Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
Note
1 - Organization and Basis of Presentation
Organization
and Line of Business
EVmo,
Inc. (the “Company”) was incorporated on June 21, 2016 under the laws of the state of Delaware originally as a limited
liability company and subsequently changed to a C corporation. The Company was originally incorporated under the name of YayYo,
Inc. and changed its name to Rideshare Rental, Inc. on September 11, 2020. On March 1, 2021, the Company changed its name from
Rideshare Rental, Inc. to EVmo, Inc. The accompanying financial statements are retroactively restated to present the Company as
a C corporation from June 21, 2016. The Company rents vehicles to Uber and Lyft drivers and drivers in the gig-ecomony.
Basis
of Presentation
The
accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America
(GAAP).
Risk
and Uncertainties
In
December 2019, a novel strain of coronavirus surfaced in China, which has and is continuing to spread throughout the world, including
the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19)
a “Public Health Emergency of International Concern,” and on March 11, 2020, the World Health Organization characterized
the outbreak as a “pandemic”. The governors of New York, California and several other states, as well as mayors on
many cities, have ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and
to stay in their homes as much as possible in the coming weeks, as the nation confronts the escalating coronavirus outbreak, and
similar restrictions have been recommended by the federal authorities and authorities in many other states and cities. Since the
beginning of 2020 and the spread of COVID-19, rideshare companies have increasingly been negatively impacted. As Americans practice
social distancing and self-isolation, Uber, Lyft, and other rideshare companies have seen a steep decline in ridership and revenue,
as a result. Given that rideshare drivers are both at risk themselves and of risk to the public, and in addition to decreased
demand overall, less people are even still driving. The Company has seen a decline in revenue during the first half of 2020 which
is having a negative impact on the cash flows of the business, but saw a positive upward movement in revenue during the second
half of 2020. The Company has seen increased demand from drivers wanting to rent cars for ridesharing purposes and new drivers
renting cars for both rideshare and delivery gig economy. The Company is not able to predict the ultimate impact that COVID -19
will have on its business. If another lockdown were to occur, the Company could be forced to significantly scale back its business
operations and its growth plans, and could ultimately have a significant negative impact on the Company. The Company cannot at
this time estimate the long term effect of this unprecedented situation on the rideshare market or delivery gig economy in general
or the Company in particular.
Note
2 – Summary of Significant Accounting Policies
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Distinct
Cars, LLC and RideShare Car Rentals, LLC. All significant intercompany transactions and balances have been eliminated.
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.
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
Cash
Equivalents
For
the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid
debt instruments with original maturities of three months or less.
Equipment
and Rental Vehicles
Equipment
and Rental Vehicles are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions,
renewals and betterments are capitalized. When equipment is retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of equipment
and rental vehicles is provided using the straight-line method for substantially all assets with estimated lives as follows:
Computer
equipment
|
5
years
|
Vehicles
|
5
years
|
Long-Lived
Assets
The
Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which
the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined
in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at December 31, 2020 and
2019, the Company determined that no impairment charge was necessary.
Revenue
Recognition
The
Company recognizes revenue from renting its fleet of cars to ridesharing and delivery gig drivers. Revenue is recognized
based on the rental agreements which are generally on a weekly basis. The Company recognizes revenue in accordance with FASB ASC
606, Revenue From Contracts with Customers.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the
asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not
be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Under
ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would
be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount
of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more
likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial
statements.
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
Stock-Based
Compensation
The
Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation.
FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the
grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement
of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.
There were 1,631,250 warrants and 2,540,000 options outstanding as of December 31, 2020 and 1,631,250 warrants and 300,000 options
outstanding as of December 31, 2019.
Basic
and Diluted Earnings Per Share
Earnings
per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”)
is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive
securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants
are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby
were used to purchase common stock at the average market price during the period. There were 4,171,250 and 1,931,250 potentially
dilutive securities outstanding at December 31, 2020 and 2019, respectively.
Advertising
Costs
The
Company expenses the cost of advertising as incurred. Advertising costs for the years ended December 31, 2020 and 2019 were $490,403
and $765,441, respectively.
Research
and Development Costs
The
Company expenses its research and development costs as incurred. Research and developments costs for the years ended December
31, 2020 and 2019 were $0 and $13,500, respectively.
Fair
Value Measurements
The
Company applies the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines
fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure
requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
|
●
|
Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
|
|
●
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
|
|
●
|
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
For
certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including
convertible notes payable, each qualify as financial instruments and are a reasonable estimate of their fair values because of
the short period of time between the origination of such instruments and their expected realization and their current market rate
of interest.
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
At
December 31, 2020 and 2019, the Company did not identify any liabilities that are required to be presented on the balance sheet
at fair value.
Recent
Accounting Pronouncements
In
June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies
the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such
payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January
1, 2019. Early adoption is permitted. The adoption of this ASU did not have an impact on its financial statements.
In
December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income
Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general
principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for
fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on
a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating
the effect of this ASU on the Company’s consolidated financial statements and related disclosures.
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting
models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features
that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result
in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host
contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation
under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and
certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share
(EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities
that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting
companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal
years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim
periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15,
2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of
the beginning of its annual fiscal year. The Company is currently evaluation the impact this ASU will have on its consolidated
financial statements.
Management
does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying
financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note
3 – Equipment
At
December 31, 2020 and 2019 equipment consisted of the following:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Computer
equipment
|
|
$
|
6,046
|
|
|
$
|
6,046
|
|
|
|
|
6,046
|
|
|
|
6,046
|
|
Less accumulated
depreciation
|
|
|
(4,138
|
)
|
|
|
(2,651
|
)
|
Equipment, net
|
|
$
|
1,908
|
|
|
$
|
3,395
|
|
Depreciation
expense for equipment for the years ended December 31, 2020 and 2019 was $1,487 and $1,697, respectively.
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
Note
4 – Rental Vehicles
At
December 31, 2020 and 2019 all of the Company’s rental vehicles consisted of the following:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Rental
vehicles
|
|
$
|
9,067,885
|
|
|
$
|
6,284,211
|
|
|
|
|
9,067,885
|
|
|
|
6,284,211
|
|
Less accumulated
depreciation
|
|
|
(2,871,452
|
)
|
|
|
(1,547,164
|
)
|
Rental vehicles,
net
|
|
$
|
6,196,433
|
|
|
$
|
4,737,047
|
|
The
Company’s rental vehicles are depreciated over their estimated useful life of five years. Depreciation expense for leased
assets for the years ended December 31, 2020 and 2019 was $1,434,896 and $993,531, respectively. A majority of the rental vehicles
are leased with terms are generally for 12 to 36 months and the Company has the right to purchase the vehicles at the end of the
lease terms.
Note
5 – Notes Payable
Notes
payable at December 31, 2020 and 2019 consisted of the following:
|
|
2020
|
|
|
2019
|
|
Notes payable to individual
investors; accrue interest at 8% per annum; principal payments equal to 1/12 of original balance plus interest due quarterly;
due from dates ranging from August 9, 2020 to March 26, 2021; unsecured (A)
|
|
$
|
304,667
|
|
|
|
319,667
|
|
Note payable to the Small Business Administration.
The note bears interest at 3.75% per annum, requires monthly payments of $731 after 12 months from funding and is due 30 years
from the date of issuance.
|
|
|
149,414
|
|
|
|
-
|
|
Note payable issued under the Paycheck
Protection Program of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in the amount of $192,775.
The loan has terms of 24 months and accrues interest at 1% per annum. During the year ended December 31, 2020, $184,775 of
this loan has been forgiven as provided for in the CARES Act.
|
|
|
8,000
|
|
|
|
-
|
|
Notes payable
to a finance company, default interest at 14% per annum; monthly principal payments ranging from $10,000 to $40,000 with unpaid
principal due on December 15, 2021
|
|
|
355,438
|
|
|
|
-
|
|
Total notes payable
|
|
|
817,519
|
|
|
|
319,667
|
|
Unamortized debt
discount
|
|
|
(1,973
|
)
|
|
|
(32,289
|
)
|
Notes payable, net discount
|
|
|
815,546
|
|
|
|
287,378
|
|
Less current
portion
|
|
|
(666,132
|
)
|
|
|
(287,378
|
)
|
Long-term portion
|
|
$
|
149,414
|
|
|
$
|
-
|
|
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
(A)
In connection with the issuance of these notes payable in 2018 and 2017, the Company also issued an aggregate of 24,050 shares
of its common stock to these note holders as additional incentive to make the loans. The aggregate relative fair value of these
shares of common stock was $119,875 and was recorded as a discount on the note payable and as additional paid in capital. The
discount of $119,875 is being amortized over the term of the notes payable. During the years ended December 31, 2020 and 2019,
$30,316 and $39,922, respectively, was charged to interest expense as amortization of the discounts, with an unamortized balance
of $1,93 at December 31, 2020.
A
rollforward of notes payable from December 31, 2018 to December 31, 2020 is below:
Notes payable, December 31, 2018
|
|
$
|
2,617,970
|
|
Issued for cash
|
|
|
2,009,300
|
|
Repayments
|
|
|
(4,379,814
|
)
|
Amortization
of debt discounts
|
|
|
39,922
|
|
Notes payable, December 31, 2019
|
|
|
287,378
|
|
Issued for cash
|
|
|
342,675
|
|
Lease obligation converted to note payable
|
|
|
355,438
|
|
Forgiveness of note payable
|
|
|
(184,775
|
)
|
Repayments
|
|
|
(15,486
|
)
|
Amortization
of debt discounts
|
|
|
30,316
|
|
Notes payable, December 31, 2020
|
|
$
|
815,546
|
|
Future
payments under note payable obligations are as follows:
Years ending December
31,
|
|
|
|
2021
|
|
$
|
668,105
|
|
2022
|
|
|
3,104
|
|
2023
|
|
|
3,175
|
|
2024
|
|
|
3,296
|
|
2025
|
|
|
3,422
|
|
Thereafter
|
|
|
136,417
|
|
|
|
$
|
817,519
|
|
Note
6 – Lease Obligations
Lease
obligations at December 31, 2020 and 2019 consisted of the following:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Lease obligations
|
|
$
|
2,352,878
|
|
|
$
|
2,400,565
|
|
Less current
portion
|
|
|
(1,426,425
|
)
|
|
|
(1,416,446
|
)
|
Long-term portion
|
|
$
|
926,453
|
|
|
$
|
984,119
|
|
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
A
rollforward of lease obligations from December 31, 2018 to December 31, 2020 is below:
Lease obligations, December 31, 2018
|
|
$
|
3,790,147
|
|
New lease obligations
|
|
|
1,159,470
|
|
Disposal of leased vehicles
|
|
|
(769,009
|
)
|
Payments on lease
obligations
|
|
|
(1,780,043
|
)
|
Lease obligations, December 31, 2019
|
|
|
2,400,565
|
|
New lease obligations
|
|
|
3,705,417
|
|
Disposal of leased vehicles
|
|
|
(975,215
|
)
|
Lease obligation converted to note payable
|
|
|
(355,438
|
)
|
Payments on lease
obligations
|
|
|
(2,422,451
|
)
|
Lease obligations, December 31,
2020
|
|
$
|
2,352,878
|
|
Future
payments under lease obligations are as follows:
Years ending December
31,
|
|
|
|
2021
|
|
$
|
1,531,108
|
|
2022
|
|
|
769,619
|
|
2023
|
|
|
210,219
|
|
Total payments
|
|
|
2,510,946
|
|
Amount representing
interest
|
|
|
(158,068
|
)
|
Lease obligation,
net
|
|
$
|
2,352,878
|
|
Note
7 – Stockholders’ Equity
The
Company authorized 100,000,000 shares of capital stock with consists of 90,000,000 shares of common stock, $0.000001 par value
per share and 10,000,000 shares of preferred stock, $0.000001 par value per share.
Common
Stock
During
the year ended December 31, 2020, the Company sold an aggregate of 2,553,571 shares of common stock to three investors for cash
proceeds of $275,000, of which 125,000 shares and $25,000 was to a member of the Company’s board of directors.
During
the years ended December 31, 2019, the Company:
|
●
|
issued
84,300 shares of common stock to vendors in satisfaction of $421,500 of accounts payable and accrued expenses. The 84,300
shares were valued at $674,000; therefore the Company took a charge to earnings of $252,900 related to the settlement of debt
during the years ended December 31, 2019;
|
|
|
|
|
●
|
issued
2,625,000 shares of common shares in connection with its initial public offering at $4.00 per share. Total gross proceeds
from the offering were $10,500,000, before deducting underwriting discounts and commissions and other offering expenses.
|
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
Stock
Options
The
following is a summary of stock option activity:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Life
|
|
|
Value
|
|
Outstanding, December 31, 2018
|
|
|
300,000
|
|
|
$
|
8.00
|
|
|
|
2.00
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2019
|
|
|
300,000
|
|
|
$
|
8.00
|
|
|
|
1.00
|
|
|
$
|
-
|
|
Granted
|
|
|
4,040,000
|
|
|
|
1.62
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1,800,000
|
)
|
|
|
4.67
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2020
|
|
|
2,540,000
|
|
|
$
|
0.22
|
|
|
|
4.52
|
|
|
$
|
1,074,245
|
|
Exercisable, December 31, 2020
|
|
|
1,162,875
|
|
|
$
|
0.22
|
|
|
|
4.52
|
|
|
$
|
491,821
|
|
The
exercise price for options outstanding and exercisable at December 31, 2020:
Outstanding
|
|
|
Exercisable
|
|
Number
of
|
|
|
Exercise
|
|
|
Number
of
|
|
|
Exercise
|
|
Options
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
2,505,000
|
|
|
$
|
0.215
|
|
|
|
1,147,875
|
|
|
$
|
0.215
|
|
|
35,000
|
|
|
|
0.220
|
|
|
|
15,000
|
|
|
|
0.220
|
|
|
2,540,000
|
|
|
|
|
|
|
|
1,162,875
|
|
|
|
|
|
For
options granted during the year ended December 31, 2020 where the exercise price equaled the stock price at the date of the grant,
the weighted-average fair value of such options was $0.211 and the weighted-average exercise price of such options was $0.215.
For options granted during the year ended December 31, 2020 where the exercise price was greater than the stock price at the date
of the grant, the weighted-average fair value of such options was $1.11 and the weighted-average exercise price of such options
was $4.00. No options were granted during the year ended December 31, 2020 where the exercise price was less than the stock price
at the date of grant.
The
fair value of the stock options is being amortized to stock option expense over the vesting period. The Company recorded stock
option expense of $739,973 and $0 during the years ended December 31, 2020 and 2019, respectively. At December 31, 2020, the unamortized
stock option expense was $253,830.
The
assumptions used during the year ended December 31, 2020 in calculating the fair value of options granted using the Black-Scholes
option-pricing model for options granted are as follows:
Risk-free interest rate
|
|
|
0.28%
- 1.59
|
%
|
Expected life of the options
|
|
|
5.0
years
|
|
Expected volatility
|
|
|
195%-212
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
The
following is a summary of warrant activity:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Warrants
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Life
|
|
|
Value
|
|
Outstanding, December 31, 2018
|
|
|
1,500,000
|
|
|
$
|
4.00
|
|
|
|
4.44
|
|
|
$
|
6,000,000
|
|
Granted
|
|
|
131,250
|
|
|
|
5.00
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2019
|
|
|
1,631,250
|
|
|
$
|
4.08
|
|
|
|
3.38
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2020
|
|
|
1,631,250
|
|
|
$
|
4.08
|
|
|
|
2.38
|
|
|
$
|
-
|
|
Exercisable, December 31, 2020
|
|
|
1,631,250
|
|
|
$
|
4.08
|
|
|
|
2.38
|
|
|
$
|
-
|
|
The
exercise price for warrants outstanding at December 31, 2020:
Outstanding
and Exerciseable
|
|
Number
of
|
|
|
Exercise
|
|
Warrants
|
|
|
Price
|
|
|
1,500,000
|
|
|
$
|
4.00
|
|
|
131,250
|
|
|
|
5.00
|
|
|
1,631,250
|
|
|
|
|
|
In
connection with the Company’s initial public offering, the Company issued the underwriters a total of 131,250 warrants to
purchase shares of the Company’s common stock for $5.00 per share. The warrants expire in November 2024.
Note
8 – Related Party Transactions
During
the years ended December 31, 2020 and 2019, the Company paid management fees of $0 and $0, respectively, to a company that is
owned by the Company’s Chief Executive Officer and director. Beginning on February 1, 2019, the Company entered into a consulting
agreement with this individual and paid $167,000 under the consulting agreement. The consulting agreement was terminated effective
September 1, 2019. Also during the years ended December 31, 2020, the Company’s CEO and director advanced the Company $250,000
and the Company repaid $150,000. At December 31, 2020, $100,000 was owed to the Company’s CEO and director related to this
advance.
During
the years ended December 31, 2020 and 2019, the Company expensed $32,173 and $587,261, respectively, in advertising expenses from
a company whose CEO was also a former director of the Company. At December 31, 2020 and 2019, $324,920 and $394,183, respectively,
was owed to this company and is included in accounts payable in the accompanying consolidated balance sheets.
During
the years ended December 31, 2020 and 2019, the Company expensed $2,321,186 and $2,214,985, respectively, in insurance expense
related to insuring the Company fleet of vehicles from an insurance brokerage firm whose owner is also a stockholder of the Company.
At December 31, 2020 and 2019, $265,257 and $171,665, respectively, was owed to this insurance brokerage from and is included
in accounts payable and accrued expenses in the accompanying consolidated balance sheets.
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
Note
9 – Income Taxes
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred
tax assets as of December 31, 2020 and 2019 based on estimates of recoverability. While the Company has optimistic plans for its
business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses
and the uncertainty with respect to its ability to generate sufficient profits from its business model. Because of the impacts
of the valuation allowance, there was no income tax expense or benefit for the years ended December 31, 2020 and 2019.
A
reconciliation of the differences between the effective and statutory income tax rates for the years ended December 31, 2020 and
2019:
|
|
2020
|
|
|
2019
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal statutory rates
|
|
$
|
(735,436
|
)
|
|
|
21.0
|
%
|
|
$
|
(825,346
|
)
|
|
|
21.0
|
%
|
State income taxes
|
|
|
(245,145
|
)
|
|
|
7.0
|
%
|
|
|
(275,115
|
)
|
|
|
7.0
|
%
|
Permanent differences
|
|
|
335,916
|
|
|
|
-9.6
|
%
|
|
|
(69,409
|
)
|
|
|
1.8
|
%
|
Valuation allowance
against net deferred tax assets
|
|
|
644,665
|
|
|
|
-18.4
|
%
|
|
|
1,169,870
|
|
|
|
-29.8
|
%
|
Effective rate
|
|
$
|
-
|
|
|
|
0.0
|
%
|
|
$
|
-
|
|
|
|
0.0
|
%
|
At
December 31, 2020 and 2019, the significant components of the deferred tax assets are summarized below:
|
|
2020
|
|
|
2019
|
|
Deferred income tax asset
|
|
|
|
|
|
|
|
|
Net operation loss carryforwards
|
|
|
3,173,878
|
|
|
|
2,419,531
|
|
Accrued expenses
|
|
|
50,205
|
|
|
|
159,887
|
|
Total deferred income
tax asset
|
|
|
3,224,084
|
|
|
|
2,579,418
|
|
Less:
valuation allowance
|
|
|
(3,224,084
|
)
|
|
|
(2,579,418
|
)
|
Total deferred
income tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
valuation allowance increased by $644,665 and $1,081,921 in 2020 and 2019, respectively, as a result of the Company generating
additional net operating losses.
The
Company has recorded as of December 31, 2020 and 2019 a valuation allowance of $3,224,084 and $2,549,418, respectively, as it
believes that it is more likely than not that the deferred tax assets will not be realized in future years. Management has based
its assessment on the Company’s lack of profitable operating history.
The
Company conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of December 31,
2020 and 2019.
The
Company has net operating loss carry-forwards of approximately $11,300,000. Such amounts are subject to IRS code section 382 limitations
and expire in 2031. The 2018, 2019 and 2020 tax year is still subject to audit.
Note
10 - Contingencies
Legal
Proceedings
From
time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation
is subject to inherent uncertainties, and it is not possible to predict the outcome of litigation with total confidence. The Company
is currently not aware of any legal proceedings or potential claims against it whose outcome would be likely, individually or
in the aggregate, to have a material adverse effect on the Company’s business, financial condition, operating results, or
cash flows.
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
Anthony
Davis v. EVmo, Inc. (formerly YayYo, Inc.), and Ramy El-Batrawi
This
action was filed on March 5, 2020, in the Superior Court of the State of California for the County of Los Angeles. Plaintiff Anthony
Davis acted as the Company’s Chief Executive Officer from approximately December 2016 through April 2017. Mr. El-Batrawi
is the founder of the Company and its former Chief Executive Officer and director, and was involved, the complaint alleges, in
Mr. Davis’s hiring and termination after a brief tenure as CEO. As part of his severance compensation, Mr. Davis was granted
stock options to purchase shares of Common Stock. Mr. Davis claims that the Company breached its agreement to award him these
stock options and includes a claim for wage and hour violations. The lawsuit also seeks declaratory and injunctive relief. Mr.
Davis also included a claim under the California Unfair Practices Act. The Company has denied all liability, asserts that it has
paid Mr. Davis all amounts due to him under his separation agreement with the Company, and has vigorously defended this lawsuit.
The Company has filed a demurrer in connection with this litigation and that demurrer is expected to be resolved at a hearing
in May 2021. If the case is not dismissed at that time, the Company will conduct discovery and file a motion for summary judgment.
In
Re YayYo Securities Litigation
Two
actions styled as securities class actions were filed in the United States District Court for the Central District of California,
on September 9, 2020 (Hamlin v. YayYo) and September 18, 2020, respectively (Koch v. YayYo et al). The plaintiffs
to each action individually alleged misrepresentations and material omissions in the registration statement on Form S-1 that the
Company filed with the SEC in connection with its initial public offering, which was declared effective on November 13, 2019,
claiming violations of Sections 11 and 15 of the Securities Act. Each purported action involved securities class action claims.
The district court consolidated the two actions, and the Hamlin action was since dismissed. The district court indicated in its
order consolidating the actions that the new caption for the case would be “In Re YayYo Securities Litigation.” The
Company filed an answer, denying liability and asserted that it accurately and completely disclosed all material facts and occurrences,
including adverse ones, in its registration statement, related public filings and other public statements, and further asserted
that the alleged violations of Sections 11 and 15 of the Securities Act are baseless. Each of the parties to this litigation has
mutually agreed to request a stay of the proceedings pending a mediation that is tentatively scheduled for April 29, 2021 in which
a global settlement, also involving the plaintiff class representative identified in the case described immediately below,
Michael
Vanbecelaere v. YayYo, Inc, et al.
Two
actions styled as securities class actions were filed in the Superior Court of the State of California for the County of Los Angeles,
on July 22, 2020 and July 23, 2020, respectively. The plaintiffs to each action individually alleged misrepresentations and material
omissions in the registration statement on Form S-1 that the Company filed with the SEC in connection with its initial public
offering, which was declared effective on November 13, 2019, claiming violations of Sections 11 and 15 of the Securities Act.
Each action purported to bring a securities class action against the Company; one of the two lawsuits was dismissed on the basis
that the lead plaintiff in one of the actions was not a suitable class representative, and that plaintiff later joined the lawsuit
brought by the other one. In its answer, the Company denied liability and asserted that it accurately and completely disclosed
all material facts and occurrences, including adverse ones, in its registration statement, related public filings and other public
statements, and further asserted that the alleged violations of Sections 11 and 15 of the Securities Act are baseless. Each of
the parties to this litigation has mutually agreed to request a stay of the proceedings pending a mediation that is tentatively
scheduled for April 29, 2021, which will also include the parties to the action described immediately above.
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
Uptick
Capital, LLC v. EVmo, Inc. (formerly YayYo, Inc.)
On
March 5, 2021, Uptick Capital, LLC (“Uptick”), filed an arbitration demand with the American Arbitration Association
(“AAA”) alleging breach of contract with respect to an Advisory Agreement that Uptick asserts it entered into with
the Company on August 7, 2017. The claim filed with the AAA alleges that “pursuant to the terms of the Advisory Agreement,
Uptick was entitled to receive $2,500 per month for three months” plus “an issuance of restricted shares of $50,000
worth of YayYo common stock in exchange for providing certain consulting services to YayYo.” The agreement, according to
the demand, was renewed once. The Company has not yet formally responded to the arbitration claim but denies liability and intends
to vigorously defend this arbitration on the basis that Uptick failed to comply with the contract. It is unknown what the potential
liabilities are but, as of the date of this Report, the Company believes they should not exceed $10,000 in cash and $100,000 worth
of stock.
Note
11 – Subsequent Events
Convertible
promissory note
On
January 8, 2021, the Company, issued a stand-alone $500,000 convertible promissory note (the “Note”) to Mr. John Gray,
principal of one of the Company’s largest stockholders, the Gray Mars Venus Trust, Arizona 2015, an Arizona asset management
limited partnership (the “Gray Trust”), in return for a loan extended by Mr. Gray to the Company in the principal
amount of the Note.
The
Note will accrue interest at a fixed rate of 6% and will mature on January 6, 2022. Any unpaid principal balance on the Note may
be converted at any time, at the option of Mr. Gray, into shares of the Company’s Common Stock, par value $0.000001 per
share (the “Common Stock”), at a price of $0.50 per share. Upon conversion, the common shares Mr. Gray receives will
have registration rights, as specified in the Note. 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.
FirstFire
Settlement
On
February 11, 2021, the Company, entered into a settlement agreement and mutual release (the “Settlement Agreement”)
with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (“FirstFire”), relating to a pending
action in the U.S. District Court in the Southern District of New York, FirstFire Global Opportunities Fund, LLC v. WestPark
Capital, Inc. et. al., No. 1:20-cv-03327-LLS (the “Litigation”). The other parties to the Settlement Agreement
are the Company’s co-defendants in the Litigation, WestPark Capital, Inc. a Colorado corporation (“WestPark”),
Mr. Richard A. Rappaport and Mr. Ramy El-Batrawi, chief executive officer of the Company.
The
Litigation was commenced by FirstFire in April 2020 and subsequently amended in December 2020. FirstFire was a subscriber to the
Company’s initial public offering of common stock, par value $0.000001 (the “Common Stock”), in November 2019
(the “IPO”). It alleged in the Litigation that the Company and the other named defendants had, in connection with
the IPO and the registration statement on Form S-1 filed thereto, committed violations of Sections 11, 12(a) and 15 of the Securities
Act of 1933, as amended (the “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.
EVmo,
Inc.
Notes
to Consolidated Financial Statements
For
Year Ended December 31, 2020 and 2019
In
consideration of the releases, covenants, terms and conditions set forth in the Settlement Agreement, FirstFire has agreed to
dismiss the Litigation with prejudice, to not file any further litigation relating to the IPO, and to waive and relinquish any
and all claims on shares of Common Stock other than as specified in the Settlement Agreement. The Company has agreed to sell to
FirstFire one hundred fifty thousand (150,000) shares of Common Stock (the “Settlement Shares”) on or around February
15, 2021, with such shares to be issued pursuant to the exemption from registration under Rule 506(b) of the Act. The purchase
price of the Settlement Shares will be $0.066667 per share, or an aggregate of $10,000. Any resale of the Settlement Shares by
FirstFire shall be subject to the conditions of Rule 144 of the Act. None of WestPark, Mr. Rappaport or Mr. El-Batrawi are contributing
to the Settlement Shares or any other consideration under the Settlement Agreement.
Social
Reality Settlement
On
February 19, 2021, Rideshare Rental, Inc., a Delaware corporation formerly known as YayYo, Inc. (the “Company”), entered
into a confidential settlement agreement and mutual release (the “Agreement”) with SRAX, Inc., a Delaware corporation
formerly known as Social Reality, Inc. (“SRAX”), relating to an action brought by SRAX against the Company in Los
Angeles Superior Court on or around February 11, 2020 (the “Litigation”). A description of the Litigation has been
included by the Company in its prior filings, most recently in its quarterly report on Form 10-Q for the quarterly period ended
September 30, 2020, filed on November 12, 2020.
The
Company and SRAX have mutually agreed to keep the material terms of the Agreement confidential, subject to disclosure as required
by applicable law or regulation.
Common
stock issuances
In
addition to the above issuance of common stock subsequent to December 31, 2020, the Company has issued the following shares of
common stock:
|
●
|
100,000
shares to a member of the Company’s board of directors for cash proceeds of $50,000;
|
|
●
|
960,550
shares to the Company’s former Chief Executive Officer for the cashless exercise
of 1,000,000 stock options;
|
|
●
|
35,000
shares for the exercise of stock options for cash proceeds of $15,450; and
|
|
●
|
825,000
shares to our Executive Chairman in connection with an anti-dilutive agreement.
|