 
Rental vehicles, net  10,366,373   6,196,433 
Right of use asset  180,860   - 
Other assets  100,000   200,000 
TOTAL ASSETS $15,541,474  $6,614,331 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities:        
Accounts payable (including $670,047 and $590,176 to related party) $2,849,876  $1,157,299 
Accrued expenses  1,097,658   961,704 
Notes payables, current (net of discount of $0 and $1,973)  156,225   666,132 
Customer deposit - related party  -   150,000 
Advance from related parties  -   100,000 
Finance lease obligations, current  1,920,254   1,426,425 
Operating lease obligations, current  138,630   - 
Total current liabilities  6,162,643   4,461,560 
         
Note payable, net of current portion (net of discount of $1,316,029 and $0)  6,027,746   149,414 
Finance lease obligations, net of current portion  2,495,616   926,453 
Operating lease obligations, net of current portion  50,996   - 
TOTAL LIABILITIES  14,737,001   5,537,427 
         
Commitments and contingencies  -   - 
         
Series B Preferred stock, $0.000001 par value; 230,550 shares authorized;
230,375 and nil shares issued and outstanding		 
 		 
 		 
2,303,750		 
 		 
 		 
 		 
-		 
 
         
STOCKHOLDERS’ EQUITY        
Preferred stock, $0.000001 par value; 10,000,000 shares authorized; nil shares issued and outstanding  -   - 
Common stock, $0.000001 par value; 90,000,000 shares authorized; 35,758,149 and 31,981,374 shares issued and outstanding  36   32 
Additional paid-in capital  38,206,344   29,750,864 
Accumulated deficit  (39,705,657)  (28,673,992)
Total stockholders’ equity  (1,499,277)  1,076,904 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $15,541,474  $6,614,331 

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

1

EVmo, Inc.

Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

             
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
  2021  2020  2021  2020 
             
Revenue $2,724,180  $2,070,821  $7,670,795  $5,399,018 
                 
Cost of revenue  2,285,878   1,194,957   5,982,075   3,891,307 
                 
Gross profit  438,302   875,864   1,688,720   1,507,711 
                 
Operating expenses:                
Selling and marketing expenses  26,565   113,904   257,129   324,546 
Product development  46,500   -   106,766   - 
General and administrative expenses  3,218,912   1,088,152   6,151,507   3,845,768 
Total operating expenses  3,291,977   1,202,056   6,515,402   4,170,314 
                 
Loss from operations  (2,853,675)  (326,192)  (4,826,682)  (2,662,603)
                 
Other income (expense):                
Interest and financing costs  (2,007,194)  (65,292)  (6,296,524)  (212,943)
Other income  83,541   -   83,541   - 
Gain on forgiveness of debt  -   -   8,000   - 
Total other income (expense)  (1,923,653)  (65,292)  (6,204,983)  (212,943)
                 
Net loss $(4,777,328) $(391,484) $(11,031,665) $(2,875,546)
                 
Weighted average shares outstanding :                
Basic  35,715,024   31,981,374   34,819,334   30,828,676 
Diluted  35,715,024   31,981,374   34,819,334   30,828,676 
                 
Loss per share                
Basic $(0.13) $(0.01) $(0.32) $(0.09)
Diluted $(0.13) $(0.01) $(0.32) $(0.09)
         
  June 30,  December 31, 
  2022  2021 
  (unaudited)    
ASSETS        
Current Assets:        
Cash $6,143,247  $1,853,928 
Accounts receivable  795,037   751,450 
Prepaid expenses  -   609,701 
Deferred offering costs  -   862,855 
Total current assets  6,938,284   4,077,934 
         
Property and equipment, net  43,861   45,601 
Rental vehicles, net  14,114,739   8,887,319 
Right of use asset  70,147   149,759 
Other assets  2,983,866   100,000 
TOTAL ASSETS $24,150,897  $13,260,613 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities:        
Accounts payable (including $124,347 and $670,047 to related party) $727,147  $3,784,315 
Credit Cards  78,372   - 
Accrued expenses  837,044   1,156,265 
Notes payables, current (net of discount of $0 and $0)  843,750   156,225 
Customer deposit - related party  -   - 
Advance from related parties  -   - 
Finance lease obligations, current  3,146,230   1,810,374 
Operating lease obligations, current  77,982   143,894 
Total current liabilities  5,710,525   7,051,073 
         
Note payable, net of current portion (net of discount of $1,097,912 and $1,246,566)  6,058,338   6,097,209 
Finance lease obligations, net of current portion  5,386,241   2,178,836 
Operating lease obligations, net of current portion  -   12,988 
TOTAL LIABILITIES  17,155,104   15,340,106 
         
Commitments and contingencies  -   - 
         
Series B Preferred stock, $0.000001 par value; 230,550 shares authorized;        
nil and 230,375 shares issued and outstanding  -   2,303,750 
Series B Preferred stock, $0.000001 par value; 230,550 shares authorized; nil and 230,375 shares issued and outstanding  -   2,303,750 
         
STOCKHOLDERS’ EQUITY        
Preferred stock, $0.000001 par value; 10,000,000 shares authorized;        
nil shares issued and outstanding  -   - 
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;        
69,693,274 and 35,758,149 shares issued and outstanding  67   36 
Common stock, $0.000001 par value; 90,000,000 shares authorized; 69,693,274 and 35,758,149 shares issued and outstanding  67   36 
Additional paid-in capital  53,361,840   39,275,591 
Accumulated deficit  (46,366,114)  (43,658,870)
Total stockholders’ equity  6,995,793   (4,383,243)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $24,150,897  $13,260,613 

 

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

 

2

EVmo, Inc.

Condensed Consolidated Statements of Stockholders’ EquityOperations

For the Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021 (unaudited)

 

 

                
     Additional     Total 
  Common Stock  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Deficit  Equity (Deficit) 
Balance, December 31, 2020  31,981,374  $32  $29,750,864  $(28,673,992) $1,076,904 
                     
Issuance of common stock for cash  100,000   -   50,000   -   50,000 
Issuance of common stock for exercise of stock options  35,000   -   15,400   -   15,400 
Issuance of common stock for cashless exercise of stock options  960,550   1   (1)  -   - 
Issuance of common stock for settlement of litigation  225,000   -   1,103,750   -   1,103,750 
Value of warrants issued with note payable                    
Issuance of common stock for conversion of convertible debt  1,000,000   1   499,999   -   500,000 
Issuance of common stock for settlement agreement  825,000   1   3,240,599   -   3,240,600 
Issuance of common stock for financing cost  600   -   1,440   -   1,440 
Beneficial conversion feature associated with convertible debt  -   -   30,000   -   30,000 
Value of warrants issued with convertible debt                    
Fair value of warrants issued for financing costs                    
Stock option expense  -   -   193,587   -   193,587 
Net loss  -   -   -   (4,417,663)  (4,417,663)
                     
Balance, March 31, 2021  35,127,524   35   34,885,638   (33,091,655)  1,794,018 
                     
Issuance of common stock for exercise of stock options  260,000   -   71,700   -   71,700 
Issuance of common stock for settlement of litigation  -           -   - 
Issuance of common stock for conversion of convertible debt             -   - 
Issuance of common stock for settlement agreement             -   - 
Issuance of common stock for financing cost              -   - 
Beneficial conversion feature associated with convertible debt  -   -   810,634   -   810,634 
Value of warrants issued with convertible debt  -   -   488,133   -   488,133 
Fair value of warrants issued for financing costs  -   -   457,417   -   457,417 
Stock option expense  -   -   104,387   -   104,387 
Net loss  -   -   -   (1,836,674)  (1,836,674)
                     
Balance, June 30, 2021  35,387,524   35   36,817,909   (34,928,329)  1,889,615 
                     
Issuance of common stock for exercise of stock options  26,875   -   5,778   -   5,778 
Issuance of common stock for cashless exercise of stock options  312,500   1   (1)  -   - 
Issuance of common stock for settlement of litigation  31,250   -   42,018   -   42,018 
Value of warrants issued with note payable  -   -   

778,697

   -   

778,697

 
Fair value of warrants issued for financing costs  -   -   503,690   -   503,690 
Stock option expense  -   -   58,253   -   58,253 
Net loss  -   -   -   (4,777,328)  (4,777,328)
                     
Balance, September 30, 2021  35,758,149  $36  $

38,206,344

  $(39,705,657) $(1,499,277)
                     
Balance, December 31, 2019  29,427,803  $29  $28,735,894  $(25,171,915) $3,564,008 
                     
Stock option expense  -   -   457,242   -   457,242 
Net loss  -   -   -   (1,761,220)  (1,761,220)
                     
Balance, March 31, 2020  29,427,803   29   29,193,136   (26,933,135)  2,260,030 
                     
Issuance of common stock for cash  2,553,571   3   274,997       275,000 
Net loss  -   -   -   (722,842)  (722,842)
                     
Balance, June 30, 2020  31,981,374   32   29,468,133   (27,655,977)  1,812,188 
Balance  31,981,374   32   29,468,133   (27,655,977)  1,812,188 
                     
Stock option expense  -   -   240,244   -   240,244 
Net loss  -   -       (391,484)  (391,484)
                     
Balance, September 30, 2020  31,981,374  $32  $29,708,377  $(28,047,461) $1,660,948 
Balance  31,981,374  $32  $29,708,377  $(28,047,461) $1,660,948 
                 
  Three Months Ended June 30, 2022  Six Months Ended June 30, 2022 
  2022  2021  2022  2021 
  (unaudited)     (unaudited)    
Revenue $2,876,626  $2,652,083  $5,336,335  $4,946,615 
                 
Cost of revenue*  2,085,312   1,915,294   4,056,505   3,696,197 
*includes vehicle depreciation                
Gross profit  791,314   736,789   1,279,830   1,250,418 
                 
Operating expenses:                
Selling and marketing expenses  74,685   64,816   139,021   230,564 
Product development  55,500   50,766   74,500   60,266 
General and administrative expenses  2,358,416   1,493,494   2,785,119   2,932,595 
Total operating expenses  2,488,601   1,609,076   2,998,640   3,223,425 
                 
Loss from operations  (1,697,287)  (872,287)  (1,718,810)  (1,973,007)
                 
Other income (expense):                
Interest and financing costs  (500,096)  (964,387)  (988,433)  (4,289,330)
Other income  -   -       - 
Gain on forgiveness of debt  -   -   -   8,000 
Total other income (expense)  (500,096)  (964,387)  (988,433)  (4,281,330)
                 
Net loss $(1,197,191) $(1,836,674) $(2,707,243) $(6,254,337)
                 
Weighted average shares outstanding :                
Basic  75,418,866   35,333,924   75,418,866   35,333,924 
Diluted  75,418,866   35,333,924   75,418,866   35,333,924 
                 
Loss per share                
Basic $(0.02) $(0.05) $(0.04) $(0.18)
Diluted $(0.02) $(0.05) $(0.04) $(0.18)

 

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

 

3

EVmo, Inc.

Condensed Consolidated Statements of Cash FlowsStockholders’ Equity

For the NineSix Months Ended SeptemberJune 30, 20212022 and 20202021 (unaudited)

 

 

  2021  2020 
       
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(11,031,665) $(2,875,546)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  1,525,332   1,047,075 
Stock option expense  356,227   697,486 
Amortization of debt discounts  1,643,408   27,719 
Common stock issued for financing costs  1,440   - 
Preferred stock issued for financing costs  53,750   - 
Common stock issued for settlement agreement  3,240,600   - 
Common stock issued for litigation settlement  42,018   - 
Gain on forgiveness of debt  (8,000)  - 
Fair value of warrants issued for financing costs  961,107   - 
Operating lease expense  77,361   - 
Changes in operating assets and liabilities:        
Accounts receivable  (516,497)  5,993 
Prepaid expenses and other assets  (68,631)  350,927 
Accounts payable  1,656,997   908,051 
Accrued expenses  830,954   26,838 
Customer deposit - related party  (150,000)  - 
Operating lease liability  (68,595)  - 
Net cash used in operating activities  (1,454,194)  188,543 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of property and equipment  (47,051)  - 
Net cash used in investing activities  (47,051)  - 
         
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from sale of common stock  50,000   275,000 
Proceeds from exercise of stock options  92,878   - 
Proceeds from advance from related parties  503,766   200,000 
Repayment of advance from related parties  (603,766)  (150,000)
Proceeds from convertible note payable  2,500,000   - 
Proceeds from notes payable, net  6,900,000   342,675 
Repayment of notes payable  (809,519)  (10,000)
Repayment of finance lease obligations  (3,629,792)  (2,017,915)
Payment of deferred offering costs  (35,000)  - 
Net cash provided by (used in) financing activities  4,968,567   (1,360,240)
         
NET INCREASE (DECREASE) IN CASH  3,467,322   (1,171,697)
         
CASH, BEGINNING OF PERIOD  72,890   1,256,429 
         
CASH, END OF PERIOD $3,540,212  $84,732 
         
CASH PAID FOR:        
Interest $157,809  $185,224 
Income taxes $-  $- 
         
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES        
Payment of accounts payable/accrued expenses with common stock $1,103,750  $- 
Finance lease obligations $5,692,784  $3,400,922 
                     
        Additional     Total 
  Common Stock  Paid-in  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Deficit  Equity (Deficit) 
Balance, Dec 31, 2021  35,769,524  $36  $39,275,591  $(43,658,870) $(4,383,243)
                   - 
Issuance of common stock for cash  27,400,000   28   13,700,000       13,700,028 
Issuance of common stock for exercise of stock options  91,500   1   69,996       69,997 
Issuance of common stock for conversion of convertible debt  128,125   1   64,063       64,064 
Issuance of common stock for financing cost  535,967   1   -       1 
Stock option expense          26,116       26,116 
Net loss              (1,510,052)  (1,510,052)
                     
Balance, March 31, 2022  65,725,116   67   53,135,766   (45,168,922)  7,966,911 
                     
Issuance of common stock for cash                  - 
Issuance of common stock for exercise of stock options  196,875       42,328       42,328 
Fair value of warrants issued for financing costs          160,877       160,877 
Stock option expense          22,868       22,868 
Net Loss              (1,197,191)  (1,197,191)
                     
Balance, June 30, 2022  65,921,991   

67

   53,361,839   (46,366,113)  6,995,793 
                     
Balance, December 31, 2020  31,981,374  $32  $29,750,864  $(28,673,992) $1,076,904 
                     
Issuance of common stock for cash  100,000   -   50,000   -   50,000 
Issuance of common stock for exercise of stock options  35,000   -   15,400   -   15,400 
Issuance of common stock for cashless exercise of stock options  960,550   1   (1)  -   - 
Issuance of common stock for settlement of litigation  225,000   -   1,103,750   -   1,103,750 
Issuance of common stock for conversion of convertible debt  1,000,000   1   499,999   -   500,000 
Issuance of common stock for settlement agreement  825,000   1   3,240,599   -   3,240,600 
Issuance of common stock for financing cost  600   -   1,440   -   1,440 
Beneficial conversion feature associated with convertible debt  -   -   30,000   -   30,000 
Stock option expense  -   -   193,587   -   193,587 
Net loss  -   -   -   (4,417,663)  (4,417,663)
                     
Balance, March 31, 2021  35,127,524   35   34,885,638   (33,091,655)  1,794,018 
                     
Issuance of common stock for exercise of stock options  260,000       71,700       71,700 
Beneficial conversion feature associated with convertible debt          810,634       810,634 
Value of warrants issued with convertible debt          488,133       488,133 
Fair value of warrants issued for financing costs          457,417       457,417 
Stock option expense          104,387       104,387 
Net loss              (1,836,674)  (1,836,674)
                     
Balance, June 30, 2021  35,387,524   35   36,817,909   (34,928,329)  1,889,615 

 

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

 

4

EVmo, Inc.

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2022 and 2021 (unaudited)

         
  2022  2021 
       
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(2,707,243) $(6,254,337)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  535,606   995,123 
Stock option expense  48,984   297,974 
Amortization of debt discounts  152,538   476,891 
Common stock issued for financing costs  31   1,440 
Common stock issued for settlement agreement  -   3,240,600 
Gain on forgiveness of debt  -   (8,000)
Fair value of warrants issued for financing costs  160,877   457,417 
Leased Vehicles  (5,791,286)  47,458 
Changes in operating assets and liabilities:        
Accounts receivable  (43,587)  (309,384)
Vehicle Deposits  (681,666)  - 
Prepaid expenses and other assets  (1,512,887)  (147,544)
Accounts payable  (3,057,168)  1,308,562 
Accrued expenses  (319,221)  (163,637)
Credit Cards  78,372   - 
Customer deposit - related party  -   (150,000)
Operating lease liability  (78,900)  (37,047)
Net cash used in operating activities  (13,215,550)  (244,484)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of property and equipment  -   (47,051)
Net cash used in investing activities  -   (47,051)
         
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from sale of common stock  13,860,175   50,000 
Proceeds from exercise of stock options  42,328   87,100 
Proceeds from advance from related parties  -   503,766 
Repayment of advance from related parties  -   (603,766)
Proceeds from convertible note payable  -   2,500,000 
Proceeds from notes payable, net  -   - 
Repayment of notes payable  500,000   (48,776)
Redemption of Preferred Stock  (2,303,750)  - 
Repayment of finance lease obligations  4,543,261   (2,071,952)
Payment of deferred offering costs  862,855   (35,000)
Net cash provided by (used in) financing activities  17,504,869   381,372 
         
NET INCREASE (DECREASE) IN CASH  4,289,319   89,837 
         
CASH, BEGINNING OF PERIOD  1,853,928   72,890 
         
CASH, END OF PERIOD $6,143,247  $162,727 
         
CASH PAID FOR:        
Interest $683,739  $102,446 
Income taxes $-  $- 
         
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES        
Payment of accounts payable/accrued expenses with common stock $-  $1,103,750 
Finance lease obligations $8,532,471  $3,705,417 

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

5

 

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine monthsSix Months Ended SeptemberJune 30, 20212022 and 20202021 (unaudited)

Note 1 - Organization and Basis of Presentation

 

Organization and Line of Business

 

EVmo, Inc. (the(“EVmo” 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 converted to a Delaware C corporation. The Company was originally incorporated under the name of YayYo, Inc. and changed its name to Rideshare Rental, Inc. on September 11, 2020. On March 1, 2021, the Company changed its name from Rideshare Rental, Inc. to EVmo, Inc. The accompanying financial statements

EVmo is a holding company operating principally through two wholly-owned subsidiaries: (i) Rideshare Car Rentals LLC, a Delaware limited liability company (“Rideshare”), and (ii) Distinct Cars, LLC, a Delaware limited liability company (“Distinct Cars”). Rideshare offers an online bookings platform (the “Rideshare Platform”) while Distinct Cars maintains a fleet of passenger vehicles and transit vans for use in the last-mile logistical space for rent to our customers who are retroactively restateddrivers 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 presentmeet the Companyvehicle suitability and other requirements of rideshare and delivery gig companies, also known as transportation network companies (“TNCs”),such as Uber, Lyft, DoorDash and Grubhub. Through Rideshare and Distinct Cars, we seek to become a C corporation from June 21, 2016. The Company primarily rentsleading provider of rental vehicles to drivers for ridesharing Transportation Network Companies (“TNCs”) such as Uber and Lyft, as well as drivers in the ridesharing and delivery gig-economy.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.

 

Basis of Presentation

 

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP)(“GAAP”). The Accounting Standards Codification (“ASC”), maintained by the Financial Accounting Standards Board (the “FASB”), is the current single official source of GAAP.

 

Risk and UncertaintiesImpact 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 Organizationit 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 itsour cash flows, but itwe then saw a positive upward movement in revenue during the second half of 2020, which continued intothrough fiscal 2021. This was consistent with the experience of the TNCs whose drivers we service. According to Bloomberg Second Measure, Uber and Lyft sales were up 104% and 84% year-over-year, respectively, in February 2022 from one year earlier, even in spite of the Delta and Omicron variants that resulted in spikes of infections through periods of 2021.

Given the current prevalence of FDA-approved eligible vaccines across nearly all age groups, the marked overall decrease in the number of COVID-19 infections, hospitalizations and deaths in the first half of 2021. In early 2021, several vaccinations for COVID-19 received emergency-use authorization from2022, and the Food and Drug Administration, and manylifting of the lockdownmost pandemic restrictions imposed by state and local governments, including those of thein our active markets, in which the Company operates, appear to be abating. The pandemic has not yet ended, however, and there have been multiple waves where infections, hospitalizations, and deaths have sharply increased. The Company therefore cannot predict the ultimate impactwe are optimistic that COVID-19 maywill not have a material impact on its business this year,our operations in the current fiscal year. However, certain factors- including, for example, a new, more aggressive and possibly beyond.deadly variant that is resistant to the vaccines- could reverse the positive trends of recent months and alter our prediction.

Interim financial statements

 

The unaudited condensed consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rulesresults and regulations. The results of operations for the ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2021.2022.

Note 2 – Summary of Significant Accounting Policies

 

Principles of Consolidation

 

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

6

EVmo, Inc.

Notes to Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021 (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.

5

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine months Ended September 30, 2021 and 2020 (unaudited)

 

Cash Equivalents

 

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

 

Property and Equipment and Rental Vehicles

 

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

 

Schedule of Estimated Lives of Equipment

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

 

Long-Lived Assets

 

The Company applies the provisions of 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 SeptemberJune 30, 2021,2022 the Company determined that no impairment charge was necessary.

 

Revenue Recognition

 

The Company recognizes all of its material revenue from renting its fleet of cars to TNC drivers. Revenue is recognized generally on a weekly basis based on the rental agreements. The Company recognizes revenue in accordance with FASB ASC Topic 606, Revenue From Contracts with Customers.

 

Income Taxes

 

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

 

7

EVmo, Inc.

Notes to Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021 (unaudited)

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

 

Stock-Based Compensation

 

The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation(“ASC 718”). 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 2,737,5005,207,842 warrants and 758,125517,750 options outstanding as of SeptemberJune 30, 20212022 and 1,631,2502,006,250 warrants and 3,221,000 1,515,000options outstanding as of SeptemberJune 30, 2020.

6

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine months Ended September 30, 2021 and 2020 (unaudited)2021.

 

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. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. There were 3,495,6255,725,592 and 4,852,2503,521,250 potentially dilutive options and warrants outstanding at SeptemberJune 30, 2022 and 2021, and 2020, respectively, and 750,000 shares potentially issuable upon the conversion of outstanding shares of Series B Preferred Stock at September 30, 2021.respectively.

 

Advertising Costs

 

The Company expenses the cost of advertising as incurred. Advertising costs for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 were $257,129139,021 and $324,546230,564, respectively.

 

Fair Value Measurements

 

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

 

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

 

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

 

8

EVmo, Inc.

Notes to Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021 (unaudited)

At SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company did not identify any liabilities that are required to be presented on the balance sheet at fair value.

 

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASUAccounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxeswhich amends ASC 740 Income Taxes (ASC 740).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. TheThrough the first half of fiscal 2022, the Company is currently evaluating the effecthas made no material changes to its financial reporting as a result of this ASU on the Company’s consolidated financial statements and related disclosures.

7

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine months Ended September 30, 2021 and 2020 (unaudited)ASU.

 

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

 

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

Note 3 – Property and Equipment

 

At SeptemberJune 30, 20212022 and December 31, 2020, property and2021 equipment consisted of the following:

 

Schedule of Property and Equipment

 September 30, December 31,  June 30, December 31, 
 2021 2020  2022 2021 
          
Computer equipment $6,046  $6,046  $6,046  $6,046 
Office furniture  17,401   -   17,401   17,401 
Leasehold improvement  29,650   -   29,650   29,650 
  53,097   6,046 
Property and equipment  53,097   53,097 
Less accumulated depreciation  (6,626)  (4,138)  (9,236)  (7,496)
Equipment, net $46,471  $1,908  $43,861  $45,601 

 

Depreciation expense for equipment for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 was $2,4881,740 and $1,1152,488, respectively.

9

EVmo, Inc.

Notes to Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021 (unaudited)

 

Note 4 – Rental Vehicles

At SeptemberJune 30 20212022 and December 31, 2020,2021 all of the Company’s rental vehicles consisted of the following:

 

Schedule of Rental Vehicles

 September 30, December 31,  June 30, December 31, 
 2021 2020  2022 2021 
          
Rental vehicles $14,760,669  $9,067,885  $19,275,855  $13,514,619 
  14,760,669   9,067,885 
Rental vehicles, gross  19,275,855   13,514,619 
Less accumulated depreciation  (4,394,296)  (2,871,452)  (5,161,116)  (4,627,300)
Rental vehicles, net $10,366,373  $6,196,433  $14,114,739  $8,887,319 
        

 

The Company’s leased assets, consisting ofrental vehicles are depreciated over their estimated useful life of five years. Depreciation expense for leased assets for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 was $1,522,8441,063,540 and $1,045,960992,635, respectively. The leaseA majority of the rental vehicles are leased with terms are generally for 3036 to 3660 months and the Company has the right to purchase the leased assetsvehicles at the end of the lease terms for generally a nominal amount.

8

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine months Ended September 30, 2021 and 2020 (unaudited)terms.

 

Note 5 – Notes Payable

Notes payable at SeptemberJune 30, 20212022 and December 31, 20202021 consisted of the following:

Schedule of Notes Payable

 September 30, December 31,  June 30, December 31, 
 2021 2020  2022 2021 
 $-  $304,667      
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 $-  $304,667 
Note payable to the Small Business Administration. The note bears interest at 3.75% per annum, requires monthly payments of $731 after 24 months from funding and is due 30 years from the date of issuance.  -   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 
Notes payable to a finance company, interest at LIBOR plus 10% per annum; monthly principal payments of 0.4166% of principal balance beginning August 1, 2022, with unpaid principal due on July 9, 2026 (A)  7,500,000   - 
Settlement of Shareholder Lawsuit Note Payable Balance 

500,000

 

500,000

 
Notes payable to a finance company, interest at the London Interbank Offered Rate (“LIBOR”) plus 10% per annum; monthly principal payments of 0.4166% of principal balance beginning August 1, 2022, with unpaid principal due on July 9, 2026 (A)  7,500,000   7,500,000 
Total notes payable  7,500,000   817,519   8,000,000   7,500,000 
Unamortized debt discount  (1,316,029)  (1,973)  (1,097,912)  (1,246,566)
Notes payable, net discount  6,183,971   815,546   6,402,088   6,253,434 
Less current portion  (156,225)  (666,132)  (843,750)  (156,225)
Long-term portion $6,027,746  $149,414  $6,058,338  $6,097,209 

 

(A)On July 9, 2021 (the “Closing Date”), the Company entered into a Term Loan, Guarantee and Security Agreement (the “Term Loan Agreement”) with EICF Agent LLC (“EICF”), as agent for the lenders, and Energy Impact Credit Fund I, LP, as lender (the “Lender”), providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million (collectively, the “Term Loans”), consisting of a $7.5 million closing date term loan facility (the “Closing Date Term Loan”) and up to $7.5 million of borrowings under a delayed draw term loan facility (the “Delayed Draw Term Loan Facility”). The Closing Date Term Loan was fully drawn on the Closing Date, while the Delayed Draw Term Loan Facility is available upon the satisfaction of certain conditions precedent specified in the Term Loan Agreement. The Term Loan Agreement matures on July 9, 2026. Borrowings under the Term Loan Agreement bear interest at the London Interbank Offered Rate (“LIBOR”),LIBOR, plus a margin of 10.0%. As a condition precedent to the Agent and the Lender entering into the Term Loan Agreement, the Company issued to the Lender a common stockCommon Stock purchase warrant, dated as of the Closing Date (the “Warrant”), which grants the Lender the right to purchase up to1.5 million shares of the common stock of the Company, par value $0.000001 (the “Common Stock”),Common Stock at an exercise price of $2.10, subject to adjustment as set forth in the Warrant. The Warrant is subject to vesting, with 450,000 shares of Common Stock exercisable as of the Closing Date and the remainder exercisable only in the event that the Company borrows under the Delayed Draw Term Loan Facility or fails to consummate a qualifying equity transaction on or before October 7, 2021. The Warrant has no expiration date. In addition, in October 2021, the Company was required to issue to Lender an additional warrant for 900,000 shares of common stock (the “Additional Warrant”) as a penalty since the Company was unable to raise equity capital within 90 days of the date of this agreement. Upon completion of the equity capital raise completed on January 6, 2022, anti-dilution adjustments were made to the issued warrants. The Warrant for 450,000 common shares at an exercise price of $2.10 was adjusted to one for 711,656 shares at an exercise price of $1.33 and the Additional Warrant for 900,000 common shares at an exercise price was adjusted to one for 1,174,311 shares at an exercise price of $0.71.

 

910

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine monthsSix Months Ended SeptemberJune 30, 20212022 and 20202021 (unaudited)

 

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

In connection with This Exchange Agreement resulted in the issuance of this note payable,preferred stock that was later either converted to Common Stock or redeemed after completion of the Company also issuedequity capital raise in January 2022. On January 22, 2022, 450,000110,325 warrants to purchase shares of itsthe Company’s Series B convertible preferred stock, par value $0.000001 per share (the “Series B Preferred Stock”) was converted to 3,152,143 shares of Common Stock withat $0.35 per share. On March 22, 2022, 110,525 shares of Series B Preferred Stock was converted to 3,157,857 shares of Common Stock at $0.35 per share. The remaining outstanding Series B Preferred Stock, 9,525 shares, was redeemed and a final warrant was issued to the Holder for 128,125 common shares at an exercise price of $2.100.50 per shares. The aggregate relative fair value of these warrants was $778,697 and was recorded as a discount on the note payable and as additional paid in capital. In addition, the Company incurred $600,000 of cost related to this note payable. The total discount of $1,378,697 is being amortized over the term of the notes payable.share.

 

A roll forwardrollforward of notesthe EIP note payable from December 31, 20202021 to SeptemberJune 30, 20212022 is below:

Schedule of Outstanding Notes Payable

    
Notes payable, December 31, 2020 $815,546 
Notes payable, December 31, 2021 $7,500,000 
Issued for cash  7,500,000  - 
Payment of cost associated with issuance of note payable  (600,000)
Debt discount related to notes payable  (778,697)
Lease obligation converted to note payable - 
Forgiveness of note payable  (8,000) - 
Repayments  (809,519) - 
Amortization of debt discounts  64,641   - 
Notes payable, September 30, 2021 $6,183,971 
Notes payable, June 30, 2022 7,500,000 

Future payments under EIP note payable obligations are as follows:

Schedule of Future Payments Under Note Payable Obligations

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

 

Note 6 – Convertible Notes

On January 8, 2021, the Company, issued a stand-alone $500,000 convertible promissory note to Mr. John Gray, principal of one of the Company’s largest stockholders, the Gray Mars Venus Trust, Arizona 2015, an Arizona asset management limited partnership. The convertible note 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.

 

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 stockCommon Stock purchase warrant. The note has an original principal amount of $2,250,000, with an original issue discount of $250,000. It bears interest at a fixed rate of 10%, is convertible into shares of Common Stock at a price of $3.00 per share (subject to adjustment as set forth in the note), and matures on January 12, 2022. 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 years of the date of issuance. The agreement provides that additional warrants, each for 93,750 shares of common stock with an exercise price of $3.00 per share, will be issued by the Company to the investor on the 12th day of each month that the note remains outstanding. Both the note and the warrant include anti-dilution provisions in which the conversion price of the note and the exercise price of the warrant will be reduced to equal the conversion or exercise price, as applicable, of any subsequently-issued derivative security to acquire shares of common stock, or their equivalent, should that conversion or exercise price be lower than that of the note or the warrant. To account for the note and warrant, the Company first determined the value of the note and the fair value of the detachable warrants issued in connection with this convertible note. The estimated value of the warrants of $623,373 was determined using the Black-Scholes option pricing model and the following assumptions: term of five years, a risk free interest rate of .089%, a dividend yield of 0% and volatility of 190%. The face amount of the convertible note of $2,250,000$2,250,000 was proportionately allocated to the convertible note and the warrant in the amount of $1,761,866 and $488,134, respectively. Since the Company’s stock price exceeded the conversion price on the transaction date, there is an embedded beneficial conversion feature present in the convertible note of $810,633. The combined discount of $1,298,767 plus the original issue discount are recorded as a debt discount to the convertible note and are being amortized over the year life of the note. In July 2021, the Company and noteholder agreed to convert the convertible note into 230,250230,375 shares of the Company’s Series B Preferred Stock.

 

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

1011

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine monthsSix Months Ended SeptemberJune 30, 20212022 and 20202021 (unaudited)

 

A roll forward of convertible notes from December 31, 2020 to September 30, 2021 is below:

Schedule of Outstanding Convertible Notes Payable

Convertible notes, December 31, 2020$-
Issued for cash2,500,000
Issued for original issue discount250,000
Debt discount related to convertible notes(1,578,767)
Conversion to common stock(500,000)
Conversion to preferred stock(2,250,000)
Amortization of debt discounts1,578,767
Convertible notes, September 30, 2021$-

Note 7 – Financing Lease Obligations

LeaseLeased vehicle obligations at SeptemberJune 30, 20212022 and December 31, 20202021 consisted of the following:

 Schedule of LeaseLeased Vehicle Obligations

 September 30, December 31,  June 30, December 31, 
 2021 2020  2022 2021 
          
Lease obligations $4,415,870  $2,352,878 
Leased vehicle obligations $8,532,471  $3,989,210 
Less current portion  (1,920,254)  (1,426,425)  (3,146,230)  (1,810,374)
Long-term portion $2,495,616  $926,453  $5,386,241  $2,178,836 
        

 

A rollforward of vehicle lease obligations from December 31, 20202021 to SeptemberJume 30, 20212022 is below:

 Schedule of OutstandingVehicle Lease Obligations

     
Lease obligations, December 31, 2020 $2,352,878 
New lease obligations  5,692,784 
Payments on lease obligations  (3,629,792)
Lease obligations, September 30, 2021 $4,415,870 
Lease vehicle obligations, December 31, 2021 $3,989,210 
New lease vehicle obligations  1,303,487 
Disposal of leased vehicles  (1,229,692)
Lease obligation converted to note payable  - 
Payments on lease obligations  (405,764)
Lease obligations, June 30, 2022 $3,658,241 
     
New lease vehicle obligations  6,663,000 
Disposal of leased vehicles  (296,823)
Lease obligation converted to note payable  - 
Payments on lease obligations  (1,491,947)
Lease obligations, June 30, 2022 $8,532,471 

 

Future payments under lease obligations are as follows:

 Schedule of Future Lease Obligations

Twelve Months Ending September 30,   
Years Ending December 31,   
2022 $2,033,761  $2,136,231 
2023  1,500,065   4,128,219 
2024  1,058,833   3,068,665 
2025  1,229,244 
2026  80,548 
Total payments  4,592,659   10,642,907 
Amount representing interest  (176,789)  (2,110,436)
Lease obligation, net $4,415,870  $8,532,471 

12

EVmo, Inc.

Notes to Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021 (unaudited)

 

Note 87 –Operating Lease Obligations

 

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

 

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

11

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine months Ended September 30, 2021 and 2020 (unaudited)Topic 842- Leases.

 

The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of SeptemberJune 30, 2021:2022:

Schedule of Operating Lease Obligations

 September 30, 
 Classification on Balance Sheet 2021  Classification on Balance Sheet June 30,
2022		 
Assets        
Operating lease assets Operating lease right of use assets $180,860  Operating lease right of use assets $70,147 
Total lease assets $180,860  $70,147 
        
Liabilities        
Current liabilities        
Operating lease liability Current operating lease liability $138,630  Current operating lease liability $77,982 
Noncurrent liabilities        
Operating lease liability Long-term operating lease liability  50,996  Long-term operating lease liability  - 
Total lease liability $189,626  $77,982 

 

Lease obligations at SeptemberJune 30, 20212022 consisted of the following:

 Schedule of Lease Obligation Maturity

Twelve Months Ending September 30, Leases 
Years Ending December 31,   
2022 $157,800  $64,832 
2023  52,600   13,150 
Total payments  210,400   77,982 
Less: imputed interest  (20,774)
Total obligation  189,626   - 
Less: current portion  (138,630)  (77,982)
Non-current capital leases obligations $50,996  $- 

 

13

The lease expense for

EVmo, Inc.

Notes to Consolidated Financial Statements

For the nine months ended SeptemberSix Months Ended June 30, 2022 and 2021 was $100,817. The cash paid under operating leases for the nine months ended September 30, 2021 was $92,050. At September 30, 2021, the weighted average remaining lease terms were 1.25 years and the weighted average discount rate was 15%.(unaudited)

 

Note 8 – Stockholders’ Equity

 

The Company has authorized 100,000,000 shares of capital stock, which 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.

 

Series B Preferred Stock

 

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

 

SharesPursuant to its Certificate of Designation and the Exchange Agreement, as applicable, the Series B Preferred Stock is convertible at any time athad the option of the holder thereof into shares of Common Stock at an initial conversion price of $3.00 per share, subject to adjustment as set forth in the Certificate of Designation.following features:

 

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. 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 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.

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

 

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

 

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine months Ended September 30, 2021 and 2020 (unaudited)

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

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

 

Common Stock

 

During the ninesix months ended SeptemberJune 30, 2021,2022, the Company:

 

 ●issued 100,000027,400,000 shares of Common Stock to a member of the Company’s Board of Directors, in a negotiated transaction forthrough an equity capital raise at $0.50 per share, or aggregate cash consideration of $50,000;share;
 ●issued 295,0003,152,143 shares of Common Stock for the exerciseat $0.35 per share to redeem 110,325 shares of 321,875 stock options for cash consideration of $92,878;Series B preferred stock;
 ●issued 1,273,0503,157,857 shares of Common Stock for the cashless exerciseat $0.35 per share to redeem 110,525 shares of 1,348,525 stock options;
●Series B preferred stock; and issued 600196,875 of shares of Common Stock from exercises of stock options granted to an investor in connection with a prior note payable agreement;
●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 256,250 shares of Common Stock in connection with legal settlements. The shares were valued at $1,145,768 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.employees.

14

EVmo, Inc.

Notes to Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021 (unaudited)

 

Stock Options

 

The following is a summary of stock option activity:

 

Summary of Stock Option Activity

      Weighted     Options
Outstanding		  Weighted
Average
Exercise
Price		  Weighted
Average
Remaining
Contractual
Life		  Aggregate
Intrinsic
Value		 
    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 
Outstanding, December 31, 2021  766,750  $0.53   3.76  $98,937 
Granted  290,000   0.84           40,000   0.47   4.89     
Forfeited  (401,475)  0.22           -   -         
Exercised  (1,670,400)  0.230           -             
Outstanding, September 30, 2021  758,125  $0.42   3.93  $514,928 
Exercisable, September 30, 2021  413,875  $0.56   3.99  $262,473 
Outstanding, March 31, 2022  806,750  $0.44   3.71  $162,791 
Exercisable, March 31, 2022  619,750  $0.50   3.86  $98,937 
                
Granted  20,000   0.39   4.77   2,400 
Forfeited  (52,125)            
Exercised  (196,875)  0.22         
Outstanding, June 30, 2022  662,000   0.59   4.44   166,962 
Exercisable, June 30, 2022  569,250   0.56   4.01   139,601 

 

The exercise price for options outstanding and exercisable at SeptemberJune 30, 2021:2022:

 Schedule of Options Outstanding by Exercise Price Range

Outstanding Exercisable
Number of Exercise  Number of Exercise 
Options Price  Options Price 
20,000 $0.210  20,000 $0.210 
528,125  0.215  252,625  0.215 
15,000  0.220  2,500  0.220 
155,000  0.530  98,750  0.530 
20,000  2.120  20,000  2.120 
20,000  3.800  20,000  3.800 
758,125     413,875    
               
Outstanding  Exercisable 
Number of  Exercise  Number of  Exercise 
Options  Price  Options  Price 
 20,000  $0.21   20,000  $0.21 
 352,000   0.215   292,375   0.215 
 15,000   0.22   10,000   0.22 
 155,000   0.53   126,875   0.53 
 20,000   0.94   20,000   0.94 
 20,000   2.12   20,000   2.12 
 20,000   3.8   20,000   3.8 
 20,000   0.39   20,000   0.39 
 20,000   0.55   20,000   0.55 
 20,000   0.39   20,000   0.39 
 662,000       569,250     

For options granted during the six months ended June 30, 2022 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $0.59 and the weighted-average exercise price of such options was $0.56. No options were granted during the six months ended June 30, 2022 where the exercise price was less than the stock price at the date of grant or the exercise price was greater than the stock price at the date of grant.

 

1315

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For Year Six Months Ended June 30, 2022 and 2021 (unaudited)

The fair value of the Ninestock options is being amortized to stock option expense over the vesting period. The Company recorded stock option expense of $49,088 and $212,694 during the six months Ended Septemberended June 30, 2022 and 2021, and 2020 (unaudited)respectively. At June 30 2022, the unamortized stock option expense was $50,179.

 

Warrants

 

The following is a summary of warrant activity:

Summary of Warrant Activity

      Weighted     Warrants
Outstanding		  Weighted
Average
Exercise
Price		  Weighted
Average
Remaining
Contractual
Life		  Aggregate
Intrinsic
Value		 
    Weighted Average    
    Average Remaining Aggregate 
 Warrants Exercise Contractual Intrinsic 
 Outstanding  Price  Life  Value 
Outstanding, December 31, 2020  1,631,250  $4.08   2.38  $- 
Outstanding, December 31, 2021  3,918,750  $2.87   3.17  $- 
Granted  1,106,250   2.64           664,092             
Forfeited  -               -             
Exercised  -               -             
Outstanding, September 30, 2021  2,737,500  $3.50   2.89  $- 
Exercisable, September 30, 2021  2,737,500  $3.50   2.89  $- 
Outstanding, March 31, 2022  4,582,842  $2.47   3.48  $- 
Exercisable, March 31, 2022  4,582,842  $2.47   3.48  $- 
                
Granted  625,000             
Forfeited  -             
Exercised  -             
Outstanding June 30, 2022  5,207,842  $2.22   3.21     
Exercisable, June 30, 2022  5,207,842  $2.22   3.21                

 

The exercise price for warrants outstanding at SeptemberJune 30, 2021:2022:

 Schedule of Warrants Outstanding by Exercise Price Range

Outstanding and Exercisable
Number of Exercise 
Warrants Price 
450,000 $2.10 
656,250  3.00 
1,500,000  4.00 
131,250  5.00 
2,737,500    
Outstanding and Exercisable
 Number of Warrants   Exercise Price 
 1,500,000  $4.00 
 65,625  $5.00 
 65,625  $5.00 
 187,500  $3.00 
 93,750  $3.00 
 93,750  $3.00 
 711,656  $1.33 
 93,750  $3.00 
 93,750  $3.00 
 93,750  $3.00 
 1,174,311  $0.71 
 93,750  $3.00 
 93,750  $3.00 
 93,750  $3.00 
 128,125  $0.50 
 625,000  $0.40 
       
 5,207,842     

 

16

In connection with a convertible note discussed in Note 6, the Company has issued an aggregate of 468,750 warrants. The fair value of the warrants was determined to be $961,106, using a Black-Scholes model, and has been recorded as financing costs in the accompanying statements of operations for the nine months ended September 30, 2021. The Company used the following assumptions in determining the fair value:

Schedule of Stock Options Value AssumptionsEVmo, Inc.

Risk-free interest rate0.76 – 0.87%
Expected life of the options5 years
Expected volatility180%-190%
Expected dividend yield0%

Notes to Consolidated Financial Statements

For Year Six Months Ended June 30, 2022 and 2021 (unaudited)

Note 109 – Related Party Transactions

 

During the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Company expensed $2,356,9241,013,516 and $1,715,2371,618,441, respectively, in insurance expense related to insuring the Company fleet of vehicles fromvia an insurance brokerage firm, whose owner is also a stockholder of the Company. At September 30, 2021Company, and December 31, 2020, $670,047 and $265,257, respectively, was owedin professional fees related to this insurance brokerage from and is included in accounts payable in the accompanying consolidated balance sheets.an administrative bookkeeping group partially owned by an officer.

 

The Company’s Executive Chairman and former CEO have made advances the Company. During the nine months ended September 30, 2021, the Company’s Executive Chairman loaned the Company $503,767 and was repaid $503,767. The Company’s former CEO loaned the Company $100,000 in 2020, and, during the nine months ended September 30, 2021 was repaid $100,000. At September 30, 2021, the Company owed its Executive Chairman and former CEO $0 and $0, respectively.

14

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine months Ended September 30, 2021 and 2020 (unaudited)

Note 1110 – 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 proceedingslitigation or asserted potential claimslitigation against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows, other than those described below.

 

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

 

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

 

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

 

On July 22 and July 23, 2020, respectively, two actions were filed in the Los Angeles Superior Court. The complaints underlying the State Cases differ from the consolidated federal securities cases discussed below (In re YayYo Securities Litigation) only by a few words and some random punctuation marks, and are therefore virtually identical. Plaintiffs Ivan Rung and Michael Vanbecelaere each claimed to have purchased the Common Stock as part of the Company’s initial public offering (the “IPO”); they purport to bring a securities class action on behalf of all purchasers of the Common Stock pursuant to the registration statement and prospectus filed with the SEC and distributed in connection with the Company’s IPO, which was launched on November 14, 2019. The State Case complaints allege misrepresentations and material omissions in the SEC filings in violation of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”). The Company has and continues to vigorously deny any and all liability and asserts that the State Cases are baseless. It is the Company’s firm position that it accurately and completely disclosed all material facts and circumstances in its SEC filings relating to the IPO, and subsequently in its periodic SEC reports, including those that were potentially adverse to the Company’s operations and business prospects. The State Cases litigation is presentlywas stayed pending the outcome of the federal securities case discussed below (Hamlin v. YayYo, Inc.),cases, as to which, as noted below, the parties have announced a “settlementsettlement in principle”, which is subject to court approval inprinciple last year. Please see Note 12- “Subsequent Events” for further information regarding the district court. The Company anticipates filing motions to dismiss the purported class actions in Superior Court on the basisfinal disposition of the anticipated approval of the federal settlement.State Cases litigation.

 

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

 

These two actions were filed on September 9, 2020 and September 18, 2020, respectively, in the United States District Court for the Central District of California. Plaintiffs Jason Hamlin and William Koch each claim to have purchased the Common Stock as part of the IPO and, like the plaintiffs in the State Cases, purport to bring a securities class action pursuant to Sections 11 and 15 of the Securities Act, as well as and Section 17(a) and 10(b)(5) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on behalf of all purchasers of the Common Stock in the IPO. The first amended complaint, like the State Cases, alleges false statements and material omissions of material fact in connection with the SEC filings distributed in connection with the IPO. The defendants include directors of the Company and the underwriters of the IPO, WestPark Capital, Inc. (“WestPark”) and Aegis Capital Corp. The federal court has consolidated the two matters for all practical purposes. As with the State Cases, the Company deniesdenied liability and assertsasserted that it accurately and completely disclosed all material facts and circumstances in its SEC filings, and that the complaint’s alleged violations of securities laws are baseless. The parties to the federal court litigation announced on October 21, 2021 that they had reached a settlement, which received preliminary approval by the district court on January 13, 2022, allowing the notice of the proposed settlement to be distributed to all class members, who unless they object or drop out, will be bound by the multi-million dollar settlement. The Company’s portion of the settlement was $1 million paid out in equal installments every three months over the course of 2022. These payments have been and will continue to be timely made. Executive Chairman Terren Peizer provided his personal guarantee for the whole amount due to the plaintiffs. Please see Note 13- Subsequent Events12- “Subsequent Events” for a description of a provisional settlementfurther information regarding the final disposition of this litigation.

17

EVmo, Inc.

Notes to Consolidated Financial Statements

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

 

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

15

EVmo, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine months Ended September 30, 2021 and 2020 (unaudited)

 

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

 

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

In the first half of 2021, a warrant holder, Bellridge Capital, LP, sought to exercise a warrant for 1,500,000 shares, with a stated exercise price of $4.00 per share, for a nominal amount, claiming that an anti-dilution adjustment had been triggered in 2020, which had reduced the exercise price to such amount. The Company rejected the exercise, on the basis that the warrant had previously been amended to remove that anti-dilution adjustment. In September 2021, the warrant holder brought suit for damages in the Southern District of New York. It is the Company’s position that the lawsuit is without merit, and the Company is vigorously defending the lawsuit. This lawsuit is currently in the discovery phase.

Note 1211 – Settlements

 

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

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

This litigation was commenced by FirstFire in April 2020 and subsequently amended in December 2020. FirstFire was a subscriber to the Company’s initial public offering of Common Stock, in November 2019 (the “IPO”). It alleged in the lLitigation that the Company and the other named defendants had,has reached in connection with both the IPOIn re YayYo Securities Litigation and the registration statement on Form S-1 filed thereto, committed violationsState Cases in Note 10- “Contingencies” above. Also, please see Note 12- “Subsequent Events” for further information regarding the final disposition 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.cases.

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 1312 – Subsequent Events

The Company has evaluated subsequent events through NovemberOn July 12, 2021. The Company has determined there were no subsequent events that require recognition or disclosure2022, the district court presiding over In re YayYo Securities Litigation signed an order and final judgment with respect to the settlement described in Note 10- “Contingencies” above. A hearing to dismiss the State Cases based on this settlement is scheduled to be held in the financial statements, except as discussed below:Los Angeles Superior Court on September 2, 2022.  

●The Company issued an aggregate of 187,500 warrants pursuant to the terms of the convertible note agreement discussed in Note 6.
●The parties to the In re YayYo Securities Litigation described in Note 11 above have, after extensive negotiations, recently filed a “Notice of Pending Settlement” with the court, which is subject to approval by the district court and which, if approved, will resolve the pending class actions upon payment by the Company of approximately $1,000,000 to the class. The Company’s Executive Chairman has provided his personal guarantee for the whole amount due to the plaintiffs, and the Board of Directors has agreed to issue 2,000,000 shares of Common Stock as consideration for the guarantee. The motion for approval of the settlement is scheduled to be heard by the court on or around November 19, 2021.

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

Cautionary Note Regarding Forward-Looking Statements

Certain statements made herein, as well as in other filings we make with the SEC and other written and oral information we release, regarding our future performance constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” and similar references to future periods. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the continued expansion of business, which assumptions involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe our assumptions 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 herein will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described in Part II, Item 1A, “Risk Factors” and elsewhere in this report and as also may be described from time to time in future reports we file with the SEC. You should read such information in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations.

 

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

Our Corporate History and Background

 

The CompanyEVmo was initially formed on June 21, 2016 as a Delaware limited liability company under the name “YayYo, LLC,LLC.” whichThe Company was subsequently converted into a Delaware corporation pursuant to Section 265 of 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”).Delaware General Corporation Law. The Company now operates as a “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 isWe became a holdingreporting company operating through its wholly-owned subsidiaries, Distinct Cars, LLC and Rideshare Car Rentals, LLC.

The Company’s operating business divisions include (i) an online rideshare vehicle booking platform to service the ridesharing economy through Rideshare Car Rentals, i.e., the Rideshare Platform, and (ii) the maintenance of a fleet of standard passenger vehicles to be made commercially available for rent through Distinct Cars. The Company seeks to become the leading provider of standard rental vehicles to drivers in the ridesharing economy.

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

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

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On February 10, 2020, after being advised by Nasdaq that it believed we no longer met the conditions for continued listing, the Company notified Nasdaq ofannounced its intent to voluntarily delist its Common Stock from Nasdaq. In connection therewith, the Company 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 and based on the determination of the Company’s Board of Directors that voluntarily delisting the Common Stock from Nasdaq was in the best interests of the Company and its stockholders. Followingcommon stock. Since delisting from Nasdaq, the Common Stock now tradesour common stock has been quoted and traded on the Pink Open Market, stillwhich is operated by OTC Markets Group, under the trading symbol, “YAYO.”same ticker symbol. The delisting was effective on March 1, 2020.

In September 2020, we changed our name from YayYo, Inc. to Rideshare Rental, Inc., in order for our corporate brand to better reflect our principal business, the rental of ridesharing and delivery gig vehicles. In February 2021, we again changed our name to EVmo, Inc., to underscore our commitment to making a full transition to electric vehicles by the end of 2024. In January 2022, we completed a follow-on public offering of 27,400,000 shares of Common Stock, at $0.50 per share, which will, among other uses, provide capital required to facilitate our electric vehicles transition strategy.

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

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Impact of COVID-19 on our business

 

On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, the World Health Organizationit 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 itsour cash flows, but itwe then saw a positive upward movement in revenue during the second half of 2020, which has continued intothrough fiscal 2021. This was consistent with the experience of the TNCs whose drivers we service. According to Bloomberg Second Measure, Uber and Lyft sales were up 104% and 84% year-over-year, respectively, in February 2022 from one year earlier, even in spite of the Delta and Omicron variants that resulted in spikes of infections through periods of 2021.

Given the current prevalence of FDA-approved eligible vaccines across nearly all age groups, the marked overall decrease in the number of COVID-19 infections, hospitalizations and deaths in the first half of 2021. In early 2021, several vaccinations for COVID-19 received emergency-use authorization from2022, and the Food and Drug Administration, and manyresulting lifting of the lockdownmost pandemic restrictions imposed by state and local governments, including those of thein our active markets, in which the Company operates, appear to be abating. The pandemic has not yet ended, however, and there have been multiple waves where infections, hospitalizations, and deaths have sharply increased. The Company therefore cannot predict the ultimate impactwe are optimistic that COVID-19 maywill not have a material impact on its business this year,our operations in the current fiscal year. However, certain factors- including, for example, a new, more aggressive and possibly beyond.deadly variant that is resistant to the vaccines- could reverse the positive trends of recent months and alter our prediction.

Principles of consolidation

 

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

 

Consolidated Results of Operations—Three Months Ended SeptemberJune 30, 2021,2022, Compared to Three Months Ended SeptemberJune 30, 20202021

 

Total Revenues.

 

Revenue for the three months ended SeptemberJune 30, 20212022 was $2,724,180,$2,876,626 an increase of $653,359$225,543 or 31.6%8.5% compared to revenue for the three months ended SeptemberJune 30, 20202021 of $2,070,821.$2,652,083. The increase is principally due to an increase in the size of our rental fleet. During the three months ended September 30, 2021, the average weeklyvehicle fleet and an increase in our daily rental income per vehicle placed in service was $416 compared to $339 for the same period in 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.rate.

 

Cost of Revenues.

 

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

 

Cost of revenues for the three months ended SeptemberJune 30, 20212022 were $2,285,878,$2,085,312, an increase of $1,090,921$170,018, or 91.3%8.9%, compared to the cost of revenues for the three months ended SeptemberJune 30, 20202021 of $1,194,957.$1,915,294. The increase is due to higher depreciation expense, and insurance expense and vehicle repairs due to an increase in fleet size and higher maintenance costs.size. For the three months ended SeptemberJune 30, 20212022 and 20202021 our cost of revenue was 83.9%72.5% and 57.7%72.2% of our revenue, respectively.respectively, including vehicle depreciation. Excluding vehicle depreciation, cost of revenue for the three months ended June 30, 2022 was 52.2%. The increase in the cost of revenue as a percentage of revenue is due to higher maintenance and insurance costs.onboarding of new vehicles.

Selling and Marketing Expenses.

 

Selling and marketing expenses for the three months ended SeptemberJune 30, 20212022 were $26,565,$74,685, representing a decreasean increase of $87,339$9,869, or 76.7%15.2%, over the expenses incurred in the three months ended SeptemberJune 30, 20202021 of $113,904.$64,816. The decreaseincrease is due to a decrease infocused advertising campaign targeted at renting new vehicles added to gig-economy drivers as we have maintained a high utilization rate for our vehicles.the platform.

General and Administrative Expenses.

 

General and administrative expenses for the three months ended SeptemberJune 30, 20212022, were $3,218,912,$2,358,416, representing an increase of $2,130,760$864,922, or 195.8%57.9%, over the expenses incurred in the three months ended SeptemberJune 30, 20202021 of $1,088,152.$1,493,494. The increase is principally due to higheradded payroll related to additional vehicles on the platform, increased professional fees salaries,related to legal proceedings and litigation settlement during the three months ended September 30, 2021.compliance.

 

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Total Operating Expenses

Total operating expenses for the three months ended SeptemberJune 30, 20212022 were $3,291,977,$2,488,601, representing an increasea decrease of $2,089,921$879,525, or 173.9%54.6%, compared to the expenses incurred in the three months ended SeptemberJune 30, 20202021 of $1,202,056.$1,609,076. The increase is due to added payroll related to additional vehicles on the reasons described above.platform, increased professional fees related to legal proceedings and compliance

Interest expense and financing cost

 

Interest and financing expenses for the three months ended SeptemberJune 30, 20212022 were $2,007,194$500,096 compared to $65,292$964,387 for the three months ended SeptemberJune 30, 2020.2021. The increase in interest expense was for redemption and conversion of Series B Preferred Stock, note interest expense and vehicle lease financing cost for the three months ended Septemberinterest expense. The decrease from June 30, 2021 was due to full amortization of debt discounts due to the $2.250 million convertible note being converted to preferred stock andnon-recurring issuance of additional warrants associated825,000 shares of Common Stock to Acuitas Group Holdings, LLC, (“Acuitas”) which is the Company’s largest shareholder, in connection with a settlement agreement between Acuitas and X, LLC, a company owned by the $2.250 million convertible note.Company’s former chief executive officer. 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.

 

Net Loss

 

The net loss for the three months ended SeptemberJune 30, 20212022 was $4,777,328,$1,197,191, representing an increase of $4,385,844$639,483 or 1,120.3%34.8% compared to net loss from the three months ended SeptemberJune 30, 20202021 of $391,484.$1,836,674 The increase is due to the reasons described above.

Consolidated Results of Operations—NineSix Months Ended SeptemberJune 30, 2021,2022, Compared to NineSix Months Ended SeptemberJune 30, 20202021

 

Total Revenues.

 

Revenue for the ninesix months ended SeptemberJune 30, 20212022 was $7,670,795,$5,336,335 an increase of $2,271,777$389,720 or 42.1%7.9% compared to revenue for the ninesix months ended SeptemberJune 30, 20202021 of $5,399,018.$4,946,615. The increase is principally due to an increase in the size of our rental fleet. During the nine months ended September 30, 2021, the average weeklyvehicle fleet and an increase in our daily rental income per vehicle placed in service was $411 compared to $298 for the same period in 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.rate.

 

Cost of Revenues.

 

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

 

Cost of revenues for the ninesix months ended SeptemberJune 30, 20212022 were $5,982,075,$4,056,505, an increase of $2,098,768$360,308, or 53.7%9.7%, compared to the cost of revenues for the ninesix months ended SeptemberJune 30, 20202021 of $3,891,307.$3,696,197. The increase is due to higher depreciation expense, and insurance expense and vehicle repairs due to an increase in fleet size and higher maintenance costs.size. For the ninesix months ended SeptemberJune 30, 20212022 and 20202021 our cost of revenue was 78.0%76.0% and 72.1%74.7% of our revenue, respectively.respectively, including vehicle depreciation. Excluding vehicle depreciation, cost of revenue for the six months ended June 30, 2022 was 56.1 %. The increase in the cost of revenue as a percentage of revenue is due to higher maintenance and insurance costs.onboarding of new vehicles.

 

Selling and Marketing Expenses.

 

Selling and marketing expenses for the ninesix months ended SeptemberJune 30, 20212022 were $257,129,$139,021, representing a decrease of $67,417$91,543, or 20.8%39.7%, over the nineexpenses incurred in the six months ended SeptemberJune 30, 20202021 of $324,546.$230,564. The decrease is due to a decreasechange in the advertising plan now targeted at renting new vehicles added to gig-economy drivers as we have maintained a high utilization rate for our vehicles.the platform.

General and Administrative Expenses.

 

General and administrative expenses for the ninesix months ended SeptemberJune 30, 2022, were $2,785,119, representing a decrease of $147,476, or 5.0%, over the expenses incurred in the six months ended June 30, 2021 were $6,151,507, representing an increase of $2,305,739 or 60.0% over the nine months ended September 30, 2020 of $3,845,768.$2,932,595. The increasedecrease is principally due to higher professional fees, salaries, and litigation settlement during the nine months ended September 30, 2021.added focus on efficiency in operations.

 

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Total Operating Expenses

Total operating expenses for the ninesix months ended SeptemberJune 30, 20212022 were $6,515,402,$2,998,640, representing an increasea decrease of $2,345,088$224,785, or 56.2%7.0%, compared to the nineexpenses incurred in the six months ended SeptemberJune 30, 20202021 of $4,170,314.$3,223,425. The increasedecrease is due to the reasons described above.added focus on efficiency in operations.

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Interest expense and financing cost

 

Interest and financing expenses for the ninesix months ended SeptemberJune 30, 20212022 were $6,296,524$988,433 compared to $212,943$4,289,330 for the ninesix months ended SeptemberJune 30, 2020.2021. The increase in interest expense was for redemption and conversion of Series B Preferred Stock, note interest expense and vehicle lease financing cost for the nine months ended Septemberinterest expense. The decrease from June 30, 2021 was due to the non-recurring 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 wasis 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. Also, the increase in interest and financing expenses for the nine months ended September 30, 2021 was due to full amortization of debt discounts due to the $2.25 million convertible note being converted to shares of Series B Preferred Stock and issuance of additional warrants associated with the $2.25 million convertible note.

 

Gain on Forgiveness of Debt

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

Net Loss

 

The net loss for the ninesix months ended SeptemberJune 30, 20212022 was $11,031,665,$2,707,243, representing an increase of $8,156,119$3,547,094 or 283.6%56.7% compared to net loss from the ninesix months ended SeptemberJune 30, 20202021 of $2,875,546.$6,254,337. The increase is due to the reasons described above.

Liquidity, Capital Resources and Plan of Operations

 

On November 15, 2019, we closed our initial public offering of Common Stockcommon stock registered on an S-1 Registration Statement under the Securities Act, which was declared effective on November 13, 2019. We sold a total of 2,625,000 common shares 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,On January 6, 2022, we sold an aggregateclosed a follow-on offering of 2,553,57127,400,000 shares of Common Stock to three investors for cash$0.50 per share, for gross 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.$13,700,000.

 

On January 8, 2021,Subsequently, we received $500,000 from a convertible note from 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.

On April 12, 2021, we entered into a securities purchase agreement with a certain investor in connection with the issuance of a 12.5% original issue discount convertible promissory note and a common stock purchase warrant. The note has an original principal amount of $2,250,000, with an original issue discount of $250,000. It bears interest at a fixed rate of 10%, and is convertible intoissued 6,310,000 shares of common stock at a pricefor the conversion of $3.00 per share (subject to adjustment as set forth in the note). The note was set to mature on January 12, 2022; however, in July 2021, the Company and the noteholder agreed to convert the note into 230,250220,850 shares of Series B Preferred Stock. The remaining 9,525 outstanding shares of Series B Preferred Stock were redeemed by the Company

 

On July 9, 2021 (the “Closing Date”), we entered into a Term Loan, GuaranteeIn addition, after the recent public offering and Security Agreement (the “Term Loan Agreement”) with EICF Agent LLC (“EICF”), as agent forconversion of most of the lenders, andSeries B Preferred Stock, the two warrants issued to Energy Impact Credit Fund I, LP as lender (the “Lender”), providingin 2021 for a secured term loan facility in an aggregate principal amount of up to $15.0 million (collectively, the “Term Loans”), consisting of a $7.5 million closing date term loan facility (the “Closing Date Term Loan”)450,000 shares and up to $7.5 million of borrowings under a delayed draw term loan facility (the “Delayed Draw Term Loan Facility”). The Closing Date Term Loan was fully drawn on the Closing Date, while the Delayed Draw Term Loan Facility is available upon the satisfaction of certain conditions precedent specified in the Term Loan Agreement. The Term Loan Agreement matures on July 9, 2026. Borrowings under the Term Loan Agreement bear interest at the London Interbank Offered Rate (“LIBOR”), plus a margin of 10.0%.

During the nine months ended September 30, 2021, we sold 100,000900,000 shares of Common Stock, respectively, were subject to a memberadjustment according to their terms. The warrant for 450,000 common shares has been adjusted to one for 711,656 common shares at an exercise price of our Board$1.33 and the warrant for 900,000 common shares has been adjusted to one for 1,174,311 common shares at an exercise price of Directors for cash consideration of $50,000.$0.71 per share.

 

Current Assets, Liabilities and Working Capital.

 

At SeptemberJune 30, 2022, the Company’s current assets totaled $6,938,284, current liabilities totaled $5,710,525, and working capital was $1,227,759. At December 31, 2021, the Company’s current assets totaled $4,847,770,$4,077,934, current liabilities totaled $6,162,643,$7,051,073, and working capital was a deficit of $1,314,873. At December 31, 2020, the Company’s current assets totaled $215,990, current liabilities totaled $4,461,560, and working capital was a deficit of $4,245,570.$(2,973,139).

 

Regarding current liabilities, the amounts categorized as accounts payable, credit cards and accrued expenses totaled $3,947,534$1,642,563 and $2,119,003$4,940,580 as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively, an increasea decrease of $1,828,531$3,298,017 or 86.3%66.8%, due primarily to accrual for legal settlementthe reduction of $1,000,000 and increase in amounts due for professional services.accounts payable.

 

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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 willto 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 months. If the Company is unable to raise sufficient 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.balance of 2022. As of SeptemberJune 30, 2021,2022, the Company had $3,540,212$6,143,247 in cash. The Company used $1,454,194 of$(13,215,550) in cash forfrom operating activities for the ninesix months ended SeptemberJune 30, 2021. 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. We were able to obtain two loans totaling $342,675 related to new legislation passed as a result of COVID-19, of which $192,775 was forgiven in 2020 and 2021.2022.

 

Capital Expenditures

 

During the ninesix months ended SeptemberJune 30, 2021,2022, the Company had capital expenditures of $5,692,784$6,927,700 in leased vehicles. At SeptemberJune 30, 2021, most2022, approximately 60% of the Company’s vehicles were financed with leases. At SeptemberJune 30, 20212022 the Company had $14,760,669$19,275,855 of rental vehicles, net of accumulated depreciation in the amount of $4,394,296,$5,161,116, totaling $10,366,373$14,114,739 in net rental vehicles. At December 31, 20202021 the Company had $9,067,885$13,514,619 of rental vehicles, net of accumulated depreciation in the amount of $2,871,452,$4,627,299, totaling $6,196,433$8,887,320 in net rental vehicles. The Company’s rental vehicles are depreciated over their estimated useful life of five years. The lease terms for those rental vehicles that are leased are generally for three years and the Company has the right to purchase the leased assets for $1 each at the end of the lease terms.

 

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Statement of Cash Flows

 

Cash Flows from Operating Activities

Net cash used in operating activities for the ninesix months ended SeptemberJune 30, 20212022 totaled $1,454,194,$(13,215,550), which was an increasedecrease of $1,642,737$12,971,066 from the net cash provided by operating activities of $188,543$(244,484) for the same period in 2020.2021. The changedecrease is principally due to the changereduction in operating assetsaccounts payable following the equity capital raise in January 2022, decrease in accrued expense, and liabilities, and non-cash expense items.

Cash Flows from Investing Activities

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

 

Cash Flows from Financing Activities

 

Net cash provided by financing activities for the ninesix months ended SeptemberJune 30, 20212022 totaled $4,968,567,$17,504,869, which was an increase of $6,328,807$17,123,497 from the net cash used in financing activities of $1,360,240$381,372 for the same period in 2020.2021. The change is principally due to cash received from the saleequity capital raise completed on January 6, 2022 and financing of Common Stock, exercise was stock options, convertible note and note payable in 2021 offset by an increase in payments on financing lease obligations.new vehicles.

Current Plan of Operations

 

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

 

The continuationAlthough, as we state above, we believe we have sufficient working capital to finance our operations in fiscal 2022 and to execute the 2022 phase of our currentEV strategy, it is possible that our expansion plan of operations may require us to raise significant additional capital 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 Rideshare Platform and, especially, Fleet Management 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 evaluatereevaluate our plan of operations to determine the manner in whichhow 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 ready availability of cash to implement that aspect of the plan and other factors, several of which are beyond our control. There iscan be no assurance that our current capital resources will be adequate to continue to fund our ongoing operations, nor can there be any assurance that, should we require additional capital, we will successfully obtain the requiredit on favorable terms, or at all. The potential inadequacy of our existing capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations. The inability to secure additional capital wouldcould 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 willmay not have sufficient funds to pay any amounts to our stockholders.

 

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

Similarly, because our thenworking capital requirements depend upon numerous factors there can be no assurance that our current business operations and business activities, and we will likely not have sufficient liquidity or cash resources will be sufficient to continue operating.fund our operations.

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

 

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements.

 

Quantitative and Qualitative Disclosures about Market Risk

 

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

 

Critical Accounting Policies and Estimates

 

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

 

Property and Equipment and Rental Vehicles

 

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

 

The Company has not changed its estimate for the useful lives of its equipment and rental vehicles, but would expect that a decrease in the estimated useful lives of equipment and rental vehicles of one year would result in an annual increase to depreciation expense of approximately $740,000,$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 $450,000.$400,000.

 

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Income Taxes

 

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

 

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

 

Revenue Recognition

 

The Company recognizes revenue primarily from renting its fleet of cars to drivers for TNC companies, such as Uber and Lyft, based on their rental agreements which are generally administered on a weekly basis. The Company recognizes revenue in accordance with FASB ASC 606, Revenue From Contracts with Customers.606.

 

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

 

Stock-Based Compensation

 

The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB718. ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.

 

Contingencies

 

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

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

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

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

 

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

 

In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to assess the effectiveness of our disclosure controls and procedures as of SeptemberJune 30, 2021.2022. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure due to a material weakness.

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

 

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

 

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

 

Changes in Internal Controls over Financial Reporting

 

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

 

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of the pending legal proceedings that could be material to the Company, please see Note 11- Contingencies.10- “Contingencies.”

 

Item 1A. Risk Factors.

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

 

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

None.

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.Effective as of August 9, 2022, Gregory Miller has resigned as Chief Operating Officer of the Company, citing family obligations as his reason for doing so. No successor to Mr. Miller has been appointed as of the date of this quarterly report.

 

Item 6. Exhibits.

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

 

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SIGNATURES

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

 

 EVMO, INC.
 (Registrant)
   
 By:/s/ Stephen Sanchez
  Stephen Sanchez, Chief Executive Officer
   
  /s/ Ryan Saathoff
  Ryan Saathoff, Chief Financial Officer
   
 Date:NovemberAugust 15, 20212022

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